By: Stearns, Roberts & Guttentag, LLC

Federally owned property is exempt from liens that normally protect subcontractors, suppliers and laborers from nonpayment. As such the Miller Act, Title 40 § U.S.C. 3131, was designed to protect subcontractors and suppliers providing labor and materials to a Federal project, and requires contractors to post a bond to ensure payment to persons supplying labor and materials on any government construction contract exceeding $100,000.

In Tarmac America, LLC (“Tarmac”) v. Pro Way Paving Systems, LLC (“Pro Way”), 2013 WL 212703 (M.D. Fla. 2013), Tarmac was a third tier supplier who contracted with Pro Way, a second tier subcontractor, for construction of the MacDill Air Force Base, to provide concrete supplies to the Project. The Contractor, R.A. Connelly, Inc. obtained two Miller Act payment bonds from surety, Ullico Casualty Company (“Ullico”), to secure payment on the Project. Vollmer, Pro Way’s manager, also signed a credit agreement between Tarmac and Pro Way.

After Tarmac remained unpaid for work performed on the Project, it filed a five count action in the Federal Court, in the Middle District of Florida: Count I was brought against the surety, Ullico, for the Miller Act claim, Counts II, IV and V were brought against the subcontractor, Pro Way, for breach of contract, account stated and open account, and Count III was brought individually against, Vollmer, for breach of guaranty alleging that Vollmer guaranteed payment to Tarmac by signing the credit agreement. In turn, Pro Way filed a cross claim against the surety, Ullico, and Vollmer brought a cross claim against Pro Way.

Tarmac moved for summary judgment on Counts II and III against Pro Way for breach of contract, and against Vollmer for breach of guaranty. Pro Way and Vollmer conceded to Counts II and III, but requested that the order not be entered as “final” pending resolution of Pro Way and Tarmac’s claims against the surety, Ullico. Although Tarmac named Ullico as a direct defendant in its amended complaint, and at the time its summary judgment was filed, Tarmac thereafter dismissed its count directly against the surety, Ullico.

The Court recognized that it must make two determinations to decide whether a judgment may be certified as “final” under Rule 54(b):

(1) “First, the court must determine that its final judgment is, in fact, both final and a judgment. That is, the court’s decision must be final in the sense that it is an ultimate disposition of an individual claim entered in the course of a multiple claims action, and a judgment in the sense that it is a decision upon a cognizable claim for relief.”
(2) Second, the Court must determine there is ” ‘no just reason for delay’ in certifying [the judgment] as final and immediately appealable.” . . . . “Consideration of the former factor is necessary to ensure that application of the Rule effectively preserves the historic federal policy against piecemeal appeals.” Consideration of the latter factor “serves to limit Rule 54(b) certification to instances in which immediate appeal would alleviate some danger of hardship or injustice associated with delay.”

Tarmac argued that there was no just reason to delay because granting summary final judgment would promote judicial economy by resolving all of Tarmac’s claims. Conversely, Pro Way and Vollmer argued that the purpose of the Miller Act provides a just reason to delay entering a final judgment while cross-claims and intervener claims are still pending against the surety, Ullico. The Court recognized that not only Tarmac, as the supplier, but also Pro Way (and Vollmer), as the subcontractor, are equally entitled to protection afforded by the Miller Act. Thus, the court granted the summary judgment, but nevertheless found that relevant equitable concerns and judicial administrative interests provided just reason to delay certifying the summary judgment as final.

Likewise, the court considered summary judgment on Counts IV and V against Pro Way for account stated and open account. Tarmac submitted eight invoices and consistently alleged an amount due of $7,995.95. Pro Way argued that the eighth invoice included an amount of $422.65 for a different project that was paid, and argued that the invoice contained a disputed fact that should prevent entry of summary judgment. The court rejected Pro Way’s argument because both parties agreed that Tarmac was owed an undisputed amount of $7,881.72, and therefore, granted summary judgment to Tarmac against Pro Way, reserving judgment concerning costs, interest, and attorneys’ fees.

This case illustrates that Miller Act bonds are designed to protect both subcontractors and suppliers for payment, and provide an alternative remedy to a lien on a Federal project. Although Tarmac dismissed its suit directly against the surety, Ullico, the judgment granted by the court in favor of Tarmac and against Pro Way, likewise affords Pro Way (and Vollmer) similar protections through a cross claim directly against the surety, Ullico, for amounts that remain unpaid to both the second tier subcontractor, and the third tier, supplier.