By: Daniel P. Scholz, Esq. of Finch, Thornton & Baird, LLP.
Recently, the Ninth Circuit Court of Appeals ruled that a supplier’s notice of claim under the Miller Act (the “Act”) allows recovery for all equipment it supplied to a federal project. In Ramona Equipment Rental v. Carolina Casualty Insurance, the supplier had supplied rental equipment to a subcontractor on a federal construction project on an open book account basis. The rentals were provided to the worksite over a six-month period, but the subcontractor did not pay the supplier.
The supplier served the general contractor and its Miller Act payment bond surety with its notice of claim less than ninety (90) days from the last day it supplied equipment to the project. The general contractor and the surety argued at trial that the ninety-day notice was untimely as to equipment furnished to the project more than ninety days before service of the notice, effectively cutting the supplier’s claim in half.
In this case of first impression for the Ninth Circuit, the Court analyzed the Act’s ninety-day notice provision (40 U.S.C. section 1331(b)(2)), which provides, in pertinent part:
[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 Court found that “if all the goods in a series of deliveries by a supplier on an open book account are used on the same government project, then the ninety-day notice is timely as to all of the deliveries if it is given within ninety days from the last delivery.” Thus, the supplier’s notice was timely and the general contractor and its surety were liable for all equipment supplied to the project. The Court rejected any contention that the supplier’s claim was limited to equipment rented within ninety (90) days from service of the notice. The Court reasoned that such a limitation would run counter to the federal public policy behind the Act, namely to protect and advance the payment rights of suppliers and laborers on federal construction projects.
The practical effect of this ruling means second-tier subcontractors and suppliers on federal projects have greater payment protections under the Act. This ruling, however, does not excuse compliance with the notice requirements of the Act. Second-tier subcontractors and suppliers must timely comply with the ninety (90) day notice of claim requirements of the Act. We invite you to contact Finch, Thornton & Baird at www.ftblaw.com to learn more about the steps you can take to prosecute and/or defend Miller Act claims.
