A Miller Act payment bond lawsuit does not need to be brought against the payment bond surety. The lawsuit can be brought only against the prime contractor. This is because the prime contractor is the principal of the payment bond and cosigned the payment bond with the surety. There are reasons when a claimant may elect not to pursue the surety and just sue the prime contractor as the principal of the payment bond.
When settling a Miller Act payment bond lawsuit, it is important to obtain a release for both the prime contractor and surety (or sureties) that cosigned the payment bond. This way the claimant does not continue the lawsuit or timely assert a Miller Act payment bond lawsuit against the non-settling party.
In U.S. f/u/b/o Heavy Materials, LLC v. Tip Top Construction Corp., 2016 WL 2992116 (D.C.V.I. 2016), a claimant settled with a payment bond surety and still continued a Miller Act payment bond lawsuit against the prime contractor. Apparently, the surety did not obtain a release of the prime contractor. The prime contractor moved to dismiss the lawsuit arguing that the plaintiff’s settlement with the payment bond surety extinguished the Miller Act payment bond claim. The federal District Court rejected this argument finding that a plaintiff (claimant under the Miller Act) can sue the prime contractor (bond-prinipal) directly under the Miller Act without naming the payment bond surety. As the Court explained, “[C]laims under the Miller Act are not limited to those against the surety of the bond. Indeed, under the Miller Act “[P]laintiff [has] the right to recover from the principal or surety, or both, for work and material supplied.” Heavy Materials, LLC, 2016 WL at *9 quoting U.S. f/u/b/o Statham Instruments, Inc. v. Western Casualty & Surety Co., 359 F.2d 521, 524 (6th Cir. 1966).
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