Consolidated Electrical & Mechanicals, Inc. v. Biggs General Contracting, Inc.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 97-3913
___________
Consolidated Electrical & Mechanicals, *
Inc., United States of America for the *
Use and Benefit of a Corporation, *
*
Appellee, *
*
v. *
*
Biggs General Contracting, Inc., a *
Corporation; Firemen’s Insurance *
Company of Newark, New Jersey, *
a Corporation, *
*
Appellants. *
___________ Appeals from the United States
District Court for the
No. 97-4048 Eastern District of Missouri.
___________
Consolidated Electrical & Mechanicals, *
Inc., United States of America for the *
Use and Benefit of a Corporation, *
*
Appellant, *
*
v. *
*
Biggs General Contracting, Inc., a *
Corporation; Firemen’s Insurance *
Company of Newark, New Jersey, *
a Corporation, *
*
Appellees. *
___________
Submitted: December 18, 1998
Filed: February 1, 1999
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Before WOLLMAN, BEAM, and LOKEN, Circuit Judges.
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WOLLMAN, Circuit Judge.
Consolidated Electrical & Mechanicals, Inc. (Consolidated) is a use-plaintiff in
this action against Biggs General Contracting, Inc. and Fireman’s Insurance Company
of Newark (Defendants) under the Miller Act, 40 U.S.C. §§ 270a-270d. After a bench
trial, the district court1 found Defendants liable under the Act, but held that
Consolidated was not entitled to damages for lost profits. Both sides appeal. We
affirm.
I.
In 1992, Biggs entered into a general contract with the federal government to
construct and remodel Missouri Air National Guard buildings at the St. Louis
International Airport. Biggs awarded Consolidated the subcontract for installing
electrical fixtures and equipment. Pursuant to the Miller Act, Biggs obtained a
payment bond for the project from Fireman’s.
1
The Honorable E. Richard Webber, United States District Judge for the Eastern
District of Missouri.
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The project was plagued by delays, primarily caused by the discovery of
asbestos, bad weather, power supply outages, and structural demolition problems.
Despite numerous requests from Consolidated, Biggs failed to promptly issue revised
construction schedules. This caused significant financial injury to Consolidated in the
form of increased storage and material costs. Biggs also failed to provide adequate
access to the work site, which resulted in idle time and labor inefficiencies for
Consolidated. Because Consolidated was not responsible for the delays, it requested
additional payment from Biggs for its increased costs. Biggs refused, pending
resolution of its request for additional payment from the government. Consolidated
then brought this action for payment.
The district court found that Biggs was partially at fault for the delay damages.
Accordingly, it held Defendants liable for $71,540 in damages under the Act. The
court denied Consolidated’s claim for an additional ten percent in lost profits.
II.
We review the district court’s factual findings for clear error. See Handeen v.
LeMaire (In re LeMaire), 898 F.2d 1346, 1349-50 (8th Cir. 1990) (en banc) (quoting
Anderson v. City of Bessemer City, 470 U.S. 564, 573-75 (1985)). A finding is clearly
erroneous if “‘although there is evidence to support it, the reviewing court on the entire
evidence is left with the definite and firm conviction that a mistake has been
committed.’” Anderson, 470 U.S. at 573 (quoting United States v. United States
Gypsum Co., 333 U.S. 364, 395 (1948)). We review the district court’s legal
conclusions de novo. See Nodaway Valley Bank v. Continental Cas. Co., 916 F.2d
1362, 1364-66 (8th Cir. 1990) (discussing the distinction between questions of law and
questions of fact); United States ex rel. Morris Constr., Inc. v. Aetna Cas. Ins. Co., 908
F.2d 375, 377-78 (8th Cir. 1990) (holding that a determination of eligibility for relief
under the Miller Act was a mixed question of law and fact, and thus subject to de novo
review).
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A.
Defendants argue that the district court clearly erred in finding Biggs partially
at fault for Consolidated’s damages. We disagree. Although the government initially
caused the asbestos-removal delays, Biggs exacerbated the delays and increased
Consolidated’s damages in several ways. After learning of the delays, Biggs failed to
provide Consolidated revised construction schedules, despite numerous requests.
Biggs also failed to conduct on-site progress meetings, coordinate the work of its
subcontractors, and provide Consolidated with electricity and proper access to the
work site. This resulted in well-documented economic injury to Consolidated in the
form of increased costs of materials and labor.
Defendants also argue that the district court erred as a matter of law in holding
them liable for all of Consolidated’s damages after acknowledging that Biggs was only
partially at fault. This question is one of first impression in this Circuit.
Because subcontractors may not impose a lien on government-owned property,
the Miller Act ensures that they can recover for materials and labor contributed to
public projects. See F.D. Rich Co. v. United States ex rel. Industrial Lumber Co.,
417U.S. 116, 121-22 (1974) (citing 40 U.S.C. §§ 270a, 270b); Department of the
Army v. Blue Fox, Inc., No. 97-1642, 1999 WL 17684 (U.S. Jan. 20, 1999); United
States ex rel. Olson v. W.H. Cates Constr. Co., 972 F.2d 987, 989-90 (8th Cir. 1992).
The Act is to be construed broadly because of its remedial nature. See Clifford F.
MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102, 107 (1944);
Olson, 972 F.2d at 990. Several circuits have interpreted the Miller Act to allow full
recovery by a subcontractor when the general contractor is not wholly at fault for the
delays. See Mai Steel Serv., Inc. v. Blake Constr. Co., 981 F.2d 414, 418-20 (9th Cir.
1992) (holding a general contractor liable for all of a subcontractor’s damages, even
though the delays were caused entirely by a third party); United States ex rel. T.M.S.
Mechanical Contractors, Inc. v. Millers Mut. Fire Ins. Co., 942 F.2d 946, 950-51 (5th
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Cir. 1991) (holding a general contractor liable for all of a subcontractor’s damages
when delays were partially caused by government’s discovery of asbestos); United
States ex rel. Pertun Constr. Co. v. Harvesters Group, Inc., 918 F.2d 915, 917-19 (11th
Cir. 1990) (holding a general contractor liable for all of a subcontractor’s damages
when delays were partially caused by government’s discovery of toxic wastes).
We agree with the reasoning of these circuits. The Miller Act favors allowing
full recovery from a general contractor regardless of fault because general contractors
have privity of contract with the government and can thus recover delay damages
directly from the government, while subcontractors cannot. (Indeed, Biggs brought suit
against the government for delay damages in this case.) This is one of the reasons
Congress believed that subcontractors had inadequate protection under state law for
their work on public projects. See Millers Mutual, 942 F.2d at 951; Pertun, 918 F.2d
at 918. Accordingly, the district court properly found against Defendants on the issue
of liability.2
B.
Consolidated cross-appeals on the issue of lost profits. It contends that it may
recover lost profits because the district court found that Biggs breached the contract.
In the alternative, Consolidated claims that it may recover lost profits because they fall
within the scope of relief contemplated by the Miller Act.
A surety’s liability under the Miller Act is measured by the general contractor’s
liability under the construction contract. See D&L Constr. Co. v. Triangle Elec. Supply
Co., 332 F.2d 1009, 1013 (8th Cir. 1964); W.F. Magann Corp. v. Diamond Mfg. Co.,
2
We note that a subcontractor may be barred from recovering delay damages
when its own conduct was the primary cause of the delay. See Mai, 981 F.2d at 419
n.8; Millers Mutual, 942 F.2d at 952 n.14. It is undisputed here, however, that
Consolidated was without fault.
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775 F.2d 1202, 1204 (4th Cir. 1985); United States ex rel. Leno v. Summit Constr. Co.,
892 F.2d 788, 791-92 (9th Cir. 1989). Claims brought under the Miller Act, however,
are federal causes of action and are separate and distinct from state law breach of
contract actions. See United States ex rel. Mariana v. Piracci Constr. Co., 405 F. Supp.
904, 906 (D.D.C. 1975) (holding that “the Miller Act provides a federal cause of action,
and the scope and substance of recovery are governed by federal rather than state law”);
United States ex rel. Yonker Constr. Co. v. Western Contracting Corp., 935 F.2d 936,
940-42 (8th Cir. 1991) (allowing subcontractor to recover full extent of contractual
damages because it pleaded a pendent state law claim in addition to its claim under the
Miller Act). Therefore, a subcontractor must specifically plead a breach of contract
claim under state law in addition to raising a Miller Act claim if it wishes to recover
damages under a contract theory. See, e.g., Leno, 892 F.2d at 791 (finding that
subcontractor could not recover state law damages because it failed to specifically plead
a state law cause of action in addition to its Miller Act claim).
Consolidated brought this claim “under the Miller Act.” Trial Tr. at 7;
Appellee’s Br. at 15. The district court addressed only a claim under the Miller Act.
See Mem. Op. of Sept. 26, 1997, at 12-16. Accordingly, we conclude that Consolidated
did not raise a free-standing state law claim against Biggs for breach of contract. Thus,
Consolidated’s argument for lost profits pursuant to a breach of contract claim against
Biggs must fail.
Consolidated also argues that it may recover lost profits pursuant to its Miller Act
claim. For this proposition, it cites Hensel Phelps Construction v. United States, 413
F.2d 701, 704 (10th Cir. 1969), and United States v. Transamerica Insurance, 881 F.
Supp. 1505, 1509 (D. Kan. 1995), which hold that lost profits are within the scope of
the Miller Act. Decisions of the Fifth, Ninth, and Eleventh Circuits, however, hold that
the Miller Act does not contemplate lost profits. See Millers Mutual, 942 F.2d at 952-
53; Mai, 981 F.2d at 418; Pertun, 918 F.2d at 919. Accord United States ex rel. Otis
Elevator Co. v. Piracci Constr. Co., 405 F. Supp. 908, 910 (D.D.C. 1975) (holding
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that “lost profit is precisely the type of breach of contract damage courts have
consistently held to fall outside the scope of the Miller Act”).
We agree with the reasoning of these latter cases. The Miller Act was not meant
to replace subcontractors’ state law contract remedies, which allow for recovery of lost
profits. Rather, it provides subcontractors an additional remedy to recover costs
expended in furnishing “labor or material in the prosecution of the work provided for
in [a public construction] contract.” 40 U.S.C. § 270b(a). “A claim for profit does not
involve actual outlay and thus ‘falls outside both the letter and the spirit of the [Miller]
Act.’” Millers Mutual, 942 F.2d at 953 (quoting Otis Elevator, 405 F. Supp. at 910).
Therefore, delay damages should be limited to out-of-pocket expenditures. See Otis
Elevator, 405 F. Supp. at 910.
As noted above, nothing in the Miller Act prevents subcontractors from bringing
state law breach of contract claims against general contractors to recover lost profits.
Because lost profits are not out-of-pocket expenditures for labor and materials,
however, they are not within the scope of remedies provided under the Miller Act.
Accordingly, the district court was correct in denying Consolidated’s claim for lost
profits on this basis.
The judgment is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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