Maryland Federal Court Strictly Enforces the Miller Act's 90-Day Notice Requirement for Second Tier Subcontractors

The federal Miller Act, 40 U.S.C. §§ 3131-3134, requires a second tier subcontractor (a subcontractor or supplier with no direct relationship with the prime contractor) who wants to file suit on a payment bond in connection with a federal construction project to provide written notice of their claim within 90 days from the last date on which it performed labor or furnished or supplied material for which the claim is made. The purpose of the Miller Act’s 90-day notice requirement “is to allow general contractors to make final payments to subcontractors after waiting a reasonable amount of time to determine whether there are outstanding claims by second-tier subcontractors.”  United States ex rel Alban Tractor Company, Inc. v. Hudson Ins. Co., 2013 WL 509151 (Civil No. CCB-12-1538) (D. Md. Feb. 11, 2013) (slip opinion).

In Alban Tractor Company, the U.S. District Court for the District of Maryland examined, and ultimately rejected, a payment bond claimant’s theory of recovery based on what the claimant termed an “amended” claim notice that would have extended the Miller Act’s 90-day notice to allow the second tier subcontractor to recover when it last furnished equipment more than 100 days prior to its notice.

The lawsuit arose out of a project for the construction and repair of the Fort Meade Veteran’s Outpatient Clinic.  The plaintiff, Alban Tractor Co. (“Alban”), was a second tier subcontractor that rented equipment to Kayden Premier Enterprises, Inc. (“Kayden”), a subcontractor with a direct contractual relationship with the prime contractor.  When Kayden failed to pay Alban, Alban gave the prime contractor and surety notice of its Miller Act claim on August 4, 2011, to recover payment for equipment and materials furnished between February 1, 2011 and May 10, 2011.

The following month, Alban, Kayden, and the prime contractor agreed to a joint check agreement, under which Alban received payment for most of its outstanding invoices.  Having been substantially paid, Alban agreed to rent additional equipment to Kayden, which it did in December 2011.  However, Alban was again not paid by Kayden.  In an attempt to collect payment on the equipment it last supplied in December 2011, Alban served an “amended” notice on April 12, 2012, claiming for both amounts remaining due from its August notice and the new rental amounts accrued in December.  Alban then filed suit for all outstanding payments.

While the Court found that Alban’s August notice was timely as to the unpaid amounts incurred prior to that notice, Alban’s “amended” April 2012 notice seeking to claim amounts due in December 2011 was held to be untimely.  The April notice sought to recover for equipment that Kayden had returned to Alban in late December, more than 90 days prior to the April notice.  The Court rejected Alban’s argument that the April 2012 notice did not constitute a new claim, but rather “amended and related back” to the August 2011 notice.  The Court explained that adopting such a theory would allow claimants to file an amended notice months or years after a project has been completed, and therefore flout the purpose of the Miller Act.  The Court further advised that second tier subcontractors do not need to provide separate notices every 90 days, but rather can wait until within 90 days of performing the last of the labor or furnishing or supplying the last of the material, and then provide a single notice.  In this case then, Alban would have needed to give notice in late March 2012, to recover on the equipment that was returned to it in late December 2011, as well as the unpaid equipment rentals from the previous summer.

This case reinforces the stringent requirements that second tier subcontractors must comply with in order to maintain a Miller Act claim against a payment bond.  BrigliaMcLaughlin is frequently called upon to both prepare and respond to Miller Act claims.  To learn more about BrigliaMcLaughlin’s Construction Risk Management and Litigation Practice, click here.