US District Court in Colorado Holds Subcontractor’s Miller Act Rights Unaffected by Subcontract’s “Incorporation by Reference” and “Pay Upon Payment” Clauses

United States of America for the Use of DDC Interiors, Inc. v. Dawson Construction Co., Inc.,
No. 94-B-2699, 1995 U.S. Dist. LEXIS 10643 (D. Colo. July 25, 1995).

Waiver of subcontractor’s right to sue prime contractor and payment bond surety for extra work under the Miller Act must be “clear and express.” Minimally, an effective waiver of rights under the Miller Act must specifically mention the Miller Act and unambiguously express an intention to waive said rights.

Plaintiff DDC Interiors, Inc. (“DDC”) subcontracted with Defendant Dawson Construction Co., Inc. (“Dawson”) to furnish labor, materials and equipment for framing, drywalling and related work on a courthouse renovation project for the United States General Services Administration (the “GSA”) in Denver, Colorado. Plaintiff filed suit against Dawson as principal and surety on a payment bond (issued by defendant USF&G) for a $600,000 balance due DDC for allegedly approved change order work. Dawson as the general contractor moved to stay the action pending the outcome of its dispute with the GSA. The court held that absent a clear and express waiver, a government subcontractor does not surrender its right to seek prompt payment under the Miller Act.

The court found that subcontract language generally incorporating by reference the “plans, specifications and amendments” to the prime contract between Dawson and the GSA, without specific reference to the disputes clause (which obligates the subcontractor to await payment until resolution of whatever disputes process the general contractor may be pursuing against the owner) does not effectuate a waiver of the subcontractor’s Miller Act rights.

Similarly, the court found that a subcontract “pa