Consolidated Electrical & Mechanicals, Inc., United States of America for the Use and Benefit of a Corporation v. Biggs General Contracting, Inc., a Corporation Firemen's Insurance Company of Newark, New Jersey, a Corporation, Consolidated Electrical & Mechanicals, Inc., United States of America for the Use and Benefit of a Corporation v. Biggs General Contracting, Inc., a Corporation Firemen's Insurance Company of Newark, New Jersey, a Corporation
Docket: 97-3913
Court: Court of Appeals for the Eighth Circuit; January 31, 1999; Federal Appellate Court
Consolidated Electrical Mechanical, Inc. (Consolidated) filed a lawsuit against Biggs General Contracting, Inc. (Biggs) and Firemen's Insurance Company of Newark under the Miller Act after experiencing financial losses due to delays on a federally contracted project for the Missouri Air National Guard. Biggs, which had subcontracted Consolidated for electrical work, failed to provide revised construction schedules and adequate site access, leading to increased storage costs and labor inefficiencies for Consolidated. The district court found Biggs partially liable for damages and awarded Consolidated $71,540 but denied its claim for an additional ten percent in lost profits. Both parties appealed the decision. The appellate court affirmed the district court's findings, reviewing factual determinations for clear error and legal conclusions de novo. The case highlights the obligations and liabilities under the Miller Act, particularly regarding payment and responsibility for project delays.
Defendants contended that the district court erred in attributing partial fault to Biggs for Consolidated's damages due to delays initially caused by the government. The court found that Biggs exacerbated these delays by failing to provide updated construction schedules, conduct progress meetings, coordinate subcontractor work, and ensure proper site access and electricity, leading to increased costs for Consolidated. The court addressed the legal issue of whether Defendants could be held liable for all of Consolidated's damages despite Biggs' partial fault, noting that this question had not been previously resolved in the Circuit.
The Miller Act prohibits subcontractors from placing liens on government property but allows them to recover for materials and labor on public projects, requiring broad interpretation due to its remedial intent. Various circuits have upheld the notion that subcontractors can recover fully from general contractors for delays, even if the contractor is not entirely at fault. The reasoning is that general contractors can recover delay damages from the government, while subcontractors lack such recourse, thus reinforcing the need for adequate protection under the Miller Act. The district court's finding against Defendants on liability was deemed appropriate.
Consolidated also cross-appealed regarding lost profits, asserting entitlement to recover them based on Biggs' breach of contract or as damages contemplated under the Miller Act.
A surety's liability under the Miller Act is contingent upon the general contractor's liability under the construction contract. Miller Act claims are federal causes of action, distinct from state law breach of contract claims, requiring subcontractors to plead state law claims alongside their Miller Act claims to recover damages. Consolidated's claim was solely under the Miller Act, and it did not raise a separate state law breach of contract claim against Biggs, leading to the dismissal of its argument for lost profits under that theory.
Consolidated also contends it can recover lost profits under the Miller Act, referencing cases that support this view. However, contrary decisions from the Fifth, Ninth, and Eleventh Circuits state that the Miller Act does not cover lost profits, which are categorized as breach of contract damages outside its scope. The Miller Act is intended to provide subcontractors with remedies for actual costs incurred for labor and materials, not for anticipated profits. Consequently, claims for profit do not align with the Act's provisions.
The court affirmed the district court's denial of Consolidated's claim for lost profits, clarifying that while subcontractors can pursue state law claims for lost profits, such damages fall outside the Miller Act's remedies. Additionally, the court noted that a subcontractor could be barred from recovering delay damages if its own actions caused the delay, although this was not applicable in Consolidated's case. The judgment was affirmed.
