Court Opinion

ID: 9492711
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:48:04.899902+00
Date Added: 2024-06-11T17:55:26.615488
License: Public Domain

MOORE, Circuit Judge,
dissenting.
I respectfully dissent from the majority’s decision to adopt the approach articulated in United States ex rel Austin v. Western Electric Co., 337 F.2d 568, 572 (9th Cir.1964), which directs a court to ask “whether [certain] work was performed ... as a ‘part of the original contract’ or for the ‘purpose of correcting defects, or making repairs following inspection of the project’ ” in those cases that involve a dispute over the statute of limitations contained in the Miller Act. Id. at 572-73 (quoting United States ex rel. Gen. Elec. Co. v. Gunnar I. Johnson & Son, Inc., 310 F.2d 899, 903 (8th Cir.1962)). I am concerned that this test, as it has been applied, has caused courts to focus excessively on the question of whether certain work constitutes a correction or repair and to lose sight of the more important question — was the project complete at the time the work in question was performed?
Two cases illustrate my concerns with the majority’s approach. First, in United States ex rel. Noland Co. v. Andrews, 406 F.2d 790 (4th Cir.1969), it was discovered, after the government had inspected and accepted a construction project, that two valves that had been required under the contract had never been furnished or installed. “It seems plain to us,” the court stated, “that the installation of the two missing valves cannot be characterized as a mere correction of a defect.” Id. at 792. Accordingly, the court held that provision of the missing valves constituted material supplied for the purposes of 40 U.S.C. § 270b(b).
Second, in United States ex rel. State Electric Supply Co. v. Hesselden Construction Co., 404 F.2d 774, 777 (10th Cir. 1968), the court held that equipment delivered by the plaintiff to replace lost or damaged equipment “concerned materials used for repair or correction and not for the accomplishment of the original contract.” The court found it significant that the project had been billed as complete before the replacements were delivered, and the court rejected the plaintiffs argument that the government would not accept the project as finished until the replacement equipment had been installed. See id. at 776.
The foregoing cases, like the approach taken by the majority in the present case, could be read as suggesting that whether remedial work performed constitutes labor performed for the purposes of the Miller Act limitations period turns on whether the same work has been done incorrectly in the past or whether the work has not been done at all. See also Austin, 337 F.2d at 573 & n. 15 (“punch list” work comprising sixty items including painting, “finish plumbing,” and “paving access road” was required for project completion and constituted original contract work). I believe, however, that this approach, which focuses literally upon the distinction between repair or replacement and the performance of omitted work, imports a false dichotomy into the analysis. See, e.g., Johnson Serv. Co. v. Transamerica Ins. Co., 485 F.2d 164, 173 (5th Cir.1973) (“[S]weeping rules about ‘repairs’ offer little help in the necessary analysis.”).
Indeed, a contract is deficient whether a certain widget specified is missing or is defective; after the contract has been accepted and the warranty period has begun, the contract is no more incomplete because of a missing widget than because of a defective one. Moreover, if a contractor discovers an error and, as required by its contract, corrects the work at an early *463stage of the project, it could not be reasonably maintained that such corrective work was not performed under the contract. The work may or may not be reimbursable under the contract, but it is not warranty work. If such corrective work constitutes contract work early in the project and midway through the project, it surely would be anomalous to conclude that such corrective work is of a different nature simply because the contractor discovered and corrected the deficiency at the conclusion of its labors.
The Miller Act simply refers to labor performed, and, as noted above, the language is to be construed liberally. Although work performed under a warranty subsequent to project completion has no impact on the running of the limitations period of § 270b(b), I believe that a court must be careful to avoid excluding other labor from the protection of the Act. I would therefore conclude that the proper approach to the problem is to determine whether the work at issue is warranty work or work conducted prior to contract completion. See Johnson Servs. Co. v. Transamerica Ins. Co., 349 F.Supp. 1220, 1225 (S.D.Tex.1972) (stating test as whether the work “was a part of the original contract or was for the purpose of what is sometimes called warranty work, that is, correcting defects or making repairs after the job was complete”), aff'd, 485 F.2d 164 (5th Cir.1973).
Although determining when the contract has been completed and the warranty period has begun may be more difficult than determining whether work is new or repair, the former approach finds strong support in the legislative history. In his letter proposing the 1959 amendment that replaced the “final settlement” language, the Comptroller General noted that an additional purpose to the amendment was to extend the protection of the Act beyond the settlement date of the contract in some instances:
It sometimes happens, also, that a supplier will be called upon to furnish labor or materials after “final settlement,” or even after the limitation has run, in connection with the correction of deficiencies after substantial completion and acceptance of the contract work and “final settlement” (based upon withholding the value of the deficiencies). Under the proposed amendment, such suppliers will not have lost most or all of the protection intended by the Miller Act but will receive full protection for 1 year after furnishing labor or material.
S.Rep. No. 86-551, 1959 U.S.C.C.A.N. at 1999.
The Comptroller General describes a situation in which a project has been substantially completed and accepted by the government with recognition that deficiencies remain. Correction of the deficiencies constitutes original contract work and § 270b(b) labor, however, because payment for the remaining work has been withheld pending completion. In speaking of deficiencies, the Comptroller General did not distinguish between omitted work and unacceptable work, nor should he have so distinguished, as correction of either deficiency in this circumstance should constitute § 270b(b) labor.
Citing this legislative history, the court in Trinity Universal Insurance Co. v. Girdner, 379 F.2d 317, 318 (5th Cir.1967), held “that the ‘last labor or materials’ language [of § 270b(b) ] is broad enough to include work performed upon the demand of the government to correct defects in the work as originally completed.” As “[tjhere [was] no contention that this work was a sham to extend the period of limitation,” the court held that replacement of defective insulation and a seal constituted the last labor performed. Id.
Following the implication of the legislative history and agreeing with the Trinity court’s interpretation of the Act and the history, I would hold that in ascertaining the § 270b(b) limitations period the dispositive question is whether the work at issue was performed or materials were supplied *464before the project was complete or after completion in accordance with a warranty.1 This test yields a fact-intensive inquiry, but not an unbounded one. Normally, the inspection and unconditional acceptance of a project by the government will indicate project completion. However, acceptance conditioned on the completion of a punch list does not constitute completion until the punch list work is accomplished. Of course the completion date specified in the contract is not dispositive.
Applying my proposed analysis to the instant case, I would hold that a material issue of fact exists that precludes the grant of summary judgment in favor of the defendant. Although the labor performed in replacing the duct heaters undoubtedly was corrective, the magistrate judge did not determine whether this corrective action took place before the contract was complete or afterwards as warranty work. I believe that the dispositive question is whether the reinstallation of the duct heaters at some time before October 18, 1994, occurred before the contract was complete. If it did, the work of Interstate’s contractor, Neeley, on October 18, 1994, was § 270b(b) labor. The contract contained detailed air balancing and testing requirements, and the performance of this work constitutes labor as the term is used in § 270b(b).
It is not at all clear that Interstate’s contract was complete when the duct heaters were reinstalled in October 1994. In his deposition, Terry Self, an Interstate official, stated that to his knowledge the company had never received notice that Interstate’s work or the building had been accepted. Self did state in an August 1994 letter that “[t]o our knowledge, Interstate finished all work on this project in early June, 1994,” but he did so in response to a letter from Parmeco that apparently asserted that Interstate had not completed its work. J.A. at 100. Self went on to note that “[i]f any work is unfinished, it would have to be in the nature of punch list work. This is the first project on which we have had difficulty finding out what work remains unfinished.” Id.
Furthermore, the circumstances in which the heaters were reinstalled suggest ongoing contract work rather than warranty work. Apparently, the original heaters were installed in April, May, or June 1994. Neeley stated in his deposition that “[w]e were there probably six or seven times off and on from then until October the 18th.” J.A. at 42. Apparently, Neeley discovered the heater installation error in early October. From what can be gleaned from the record before the court, it appears that Neeley was on site during this period performing the balancing and testing required under Interstate’s contract. Interstate’s contract specified that “[tjest runs shall be made over the full design load range where possible and shall continue for as long as necessary to demonstrate that systems will operate as designed.” J.A. at 37. The contract also specified that “[a]ny piece of equipment or any item not meeting the system requirements shall be repaired or replaced and the systems rebalanced until the performance is confii’med.” Id. (emphasis added). Apparently, the installation error was discovered in the course of these tests and the corrections followed in accordance with the contract. If this is so, this work *465should be held to constitute § 270b(b) labor, unless it is shown clearly that the project was accepted as complete prior to October 1994 despite Interstate’s failure to comply with the testing requirements of the contract.
Often the final labor performed under a construction subcontract will be in response to a punch list. The punch list may include items omitted by the subcontractor or work that inspection indicates must be repaired or replaced. In either case, the completion of the punch list work constitutes labor performed under the contract, and this is well understood within the construction industry. To hold that corrective work performed pursuant to such a punch list does not constitute labor performed within the meaning of § 270b(b) would be inappropriate and, because contrary to everyday understanding, would create a trap for the unwary and undermine the protective effect of the Miller Act. Accordingly, I believe that the corrective or remedial nature of the work performed should not be dispositive for the purposes of § 270b(b). Rather, a court should determine whether the work was performed prior to contract completion, as in the case of a punch list, or was performed after the project was completed under a warranty.
The record before us is incomplete. Based upon what is before the court, however, I see no evidence that the work performed by Interstate and its subcontractor in October 1994 was performed after the contract was completed. Thus, I would remand the case for further consideration in light of the foregoing analysis.

. Referring back to the widget example, one may ask whether there is a qualitative difference between the performance of corrective work at the end of the project pursuant to a punch list and the performance of corrective work after project completion pursuant to a warranty. For the purposes of the Miller Act, I believe that the difference is significant. The obligation to make the final payment under a construction contract normally commences with the completion of the work, in-eluding the completion of punch list work. Thus, under a more logical approach, i.e., one that is based on contract completion, the commencement of the limitations period for suing to recover on the bond for nonpayment will coincide with the accrual of the obligation to pay. Remedial work performed pursuant to a warranty, on the other hand, should have no bearing on either the obligation to make final payment or on the limitations period.