Filing Suit (Payment Bonds)

III. FILING SUIT (PAYMENT BONDS)

A. Obtaining Documents/Bonds on State and Federal Jobs

Both federal law and Maryland law have provisions that allow a potential claimant on a statutorily required payment bond to acquire copies of the bond. Federal law states that, "[t]he department secretary or agency head of the contracting agency must furnish a certified copy of a payment bond and the contract for which it was given to any person applying for a copy who submits an affidavit that the person has supplied labor or material for work described in the contract and payment for the work has not been made or that the person is being sued on the bond."⁶⁶

Maryland law states that, "[o]n request by a person who submits an affidavit verifying that the person has supplied labor or materials but has not been paid or is being sued under this section, the Comptroller or the officer in charge of the office where the payment security or evidence of security is required to be filed shall issue: (i) a certified copy of the payment bond; or (ii) for other security, a certified statement of the security."⁶⁷

B. Notice Required on Federal Projects

There are no notice requirements for a subcontractor or supplier that has a direct contractual relationship with the prime contractor that provided the payment bond pursuant to the Miller Act.⁶⁸ A subcontractor or supplier that is within the coverage of a Miller Act payment bond, but that has no contractual relationship with the prime contractor, is required to give written notice to the prime contractor "within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made."⁶⁹ The notice must be delivered to the prime contractor "by any means that provides written, third-party verification of delivery" and "must state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed."⁷⁰ The 90-day period runs from the last day of performance of work that is part of the contract.⁷¹ Work performed on the project for the "purpose of correcting defects, or making repairs following inspection of the project" does not extend the 90-day period for giving notice.⁷²

C. Notice Required on State Projects

There are no notice requirements for a subcontractor or supplier that has a direct contractual relationship with the prime contractor that provided the payment bond pursuant to the Little Miller Act.⁷³ A subcontractor or supplier that is within the coverage of a Little Miller Act payment bond, but that has no contractual relationship with the prime contractor, is required to give written notice to the prime contractor "within 90 days after the labor or materials for which the claim is made were last supplied in the prosecution of work covered by the" bond.⁷⁴ The required notice must be sent by certified mail and must "state with substantial accuracy the person to whom the labor or material was supplied."⁷⁵ The "date from which the ninety day period will run is the last date upon which any work or materials necessary to complete the contract is performed or furnished."⁷⁶

D. Time Requirements for Bringing Action

A civil action against a Miller Act payment bond surety must "be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action."⁷⁷ Returning to the project to complete repair or corrective work does not restart the one-year period for bringing suit under the Miller Act.⁷⁸ Similarly, time spent completing punch lists usually does not extend the time for filing suit against a Miller Act payment bond surety.⁷⁹

A civil action against a Maryland Little Miller Act payment bond surety must "be filed within [one] year after the public body finally accepts the work performed under the contract."⁸⁰ Final acceptance refers to the date when the prime contractor's responsibility to the government, and the government's liability to the prime contractor, is at an end.⁸¹ Final acceptance "must be unqualified, unconditional and for a complete performance of the contract" in order for the limitations period under the Little Miller Act to commence.⁸² "Final acceptance, for purposes of the accrual of a cause of action, is like the discovery rule, a mixed question of law and fact."⁸³

Common-law payment and performance bonds in Maryland are subject to a twelve-year statute of limitation.⁸⁴ A provision in a surety bond that attempts to shorten the limitations period for bringing suit on the bond "is against State public policy, illegal, and void."⁸⁵

E. Parties Covered by Payment Bond

The coverage of a common-law bond must be determined by the language of the bond itself and the associated contract for which it was issued.⁸⁶

F. Jurisdiction and Venue

A civil action against a Miller Act surety must be brought "in the name of the United States for the use of the person bringing the action" and must be brought "in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy."⁸⁷ "Federal court jurisdiction under the Miller Act is exclusive. There is no concurrent jurisdiction in the State courts."⁸⁸

A civil action against a Little Miller Act surety must be filed in the appropriate court of the county where the contract was "executed and performed" or in the county where the contractor that provided the bond "has its principal place of business."⁸⁹ A suit on a Little Miller Act payment bond may be brought in federal district court provided that diversity of citizenship exists and the jurisdictional amount is satisfied.⁹⁰

G. Arbitration Provisions

A valid arbitration clause in a contract on a project that is subject to the Miller Act will be enforced as between the parties to the construction contract.⁹¹ By demanding arbitration against the bond principal, the claimant does not waive its right to maintain a civil action against the Miller Act surety.⁹² A demand for arbitration does not stop the one-year limitations period for suit against a Miller Act surety

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