John Fatino Published Analysis of Seedorff Masonry, Inc. v. Archer Western Construction, LLC Appellate Decision
UNITED STATES FOR SEEDORFF MASONRY, INC. v. ARCHER WESTERN CONSTRUCTION, LLC
Recently, the United States Court of Appeals for the Eighth Circuit ruled on a matter which concerned a dispute between a general contractor and subcontractor. The case deals with the Miller Act but demonstrates how parties can remain entangled over state law issues once the Miller Act claim is resolved. As a result, the case provides a good practice pointer for counsel.
Facts, Procedural History, and Court Rulings:
In 2014, Archer Western Construction, LLC (“Archer”), a general contractor, entered into a contract with the United States in construction of the National VA Cemetery.1 Archer, as principal, and the surety, Travelers Casualty and Surety Company of America (“Travelers”) delivered and executed the requisite bond conditioned under the Miller Act.2
Archer hired Seedorff Masonry, Inc. (“Seedorff”) as a subcontractor for masonry work in Omaha, Nebraska.3 Seedorff’s work was accepted, but there was a dispute about the quality of Seedorff’s masonry work and the payment applications went unpaid.4 Seedorff alleged unjust enrichment, violations of the Miller Act and Nebraska Construction Prompt Pay Act, and sued Archer and its surety, Travelers casualty and Surety Company of America.5
The parties entered into negotiations and Archer paid Seedorff $759,077.76 on April 12, 2019 in satisfaction of some of the unpaid payment applications.6 The parties were unable to resolve the disputes regarding the other payment applications, resulting in a bench trial.7 Seedorff won the amounts Archer owed on the unpaid payment applications, including interest for the Miller Act claim.8 However, the court did not award any interest on the April 12, 2019 payment, as Seedorff had accepted the payment and thereby waived any claim it had on the interest.9 Seedorff appealed on the state law issue.10 The parties remained entangled over the companion Nebraska state court claims even though the federal issue had been resolved.
Seedorff made two arguments upon appeal arguing that district court should have awarded it interest on the April 12, 2019 payment because (1) “the payment was a ‘partial settlement payment’ and not a progress payment or a final payment” and (2) “it preserved its rights to seek prejudgment interest in a document entitled Partial Waiver and Release of Claims for Payment.”11
Partial Settlement Payment or Progress/Final Payment?
The relevant Nebraska statute allows subcontractors to collect any interest from contractors when the payment, either periodic or final, is delayed over 30 days.12 This statute also notes that if a subcontractor accepts a payment, all claims for any interest on that payment is released.13 The payment from April 12, 2019 did satisfy some of the payment applications submitted by Seedorff for the project in Omaha.14 The Eighth Circuit found that this is a progress payment under this statute.15 Even though there was a delay, the terms of the statue were satisfied by Seedorff’s acceptance of the payment, and thereby Seedorff waived its ability to make a claim for any interest related to that payment.16
The Partial Waiver and Release of Claims for Payment Document.
A plain reading of the Partial Waiver and Release of Claims for Payment signed by Seedorff (but not Archer) undermines Seedorff’s claim that the interest issue was preserved in this document.17 The Eighth Circuit did not determine if the statute can be modified by an agreement between the parties.18
The Eighth Circuit affirmed the ruling of the district court.19
This case demonstrates the reality of accepting a late payment and thereby waiving any claim for interest on that payment under Nebraska law. In this case, the plaintiff did not have the right to pursue a claim for interest as a result of the general contractor’s delayed payment for the subcontractor’s services. This case potentially gives rise to future litigation if an agreement between parties can waive or modify the provisions of Nebraska Construction Prompt Pay Act.
For more information on this topic
Contact John F. Fatino at 515-288-6041 or firstname.lastname@example.org. Elaina J. Steenson, J.D. candidate, Drake University Law School, assisted in the preparation of these materials. The article was also published on the American Bar Association TIPS blog.
1 United States of America v. Archer Western Constr., 2020 WL 5493035.
3 United States for Seedorff Masonry, Inc. v. Archer W. Constr., LLC, No. 20-1253, 2021 WL 613634, at *1 (8th Cir. Feb. 17, 2021).
12 Id. (citing Neb. Rev. Stat. § 45–1205).
13 Id. (citing Neb. Rev. Stat. § 45–1205).
19 Id. at *2.