Surety Owes $750k After Failure To Prove Sub's Collusion And Interference

Tuesday, February 05, 2019 8:51 am
 
February 2019 - Volume 41 Number 2
 

Tortious Interference

Pritchett Control, Inc. v. Hartford Accident & Indem. Co., 2019 U.S. Dist. Lexis 5161 (D.Md. January 10, 2019)

A surety couldn’t offset its state Little Miller Act obligation to pay an unpaid sub despite allegations that the sub violated state procurement law.

In August 2013, the Maryland Transit Administration (MTA) awarded James W. Ancel, Inc. (JWA) a fixed-price contract in the amount of $41,154,270 for a Baltimore bus facility modernization project. The contract required the procurement and installation of heating, ventilation, and air condition (HVAC) controls equipment. JWA entered into a subcontract with Pritchett Control, Inc. (Pritchett) for the HVAC work. 

During Pritchett’s performance, JWA requested additional work from the sub and executed numerous associated change orders, including a small deduction in the total subcontract price for work completed by a different subcontractor. The total subcontract value came to $750,397. But JWA didn’t pay. In 2017, Pritchett sued Hartford Accident and Indemnity Company (Hartford), the project’s payment bond surety, under the Maryland Little Miller Act, to recover payment for its work.  Hartford also didn’t pay and instead claimed tortious wrongdoing by Pritchett. It argued that the sub interfered with JWA’s rights under the prime contract and obtained the subcontract through illegal means---i.e., by misrepresenting itself as the sole supplier of required equipment. 

Pritchett filed a motion for summary judgment seeking payment of the outstanding $750,397 balance plus interest. The surety moved to dismiss, but the district court granted Pritchett’s motion.

The Miller Act liability question

Hartford argued that Pritchett was not entitled to payment under the Little Miller Act (though its claims met all other requirements) because the sub violated Maryland procurement law. As a result, the subcontract was unenforceable. Hartford invoked the gener[..]

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