Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-55156/USCOURTS-ca9-12-55156-0/pdf.json

Nature of Suit Code: 130
Nature of Suit: Miller Act
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RAMONA EQUIPMENT RENTAL, INC.,

for the use of the United States on

behalf of a California corporation,

Plaintiff-Appellee,

v.

CAROLINA CASUALTY INSURANCE

COMPANY, a Florida corporation;

CANDELARIA CORPORATION, an

Arizona corporation; OTAY GROUP,

INC., a California corporation,

Defendants-Appellants.

No. 12-55156

D.C. No.

3:08-cv-01685-

H-MDD

OPINION

Appeal from the United States District Court

for the Southern District of California

Marilyn L. Huff, District Judge, Presiding

Argued and Submitted

October 11, 2013—Pasadena, California

Filed June 20, 2014

Before: Richard A. Paez and Andrew D. Hurwitz, Circuit

Judges, and Ralph R. Erickson, Chief District Judge.*

Opinion by Judge Paez;

Dissent by Judge Erickson

* The Honorable Ralph R. Erickson, Chief District Judge for the U.S.

District Court for the District of North Dakota, sitting by designation.

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2 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

SUMMARY**

Miller Act

The panel affirmed the district court’s judgment after

bench trial in favor of the plaintiff in an action under the

Miller Act.

The plaintiff alleged that a subcontractor on a federal

project failed to pay for equipment rented on an open book

account. The panel held that the plaintiff’s notice of demand,

served on the prime contractor within ninety days of the last

day on which the plaintiff furnished the equipment, was

timely as to equipment furnished more than ninety days

before the notice. Agreeing with the First, Fourth, and Fifth

Circuits, the panel held that if all the goods in a series of

deliveries by a supplier on an open book account are used on

the same government project, then the ninety-day notice is

timely as to all of the deliveries if it is given within ninety

days from the last delivery.

The panel also affirmed the district court’s determination

of when the plaintiff’s duty to mitigate damages arose, as

well as the district court’s award of contractual prejudgment

interest.

Dissenting, Judge Erickson wrote that he would reverse

the district court’s judgment because, in light of the Miller

Act notice provision’s purpose of protecting the general

contractor and its surety, the plaintiff’s ninety-day notice was

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO. 3

not timely as to equipment furnished more than ninety days

before the notice. Judge Erickson wrote that he also would

reverse as to mitigation of damages and prejudgment interest.

COUNSEL

Robert J. Berens (argued) and Adam D. Melton, Phoenix,

Arizona, for Defendants-Appellants.

James D. Crosby (argued) and Leah A. Plaskin, Klinedinst

PC, San Diego, California, for Plaintiffs-Appellees.

OPINION

PAEZ, Circuit Judge:

CandelariaCorporation (“Candelaria”), a prime contractor

on a federal construction project, Carolina Casualty Insurance

Company (“CCIC”), its surety, and Otay Group, Inc.

(“Otay”), a subcontractor (collectively, “Defendants”), appeal

the district court’s judgment in favor of Ramona Equipment

Rental, Inc. (“Ramona”), Candelaria’s supplier of rental

equipment, in Ramona’s action under the Miller Act,

40 U.S.C. §§ 3131–3134. The suit involves Otay’s failure to

pay for equipment rented from Ramona on an open book

account. As required by the Miller Act, Ramona served

Candelaria with notice of demand for payment within ninety

days of the last day on which it furnished the equipment. The

critical issue in this appeal is whether Ramona’s notice is

timely as to rental equipment furnished more than ninety days

before the notice. We hold that it is, and affirm the district

court’s judgment.

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4 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

I.

This dispute arises from a federal construction project

known as ICE El Centro SPC - Perimeter Fence

Replacement/Internal Devising Fence Replacement ( the

“Project”). Candelaria was the prime contractor on the

Project and, in tandem with CCIC, provided a payment bond

as mandated by the Miller Act. See 40 U.S.C. § 3131. In

December 2007, Otay entered into a subcontract with

Candelaria agreeing to supply certain labor and equipment

for the Project. Shortly thereafter, Otay submitted, and

Ramona approved, a credit application which established an

open account for Otay to rent equipment from Ramona for

use on the Project. Under the terms of the credit application,

rentals would be documented by a rental agreement and

invoice.

Between December 2007 and June 2008, Otay and

Ramona entered into eighty-nine rental agreements on credit,

totaling $235,446.84. On June 6, 2008, Candelaria

terminated Otay’s subcontract for cause. At that time,

Candelaria owed Otayover $500,000 for labor and equipment

provided to the Project, and Otay had paid Ramona only

$17,658.57 on the outstanding rental agreements.

On July 25, 2008, Ramona served a ninety-day notice of

its claim for payment on Candelaria’s payment bond pursuant

to 40 U.S.C. § 3133(b)(2).1 Following service of the notice,

1

 Section 3133(b)(2) provides: “[a] person having a direct contractual

relationship with a subcontractor but no contractual relationship, express

or implied, with the contractor furnishing the payment bond may bring a

civil action on the payment bond on giving written notice to the contractor

within 90 daysfrom the date on which the person did or performed the last

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RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO. 5

in September 2008, Ramona filed a complaint in district court

under the Miller Act to recover $393,567.09 in unpaid

equipment rentals plus monthly service charges. At trial,

Defendants argued that Ramona’s ninety-day notice was

untimely as to all rental equipment furnished to the project

more than ninety days before service of the notice on July 25,

2008. Defendants also argued that Ramona failed to mitigate

its damages and that Ramona was not entitled to recover

compound prejudgment interest, which the credit application

called “service charges.”

The district court rejected Defendants’ first argument and

concluded that, in light of the open book account, the ninetyday notice covered all rental equipment furnished to the

Project. The court, however, determined that Ramona’s duty

to mitigate damages arose as of June 10, 2008 (four days after

Otay’s termination by Candelaria) and barred recovery for

invoices after that date. Finally, the court rejected Ramona’s

claim for compound prejudgment interest and awarded simple

interest at the contractual rate of 1.5 %. Accordingly, on

August 31, 2011, the district court entered judgment awarding

Ramona $178,686.56 plus $106,516.64 in service charges and

$114,081.28 in attorneys’ fees. Defendants timely appealed.2

of the labor or furnished or supplied the last of the material for which the

claim is made . . . .” 18 U.S.C. § 3133(b)(2).

2 We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the

district court’s findings of fact under Federal Rule of Civil Procedure

52(a)(1) for clear error and its legal conclusions de novo. See Fisher v.

Tucson Unified Sch. Dist., 652 F.3d 1131, 1136 (9th Cir. 2011); see also

United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc)

(holding that factual findings are clearly erroneous where they are

“illogical, implausible, or without support in inferences that may be drawn

from facts in the record.”).

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6 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

II.

The Miller Act “represents a congressional effort to

protect persons supplying labor and material for the

construction of federal public buildings in lieu of the

protections they might receive under state statutes with

respect to the construction of nonfederal buildings.” Mai

Steel Serv. Inc. v. Blake Constr. Co., 981 F.2d 414, 416–17

(9th Cir. 1992) (internal citation omitted). To accomplish this

beneficial purpose, the Miller Act is entitled to a liberal

interpretation. See United States ex rel. Sherman v. Carter,

353 U.S. 210, 216 (1957); see also United States v. W. Elec.

Co., 337 F.2d 568, 572 (9th Cir. 1964). The Miller Act

requires that laborers and materialmen with no direct

relationship to the general contractor furnishing the payment

bond, “giv[e] written notice to the contractor within 90 days

from the date on which the person did or performed the last

of the labor or furnished or supplied the last of the material

for which the claim is made.” 40 U.S.C. § 3133(b)(2); see

United States ex rel. Water Works Supply Corp. v. George

Hyman Constr. Co., 131 F.3d 28, 31–32 (1st Cir. 1997). This

notice requirement “serves an important purpose: it

establishes a firm date after which the general contractor may

pay its subcontractors without fear of further liability to the

materialmen or suppliers of those contractors.” Id. at 32. 

Failure to comply with the ninety-day notice requirement is

fatal to a Miller Act claim.

We have not addressed the precise issue presented by this

appeal.3In the absence of controlling Ninth Circuit authority,

3

In Apache Powder Co. v. Ashton Co., we dealt with a ninety-day notice

that demanded payment for material supplied more than ninety days

before the notice. 264 F.2d 417, 418 (9th Cir. 1959). The dispute there,

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RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO. 7

the district court turned to Noland Co. v. Allied Contractors,

Inc., 273 F.2d 917, 920 (4th Cir. 1959), for guidance. In

Noland, the Fourth Circuit considered a claim for six unpaid

shipments sent by Noland, a supplier of electrical equipment,

to a subcontractor on an open account. Id. at 919. Noland

sent written notice under the Miller Act within ninety days of

the last shipment. Id. at 918. The notice included claims for

several shipments that were delivered more than ninety days

before the notice. Id. The court held that the notice was

timely as to all shipments, concluding that where there are

multiple deliveries or contracts, “the measuring date will be

the date when the last material is furnished under the last

contract.” Id. at 920. Defendants acknowledge Noland, but

argue that it is outdated and that we should adopt the

reasoning of several more recent district court decisions that

protect the prime contractor and surety from the risk of

double payment. Several of our sister circuits, however, have

agreed with Noland’s holding, as do we.

In United States ex rel. A & M Petroleum, Inc. v. Sante Fe

Engineers Inc., the Fifth Circuit concluded that notice within

ninety days of the last delivery on a project involving

multiple purchase orders—including orders made more than

ninety days before the notice—was timely under the Miller

Act. 822 F.2d 547, 548 (5th Cir. 1987). Noting that this

“seems to be the preferred interpretation” among the circuit

courts, the Fifth Circuit held that under the Miller Act, a

materialman or laborer need only give notice to a general

contractor within ninety days of the last delivery or rendition

of services, rather than after each unpaid deliveryor provision

of labor. Id. Thus, when there is an open account, a ninetyhowever, centered on the form of the notice, and not whether the notice

was timely for all deliveries covered by the notice.

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8 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

day notice is timely even when it includes material furnished

more than ninety days before the notice.

Similarly, in Water Works Supply Corp., the First Circuit

considered circumstances where the plaintiff extended a line

of credit on an open book account for the purchase of pipe

and piping materials. 131 F.3d at 30. In March 1995, the

plaintiff served a ninety-day Miller Act notice relating to two

outstanding invoices from November 1994 and January1995. 

Id. The general contractor asserted that, notwithstanding the

open book account, each order represented a separate contract

with a separate ninety-day limit. Id. at 34. The court rejected

this argument, noting that “the weight of the authority

contradicts that position.” Id. Rather, the First Circuit 

reasoned that although a strict reading of the notice provision

might offer more protection to the general contractor, “the

goal of a specific statutory provision must take a back seat to

the purpose of the overall statute, which is to provide

recovery for suppliers who have provided materials but not

received compensation.” Id. (citing Noland, 273 F.2d at

920–21). Accordingly, the court held that “[w]here claims

are based on an open account theory, the ninety-day notice

period for all of the deliveries begins on the date of the last

delivery to the project.” Id.4

4 Although Defendants rely on the Second Circuit’s opinion in United

States ex rel. J.A. Edwards & Co., Inc. v. Peter Reiss Construction Co.,

it involved circumstances distinguishable from those at issue here. 

273 F.2d 880 (2nd Cir. 1959). That case addressed a series of unpaid

deliveries in August, September and October 1956. Id. at 881. In March

1957, the plaintiff made an additional delivery which also went unpaid,

and in April, served a Miller Act ninety-day notice seeking payment for

the March delivery and the deliveries made in the prior year. Id. The

Second Circuit held that, given the significant gap in deliveries, the 1957

delivery did not “revive a Miller Act liability long extinguished . . .” Id.

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RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO. 9

Here, the relationship between Otay and Ramona was

governed by an open book account that allowed Otay to rent

equipment from Ramona on an ongoing credit basis. Ramona

continued to rent equipment to Otay for use at the Project

until Candelaria terminated its subcontract on June 6, 2008,

and, within ninety days of the last rental, Ramona served

notice of its claim for payment on Candelaria. These

circumstances are clearly analogous to those addressed by the

First, Fourth and Fifth Circuits. Accordingly, we join our

sister circuits and hold that if all the goods in a series of

deliveries by a supplier on an open book account are used on

the same government project, the ninety-day notice is timely

as to all of the deliveries if it is given within ninety days from

the last delivery.

Relying on several recent district court cases, the dissent

asserts that the ninety-day notice requirement serves to

protect the general contractor and its surety. Dissent at 14;

see e.g., United States ex rel. Country Boys Feed & Farm

Supply v. Eickelmann, No. 08-3429-CV-S-GAF, 2010 WL

750059 (W.D. Mo. March 2, 2010); United States ex rel.

Robert DeFilippis Crane Serv. Inc. v. William L. Crow

Constr. Co., 826 F. Supp. 647 (E.D.N.Y. 1993). Although we

acknowledge that “an important purpose of the 90-day notice

provision is to protect the general contractor and his surety,”

United States ex rel. Miller & Bentley Equip. Co. v. Kelley,

327 F.2d 590, 591 (9th Cir. 1964), the weight of circuit

at 881–82. The court, however, explicitly noted that it was “not here

required to decide whether, when a materialman makes deliveries under

a series of purchase orders so that each delivery is within 90 days of its

predecessor, a notice given within 90 days of the last order or delivery will

relate back to include the entire chain.” Id. at 881. The issue in this case

is precisely that which the Second Circuit declined to address in J.A.

Edwards.

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10 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

authority recognizes a broader purpose in the Miller Act. In

the end, the goal of the notice provision “must take a back

seat to the purpose of the overall statute, which is to provide

recovery for suppliers who have provided materials but not

received compensation.” Water Works Supply Co., 131 F.3d

at 34.

Moreover, contrary to Defendants’ argument, there is no

risk here of double liability to Candelaria. See United States

ex rel. Blue Circle West, Inc. v. Tucson Mech. Contracting,

Inc., 921 F.2d 911, 914 (9th Cir. 1990) (noting that the intent

of the Miller Act notice requirement is, in part, to help

general contractors to “avoid such double liability”). Rather,

Candelaria has thus far avoided payment almost entirely,

ultimately providing only $70,000 of the $600,000 due on

Otay’s subcontract. We therefore affirm the district court’s

award of $178,686.56 in damages, holding that all amounts

due for all the rental equipment furnished to Otay for

construction of the project were properly included in the

ninety-day notice.5

5 Defendants also argue that equipment Ramona rented fromthird parties

and then “re-rented” to Otay does not constitute materials “furnished or

supplied” under the Miller Act. We disagree. The words “furnished or

supplied” are not defined in the Miller Act and are therefore entitled to

their ordinary meaning. See Woods Constr. Co., Inc. v. Pool Constr. Co.,

348 F.2d 687, 689 (10th Cir. 1965); see also FDIC v. Meyer, 510 U.S.

471, 476 (1994) (“In the absence of [a definition in the statute], we

construe a statutory term in accordance with its ordinary or natural

meaning”). We agree with the district court that these words should not be

read to imply a requirement of ownership of the object being furnished or

supplied. Moreover, Defendants’ reliance on Woods is inapposite; Woods

dealt with access to real property and not re-rented personal property. 

348 F.2d at 689. Accordingly, all equipment rented before June 10, 2008

to Otay was properly included in Ramona’s Miller Act claim.

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RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO. 11

III.

Defendants also argue that the district court erred in

determining that Ramona’s duty to mitigate damages arose

only after June 10, 2008, four days after Candelaria

terminated Otay’s contract. Reviewing the district court’s

factual determination regarding the reasonableness of

Ramona’s mitigation efforts for clear error, we find none. 

See Jackson v. Shell Oil Co., 702 F.2d 197, 202 (9th Cir.

1983).

From December 2007 to June 2008, Ramona furnished

equipment to Otay for the project and regularly invoiced Otay

for the rentals. Otay paid the first nine invoices through

March 4, 2008, but by May 28, 2008, had paid only two of

the remaining eighty invoices. Recognizing that Otay was

having financial difficulties, Candelaria made several

attempts in May and June 2008 to meet with Otay

representatives in order to determine a payment plan. These

efforts were unsuccessful and, on June 6, 2008, Candelaria

terminated Otay for cause. Ramona ceased renting

equipment to Otay upon learning of the termination, but

seventy-eight invoices remained unpaid in the amount of

$218,329.23.

Defendants contend that because Ramona did not notify

Candelaria of Otay’s overdue payments, and did not cease

equipment rentals when prior invoices went unpaid, it failed

to properly mitigate damages. “Where a party is entitled to

the benefit of a contract and can save himself from a loss

arising from a breach of it at a trifling expense or with

reasonable exertions, it is his duty to do it . . . .” Commodity

Credit Corp. v. Rosenberg Bros. & Co. 243 F.2d 504, 511

(9th Cir. 1957). Here, the district court determined that

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12 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

because Otay and Candelaria were still trying to resolve their

business issues as of June 5, 2008, Ramona “had a good faith

belief that Otay and Candelaria would resolve their issues and

payment would be forthcoming from Otay.” The district

court also found that Ramona and Otay had a long-standing

business relationship and Otay was providing on-time

payments to Ramona on another federal government contract

during this time period, which, “add[ed] credence to

Ramona’s position that it expected Otay to also make

payments on the [Project].” Although Ramona failed to alert

Candelaria to Otay’s delinquencyuntil seventy-eight invoices

from Otay were overdue, this does not render the district

court’s conclusion—that Ramona had commercially

reasonable justifications for choosing not to mitigate its

damages prior to June 10, 2008—“illogical [or]implausible.” 

See Hinkson, 585 F.3d at 1263. Accordingly, we affirm the

district court’s ruling not to award damages for invoices

submitted on or after June 10, 2008.

IV.

Finally, Defendants assert that Ramona waived its right

to collect service charges through its course of conduct, as

Ramona did not assess service charges until June 30, 2008. 

This argument was raised for the first time in the district court

in a post-trial motion to alter or amend the judgment. The

issue is waived. See Beech Aircraft Corp. v. United States,

51 F.3d 834, 841 (9th Cir. 1995) (“That Plaintiffs raised the

issue in a post-judgment motion does not save this issue for

appeal for the Plaintiffs . . . . Because Plaintiffs could have

raised the issue at or before trial and because they have not

presented any valid reason for not having done so, we decline

to consider Plaintiffs’ . . . argument.”). Accordingly, we

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RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO. 13

affirm the district court’s award of contractual prejudgment

interest (service charges).

AFFIRMED.

ERICKSON, Chief District Judge, dissenting:

I respectfully dissent. The Miller Act provides,

[a] person having a direct contractual

relationship with a subcontractor but no

contractual relationship, express or implied,

with the contractor furnishing the payment

bond may bring a civil action on the payment

bond on giving written notice to the contractor

within 90 days from the date on which the

person did or performed the last of the labor

or furnished or supplied the last of the

material for which the claim is made.

40 U.S.C. § 3133(b)(2). This case involves a series of

contracts under an open account. From January 2008 through

July 2008, Otay paid only eleven of its eighty-nine invoices. 

Of the $706,917.62 Otay paid Ramona during the relevant

time period, Otay allocated only $17,538.32 to this federal

construction project. The remainder was allocated to a

separate project. Ramona did not notify Candelaria until July

25, 2008 of the nonpayment. In the interim, Ramona

assessed 1.5% monthly compounding interest on each

outstanding balance.

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14 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

A significant purpose of the 90-day notice provision in

the Miller Act is to protect the general contractor and its

surety. The potential extended duration of an open account

relationship risks surprising the general contractor with an

unforseen and possibly staggering obligation. Requiring a

subcontractor to provide notice at 90-day intervals is not

overly burdensome, comports with the purpose of the Miller

Act, and lessens the risk that a subcontractor might delay

notice of outstanding debt for a greater profit.

I join the other courts that have adopted the more

stringent notice requirement advocated by Appellants. See,

e.g., United States ex rel. Country Boys Feed and Farm

Supply v. Eickelmann, No. 08-3429-CV-S-GAF, 2010 WL

750059, at *5 (W.D. Mo. March 2, 2010) (“Generally, an

open account should not be considered a contract for

purposes of the notice provision. Rather, the separate orders

of materials under the open account, which are typically

represented in purchase orders or invoices, satisfy the

underlying contract requirement.” (internal citation omitted));

United States ex rel. Robert DeFilippis Crane Serv. Inc. v.

William L. Crow Constr. Co., 826 F.Supp. 647, 655

(E.D.N.Y. 1993) (“Where claims are based on a series of

contracts, a claim must be made within 90 days from the date

on which the supplier ‘furnished or supplied the last of the

material’ for each underlying contract.”); see also United

States ex rel. J.A. Edwards & Co. v. Peter Reiss Const. Co.,

273 F.2d 880, 881–82 (2d Cir. 1959) (“[I]t would be wholly

inconsistent with the purpose of the notice provision of the

Miller Act . . . to hold that a shipment made on March 5,

1957, under an order of February 20, 1957, could revive a

Miller Act liability long extinguished.”).

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I believe Ramona’s July 25, 2008 notice of claim bars

recovery for the forty-seven invoices issued prior to April 26,

2008. Accordingly, I would reverse and remand for entry of

judgment, reducing the damages by $113,508.46 for failure

to provide the proper notice of claim.

Appellants also contend that Otay’s prolonged

delinquency on project-related payments should have put

Ramona on notice of its need to mitigate damages. I agree. 

By the time Otay’s subcontract was terminated on June 6,

2008, seventy-eight invoices remained unpaid.

The general rule regarding a party’s duty to mitigate

damages provides:

[W]here a party is entitled to the benefit of a

contract and can save himself from a loss

arising from a breach of it at a trifling expense

or with reasonable exertions, it is his duty to

do it; and he can charge the delinquent with

such damages only as, with reasonable

endeavors and expense, he could not prevent.

Commodity Credit Corp. v. Rosenberg Bros. &Co., 243 F.2d

504, 511 (9th Cir. 1957). Ramona allowed seventy-eight

invoices to go unpaid, accruing a debt of $218,329.23 and an

additional $175,658.57 in self-generated late fees.

The district court failed to consider, as a reasonable

mitigating measure, Ramona’s failure to timely notify

Candelaria of Otay’s growing debt. Ramona concedes the

very act of filing a Miller Act claim can constitute “available

and judicially honorable means of mitigating” losses. United

States ex rel. Balboa Ins. Co. v. Algernon Blair, Inc.,

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16 RAMONA EQUIP. RENTAL V. CAROLINA CAS. INS. CO.

795 F.2d 404, 409 (5th Cir. 1986). For a Miller Act obligee

to have the opportunity to mitigate damages, however, an

aggrieved party must actually submit the claim. Regardless

of the statutory notice requirements, sending Appellants

notice at any time in the months between Otay’s original

default and its ultimate termination would surely constitute

reasonable exertion “at a trifling expense.” See Commodity

Credit Corp., 243 F.2d at 511. Moreover, this measure could

have prevented hundreds of thousands of dollars in “service

charges” and litigation expenses.

The district court’s determination that the duty to mitigate

damages did not arise until June 10, 2008 was clearly

erroneous. Providing notice to Appellants of Otay’s default

was a reasonable form of mitigation available to Ramona

prior to termination of the subcontract. I would reverse and

remand for further proceedings on this issue.

Appellants also assert Ramona waived its right to service

charges through its course of conduct. Each rental agreement

provides that a customer “agrees to pay a monthly service

charge on all unpaid balances of 1–1/2% per month.” Despite

Otay’s growing delinquency, Ramona did not assess service

charges on any invoices issued during Otay’s subcontract

(with the exception of one service charge which Ramona

credited back to Otay). Ramona’s first exercise of this

contractual right took place on June 30, 2008—months after

Otay’s first default and weeks after its termination by

Candelaria—when Ramona issued thirty-five “finance

charge” invoices at once.

Ramona waived its right to collect service charges

through its course of conduct. I would, therefore, vacate the

award of $106,516.64 for service charges.

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