Avoiding an Arbitration Provision to Pursue a Payment Bond Claim in Court

Does your subcontract contain a binding arbitration provision as the means to resolving disputes? If so, and you sue the general contractor and payment bond surety in court there is a good chance that the payment bond claim will be stayed pending the outcome of the arbitration with the general contractor.  This is probably not the outcome you want.

For example, in a recent case involving a subcontractor on a federal project, the subcontractor’s Miller Act payment bond lawsuit was stayed pending the outcome of the subcontractor’s arbitration with the general contractor.  The subcontractor had sued both the Miller Act payment bond and the general contractor.  Perhaps it should have only sued the payment bond.

Sometimes it is better off not suing the general contractor, particularly if there is an arbitration provision and you are trying to circumvent the arbitration provision.   One way to do this is to sue the payment bond surety without suing the general contractor. This way you have an argument that the arbitration provision should not apply.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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