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United States v. Zurich American Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

August 27, 2019

UNITED STATES OF AMERICA for use and benefit of A&C CONSTRUCTION & INSTALLATION CO. WLL, Plaintiff,
v.
ZURICH AMERICAN INSURANCE COMPANY and THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, Defendants.

          MEMORANDUM OPINION AND ORDER

          Harry D. Leinenweber, Judge United States District Court

         For the reasons stated herein, Defendants Zurich American Insurance Company (“Zurich”) and The Insurance Company of the State of Pennsylvania's Motion for Summary Judgment (Dkt. No. 104) is granted.

         I. BACKGROUND

         Persons who work on construction projects in most states are entitled to obtain a mechanics lien in the event they are not paid by the general contractor for their services and/or material. The situation is different when the construction project is financed by the federal government. The unpaid worker or material man is not entitled to a lien for unpaid services and/or material. Instead, Congress enacted the Miller Act (40 U.S.C. § 3133) to protect such persons. The Act requires the general contractor to provide a surety, who by force of the Act, must make good the obligations to the suppliers of labor and material of a defaulting contractor.

         In general, the Miller Act is entitled to liberal construction to effectuate its purpose of protecting those whose labor and materials go into public projects. United States v. Carter, 353 U.S. 210, 216 (1957). It grants a private right of action on the payment bond for those furnishing material or labor on the job but have not been paid. There are, however, three conditions to the right if such a person has dealt exclusively with a subcontractor and has no direct contractual relationship with the prime contractor. First, he must give written notice of his claim to the prime contractor. Second, the notice must be provided within ninety days from the date on which the subcontractor performed the last of the labor or furnished the last of the material. Third, the aggrieved subcontractor must bring suit in the name of the United States for the use and benefit of the subcontractor within one year after the day in which the last of the labor was performed or material supplied. The giving of notice and the limitation on filing suit are conditions precedent to the right to maintain the action. United States ex. rel Material Service Div. of Gen. Dynamics Crp. v. Home Indemnity Co., 489 F.2d 1004, 1005 (7th Cir. 1973).

         AMEC Foster Wheeler Environment & Infrastructure, Inc (“AMEC”) entered into a contract with the Army Corps of Engineers for AMEC to serve as the prime contractor for the construction of two billets in the Blatchford-Preston Complex at Al-Udeid Air Base in Qatar. In accord with the Miller Act, AMEC, as principal, and Zurich and The Insurance Company of the State of Pennsylvania, as sureties, executed and delivered to the Army Corps the required payment bond. On October 1, 2012, AMEC awarded certain mechanical work to Black Cat Engineering & Construction (“Black Cat”) and on January 24, 2013, awarded additional work to Black Cat that consisted of an internal fire suppression system. On January 31, 2013, Black Cat and Plaintiff, A&C Construction & Installation, WLL (“A&C” or “Plaintiff”), entered into a subcontract for the construction of certain mechanical work, called the “MEP Agreement.” Later, on July 1, 2013, Black Cat entered into a further sub-contract relating to fire suppression work, called the “Fire Suppression Agreement.”

         Black Cat and A&C did not get along and Black Cat terminated A&C from the Fire and Suppression Agreement on December 16, 2015. A&C had stopped most of the work on the MEP agreement in November of 2015 and last performed any actual work on this agreement on May 16, 2016. A&C contends that it continued to provide work and provide equipment after that date because its equipment remained on the site for Black Cat's use, and it continued to provide supervision of one of its subcontractors who remained on the job through the project's completion on February 28, 2017. Thus, the last date that Plaintiff contends it supplied labor and material was February 28, 2017.

         What is not in dispute is that A&C provided its Miller Act notice on August 16, 2016, alleging as of that date it was owed $8, 449, 710 for “Mechanical, Electrical and Plumbing and Fire Suppression works.” This Miller Act notice was the only information provided to AMEC and the sureties until the institution of this lawsuit, which also requested damages in the same amount as on the Miller Act notice. Plaintiff filed its Complaint on June 7, 2017. Defendants have moved for summary judgment.

         II. LEGAL STANDARD

         The applicable portions of the Miller Act reads as follows:

(b) Right to bring a civil action.
(1) In general.--Every person that has furnished labor or material in carrying out work provided for in a contract for which a payment bond is furnished under section 3131 of this title and that has not been paid in full within 90 days after the day on which the person did or performed the last of the labor or furnished or supplied the material for which the claim is made may bring a civil action on the payment bond for the amount unpaid at the time the civil action is brought and may prosecute the action to final execution and judgment for the amount due.
(2) Person having direct contractual relationship with a subcontractor.--A person having a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made. The action must state 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. The notice shall be served--
(A) by any means that provides written, third-party verification of delivery to the contractor at any place the contractor maintains an office or conducts business or at ...

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