Subcontract Provisions Did Not Waive Miller Act Rights

Tuesday, July 03, 2018 6:49 am
 
July 2018 - Volume 40 Number 7
 

Miller Act

Pinnacle Crushing & Constr. LLC v. Hartford Fire Ins. Co., 2018 U.S. Dist. Lexis 67965 (Wash. April 23, 2018)

A contractor and a surety were unsuccessful in arguing that dispute provisions incorporated into two project subcontracts waived subcontractors’ rights to seek payment recovery under the Miller Act.

In 2016, Cherokee General Corporation (Cherokee) signed on as the prime contractor for work on a U.S. Army Corps of Engineers (the Corps) construction project. The project took place at the Army training center in Yakima, Washington and involved demolishing the existing air field, expanding the airstrip, and reconstructing the airway and taxiways, as well as other incidental work. In October 2016, Cherokee entered into a subcontract with SCI Infrastructure, LLC (SCI), and SCI in turn also entered into a subcontract with Pinnacle Crushing and Construction, LLC (Pinnacle).

In June 2017, the Corps terminated the prime contract and withheld certain payments because of Cherokee’s failure to make timely progress and provide adequate quality control on the project. Cherokee disputed these actions and claimed the delay and increased costs were due to differing site conditions. Cherokee submitted a claim to the Corps in accordance with its contract and passed through claims from subcontractors SCI and Pinnacle. SCI and Pinnacle also brought suit under the Miller Act payment bond furnished by Cherokee’s surety Hartford Fire Insurance Company (Hartford).

In their Miller Act claims, Pinnacle and SCI argued that they had performed the subcontract work but had not been paid. Pinnacle sought to recover $1,057,597, and SCI sought $2,595,116. Hartford and Cherokee filed a motion to dismiss these claims, arguing that the subcontract waived Pinnacle’s and SCI’s recovery rights under the Miller Act. The district court disagreed and denied the motion.

Claims not ‘unripe’

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