Federally owned construction projects are covered by a Miller Act Payment Bond for the benefit of the subcontractors and suppliers thereof. If you make a claim for payment under the Miller Act, you may, under certain circumstances, also have a claim for attorney fees and interest. The text of the Miller Act is silent with respect to attorney fees and pre-judgment interest. However, federal common law allows the recovery of both under certain circumstances.
Miller Act claimants are entitled to attorney fees if the claimant has a contractual basis for attorney fees. In many cases, the bond claimant need only show there is an attorney fee provision in the bond claimant’s contract. For example, courts have awarded suppliers attorney fees under the Miller Act where their contract or credit application with the subcontractor contained an attorney fees provision.
In addition, attorney fees are also available if the opposing party acted in “bad faith, vexatiously, wantonly, or for oppressive reasons.” This is a high threshold, thus this exception is not nearly as commonly invoked as the contractual exception.
Miller Act claimants may also pursue additional claims against parties other than the surety that may give rise to attorney fees. The Miller Act does not exclude other claims. For example, a supplier could pursue a subcontractor for attorney fees under a breach of contract or sworn account claim.
Federal courts will consider state law as a guide to determine whether or not to award prejudgment interest. Thus, if the claimant’s contract contains a provision entitling the claimant to interest, and state law would allow the recovery of such interest, then the claimant may be able to recover prejudgment interest under the Miller Act against the surety.
How to Preserve Your Rights
These exceptions are yet another example of why documentation matters. Suppliers should put attorney fee and interest provisions in their credit applications and invoices. Likewise, subcontractors should include attorney fee and interest provisions in their subcontract with the prime contractor. Doing so may preserve such rights against a surety that provides a Miller Act bond on a federal project. Not doing so may limit your recovery.