Lawsuit Seeking Payment Under the Miller Act does not Require a Contractor or Subcontractor to be Licensed in the State in Which it is Seeking Payment

In Technica LLC, et al. v. Carolina Cas. Ins. Co., et al., 2014 U.S. App. LEXIS 8023, (9th Circuit 2014), the court held that the fact that Technica was not a licensed California contractor, as required by California law, did not bar its Miller Act (40 U.S.C. §§ 3131-3134) claim for payments due under a subcontract. The Miller Act is the modern-day remedy to the historical dilemma faced by contractors and materialmen denied compensation in federal construction projects. The common law doctrine of sovereign immunity prevented liens against property of the federal government, and federal statutes only allowed those in privity of contract to sue to enforce contractual rights. The Miller Act requires a general contractor on a federal construction project to furnish a payment bond “for the protection of all persons supplying labor and material in carrying out the work provided for in the contract.” If anyone supplying labor or material has not been paid after 90 days, they may bring a civil action on the payment bond for the amount due. The Miller Act explicitly extends to subcontractors.

California Law precludes any contractor from maintaining an action for collection of compensation for services if the contractor was not a licensed contractor during the performance of the contract. See California Business and Professions Code § 7031(a). Technica performed $893,677.77 of work, but was only paid $287,861.81. When suit was brought to recover the remaining amount due, the defendants argued that because Technica was not a licensed California contractor, it could not bring an action for collection of the money it was owed. Following similar decisions in the Eighth and Tenth Circuit Courts of Appeal, the Ninth Circuit held that the state law limitation on the right of a non-licensed contractor to maintain an action for collection of unpaid services did not apply to an action under the Miller Act.

The court noted that “the federal rights affording relief under a federally declared standard could be defeated if states were permitted to have the final say as to what defenses could and could not be properly interposed to suits under the [Miller] Act. Applying the state’s licensing statute as a defense to a Miller Act claim would, at best, condition the rights of a subcontractor on the procedural requirements of the law, and, at worst, result in the nullification of those rights completely. Neither result is in accordance with the remedial purposes of the Miller Act.

The Court concluded by noting that enforcement of state licensing requirements against Miller Act claims would wreak havoc on the uniform application of the Miller Act. Federal contractors routinely bid on projects throughout the county and often perform contracts that span multiple states. Requiring them to comply with contractor licensing requirements in any given state in which the work is contrary to the intent of Congress in enacting the Miller Act, which was meant to reduce the substance and procedural hurdles placed on federal contractors, labor providers, and materialmen in seeking payment of wages denied to them.

The Court’s decision is a practical one and provides protections to contractors and subcontractors who are brought into a different state, where they are not licensed, to work on a federal project.