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FAERBER ELEC. CO. v. ATLANTA TRI-COM

May 1, 1992

FAERBER ELECTRIC COMPANY, INC., an Illinois corporation, and GREAT LAKES CONSTRUCTION CO., an Illinois corporation, Plaintiffs,
v.
ATLANTA TRI-COM, INC., a Georgia corporation, CONTRACTORS SURETY & FIDELITY CO., LTD., a Nevada corporation, RAYTHEON SERVICE COMPANY, a Delaware corporation, Defendants. and UNITED STATES OF AMERICA for the use and benefit of FAERBER ELECTRIC COMPANY, INC., an Illinois corporation, and GREAT LAKES CONSTRUCTION CO., an Illinois corporation, Plaintiffs, v. RAYTHEON SERVICE COMPANY, a Delaware corporation, Defendant.



The opinion of the court was delivered by: WILLIAM T. HART

 This case involves a contract with the Federal Aviation Administration for the construction of certain facilities at various airports. Defendant Raytheon Service Company contracted to do the work. Raytheon, in turn, subcontracted with defendant Atlanta Tri-Com, Inc. to perform certain runway work at O'Hare International Airport in Chicago, Illinois. Tri-Com subcontracted with plaintiffs Faerber Electric Company, Inc. and Great Lakes Construction Co., Inc. to perform part of this work. Tri-Com obtained a labor and material payment bond from defendant Contractors Surety & Fidelity Company, Ltd. There is complete diversity of citizenship and each plaintiff's claim against each defendant exceeds $ 50,000. All claims are state law claims except that one claim (which will be discussed further) is in part a federal claim under the Miller Act, 40 U.S.C. § 270a et seq. Presently pending is Raytheon's "summary judgment" motion to dismiss the three claims against it, Counts VII, VIII, and IX.

 Prior to the taking of any discovery, Raytheon moved for summary judgment on the claims against it. Both Raytheon and plaintiffs represented in court that there was a discrete legal issue regarding the applicability of the Miller Act that could be resolved on undisputed facts, thereby enabling the parties to properly focus their discovery in this case. Since both of the parties involved indicated that a legal issue could be resolved without discovery, the parties were permitted to proceed on the motion despite the unusual circumstance of there not yet being any discovery. Raytheon's motion, however, was not limited to the Miller Act claim. Raytheon also seeks summary judgment on the Count VIII equitable lien claim and the Count IX quantum meruit claim. Those claims, however, require the development of certain facts before they can be resolved. Plaintiffs' response as to those two claims will be treated as one pursuant to Fed. R. Civ. P. 56(f). Summary judgment on Counts VIII and IX will be denied without prejudice so that the parties may complete discovery as to those claims.

 Three facts which the parties agree can be treated as uncontested for purposes of the present motion provide a sufficient basis for considering Raytheon's summary judgment motion on Count VII. The key facts are (1) the contract between Raytheon and the FAA had no express provision requiring Miller Act bonds; (2) the payment bond Tri-Com obtained from Contractors Surety is not a Miller Act bond; and (3) the Miller Act bonds Raytheon eventually obtained covered a period that would not include coverage for the work plaintiffs performed. All other facts alleged in the complaint will be assumed to be true as well as any representations made in plaintiffs' brief. While this is not the ordinary procedure for summary judgment, see Fed. R. Civ. P. 56(e), this case is before the court under special circumstances. Raytheon represented that it would seek summary judgment on a discrete legal basis only. The parties agreed to stipulate to certain facts so that the particular legal issue of what happens when no Miller Act bond is obtained could be addressed. To the extent Raytheon seeks to inject other factual issues into its motion, they will not be considered because plaintiffs have not yet had the opportunity for discovery. The facts assumed to be true for the present motion are as follows.

 Plaintiffs satisfactorily completed work under their contract with Tri-Com. Tri-Com, however, has failed to pay plaintiffs for the work performed and Contractors Surety has not made payments under the bond. Raytheon's contract with the FAA is one to which the Miller Act applies, which ordinarily would require that Raytheon obtain performance and payment bonds, including a payment bond ensuring that Raytheon's subcontractors would pay the sub-subcontractors. The FAA, however, failed to expressly include a bond requirement in the bid documents or the written contract it entered into with Raytheon. This noncompliance with the Miller Act was not brought to the FAA's attention until after Tri-Com failed to make payments to plaintiffs. The FAA then amended the express language of the contract and Raytheon obtained Miller Act bonds covering further work. The bonds, however, did not cover the work already performed by plaintiffs. Nevertheless, plaintiffs provided Raytheon with timely notice under the Miller Act that plaintiffs had not received payment from Tri-Com.

 Under the Miller Act, "before any contract, exceeding $ 25,000 in amount, for the construction, alteration, or repair of any public building or public work of the United States is awarded to any person, such person shall furnish to the United States the following bonds, which shall become binding upon the award of the contract to such person, . . . ." 40 U.S.C. § 270a(a). The Miller Act further provides:

 (a) Every person who has furnished labor or material in the prosecution of the work provided for in such contract, in respect of which a payment bond is furnished under sections 270a to 270d of this title and who has not been paid in full therefor before the expiration of a period of ninety days after the day on which the last of the labor was done or performed by him or material was furnished or supplied by him for which such claim is made, shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due him: Provided, however, That any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond upon giving written notice to said contractor within ninety days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. Such notice shall be served by mailing the same by registered mail, postage prepaid, in an envelope addressed to the contractor at any place he maintains an office or conducts his business, or his residence, or in any manner in which the United States marshal of the district in which the public improvement is situated is authorized by law to serve summons.

 (b) Every suit instituted under this section shall be brought in the name of the United States for the use of the person suing, in the United States District Court for any district in which the contract was to be performed and executed and not elsewhere, irrespective of the amount in controversy in such suit, but no such suit shall be commenced after the expiration of one year after the day on which the last of the labor was performed or material was supplied by him. The United States shall not be liable for the payment of any costs or expenses of any such suit.

 Id. § 270b.

 As the Supreme Court has explained,

 the Miller Act was designed to provide an alternative remedy to the mechanics' liens ordinarily available on private construction projects. F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 122, 40 L. Ed. 2d 703, 94 S. Ct. 2157 (1974). Because "a lien cannot attach to Government property," persons supplying labor or materials on a federal construction project were to be protected by a payment bond. Id. at 121-22.

 J.W. Bateson Co. v. United States ex rel. Board of Trustees of National Automatic Sprinkler Industry Pension Fund, 434 U.S. 586, 589, 55 L. Ed. 2d 50, 98 S. Ct. 873 (1978).

 Raytheon contends that the Miller Act only provides a remedy as against the surety and under the payment bond. It contend there can be no remedy based on a payment bond where none was obtained. Plaintiffs contend that Raytheon was statutorily required to obtain the Miller Act bonds even absent the FAA expressly imposing such a requirement and that Raytheon is liable to the unpaid sub-subcontractors for failing to obtain the necessary bonds.

 Consistent with the Miller Act, Count VII is labeled as being in the name of the United States for the use and benefit of plaintiffs. A number of theories, however, are asserted in this count. Plaintiffs refer to a direct cause of action for payment by Raytheon. Complaint Count VII, P 34. Presumably, this means a claim under the Miller Act as they would have if a bond had been issued. Alternatively, plaintiffs refer to three other theories of recovery. Id. PP 35-37. Plaintiffs refer to a direct cause of action against Raytheon for failure to obtain the statutorily mandated bond (P 35); Raytheon being estopped from denying ...


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