JSI Communications v. Travelers Casualty & Surety Co. of America
2015 U.S. App. LEXIS 21080
5th Cir.2015Background
- McMillan-Pitts was prime contractor on a Mississippi public project and procured payment and performance bonds from Travelers; McMillan-Pitts and Travelers were jointly liable under the bonds.
- Tackett was a subcontractor to McMillan-Pitts and subcontracted JSI to install cabling; JSI completed work on July 31, 2012 and invoiced Tackett $36,346.09, which remained unpaid.
- McMillan-Pitts interpleaded $19,445.16 into Mississippi chancery court after a garnishment and obtained a judgment releasing it from liability tied to the Tackett subcontract and related instruments; McMillan-Pitts later amended the interpleader to add other claimants, including JSI.
- Travelers denied JSI’s bond claim, asserting the chancery judgment extinguished McMillan-Pitts’s (and thus Travelers’s) liability; Travelers initially raised a 90-day notice defense but abandoned it at summary judgment.
- JSI sued Travelers in state court; the case was removed to federal court. The district court granted summary judgment for Travelers; JSI appealed.
- The Fifth Circuit concluded the interpleader judgment did not extinguish Travelers’s statutory payment bond obligation and found JSI entitled to liability on the bond for $36,346.09; other fees and bad-faith issues were remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travelers remains liable on the payment bond to second-tier subcontractor JSI | JSI argued Mississippi’s Little Miller Act allows recovery on the bond despite the contractor’s release in interpleader | Travelers argued the chancery court judgment releasing McMillan-Pitts on the subcontract discharged bond liability | Held: Travelers remains liable; second-tier claim under Little Miller Act is independent of contractor’s subcontract release |
| Effect of chancery interpleader judgment on bond obligation | JSI argued the interpleader covered only the interpleaded stake and did not release bond obligations | Travelers argued the amended judgment extinguished related liabilities, including bond exposure | Held: Interpleader release was limited to the stake ($19,445.16) and did not release an unlitigated, separate statutory bond obligation owed by Travelers |
| Whether JSI satisfied statutory preconditions for bond recovery (notice, timing, amount) | JSI contended it gave timely written notice within 90 days and stated amount with accuracy | Travelers initially disputed timeliness but dropped the defense; no other basis to deny compliance | Held: JSI met statutory requirements; judgment rendered for liability in the amount of $36,346.09 |
| Disposition of JSI’s bad-faith claim against Travelers | JSI argued denial of the bond claim was in bad faith and sought damages | Travelers asserted no bad-faith liability because it owed no bond duty per the chancery judgment | Held: Summary judgment for Travelers on bad-faith was vacated and remanded for reconsideration in light of Travelers’s liability on the bond |
Key Cases Cited
- EEOC v. Chevron Phillips Chem. Co., 570 F.3d 606 (5th Cir. 2009) (summary judgment standard and review described)
- Key Constructors, Inc. v. H & M Gas Co., 537 So. 2d 1318 (Miss. 1989) (interpreting Mississippi’s Little Miller Act and analogy to federal Miller Act)
- Aetna Cas. & Sur. Co. v. Doleac Elec. Co., 471 So. 2d 325 (Miss. 1985) (purpose of Mississippi bond requirements on public projects)
- Ill. Sur. Co. v. John Davis Co., 244 U.S. 376 (U.S. 1917) (subcontractor may claim under bond even if subcontractor was paid)
- Lee v. W. Coast Life Ins. Co., 688 F.3d 1004 (9th Cir. 2012) (scope of interpleader stake defines stakeholder’s discharge)
- United States ex rel. Martin Steel Constructors, Inc. v. Avanti Constructors, Inc., 750 F.2d 759 (9th Cir. 1984) (Miller Act construed liberally to protect suppliers)
- First Nat’l Bank of Vicksburg v. Middleton, 480 So. 2d 1153 (Miss. 1985) (interpleader purpose and determination of entitlement)
- State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (U.S. 1967) (limits of interpleader discharge and stakeholder liability)