Academic journal article Defense Counsel Journal

Annual Survey of Fidelity and Surety Law, 2002, Part II: This Roundup of Recent Cases Covers Public and Private Construction Bonds and Financial Institution Bonds

Academic journal article Defense Counsel Journal

Annual Survey of Fidelity and Surety Law, 2002, Part II: This Roundup of Recent Cases Covers Public and Private Construction Bonds and Financial Institution Bonds

Article excerpt

Edited by Charles W. Linder Jr.

I. PUBLIC CONSTRUCTION BONDS

A. Bonds under Federal Laws

Miller Act claims generally arbitrable under Federal Arbitration Act, but terms of standard AIA contract expressed parties' intent to exclude it from arbitration.

In American Sheet Metal v. Travelers Insurance Co., (1) the U.S. District Court for the Eastern District of Virginia ruled that the parties to a subcontract had expressed their intention to exclude Miller Act claims from arbitration.

American Sheet Metal, a subcontractor that provided labor and materials to replace a roof on a building at the Norfolk Naval Shipyard, asserted a Miller Act claim for $180,545 against Travelers and the general contractor, Mary K. Shah Inc. They counterclaimed for liquidated damages of $480,000, alleging that the subcontractor had delayed completion of the project. In addition, they moved to stay the proceedings and asked the court to require the parties to arbitrate, relying on an arbitration clause in the AIA contractor-subcontractor standard agreement form, Article 6.1 of which stated that the parties had agreed that any "controversy or claim between the contractor and the subcontractor arising out of or related to this subcontract, or the breach thereof, shall be settled by arbitration."

While noting that the Federal Arbitration Act generally makes a Miller Act claim arbitrable, the court said the question before it was whether other language in the subcontract expressed the parties' intent to exclude Miller Act claims from arbitration. The court found that Article 6.5 specifically excluded from arbitration all rights and remedies arising from federal law. Article 6.5 stated: "This Article 6 shall not be deemed a limitation of rights or remedies which the subcontractor may have under federal law ... unless such rights or remedies are expressly waived by the subcontractor." The Miller Act, which is federal legislation, was thus excluded unless expressly waived.

The court found that American Sheet had not expressly waived its right to seek redress in federal court, and the motion to compel arbitration and stay was denied.

Subcontractor denied recovery under Miller Act and Little Miller Acts. Even though project was international airport, party contracting with general contractor was not federal or state agency and therefore subcontractor not involved with public work.

In Blumenthal-Kahb Electric v. American Home Assurance, (2) Blumenthal, an electrical subcontractor on a project to build a pedestrian tunnel at Washington Reagan Airport in Virginia, invoked both the Miller Act and Virginia's Little Miller Act in suing on the general contractor's payment bond to recover payment for work done and materials used on the job. The surety moved to dismiss the lawsuit on the basis that neither the Miller Act nor the Virginia statute applied because the manager of the airport, the Metropolitan Washington Airport Authority, which was the contracting party with the general contractor, San Jose Construction Co., was not a part of the federal or Virginia state governments.

The U.S. District Court for the Eastern District of Virginia agreed, granting the surety's motion to dismiss, and further ruled that the tunnel was not a public work of either the United States or Virginia and therefore not eligible for Miller Act or Little Miller Act protection. In addition, the court found that the Virginia statute specifically exempted the airport authority from the requirement for contractors to furnish a bond pursuant to the Little Miller Act.

B. State and Local Bonds

1. Procedural

Claimant under Connecticut's Little Miller Act did not comply with statute's 180-day notice requirement.

Millgard Corp. v. White Oak Corp., (3) involved Connecticut's Little Miller Act payment bond statute, C.G.S.A. [section] 49-42(b), and its requirements concerning written notice. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.