Frontier Contr. Inc. v. Allen Eng’g Contr., Inc., 2014 U.S. Dist. LEXIS 136474 (E.D. Cal. Sept. 2014)

Frontier Contracting Inc. (Frontier) entered into a teaming agreement with Allen Engineering Contractor, Inc. (Allen) to complete two U.S. Federal Highway projects in Sequoia and Kings Canyon National Parks.  During the course of the projects, disputes arose and Allen refused to issue full payments to Frontier.  Frontier then filed a complaint against Allen alleging, in part, a Miller Act claim.

Allen moved for summary judgment on Frontier’s Miller Act claim alleging that the parties’ teaming agreement created a joint venture, whereas the Miller Act requires a subcontractor relationship.  The teaming agreement required Allen to provide the administrative duties and Frontier to perform the physical construction.  Frontier contended that it was a first-tier subcontractor for both projects.  In opposition to Allen’s motion for summary judgment, Frontier argued that conflicting evidence, including deposition testimony from the parties’ presidents and other documents, existed with respect to whether a subcontractor relationship existed.

The Court’s analysis focused on the distinctions between a joint venture and a subcontractor relationship.  The analysis of whether a subcontractor relationship exists under the Miller Act centers on “substantiality and importance of [a] party’s relationship with the prime contractor.” But the Court held that there is no exact test to determine whether a party is a subcontractor.  And it found the same is true for joint ventures, as courts must analyze the relationship between the parties.  The Court noted two key factors that are indicative of a joint venture: (i) whether the parties have a right to control the performance of the work, and (ii) whether there is an agreement to share in the profits and losses.

Allen contended that the teaming agreement alone established a joint venture.  But the Court held that a genuine dispute of material facts existed on whether there was a subcontract or joint venture, and so it denied Allen’s motion for summary judgment.

The Court determined that the teaming agreement could support both a joint venture and a subcontractor relationship because certain provisions discussed joint ownership of capital assets and the splitting of profits, while other provisions stated that nothing in the agreement shall be deemed to constitute a joint venture.   The Court also cited the Code of Federal Regulations which indicates teaming agreements can form partnerships, joint ventures or subcontractor relationships.  And, finally, the court found that the parties’ presidents gave conflicting testimony regarding their understanding of the teaming agreement and therefore the parties’ relationship.

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