The Miller Act
(40 U.S.C. 3131, et seq.) is the exclusive bond recovery framework for
contractors working on federal works of improvement. Just recently, the Ninth Circuit Court of
Appeal, in a decision certified for publication, significantly opened the
playing field for contractors suing to collect sums due them. (See Technica,
LLC v. Carolina Casualty Insurance Company, et al., D.C.No.
3:08-cv-01673-H-KSC.)
In Technica, the subcontractor who “was not
a licensed California contractor as required by California law” sued the
general contractor and its surety for payment for work performed on a federal
construction project in California. The District
Court granted the general’s and surety’s motion for summary judgment on the
basis of Business & Professions Code § 7031(a), which “precludes any
contractor from maintaining an action for collection of compensation for
services if the contractor was not a licensed contractor during the performance
of the contract.” (Slip op. at 4.)
Acknowledging
this was a matter of first impression, the Ninth Circuit Court of Appeal reversed,
holding the absence of a California contractor’s license did not bar the
subcontractor from pursuing a Miller Act claim for payment under these
circumstances. Agreeing with the Eighth and Tenth Circuits,
and distinguishing cases dealing with the substantive law of contracts, the
panel held that rights and remedies under the Miller Act may not be conditioned
upon State law.
Specifically,
the Court said, “the text of the Miller Act forecloses any argument that
complying with state contractor licensing requirements is a condition to
maintaining a Miller Act claim ....”
(Slip op. at 7, fn. 4.) After
discussing the Supreme Court, Eighth and Tenth Circuit cases, and
distinguishing the Ninth Circuit cases cited by the general and the surety, the
Court concluded:
“We therefore hold that the limitation
in California Business and Professions Code § 7031(a) on the right of a
non-licensed contractor to maintain an action for collection of [compensation for]
unpaid services does not apply to an action under the Miller Act. Manifestly the federal rights affording
relief under a federally declared standard could be defeated if states were
permitted to have the final say as to what defenses could and could not be
properly interposed to suits under the Act.
[Citation.]”
In short, although
not explicitly stated, the Court of Appeals seems to have invoked the “supremacy
clause” (U.S. Const., Art. VI, para. 2), and as a result, the California
Business & Professions Code § 7031(a) restriction does not apply to a
contractor filing an action under the Miller Act.
How does this
affect your business? Questions? Comment, or send me an email, and let’s
discuss.
Nothing in this blog is intended to create an
attorney-client relationship. This
article is intended to provide a general overview of the current status of the
law for informational purposes only, and is not intended to constitute, or
serve as a substitute for, a professional legal consultation. Laws change every day; please consult an
attorney regarding the current status of the law, and how the law affects your
specific circumstances. Thank you.