Source: https://www.legalcrystal.com/case/103510/f-d-rich-co-inc-vs-industrial-lumber-co
Timestamp: 2018-02-19 22:00:28
Document Index: 434266936

Matched Legal Cases: ['§ 270', '§ 270', '§ 270', '§ 270', '§ 270', '§ 270', '§ 270', '§ 270', '§ 270']

F D Rich Co Inc Vs Industrial Lumber Co - Citation 103510 - Court Judgment | LegalCrystal
F.D. Rich Co., Inc. Vs. Industrial Lumber Co. - Court Judgment
LegalCrystal Citation legalcrystal.com/103510
Case Number 417 U.S. 116
Appellant F.D. Rich Co., Inc.
Respondent industrial Lumber Co.
f.d. rich co., inc. v. industrial lumber co. - 417 u.s. 116 (1974) u.s. supreme court f.d. rich co., inc. v. industrial lumber co., 417 u.s. 116 (1974) f.d. rich co., inc. v. united states for the use of industrial lumber co. no. 72-1382 argued january 9, 1974 decided may 28, 1974 417 u.s. 116 certiorari to the united states court of appeals for the ninth circuit petitioner f. d. rich co., the prime contractor on a federal housing project in california, had two separate contracts for the project with cerpac co., one contract being for cerpac to select, modify, detail, and install all custom millwork and the other being for cerpac to supply all exterior plywood. cerpac, in turn, ordered the lumber called for under the.....
U.S. Supreme Court F.D. Rich Co., Inc. v. Industrial Lumber Co., 417 U.S. 116 (1974)
1. Based on the substantiality and importance of its relationship with the prime contractor, MacEvoy Co. v. United States ex rel. Tomkins Co., 322 U. S. 102 , Cerpac was clearly a subcontractor for Miller Act purposes, considering not just its plywood contract, but also its custom millwork contract on the California project. Moreover, Cerpac and Rich had closely interrelated management and financial structures, and their relationship on the California
project as the same as on many other similar projects; hence it would have been easy for Rich to secure itself from loss as a result of Cerpac's default. Pp. 417 U. S. 121 -124.
2. Venue for suit on the South Carolina shipment properly lay in the Eastern District of California, since there was clearly a sufficient nexus for satisfaction of § 270b(b)'s venue requirements. The contract between Cerpac and respondent was executed in California, all materials thereunder to be delivered to the California worksite. California remained the site for performance of the original contract despite the diversion of one shipment to South Carolina. There was no showing of prejudice resulting from the case's being heard in California, and considerations of judicial economy and convenience supported venue in the court where all of respondent's claims could be adjudicated in a single proceeding. Pp. 417 U. S. 124 -126.
3. Attorneys' fees were improperly awarded respondent. Pp. 417 U. S. 126 -131.
(a) The Court of Appeals erred in construing the Miller Act to require the award by reference to the "public policy" of the State in which suit was brought, since the Act provides a federal cause of action and there is no evidence of any congressional intent to incorporate state law to govern such an important element of Miller Act litigation as liability for attorneys' fees. Pp. 417 U. S. 127 -128.
(b) The provision of the Miller Act in 40 U.S.C. § 270b(a) that claimants should recover the "sums justly due," does not require the award of attorneys' fees on the asserted ground that, without such fee-shifting, claimants would not be fully compensated. To hold otherwise would amount to judicial obviation of the "American Rule" that attorneys' fees are not ordinarily recoverable in federal litigation in the absence of a statute or contract providing therefor, in the context of everyday commercial litigation, where the policies which underlie the limited judicially created departures from the rule are inapplicable. Pp. 417 U. S. 128 -131.
MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. DOUGLAS, J., filed an opinion dissenting in part, post, p. 417 U. S. 131 .
The Miller Act, 49 Stat. 793, as amended, 80 Stat. 1139, 40 U.S.C. § 270a et seq., requires a Government contractor [ Footnote 1 ] to post a surety bond "for the protection of all persons supplying labor and material in the prosecution of the work provided for" in the contract. The Act further provides that any person who has so furnished labor or material and who has not been paid in full within 90 days after the last labor was performed or material supplied may bring suit on the payment bond for the unpaid balance. 40 U.S.C. § 270b(a). This case presents several unresolved issues of importance in the administration of the Act.
Shortly after Industrial's shipments began, Rich informed Cerpac that more plywood was needed for another Government project being constructed in Charleston, South Carolina, for which Cerpac had also contracted to supply Rich with all exterior plywood. Rich and Cerpac decided to divert some of the Beale lumber to Charleston. Accordingly, Industrial was advised to supply a shipment of the plywood called for under its Beale contract with Cerpac to the South Carolina site. Industrial arranged for the wood to be shipped by one of its suppliers to a railhead near Charleston. The shipment diverted to South Carolina was one of 22 called for by Industrial's Beale Contract. [ Footnote 2 ] There were several subsequent shipments to the California site under that contract.
During April and May, 1966, Cerpac fell behind in its payments to Industrial, and on July 13, 1966, having not received payment on invoices for nine separate shipments, Industrial gave notice to Rich and its surety of a Miller Act claim, and thereafter brought the instant action in the Federal District Court for the Eastern District of California. [ Footnote 3 ] The District Court recognized that, under our decision in MacEvoy Co. v. United States ex rel. Tomkins Co., 322 U. S. 102 (1944), Rich's liability turned on whether Cerpac was a "subcontractor" within the meaning of the Act, or merely a materialman. The District Court found that Cerpac was a subcontractor; hence Industrial, as its supplier, could assert a Miller Act claim against Rich, the prime contractor on the project. The District Court also rejected Rich's claim that venue for suit on the South Carolina shipment was improper in the Eastern District of California. Accordingly, the District Court granted judgment for Industrial, holding Cerpac [ Footnote 4 ] and Rich as primary obligees and Transamerica on its bond, jointly and severally liable for the amount of all nine unpaid invoices, $31,402.97, including the amount
Both Rich and Industrial appealed. The Court of Appeals affirmed the judgment against Rich in large part. [ Footnote 5 ] On Industrial's cross-appeal, the court reversed, holding that attorneys' fees should have been awarded to Industrial as a successful plaintiff under the Miller Act, and remanded to the District Court for consideration of the amount of attorneys' fees to be awarded. 473 F.2d 720 (CA9 1973). We granted certiorari. [ Footnote 6 ] 414 U.S. 816 (1973). We affirm the judgment below to the extent it holds that Cerpac was a "subcontractor" for Miller Act purposes and that there was proper venue, but reverse as to the propriety of an award of attorneys' fees.
project. Ordinarily, a supplier of labor or materials on a private construction project can secure a mechanic's lien against the improved property under state law. But a lien cannot attach to Government property, see Illinois Surety Co. v. John Davis Co., 244 U. S. 376 , 244 U. S. 380 (1917), so suppliers on Government projects are deprived of their usual security interest. The Miller Act was intended to provide an alternative remedy to protect the rights of these suppliers.
The rights afforded by the Act are limited, however, by the proviso of § 270b(a). In MacEvoy Co. v. United States ex rel. Tomkins Co., supra, this Court construed § 270b(a) to limit the protection of a Miller Act bond to those who had a contractual agreement with the prime contractor or with a "subcontractor." Those in more remote relationships, including persons supplying labor or material to a mere materialman, were found not to be protected. 322 U.S. at 322 U. S. 109 -111. Industrial was a supplier of materials to Cerpac. Thus, if Cerpac were a subcontractor for purposes of the Act, Industrial, having given the required statutory notice, could assert a Miller Act claim against Rich, the prime contractor. But if Cerpac were merely a materialman, Industrial could not assert its Miller Act claim, since it would be merely a supplier of materials to a materialman, a relationship found too remote in MacEvoy to enjoy the protections of the Act.
In MacEvoy, supra, the Court adopted a functional, rather than a technical, definition for the term subcontractor as used in the proviso. The Court noted that a subcontractor is "one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contract. . . ." 322 U.S. at 322 U. S. 109 . The Court went on to explain the reason for the exclusion from the protections of the Act of suppliers of mere materialmen, as opposed to those who supply subcontractors:
Id. at 322 U. S. 110 . (Emphasis added.)
The Court of Appeals properly construed our holding in MacEvoy to establish as a test for whether one is a subcontractor the substantiality and importance of his relationship with the prime contractor. [ Footnote 7 ] It is the substantiality of the relationship which will usually determine whether the prime contractor can protect himself, since he can easily require bond security or other protection from those few "subcontractors" with whom he has a
MacEvoy, supra, at 322 U. S. 107 . It is consistent with that intent to look at the total relationship between Cerpac and Rich, not just the contract to supply exterior plywood, to determine whether Cerpac was a subcontractor. [ Footnote 8 ] Cerpac had not only agreed to supply standard plywood, but also had a separate contract to select, modify, detail, and install all custom millwork for the Beale project. Cerpac, in effect, took over a substantial part of the prime contract itself. Moreover, the management and financial structures of the two companies were closely interrelated, and their relationship on the Beale project was the same as on many other similar Government projects during the same period. Cerpac was, as the Court of Appeals observed, "in a special, integral, almost symbiotic relationship [with] Rich." 473 F.2d at 724. It would have been easy for Rich to secure itself from loss as a result of a default by Cerpac.
40 U.S.C. § 270b(b). Petitioners argue that this provision bars a district court in California [ Footnote 9 ] from adjudicating respondent's claims arising from the shipments of plywood delivered in South Carolina. But § 270b(b) is merely a venue requirement, [ Footnote 10 ] and there was clearly a sufficient nexus for its satisfaction. The "Beale 647" contract between Cerpac and Industrial was executed in California, all of the materials described therein to be delivered to a worksite in that State. Although one of the 22 shipments made pursuant to the contract was later diverted to South Carolina for petitioner Rich's convenience, the site for performance of the original contract remained the same for Miller Act purposes. [ Footnote 11 ] Several shipments to the Beale site were made after the South Carolina shipment. Moreover, petitioners have pointed to no prejudice resulting from the case's being heard in the California court and considerations of judicial economy and convenience clearly support venue in the
We turn now to the question of whether attorneys' fees were properly awarded respondent as a successful Miller Act plaintiff. The so-called "American Rule" governing the award of attorneys' fees in litigation in the federal courts is that attorneys' fees "are not ordinarily recoverable in the absence of a statute or enforceable contract providing therefor." Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U. S. 714 , 386 U. S. 717 (1967). There was no contractual provision concerning attorneys' fees in this case. Nor does the Miller Act explicitly provide for an award of attorneys' fees to a successful plaintiff. But the Court of Appeals construed the Act to require an award of attorneys' fees where the "public policy" of the State in which suit was brought allows for the award of fees in similar contexts. The court reasoned that the Act provides remedies
"'in lieu of the lien upon land and buildings customary where property is owned by private persons.' . . . The federal remedy was intended to substitute for the unavailable state remedy of the lien. Therefore, if state [law] allows a supplier on private projects to recover such fees, there is no reason for a different rule to apply to federal projects. . . . [ Footnote 12 ]"
fees in state actions on the bonds of contractors for state and municipal public works projects. [ Footnote 13 ]
A uniform rule also avoids many of the pitfalls which have already manifested themselves in using state law referents. For example, California law does not provide for awards of attorneys' fees in suits arising from private construction projects. And a California court had held that the state statute providing for awards of attorneys' fees in suits on the bonds of state and municipal public works contractors is inapplicable to construction projects of the United States. [ Footnote 14 ] The Court of Appeals nonetheless
held that, since federal law controls Miller Act recoveries, it was free to look to "state policy", rather than state law, and proceeded to find an award of attorneys' fees appropriate. Although the court below premised its decision on the theory that a Miller Act remedy is afforded " in lieu of the lien upon land and buildings customary where property is owned by private persons,'" it gave respondent more protection than California law affords litigants involved in disputes arising from private construction projects who are not entitled to an award of attorneys' fees. We think it better to extricate the federal courts from the morass of trying to divine a "state policy" as to the award of attorneys' fees in suits on construction bonds.
Finally, the Court of Appeals intimates that, in providing that Miller Act claimants should recover the "sums justly due," 40 U.S.C. 270b(a), Congress must have intended to provide for the award of attorneys' fees because without such fee-shifting, Miller Act claimants would not be fully compensated -- the claimant's recovery would always be diminished by the cost of his legal representation. This argument merely restates one of the oft-repeated criticisms of the American Rule. [ Footnote 15 ] Almost a half century ago, the Massachusetts Judicial Council pleaded for reform, asking
his doctor's bill but not his lawyer's bill? [ Footnote 16 ]"
Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U. S. 714 , 386 U. S. 718 (1967). Moreover, "the time, expense, and difficulties of proof inherent in litigating the question of what constitutes reasonable attorney's fees," ibid., has given us pause, even though courts have regularly engaged in that endeavor in the many contexts where fee-shifting is mandated by statute, policy, or contract. Finally, there is the possibility of a threat being posed to the principle of independent advocacy by having the earnings of the attorney flow from the pen of the judge before whom he argues.
The American Rule has not served, however, as an absolute bar to the shifting of attorneys' fees even in the absence of statute or contract. The federal judiciary has recognized several exceptions to the general principle that each party should bear the costs of its own legal representation. We have long recognized that attorneys' fees may be awarded to a successful party when his opponent has acted in bad faith, vexatiously, wantonly or for oppressive reasons, [ Footnote 17 ] or where a successful litigant
conferred a substantial benefit on a class of persons and the court's shifting of fees operates to spread the cost proportionately among the members of the benefited class. [ Footnote 18 ] The lower courts have also applied a rationale for fee-shifting based on the premise that the expense of litigation may often be a formidable if not insurmountable obstacle to the private litigation necessary to enforce important public policies. [ Footnote 19 ] This "private attorney general" rationale has not been squarely before this Court, and it is not so now; nor do we intend to imply any view either on the validity or scope of that doctrine. It is sufficient for our purposes here to observe that this case clearly does not fall within any of these exceptions. Miller Act suits are plain and simple commercial litigation. In effect, then, we are being asked to go the last mile in this case, to judicially obviate the American Rule in the context of everyday commercial litigation, where
the policies which underlie the limited judicially created departures from the rule are inapplicable. This we are unprepared to do. The perspectives of the profession, the consumers of legal services, and other interested groups should be weighed in any decision to substantially undercut the application of the American Rule in such litigation. Congress is aware of the issue. [ Footnote 20 ] Thus, whatever the merit of arguments for a further departure from the American Rule in Miller Act commercial litigation, those arguments are properly addressed to Congress.
Petitioners also raise issues in their brief concerning the timeliness of the Miller Act notice and the amount of prejudgment interest awarded respondent. Those issues were not raised in the petition for certiorari, hence are not properly before the Court. See, e.g., Namet v. United States, 373 U. S. 179 , 373 U. S. 190 (1963); Rule 23.1(c) of the Rules of this Court.
B.C. Richter Contracting Co. v. Continental Casualty Co., 230 Cal.App.2d 491, 41 Cal.Rptr. 98 (1964) (construing the former law, see n 13, supra ).
The Court, dealing with the Miller Act's predecessor, held in Illinois Surety Co. v. John Davis Co., 244 U. S. 376 , 244 U. S. 380 , that the Heard Act "must be construed liberally." That same principle applies to the Miller Act. Fleisher Co. v. United States ex rel. Hallenbeck, 311 U. S. 15 , 311 U. S. 17 -18. The Act is silent as to attorneys' fees, saying only that the payment bond shall allow the supplier "to prosecute said action to final execution and judgment for the sum or sums justly due him." 40 U.S.C. § 270b(a).
The Miller Act is unlike the Lanham Act involved in Fleischmann Distilling Corp. v. Maier Brewery Co., 386 U. S. 714 . That Act itemized the components of the remedy which the Act afforded: injunctive relief, treble damages, and "costs" (which by federal statute did not include attorneys' fees). Id. at 386 U. S. 719 -720. Moreover, attempts to amend the Lanham Act to include attorneys' fees had never succeeded, id. at 386 U. S. 721 . Here there is no such legislative history; nor does the Miller Act itemize the components of the "sum or sums justly due."
The Court says that dependence on state law is inappropriate, for we deal with a federal standard that should be uniform. That takes great liberties with the Miller Act. Here, the contract and law were made in California and were to be performed there. In Illinois Surety Co. v. John Davis Co., supra, the contract and law were made in Illinois, and were to be performed there. " Questions of liability for interest must therefore be determined by the law of that State," said Mr. Justice Brandeis speaking for the Court, 244 U.S. at 244 U. S. 381 . If state law would give the claimant interest, it should give him attorneys' fees based on the purpose of the Miller Act. Judge Carter writing for the Court of Appeals pointed out that the Miller Act is the federal equivalent of state lien laws. See 473 F.2d 720, 727. The remedy in a federal suit is therefore properly composed of the same elements as would be available to lien claimants in a state court collecting for labor and materials furnished on nonfederal projects. One of the elements of recovery permitted in a California court is attorneys' fees. The "sum or sums justly due" should as a matter of federal law be construed to be the same as that due a claimant whose remedy is based on a state statute, when the federal remedy was intended to be the equivalent of the state remedy.