In a recent decision, the 9th U.S. Circuit Court of Appeals held, for the first time, that California’s contractor licensing requirement cannot be used to bar a federal subcontractor from pursuing a claim under the Miller Act, 40 U.S.C. § 3131, for payment in connection with a federal government contract. In reversing the district court’s grant of summary judgment in favor of the defendant prime contractor and its surety, the 9th Circuit joined the 10th and 8th circuits and the U.S. Supreme Court in holding “that rights and remedies under the Miller Act may not be conditioned by state law.” Technica LLC ex rel. United States v. Carolina Cas. Ins. Co., 749 F.3d 1149 (9th Cir. Apr. 29, 2014). the 9th Circuit’s decision is noteworthy because it provides much-needed clarity regarding the rights and defenses available to federal contractors and their sureties in the context of Miller Act suits.
The dispute in Technica arose out of a federal construction project, the Immigration and Customs Enforcement Detention Center in El Centro, Calif., a city situated near the U.S.-Mexico border. As required by the Miller Act and the terms of its contract with the government, the prime contractor on the project, Candelaria Corp., provided a payment bond, which was issued by its surety, Carolina Casualty Insurance Co. In December 2007, Candelaria entered into a subcontract with Otay Group Inc. under which otay was to perform a portion of the work that was called for by the prime contract. Otay, in turn, contracted with Technica LLC to act as a sub-subcontractor on the project.
Originally Published in Westlaw Journal, Volume 28, Issue 5, 2014.
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