United States ex rel. Adams Steel, LLC v. Elkins Contractors, Inc.

225 F. Supp. 3d 351, 2016 U.S. Dist. LEXIS 188426
CourtDistrict Court, D. South Carolina
DecidedMarch 3, 2016
DocketCivil Action No. 2:15-85-RMG
StatusPublished

This text of 225 F. Supp. 3d 351 (United States ex rel. Adams Steel, LLC v. Elkins Contractors, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Adams Steel, LLC v. Elkins Contractors, Inc., 225 F. Supp. 3d 351, 2016 U.S. Dist. LEXIS 188426 (D.S.C. 2016).

Opinion

ORDER

Richard Mark Gergel, United States District Court Judge

This matter is before the Court on Plaintiff Continental Casualty Company’s motion for summary judgment. For the reasons given in this Order, the Court denies the motion.

I. Background

A. The Miller Act

This is an action on a payment bond under the Miller Act, 40 U.S.C. §§ 3131-34. The Miller Act applies to contracts awarded for the construction, alteration, or repair of any public facility of the United States Government. 40 U.S.C. § 3131(b). It requires prime contractors on government construction contracts exceeding $150,000 to post performance bonds, guaranteeing performance of their contractual duties, and payment bonds, guaranteeing payment of their subcontractors. See 48 C.F.R. § 28.102.1

[354]*354A subcontractor of the prime contractor who has not been paid within ninety days of the day when it last furnished labor or materials may bring a civil action on the payment bond for the amount unpaid. 40 U.S.C. § 3133(b)(1). A subcontractor of a subcontractor (a “second-tier” subcontractor) may bring a civil action on the payment bond for the amount unpaid on written notice to the prime contractor given within ninety days of the day when it last furnished labor or materials. 40 U.S.C. § 3133(b)(2). The notice to the prime contractor must be served “by any means that provides written, third-party verification of delivery to the contractor at place the contractor maintains an office or conducts business or at the contractor’s residence” or by the same means by which the U.S. marshal may serve summons. Id. Subcontractors of those subcontractors, i.e., “third-tier” subcontractors, may not maintain a Miller Act action on a payment bond. United States ex rel. Glob. Bldg. Supply, Inc. v. WNH Ltd. P’ship, 995 F.2d 515, 518 (4th Cir. 1993). No action may be commenced “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 action.” 40 U.S.C. § 3133(b)(4).

The Miller Act protects the government, by requiring contractors on government construction projects to be bonded, and it protects subcontractors,' who might otherwise be reluctant to work on government projects, because the government’s sovereign immunity prevents mechanic’s liens. See Glob. Bldg. Supply, 995 F.2d at 517-18, “Unquestionably, the Miller Act is highly remedial in nature and is ‘entitled to a liberal construction and application in order properly to effectuate the Congressional intent to protect those whose labor and materials go into public projects.’” United States ex rel. Clark-Fontana Paint Co. v. Glassman Const. Co., 397 F.2d 8, 10 (4th Cir. 1968) (quoting Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102, 107, 64 S.Ct. 890, 88 L.Ed. 1163 (1944)); see also United States ex rel. Honeywell, Inc. v. A & L Mech. Contractors, Inc., 677 F.2d 383, 386 (4th Cir. 1982) (“The principal purpose of the Miller Act is the protection of persons supplying labor and materials to subcontractors on federal construction projects. To that end, the Supreme Court has held that the Miller Act should receive a liberal construction.”)

Enforcement of the ninety-day notice period in which a second-tier subcontractor must provide notice of claim to the prime contractor, however, is “exempted from liberal construction,” Pepper Burns Insulation, Inc. v. Artco Corp., 970 F.2d 1340, 1343 (4th Cir. 1982), and is subject to “[sjtrict enforcement,” Honeywell, 677 F.2d 383 at 386. The ninety-day notice period “provides contractors with a date certain after which they are no longer at risk of liability to second-tier subcontractors,” which facilitates “closure of the project finances.” Pepper Burns, 970 F.2d at 1343. While subcontractors (who are exempt from the notice requirement) submit their invoices directly to the prime contractor, second-tier subcontractors submit their invoices to the subcontractors and therefore the prime contractor has no notice of the outstanding invoices unless notice is provided by the second-tier subcontractors. The notice period allows prime contractors to make final payments to their subcontractors with knowledge that there can be no outstanding claims by second-tier subcontractors. Thus it is a strict requirement that notice actually be “put into the possession of the [prime] contractor” within the ninety-day period. Id. The second-tier subcontractor “must [355]*355sustain the burden of proving receipt [of notice] and it has been uniformly held’ that this fact may be proved as any other fact.” United States ex rel. Twin Cty. Transit Mix, Inc. v. R. P. McTeague Constr. Corp., 264 F.Supp. 619, 620 (E.D.N.Y. 1967).

The Miller Act’s notice requirements are not jurisdictional, however. See, e.g., United States ex rel. Skip Kirchdorfer, Inc. v. M.J. Kelley Corp., 995 F.2d 656, 659 (6th Cir. 1993); United States ex rel. Bernard Lumber Co. v. Lanier-Gervais Corp., 896 F.2d 162, 164 (5th Cir. 1990); United States ex rel. Nelson v. Reliance Ins. Co., 436 F.2d 1366, 1370 (10th Cir. 1971); United States ex rel. Humble Oil & Ref. Co. v. Fidelity & Casualty Co., 402 F.2d 893, 897-900 (4th Cir. 1968); United States ex rel. E.E. Black, Ltd. v. Price-McNemar Constr. Co., 320 F.2d 663, 665-66 (9th Cir. 1963). Thus, although the notice requirement is strictly enforced, it is nevertheless subject to equitable principles. See Humble Oil & Refining, 402 F.2d at 897-99; United States ex rel. Gulfport Piping Co. v. Monaco & Son, Inc., 336 F.2d 636, 636 (4th Cir. 1964); Datastaff Tech. Grp., Inc. v. Centex Const. Co., 528 F.Supp.2d 587, 594 (E.D. Va. 2007) (collecting cases).

B. Factual Background

In July 2012, Defendant Ikhana, LLC (“Ikhana”) contracted with the United States Government to serve as general contractor for the. construction of the Red Horse Readiness and Training Facility (the “Project”) at Joint Base Charleston in South Carolina. (Compl. ¶8.) The Miller Act required Ikhana to furnish payment and performance bonds.

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Bluebook (online)
225 F. Supp. 3d 351, 2016 U.S. Dist. LEXIS 188426, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-adams-steel-llc-v-elkins-contractors-inc-scd-2016.