Miller Act May Not Cover Unused Labor

Furnishing to a Federal Construction Project? Beware, the Miller Act May Not Cover Unused Labor

The Miller Act is federal statute that requires payment bonds on projects contracted by the United States. We’ve previously discussed the Miller Act, but this post is going to take a look at something that isn’t covered under the Miller Act: unused labor.

Goose Creek Nuclear Power Facility

The United States Department of the Navy hired general contractor, Caddell Construction Co. (DE), LLC (Caddell), to construct the Goose Creek Nuclear Power Facility near Charleston, South Carolina. In accordance with statute, Caddell obtained the appropriate payment bond.

Caddell hired Allan Spear Construction, LLC (ASC) to provide “supplemental concrete” to the project. Within the contract, there is a provision that “[ASC] will have a minimum of 12 consecutive weeks to provide a minimum of 20 workers over the 12 weeks period.”

ASC interpreted this provision as a minimum – as in, “for a minimum of 12 weeks, the GC will pay for at least 20 workers, even if the GC doesn’t use the 20 workers.” Of course, this is not the same provision interpretation that Caddell had – but we’ll come back to that.

According to the court opinion, Caddell initially used at least 20 workers. But as time went on the number of needed workers dropped. Caddell continued to pay ASC as though it were using the 20 workers, but eventually Caddell stopped paying for the 20 workers & began paying for only the workers used.

When payments dropped, ASC made a demand upon Caddell for payment and then filed suit against the payment bond, seeking claims just under $600,000.

May Be Valid Breach of Contract Claim, But Not Under Miller Act

ASC filed suit (and additional breach of contract claims) to recover the funds ASC believed it was owed by Caddell, based on ASC’s interpretation of the contractual provision: ASC will be paid for 20 workers per week for 12 weeks.

Caddell contested this claim, arguing ASC’s claim does not fall within the parameters of the Miller Act, because the claim is not based on labor/materials provided, rather it’s based on labor not used.

3133. Rights of persons furnishing labor or material

(b) Right To Bring a Civil Action –

(1) In general.-Every person that has furnished labor or material in carrying out work provided for in a contract for which a payment bond is furnished under section 3131 of this title and that has not been paid in full within 90 days after the day on which the person did or performed the last of the labor or furnished or supplied the material for which the claim is made may bring a civil action on the payment bond for the amount unpaid at the time the civil action is brought and may prosecute the action to final execution and judgment for the amount due.

The court observed “the surety of a bond furnished by the Miller Act may not be held liable for claims which a subcontractor may have against the prime contractor not based on labor or materials furnished.” To be within the scope of the Miller Act, the claim must be for labor or materials that were actually furnished.

The court decided ASC’s claims may be appropriate for a breach of contract claim, but not a Miller Act claim.

“Here, by ASC’s own allegations, Caddell paid for the laborers actually used but breached their contract by refusing to meet the twenty-laborer-minimum provision. Because ASC seeks damages arising out of an agreement to pay for twenty laborers not actually used—rather than “labor performed” or “materials furnished”—the Miller Act does not provide the remedy. Accordingly, the Court finds that ASC’s only cause of action against the Moving Defendants fails as a matter of law. Therefore, the Court grants the Moving Defendants’ Motion for Summary Judgment.”

Securing Rights Under the Miller Act

For those who have furnished labor or materials to a federal project, and have not been paid, the bond claim should be served after your last furnishing, but within 90 days from your last furnishing. If serving the bond claim does not prompt payment, file suit to enforce the Miller Act Bond Claim in U.S. District Court after 90 days from last furnishing materials or services, but within 1 year from last furnishing materials or services.

Questions about securing rights under the Miller Act? Contact us today!

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