Miller Act Suit remained until CDA’s remedies were exhausted | Bradley Arant Boult Cummings LLP

A federal district court in Washington recently dismissed a subcontractor’s petition for reconsideration of a stay motion already granted in a Miller Act lawsuit (the Miller Act governs the requirements of prime contractor surety on federal projects and provides remedies against the surety for subcontractors, vendors and suppliers on such projects). In United States of America, for use and benefit of Ballard Marine Construction, LLC, v. Nova Group Inc., et al., the prime contractor, Nova Group, has decided to suspend Ballard Marine’s Miller Act lawsuit until Ballard Marine and Nova Group have exhausted the contract dispute resolution (CDA) process.

The parties’ sub-contract required Ballard Marine to wait for a resolution of the CDA process and a determination by the government of how much Ballard Marine and Nova Group might be entitled to before suing Nova Group or its sureties separately. The district court allowed Nova Group’s motion, and Ballard Marine requested a reconsideration and clarification as to whether the stay was extended by the contracting officer’s final decision or by exhaustion of the process. appeal of the CDA.

Ballard Marine argued that this latter view of the suspension was unfair because the appeal process could take years to be fully resolved, and it was more appropriate to extend the suspension only until the Navy contracting officer makes final decision on Ballard Marine’s request. Nova Group responded by saying that the report and recommendation granting the stay motion already made it clear that the stay had been extended through CDA’s appeal process.

Further, Nova Group argued that until CDA’s appeal process was exhausted, no determination could be made as to the amount owed under the subcontract. Nova Group convincingly argued that the Miller Act was not intended to “circumvent the [CDA] process by which monetary law is quantified. According to Nova Group, the government’s determination of the right was a precondition for Ballard Marine to pursue any claims. Nova Group also provided evidence that it had diligently pursued Ballard Marine’s claim and disputed the claim that the CDA’s appeal process would take many years to resolve. The district court ruled in favor of Nova Group and dismissed the request for reconsideration.

Lessons from Construction Marine Ballard

Contractors and sub-contractors should be aware of the litigation requirements in their sub-contracts. Subcontracts on federal projects often contain clauses incorporating the requirements of the main contract or provisions requiring the ACD process to be followed and exhausted before suing a prime contractor on transfer claims. These provisions should feature prominently in internal company assessments regarding recovery options / exposure and potential litigation timeframes.

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