Sub or Sub-Sub? Hierarchy Matters To Sub's Miller Act and Prompt Pay Claims

Friday, August 03, 2018 3:47 am
August 2018 - Volume 40 Number 8

Payment --- Bonds

RAMJ Constr., LLC v. Seola Enters., 2018 U.S. Dist. Lexis 110730 (M.D. La. July 2, 2018)

When a general contractor and a surety attempted to dismiss multiple claims, including Miller Act, Breach of Contract and Prompt Payment, the court ruled in its favor---mostly.

Covenant General Contractors, Inc. (Covenant) was the prime contractor on a U.S. Army Corps of Engineers (Corps) project to haul and install mobile emergency housing units. Covenant provided a Miller Act payment bond for the project in the amount of $15 million, issued by United Fire and Casualty Company (United Fire). RAMJ Construction, L.L.C. (RAMJ), a project sub-subcontractor, made a claim on that bond, alleging that it performed $393,000 worth of project work for which it was never paid.

RAMJ claimed it sent a notice of amounts due to the subcontractor that had hired it for the project, Seola Enterprises, Inc. (Seola)---as well as to Covenant and United Fire. RAMJ received no response. It then sued those three parties, along with Quaternary Resource Investigations, LLC (QRI), the party that acted as project manager under a subcontract with Covenant. RAMJ alleged breach of contract and violations of Louisiana prompt payment law and the Miller Act. Seola is not a party to this motion; the remaining three parties (collectively, the defendants) moved to dismiss RAMJ’s claims. 

The court sided with RAMJ and denied the motion to dismiss---except as to the prompt payment claim.

An oral payment obligation may have existed

The defendants argued that RAMJ did not have a contract with any of them. RAMJ countered that it did have a contract with Covenant and QRI “through oral agreements and course of dealings.”

In Louisiana, a contract is “an agreement by two or more parties whereby obligations are created, modified or extinguished.” La. Civ. Code Ann. Art. 1906. And the party who demands performance of a contract must prove that it exists. L[..]