Tag Archives: Miller Act statute of limitations

LABOR UNDER THE MILLER ACT AND ESTOPPEL OF STATUTE OF LIMITATIONS

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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.

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.

 

MILLER ACT STATUTE OF LIMITATIONS AND EQUITABLE TOLLING

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When it comes to a Miller Act payment bond claim, there is a one-year statute of limitations—“The Miller Act contains a statute of limitations provision that requires actions to ‘be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the claim.’” U.S. f/u/b/o Techniquex Specialty Flooring, Inc., v. Philadelphia Indemnity Ins. Co., 2022 WL 169070, *3 (M.D.Penn. 2022) (citing the Miller Act).

There is an argument, albeit a difficult one, to support an equitable tolling of the one-year statute of limitations. This would be an argument filed when the one-year statute of limitations expires, but there is reason for missing the statute of limitations caused typically by the overt misleading of the defendant (surety/bond-principal):

“Equitable tolling functions to stop the statute of limitations from running where the claim’s accrual date has passed.” “Equitable tolling is appropriate in three situations: (1) when the defendant has actively misled the plaintiff respecting the facts which comprise the plaintiff’s cause of action; (2) when the plaintiff in some extraordinary way has been prevented from asserting his rights; and (3) when the plaintiff has timely asserted his rights in the wrong forum.” The first ground for equitable tolling“appears to be the same, in all important respects” to equitable estoppel, which “excuses late filing where such tardiness results from active deception on the part of the defendant” and “what courts describe as ‘equitable tolling’ is encompassed by the latter two parts of our Circuit’s doctrine.” The extraordinary circumstances standard may be met “where the defendant misleads the plaintiff, allowing the statutory period to lapse; or when the plaintiff has no reasonable way of discovering the wrong perpetrated against her …”

Tehniquex, supra, at *5 (internal citations omitted).

If you are involved on a federal project, it is imperative that you appreciate your Miller Act payment bond rights.  This includes knowing when your last date of furnishing is as well as your last date to file a Miller Act payment bond lawsuit. While equitable tolling is an argument if the statute of limitations expires, it is admittedly a very difficult argument to prevail on and will require evidence substantiating the basis for the equitable tolling.  Otherwise, you are just a party that missed the deadline to file a Miller Act payment bond claim, and in most occasions, there is really no justifiable reason for this to  be the situation.

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.

 

NOT ALL WORK IS COVERED UNDER THE FEDERAL MILLLER ACT

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The recent opinion out of the Eastern District Court of Virginia, Dickson v. Forney Enterprises, Inc., 2021 WL 1536574 (E.D.Virginia 2021),  demonstrates that the federal Miller Act is not designed to protect ALL that perform work on a federal construction project.   This is because NOT ALL work is covered under the Miller Act.

In this case, a professional engineer was subcontracted by a prime contractor to serve on site in a project management / superintendent capacity.  The prime contractor’s scope of work was completed by January 31, 2019.  However, the prime contractor was still required to inventory certain materials on site, which was performed by the engineer.  The engineer claimed it was owed in excess of $400,000 and filed a Miller Act payment bond lawsuit on February 5, 2020 (more than a year after the project was completed).

There are two immediate questions that pop out that this court deal with: (1) are the type of project management / superintendent-type services the engineer performed covered under the Miller Act; and 2) did the engineer timely file the Miller Act payment bond lawsuit within the statute of limitations if the project was completed more than a year prior to the engineer filing suit.   Both answers resulted in a resounding No!

MILLER ACT PROTECTS LABOR

The Miller Act protects labor, and while “labor” is not a defined term under the Miller Act, “courts have limited the term to refer only to physical toil or manual labor.” Dickson, supra, at *2.   Supervisory work is generally not considered labor unless it also includes manual labor.  Id.   “[C]lerical or administrative tasks [] even if performed at the job site, do not involve the physical toil or manual work necessary to bring them within the scope of the Miller Act.” Id. (citation omitted).

Here, the engineer was hired in a management and superintendent (supervisor) capacity.  He was subcontracted to oversee manual labor.  Any manual labor, to the extent there was any such as field measurement or inspections performed by the engineer, were incidental to his supervisory duties and “[t]aking field measurements and inspecting materials…were administrative tasks incidental to his role as project manager….[and] they do not rise to the level of physical toil necessary to recover under the Miller Act.” Dickson, supra, at *2 (citations omitted).

The type of work the engineer performed and sought payment for was NOT work covered under the Miller Act.

MILLER ACT STATUTE OF LIMITATIONS

The Miller Act requires a plaintiff to file suit “no later than one year after the day on which the last of the labor was performed or material was supplied” by the plaintiff. Dickson, supra, at *3 citing 40 U.S.C. s. 3133(b)(4).

Here, the project was concluded as late as January 31, 2019.  “Work performed after the termination of the prime contract, like the inventory [the engineer] conducted February 8, 2019 is a post-project task and thus not recoverable under the Miller Act.” Dickson, supra, at *3.

Putting aside that inventory control would be deemed a clerical task and not “labor” covered under the Miller Act, the engineer cannot extend the one-year statute of limitations beyond one-year after the termination / completion of the project.  Id.

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.

 

TIMELY FILE YOUR MILLER ACT PAYMENT BOND LAWSUIT

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If you are a subcontractor, sub-subcontractor, or supplier on a federal construction project, please make sure to preserve your Miller Act payment bond rights.  This includes filing suit in a federal district court against the payment bond surety.   The Eleventh Circuit’s ruling in Thomas v. Burkhardt, 2016 WL 143351 (11th Cir. 2016) illustrates what can happen if you do not properly pursue your Miller Act payment bond rights.

 

In Thomas, a subcontractor sued a contractor in state court and recovered a judgment against the contractor.  When the subcontractor could not collect on its judgment, it sued the contractor’s Miller Act payment bond surety.  The problem was the subcontractor filed its lawsuit many years after the statute of limitations expired on the Miller Act.  The subcontractor argued the contractor’s surety should be bound by the state court judgment against the contractor (the principal of the payment bond). The Eleventh Circuit said “No!”  The surety was not bound by the state court judgment. Indeed, even if the surety had notice of the subcontractor’s state court suit against the contractor, the Eleventh Circuit still maintained that the surety would not be bound by the state court judgment and would not be estopped from raising the statute of limitations as a defense:

 

[T]he doctrine of estoppel against the surety rests on the principle that a surety with knowledge of a suit against the principal has a “full opportunity to defend” the suit and to protect its rights. But there is no such equitable principle at work here. The surety cannot protect its rights by joining in the defense of the suit. It cannot intervene as defendant any more than it could be named as defendant in the first place.

Thomas, supra, at *3 quoting U.S. Fid. & Guar. Co. v. Hendry Corp., 391 F.2d 13, 17 (5th Cir. 1968).

 

The morale is to timely file your Miller Act payment bond claim against the payment bond surety.  There is no reason not to!

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.