Since I wrote my ebook on the application of federal Miller Act payment bonds, I have not discussed a case applying the Miller Act. Until now!
Below is a case that reinforces two important points applicable to Miller Act payment bond claims. First, the case reinforces what a claimant needs to prove to establish a Miller Act payment bond claim. Very important. Second, the case reinforces that a subcontractor is going to be governed by its subcontract. This means that those provisions regarding payment and scope of work are very important. Not that you did not already know this, but ignoring contractual requirements will not fly.
In U.S.A. f/u/b/o Netplanner Systems, Inc. v. GSC Construction, Inc., 2017 WL 3594261 (E.D.N.C. 2017), a prime contractor hired a subcontractor to run cabling and wiring at Fort Bragg. The subcontractor claimed it was owed a balance and filed a lawsuit against the general contractor the Miller Act payment bond.
“A plaintiff must prove four elements to collect under the Miller Act: (1) labor or materials were supplied for work in the contract; (2) the supplier of that labor or materials is unpaid; (3) the supplier had a good faith belief that the labor or materials were for the specified work; and (4) jurisdictional requisites are met.” U.S.A. f/u/b/o Netplanner Systems, Inc., supra, at *5.
The prime contractor claimed that the subcontractor was not owed any balance since it violated terms of the subcontract regarding its timely performance. Per the subcontract, the subcontractor agreed that it would perform and complete its work in accordance with the schedule approved by the federal government and that final payment will be made when the subcontractor fully performed in accordance with the requirements of the Contract Documents.
In this case, the trial court determined there were questions of fact involving whether the subcontractor complied with the terms of the subcontract. But, in doing so, the trial court confirmed, again, what we already know — that the subcontractor’s performance will be determined in reference to its underlying subcontract.
“‘Whether a subcontractor has been paid in full for providing labor and materials must be determined by reference to the underlying subcontract as it relates to the scope of the work and the payment terms.’” U.S.A. f/u/b/o Netplanner Systems, Inc., supra, at *5 quoting U.S. ex rel. Acoustical Concepts, Inc. v. Travelers Cas. and Sur. Co. of Am., 635 F.Supp.2d 434, 438 (E.D. Va. 2009).
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.