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CHICAGO RIGGING CO. v. UNIROYAL CHEM. CO.

July 17, 1989

CHICAGO RIGGING COMPANY, Plaintiff,
v.
UNIROYAL CHEMICAL CO., INC., Defendant



The opinion of the court was delivered by: NORDBERG

 JOHN A. NORDBERG, UNITED STATES DISTRICT JUDGE

 I. INTRODUCTION

 The plaintiff, Chicago Rigging Co., has brought this suit pursuant to the Miller Act, 40 U.S.C. §§ 270a-270f (1982), which governs the rights of persons furnishing labor or materials in the construction, alteration, or repair of any public building or public work of the United States. The defendant, Uniroyal Chemical Co., Inc. (Uniroyal), was awarded a government contract for the demolition of certain buildings, but did not require the subcontractor of the project, D.A. Principali Engineering, Inc. (PEI), to obtain a payment bond. The plaintiff, who subcontracted with PEI to perform all the demolition and removal work, now claims that PEI has not paid it in full and that Uniroyal is responsible because it negligently failed to secure the bond. *fn1"

 The defendant has filed a motion to dismiss the second amended complaint *fn2" for failure to state a claim and for lack of subject matter jurisdiction. *fn3" In support of this motion, the defendant claims that 1) a payment bond never was required because the demolition contract did not fall within the scope of the Act, and 2) in any event, the plaintiff failed to comply with the notice provisions of the Act. For the following reasons, the court grants the defendant's motion to dismiss the cause of action.

 II. FACTS

 PEI in turn subcontracted with the plaintiff to perform all the demolition and removal work. Initially, the subcontract was for $ 300,000 with a 15% retention, but the plaintiff later subcontracted for additional work totalling $ 4,950. The plaintiff completed the work on September 15, 1987, and billed PEI accordingly. On September 1, 1987, the plaintiff received payment, less the 15% retention, for the demolition and removal of Building 720. On September 9, 1987, the plaintiff received payment, less the 15% retention, for work associated with Building 708. Finally, on September 28, 1987, the plaintiff received a partial payment of $ 100,000 (out of the $ 158,100 that was due) for the demolition and removal of Building 703. Thus, as of the filing of the complaint, PEI still owed the plaintiff $ 107,950 for the project: $ 58,000 for the demolition of Building 703; $ 4,950 for the additional subcontracted work; and $ 45,000, which represents the 15% retention that was to be paid upon completion of the work.

 From September 28, 1987, to October 14, 1987, the plaintiff's foreman at the Joliet site, Dave Kerr, telephoned the president of PEI and demanded payment. PEI told Kerr that it was awaiting payment from Uniroyal of its retention. On October 14, Kerr telephoned Uniroyal and was informed that on September 28 Uniroyal had paid PEI the 35% retention and that PEI already had spent the money. See Second Amended Complaint, Exh. A (affidavit of Dave Kerr).

 On November 6, Kerr met with several Uniroyal representatives and told them that Chicago Rigging had not received payment from PEI; that Chicago Rigging may have to sue PEI and Uniroyal for the over $ 100,000 owed; and that he thought the Miller Act provided Chicago Rigging with a remedy against Uniroyal. See id. The plaintiff claims that the Uniroyal representatives told Kerr that Uniroyal was exempt from the Miller Act because the property involved was government-owned and contractor-operated, as opposed to government-owned and -operated. See id. The Uniroyal representatives then discussed possible alternative remedies for Chicago Rigging. Believing that the Miller Act might apply to this case, Chicago Rigging filed this complaint on December 30, 1987.

 III. ANALYSIS

 A. Overview of the Miller Act

 On a private construction project, subcontractors can secure payment through use of mechanics' and materialmen's liens. On a government project, however, such remedies are unavailable because the doctrine of sovereign immunity precludes liens against government property. Arvanis v. Noslo Eng'g Consultants, Inc., 739 F.2d 1287, 1288-89 (7th Cir. 1984), cert. denied, 469 U.S. 1191, 83 L. Ed. 2d 969, 105 S. Ct. 964 (1985). To protect subcontractors, and to encourage potential subcontractors to participate in government projects, Congress passed the Miller Act. *fn4" The statute requires that before the United States awards a contract exceeding $ 25,000 for the construction, alteration, or repair of any public building, the contractor must furnish the government with two bonds. The contractor first must furnish a performance bond sufficient to protect the interests of the United States. 40 U.S.C. § 270a(a)(1). For the protection of subcontractors, the contractor must furnish a payment bond, generally in the amount of 50% of the value of the job awarded. Id. § 270a(a)(2). *fn5"

 The Act also provides a private right of action on the payment bond for those who furnished labor and materials and who have not been paid for their work. Id. § 270b(a). The Act attaches three conditions to this right, however. First, if such person has dealt exclusively with the subcontractor and has had no direct contractual relationship with ...


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