Bateson Company, Inc v. United States Board of Trustees of National Automatic Sprinkler Industry Pension Fund

• Decision Date: 22 February 1978
• Docket Number: No. 76-1476,76-1476
• Parties: J. W. BATESON COMPANY, INC., et al., Petitioners, v. UNITED STATES ex rel. BOARD OF TRUSTEES OF the NATIONAL AUTOMATIC SPRINKLER INDUSTRY PENSION FUND et al
• Court: U.S. Supreme Court

434 U.S. 586

98 S.Ct. 873

55 L.Ed.2d 50

J. W. BATESON COMPANY, INC., et al., Petitioners,

v UNITED STATES ex rel. BOARD OF TRUSTEES OF the NATIONAL AUTOMATIC SPRINKLER INDUSTRY PENSION FUND et al.

No. 76-1476.

Argued Nov. 30, 1977.

Decided Feb. 22, 1978.

Syllabus

Petitioner prime contractor (Bateson) entered into a Government contract for construction of a hospital addition and posted a payment bond as required by the Miller Act to protect those who have a direct contractual relationship with either the prime contractor or a "subcontractor." Bateson then subcontracted a portion of the work to a firm (Pierce) which in turn subcontracted with another firm (Colquitt) for installation of a sprinkler system. When Colquitt failed to pay over amounts withheld from its employees' wages for union dues, vacation savings, and various union trust funds, as required by a collective-bargaining agreement with respondent union, the union and respondent trustees filed suit against Bateson in the name of the United States for the amount claimed due under the payment bond. The District Court granted summary judgment for respondents, and the Court of Appeals affirmed, holding that although Colquitt was "technically a sub-subcontractor," nevertheless it should be considered a "subcontractor" for purposes of payment bond recovery by its employees or their representatives, since it was performing "an integral and significant part of [Bateson's] contract" with the Government. Held: Colquitt's employees were not protected by the Miller Act payment bond, since they did not have a contractual relationship either with Bateson or with Pierce or any other "subcontractor" and since Colquitt cannot be considered a "subcontractor." Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102, 64 S.Ct. 890, 88 L.Ed. 1163, and F. D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 94 S.Ct. 2157, 40 L.Ed.2d 703, distinguished. As confirmed by the Miller Act's legislative h story, the word "subcontractor" as used in the Act must be construed as being limited to meaning one who contracts with a prime contractor. Pp. 875-878.

179 U.S.App.D.C. 325, 551 F.2d 1284, reversed.

Jack Rephan, Washington, D.C., for petitioners.

Donald J. Capuano, Washington, D.C., for respondents.

Mr. Justice MARSHALL delivered the opinion of the Court.

Under the Miller Act, 49 Stat. 793, as amended, 80 Stat. 1139, 40 U.S.C. § 270a et seq., a prime contractor on a federal construction project involving over $2,000 must post a payment bond to protect those who have a direct contractual relationship with either the prime contractor or a "subcontractor." The issue in this case is whether the term "subcontractor," as used in the Act, encompasses a firm that is technically a "sub-subcontractor."

The material facts are not in dispute. Petitioner J. W. Bateson Co. entered into a contract with the United States for construction of an addition to a hospital and provided a payment bond signed by Bateson's president and by representatives of petitioner sureties. Bateson, the prime contractor, subcontracted with Pierce Associates for a portion of the original work, and Pierce in turn subcontracted with Colquitt Sprinkler Co. for the installation of a sprinkler system, one of the items specified in the contract between Bateson and the United States. Under a collective-bargaining agreement with respondent Road Sprinkler Fitters Local Union No. 669, Colquitt was obligated to pay over amounts withheld from employees' wages for union dues and vacation savings, and to contribute to the union's welfare, pension, and educational trust funds. When Colquitt failed to make any of these pay- ments by the end of the union members' employment with the firm, the union and respondent trustees notified Bateson of the amount that they claimed was due them under the payment bond and then filed suit against Bateson in the name of the United States.

The District Court granted summary judgment for respondents, and the Court of Appeals for the District of Columbia Circuit affirmed, 179 U.S.App.D.C. 325, 551 F.2d 1284 (1977). The appellate court recognized that Colquitt, which had a contractual relationship with Pierce but not with Bateson, was "technically a sub-subcontractor," but it concluded nevertheless that Colquitt should be considered a "subcontractor" for purposes of payment bond recovery by its employees or their representatives. Id., at 327, 551 F.2d, at 1286.¹ Applying a functional test based on the "substantial[ity] and importan[ce]" of the relationship between Bateson and Colquitt, the court noted that Colquitt was performing on the jobsite "an integral and significant part of [Bateson's] contract" with the Government, that the work "was performed over a substantial period of time," that Bateson had access to Colquitt's payroll records, and that Bateson could have protected itself "through bond or otherwise" against Colquitt's default. Ibid., 179 U.S.App.D.C., at 327, 551 F.2d, at 1286.

We granted certiorari, 433 U.S. 907, 97 S.Ct. 2971, 53 L.Ed.2d 1090 (1977), to resolve a conflict between the decision below and the holdings of at least three other Circuits.² We now reverse.

Like the predecessor Heard Act, Act of Aug. 13, 1894, ch. 280, 28 Stat. 278, as amended, Act of Feb. 24, 1905, 33 Stat. 811, the Miller Act was designed to provide an alternative remedy to the mechanics' liens ordinarily available on private construction projects. F. D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 122, 94 S.Ct. 2157, 2161, 40 L.Ed.2d 703 (1974). Because "a lien cannot attach to Government property," persons supplying labor or materials on a federal construction project were to be protected by a payment bond. Id., at 121-122, 94 S.Ct. at 2161. The scope of the Miller Act's protection is limited, however, by a proviso in § 2(a) of the Act that "had no counterpart in the Heard Act." Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102, 107, 64 S.Ct. 890, 894, 88 L.Ed. 1163 (1944). This proviso has the effect of requiring that persons who lack a "contractual relationship express or implied with the [prime] contractor" show a "direct contractual relationship with a subcontractor" in order to recover on the bond. 40 U.S.C. § 270b(a); ³ see F. D. Rich Co. v. United States ex rel Industrial Lumber Co., supra, 417 U.S. at 122, 94 S.Ct., at 2161; Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., supra, 332 U.S. at 107-108, 64 S.Ct., at 893-894. In the instant case it is conceded that Colquitt's employees enjoyed no contractual relationship, "express or implied," with Bateson, and that they did have a "direct contractual relationship" with Colquitt. The question before us, then, is whether Colquitt can be considered a "subcontractor."

As we observed in Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., supra, Congress used the word "subcontractor" in the Miller Act in accordance with "usage in the building trades." 322 U.S., at 108-109, 64 S.Ct., at 894; see id., at 10, 64 S.Ct., at 895. In the building trades,

"a subcontractor is one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contract . . . ." Id., at 109, 64 S.Ct., at 894 (emphasis added).

It thus appears that a contract with a prime contractor is a prerequisite to being a "subcontractor." ⁴ This interpretation of the Act's language is confirmed by the legislative history, which leaves no room for doubt about Congress' intent. While relatively brief, the authoritative Committee Reports of both the House of Representatives and the Senate squarely focus on the question at issue here:

"A sub-subcontractor may avail himself of the protection of the bond by giving written notice to the contractor, but that is as far as the bill goes. It is not felt that more remote relationships ought to come within the purview of the bond." H.R.Rep.No. 1263, 74th Cong., 1st Sess., 3 (1935); S.Rep.No. 1238, 74th Cong., 1st Sess., 2 (1935).

This passage indicates both that Congress understood the difference between "sub-subcontractors" like Colquitt and "subcontractors" like Pierce, and that it intended the scope of protection of a payment bond to extend no further than to sub-subcontractors. See MacEvoy, 322 U.S., at 107-108, 64 S.Ct., at 893-894 and n. 5. There is nothing to the contrary anywhere in the legislative history. Thus, while Colquitt could have claimed against the payment bond had Pierce defaulted in its obligations, the employees of Colquitt were not similarly protected against Colquitt's default, because they did not have a contractual relationship with Pierce or any other "subcontractor." ⁵

This view of what was intended in the Miller Act is reinforced by the fact that all reported decisions that have considered the question, except that of the court below and one early District Court decision, have reached the same conclusion.⁶ Presumably aware of this well-settled body of law dating back almost 20 years, Congress has never moved to modify the Act's coverage. As a result, all of those concerned with Government projects—prime contractors, sureties, various levels of subcontractors and their employees—have been led to assume that the employees of a sub-subcontractor would not be protected by the Miller Act payment bond and to order their affairs accordingly.⁷ In the absence of some clear indication to the contrary, we should not defeat these reasonable expectations, particularly in view of the importance of certainty with regard to bonding practices on Government construction projects. See generally MacEvoy, supra, at 110-111, 64 S.Ct., at 895.

In reaching a result contrary to that of other Courts of Appeals, the court below did not address itself either to the legislative history quoted above or to the conflict among the Circuits that...