By: Tina Paries
The Miller Act, 40 U.S.C. § 3131, et. seq., was enacted to protect subcontractors against nonpayment for work performed on federal government construction projects. The Miller Act requires a prime contractor to supply a payment bond on any contract more than $100,000 for “the construction, alteration, or repair of any public building or public work of the Federal Government.” 40 U.S.C. § 3131(b)(2). The Miller Act further sets forth the specific requirements that must be met in order to assert a claim under such a payment bond. Only a party that does not have a direct contract with the prime contractor must provide notice of its claim to the prime 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.” 40 U.S.C. § 3133(b)(2).
The U.S. Court of Appeals for the Seventh Circuit recently addressed the importance of this required notice in A&C Construction & Installation, Co. WLL v. Zurich American Insurance Company and The Insurance Company of the State of Pennsylvania, 963 F.3d 705 (7th Cir. 2020). A sub-subcontractor contracted with a third-tier contractor to perform a portion of its work on an air force base. In December 2015, however, the sub-subcontractor was terminated. The sub-subcontractor’s third-tier contractor continued to perform work at the project through February 2017 and the sub-subcontractor also allowed some of its on-site equipment to continue to be utilized.
On August 16, 2016, the sub-subcontractor served notice of its bond claim on the prime contractor claiming it was owed over $8 million for the work performed at the project. In that notice, the sub-subcontractor did not provide a specific date and instead stated that “[c]ertain [sub-subcontractor] equipment remains onsite.” When no payment was ultimately made to the sub-subcontractor, it filed a lawsuit seeking to enforce its bond claim.
The sureties that issued the payment bonds argued, among other things, that the sub-subcontractor’s notice did not comply with the Miller Act. The sub-subcontractor maintained that its equipment was utilized on the project up until its conclusion on February 28, 2017 and that its third-tier contractor similarly continued to provide work through that date. In other words, the sub-subcontractor argued that it gave notice earlier than what was required under the Miller Act.
The U.S. District Court found that the sub-subcontractor failed to comply with the Miller Act because it should have provided notice within 90 days of that work (from February 28, 2017). The Seventh Circuit Court of Appeals affirmed that finding and confirmed that giving written notice and bringing suit within the prescribed time limits under the Miller Act are strict conditions precedent to recovering under a bond. It went on to reiterate that one of those conditions is providing “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.” Relying on the sub-subcontractor’s asserted date of last performance, the court found that the date of the notice, August 16, 2016, was not “within 90 days” of February 28, 2017. As such, the court found the sub-subcontractor failed to comply with the notice requirement.
Practice Tip: A&C Construction serves as a reminder that it is important to always be familiar with notice requirements contained in remedial statutes like the Miller Act and, even more important, to make sure you comply with those requirements.