Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-56539/USCOURTS-ca9-12-56539-0/pdf.json

Parties Involved:
Candelaria Corporation
Appellee
Carolina Casualty Insurance Company
Appellee
Does 1 through 10, inclusive
Appellee
Otay Group, Inc.
Appellee
Technica LLC
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TECHNICA LLC, for the use and

benefit of: United States of America,

Plaintiff-Appellant,

v.

CAROLINA CASUALTY INSURANCE

COMPANY; CANDELARIA

CORPORATION; OTAY GROUP, INC.;

DOES 1 THROUGH 10, INCLUSIVE,

Defendants-Appellees.

No. 12-56539

D.C. No.

3:08-cv-01673-

H-KSC

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 April 29, 2014

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

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

Opinion by Judge Paez

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

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

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 1 of 11
2 TECHNICA LLC V. CAROLINA CAS. INS. CO.

SUMMARY**

Miller Act

Reversing the district court’s summary judgment, the

panel held that a subcontractor’s lack of a California

contractor’s license did not bar it from pursuing a Miller Act

claim for payments due on a subcontract for work on a

federal construction project in California.

Agreeing with the Eighth and Tenth Circuits, and

distinguishing cases dealing with the substantive law of

contracts, the panel held that rights and remedies under the

Miller Act may not be conditioned by state law. Therefore,

the limitation in California Business and Professions Code

§ 7031(a) on the right of a non-licensed contractor to

maintain an action for collection of unpaid services does not

apply to an action under the Miller Act.

COUNSEL

J. Scott Scheper (argued), Jack R. Leer; Seltzer Caplan

McMahon Vitek, San Diego, California, for PlaintiffAppellant Technica, LLC.

Robert J. Berens (argued), Adam D. Melton; Lewis Brisbois

Bisgaard & Smith, LLP, Phoenix, Arizona, for DefendantsAppellees Carolina Casualty Insurance Company, Candelaria

Corporation and Otay Group, Inc.

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

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

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 2 of 11
TECHNICA LLC V. CAROLINA CAS. INS. CO. 3

OPINION

PAEZ, Circuit Judge:

In this Miller Act case, Technica, Inc. (“Technica”), a

subcontractor on a federal construction project in California,

appeals the grant of summary judgment to Candelaria

Corporation (“Candelaria”), the prime contractor, and its

surety Carolina Casualty Insurance Company (“CCIC”). See

40 U.S.C. §§ 3131–3134. At issue is whether the district

court erred in concluding that because Technica was not a

licensed California contractor as required by California law,

it is precluded from pursuing its Miller Act claim for

payments due under the subcontract. Reviewing the grant of

summary judgment de novo, we conclude that the absence of

California licensure does not bar this suit, and therefore

reverse. See McDonald v. Sun Oil Co., 548 F.3d 774, 778

(9th Cir. 2008).

I.

This dispute stems from work performed in California

on the ICE El Centro SPC - Perimeter Fence

Replacement/Internal Devising Fence Replacement federal

project (“Project”). Candelaria, the prime government

contractor on the Project, provided a payment bond as

required by the terms of the government contract and the

Miller Act, and enlisted CCIC as its surety. In December

2007, Candelaria entered into a subcontract with OtayGroup,

Inc. (“Otay”) to perform a portion of the work required under

the prime contract. Shortly thereafter, Otay contracted with

Technica to act as a sub-subcontractor on the Project.

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 3 of 11
4 TECHNICA LLC V. CAROLINA CAS. INS. CO.

Between late 2007 and June 2008, Technica provided

$893,697.77 worth of labor, material and services to the

Project. Technica submitted invoices to Otay and Candelaria

for this work, but received only partial payments totaling

$287,861.81. In June 2008, Candelaria terminated Otay’s

subcontract. In September 2008, Technica filed a complaint

in district court invoking its rights under the Miller Act to

recover outstanding amounts owed on the subcontract against

the payment bond.

Candelaria and CCIC filed a motion for summary

judgment, arguing that California’s contractor licensing

statute, California Business and Professions Code § 7031(a),1

provided a complete defense to Technica’s Miller Act claim. 

Section 7031(a) precludes anycontractor from maintaining an

action for collection of compensation for services if the

contractor was not a licensed contractor during the

performance of the contract. Candelaria and CCIC asserted

that because Technica did not hold a California contractor’s

license and did not fit within the “labor provider” exception

to the licensing requirement it could not maintain its Miller

1

 Section 7031(a) provides: “Except as provided in subdivision (e), no

person engaged in the business or acting in the capacity of a contractor,

may bring or maintain any action, or recover in law or equity in any

action, in any court of this state for the collection of compensation for the

performance of any act or contract where a license is required by this

chapter without alleging that he or she was a duly licensed contractor at

all times during the performance of that act or contract, regardless of the

merits of the cause of action brought by the person . . . .” See also

Hydrotech Sys, Ltd. v. Oasis Waterpark, 803 P.2d 370 (Cal. 1991) (en

banc).

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 4 of 11
TECHNICA LLC V. CAROLINA CAS. INS. CO. 5

Act claim.2See Cal. Labor Pool, Inc. v. Westway

Contractors, Inc., 61 Cal. Rptr. 2d 715 (Ct. App. 1997). The

district court, finding there was no dispute that Technica

lacked a California contractor’s license, concluded that

California’s contractor licensing law applied and that,

because the labor provider exception did not apply, Technica

could not pursue its Miller Act claim.

This appeal timely followed.3

II.

The Miller Act is the modern-day remedy to the historical

dilemma faced by contractors and materialmen denied

compensation in federal construction projects. The common

law doctrine of sovereign immunity prevented liens against

property of the federal government, and federal statutes only

allowed those in privity of contract with the government to

sue to enforce contractual rights. See 28 U.S.C. § 1491;

United States v. Munsey Trust Co., 332 U.S. 234, 241 (1947). 

Recognizing that other parties who contribute to the

performance of a federal construction contract, including

subcontractors, should in some way be assured payment of

their claims, Congress enacted the Heard Act in 1894. See

Act of August 13, 1894, ch. 280, 28 Stat. 278, amended by

2 Candelaria and CCIC also alleged that Technica’s Miller Act claim

was barred because Technica acted as a financer of Otay’s labor costs and

financers of labor may not pursue Miller Act claims. The district court did

not address this argument in its summary judgment ruling and it was not

raised by the parties on appeal. Accordingly, it is waived. See Brookfield

Commc’ns Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1046 n.7 (9th

Cir. 1999).

 

3

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

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 5 of 11
6 TECHNICA LLC V. CAROLINA CAS. INS. CO.

Pub. L. No. 58-100, ch. 778, 33 Stat. 811, and Pub. L. No.

61-476, ch. 238, 36 Stat. 1167. In 1935, the Heard Act was

repealed and the Miller Act enacted in its place. See Pub. L.

No. 74-321, ch. 642, 49 Stat. 793 (codified as amended at

40 U.S.C. §§ 3131–3134).

The Miller Act requires a general contractor on a federal

construction project to furnish a payment bond “for the

protection of all persons supplying labor and material in

carrying out the work provided for in the contract.” 

40 U.S.C. § 3133(b)(2). It “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) (quoting United States ex rel. Sherman v.

Carter, 353 U.S. 210, 216 (1957)) (internal quotation marks

omitted). Under the Miller Act, any person who has

furnished labor or material in carrying out work on a federal

construction project and

[who] has not been paid in full within 90 days

after the day on which the person did perform

the last of labor . . . 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)(1). The Miller Act explicitly extends to

sub-subcontractors, like Technica, the right to file and

prosecute an action against a prime contractor’s payment

bond. See § 3133(b)(2) (“A person having a direct

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 6 of 11
TECHNICA LLC V. CAROLINA CAS. INS. CO. 7

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 . . . .”). Because, the Miller Act

provides Technica a federal cause of action, “the scope of the

remedy as well as the substance of the rights created thereby

is a matter of federal not state law.” F.D. Rich Co., Inc., v.

United States ex rel. Indus. Lumber Co., 417 U.S. 116, 127

(1974). The Miller Act is highly remedial in nature, and “is

entitled to a liberal construction and application in order

properly to effectuate the Congressional intent to protect

those whose labor and materials go into public projects.” 

Sherman, 353 U.S. at 216 (quoting Clifford F. MacEvoy Co.

v. Calvin Tomkins Co., 322 U.S. 102, 107 (1944)) (internal

quotation marks omitted).

III.

The question before us is whether California’s

contractor’s licensing law restricts “the substance of the

rights” afforded to Technica under the Miller Act. Although

this is a matter of first impression for our circuit, the Supreme

Court, and the Eighth and Tenth Circuits, have held that

rights and remedies under the Miller Act may not be

conditioned by state law. We conclude that their reasoning

applies with equal force to this case.4

4 Because we conclude the text of the Miller Act forecloses any

argument that complying with state contractor licensing requirements is

a condition to maintaining a Miller Act claim, we find it unnecessary to

conduct a preemption analysis. Accordingly, Candelaria and CCIC’s

argument that California’s contractor licensing requirements are not

preempted by the Federal Acquisition Regulations (“FARs”), 48 C.F.R.

ch. 1, is irrelevant to the issue before us. Whether Technica’s right to

recover against the payment bond is barred by section 7031(a) turns on the

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 7 of 11
8 TECHNICA LLC V. CAROLINA CAS. INS. CO.

In F.D. Rich, the Supreme Court relied upon the federal

interest in the uniform application of law in determining that

state laws cannot be used to provide an award of attorneys’

fees to a Miller Act claimant where such a right is not

provided by federal law. 417 U.S. at 127–28. Reversing a

ruling of this circuit, the Supreme Court held that, where

there was no evidence of congressional intent to incorporate

state law, the application of uniform federal law better served

“[t]he reasonable expectations of [] potential litigants” under

the Miller Act. Id. at 127. In particular, the Court noted

“[m]any federal contracts involve construction in more than

one State, and often, as here, the parties to Miller Act

litigation have little or no contact, other than the contract

itself, with the State in which the federal project is located.” 

Id.

Following F.D. Rich, the Tenth Circuit concluded that

state statutes cannot condition the rights available to a

subcontractor under the Miller Act because state laws “do not

condition or otherwise proscribe in any manner the right of

the United States to institute and maintain in the United

States Court for the use and benefit of a subcontractor an

action against the prime contractor . . . .” Hoeppner Constr.

Co. v. United States ex rel. E.L. Mangum, 287 F.2d 108, 110

(10th Cir. 1960). In Hoeppner, the Tenth Circuit considered

a proffered defense to a Miller Act claim based on Colorado’s

requirement that a partnership record an affidavit with a

county recorder’s office identifying the names of the

individual partners. Id. State law further provided that where

the partnership failed to file such an affidavit, it could not

maintain an action to collect debts. Id. Invoking this

rights afforded under the Miller Act and not whether the licensing

requirements are preempted by the FARs.

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 8 of 11
TECHNICA LLC V. CAROLINA CAS. INS. CO. 9

procedural requirement, the surety argued that the United

States could not maintain an action under the Miller Act on

behalf of a subcontractor who had failed to file the affidavit. 

Id. The court rejected this defense, holding that the right to

maintain an action under the Miller Act “does not have its

source in the law of Colorado.” Id. Accordingly, the state

law filing requirements could not be used to limit

subcontractor rights under the Miller Act. Id.

Similarly, in Aetna Casualty & Surety Co. v. United

States ex rel. R.J. Studer & Sons, the Eighth Circuit held that

a South Dakota statute forbidding enforcement of a contract

on behalf of a foreign corporation could not be used to defeat

a Miller Act claim by a joint venture that included a Montana

corporation. 365 F.2d 997, 999–1000 (8th Cir. 1966). 

Acknowledging that the Miller Act “is highly remedial in

nature,” the court held that state statutes which restrict the

rights of noncomplying parties “should not and will not be

enforced by the federal courts in Miller Act cases.” Id. at

1000; see also United States ex rel. James F. O’Neil Co. v.

Malan Constr. Corp., 168 F. Supp. 255, 258–59 (E.D. Tenn.

1958) (holding that application of a state law defense

requiring a corporation to qualify itself in Tennessee “would

be futile, and would defeat the purpose of the [Miller] Act, if,

having created the right to a surety bond . . . the right so given

were simultaneously nullified by application of the state

law”).

Although Candelaria and CCIC urge us to consider case

law in this circuit that applies state law in Miller Act claims,

these cases are distinguishable because they deal with the

application of the substantive law of contracts and not the

rights established by the Miller Act. For instance, in

Continental Casualty Co. v. Schaefer, we held that

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 9 of 11
10 TECHNICA LLC V. CAROLINA CAS. INS. CO.

Washington’s substantive law of contracts applied to an issue

that “does not involve construction o[r] application of a

federal statute,” such as whether the parties had created an

implied agreement in their contract to cover payment for

additional work. 173 F.2d 5, 7 (9th Cir. 1949); see also

United States ex rel. Palmer Constr., Inc. v. Cal State Elec.,

Inc., 940 F.2d 1260, 1261 (9th Cir. 1991) (explaining that

state law controls the interpretation of subcontracts in a

Miller Act case); United States ex rel. Leno v. Summit Constr.

Co., 892 F.2d 788, 791–92 (9th Cir. 1989) (holding that while

state law controls the calculation of damages under a Miller

Act subcontract, claims arising under the Miller Act are not

entitled to attorneys’ fees under state law).

We therefore hold that the limitation in California

Business and Professions Code § 7031(a) on the right of a

non-licensed contractor to maintain an action for collection of

unpaid services does not apply to an action under the Miller

Act. “Manifestly the federal rights affording relief . . . under

a federally declared standard could be defeated if states were

permitted to have the final say as to what defenses could and

could not be properly interposed to suits under the Act.” Dice

v. Akron, Canton & Youngstown R.R. Co., 342 U.S. 359, 361

(1952) (addressing state law defenses to claims under the

Federal Employers’ Liability Act). Like the state restrictions

on a foreign corporation’s right to maintain a suit at issue in

Aetna Casualty & Surety Co., application of California’s

licensing statute as a defense to a Miller Act claim would, at

best, condition the rights of a subcontractor on the procedural

requirements of state law, and, at worst, result in the

nullification of those rights entirely. Neither result is in

accordance with the remedial purposes of the Miller Act.

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 10 of 11
TECHNICA LLC V. CAROLINA CAS. INS. CO. 11

Moreover, as the Supreme Court has held, enforcement of

state licensing requirements against Miller Act claims would

wreak havoc on the uniform application of the Miller Act. 

See F.D. Rich, 417 U.S. at 127. Federal subcontractors

routinely bid on projects throughout the country and often

perform contracts that span multiple states. Requiring them

to complywith contractor licensing requirements in anygiven

state in which they may work is contrary to the intent of

Congress in enacting the Miller Act, which was meant to

reduce the substantive and procedural hurdles placed on

federal subcontractors, labor providers and materialmen in

seeking payment or wages denied to them. See Sherman,

353 U.S. at 216.

IV.

For the above reasons, we reverse the district court’s grant

of summary judgment to Candelaria and CCIC. Because the

California licensing requirement is not a defense to a claim

under the Miller Act, we need not address whether Technica

falls within the labor provider exception to the statute. See

Cal. Labor Pool, Inc., 61 Cal. Rptr. 2d 751.

REVERSED AND REMANDED.

 Case: 12-56539, 04/29/2014, ID: 9075651, DktEntry: 31-1, Page 11 of 11