99 F. Supp. 3d 543
E.D. Pa.2015Background
- VA awarded a prime contract to Nason Construction for a Philadelphia VA parking garage; Zurich issued a payment bond for Nason.
- Marenalley Construction entered a subcontract with Nason for ~$1.33M and performed additional work due to VA-directed changes and unforeseen conditions.
- Marenalley submitted change orders/equitable adjustment requests to Nason; Nason filed a certified claim with the VA including Marenalley’s claimed amounts; the VA has not decided the claim.
- Marenalley sued Zurich under the Miller Act to recover unpaid labor and materials (~$590K). Nason intervened and moved to dismiss or stay, arguing the subcontract requires exhaustion of the prime contract’s CDA administrative process before bond suit.
- The subcontract contains provisions referencing the prime contract’s disputes clause; Marenalley has no privity with the VA and cannot present claims directly to the contracting officer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the subcontract requires Marenalley to await resolution of Nason’s CDA administrative process before suing the Miller Act bond | Marenalley: subcontract does not (and in any event cannot) waive Miller Act rights; it can sue the bond 90 days after completing its work | Nason/Zurich: subcontract incorporates prime contract dispute clause and requires exhaustion of CDA remedies before bond suit | Court: No waiver; subcontract cannot be read to bar Miller Act suit pre-exhaustion; dismissal denied |
| Whether the complaint should be dismissed for failure to follow administrative process | Marenalley: CDA is only for contractor vs. government and does not resolve prime–subcontractor payment disputes | Nason/Zurich: administrative process governs and is pending; dismissal appropriate until it resolves | Court: Denied — CDA does not provide subcontractor remedy and does not preclude Miller Act suit |
| Whether this action should be stayed pending the CDA process | Marenalley: stay would cause indefinite delay and defeat Miller Act’s prompt-payment purpose | Nason/Zurich: risk of duplicative litigation, inconsistent results, and surety liability is derivative of contractor’s claim against the VA | Court: Denied — Miller Act gives subcontractor independent right to prompt suit; stay would undermine statutory protection |
Key Cases Cited
- United States v. Blair, 321 U.S. 730 (1944) (subcontractor has no direct contract claim against the United States)
- Beacon Construction Co. v. Prepakt Concrete Co., 375 F.2d 977 (1st Cir. 1967) (prime contractor is the party entitled to present claims to contracting officer)
- Fanderlik-Locke Co. v. United States, 285 F.2d 939 (10th Cir. 1961) (CDA does not provide for hearing disputes between prime and subcontractor)
- United States ex rel. Sherman v. Carter, 353 U.S. 210 (1957) (surety liability on Miller Act bond must be coextensive with Act’s protections)
- Walton Technology v. Weststar Engineering, Inc., 290 F.3d 1199 (9th Cir. 2002) (subcontract terms conflicting with Miller Act ineffective; surety liability analyzed under Miller Act)
- T.M.S. Mechanical Contractors v. Millers Mutual Fire Ins. Co. of Texas, 942 F.2d 946 (5th Cir. 1991) (Miller Act protections displace ordinary derivative-liability rules)
- Daniel, Urbahn, Seelye & Fuller v. United States, 357 F. Supp. 853 (N.D. Ill. 1973) (history of Heard Act and Miller Act and subcontractor payment issues)