Miller Act Bond Claim: Miss 1 Day, Lose $8M

Miller Act Bond Claim Deadline: Miss 1 Day, Lose $8M

Miss the Miller Act Bond Claim deadline by a day and lose the right to recover a claim amount of over $8M. Sounds a bit dramatic, no? Perhaps. But the Miller Act is clear, and as one sub-subcontractor has learned, leaves little room for error.

Here’s an Overview of the Miller Act Bond Claim

Mechanic’s lien rights are not available on federal projects. If you are furnishing to a federal project, you would seek payment protection under the Miller Act by serving a Miller Act Bond Claim. Generally, payment bonds are required on general contracts for construction exceeding $100,000.

You are not required to serve a preliminary notice to secure Miller Act Bond Claim rights; however, we recommend serving a non-statutory notice to ensure all parties within the ladder of supply are aware you are furnishing to the project.

You should serve the Miller Act Bond Claim notice upon the prime contractor after last furnishing materials or services, but within 90 days from your last furnishing date. It is imperative (as we’ll see in this case) the Miller Act Bond Claim notice be received by the prime contractor within the 90-day period. The bond claim may be served by any means that provides written, third-party verification or in any way the U.S. Marshal may serve summons.

Should you need to proceed with suit to enforce the bond claim, you would file suit in U.S. District Court after 90 days from your last furnishing, but within one year from last furnishinganother key date in today’s case.

Couple Key Points: You are only protected under the Miller Act if you provide labor or materials to a contractor or first-tier subcontractor. If you are further down the ladder of supply, rights under the payment bond will not extend to you.  Also, the Miller Act prohibits any waiver of rights, unless the waiver is in writing, signed by the person waiving the rights, and executed after that person has furnished labor or materials.

Did You Know?

Did you know Miller Act Bond Claim rights exist in countries other than the United States? It’s true! Assuming the construction project is contracted by the United States government, such as for a military base in another country.

The Case: United States v. Zurich American Insurance Company, Dist. Court, ND Illinois 2019

Our story begins in 2012 when the Army Corps of Engineers hired AMEC Foster Wheeler Environment & Infrastructure, Inc. (AMEC) as the general contractor for construction at the Blatchford-Preston Complex and Al-Udeid Air Base in Qatar. AMEC hired subcontractor Black Cat Engineering & Construction (Black Cat) and Black Cat, in turn, hired sub-subcontractor A&C Construction & Installation, WLL (A&C).

As with any good story, the relationship between Black Cat and A&C soured.

Black Cat terminated its relationship with A&C in December 2015, and according to the court opinion A&C last furnished May 16, 2016. However, the last furnishing is a bit murky because A&C claimed it continued to provide work and equipment into 2017.

On August 16, 2016 A&C served the Miller Act Bond Claim notice with a claim amount of $8,449,710. Then on June 7, 2017, A&C filed suit to enforce its bond claim.

Now, I mentioned the sub-subcontractor lost its rights under the Miller Act because it served its bond claim late – by 1 day. At first glance, you may think May 16th to August 16th is 90 days, but it’s not. Here’s the court breakdown:

“The time between the last work on site was May 16, 2016 and the notice was served on August 16, 2016, a total of 91 days. The lawsuit was filed on June 7, 2017, which is one year and 22 days after May 16, 2016, the date of the last work.”

If you’re like me, you immediately went to the date calculator in The National Lien Digest to see if the math is right. *My inner bond claim guru light is shining bright! * To save you time & confusion, the date is right, but you must consider weekends/holidays etc.

A&C tried to argue that its last furnishing was in 2017, therefore when it filed suit in June 2017, it more than met the notice requirement (A&C actually said that it gave “too much notice.” Too much notice? *Insert my skeptical face here*)

The court didn’t buy the too-much-notice-argument.

“If [A&C] is to rely upon its 90-day notice, then it needed to bring suit…by August 19, 2017 or file a subsequent notice at some later date if there was in fact additional amounts due for labor and/or materials. It did not do so. In fact, its [suit action], which was filed on June 7, 2017, prayed for the exact same amount as was alleged as unpaid in the Miller Act notice. Based on that, one could conclude that no additional labor or materials were furnished after the date of the notice. If… additional amounts did become due after the August 19, 2016 notice … a 90-day notice would be due on or before May 29, 2017. None was filed…

[A&C’s] …argument is that it gave “too much notice” so that AMEC was on notice that Plaintiff was owed money by Black Cat, and therefore the purpose of the statute was satisfied. This, however, does not meet with the requirement that the limitations periods constitute conditions precedent…”

If you are keeping a tally: Court deemed A&C’s last furnishing date was 5/16/16. The bond claim notice was served 91 days from last furnishing and suit was filed 1 year, 22 days from last furnishing. Both actions late, A&C has no bond claim rights!

What Can the Sub-Subcontractor Do Now?

All hope is not lost for A&C and its claim of $8M+. Although securing bond claim rights is ideal, there may be other options available to claimants in the event securing bond claim rights fails. In this case, A&C could (and is) pursue its claim against Black Cat directly, which we refer to as “suit against the debtor.”

Take Away: carefully track bond claim deadlines!

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