United States ex rel. Tusco, Inc. v. Clark Construction Group, LLC
235 F. Supp. 3d 745 | District Court, D. Maryland | 2016
What This Case Means for Subcontractors
Tusco, a subcontractor, sued Clark Construction and its surety Travelers for unpaid change order work on a federal project. Tusco claimed the surety violated the Miller Act payment bond. The court ruled that a surety cannot hide behind pay-when-paid clauses or dispute resolution procedures in the subcontract—the surety must pay valid claims regardless. This means sureties are directly liable to subcontractors and cannot use the prime contractor's contract terms as a shield.
Key Takeaways
- •Pay-when-paid and pay-if-paid clauses in your subcontract do NOT apply to the surety's payment bond obligations under the Miller Act
- •You can sue the surety directly for unpaid work without first resolving disputes through the subcontract's dispute resolution process
- •On federal projects, the surety's payment bond is a separate, independent obligation that protects you even if the prime contractor withholds payment
A surety is not entitled to the benefits of its principal's pay-when-paid clause.
Frequently Asked Question
Can a surety refuse to pay my Miller Act claim because of a pay-when-paid clause in my subcontract?
No. The court ruled that sureties are not entitled to the benefits of pay-when-paid or pay-if-paid clauses. Your Miller Act payment bond claim against the surety is independent of your subcontract terms. You can pursue the surety directly without waiting for the prime contractor to pay or resolving disputes through the subcontract process.
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