283 F. Supp. 3d 476
E.D. Va.2017Background
- Kitchens-to-Go (subcontractor) supplied temporary kitchen trailers for a Navy construction project; John C. Grimberg Co. was the prime contractor and Hartford was the payment-bond surety under the Miller Act.
- Subcontract contained an Article 9 no-damages-for-delay clause (subcontractor entitled only to reimbursement actually recovered from the owner) and Article 15 incorporating the prime contract’s owner-prime dispute procedures.
- Project delays extended the work; Grimberg submitted a cost worksheet to the Navy seeking ~$686,818 for extended trailer lease; the Navy rejected payment, stating lease extensions were Grimberg’s responsibility.
- Subcontractor sued under the Miller Act seeking $734,496 (including extended-lease delay damages); Grimberg later paid $127,275 (mooting that portion), leaving the Extended Lease claim contested.
- Court addressed three issues on partial summary judgment: (1) whether the Miller Act bars enforcement of the no-damages-for-delay clause against the surety; (2) whether the subcontract’s incorporation of owner-prime dispute procedures requires the subcontractor to await that process; and (3) whether the amount of delay damages is ripe for summary judgment given the surety’s Rule 56(d) affidavit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of no-damages-for-delay clause against the surety | Clause cannot defeat Miller Act rights; surety cannot enforce it to avoid bond liability | Clause conditions subcontractor recovery on owner payment, so no amount is due until owner pays | Clause unenforceable against surety; Miller Act controls (summary judgment for plaintiff on this issue) |
| Effect of subcontract provision incorporating owner-prime dispute procedures | Subcontractor need not await owner-prime dispute resolution to sue on payment bond after 90 days | Article 15 requires resolving owner-related disputes under prime contract procedures; stay pending those proceedings is appropriate | Subcontractor need not await those proceedings; stay denied (summary judgment for plaintiff on this issue) |
| Validity of waiver via subcontract | No valid waiver: statutory waiver must be written, signed, and executed after furnishing labor/materials | Subcontract asserts subcontract terms operate as waiver or condition | Waiver invalid: clause executed before work, so cannot waive Miller Act rights under 40 U.S.C. § 3133(c) |
| Amount of delay damages (ripeness for summary judgment) | Subcontractor contends amount is established by Grimberg’s submission to the Navy and seeks judgment on amount | Surety submitted Rule 56(d) affidavit seeking further discovery on amount and contends passing on claim ≠ admission of amount due | Summary judgment on amount denied; Rule 56(d) affidavit permits further discovery to determine genuine dispute of fact |
Key Cases Cited
- Walton Tech., Inc. v. Weststar Eng'g, Inc., 290 F.3d 1199 (9th Cir. 2002) (Miller Act limits on surety enforcing subcontract terms; look beyond principal's contract)
- United States ex rel. Sherman v. Carter, 353 U.S. 210 (1957) (Miller Act bond liability must be coextensive with Act to effectuate its purpose)
- F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116 (1974) (Miller Act is remedial and protects suppliers on federal projects)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (genuine dispute for trial standard)
- United States ex rel. Woodington Elec. Co. v. United Pac. Ins., 545 F.2d 1381 (4th Cir. 1976) (subcontract can define measure of recovery, but cannot eliminate Miller Act rights)
- Moore Bros. Co. v. Brown & Root Inc., 207 F.3d 717 (4th Cir. 2000) (purpose of surety bond to ensure payment when principal does not pay)