Federal Lien Law Summary

Prepared by:
Levy · von Beck & Associates, P.S.
600 University Street, Suite 3300
Seattle, WA 98101 (206) 626-5444
www.levy-law.com

The information contained in this document is an interpretive summary of the private and public works construction lien statutes and is subject to change without notice. Levy · von Beck & Associates, P.S. strongly recommends that the user seek legal counsel before relying on this document to confirm that the information is current and accurate. This document is provided as a courtesy and, as such, Levy · von Beck & Associates, P.S. accepts no liability in connection with reliance thereon or any loss sustained by anyone using or relying on the information contained herein. The intended use of this document is to provide a framework for understanding and dealing with the construction lien statutes.

QUESTIONS	REQUIREMENTS AND CITATIONS

What work is covered?	Al l projects in excess of $100,000, for the construction, alteration or repair of
	any public building or public work of the United States. NOTE that where the
	public body waives the bond requirement, there is no basis for a Miller Act
	claim. NOTE ALSO that claims against Postal Service may be preempted by
	the Contract Disputes Act, and there may not be any Miller Act claims allowed
	in contracts for the Postal Service, so it is best to check for a bond at the outset.
	NOTE that a New York case has interpreted the Miller Act as supporting
	payment bond coverage for wages and benefits of union workers for the time
	spent on strike after their paychecks bounced. [40 USC §3131; Cushman at
	§1.01; Felix Rivera de Leon v. Maxon Eng’g Services, Inc., 283 F. Supp. 2d
	550 (2003); Tradesman International, Inc. v. United States Postal Service and
	Lockheed Martin Corp., 234 F. Supp. 2d 1191 (2002); Morin v. Empiyah &
	Co., LLC, 389 F.Supp. 2d 506 (S.D.N.Y. 2005)]

Who may make a claim?	Subcontractors to the prime contractor, suppliers of labor or material to the
	prime contractor, and sub-subcontractors and suppliers of labor or materials to
	first-tier subcontractors. Suppliers to suppliers are not covered. NOTE that the
	definition of a subcontractor for Miller Act purposes includes one who supplies
	“necessary material” and one who performs for and takes from the prime
	contractor a specific part of the labor or materials required by the original
	contract. A subcontractor must have a substantial and important relationship
	with the prime contractor. A middleman who supplies crucial steel framework
	by arranging for the fabrication and delivery to the site of a substantial amount
	of structural steel, as well as preparing shop and erection drawings, will be
	considered a subcontractor. NOTE ALSO that where the public body waives
	the bond requirement, no one can bring a Miller Act claim. NOTE ALSO that
	where a subcontractor provides on-site project management, supervision, and
	administrative and oversight services to the government contractor, this work
	will NOT be covered under a payment bond as labor; according to the court,
	where the work involves clerical or administrative tasks which do not involve
	physical toil or manual work, it is not covered by the payment bond. NOTE

	ALSO that where subcontractor is an insider or alter ego of the general
	contractor, it will not be entitled to recover from the payment bond. NOTE that
	the terms of a payment bond cannot be more restrictive, or require additional
	notices, especially of a non-signatory sub-subcontractor. In other words, the
	terms of the bond itself cannot require more notices than those set out in the
	Miller Act. NOTE ALSO that where a general contractor defaults and its
	bonding company takes over the project and hires a contractor to complete the
	project, unless that contractor provides a payment bond, that contractor’s subs
	are considered second-tier subcontractors and must give the bond company the
	notice of claim if they are unpaid. [40 USC §§3131 & 3141; Cushman at
	§1.01; U.S. ex rel. E & H Steel Corp. v. C. Pyramid Enterprises, Inc., 509 F.3d
	184, (3rd Cir. 2007); Felix Rivera de Leon v. Maxon Eng’g Services, Inc., 283
	F. Supp. 2d 550 (2003)] [40 USC §3131; Cushman at §§1.03, 1.04, 1.04[B];
	U.S. ex rel. Constructors, Inc. v. Gulf Ins. Co., 313 F.Supp.2d 593 (E.D.Va.
	2004); U.S. ex rel. Johnson Pugh Mechanical, Inc. v. Landmark Const. Corp.,
	318 F.Supp.2d 1057 (D.Colo. 2004); Nagel Const., Inc. v. Crest Const. &
	Excavating LLC, Not reported in F.Supp.2d, 2006 WL 1806487 (W.D.Mich.
	2006); U.S. ex rel. Ocean Const. Services, Inc. v. Liberty Mut. Ins. Co., Not
	Reported in F.Supp.2d, 2006 WL 2471651 (E.D.Va., Aug 24, 2006)]

What is the claim against?	The prime contractor’s payment bond. [40 USC §3133(b); Cushman at §1.01]

Who must give final	All claimants contracting with or supplying to the subcontractor but not the
notice?	prime contractor. [40 USC §3133(b); Cushman at §1.06[A]]

To whom is final notice	Prime contractor. [40 USC §3133(b); Cushman at §1.06[A]]
given?

When must final notice be given?

Within 90 days of claimant’s last delivery to or work on the project. To be safe, notice should be received within 90 days of claimant’s last day. If there is more than 90 days between deliveries, and the deliveries are not clearly part of the same contract, send the notice within 90 days of each delivery. [40 USC §3133(b); Cushman at §1.06[C]; U. S. for Use of General Elec. Co. v. H. I. Lewis Const. Co., 375 F.2d 194 (C.A.2 (Vt.) 1967)]

Contents of final notice?	-Amount claimed
	-Name of the party to whom the material or labor were provided.
	-Statement that the claimant is looking to the prime contractor for payment.
	Per case law, the notice does not need to be signed by the claimant. [40 USC
	§3133(b); Cushman at §1.06[B]; Houston Fire & Cas. Ins. Co. v. U.S. for Use
	and Benefit of Trane Co., 217 F.2d 727 (C.A.5 (Tex.) 1954); U. S. for Use of A.
	& J. Friedman Supply Co. v. M. S. I. Corp., 246 F.Supp. 337 (D.C.N.J.1965)]

How is final notice given?	Any means that provides written, third-party verification of delivery; no longer
	limited to registered or certified mail. Recommend sending it by regular mail
	as well. May also serve in any manner in which the United States marshal of
	the district in which the public improvement is situated by law may serve
	summons. [40 USC §3133(b); Cushman at §1.06[B]]

Time to start suit?	More than 90 days but less than one year after the last day on which the
	claimant provided labor or materials to the project. NOTE that this time period
	begins to run from the time subcontractor claimant last provides labor or
	materials, not the time the subcontractor’s replacement subcontractor last
	delivers labor or materials. NOTE ALSO that remedial or corrective work will
	not extend deadline for filing suit. NOTE ALSO that where claimant’s contract
	requires claims be arbitrated rather than litigated, claimant may be required to
	arbitrate breach of contract claim while bond claim is stayed pending outcome of
	arbitration. [40 USC §3133(b); Cushman at §1.07; GE Supply v. C & G
	Enterprises, Inc., 212 F.3d 14 (C.A.1 [Puerto Rico] 2000; Safe Environment of
	America, Inc. v. Employers Ins. of Wausau, 278 F.Supp.2d 121 (D.Mass.
	2003); U.S. ex rel. PRN Associates, Inc. v. K & S Enterprises, Inc.,
	Not reported in F.Supp.2d, 2007 WL 925267 (S.D.Ind. 2007) Lee & Rua Co. v.
	Great American Ins., Slip Copy, 2008 WL 1868633 (W.D.Wash.,2008)]

Are attorney’s fees	Probably not, though they have been allowed where the claimant’s contract
allowed?	specifically provides for attorney’s fees, where the opposing party acts in bad
	faith, and in a recent case in the 5th circuit, because of Texas laws allowing
	attorney’s fees. [Cushman at §1.05[F]; North Star Terminal & Stevedore Co. ex
	rel. v. Nugget Const. Inc., 126 Fed.App. 348, 2005 WL 487313, Unreported;
	U.S. ex rel. U.S. Prefab, Inc. v. Norquay Const., Inc., Slip Copy, 2008 WL
	2026360 (D.Ariz. 2008)] Fees will also be allowed if the bond itself provides for
	them. According to the Florida court, the bad faith that triggers attorney’s fees
	must occur during the course of the litigation; prelitigation bad faith will not
	justify attorney’s fees. [Weathertrol Maintenance Corp. v. Nova Cas. Co.,
	2007 WL 566293 (S.D.Fla. 2007)] Prejudgment interest may be awarded.
	[Eastern Seaboard Const. Co., Inc. v. Gray Const., Inc., --- F.3d ----, 2008 WL
	5428159 (C.A.1 (Me.) 2008)]

Can the claim be waived?	Yes, but only if the waiver is in writing, signed by the person whose right is
	waived, and executed after the claimant has furnished labor or material for use
	in the performance of the contract. [40 USC §3133(c)]

Is interest allowed?	Prejudgment interest is allowed where it is reasonably ascertainable, or where
	the claimant’s contract provides for it, or where state law allows it. [U.S. ex
	rel. McKenney's, Inc. v. Government Technical Services, LLC, 531 F.Supp.2d
	1375 (N.D.Ga.2008); U.S. ex rel. Metric Elec., Inc. v. Enviroserve, Inc., 301
	F.Supp.2d 56 (D.Mass. 2003); Cushman at §1.05[F]] A claimant is not
	allowed to recover overhead or profit for work that was not performed,
	however. [U.S. ex rel. Metric Elec., Inc. v. Enviroserve, Inc., 301 F.Supp.2d 56
	(D.Mass. 2003)]
	Note that, at least in Pennsylvania, a claimant cannot bring a bad faith claim
	against a surety that fails to pay a claim. [U.S. ex rel. SimplexGrinnell, LP v.
	Aegis Ins. Co., Slip Copy, 2009 WL 90233 (M.D.Pa.2009)]

Special Notes	Note that a subcontractor may be allowed to recover delay costs against a
	Miller Act surety, at least when the government or the contractor is responsible
	for the delay. [Consolidated Elec. & Mech., Inc. v. Biggs Gen. Contracting,
	Inc., 167 F.3d 432 (8th Cir. 1999); Lighting & Power Services, Inc. v. Wayne
	M. Roberts, 354 F.3d 817 (8th Cir. 2003)]

“Pay when paid” or “pay if paid” clauses are generally not valid defenses to a valid Miller Act lawsuit and generally are not enforced. [U.S. ex rel. McKenney's, Inc. v. Government Technical Services, LLC, 531 F.Supp.2d 1375 (N.D.Ga.2008); U.S. ex rel. Walton Technology, Inc. v. Weststar Engineering, Inc., 290 F.3d 1199 (9th Cir. 2002); Moore Brothers Co. v. Brown & Root Inc., 207 F.3d 717 (4th Cir. 2000) U.S. ex rel. Straightline Corp. v. American Cas. Co. of Reading, PA, Not Reported in F.Supp.2d, 2007 WL 2050323 (N.D.W.Va.)] NOTE ALSO that there is no cause of action for a breach of the federal Prompt Payment Act. [U.S. ex rel. King Mountain Gravel, LLC v. RB Constructors, LLC, 556 F.Supp.2d 1250 (D.Colo.2008)]

NOTE that where a surety gives the public body written notice of a potential default, the public body may be required to withhold funds from the contractor. [Insurance Co. of West v. U.S., 83 Fed.Cl. 535 (Fed.Cl.2008)]

The information contained in this document is an interpretive summary of the federal Miller Act statutes and is subject to change without notice. Levy · von Beck & Associates, P.S. strongly recommends that the user seek legal counsel before relying on this document to confirm that the information is current and accurate. This document is provided as a courtesy and, as such, Levy · von Beck & Associates, P.S. accepts no liability in connection with reliance thereon or any loss sustained by anyone using or relying on the information contained herein. The intended use of this document is to provide a framework for understanding and dealing with the construction lien statutes.