The Miller Act Goes Abroad: Where to File Suit to Enforce a Payment Bond When the Work Is Done outside the United States
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THE MILLER ACT
The Miller Act Goes Abroad: Where to File Suit to
Enforce a Payment Bond When the Work Is Done
Outside the United States
By James R. Harvey III and Gretchen M. Ostroff
Gretchen M. Ostroff
The federal Miller Act' affords a powerful remedy to sub-
contractors on federal projects. Its protection transcends
situations that otherwise would leave subcontractors with-
out any hope of being paid, such as prime contractor
bankruptcies and onerous conditional payment terms.
The availability of this remedy on domestic projects is
nothing new. Less appreciated, however, is the security
the Miller Act provides to subcontractors performing
federal government work overseas. The Act provides
specific guidance that Miller Act suits must be brought
where the project is located, but this is of little help to
a claimant performing work abroad, where there is no
U.S. federal court.
This article explores use of the Miller Act by those
who furnish labor or materials to projects located outside
the United States. Among the issues considered are the
exercise by the U.S. federal courts of personal jurisdic-
tion over the surety and its principal and the appropriate
venues for filing a Miller Act suit when the subject proj-
ect is located on foreign soil, or when work is partially
performed in the United States and then shipped abroad.
The Miller Act Generally
The purpose of the Miller Act is to supplant the
security ordinarily afforded by a mechanic's lien in situ-
ations where liens are prohibited, i.e., when the work is
James R Harvey III is a partner with Vandeventer Black
LLP in Norfolk, Virginia. Gretchen M. Ostroff is of
counsel in the firm's Construction and Public Contracts
department.
performed on public land.2 The Miller Act protects those
who furnish labor or materials on federal public works
contracts from defaults in payment by the prime contrac-
tor.3 The Act accomplishes its purpose by providing for
a payment bond in place of a lien.4 Under the current
language of the Miller Act, a person who furnishes labor
or materials can sue under the statute for the amount
due.5 However, many cases interpreting the Miller Act
do so under its prior version, which used the phrase for
the sum or sums justly due him.6 Because the Miller Act,
while restated in its current form, did not change substan-
tively, courts often treat these phrases interchangeably.'
Federal law governs the Act's construction and appli-
cation, but state law applies to determine the prime
contractor's contractual liability to its subcontractor.8
Regardless of any contrary choice of law provision, fed-
eral law controls the surety's liability on a Miller Act
payment bond.9 The Miller Act is a remedial statute, so
it is given a liberal construction 'in order to properly
effectuate the Congressional intent to protect those whose
labor and materials go into public projects.' This lib-
eral construction requires a court to look holistically at
the claimant's relationship with the prime contractor to
determine whether a claimant is a subcontractor for
purposes of the Act. For instance, where a supplier of
materials to a federal construction project possesses a
good faith and reasonable belief that the materials are
intended for use in prosecution of the project, the sup-
plier will be protected by the bond regardless of whether
the materials ultimately end up being incorporated into
the federal project. However, the Miller Act's highly
remedial nature should not be exploited to justify ignor-
ing [the Act's] plain words of limitation and imposing
wholesale liability on payment bonds.
The broad interpretation of surety responsibility
under the Miller Act means that a surety's liability is not
constrained by the principal's contractual liability to its
subcontractor. '[T]he surety's liability on a Miller Act
bond must be at least coextensive with the obligations
imposed by the Act if the bond is to have its intended
effect.4 Therefore, the surety remains liable on the bond
regardless of any contractual defense to payment avail-
able to the prime contractor, such as a pay when paid
clause. For instance, where a surety did not include an
express pay when paid condition in the language of the
payment bond, it could not assert a defense to its own
20 THE CONSTRUCTION LAWYER Summer 2018
Published in The Construction Lawyer, Volume 38, Number 3, Summer 2018. 02018 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof
may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
James R. Harvey III](ViewImageLocal?handle=hein.journals/conlaw38&div=34&collection=&method=preview&ext=.png&size=3)
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The Miller Act Goes Abroad: Where to File Suit to Enforce a Payment Bond When the Work Is Done outside the United States
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