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Prime Contract Termination Didn't Trigger Subcontract Termination

Tuesday, September 26, 2017 06:22 am


Contract Termination --- Miller Act

U.S. f/u/b/o American Civil Construction, LLC v. Hirani Eng'g & Land Surveying, PC et al, 2017 U.S. Dist. Lexis 99102 (D.C. June 27, 2017)

A sub may be able to recover under the Miller Act---and under the theory of quantum meruit---for work performed well after the prime contract on the project was terminated.

Hirani Engineering & Land Surveying PC (Hirani) was the general contractor on a U.S. Army Corps of Engineers flood protection project on a public street in Washington D.C. Hirani hired subcontractor American Civil Construction, LLC (ACC) to provide project supervision, among other tasks, for a fixed price of $2,845,600. After multiple project delays (totaling 549 days), the Corps terminated its prime contract with Hirani on April 26, 2013. Sometime later, Hirani terminated the subcontract as well.

ACC sued Hirani for wrongfully refusing to pay amounts due under the subcontract, delaying the sub's work, and terminating the subcontract without notice. ACC sought $2 million in damages. ACC also named Hirani's bond surety in the suit and sought Miller Act recovery based on Hirani's failure to pay for labor, services, and materials furnished to the project. The defendants moved for summary judgment based, primarily, on the contention that ACC's Miller Act claim was time barred.

Miller Act clock depends on subcontract termination

According to the defendants, ACC's last date of subcontract performance took place on March 22, 2013, and the subcontract was terminated on April 26, 2013. Therefore, they argued, ACC's Miller Act claim, which was filed April 29, 2014, just missed the one-year statute of limitations. ACC countered that its last day of performance was later---on May 1, 2013---with subcontract termination occurring on the following day.

The court found that the defendants' dates were erroneously based on the prime contract, not the subcontract. Hirani and the surety argued that when the Corps terminated Hirani's prime contract on April 26, 2013, there was no more subcontract work to be performed because "the only contract that linked [ACC] to the Project had already been terminated." In other words, they argued that the prime contract's termination automatically terminated the subcontract on that same day---and put a halt to any compensable work under the subcontract after that date.

"Not so fast," the court said. The subcontract did incorporate portions of the prime contract (i.e., descriptions of work to be performed), but "such references do not convert agreement to the subcontract into agreement to the prime contract," the court explained, a [...]

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