Attorneys’ Fees in Federal Miller Act Litigation

Federal bond claims have recently increased as a result of construction spending at North Carolina military facilities.  Previously, suppliers to federal projects could usually rely on prompt payment from the bonding companies after making a claim.  Suppliers now experience a trend of delay tactics from numerous sureties on federal projects.  These delay tactics force suppliers to initiate federal litigation in a higher percentage of bond claims than in years past.

Additional federal bond claim litigation mandates that companies protect themselves by taking steps to recover attorneys’ fees in such cases.  The Miller Act provides the ground rules for litigating federal bond claims.  Unlike North Carolina’s payment bond scheme, the Miller Act is silent as to attorneys’ fees.

In the F.D. Rich Co. v. United States ex rel. Industrial Lumber Co. case, the United States Supreme Court applied the “American Rule” to federal Miller Act litigation.  The “American Rule” provides that each party typically pays its own fees and costs.  The court explained that federal courts should not incorporate state law to the federal cases as a national rule would “extricate the federal courts from the morass of trying to divine a ‘state policy’ as to the award of attorney’s fees.”  Years later, the Fourth Circuit created an exception to the national rule for North Carolina’s federal courts.  In U.S. ex. rel. Maddux Supply Co. v. St. Paul Fire & Marine Ins. Co., the court adopted the standard which provides that “interest and attorney’s fees are recoverable if they are part of the contract between the subcontractor and supplier.”

In short, North Carolina businesses may claim attorney’s fees in a federal Miller Act lawsuit if they originally included appropriate language within the project subcontract or credit application.   Contractual attorney’s fees language is key.