Court Opinion

ID: 2671688
Source: CourtListenerOpinion
Date Created: 2014-04-30 00:02:03.151018+00
Date Added: 2024-06-11T09:19:44.419876
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

 TECHNICA LLC, for the use and                      No. 12-56539
 benefit of: United States of America,
                   Plaintiff-Appellant,               D.C. No.
                                                   3:08-cv-01673-
                      v.                               H-KSC

 CAROLINA CASUALTY INSURANCE
 COMPANY; CANDELARIA                                  OPINION
 CORPORATION; OTAY GROUP, INC.;
 DOES 1 THROUGH 10, INCLUSIVE,
             Defendants-Appellees.

         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.
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 Plaintiff-
Appellant Technica, LLC.

Robert J. Berens (argued), Adam D. Melton; Lewis Brisbois
Bisgaard & Smith, LLP, Phoenix, Arizona, for Defendants-
Appellees 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.
        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 Otay Group,
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.
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 any contractor 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).
            TECHNICA LLC V. CAROLINA CAS. INS. CO.                       5

Act claim.2 See 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.
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
          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
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.
         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
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.
        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 comply with contractor licensing requirements in any given
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.