Surety not bound by state court judgment against principal on payment bond

In prior posts, I have noted the importance of having an experienced construction attorney reviewing your claims. This issue is again highlighted in a recent decision from the Eleventh Circuit of Appeals styled Thomas v. Burkhardt, 2016 U.S. App. LEXIS 454 (January 28, 2016 11th Cir.) . In this case, Mr. Thomas served as a subcontractor to Thorington Electrical and Construction Company (“TECC”) on a federal construction project in Alabama. TECC and Travelers Casualty and Surety Company of America (“Surety”) provided a payment bond for the project pursuant to the Federal Miller Act.

Mr. Thomas completed his work on the project in March 2006 but TECC only paid approximately $90,000, about half of what Mr. Thomas was owed. In January 2008, Mr. Thomas filed suit against TECC in Alabama state court to collect the remaining balance. In September 2008, Mr. Thomas first notified Surety that he intended to file a claim against the Miller Act Payment Bond for the project. In October 2008, the Alabama state court entered a final judgment against TECC in the amount of $99,172.77. Mr. Thomas was unable to collect on his judgment against TECC and in February 2009, Mr. Thomas submitted a claim form along with a copy of the state court judgment to the Surety. In August 2009, Surety notified Mr. Thomas that it was denying his claim because it was not timely filed under the Miller Act.

In 2012, Mr. Thomas filed a federal lawsuit against Surety seeking to recover the amount of the state court judgment against TECC. The federal district court granted summary judgment in favor of Surety ruling that Mr. Thomas’ claim was time-barred because he failed to file suit within one year of completion of his work at the Project in accordance with the Miller Act. On appeal, Mr. Thomas did not dispute that his claim was untimely under the Miller Act but instead argued the state court judgment should be binding on Surety under the Full Faith and Credit Clause of the U.S. Constitution. The Eleventh Circuit of Appeals rejected this argument because only federal courts may determine a surety’s liability on a Miller Act bond. Therefore, federal courts have established that the Full Faith and Credit Clause does not apply to a state court judgment that would bind a surety on a Miller Act payment bond. Accordingly, the Eleventh Circuit affirmed the summary judgment ruling against Mr. Thomas.

The unfortunate result of Mr. Thomas being unable to collect $100,000 could have been avoided by him consulting a construction attorney when he completed work at the project. A construction attorney would have been aware of the one year statute of limitations and advised him to file suit against TECC and Surety in federal court under the Miller Act as opposed to filing suit in the state courts.

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