Subcontract Provision Requiring Subcontractor to Pass Through its Claims Does Not Prevent the Subcontractor From Suing to Recover Against Miller Act Bond

Pinnacle Crushing & Constr. LLC v. Hartford Fire Ins. Co., 2018 U.S. Dist. LEXIS 67965 (W.D. Wa. Apr. 23, 2018)

The Army Corps of Engineers (the “Corps”), as owner, and Cherokee General Corporation (“CGC”), as prime contractor, entered into a contract (the “Contract”) in connection with work at the Yakima Training Center (the “Project”).  CGC subcontracted with SCI Infrastructure (“SCI”) for certain work related to the Project (the “SCI Subcontract”), and SCI subcontracted with Pinnacle Crushing & Construction, LLC (“Pinnacle”) (the “Pinnacle Subcontract”).  CGC obtained a Miller Act payment bond (the “Bond”) from Hartford Insurance Co. (the “Surety”) to provide coverage for labor and materials supplied in carrying out the work.

After the Corps terminated the Contract with CGC, CGC submitted a claim under the Contracts Disputes Act.  As required by the SCI Subcontract, CGC asserted SCI’s pass through claims against the Corps, which included amounts allegedly owed to both SCI and Pinnacle.

Separately, SCI and Pinnacle sued CGC and the Surety to recover under the Bond for the work they performed under the subcontracts, but for which CGC had not paid them. Continue reading “Subcontract Provision Requiring Subcontractor to Pass Through its Claims Does Not Prevent the Subcontractor From Suing to Recover Against Miller Act Bond”

Federal Court in Alabama Rules that 1999 Amendment to the Miller Act Does Not Preclude Arbitration of Underlying Claims

United States v. Int’l Fid. Ins. Co., No. 16-0472-WS-C, 2017 U.S. Dist. LEXIS 16791 (S.D. Ala. Feb. 7, 2017)

This action arose out of a payment dispute between Bay South Limited, Inc. (“Bay South”) and Stephens Construction & Concrete, Inc. (“Stephens”). Bay South entered into two subcontracts with Stephens, whereby Bay South agreed to furnish labor and materials to Stephens on two federal construction projects.  In connection therewith, International Fidelity Insurance Company (“Fidelity”) issued payment bonds (the “Bonds”) to Stephens.  Bay South filed a complaint in federal court to assert claims against the Bonds under the Miller Act (40 U.S.C. §3133), as well as other claims.  Stephens sought to compel arbitration of Bay South’s claims, pursuant to the arbitration provision in the subcontracts, which provided:

“In the event of a dispute arising between [Stephens] and [Bay South] under the Subcontract Agreement, the dispute shall be settled by arbitration in accordance with the Construction Industry Rules of the American Arbitration Association then in effect …”

Bay South argued that the 1999 Amendment to the Miller Act prohibits such claims from being arbitrated, and, in the alternative, even if these claims may be arbitrated generally, Bay South’s specific claims are not subject to arbitration because they are not within the scope of the parties’ arbitration agreement. Continue reading “Federal Court in Alabama Rules that 1999 Amendment to the Miller Act Does Not Preclude Arbitration of Underlying Claims”

Kentucky Appellate Court Holds That a Contractor May Pursue Claim of Negligent Misrepresentation Against Architect Despite Lack of Contract, the Economic Loss Rule, and Project Waivers

D.W. Wilburn, Inc. v. K. Norman Berry Assocs., No. 2015-CA-001254-MR, 2016 Ky. App. Lexis 206 (Ky. Ct. App. Dec. 22, 2016)

This case arose out of a construction project in which the Oldham County Board of Education (the “Board”) was the owner, K. Norman Berry Associates (“KNBA”) was the architect and D.W. Wilburn (“Wilburn”) was the general contractor. The Board’s contract with Wilburn provided that: (i) change orders must be signed by the architect, contractor, and owner; (ii) claims for additional time, money or delay damages must be submitted within twenty-one days of the event giving rise to the claim; (iii) change orders resolved all claims for time and money relating to the scope of the change order, and (iv) the contractor’s acceptance of final payment waived its claims, except those identified in writing as unsettled at the time of final application for payment.  Pursuant to the contract, the parties executed twenty-one change orders and Wilburn submitted a final payment application and closeout form.

Later, Wilburn was sued by one of its subcontractors for delay to the project. Wilburn then sued KNBA in a third party complaint asserting that KNBA was liable for the delay as a result of its defective plans and specifications.  The trial court granted KNBA summary judgment, dismissing Wilburn’s claim for lack of contractual privity.  Wilburn appealed, and the Court of Appeals reversed. Continue reading “Kentucky Appellate Court Holds That a Contractor May Pursue Claim of Negligent Misrepresentation Against Architect Despite Lack of Contract, the Economic Loss Rule, and Project Waivers”