If you want a case that goes into history of the federal Miller Act, check out the Fourth Circuit Court of Appeal’s opinion in U.S. ex rel. Dickson v. Fidelity and Deposit Company of Maryland, 2023 WL 3083440 (4th Cir. 2023). While I am not going to delve into this history, it’s a worthwhile read. It is also a worthwhile read for two other points.
First, it discusses what constitutes “labor” under the Miller Act.
Second, it discusses doctrine of estoppel to prevent a surety from raising the statute of limitations to bar a Miller Act payment bond claim, which is a doctrine you do NOT want to rely on, as this case reinforces.
Both of these points applicable to Miller Act claims are discussed below.
This case dealt with a prime contractor renovating staircases that was terminated by the federal government. The prime contractor hired a professional engineer as its subcontractor to serve as its project manager and supervise labor on the project. The engineer/subcontractor also had “logistical and clerical duties, taking various field measurements, cleaning the worksite, moving tools and materials, and sometimes even watering the concrete himself.” Dickson, supra, at *1.
The subcontractor submitted an approximate $400,000 claim to the prime contractor’s Miller Act payment bond. Roughly a year later, the surety denied the claim stating the subcontractor was pursuing labor not covered under the Miller Act. The surety asked the subcontractor to resubmit its claim and, once received, will conduct another review while reserving all rights. The subcontractor elected to sue the Miller act payment bond surety.
The trial court granted summary judgment in favor of the surety finding the subcontractor’s work did not qualify as recoverable labor under the Miller Act. The trial court further held there were no grounds for an estoppel argument to estop the surety from raising the statute of limitations since the subcontractor’s payment bond claim was filed more than a year after its final furnishing. The subcontractor appealed.
Labor under the Miller Act
What constitutes labor under the Miller Act is important because it determines what is recoverable and, equally important, “‘[t]he statute of limitations funs ‘one year after the day on which the last of the labor was performed.’” Dickson, supra, at *6 (citation omitted).
“While published caselaw interpreting the word ‘labor’ under the Miller Act is sparse, courts have largely agreed that tasks involving “physical toil” are labor and that on-site supervision of “physical toil” is also labor.” Dickson, supra, at *3.
With respect to the subcontractor’s on-site supervision, the Fourth Circuit found this was recoverable labor under the Miller Act. “The bulk of [the subcontractor’s] work involved both direction and supervision of manual labor and occasional performance of manual labor and therefore qualifies as ‘labor.’” Dickson, supra, at *6.
The subcontractor’s supervision, however, was performed outside the one-year limitations period. In furtherance of trying to create an argument that the Miller Act payment bond lawsuit was timely filed, he argued that he performed a (timely) final inventory which should constitute labor under the Miller Act. The Fourth Circuit found this did NOT constitute labor or physical toil under the Miller Act and was merely clerical—“And we agree with the district court’s conclusion that, based on this record, taking the final inventory of a job site lacks the ‘physical exertion’ and ‘[b]odily toil’ required to qualify as labor.” Dickson, supra, at *7.
Notably, this case does have an interesting dissent that touches on a discussion that mental toil or mental exertion should constitute labor. Sure, this dissent is not the law. Yet, if you need to create an argument in this regard, this dissent provides the basis to do so.
Estoppel
For the subcontractor to have a valid Miller Act payment bond claim, the surety must be estopped from raising the statute of limitations; otherwise, the lawsuit was untimely filed. But for estoppel to apply, the subcontractor would have to demonstrate it was misled by the surety to its prejudice. Dickson, supra, at *7 (“And in Miller Act disputes, estoppel ‘arises where one party by his words, actuals, and conduct led the other to believe that it would acknowledge and pay the claim, if, after investigation, the claim were found to be just, but when, after the time for suit had passed, breaks off negotiations and denies liability and refuses to pay.’”) Id. (citation omitted).
Unfortunately for the subcontractor, estoppel did not apply. This means the lawsuit was untimely filed!
Here, there was no affirmative indication [the surety] would acknowledge and pay the claim. There were no negotiations or promises to pay. Instead, [the surety] only promised to investigate the claim. Not only did [the surety] not promise to acknowledge and pay the claim, but it repeatedly made clear its communications were for investigative purposes and reserved all rights and defenses.
Dickson, supra, at *8.
Don’t let this happen to you. Timely file your Miller Act payment bond lawsuit.
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.