“Two roads diverged in a wood, and . . .” the Prime Contractor had to take both roads at the same time to the same place.
Subcontractor on project for the U.S. Army Corps of Engineers at Ft. Lee, Virginia, sued Prime Contractor and Surety for nonpayment under the Federal Miller Act. Prime and Surety wanted to pause (stay) the litigation while pursuing arbitration. The Court granted a stay of the litigation for the Prime. The Court denied the stay of the litigation for the Surety because:
- The Surety was not obligated under any written agreement to arbitrate and
- The Surety’s liability under the Miller Act is independent of the Prime’s liability (these two facts are true in most instances).
In other words, even if the Prime owes nothing to the Subcontractor, the Surety could still owe payment to the Subcontractor if the lawsuit was timely filed, the work was done, and the Subcontractor was not already paid. In this case, the Prime had to pay for the Surety’s defense (a typical obligation) in the litigation while simultaneously paying for its own arbitration defense.
United States f/u/b/o Duncan Telecom, Inc. v. Pond Constructors, Inc. and Berkley Regional Insurance Co., U.S. Dist. Ct., E.D. Virginia No. 1:16-CV-01086 (October 11, 2016)
To avoid/reduce this dual-track approach/cost, prime contractors can:
- Seek the surety’s prior written agreement to arbitrate;
- Apply the American Arbitration Association’s Fast Track Procedures if the disputed amount is less than $100,000; or
- Require Alternative Dispute Resolution before any litigation (this will work in the Federal First Circuit (ME, NH, MA, and RI), but may not work in all Federal Courts). (Caution: Requiring arbitration of a Miller Act dispute will not pause the one-year statute of limitations to file a Miller Act lawsuit.)
Roads & Bridges | Written Notice
WRITTEN NOTICE | Beware that strict compliance of the contract might be required.
When an owner replaced a contractor for significant safety violations, […]
Roads & Bridges | Mommie Dearest
MOMMY DEAREST | The story of an ESA without a MOM
Nobody enters this world, or a contract, without a mother: There can […]
IIJA | Does Closing a “Giant Loophole” Cost Contractors?
A recent article published by Roads and Bridges magazine reports that the Office of Management and Budget is working to broaden the scope […]
Roads & Bridges | Buy American Plan Gets an Update
BUY AMERICAN PLAN GETS AN UPDATE
The Office of Management and Budget is developing standards to replace the current Buy […]
Roads & Bridges
Where Does the Buck Stop?
WHERE DOES THE BUCK STOP? | A shallow concrete pour leads to an interesting lawsuit
On the desk of President Harry S. Truman […]
Roads & Bridges | Reshaping Agreements
RESHAPING AGREEMENTS | Oral Agreements Must Be Written in Stone
Reuse, reshaping, and/or reapplication of existing materials was the goal in this roadway […]
Pay-If-Paid Unenforceable in Virginia Starting Jan. 1, 2023
As of Jan. 1, 2023, pay-if-paid clauses are unenforceable, regardless of whether a surety/payment bond claim is involved. This is only for […]
How Short is Too Short
A limitations period is too short when it’s unreasonably short.
Construction Contracting Without Relief Clauses During COVID-19
What to do if your contract lacks the parts to handle COVID-19? Considerations for creating new contracts during COVID-19.
Jonathan J. Straw
Partner | KraftsonCaudle.com
Download Jon’s Bio