Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-00803/USCOURTS-casd-3_17-cv-00803-2/pdf.json

Nature of Suit Code: 130
Nature of Suit: Miller Act
Cause of Action: 40:3131 Bonds of contractors of public buildings

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA for the 

use and benefit of:

McCULLOUGH PLUMBING, INC.,

Plaintiff,

v.

HALBERT CONSTRUCTION

COMPANY, INC. et al.,

Defendants.

Case No.: 17-CV-803-CAB-WVG

ORDER DENYING MOTION FOR 

PARTIAL SUMMARY JUDGMENT

AND RELATED CROSS-CLAIMS AND 

COUNTERCLAIMS AND THIRD 

PARTY COMPLAINT

This matter is before the Court on a motion for partial summary judgment filed by 

Defendant Halbert Construction Company, Inc. (“Halbert”). The motion has been fully 

briefed, and the Court deems it suitable for submission without oral argument. The motion 

is denied.

I. Background

Halbert was the prime contractor on a contract with the United States Army Corps 

of Engineers for work on a dining facility in Monterey, California (the “Project”). In 

connection with the Project, Halbert and Defendant Western Surety Company (“Western”)

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executed and delivered a payment bond to the United States under the Miller Act, 40 U.S.C. 

§§ 3131 et seq. Plaintiff McCullough Plumbing, Inc. (“McCullough”) entered into a 

subcontract with Halbert to provide plumbing work for the Project (the “Subcontract”).

McCullough alleges that Halbert has not paid McCullough for the full value of the 

labor, services, materials, equipment, and supplies it provided to the Project. In its 

complaint, McCullough asserted claims against Halbert for breach of the Subcontract and 

quantum meruit, and against Halbert and Western jointly for recovery on the Miller Act 

payment bond. McCullough’s damages fall into three categories: (1) the unpaid balance 

of the original Subcontract amount; (2) payment for change orders; and (3) damages 

resulting from delay1in completion of the Project such as extended overhead and personnel 

costs. Halbert and Western now move for partial summary judgment that based on the 

language of the Subcontract, McCullough may not recover the third category of damages—

those resulting from the delay in completion of the Project.

II. Legal Standard

Although this is a motion for partial summary judgment, the familiar summary 

judgment standard set forth in Federal Rule of Civil Procedure 56 still applies. See Harper 

v. City of San Jose, No. C 09-05758 JW, 2011 WL 7109218, at *1 (N.D. Cal. Mar. 7, 2011)

(noting that although Rule 56 does not explicitly refer to “partial summary judgment,” 

“partial summary judgment is inherent in that Rule 56(a) requires a party to identify ‘each 

claim or defense—or the part of each claim or defense—on which summary judgment is 

sought.’”). Summary judgment (or partial summary judgment) is proper “if the pleadings, 

depositions, answers to interrogatories, and admissions on file, together with the affidavits, 

if any, show that there is no genuine issue as to any material fact and that the moving party 

is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 

 

1 The original contract completion date for the Project was January 19, 2015, but the Project was not 

completed until several years later. There are disputes of fact as to who or what is responsible for the 

delay, but those disputes are not material to the discrete grounds on which the Court is denying the instant 

motion.

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(1986); see also Fed. R. Civ. P. 56. To avoid summary judgment, disputes must be both 

1) material, meaning concerning facts that are relevant and necessary and that might affect 

the outcome of the action under governing law, and 2) genuine, meaning the evidence must 

be such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. 

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Cline v. Indus. Maint. Eng’g & Contracting 

Co., 200 F.3d 1223, 1229 (9th Cir. 2000) (citing Anderson, 477 U.S. at 248). “Under this 

standard, partial summary judgment “on all or any part of a claim” may be entered as to 

that portion of the claim. This reasoning extends to damages claims.” Pinnacle Fitness & 

Recreation Mgmt., LLC v. Jerry & Vickie Moyes Family Tr., 844 F. Supp. 2d 1078, 1093 

(S.D. Cal. 2012).

III. Discussion

Halbert’s sole argument for partial summary judgment is that Section 2.4 of the 

Subcontract prevents McCullough from recovering damages arising out of delays to the 

Project. Section 2.4 of the Subcontract states:

No Damage for Delay. Should Subcontractor’s performance be delayed, 

hindered, interfered with, or otherwise disrupted by any act of the Contractor, 

other subcontractor(s) or supplier, whether avoidable or unavoidable, 

reasonable or unreasonable, or foreseeable or unforeseeable, Subcontractor’s 

sole and exclusive remedy shall be an equitable time extension for the 

performance of the work. This exclusive remedy shall apply only if 

Subcontractor properly notifies the Contractor, in writing, of the cause of 

delay within seven (7) days of the occurrence of the event, and provided a 

similar extension of time is allotted to the Contractor by the Owner under the 

Contract Documents. Subcontractor shall not be entitled to and hereby 

expressly waives any claim for any increase in the subcontract price or for 

additional damages or compensation as a consequence of such delays, unless 

such delays are payable for under the terms and conditions of the Contract 

Documents.

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[Doc. Nos. 1 at 21; 65-1 at 16.]2 In opposition, McCullough argues that the Miller Act 

renders this No Damage for Delay clause void.

3

 As one district court recently noted, “the 

availability of a ‘no damages for delay’ . . . defense for a surety is a field of law that is 

rapidly evolving. No published or controlling Circuit authority squarely addresses the 

enforceability of no-damages-for-delay clauses by sureties, and courts within this district 

are divided on this question.” United States for the Use and Benefit of Manganaro 

Midatlantic LLC v. Grimberg/Amatea JV, Civil No. PX-16-2816, 2018 WL 3818876, at *2 

n.1 (D. Md. Aug. 10, 2018) (internal citations and quotation marks omitted).

Aside from acknowledging it as a grounds for subject matter jurisdiction, Halbert

ignores the Miller Act in its motion and argues only that the No Damage for Delay clause 

is enforceable under California law. “The Miller Act, [however], provides a federal cause 

of action, and the scope of the remedy as well as the substance of the rights created thereby 

is a matter of federal, not state law.” United States for Use and Benefit of Walton Tech., 

Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199, 1206 (9th Cir. 2002) (quoting F.D. Rich Co., 

Inc. v. United States ex rel. Indust. Lumber Co., Inc., 417 U.S. 116, 127 (1974)). Thus, 

whether McCullough is entitled to recovery from the Miller Act payment bond of costs 

caused by delays on the Project is a question of federal, not California law. As a result, the 

enforceability of the No Damage for Delay clause under California law is relevant only if 

the clause complies with the Miller Act because “the liability of a surety and its principal 

on a Miller Act payment bond is coextensive with the contractual liability of the principal 

only to the extent that it is consistent with the rights and obligations created under the 

Miller Act.” Id. Put differently, if the No Damage for Delay clause is void under the Miller 

Act, it is irrelevant that it is enforceable under California law. Accordingly, the first step 

 

2 Pinpoint cites to documents in the record are to the ECF page number in the watermark at the top of the 

page.

3 McCullough also argues alternative grounds why the No Damage for Delay clause does not preclude 

recovery. Because, as discussed herein, the clause is void under the Miller Act, these alternative grounds 

need not be addressed here.

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in the analysis of Halbert’s motion is whether the No Damage for Delay clause complies 

with the Miller Act.4

“It is well settled that the Miller Act provides security for those furnishing labor and 

materials on government projects and should be construed liberally to effect this object.” 

United States for the use of Youngstown Welding & Eng’g Co. v. Travelers Indem. Co., 

802 F.2d 1164, 1166 (9th Cir. 1986); see also Taylor Constr. Inc. v. ABT Serv. Inc., 163 

F.3d 1119, 1122 (9th Cir. 1998) (“The policy behind the Act is ‘to provide a surety who, 

by force of the Act, must make good the obligations of a defaulting contractor to his 

suppliers of labor and material.”) (quoting United States ex rel. Sherman v. Carter, 353 

U.S. 210, 217 (1957)). “The Act ‘represents a congressional effort to protect persons 

supplying labor and material for the construction of federal public buildings in lieu of the 

protection 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). To this end, the Miller Act states:

Every person that has furnished labor or material in carrying out work 

provided for in a contract for which a payment bond is furnished under section 

3131 of this title and that has not been paid in full within 90 days after the day 

on which the person did or performed the last of the labor or furnished or 

supplied the material for which the claim is made may bring a civil action on 

the payment bond for the amount unpaid at the time the civil action is brought 

and may prosecute the action to final execution and judgment for the amount 

due.

40 U.S.C. § 3133(b). As further protection, section 3133(c) limits the manner in which 

this right may be waived, stating that “[a] waiver of the right to bring a civil action on a 

payment bond required under this subchapter is void unless the waiver is—(1) in writing; 

(2) signed by the person whose right is waived; and (3) executed after the person whose 

right is waived has furnished labor or material for use in the performance of the contract.” 

 

4 Halbert’s failure to address this threshold issue in its motion is grounds alone to deny summary judgment.

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40 U.S.C. § 3133(c). Further, “federal courts have been uniform in their insistence that a 

waiver be clear and explicit.” Youngstown Welding, 802 F.2d at 1166.

“[I]ncreased out-of-pocket costs caused by construction delays fall within the 

intended coverage of the Miller Act. Thus, a subcontractor may recover these costs from a 

Miller Act surety.” Mai Steel Serv., Inc. v. Blake Constr. Co., 981 F.2d 414, 418 (9th Cir. 

1992); see also United States ex rel T.M.S. Mech. Contractors, Inc. v. Millers Mut. Fire 

Ins. Co. of Tex., 942 F.2d 946, 951(5th Cir. 1991) (“[A] subcontractor can recover 

increased out-of-pocket costs for labor and materials furnished in the course of performing 

its subcontract caused by contractor or government delay.”). Halbert does not argue that 

the No Damage for Delay constitutes a valid Miller Act waiver of McCullough’s right to 

recover these increased costs. Instead, Halbert argues that the No Damage for Delay clause 

concerns the measure of McCullough’s recovery, relying on the statement in Walton 

Technology that “[c]onsiderable differences exist between a case in which the measure of 

recovery in a Miller Act case is determined by reference to the subcontract terms governing 

how work performed under the subcontract will be compensated and one in which the 

timing of recovery, and, in some cases, the right of recovery under the Miller Act is dictated 

by such terms.” Walton Tech., 290 F.3d at 1207 (emphasis in original). 

Halbert contends that the No Damage for Delay clause merely states that the measure 

of McCullough’s recovery for any delays caused by circumstances outside of its control is 

limited to “an extension of time.” Other district courts have rejected this argument. See, 

e.g., United States on behalf of Kitchens To Go v. John C. Grimberg Co., Inc., 283 F.Supp. 

3d 476, 482 (E.D. Va. 2017) (holding that surety could not rely on a no-damages-for-delay 

clause in a subcontract executed before the subcontractor provided any labor on the project 

because the clause “contravenes both the text and the purpose of the Miller Act”);

Foundation Fence, Inc. v. Kiewit Pac. Co., No. 09cv2062 DMS (JMA), 2010 WL 4024877, 

at *4 (S.D. Cal. Oct. 13, 2010) (noting that Walton Tech. treated clauses concerning timing 

of recovery and those concerning entitlement to recovery the same way: “as ‘an implied 

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waiver of [the subcontractor’s rights under the Miller Act.”) (quoting Walton Tech., 290 

F.3d at 1208).

“Where subcontract terms effect [sic] . . . the right of recovery under the Miller Act, 

enforcement of such terms to preclude Miller Act liability contradict the express terms of 

the Miller Act.” Walton Tech., 290 F.3d at 1207 (emphasis added). The No Damage for 

Delay clause plainly affects McCullough’s right to recovery of increased out-of-pocket 

costs caused by construction delays under the Miller Act. That McCullough would be 

allowed additional time to complete its work on the Project when it could not complete its 

work on time through no fault of its own merely means that McCullough will not be liable 

for the delay liquidated damages to which Halbert would be entitled under section 2.7 of 

the Subcontract for delays caused by McCullough. Permitting Halbert and Western to use 

the No Damage for Delay clause to preclude McCullough’s recovery from the Miller Act 

bond of additional costs arising out of delays for which McCullough is not responsible is, 

in effect, enforcing the provision as an implied waiver of McCullough’s rights under the 

Miller Act. 

Indeed, the No Damage for Delay clause expressly states that it constitutes a waiver 

of any claim for any increase in the Subcontract price as a consequence of delays, and one 

such claim would be for recovery from the Miller Act bond of costs attributable to such 

delays. Yet, there is no dispute that the Subcontract was executed before McCullough 

provided any labor or materials for the Project, contravening the requirements for a valid 

waiver under the Miller Act. 40 U.S.C. § 3133(c)(3). Moreover, the No Damage for Delay 

clause does not identify any rights that McCullough may have under the Miller Act 

payment bond as a predicate for releasing them. Thus, for this additional reason, the No 

Damage for Delay clause does not constitute a “clear and explicit” waiver of McCullough’s

Miller Act rights. Cf. Walton Tech., 290 F.3d at 1209 (holding that “pay when and if paid” 

clause that did not identify any Miller Act rights as being waived pursuant to such clause 

was not a “clear and explicit waiver of Miller Act rights). Accordingly, the No Damage 

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for Delay clause is void because it does not comply with the rights and responsibilities 

created under the Miller Act. 

IV. Conclusion

Under the Miller Act, McCullough is entitled to recover increased out-of-pocket 

costs resulting from construction delays for which McCullough is not responsible. The No 

Damage for Delay clause, which states that McCullough is precluded from recovering these 

costs, is void because it does not satisfy the Miller Act’s requirements for a waiver of 

McCullough’s Miller Act right to recover these increased costs. Accordingly, Halbert’s 

motion for summary judgment is DENIED.

It is SO ORDERED.

Dated: December 17, 2018

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