Category Archives: payment bond

SURETY’S SEVERAL LIABILITY UNDER BONDS

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When a payment or performance bond is issued on behalf of its bond-principal, the surety is jointly and severally liable with its bond-principal.  This means the surety has several liability under the bond, i.e., you don’t need to pursue the principal of the bond to pursue liability under the bond, which is a separate written intrument.  Thus, if you are claiming damages of $500,000, by way of example, you can sue both the principal and surety under the bond, you can ONLY sue the principal under the bond (which is rarely practical), or you can ONLY sue the surety under the bond (which, oftentimes, is very practical).  In many instances where I am pursuing a bond claim on behalf of a client, particularly a payment bond claim, I only sue the surety and do not sue the bond-principal unless there are certain strategic reasons in doing so. This is because of the surety’s several liability under the bond and there may be solvency issues with the principal or contractual reasons that, strategically, make much more sense to exclude the principal from the action.

In MJM Electric, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2023 WL 2163087 (M.D.Fla. 2023), an electrical subcontractor was hired to perform electrical work by the prime contractor.  The prime contractor had a payment bond.  The project was delayed for two years. The electrical subcontractor claimed the prime contractor failed to compensate it for significant delays and out of scope work.

The electrical subcontractor sued the prime contractor’s payment bond surety ONLY for amounts it incurred in the performance of the subcontract. The surety moved to require the subcontractor to join the prime contractor into the lawsuit as an indispensable party.

The purpose of this posting is not to go into the federal procedural analysis to determine an indispensable party.  The point is to establish that such a position in many instances makes minimal sense when considering that the surety is severally liable, the prime contractor can always intervene into the lawsuit, and the surety can always pursue the prime contractor for indemnity under the general agreement of indemnity between the surety and bond-principal.  In denying the surety’s motion, the Middle District of Florida expressed:

Though [electrical subcontractor] may have claims against [prime contractor] under its contract, those claims are separate from the claims under the bond against [surety] and any judgment against [surety] under the separate terms of the bond contract would not affect those claims. Likewise, [surety] may seek indemnification or any other claim it may have against [prime contractor], but failure to join [prime contractor] here does not prevent full relief for [electrical subcontractor] under the bond nor does it expose [surety] to duplicate or inconsistent liability.  Of course, any judgment in this action would not bind [prime contractor] and so would not affects its rights.

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.

 

DO NOT FILE A MILLER ACT PAYMENT BOND LAWSUIT AFTER THE ONE-YEAR STATUTE OF LIMITATIONS

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Under the Miller Act, a claim against a Miller Act payment bond must be commenced “no later than one year after the date on which the last of the labor was performed or material was supplied by the person bringing the action.” 40 U.S.C. s. 3133(b)(4).  Stated another way, a claimant must file its lawsuit against the Miller Act payment bond within one year from its final furnishing on the project.

Filing a lawsuit too late, i.e., outside of the one-year statute of limitations, will be fatal to a Miller Act payment bond claim.  This was the outcome in Diamond Services Corp. v. Travelers Casualty & Surety Company of America, 2022 WL 4990416 (5th Cir. 2022) where a claimant filed a Miller Act payment bond lawsuit four days late.  That four days proved to be fatal to its Miller Act payment bond claim and lawsuit.  Do not let this happen to you!

In Diamond Services Corp., the claimant submitted a claim to the Miller Act payment bond surety.  The surety issued a claim form to the claimant that requested additional information. The claimant returned the surety’s claim form. The surety denied the claim a year and a couple of days after the claimant’s final furnishing.  The claimant immediately filed its payment bond lawsuit four days after the year expired.  The claimant argued that the surety should be equitably estopped from asserting the statute of limitations in light of the surety’s letter requesting additional information. (The claimant was basically arguing that the statute of limitations should be equitably tolled.) The trial court dismissed the Miller Act payment bond claim finding it was barred by the one-year statute of limitations and that equitable estoppel did not apply.

On appeal, the Fifth Circuit maintained that a party must show it was misled to its detriment when relying on equitable estoppel.  The Fifth Circuit held the surety’s letter with its claim form and requesting additional information “made no representations that [the claimant] would be paid or that [the surety] would engage in claim negotiations with [the claimant], and explicitly reserved ‘all rights and defenses…include[ing], without limitation, defenses that may be available under any applicable notice and suit limitation provisions.’” Diamond Services Corp., supra. Hence, it was not reasonable for the claimant to rely on this letter in electing not to timely bring suit within the one-year statute of limitations.

Sureties, as a matter of course, will respond to its receipt of a claim requesting additional information.  That letter may accompany the surety’s preferred claim form.  Let’s be clear here.  The completion of the claim form and furnishing of additional information is not a statutory requirement to pursue a Miller Act payment bond claim (and it’s not a statutory requirement to many statutory bonds). Whether the claim form is submitted, or whether additional information is furnished, does not equate to a surety paying a claim.  It just does not.  For this reason, there should NEVER be an instance where a claimant forbears its rights to timely sue thinking a surety will pay the claim based on the submission of a claim form or additional information.

Timely file your Miller Act payment bond lawsuit within the one-year statute of limitations.  No ifs, ands, or buts.  This is true whether you submit a claim form or additional information or you do not.

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.

 

APPLICATION OF SET-OFF WHEN DETERMINING PREVAILING PARTY FOR PURPOSES OF ATTORNEY’S FEES

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The recent opinion from the Second District Court of Appeal in Hayward Baker, Inc. v. Westfield Ins. Co., 2020 WL 7767859 (2nd DCA 2020) demonstrates that the significant issues test for determining the prevailing party for purposes of attorney’s fees applies to disputes involving payment bonds under Florida’s Lien Law (Florida Statutes Chapter 713).  The significant issues test is more or less a subjective test where the party that is deemed to have prevailed on the significant issues in the case is the prevailing party for purposes of attorney’s fees in the case.  A trial court has discretion to determine the prevailing party which will not be disturbed absent an appellate court finding the trial court abused that discretion.   This significant issues test is an important consideration so that parties understand just because money ends up going their way does not necessarily mean they prevailed on the significant issues in the case.  It could mean that.  But it may not based on the claims and moneys involved in the dispute.

In Hayward Baker, the subcontractor recovered a final judgment of $290,000 against the general contractor and payment bond surety. Both the subcontractor and general contractor moved for attorney’s fees as the party that prevailed on the significant issues in the dispute.  The subcontractor was awarded the full amount due under the subcontract; however, there was a set-off issue.  The general contractor asserted a claim against the subcontractor for property damage associated with the subcontractor’s work and received $450,000 from an insurance carrier relative to that claim in a settled dispute.   The subcontractor was able to set-off this recovered amount from the property damages the general contractor sought against the subcontractor. Thus, the issue was when factoring in the set-off, which party prevailed on the significant issues.  The Second District held it was the subcontractor that recovered the final judgment in its favor:

[T]he ruling on [the subcontractor’s] motion to set off the $450,000 [the general contractor] had received from the [insurance carrier] in the 2012 [settled] Case against the damages award entered against [the subcontractor] was pivotal to the prevailing party determination. The result of applying the setoff against [the general contractor’s] damages award was that [the general contractor] received none of the benefit it sought in the litigation: a judgment was not entered against [the subcontractor] for any of the damage caused to the hospital property. On the other hand, [the subcontractor] received all of the benefit it sought in the litigation, as it obtained $290,000 plus prejudgment interest for the work it performed under the subcontract and it was relieved from paying any damages to [the general contractor]. [The subcontractor], therefore, was the prevailing party in the underlying litigation and entitled to an award of attorneys’ fees

Hayward Baker, 2020 WL at *2.

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.

 

IS A MILLER ACT PAYMENT BOND SURETY BOUND BY A DEFAULT OR DEFAULT JUDGMENT AGAINST ITS PRINCIPAL?

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Maguire-O’Hara Construction, Inc. v. Cool Roofing Systems, Inc., 2020 WL 6532852 (W.D. Oklahoma 2020) is an interesting case dealing with suretyship law and the subject of whether a Miller Act payment bond surety is bound by a default or default judgment against its prime contractor (bond principal).

In this case, a subcontractor sued a prime contractor for breach of contract and the contractor’s Miller Act payment bond surety for a breach of the payment bond.  The prime contractor did not respond to the lawsuit and the subcontractor obtained a default against the contractor.  The Miller Act payment bond surety did engage counsel to defend itself in the dispute.  Prior to trial, the subcontractor moved in limine to preclude the surety from raising defenses at trial under the subcontract because a default was entered against the prime contractor.  The subcontractor argued that the surety should be bound by the default and, therefore, precluded from raising liability defenses under the subcontract.  Such a ruling would leave the surety no defenses disputing liability at trial.

[A] suretys’ liability under the Miller Act coincides with that of the general contractor, its principal.  Accordingly, a surety [can] plead any defenses available to its principal but [can]not make a defense that could not be made by its principal.

Maguire-O’Hara Construction, supra, at *2 (internal citations and quotations omitted).

Here, the trial court held that a default against the prime contractor does not preclude its payment bond surety from raising the liability defenses of the prime contractor (the principal of the bond).  In reaching this decision, though, the trial court indicated this ruling may have likely been different if a judgment, such as a default final judgment, had been entered against the prime contractor.   The trial court cited the Eleventh Circuit Court of Appeals ruling in Drill South, Inc. v. International Fidelity Ins. Co., 234 F.3d 1232 (11th Cir. 2020) where the appellate court affirmed a judgment against the surety because the surety was bound by the default judgment against the prime contractor.

To the extent that [the Miller Act payment bond surety] argues that it had no obligation to defend the action against [the prime contractor], we are not persuaded. We believe the issue is not whether the Agreement of Indemnity imposed an obligation on [the surety] to defend [the prime contractor], but whether it conferred a right to defend. The law requires only that a surety have notice and an opportunity to defend before it is bound by a judgment against its principal. We believe [the surety] had this right and opportunity, and simply chose, for whatever reason, not to exercise its right.

[The surety] argues, however, that when a surety and principal are sued in the same action, and the surety answers  and defends on its own behalf, the surety is not bound by a default judgment entered against the surety’s principal. Although we recognize the existence of authority supporting [the surety’s] position, those cases are not binding on this Court; nor do we find their reasoning persuasive.

We believe that the general rule that a surety is bound by a judgment entered against its principal when the surety had both notice and opportunity to defend applies whether the principal and surety are sued in the same action or in separate actions.

Drill South, 234 F.3d at 1237-1237.

 

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.

 

MILLER ACT PAYMENT BOND SURETY BOUND TO ARBITRATION AWARD

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Here is an interesting case binding a Miller Act payment bond surety to an arbitration award against its prime contractor (bond principal) that it received sufficient notice of.  Notice is the operative word.  The surety could have participated in the arbitration, elected not to, and when its prime contractor (bond principal) lost the arbitration, it was NOT given another bite out of the apple to litigate facts already been decided.

In BRC Uluslararasi Taahut VE Ticaret A.S. v. Lexon Ins. Co., 2020 WL 6801933 (D. Maryland 2020), a prime contractor was hired by the federal government to make security upgrades and interior renovations to a United States embassy in the Czech Republic.  The prime contractor hired a subcontractor to perform all of the installed contract work.   The prime contractor terminated the subcontractor for default during the course of construction.

The subcontractor demanded arbitration in accordance with the subcontract claiming it was wrongfully terminated.  The subcontractor also filed a lawsuit asserting a Miller Act payment bond claim against the prime contractor’s surety (as well as a breach of contract action against the prime contractor). The subcontractor made clear it intended to pursue its claims in arbitration and hold the payment bond surety jointly and severally liable.  The parties agreed to stay the lawsuit since the facts were identical to those being arbitrated. The arbitration went forward and an award was entered in favor of the subcontractor and against the prime contractor for approximately $2.3 Million.

The subcontractor moved to lift the stay entered in the lawsuit to confirm the arbitration award against the prime contractor and Miller Act payment bond surety.  The prime contractor moved to vacate the award.

Beginning with the prime contractor’s motion to vacate the arbitration award, the Federal Arbitration Act gives limited grounds to support vacating an arbitration award.  The grounds the prime contractor raised will not be discussed. They were all denied because it is difficult to vacate an arbitrator’s final award and that is the important take-away message.  In support of this (and contained in a noteworthy, lengthy discussion by the Court), the Court stated: “The FAA [Federal Arbitration Act] creates a ‘strong presumption in favor of confirming arbitration awards,’ and ‘judicial review’ of such awards ‘must be an extremely narrow exercise.’” BRC Uluslararasi Taahut, supra, at *4.

Of significance here, the subcontractor moved to enforce the arbitration award against the Miller Act payment bond surety, as it should.  Even though the surety was not a party to the arbitration, it was on notice of the arbitration, was notified the subcontractor would look to hold it jointly and severally liable, and the surety consented to the stay of the lawsuit pending the outcome of the arbitration. The Court noted, “[s]uch notice is sufficient to bind [the surety] to the arbitration award.” BRC Uluslararasi Taahut, supra, at *9 (citing cases showing that if the surety has notice of the proceedings against its principal, it can be bound by an arbitration award against the principal).  Further, the Court intuitively stated:

[The surety] clearly knew that the arbitration would occur.  Now dissatisfied with the outcome, [the surety] wishes not to be bound by the very proceeding [the surety] averred would avoid duplicative litigation.  The Court suspects that had [the prime contractor] prevailed in arbitration, [the surety] would be singing a different tune.  [The surety] will not be afforded a second bite at the litigation apple simply because it must now honor its obligations as the surety on the project.

Id.

Remember, if you are arbitrating rights, do not neglect to timely file your Miller Act payment bond lawsuit, or for that matter, any statutory payment bond lawsuit.  Give the surety NOTICE that you intend to hold it jointly and severally liable for any arbitration award entered against its prime contractor (bond principal).   Whether the surety elects to participate in the arbitration is within its discretion, but the key is to give the surety notice so that if you do prevail, you find yourself in same shoes as the subcontractor discussed in this case—binding the payment bond surety to the award entered against the prime contractor.  The prime contractor and its surety should also recognize this likely outcome.

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.

 

QUICK NOTE: USE COUNSEL WHEN PREPARING A NOTICE OF NONPAYMENT

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If you are a subcontractor or supplier working on a private construction project, you always want to pull up the Notice of Commencement from the public records to see if there is a payment bond in place.  If there is not, you know you have to preserve your construction lien rights as to the real property (the project).  If there is, you know you will have to preserve your rights against the payment bond.

In an earlier posting, I discussed statutory changes changes to notices of nonpayment that were to take effect as of October 1, 2019.   A notice of nonpayment must be served by the unpaid claimant within 90 days of its final furnishing to preserve payment bond rights (for amounts above 10% retainage).   These changes have gone into effect and are important for a claimant to know in order to preserve rights against an unconditional payment bond issued per Florida Statute s. 713.23.   (If you are unsure about your rights relative to a payment bond, please work with counsel to ensure your rights are protected!)  The notice of nonpayment is a statutory form that will need to be notarized by the claimant.  The claimant should sign/notarize because the notice of nonpayment is reflecting amounts owed including retainage, the amount paid, and the approximate amount of money associated with to-be-performed work.

One of the recent statutory changes is that:

A claimant who serves a fraudulent notice of nonpayment forfeits his or her rights under the bond. A notice of nonpayment is fraudulent if the claimant has willfully exaggerated the amount unpaid, willfully included a claim for work not performed or materials not furnished for the subject improvement, or prepared the notice with such willful and gross negligence as to amount to a willful exaggeration.

It is uncertain how this will be applied to notices of nonpayment other than this mimics language relative to a “fraudulent lien.”  One of the defenses to a fraudulent lien is known as the advice of counsel defense.  It logically makes sense that this advice of counsel defense will also apply to the preparation of notices of nonpayment.  For this important reason, a claimant should work with counsel and have its counsel prepare the notice of nonpayment with the relevant accounting information, whether it be a payment application(s), a change order log, an accounting summary, or potential change orders and issued back-charges.  This will facilitate a discussion as to amounts to include and will support an advice of counsel defense.  No different than a lienor using a lawyer to prepare a lien (and I would encourage all lienors to utilize counsel for lien preparation), a claimant should use a lawyer to prepare a notice of nonpayment.

Please let me know if you need assistance with preserving payment bond rights

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.

 

QUICK NOTE: MAKE SURE TO TIMELY PERFECT YOUR CONSTRUCTION LIEN AND PAYMENT BOND RIGHTS!

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In today’s current climate, you do not want to wait until the last minute to record your construction lien or serve your notice of nonpayment to preserve your payment bond rights.  Operate conservatively and preserve these rights now, not later.   Whether preserving construction lien or payment bond rights, the key date is 90-days from your final furnishing date.  A construction lien must be recorded within 90 days from your final furnishing date.  Likewise, a notice of nonpayment (to preserve payment bond rights on a private project) needs to be served within 90 days from your final furnishing date.

It is important to remember that performing punchlist, warranty, and corrective work does NOT extend your final furnishing date. In other words, do not think you can record a lien or serve your notice of nonpayment within 90 days from completing punchlist or warranty work.  That would be a bad idea.  See, e.g., Delta Fire Sprinklers, Inc. v. Onebeacon Ins. Co., 937 So.2d 695 (Fla. 5th DCA 2006) (performing punchlist items insufficient for extending final furnishing date in order for subcontractor to timely serve its notice of nonpayment).

MAKE SURE TO TIMELY PERFECT YOUR CONSTRUCTION LIEN AND PAYMENT BOND RIGHTS!

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.

 

QUICK NOTE: FRAUDULENT NOTICE OF NONPAYMENT

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There is a defense to construction liens raised by owners known as the fraudulent lien defense.  A party can assert a fraudulent lien as an affirmative defense or as an affirmative claim.  This is embodied in Florida Statute s. 713.31.

Recently, with respect to payment bond claims, there is also a defense relating to a party’s fraudulent notice of nonpayment.  This fraudulent notice of nonpayment defense mimics the fraudulent lien defense and provides:

A lienor who serves a fraudulent notice of nonpayment forfeits his or her rights under the bond. A notice of nonpayment is fraudulent if the lienor has willfully exaggerated the amount unpaid, willfully included a claim for work not performed or materials not furnished for the subject improvement, or prepared the notice with such willful and gross negligence as to amount to a willful exaggeration. However, a minor mistake or error in a notice of nonpayment, or a good faith dispute as to the amount unpaid, does not constitute a willful exaggeration that operates to defeat an otherwise valid claim against the bond. The service of a fraudulent notice of nonpayment is a complete defense to the lienor’s claim against the bond.

Fla. Stat. s. 713.23(1)(d); 255.05(2)(a)(2).

It can be expected that any party required to serve a notice of nonpayment will receive as an affirmative defense to a payment bond lawsuit that the notice of nonpayment was fraudulent.  There has not been a case as of yet to apply a standard to this defense so it is presumed that the standard will be fairly consistent with the standard applied to fraudulent liens.  Nonetheless, even if the standard is challenging, this will be an expected defense where notices of nonpayment will be challenged as being fraudulent.    Also, a claimant that is not required to serve a notice of nonpayment to preserve its payment bond rights will not have to deal with this notice of nonpayment defense.

If you need to serve a notice of nonpayment to preserve payment bond rights or, alternatively, are the recipient of a notice of nonpayment, it is prudent to consult with counsel to ensure your rights are appropriately preserved and protected.   When dealing with fraudulent liens, a lienor can rely on advice of counsel if the lien is prepared by counsel.   Presumably, a claimant that serves a notice of nonpayment should be able to rely on advice of counsel too if the notice of nonpayment was prepared by counsel.

 

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.

 

SUIT ON SUBCONTRACTOR’S COMMON LAW PAYMENT BOND

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When a subcontractor furnishes a payment bond, is it referred to as a common law payment bond governed by state law.  There is no federal statute (or even state statute in most jurisdictions) governing the requirements of a subcontractor’s payment bond, hence the reason it is oftentimes referred to as a common law payment bond.  This is different than a prime contractor’s payment bond which is generally governed by federal or state-specific statutes.

In an opinion out of the Northern District of North Dakota, U.S. v. Western Surety Company, 2010 WL 609548 (D. North Dakota 2020), the Court discussed a painting sub-subcontractor’s claim against a subcontractor’s common law payment bond on a federal project.    Here, the subcontractor hired the sub-subcontractor and a payment dispute arose.  The subcontractor furnished its own payment bond.   The sub-subcontractor filed a lawsuit against both the prime contractor’s Miller Act payment bond and the subcontractor’s common law payment bond.  The Miller Act payment bond dispute got resolved and the case proceeded as to the subcontractor’s common law payment bond.

The common law payment bond surety moved for summary judgment claiming the painting sub-subcontractor failed to properly trigger the bond because it failed to provide notice of its claim as required by the terms of the bond.   Since the bond is deemed a contract, the Court looked at principles of North Dakota contract law governing this argument.   The common law bond required a claimant to give written notice within 90 days of its last day of work (which is a common requirement in such bonds).  The surety wanted the Court to construe this language similar to the requirements of the federal Miller Act by requiring the sub-subcontractor to give it notice with substantial accuracy of the claim.  The Court rejected this sentiment, and denied the summary judgment, as the subcontractor’s payment bond made no mention of “substantial accuracy.”   The Court looked at a hodge-podge of communications finding that a reasonable jury could conclude that the painting sub-subcontractor complied with the provisions of the bond.  Additionally, the Court noted that even if the notice was inadequate, the surety failed to establish how it was prejudiced based on North Dakota law that states: “A surety is exonerated…[t]o the extent to which the surety is prejudiced by an omission of the creditor to do anything when required by the surety which it is the creditor’s duty to do.”  U.S., supra, at *6 (internal quotation and citation omitted).

Lastly, the Court discussed how the subcontractor’s common law payment bond mentions the obligee of the bond is the general contractor.  This is how all subcontractor payment bonds are worded.  However, within the bond, there is a definition for “claimants” that allows claimants to sue on the bond.  The Court addressed this to reflect that the painting sub-subcontractor, meeting the definition of claimant in the payment bond, was a third-party beneficiary of the subcontractor’s payment bond and had standing to sue the bond.

This is a good case if you are dealing with a subcontractor’s common law payment bond.  The requirements to sue the bond will be less rigorous than suing a payment bond governed by a statute, such as a Miller Act payment bond.

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.

 

SERVING NOTICE OF NONPAYMENT UNDER MILLER ACT

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Under the federal Miller Act, if a claimant is NOT in privity with the prime contractor, it needs to serve a “notice of nonpayment” within 90 days of its final furnishing.   In this manner, 40 U.S.C. 3133 (b)(2) states:

 

A person having a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made. The action must state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. The notice shall be served–

(A) by any means that provides written, third-party verification of delivery to the contractor at any place the contractor maintains an office or conducts business or at the contractor’s residence; or

(B) in any manner in which the United States marshal of the district in which the public improvement is situated by law may serve summons.

Although the bolded language states that, “The action must state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done…,” courts have found that this requirement also applies to the notice of nonpayment.  See Prince Payne Enterprises, Inc. f/u/b/o Prince Payne Enterprises, Inc. v. Tigua Enterprises, Inc., 2019 WL 5394197, *4 (D. South Carolina 2019).

However, there is a certain liberality regarding the format of the notice as long as it states with substantial accuracy the amount claimed and the name of the party to whom the work was done.

For instance, in Prince Payne Enterprises, a sub-subcontractor—not in privity with the prime contractor—filed a Miller Act payment bond lawsuit.  To support that it provided a notice of nonpayment to the prime contractor, the sub-subcontractor attached a hodgepodge of documentation, none of which was applicable, to its complaint, as well as alleged that it demanded payment from the prime contractor within 90 days of its final furnishing date on the project.  The prime contractor moved to dismiss the Miller Act payment bond claim based on the inapplicability of the hodgepodge of documentation which included letters that came after the 90 days expired.  But, based on the allegation that the sub-subcontractor demanded payment on the prime contractor, the Court held:

While the dates and contents of the attached exhibits may not meet the notice requirements of the Miller Act, the court must accept the allegation that Prince Payne [sub-subcontractor] demanded payment from Tigua [prime contractor] within ninety days of last performing work as true. Discovery may reveal that this is not true or that none of the communications satisfy the Miller Act’s notice requirements; however, at this early stage of litigation, the court finds that Prince Payne’s proposed amended complaint sufficiently alleges a viable cause of action for a violation of the Miller Act.

Prince Payne Enterprises, supra, at *4.

This sub-subcontractor is likely in trouble supporting that it served a notice of nonpayment within 90 days of its final furnishing date.  However, it lived to see another day by surviving a motion to dismiss.  Summary judgment will be different.  This could have been avoided had the sub-subcontractor appreciated that to preserve a Miller Act payment bond claim, it MUST serve a notice of nonpayment within 90 days of its final furnishing.  Rights preservation is everything!

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.