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Miller Act Surety Not Bound By Arbitration Award Against Contractor

Wednesday, February 01, 2012 03:28 am

 

The parties in a recent California case touched on a key question: To what extent is an arbitration award against a principal binding upon a Miller Act surety? The case law offers several answers.

1) State-confirmed award has preclusive effect

An arbitration award against a general contractor may have preclusive effect on a Miller Act surety, depending on state court confirmation of the award. Where a state has already confirmed an arbitration award, federal courts must consider the effect of that prior judgment.

In U.S. ex rel. Aurora Painting, Inc. v. Fireman's Fund Ins. Co., 832 F. 2d 1150, 1151 (9th Cir. 1987), the sub sued the surety in federal court to recover on the bond after obtaining confirmation in Alaska state court of an arbitrator's award against the principal. The surety wasn't a named party in the arbitration, but it had actual notice of the state court action, tendered its defense to the principal, and used the same counsel as the principal. Thus, the Ninth Circuit court found that "the surety cannot now complain that it was inadequately represented" and ruled that the arbitration judgment had preclusive effect on the surety's liability under the Miller Act.

2) Unconfirmed award may have preclusive effect

Some courts have also ruled that unconfirmed arbitration awards against principals have preclusive effect. What matters is whether the Miller Act surety had notice of the proceedings against the principal.

In U.S. ex rel [...]

 
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