Claim For Attorney’s Fees Under Miller Act Payment Bond Claim With A Twist
June 28, 2022
In this Surety Today blog post we will provide a Case Law Note to consider the issue of a claim for attorney’s fees that was asserted against the payment bond surety under the Miller Act.
FED. ENGINEERS & CONSTRUCTORS, INC. V. RELYANT GLOB., LLC, No. 3:19-CV-73-KAC-JEM, 2022 WL 1721454 (E.D. Tenn. May 27, 2022)
This case addresses a unique argument that attorney’s fees permitted under a state law may be recoverable against a Miller Act surety. Spoiler alert: The Court says – Nope! This case arose from the termination of a subcontract to renovate a United States Air Force dormitory in Missouri. The United States Army Corps of Engineers (“USACE”) hired Relyant Global, LLC (“Relyant”) as the prime contractor for the renovation project. Relyant subcontracted with Federal Engineers and Constructors, Inc. (“Federal”) for the project. Lexon Insurance Company (“Lexon”) was the surety and issued bonds with Relyant as required by the Miller Act. After approximately one year, Relyant terminated the subcontract. In response to the termination, Federal filed suit asserting various claims related to an alleged breach of contract including violation of the federal and Tennessee Prompt Payment Acts (“TPPA”) and sought punitive damages and attorney’s fees. Relyant and Lexon moved for judgment on the pleadings.
The Court dismissed Federal’s federal Prompt Payment Act claims because the Act does not afford private causes of action. While finding a potential cause of action under the TPPA, the Court dismissed Federal’s claim for punitive damages. In the counts of the complaint asserting violation of the TPPA and the Miller Act, Federal sought recovery of attorney’s fees and costs. Relyant and Lexon argued that as a matter of law, the Subcontract precluded Federal from recovering attorney’s fees and legal expenses. The Subcontract provided that “[i]f a dispute arises relating to the performance of the Work covered by this Agreement, and legal or other costs are incurred by the Parties, it is agreed that each part shall be responsible for its own court costs, attorney’s fees, and any other related legal expenses.” Federal countered that the TPPA, provided that “[r]easonable attorney’s fees may be awarded against the nonprevailing party; provided, that such nonprevailing party has acted in bad faith.” The TPPA further provided that its provisions may not be waived by contract and are applicable to all private and state contracts. With respect to the Miller Act claim, Federal asserted that Lexon’s liability is that of Relyant’s, and because Relyant may be liable for attorney’s fees and costs under the TPPA, Lexon may be liable as well. Lexon countered that Miller Act claims cannot include a request for the recovery of attorney’s fees based on state law.
In analyzing the attorney fee issue, the Court began by noting that as an initial matter, the TPPA does not apply to insurance companies and therefore could not be the basis for a recovery of attorney’s fees against Lexon. (As a side bar – I take umbridge at the Court’s equating a surety with an insurance company, see my prior blog post on the issue). Further, the Court observed that Miller Act remedies are generally a matter of federal law. F.D. Rich. Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 127-28 (1974), superseded by statute on other grounds, 31 U.S.C. § 3905(j). The Supreme Court in F.D. Rich stated “The Miller Act provides a federal cause of action, and the scope of the remedy as well as the substance of the rights created thereby is a matter of federal not state law.” Id. at 127. The Supreme Court also emphasized that federal courts should be free “from the morass of trying to divine a ‘state policy’ as to the award of attorneys’ fees in suits on construction bonds.” Id. at 128. The Relyant Court noted, “the Miller Act’s uniform national rule better serves the expectations of potential litigants, especially because federal contracts often involve construction in multiple states and—as is the case here—parties often have little connection to the state where the project is located.” Id. at 127. Thus, the Court held that federal law provides the exclusive remedies under the Miller Act. The Court further held that the Miller Act does not authorize the recovery of attorney’s fees. Id. at 126.
However, the Relyant Court’s analysis did not end there because it noted that attorney’s fees may also be awarded for a Miller Act claim based on the express provisions of the relevant parties’ contract. See Owners Ins. Co. v. Fid. & Deposit Co. of Md., 21-cv-184,2021 WL 3525174, at *6 (E.D. Mo. Aug. 10, 2021) (collecting cases). The Court stated that “[i]f the Parties’ subcontract expressly provided for payment of attorney’s fees, this language could authorize the payment of contractually-obligated attorney’s fees.” See Paige Int’l, Inc. v. XL Specialty Ins. Co., 267 F. Supp. 3d 205, 213 (D.D.C. 2017). As noted above, the Subcontract waived recovery of attorney’s fees and Lexon’s payment bond did not mention attorney’s fees. Therefore, there was no contractual basis for the recovery of attorney’s fees. Accordingly, the Court dismissed the claim for attorney’s fees against Lexon.
For a good discussion of the surety and attorney’s fees listen to our Surety Today Podcast from March 14, 2022. If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (email@example.com) or any member of the Surety and Fidelity Practice Group.
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