Timing Is Everything: Miller Act Notice Defect Saves Surety

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Timing Is Everything: Miller Act Notice Defect Saves SuretyThe Miller Act protects subcontractors from nonpayment on federal projects by requiring prime contractors to issue payment bonds. To obtain relief under the Miller Act, a subcontractor must (1) give the prime contractor written notice of its claim within 90 days of the date it last performed work on a federal project and (2) file suit against the bond for any outstanding nonpayment within one year of the date work was last performed. A subcontractor’s non-compliance with these timing requirements, when applied strictly, can allow a surety to escape liability. In A&C Constr. & Installation, Co. WLL v. Zurich American Insurance Company (decided June 30, 2020), the surety, Zurich, was able to do just that. There, the U.S. Court of Appeals for the Seventh Circuit upheld a summary judgment ruling dismissing a sub-subcontractor’s claim for not complying with the Miller Act notice and suit timing requirements.

The Facts

Before the trial court, the surety moved for summary judgment against A&C Construction, a sub-subcontractor on a U.S. Army Corps of Engineers project in Qatar. Zurich argued A&C last performed work on May 16, 2016, but did not provide notice of its claim until August 16, 2016 (91 days later) and did not file suit until June 7, 2017, more than a year after it last performed work on the project. A&C countered by arguing it continued leasing equipment on the project until February 28, 2017, so its rights under the Miller Act did not accrue until that later date.

Finding for the surety, the trial court noted that the later date of last performance presented by A&C did not cure the defect with respect to the initial 90-day notice requirement. Even assuming A&C last performed work for purposes of its Miller Act claim on February 28, 2017, August 16, 2016, is not “within 90 days” of that February date. A&C, thus, did not satisfy the condition that notice be filed within 90 days of last performing work.

On appeal, the Seventh Circuit agreed with the trial court. Per the Seventh Circuit, the 90-day notice requirement was a strict precondition for filing suit under the Miller Act, the statute was unambiguous as written, and the court had to enforce the statute as written.

Lessons from A&C Construction

Like lien notice and filing requirements, Miller Act timing requirements can be, and often are, strictly enforced. Subcontractors and second-tier vendors should be mindful of meeting these preconditions to preserve payment security on their claims. Conversely, general contractors and sureties may be able to use these timing requirements to their advantage. Dismissal of the surety from a subcontractor dispute can simplify a dispute, lessen a contractor’s litigation expenses, and, of course, avoid any future payment dispute with the surety.

If you have questions about the Miller Act or subcontractor disputes on federal projects, please feel free to contact Doug Patin, Aron Beezley, or Aman Kahlon.