Background

A supplier sued the general contractor and surety, to recover payment for materials it supplied on a federal Miller Act project in Georgia, in U.S. ex. rel. New Millennium Building Systems, LLC v. Paul S. Akins Company, Inc., 2012 WL 405 1874 (N.D. Ga. 2012). The supplier’s only substantive claim for relief was on the payment bond provided under the Miller Act, 40 U.S.C. §§ 3131-34. As part of its relief, the supplier sought to recover from the surety its attorneys’ fees as allowed under a Georgia statute that makes sureties liable for bad-faith conduct in handling claims on a bond.

The contractor and the surety in New Millennium asked the court to strike the claim for attorneys’ fees, arguing that the supplier could not recover attorneys’ fees allowed under a state statute, for a violation of the Miller Act. The court ruled that the supplier’s claim for attorneys’ fees under the Georgia statute must be stricken, without ever considering the allegations of bad faith. The court reasoned that any recovery of attorneys’ fees under a Miller Act claim must be on the grounds allowed under federal law. Therefore, the supplier could not recover attorneys’ fees allowed under a state statute, in a Miller Act claim.

Analysis of Attorney Fee Entitlement

The New Millennium case was decided largely based on a decision by the United States  Supreme Court, nearly 40 years ago, that “the Miller Act provides a federal cause of action, and the scope of the remedy as well as the substance of the rights created thereby is a matter of federal, not state law.” F.D. Rich Co. v. U.S. ex rel. Indus. Lumber Co., 417 U.S. 116 at 127 (1974). In other words, a claim under the Miller Act is a claim under a federal statute, and the recovery allowed under the Miller Act is as much a matter of federal law as are any other rights created by that law. That rule does not necessarily mean that Miller Act remedies can never be based on state law. It means, rather, that federal law decides which remedies are available. For example, the recovery of interest under the Miller Act is technically a question of federal law, but federal courts decide that question by applying the interest remedies allowed under the state law involved in the Miller Act case. Thus, federal courts use the state remedy as the measure of recovery of interest under the Miller Act. In contrast, the Supreme Court decided in F.D. Rich that federal courts should use a uniform federal rule in deciding what attorneys’ fees can be recovered under a Miller Act claim.

The Supreme Court in F.D. Rich may, in part, have decided to apply a federal rule for recovery of attorneys’ fees under the Miller Act, because a federal rule already existed for recovery of attorneys’ fees in many other kinds of federal cases. That rule allows a party to recover attorneys’ fees, if the recovery is allowed under: a federal statute; or, an applicable contract. The Supreme Court in F.D. Rich analyzed that federal rule for recovery of attorneys’ fees, and suggested that the rule provided an adequate remedy for parties suing under the Miller Act.

Value of Consistency

The Supreme Court expressly noted in F.D. Rich that inconsistent decisions on recovery of attorneys’ fees could result under the Miller Act, if federal courts were able to devise separate rules for such recovery in each state, district, or territory of the United States. While the Supreme Court recognized that there was some force to arguments in favor of allowing parties suing under the Miller Act to more readily recover their attorneys’ fees, the Court noted a federal rule allows for such recovery by a party who prevails over another party who has acted in bad faith, vexatiously, wantonly or oppressively, and other exceptions that might also be allowed under the federal rule. Given those exceptions, and the fact Congress had considered, but had not provided, a more generous recovery for attorneys’ fees under the Miller Act, the Supreme Court in F.D. Rich held that the existing rule was an adequate remedy.

Effect of State Law Claim

The court in New Millennium noted that some federal courts have allowed recovery of Miller  Act related attorneys’ fees under state laws, when a separate state-law violation was alleged. For example, the New Millennium court cited cases that allowed recovery of attorneys’ fees by a Miller Act claimant who alleged that the conduct of the Miller Act surety or contractor violated a separate state law. The court in New Millennium concluded that the Miller Act did not allow a state-law remedy, for recovery of attorneys’ fees, on a claim made solely under the Miller Act. Thus, the supplier in New Millenium might have recovered its attorneys’ fees, if it had asserted its state-law claim separately, rather than trying to engraft the state-law remedy onto its Miller Act claim.

Under the analysis set forth in New Millennium, attorneys’ fees might be recovered in Miller Act cases, but the right to recover them is restricted by the federal rule that allows recovery of attorneys’ fees only when those fees are allowed by statute, contract, or an exception to the rule. Therefore, subcontractors and suppliers may need to seek recovery of attorneys’ fees on a Miller Act project under one of the exceptions to the federal rule discussed above. Alternatively, contractors, subcontractors, or suppliers on Miller Act projects may be able to recover attorneys’ fees by stating separate, state-law claims for such fees, where a such state-law claim exists.