Opinion ID: 596464
Heading Depth: 2
Heading Rank: 3

Heading: Factors Applied to the Present Case

Text: 17 Conveyor Rental argues that a subcontractor relationship existed between Ed Waln and the Tribe in part because the Tribe was required to custom fabricate the gravel to meet the specifications in the prime contract. 18 Evidence to support this claim is Ed Kelton's affidavit stating that he was hired by the Tribe to design, mobilize, supervise, and act as foreman of the operation, which included deciding what measures were necessary to bring the material into compliance with the prime contract specifications. Supplemental evidence supporting this claim was presented in Conveyor Rental's Motion for a New Trial showing that the Tribe was required to select rock which, when crushed, would not exceed a plasticity index of 6. 20 To meet those specifications, the Tribe had to crush the rock and then screen it to produce gravel which met the size requirements. 19 We find that the custom specifications in the present case are more like the custom specifications in cases finding a materialman relationship. In Aetna Casualty & Surety Co. v. United States for the Use of Gibson Steel Co., the Fifth Circuit found that the custom manufacturing of some steel and iron products used in a building is simply not enough in itself to establish the relationship of responsibility and importance necessary to render a middle party a subcontractor. 382 F.2d 615, 617 (5th Cir.1967); accord United States for the Use of Pioneer Steel Co. v. Ellis Constr. Co., 398 F.Supp. 719, 721 (E.D.Tenn.1975) (custom fabrication of trusses and pipebridges for building not enough to establish subcontractor relationship); see Brown & Root, Inc. v. Gifford-Hill & Co., 319 F.2d 65, 66 (5th Cir.1963) (involving sand and gravel specifications). The Tenth Circuit, in United States for the Use of Bryant v. Lembke Construction Co., found a materialman relationship in circumstances where the specifications for concrete in the prime contract were merely descriptive of what was to be furnished. 370 F.2d 293, 296 (10th Cir.1966); accord United States for the Use of Potomac Rigging Co. v. Wright Contracting Co., 194 F.Supp. 444, 447 (D.Md.1961) (descriptive specifications for cribbing in retaining wall were necessary whether the supplier is a subcontractor or only a material supplier). 20 The specifications here, which appear to be merely descriptive of what was to be furnished, are similar to the relatively uncomplicated specifications for steel products required for a building (Gibson ), trusses and pipebridges for a building (Pioneer Steel ), sand and gravel for navigation locks (Brown & Root ), concrete for buildings (Lembke ) and cribbing for retaining walls (Potomac Rigging ). The BIA specifications in the present case were necessary whether the supplier is a subcontractor or only a material supplier. Potomac Rigging, 194 F.Supp. at 447. 21 The two cases which found a subcontractor relationship are distinguishable from the present case because they involved highly intricate customized fabrication. In Miller Equipment Co. v. Colonial Steel & Iron Co., the agreement called not for the mere supply of material but for the custom fabrication of massive girders and their accessories, key and integral components of the bridge, designed and fabricated to mesh precisely in their final assembly on the job-site. 383 F.2d 669, 674 (4th Cir.1967). And in United States for the Use of Wellman Engineering v. MSI Corp., the [m]echanism [was] built to the prime contract specifications, for the unique task of rapid movement of the heavy concrete roofs of missile launchers.... 350 F.2d 285, 287 (2d Cir.1965), cert. denied, 390 U.S. 955, 88 S.Ct. 1049, 19 L.Ed.2d 1148 (1968). 22 We conclude, therefore, this factor tends to support a materialman relationship given the relatively simple requirements of the BIA specifications. 23
24 Courts have found that a continuing relationship between the supplier and the prime contractor could be indicative of a substantial and important subcontractor relationship. For example, this factor has weighed in favor of such a relationship where there is a close financial interrelationship between the companies 21 , a requirement of shop drawing approval by prime contractor 22 or requirement that supplier's representative be on the job site 23 . 25 In the present case there is no evidence of a close financial relationship between Ed Waln and the Tribe nor was a Tribe representative required on site. Although Ed Waln did provide a lab technician to test the gravel, this relationship was not as ongoing or symbiotic as those in the above cases. Moreover, the fact that Ed Waln checked the compliance with specifications may show less than a complete transfer of the responsibility for this part of the contract to the Tribe. Therefore, this factor weighs in favor of a materialman relationship.
26 The on-site performance of the supplier has been regarded as a factor in support of a subcontractor relationship by the Ninth Circuit. See Basich Bros. Constr. Co. v. United States for Use of Turner, 159 F.2d 182, 183 (9th Cir.1946) (subcontractor supplier delivered material to prime contractor at plant site); see also Moon, 698 F.Supp. at 667 (materialman supplier did no on-site work); but see Wellman, 350 F.2d at 286 (Second Circuit holding that definition of subcontractor not limited to only on-site performers). In the present case, this factor weighs in favor of a materialman relationship because the Tribe did not perform on site.
27 In accordance with all the cases addressing this issue, we afford only de minimus consideration to the fact that the agreement between Ed Waln and the Tribe was a purchase order rather than a subcontract. See Morrison-Knudson, 687 F.2d at 134 (the presence or absence of [the term subcontractor] in the contractual agreement between the prime contractor and the middle party is not controlling of the 'subcontractor' issue); Miller Equip., 383 F.2d at 674 (it is unimportant that the agreement was designated as a purchase order); Lembke, 370 F.2d at 296 (meaning of subcontractor is not dependent upon how the parties designate themselves). However, the de minimus consideration weighs in favor of materialman status.
28 Courts have found supplying non-inventory materials to be a factor supporting a subcontractor relationship 24 and, conversely, supplying preexisting inventory to be a factor supporting a materialman relationship. 25 29 Aetna presented the affidavit of Albert C. Ruckman, an engineer employed by a competing construction company, to support its argument that the Tribe supplied preexisting inventory to Ed Waln. 26 30 We agree with Conveyor Rental that Mr. Ruttman's statement is inadmissible under Fed.R.Evid. 602 and Fed.R.Civ.P. 56(e) for lack of requisite personal knowledge. Accordingly, there is no evidence in the record to support Aetna's preexisting inventory argument. 31
32 In determining whether there is a substantial and important relationship between the companies, courts also look at the secondary contract's percentage of the prime contract. Here the Tribe furnished all the gravel for the projects and the secondary contract's percentage of the prime contract ranges from five to nine percent (depending upon various factors contested by the parties). 33 While all courts agree proportionate responsibility is an important factor, there is no consensus in their interpretation of figures. For example, the percentage of the prime contract in courts finding a subcontractor relationship has ranged from 2.5%, Morrison-Knudson, 687 F.2d at 135 n. 3, to 15%, Miller Equip., 383 F.2d at 674. And the percentage of the prime contract in courts finding a materialman relationship has ranged from 2%, Gibson, 382 F.2d at 618, through 5.15%, Moon, 698 F.Supp. at 668, to 9%, Pioneer Steel, 398 F.Supp. at 721. 34 Although the Tribe furnished all the gravel for the project, see, e.g., Basich, 159 F.2d at 183, we find, even at a percentage figure most favorable to Conveyor Rental, that the percentage of the prime contract is indicative of a materialman relationship. This conclusion is based in part on the fact that nine percent overstates the importance of the gravel to the whole project considering the amount of work that had to be done to the gravel by other people for the road project to be completed.
35 Courts have found that suppliers receiving progress payments or proportionate payments are more likely to be subcontractors, while suppliers receiving fixed payment (e.g., payment within ninety days) are more likely to be materialmen. Gibson, 382 F.2d at 618; Potomac Rigging, 194 F.Supp. at 447-48. 36 This factor weighs on the subcontractor side because the contract between Ed Waln and the Tribe provided for progress payments.
37 Aetna and/or the district court considered the following additional factors not raised by other courts. 38
39 The district court found that the Tribe's product was not substantial and important to the completion of the prime contract because, inter alia, the Tribe's product was interchangeable with products of other suppliers and the general contractor could readily find another supplier. 40 No court has adopted a uniqueness or interchangeability requirement to support a subcontractor relationship, and we decline to do so now. Such a requirement would contradict Supreme Court and Ninth Circuit cases that have found subcontractor relationships where materials were not unique. See, e.g., F.D. Rich, 417 U.S. at 119, 94 S.Ct. at 2160 (plywood and millwork); Basich, 159 F.2d at 183 (gravel); Travelers Indem. Co. v. United States for the Use and Benefit of Western Steel Co., 362 F.2d 896 (9th Cir.1966) (structural steel); see also Morrison-Knudson, 687 F.2d at 130 (fabricated pipe); Moon, 698 F.Supp. at 665 (structural steel). The Miller Act would be at least partially dismantled if the uniqueness of the work or material supplied to federal projects had to be established before a subcontractor's supplier could recover. 41
42 Aetna argues that the Tribe was not a subcontractor because it did not pay wages pursuant to the Bacon-Davis Act, which governs the salary of subcontractors' employees on federal projects. 43 The only evidence of the Tribe's payroll practices is contained in the affidavit of James L. Combs, vice president of JWJ Contracting Company, a subcontractor that later assumed Ed Waln's contract and finished the Point of Pines Road Project. Mr. Combs stated he had personal knowledge that: The Tribe did not comply with the Davis-Bacon Act which covers contractors and subcontractors performing work on a Federal Government project. At no time did the Tribe submit certified payrolls to the government to show compliance with Davis-Bacon. 44 This evidence is inadmissible under Fed.R.Evid. 602 and Fed.R.Civ.P. 56(e) for failure to establish Mr. Combs' personal knowledge as to what payroll documents the Tribe submitted to the Government. Therefore, there is no evidence in the record to support Aetna's allegations. 45
46 Aetna claims the Tribe must be a materialman because it intended to use Conveyor Rental's equipment to produce crushed rock on other BIA projects. Aetna makes no cognizable legal argument, failing to explain how the Tribe's intended use of the rental equipment after the project is completed has anything to do with the nature of the Tribe's relationship with Ed Waln.
47 Conveyor Rental argues that the district court erred in failing to follow Basich Bros. Constr. Co. v. United States for Use of Turner, 159 F.2d 182 (9th Cir.1946), a Ninth Circuit case which found a subcontractor relationship existed in a factual scenario somewhat similar to the present case. 48 While it is true that, like the Tribe, the subcontractor in Basich Bros. produced all the gravel, rock and sand required for a road project in accordance with government specifications, other factors tend to show a closer interrelationship between that case's prime contractor and subcontractor than exists in the present case. Unlike the present case, the prime contractor in Basich Bros.: made arrangements to secure the subcontractor's worksite; paid for the rental of the subcontractor's worksite; maintained and operated the subcontractor's plants; paid the subcontractor's labor payroll; and entered into a contract with the subcontractor which provided for the renegotiation of the prices of subcontracts. 159 F.2d at 183. Consequently, the Basich Bros. holding does not control the present case.