F. D. RICH CO., INC., ET AL. v. UNITED STATES FOR THE USE OF INDUSTRIAL LUMBER CO., INC.
No. 72-1382
Supreme Court of the United States
Argued January 9, 1974—Decided May 28, 1974
417 U.S. 116
MARSHALL, J.
Dennis S. Harlowe argued the cause for respondent. With him on the brief was E. M. Murray.
MR. JUSTICE MARSHALL delivered the opinion of the Court.
The Miller Act, 49 Stat. 793, as amended, 80 Stat. 1139,
I
Between 1961 and 1968, petitioner F. D. Rich Co. was the prime contractor on numerous federal housing projects. During the years 1963-1966, much if not all of the plywood and millwork for these projects was supplied by Cerpac Co. The Cerpac organization was closely intertwined with Rich. The principals of Rich held a substantial voting interest in Cerpac stock, supplied a major share of its working capital, and were thoroughly familiar with its operations and financial condition.
On October 18, 1965, Rich contracted with the United States to build 337 family housing units at Beale Air
On February 22, 1966, Cerpac placed a single order with respondent Industrial Lumber Co. for all exterior plywood required under its plywood contract for the Beale project. Industrial is a broker, purchasing wood products and materials for resale. It acknowledged the complete Cerpac order, purchased the plywood from its own suppliers and arranged fоr deliveries at the Beale site to begin on March 10, 1966. Each shipment was receipted as it arrived on the site by a Rich representative.
Shortly after Industrial‘s shipments began, Rich informed Cerpac that more plywood was needed for another Government project being constructed in Charleston, South Carolina, for which Cerpac had also contracted to supply Rich with all exterior plywood. Rich and Cerpac decided to divert some of the Beale lumber to Charleston. Accordingly, Industrial was advised to supply a shipment of the рlywood called for under its Beale contract with Cerpac to the South Carolina site. Industrial arranged for the wood to be shipped by one of its suppliers to a railhead near Charleston. The shipment diverted to South Carolina was one of 22 called for by Industrial‘s Beale Contract.2 There were several subsequent shipments to the California site under that contract.
Both Rich and Industrial appealed. The Court of Appeals affirmed the judgment against Rich in large part.5 On Industrial‘s cross-appeal, the court reversed, holding that attorneys’ fees should have been awarded to Industrial as a successful plaintiff under the Miller Act, and remanded to the District Court for consideration of the amount of attorneys’ fees to be awarded. 473 F. 2d 720 (CA9 1973). We granted certiorari. 414 U. S. 816 (1973). We affirm the judgment below to the extent it holds that Cerpac was a “subcontractor” for Miller Act purposes and that there was proper venue, but reverse as to the propriety of an award of attorneys’ fees.6
II
Section 270a (a)(2) of the Miller Act establishes the general requirement of a payment bond to protect those who supply labor or materials to a cоntractor on a federal
The rights afforded by the Act are limited, howеver, by the proviso of
Petitioners assert that the courts below erred in finding Cerpac a subcontractor. Cerpac‘s role under the plywood contract alone was that of a broker receiving standard lumber supplied by Industrial and, in turn, supplying it without modification to Rich. Petitioners argue that the court should not have looked beyond the plywood сontract to determine Cerpac‘s status under the Act.
“The relatively few subcontractors who perform part of the original contract represent in a sense the prime contractor and are well known to him. It is easy for the prime contractor to secure himself against loss by requiring the subcontractors to give security by bond, or otherwise, for the payment of those who contract directly with the subcontractors. . . . But this method of protection is generally inadequate to cope with remote and undeterminable liabilities incurred by an ordinary materialman, who may be a manufacturer, a wholesaler or a retailer.” Id., at 110. (Emphasis added.)
The Court of Appeals properly construed our holding in MacEvoy to establish as a test for whether one is a subcontractor, the substantiality and importance of his relationship with the prime contractor.7 It is the substantiality of the relationship which will usually determine whether the prime contractor can protect himself, since he can easily require bond security or other protection from those few “subcontractors” with whom he has a
Measured against that test, Cerpаc was clearly a subcontractor for the purposes of the Act. The Miller Act is “highly remedial [and] entitled to a liberal construction and application in order properly to effectuate the Congressional intent to protect those whose labor and materials go into public projects.” MacEvoy, supra, at 107. It is consistent with that intent to look at the total relationship between Cerpac and Rich, not just the contract to supply exterior plywood, to determine whether Cerpac was a subcontractor.8 Cerpac had not only аgreed to supply standard plywood but also had a separate contract to select, modify, detail, and install all custom millwork for the Beale project. Cerpac, in effect, took over a substantial part of the prime contract itself. Moreover, the management and financial structures of the two companies were closely interrelated and their relationship on the Beale project was the same as on many other similar Government projects during the same period. Cerpac was, as the Court of Aрpeals observed, “in a special, integral, almost symbiotic relationship [with] Rich.” 473 F. 2d, at 724. It would have been easy for Rich to secure itself from loss as a result of a default by Cerpac.
III
We also agree with the courts below that venue under the Miller Act for suit on the shipment diverted to South Carolina properly lay in the Eastern District of California. The Act provides:
“Every suit instituted under this section shall be brought in . . . the United States District Court for
any district in which the contract was to be performed and executed and not elsewhere . . . .”
40 U. S. C. § 270b (b) .
Petitioners argue that this provision bars a district court in California9 from adjudicating respondent‘s claims arising from the shipments of plywood delivered in South Carolina. But
IV
We turn now to the question of whether attornеys’ fees were properly awarded respondent as a successful Miller Act plaintiff. The so-called “American Rule” governing the award of attorneys’ fees in litigation in the federal courts is that attorneys’ fees “are not ordinarily recoverable in the absence of a statute or enforceable contract providing therefor.” Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U. S. 714, 717 (1967). There was no contractual provision concerning attorneys’ fees in this case. Nor does the Miller Act explicitly provide for an award of attorneys’ fees to a successful plaintiff. But the Court of Appeals construed the Act to require an award of attorneys’ fees where the “public policy” of the State in which suit was brought allows for the award of fees in similar contexts. The court reasoned that the Act provides remedies ” ‘in lieu of the lien upon land and buildings customary where property is owned by private persons’ . . . . The federal remedy was intended to substitute for the unavailable state remedy of the lien. Therefore, if state [law] allows a supplier on private projects to recover suсh fees, there is no reason for a different rule to apply to federal projects . . . .”12 Looking to California law, the Court of Appeals found an award of attorneys’ fees proper because
We think the Court of Appeals erred in its construction of the statute. The Miller Act provides a federal cause of action, and the scope of the remedy as well as the substance of the rights created thereby is а matter of federal not state law. Neither respondent nor the court below offers any evidence of congressional intent to incorporate state law to govern such an important element of Miller Act litigation as liability for attorneys’ fees. Many federal contracts involve construction in more than one State, and often, as here, the parties to Miller Act litigation have little or no contact, other than the contract itself, with the State in which the federal project is located. The reasonable expectations of such potential litigants are better served by a rule of uniform national application.
A uniform rule also avoids many of the pitfalls which have already manifested themselves in using state law referents. For example, California law does not provide for awards of attorneys’ fees in suits arising from private construction projects. And, a California court had held that the state statute providing for awards of attorneys’ fees in suits on the bonds of state and municipal public works contractors is inapplicable to construction projects of the United States.14 The Court of Appeals nonethe-
Finally, the Court of Appeals intimates that in providing that Miller Act claimants should recover the “sums justly due,”
The American Rule has not served, however, as an absolute bar to the shifting of attorneys’ fees even in the absence of statute or contract. The federal judiciary has recognized several exceptions to the general principle that each party should bear the costs of its own legal representation. We have lоng recognized that attorneys’ fees may be awarded to a successful party when his opponent has acted in bad faith, vexatiously, wantonly, or for oppressive reasons,17 or where a successful litigant
Miller Act suits are plain and simple commercial litigation. In effect then, we are being asked to go the last mile in this cаse, to judicially obviate the American Rule in the context of everyday commercial litigation, where
The judgment of the Court of Appeals is affirmed insofar as it holds that Cerpac is a subcontractor for Miller Act purposes and that there was proper venue for suit on the shipment diverted to South Carolina, but reversed insofar as it holds that an award of attorneys’ fees to respondent Industrial is required by the Act.
It is so ordered.
MR. JUSTICE DOUGLAS, dissenting in part.
The Court, dealing with the Miller Act‘s predecessor, held in Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 380 (1917), that the Heard Act “must be construed liberally.” Thаt same principle applies to the Miller Act. Fleisher Co. v. United States ex rel. Hallenbeck, 311 U. S. 15, 17-18. The Act is silent as to attorneys’ fees, saying only that the payment bond shall allow the supplier “to prosecute said action to final execution and judgment for the sum or sums justly due him.”
The Court says that dependence on state law is inappropriate, for we deal with a federal standard that should be uniform. That takes great liberties with the Miller Act. Here the contract and law were made in California and were to be performed there. In Illinois Surety Co. v. John Davis Co., supra, the contract and law were made in Illinois and were to be performed there. “Questions of liability for interest must therefore be determined by the law of thаt State,” said Mr. Justice Brandeis speaking for the Court, 244 U. S., at 381. If state law would give the claimant interest, it should give him attorneys’ fees based on the purpose of the Miller Act. Judge Carter writing for the Court of Appeals pointed out that the Miller Act is the federal equivalent of state lien laws. See 473 F. 2d 720, 727. The remedy in a federal suit is therefore properly composed of the same elements as would be available to lien claimants in a state court collecting for labor and materials furnished on nonfederal projects. One of the elements of recovery permitted in a California court is attorneys’ fees. The “sum or sums justly due” should as a matter of federal law be construed to be the same as that due a claimant whose remedy is based on a state statute, when the federal remedy was intended to be the equivalent of the state remedy.