In an
effort to protect subcontractors on public works projects, the District of
Columbia joined other states in enacting a statutory structure entitled the
‘District of Columbia Little Miller Act’ (DCLMA). This and the other Little Miller Acts
throughout the country are modeled after the Federal Miller Act which requires
a general contractor on a public works project to secure a payment bond before
work can commence on a project. The
intent of the Little Miller Acts is to provide subcontractors who do not
received full payment from a general contractor a means to recover when a
mechanic’s lien is not available due to the owner’s sovereign immunity
protection. Like the Federal Miller Act,
the DCLMA has a 90 day accrual window from the last day of labor or material furnished until a subcontractor or supplier can submit a claim on
a payment bond if full payment is not received.
This 90 day accrual period is to ensure a prompt resolution for the
subcontractor. In Strittmatter Metro,LLC v. Fidelity and Deposit Company of Maryland et al, U.S. District Court
for D.C. ruled on whether a DCLMA payment bond claimant must exhaust dispute
resolution procedures set out in the prime contract between the owner and
general contractor before it can recover for non-payment.
The
plaintiff in Strittmatter is a site
contractor who was contracted by a general contractor (GC) for work at the Ballou
Senior High School in the amount of $4.9 million. The Master Subcontract Agreement contained provisions
allowing for the expansion of the scope of work as the project progressed. The
plaintiff claims that it performed its contractual scope of work and is owed
additional payments in excess of $1.2 million and has made a claim on the GC
furnished payment bond in accordance with the DCLMA. The GC’s prime contract with the District
contains dispute resolution procedures which include mandatory mediation. If
mediation fails, all disputes are then brought to the District of Columbia’s
Board of Contract Appeals. The GC has
initiated a claim against the District and entered into this mediation. The GC’s claim is inclusive of the
plaintiff’s $1.2 million claim as well. The defendant is the payment bond
issuer and has submitted a motion to dismiss or stay the DCLMA action pending
resolution of the GC’s claim with the District.
The
defendant argues that due to a clause in the plaintiff’s subcontract which
fully integrates the terms of GC’s prime contract, the plaintiff must enter
into the mediation and District of Columbia’s Board of Contract Appeals
procedures outlined in the GC’s contract.
To counter, the plaintiff points to a clause in the prime contract that
states the District is not in privity with any subcontractors and as such
subcontractors cannot seek compensation from the District. Plaintiff contends that as a result of this,
it is not possible for it to enter into a dispute resolution procedure that is
not available to it. The Court reviewed Miller Act case law and found that the
intent of the Miller Act is to deal with this lack of privity between the government
and a subcontractor; the payment bond is there to bridge that gap and protect
the subcontractor. The Court further
found that the District’s prime contract language disavowing subcontractor
claims and payment only further proves the intent of the Miller Act.
Accordingly, the court rejected the requirement that the plaintiff enter into
mandatory dispute resolution procedures before initiating a DCLMA claim.
The
Court next reviewed the defendant’s assertion that the plaintiff must await the
completion of the GC’s dispute resolution procedures with the District before
it can present a DCLMA claim. The Court
too rejected this argument by stating that the plaintiff lacks control over any
proceeding involving the GC and District, even with the inclusion of the
plaintiff’s $1.2 million claim. The
Court reasoned that such waiting period is counter to the “express purpose of
the DCLMA to provide a prompt remedy to an aggrieved subcontractor.” If the
plaintiff were required to wait for the GC’s dispute resolution process to complete,
and the GC did not prevail with plaintiff’s claim, the Court mused the
plaintiff might be put in a situation where it would statutorily time barred
from recovery under the DCLMA. Putting a
subcontractor in such a situation would once again run counter to the intent of
the Miller Act.
Accordingly,
the Court denied the Defendant’s Motion to Dismiss or Stay the Proceeding.
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The author, Brendan Carter, is a contributor to The Dispute Resolver and a former Student Division Liaison to the Forum on Construction Law. He is an attorney and a Senior Consultant with Navigant’s Global Construction Practice based in Boston, MA. He may be contacted at 617.748.8311 or brendan.carter@navigant.com
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