Sub-subcontractor wins in Postal Service construction case - LAW OFFICE OF ELIAS M. GORDAN

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0 height="100%"><tr> <td valign="top" width=175 BGCOLOR="#A6CAF0" TEXT="#080000"> <div> <B> <TABLE BORDER="0" CELLPADDING="2" CELLSPACING="1" WIDTH="132" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 35 ><NOBR><div> <IMG BORDER="0" SRC="1x1.gif" HEIGHT="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="21"></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <IMG BORDER="0" SRC="1x1.gif" HEIGHT="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="21"></div> </NOBR></tD> <tD VALIGN=TOP WIDTH="20"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="35" ALIGN="bottom" WIDTH="20" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=TOP><NOBR><div> <A HREF="id42.htm" TARGET="_top" TITLE="ARCHIVE PAGE LAW OFFICE OF ELIAS M. GOR"><U><B><IMG SRC="00d0d1d0.gif" border=0 width="13" height="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></U></A></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <IMG BORDER="0" SRC="1x1.gif" HEIGHT="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="27"></div> </NOBR></tD> </tR> </TABLE></B></div> <div> <B>© </B>2001 Elias M. Gordan</div> <div> All rights reserved</div> <bR> <div> <B>Law Office of</B></div> <div> <B>Elias M. Gordan</B></div> <div> Post Office Box 60</div> <div> Palos Park, IL  60464</div> <bR> <div> Phone  708.923.9735</div> <div> Email  gordanlaw@att.net</div> <div> Web    www.gordanlaw.com</div> <div> <A HREF="index.htm" TARGET="_top" TITLE="HOME PAGE LAW OFFICE OF ELIAS M. GORDAN"><U><B>HOME</B></U></A></div> <div> <A HREF="id24.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. GORDAN About Us"><U><B>About Us</B></U></A></div> <div> <A HREF="id30.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. 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Gordan-Archive</B></div> <bR> <div> <B>FEDERAL APPEALS COURT SIDES WITH INDIANA SUB-SUBCONTRACTOR</B></div> <bR> <div>  (17 January 2001)   The Seventh Circuit Court of Appeals, which hears appeals of federal cases in Illinois, Indiana, and Wisconsin, sided in favor of a sub-subcontractor this past Wednesday, January 10<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT> (case number 00-2112), in a payment-bond situation, where the various Federal courts have made conflicting pronouncements.  This may result in  the United States Supreme Court ultimately resolving the conflict between the lower courts.  </div> <div>      The case pitted S&G Excavating against the Seaboard Surety Company.  S&G was a sub-subcontractor on a post office project in Terre Haute, Indiana.  They were retained to do foundation work on the new postal facility by EUI Corp., a subcontractor to Austin Corp., the general contractor on the project.  S&G finished its work in April, 1997, but was not paid for their work by EUI.  In May of 1997, they filed, in the Vigo County County Recorder’s office, a notice of their intent to hold a mechanic’s lien against the Postal Service property. They sent Austin Corp. a copy of their notice, and a bill for the unpaid $73,000, detailing their work for EUI.  They apparently did not include a request for Austin to directly pay them the money, or to hold back the money from EUI’s payment.  S&G then sued to collect on Austin’s Miller Act payment bond from Seaboard.  S&G lost at the District Court level, on the grounds that they did not demand payment from Austin.  The trial judge noted that five federal judicial circuits (the 1<FONT SIZE="1" COLOR="#000000" FACE="Arial" >st</FONT>, 2<FONT SIZE="1" COLOR="#000000" FACE="Arial" >nd</FONT>, 5<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT>, 9<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT>, and 11<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT> Circuits) require an express or implied demand for general contractor payment, even though it is not specifically required under the Miller Act (the case citation is 93 F. Supp. 2d 968, S.D. Ind. 2000).</div> <div>         The 7<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT> Circuit reversed the decision of the trial judge on January 10<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT>, 2001, and sent the case back for further proceedings.  Judge Easterbrook noted that the Miller Act, 40 U.S.C. §270b (a), only requires three conditions for obtaining payment from a Contractor payment bond: </div> <div> - notice must be given within 90 days of the sub-subcontractors’ last work;</div> <div> - the notice must state, with substantial accuracy, the amount claimed; and</div> <div> - the notice must include the name of the party to whom the material was furnished or supplied, or for whom the labor was done or performed.</div> <div>         To quote Judge Easterbrook, “if the statute sets out three conditions to payment, than a notice meeting all three is sufficient.  Judges are not authorized to add requirements of their own devising.”  He also noted that the Miller act was a remedial act, which should be read charitably to subcontractors (and, presumably, sub-subcontractors).  He also noted that the 10<FONT SIZE="1" COLOR="#000000" FACE="Arial" >th</FONT> Circuit, in the <U>McWaters and Bartlett</U> case, 272 F.2d 291, 295 (1959), “got this right” .</div> <div>         There are two interesting points to consider:</div> <div> - the various federal appeals courts have made conflicting pronouncements on this issue (five against subs, now two in favor).  Might this case or similar cases be appealed to the United States Supreme Court?</div> <div> - The court noted that while federal projects are not normally subject to mechanic’s liens, Congress has waived sovereign immunity for the Postal Service.  Presumably, this allows an unpaid party to file a mechanic's lien against Postal Service property, in addition to the traditional claims against the payment bond and the unpaid construction funds.  The court, of course, did not address the mechanic’s lien issue.  Pre-1999 Indiana mechanic’s lien law required notice of intention to hold a mechanic’s lien within 60 days.  Recent changes have extended this to 90 days for most (but not all) projects.  See Indiana Code 32- 8-3-3.</div> <div> As always, please <FONT SIZE="3" COLOR="#0000BF" FACE="Arial" ><A HREF="id26.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. 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