Petition for Writ of Certiorari — Hardaway Co. v. United States Department of the Army Corps of Engineers

, [\

i) | BILED

1) | MAY 2 5 1993

92-1906) orion

ie

In the Supreme Court

OF THE

United States

October Term, 1992

THE HARDAWAY COMPANY,

Petitioner,

VS.

UNITED STATES, DEPARTMENT OF THE ARMY,

CORPS OF ENGINEERS,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

PAUL Z. LEWIS

Counsel of Record for Petitioners

Lewis & McKenna

82 East Allendale Road

Saddle River, New Jersey 07458

(201) 934-9800

Attorneys for Petitioner

On the Brief

Michael F. McKenna and

Frederick P. Alimonti

OE

QUESTIONS PRESENTED FOR REVIEW

Whether the Federal Tort Claims Act gives rise to a cause of

action against the government in favor of parties that rely to their

detriment on the government to perform an express duty in a non-

negligent manner.

* x *

Whether government conduct mandated by federal statutes is,

ipso facto, conduct that is “uniquely governmental" and insulated

from review under the Federal Tort Claims Act.

PARTIES TO THE PROCEEDING BELOW

The parties to these proceedings are set forth in the caption.

TABLE OF CONTENTS

stl. On rr ili

POE OP AUTHORITIES 00 iv

OFFICIAL AND UNOFFICIAL REPORTS

AND OPINIONS INVOLVED... ooo cccocoe l

BASIS FOR JURISDICTION 0.......-ccceeocecseeeeeoc 2

THE STATUTES AND REGULATIONS

sippy heey 3

UCAS 4

A. Federal Jurisdictional Predicate........................... 4

B. Statement of Facts Relevant

1. hua (re 4

|: a rrr 5

SUMMARY OF ARGUMENT o.oo 6

i |

ARGUMENT

THIS COURT SHOULD GRANT

CERTIORARI TO RESOLVE WHETHER

THE GOVERNMENT'S BREACH OF AN

EXPRESS DUTY THAT INDUCES

DETRIMENTAL RELIANCE GIVES

RISE TO AN ACTION UNDER THE

FEDERAL TORTS CLAIM ACT ...00000.. occ eeeeeees 7

CONCLUSION 16

SOE HEHEHE EEE EEE EEE EEE HEHEHE EEE EE EEE EEE EEE EEE EEE EEE ES

INDEX TO APPENDIX

Decision of the U.S. District Court, granting the United State's

Motion to Dismiss, dated April 19, 1991

Decision of the United States Court of Appeals for the

Eleventh Circuit, affirming the decision of the District Court .. . .B-1

Decision of the United States Court of Appeals for the Eleventh

Circuit, denying petitioner's motion for reconsideration. ....... C-1

Pertinent Excerpt from Fedcral Tort Claims Act, 28 U.S.C. §

1346 (ISTE) & 2B U.S.C. 6 2E71 CIGGS) . . wen nccncccss D-1

Pertinent Excerpt from the Miller Act, 40 U.S.C. §270a (1986) . .E-1

iV

TABLE OF AUTHORITIES

Cases

Arvanis v. Noslo Eng'g Consultants, Inc., 739 F.2d 1287

(7th Cir. 1984), cert. denied, 469 U.S. 1191 (1985) ....... 12

Atlanta v. United Electric Co., 202 Ga. App. 239,

og tL errr rrr sere rrr reer 13 n.10

Barron v. United States, 473 F. Supp. 1077 (D. Hawaii 1979),

aff'd in part, rev'd in part, 654 F.2d 644 (9th Cir. 1981)... .15 n.12

Block v. Neal, 460 U.S. 289 (1983) ............----45- 15 n.12

Carter v. United States, 982 F.2d 1141 (7th Cir. 1992)..... 13 n.11

Conley v. Gibson, 355 U.S. 41 (1955)... 2.2... ee ee eee ll

Devlin Lumber & Supply Corp. v. United States,

Po ee 13 n.11

Green Elec. Sys. v. Metropolitan Airports Comm.,

486 N.W.2d 819 (Minn. App. 1992)................4-. 13 n.10

Hardaway v. U.S. Army Corps of Engineers, 980

® fos, Co See eee ea 10-11

Indian Towing Co. v. United States, 350 U.S. 61 (1955) . . . .8,10,12

JM Mechanical Corp. v. United States, 716 F.2d 190

fr ee ere ee ee ee eee 13-14

McMann v. Northern Pueblos Enters., 594 F.2d 784

Toot 2 ers eee e ee eee eee 12 n.11

National Sav. Bank v. Creswell, 100 U.S. 630 (1879)...... 15

Seaboard Coast Line Railroad v. United States, 473 F.2d

Pe En vacewas ab dw hv hevan eS b00s #éa000s 14n.12

United States v. Smith, 324 F.2d 622 (Sth Cir. 1963)....... passim

Vv

Westbay Steel Inc. v. United States, 970 F.2d 648

i tat veut dCi yhee bs tame eke we a8 400 13 n.11

Statutes and Regulations

The Federal Tort Claims Act 28 U.S.C. §§ 1346

EE OR Ss 9 ee oe eee ee ee eee passim

The Miller Act, 40 U.S.C. § 270a (1986) ................ passim

re rena 2

eee CEO os sv dd web Sd dais Raw'n even ces 14

co ES ree 13

48 C.F.R. § 28-202-2(a) (1986) (repealed) ............... passim

No.

In the Supreme Court

OF THE

United States

October Term, 1992

THE HARDAWAY COMPANY,

Petitioner,

VS.

UNITED STATES, DEPARTMENT OF THE ARMY,

CORPS OF ENGINEERS,

Respondent.

OFFICIAL AND UNOFFICIAL REPORTS AND OPINIONS

INVOLVED

The decision and order of the district court dated April 19,

1991, granting the United States motion to dismiss is unpublished.

(Pet. App. "A").

The decision of the United States Court of Appeals for the

Eleventh Circuit, dated January 13, 1993, affirming the decision of

the district court is reported at 980 F.2d 1415. (Pet. App. "B").

The order of the United States Court of Appeals for the

Eleventh Circuit dated February 25, 1993, denying petitioner's motion

for rehearing, has not been published. (Pet. App. "C").

2

BASIS FOR JURISDICTION

The Supreme Court's jurisdiction is predicated upon 28

U.S.C § 1254 (1993) and Rule 10 (a) & (c) of the Rules of the

Supreme Court of the United States, on the grounds that several

circuit courts of appeal have decided this question in a way that

conflicts with applicable decisions of this Court and there is a conflict

between the circuits on this question. The Circuit Court of Appeals

dismissed this action on January 13, 1993. Hardaway's petition for

rehearing was denied in February 25, 1993.

THE STATUTES AND REGULATIONS INVOLVED

This action involves the interpretation of the Federal Tort

Claims Act, 28 U.S.C. §§ 1346 & 2671 et seg ("FTCA") and the

Miller Act 40 U.S.C. § 270a (1986). See App. "D" & "E".

This action also involves the interpretation of a regulation in

effect at the time of the relevant contract. 48 C.F.R. §28-202-2(a)

(1986) (repealed) provided, in pertinent part:

Individual Sureties are acceptable for all types of

bonds except position schedule bonds. The

contracting officer shall determine the acceptability

of individuals proposed as sureties. At least two

individual sureties must execute the bond and the net

worth of each individual surety must equal or exceed

[the] penal amount of the bond. Contracting officers

shall consider the number and amounts of other

bonds upon which a proposed individual surety is

bound, and the status of the contracts for which such

bonds were furnished, in determining _ the

acceptability of the individual surety .. . .

3

STATEMENT OF THE CASE

Federal jurisdiction in this action is predicated upon 28

U.S.C. § 1346 and 28 U.S.C. §§ 2671 ef seq, as a civil action arising

out of the Federal Torts Claim Act.

\

B. Statement of Facts Relevant to the Petition

This action was dismissed before discovery or trial. All

allegations must be construed in the light most favorable to the

petitioner.

This case involves claims for negligence arising out of the

United States, Department of the Army, Corps of Engineers (“the

Corps") administration of a contract. C. Ardavin Construction, Inc.

("Ardavin"), a minority contractor, was the prime contractor on a

government project for the construction of roads at MacDill Air Force

Base, Tampa, Florida. The Hardaway Company ("Hardaway")

entered ” the subcontract with Ardavin on January 14, 1988. (R2-

Ex."E”).

Under the terms of the Miller Act, Ardavin was required to

post performance and payment bonds for the protection of

subcontractors, such as Hardaway, that are unable, in this and all

federal projects, to lien the project in the event of non-payment.

Pursuant to the Miller Act, these bonds must be in place prior to the

government's award of the contract to the general contractor. 40

U.S.C. § 270a(a).

Ardavin contacted Hardaway and asked it to perform

paving work on the project as a subcontractor. Due to concerns about

the financial viability of Ardavin, in order to protect itself from any

potential forfeiture, and prior to entering into its subcontract with

1 Hardaway's parent is the Lampton Company. Hardaway has no other

parents or affiliates.

For the convenience of the Court, should the record on appeal be

requested, references to the original record on appeal are provided throughout.

4

Ardavin, Hardaway asked the Corps if proper Miller Act bonds were

in place. Mr. Leonard B. Harris, the Corps on-site engineer, advised

Hardaway that bonds were in place and had been approved by the

Corps. (R.2-Ex."E"). At that time two individual sureties, Peter

Harris and Quida J. Trahan, M.D. had been approved by the Corps.

(R.2-5). Individual non-traditional sureties were permitted pursuant

to the Federal Acquisition Regulations ("FARs"), provided the Corps'

contracting officer had made a determination that these sureties were

"acceptable" by determining that each surety had an individual net

worth in excess of the penal sum of the bond and, after reviewing

such items as the sureties’ net worth, other bonds, and the status of the

contracts for which these bonds were posted. See 48 C.F.R. § 28.202

(1986).

However, the Corps’ regulation-required determination that

these sureties were acceptable was severely insufficient, if not non-

existent, based upon nothing more than affidavits from these

individuals avowing that they met the requirements of 48 C.F.R.

§ 28.202 (1986). (R2-Exs. "A" & "B"). No investigation was ever

performed by the contracting officer. In what proved to be false

affidavits, these sureties represented that they had assets in excess of

$18 million. Even the most cursory investigation of these individuals

would have revealed that they had little or no assets whatsoever, let

alone the amounts represented in the affidavits.2

In reliance on the government's approval and apparent

compliance with the FARs, Hardaway entered into the subcontract

with Ardavin. Hardaway performed its work under the subcontract,

including additional work requested by Ardavin and the Corps.

Hardaway's work was accepted by the Corps and is currently in use.

When Hardaway sought payment for the work, Ardavin defaulted,

2 Harris’ affidavit listed his net worth as $6,503,250 (R. 2 - Ex. "A") and

Trahan listed her net worth as $11,848,200. (R. 2 - Ex. "B"). On July 30, 1986,

Harris and Trahan issued separate payment bonds in the penal amount of

$1,295,105.32 (R. 2 - Exs. "C" and "D") and separate performance bonds in the

amount of $2,590,210.65 (R. 2 - Exs. "C" and "D"). In litigation discovery, neither

surety could be found, absolutely no assets were located. Indeed, even the bank

that purportedly "certified" Harris and Trahan's net worth was out of business and

under investigation by the FBI and the Attorney General of Tennessee.

ee ”

5

leaving $255,366.95 owing to Hardaway. (R2- Ex. "F"). Hardaway

first asked the Corps to withhold payment from Ardavin to cover the

default. The Corps refused, advising Hardaway that its only recourse

was the Miller Act. (R2-Ex."I"). Hardaway then pursued an action

against the two individual sureties. Those individuals defaulted and

Hardaway was awarded a judgment against them, which has proven

uncollectable.3 In fact, despite arduous efforts, Hardaway was

unable to locate either of the individuals or a penny of their assets.

(R2-6-7). After exhausting its administrative remedies pursuant to 28

U.S.C. § 1346 & 2675(a), Hardaway filed its complaint against the

Corps for negligence under the FTCA. (R.2).

Hardaway, alleged in its amended complaint that the Corps

negligently carried out its statutory and common law duties to make a

pre-acceptance determination that Ardavin's two individual sureties

had sufficient net worth and otherwise satisfied the FAR

requirements.4

OPINIONS BELOW

On April 11, 1991, the Middle District of Florida (per Hon.

William J. Castagna) issued an Order granting the Corps' motion to

dismiss. (App. "A"). On May 9, 1991, Hardaway filed its notice of

appeal of the District Court's Order.

The United States Court of Appeals affirmed the decision of

the district court by decision dated January 13, 1993. (App. "B").

Hardaway's Petition for rehearing was denied by the Eleventh

Circuit on February 25, 1993. (App. "C").

' United States of America u/b/o The Hardaway Company v. Peter Harris

and Quida Trahan, Case No. 88-1134-CIV-T-10A (M.D. Fla.).

4 As set forth previously, at the time of the subcontract the pertinent FAR

required the government contracting officer "to determine the acceptability of

individuals proposed as sureties," whenever such sureties were offered by

contractors on government projects. See 48 C.F.R. § 28.202 (1986). Under this

regulation the Corps was obligated to determine that each individual surety had net

worth in excess of $3,885,210.00 to secure the payment bonds in the amount of

$1,295,000.00 and the performance bonds in the amount of $2,590,210.00.

6

SUMMARY OF ARGUMENT

Of all the parties involved with this loss, Hardaway, by any

objective standard, is without fault. It was the government's

obligation under the Federal Acquisition Regulations to make a

determination that these sureties have the financial capacity to post

bonds of this magnitude for the precise purpose of preventing this

type of forfeiture. This determination was clearly an operational

responsibility, not a policy-making or discretion-driven activity.

Hardaway took the initiative of contacting the Corps to

confirm that proper bonds were in place, although it had no obligation

to do so. Only upon receiving confirmation from the Corps that

proper Miller Acts bonds were in place, did Hardaway proceed to

enter into the subcontract with Ardavin.

The court below characterized Hardaway's argument as

"perverse." It held that the government cannot be held liable for the

negligence of its agents' determinations of surety acceptability

because, under the Eleventh Circuit's law, the government is |

purportedly not responsible for failing to ensure that bonds are even in

place. However, there is a big distinction; government agents are not

free to carry out their duties carelessly when this performance is

known to be critical to a subcontractor's welfare. In any event,

Eleventh Circuit law with respect to ensuring that bonds are in place

is severely flawed, as it is based upon the same syllogistic analysis

that this Court, implicitly, and the Seventh Circuit, expressly,

rejected.

Hardaway relied upon the Corps’ determination and

approval of the sureties, only to discover that the Corps had not, in

fact, followed the mandate of the regulation in effect at the time,

which set forth specific criteria for the sureties' approval. In sum,

having done everything within its power to protect itself before

entering into the subcontract with Ardavin, Hardaway remains

uncompensated for the work it performed.

. SA ALIBI AOS Ch A A Oe ES ah ge

ee me Ot

Pursuant to the Miller Act, Hardaway's remedies were

against Ardavin and the non-existent sureties, which it pursued in

vain. Had the Corps performed a proper investigation, these

individual sureties would not have been permitted to bond the project.

ee So

- ‘Ales a8 pr Sia > “

7

&

The Corps’ negligence in the performance of this task, a task

performed for the benefit of subcontractors like’ HafdaWay; tat would

rely on this performance to their possible detriment, should form the

basis for an action under the Federal Torts Claim Act.

ARGUMENT

THIS COURT SHOULD GRANT CERTIORARI TO

RESOLVE WHETHER THE GOVERNMENT'S BREACH OF

AN EXPRESS DUTY THAT INDUCES DETRIMENTAL

RELIANCE GIVES RISE TO AN ACTION UNDER THE

FEDERAL TORTS CLAIM ACT

This dispute involves the question of whether the government

can escape liability for its negligence under the FTC.A for its negligent

failure to carry out duties it assumes, knowing that private citizens

will rely on the performance. In this particular case., the government's

duty was to make a determination that individual! sureties had the

financial capacity to post bonds on a construction contract.

Hardaway relied on the government to perform this duty non-

negligently only to forfeit payment, for all intents amd purposes, when

these sureties proved to be non-existent.

As this case now stands, Hardaway, having relied upon the

assurances given by the Corps that acceptable? sureties were in place

prior to entering into a subcontract with Atrdavin, remains

uncompensated for the bulk of the work it performed under the

subcontracts because the Corps did not do its job. Hardaway's

forfeiture is attributable to its reliance upon the Corps’ determination

that the individual sureties met the regulatory standards for

acceptability - a state of fact that Hardaway confirmed with the

Corps.

The FTCA legislates a waiver of sovereign immunity "for

money damages . . . caused by the negligent or wrongful act or

5 The FAR provided a non-exhaustive list of the criteria to be considered

in determining “acceptability.". These items include net worth, previous and

current bonds, and the status of projects bonded by the individual sureties. See 48

C.F.R. § 28-202-2(a) (1986).

8

omission of an employee of the government . . . under circumstances

where the United States, if a private person, would be liable to the

claimant... ." 28 U.S.C. § 1346 (b), in pertinent part.

In the case sub judice, in addition to any common law duties,

a specific regulation required the Corps to determine the acceptability

of individuals as sureties. This determination is of paramount

importance in actions under the Miller Act, where the bond is the sole

protection afforded a subcontractor in the event of the general

contractor's default. The importance of adequate Miller Act bonds

was unquestionably known to the Corps in this case.6

In the seminal decision of Indian Towing Co. v. United

States, 350 U.S. 61 (1955), this Court upheld FTCA jurisdiction for a

tugboat owner's claims that the Coast Guard caused the grounding of

his tug by its negligent inspection of a lighthouse.’ The Coast Guard

argued that, "[The FTCA] must be read as excluding liability in the

performance of activities private persons do not perform. Thus there

would be no liability for negligent performance of ‘uniquely

governmental functions’." 350 U.S. at 64. In rejecting this argument,

this Court held:

While the area of liability is circumscribed

by certain provisions of the [FTCA], all government

activity is inescapably “uniquely governmental" in

that it is performed by the government. . . ._ [I]t is

hard to think of any governmental activity on the

“operational level," . . . which is “uniquely

governmental," in the sense that its kind has not at

6 The acknowledged purpose of the Miller Act is to protect materialmen

and subcontractors from a general contractor's default. As evidence of this, when

Hardaway informed the government of Ardavin's default and asked the government

to withhold payment, the contracting officer at MacDill sent Hardaway a pre-

printed information packet on the Miller Act, confirming his knowledge of (i) the

Miller Act and (ii) the importance of the payment bonds. (R.2 - Ex. I).

7 350 U.S. at 62. The owner alleged that Coast Guard should have

discovered that the light was not functioning, and then negligently failed to warn

the navigating public about the non-functioning light.

Tee ee ee Sa ree

<. aod atte se

eepacrs

ore

9

one time or another been, or could not conccivably

be, privately performed.

There is nothing in the [FTCA] which shows

that Congress intended to draw distinctions so

finespun and capricious as to be almost incapable of

being held in the mind for adequate formulation. The

statute was the product of nearly thirty years of

congressional consideration and was drawn with

numerous substantive limitations and administrative

safeguards. ... The language of the statute does not

support the government's argument.

Id.

Some circuit courts have carved an exception to the clear

rule of Indian Towing in cases involving the Miller Act. This

exception was first announced in United States v. Smith, 324 F.2d

622 (Sth Cir. 1963), and was the linchpin of the Eleventh Circuit's

ruling in this action. As set forth in detail below, Smith and the

several cases since relying on it, have ruled that a private person could

not conceivably be asked to post a Miller Act bond and, therefore

(applying logic of the type expressly rejected in Indian Towing) the

government could not be held liable when it failed to assure that

proper bonding was in place.

In Smith, the general contractor failed to obtain the required

Miller Act bond. Thereafter, the unpaid subcontractor brought an

action against the government for failing to require the bond prior to

awarding the contract. Section 270a(a) of the Miller Act requires that

a contractor furnish a bond before any contract in excess of $25,000

is awarded. See 40 U.S.C. § 270a(a). While Section 270a(a) places

the responsibility of obtaining the bonds on the general contractor, it

contains an additional concomitant duty on the part of the government

not to a award a contract until the required bonds are in place. See

40 U.S.C. § 270a(a) (1986). This duty was ignored by the Fifth

Circuit in Smith.

The Smith court, while recognizing this argument, side-

stepped the issue by holding:

10

The existence or nonexistence of a claim by a laborer

or matcrialman under a government contract depends

entirely upon a Federal statute. There being no

possibility of such a situation being construed by

state law, the attempt to vindicate such right, it seems

clear, cannot bring it within the ambit of tort law

claims law language which says in effect that the

United States may be sued for certain negligent

conduct if such negligent conduct perpetrated by a

private person would give rise to a claim under state

law. The nature of the claim sought by the claimant

here is simply not one which would be asserted

against "a private person" under the laws of the State

of Georgia.

Smith, 324 F.2d at 625.

This opinion flies directly in the face of logic and the holding

of Indian Towing that such a bootstrap argument draws distinctions

too finespun and capricious to operate as impediments to relief.

Rather than directly address the pertinent issue of whether the

Miller Act itself places a duty on the government to ascertain that a

bond is in place prior to awarding the contract, the Eleventh Circuit

and the Smith court relied on this circular argument of analogous state

conduct. Relying on Smith, the Eleventh Circuit held that there could

be no liability under the Federal Torts Claim Act, as there could be no

analogous state cause of action predicated upon the Miller Act:

“Because there is no analogous private right of action for failing to

investigate a surety on a Miller Act Bond, Hardaway cannot maintain

an action against the Corps under the FTCA." Hardaway v. U.S.

Army Corps of Engineers, 980 F.2d 1415, 1416-17 (11th Cir. 1993).

As a result of this threshold determination, the Eleventh Circuit did

not even address Hardaway's contention that Florida law provides a

remedy.8 In addition, the Eleventh Circuit never reached Hardaway's

8 Hardaway contends that Florida would recognize a cause of action

pursuant to theories of negligence per se, common law breach of duty, common law

failure to perform a duty in a non-negligent manner, and/or Florida's Good

ee ed

aie lactate a Alii ln, =i a —

1]

argument that the government assumed a duty to make its

determination pursuant to the express terms of the FAR and is liable

to those that detrimentally rely on this determination.

As discussed, the Eleventh Circuit's rationale has already

been rejected by this Court in Indian Towing, which recognized that

there is no uniquely governmental function exception under the

FTCA. If we take the argument of the Fifth Circuit in Smith and the

Eleventh Circuit in the instant action to their logical extreme, both the

FTCA and the Miller Act would be completely emasculated. In the

case of the FTCA, under Smith's logic, no claim could be effectively

pursued against the government, as there would never be any

government action that was not - by its very nature as the action of a

governmental body, officer, or employee - uniquely governmental.

With regard to the Miller Act, the very purpose of the bonding

requirements are meaningless if a contracting officer is free to

"discharge" his duties so carelessly as to freely award a contract with

no bonds in place (Smith) or fail entirely to determine the adequacy

of the sureties notwithstanding its express duty to do so (this case).

In holding that the case sub judice was indistinguishable from

Smith and its progeny, the court below held: "Smith establishes that

the government cannot be held liable under the FTCA when no bond

exists. It would be perverse to hold that the government can be liable

when a bond does exist, but proves to be inadequate." Hardaway,

980 F.2d at 1417. The Eleventh Circuit, just as the court in Smith,

never addressed the issue of whether the Miller Act places a duty

upon the government to determine that proper bonds are in place prior

to awarding the contract. The case for imposing liability against the

government in this action is particularly compelling, as Hardaway

was only depending on the Corps to follow its own regulations. Much

like the case of Coast Guard's lighthouse inspection in Indian Towing,

Hardaway was relying on nothing more then the contracting officer's

non-negligent performance of his duty. In dismissing this case on the

Corps’ motion to dismiss, Hardaway has been denied any opportunity

to prove such elements as the extent of the Corps' duty under the

regulation and the forseeability of reliance by subcontractor like

12

Hardaway. A motion to dismiss for failure to state a claim should not

be granted unless it appears beyond a doubt that the plaintiff can

prove no set of facts that would entitle it to relief. See Conley v.

Gibson, 355 U.S. 41 (1955).?

There is a conflict amongst the circuits on this issue.

Although holding that the government was not liable for the

contractor's failure to acquire a Miller Act bond on alternative

grounds, the Seventh Circuit in Arvanis v. Noslo Eng'g Consultants,

Inc., 739 F.2d 1287 (7th Cir. 1984), cert. denied, 469 U.S. 1191

(1985), recognized that the Smith governmental function exception

was a logically flawed, self-fulfilling prophecy. That Court noted that

Smith's holding with respect to analogous state conduct bore "some

similarity to [the argument] rejected in Indian Towing .. ." Id. at

1290 n.3. The Arvanis Court rejected Smith's simplistic approach

and went on to consider whether the government had breached a duty

owed to subcontractors under the applicable law of Illinois. With

respect to the analogous conduct argument of Smith, the Arvanis

court held:

We think the syllogistic analysis assumes the answer

to the question at issue. It should be possible to

define governmental action in almost any situation

narrowly enough to render it "uniquely governmental"

(e.g., no private party could negligently drive a truck

carrying U.S. Mail). The better approach is to focus

on the behavior involved, not the legal labels applied,

and then look for analogies with private conduct. For

cxample, private parties in many situations are

required by contract or by state law to obtain bonds -

and often fail to do so.

9 The decision of the district court (App. "A") is not clear as to whether it

was a 12(bX1) subject matter dismissal, or 12(b\(6) dismissal for failure to state a

claim. As failure to state a claim under the FTCA deprives a federal court of

subject matter jurisdiction, the two are functional equivalents in this case.

13

Id. at 1290.19

Unlike the Arvanis decision, the court below never

addressed the apparent conflict between Smith and Indian Towing. | l

Accordingly, there is a conflict between Smith and its progeny and

Indian Towing as well as a conflict between the Seventh Circuit

(Arvanis) and the Smith line of cases.

Although it did not rely on Indian Towing, the decision of

the Third Circuit in JM Mechanical Corp. v. United States, 716 F.2d

190 (3d Cir. 1983), recognized the potential for governmental liability

when it failed in its duty to obtain proper bonding to the detriment of a

relying subcontractor. In JM Mechanical, the United States

Department of Housing and Urban Development (HUD) had been the

insurer on the mortgage of a housing project. Under the pertinent

regulations, HUD was charged with investigating and approving

sureties for the mortgagor/contractor's payment and performance

bonds. See 24 C.F.R. § 221.542 (1982).

Much like the case sub judice, it was another party's

responsibility to acquire the bonds. HUD did, however, have a

regulatory obligation to investigate the sureties. The bonds approved

by HUD proved to be forgeries. HUD, however, knowingly allowed

construction to continue unbonded. Prior to commencing work, JM

Mechanical contacted the contractor about bonding and was informed

10 It is particularly noteworthy that several states have imposed liability on

their respective state or municipal governments when the general contractor fails to

supply a proper bond on government owned construction projects. See Green Elec.

Sys. v. Metropolitan Airports Comm., 486 N.W.2d 819, 823 (Minn. App. 1992),

Ailanta v. United Electric Co., 202 Ga. App. 239, 414 S.E.2d 251, 253 (1991).

1 The Arvanis Court similarly rejected the Smith progeny of McMann v.

Northern Pueblos Enters., 594 F.2d 784 (10th Cir. 1979) and Devlin Lumber &

Supply Corp. v. United States, 488 F.2d 88 (4th Cir. 1973). Contrary to Arvanis,

the Ninth Circuit recently adopted the Smith position in Westbay Steel Inc. v.

United States, 970 F.2d 648 (9th Cir. 1992). See generally Carter v. United States,

982 F.2d 1141, 1144 (7th Cir. 1992) (under Indian Towing government may be

liable “for negligence in carrying out acts that no private person performs, because

there are ‘like’ circumstances that lead to private liability").

14

that there were valid bonds, reviewed and approved by HUD. JM

Mechanical then completed its work, but was not paid.

After sccuring a default judgment against the contractor

(much like the case here), JM Mechanical filed a complaint against

HUD. JM Mcchanical alleged that HUD was "negligent in its

investigation and verification of the payment and performance bonds,

was negligent in the enforcement of its own regulations . . . and was

negligent in failing to secure another surcty bond or other assurances

of payment as required by Federal Regulations." Jd. at 192. In

upholding the subcontractor's claim, the Court quoted JM

Mechanical's characterization of HUD's negligence: "[W]e believe

that HUD breached its responsibility of using due care on behalf of

the contractors and therefore has violated the standard and made itself

liable for the damages that have been incurred by [JM Mechanical]."

Id.

The government argued that the claim was really an action for

injuries resulting from a negligent misrepresentation by the

government and barred under 28 U.S.C. § 2680(h), an exception to

the FTCA for misrepresentations. The Court, noting the alleged

reliance of the subcontractors, summarily rejected this argument:

Thus JM alleges and the government admits that

HUD had guaranteed the mortgage on the bonds.

That guarantee, JM asserts, gave rise to the duty

to secure valid bonds, which duty the government

failed to perform. That duty was owed to

subcontractors who rely on the government to

Sollow its own regulations for the protection of

the subcontractors. . . . Finally JM alleges that

the government's negligent breach was the

proximate cause of its injury.

Thus JM has made a valid claim under the FTCA.

While that claim might fail at trial . . . the District

Court had subject matter jurisdiction over the

claim and erred in granting the government's

motion to dismiss under Fed.R.Civ.P. 12(b)(1).

Id. at 195 (emphasis supplied).

15

This action closely mirrors JM Mechanical. 1n both

actions, the contractor relied upon the government's representation

that appropriate bonding was in place. In fact, either no bonds were

in place (JM Mechanical), or the bonds in place were worthless (this

action). JM Mechanical relied on communications from the

contractor, who in turn made representations about HUD. HUD's

negligence was in failing to determine that the sureties met the

requirements of the regulation and allowing the project to continue

unbonded.

Similarly, a duty of care was owed to Hardaway and the

other subcontractors that the Corps knew would be relying on the

Corps to follow its own regulations and who foreseeably would be

looking to the bonds for payment. This was the same duty HUD

owed to JM Mechanical and the subcontractors on that project. The

Corps’ breach of its duty to follow its own regulations was

substantially identical to HUD's breach. !2

Although the greater wrong-doers were, perhaps, Ardavin and

the two sureties, Hardaway is the party that should least be called

upon to bear this loss. It is a long standing principle that where one

of two persons must suffer loss, the loss should fall upon the person

who, by reasonable diligence, could have prevented it. See National

Sav. Bank v. Creswell, 100 U.S. 630, 643 (1879). In this action,

Hardaway took the precaution of contacting the Corps to confirm that

sureties had been investigated and were in place. (R2-5). Nothing

short of conducting the investigation expressly required of the Corps,

could have prevented this loss to Hardaway. The Corps was the party

in the best position to prevent the loss and therefore, should bear its

burden.

2 For other examples of the Government having been negligent under the

FTCA in the areas of investigation and construction see, Block v. Neal, 460 U.S.

289 (1983), (claims against the Farmers Home Administration for negligent

inspection and supervision of construction of borrower's home cognizable under

FTCA), Seaboard Coast Line Railroad v. United States, 473 F.2d 714 (Sth Cir

1973). (Government liable for negligent design and construction of a drainage

ditch, Barron v. United States, 473 F. Supp. 1077 (D. Hawaii 1979) (Government

liable for failure to require subcontractor to comply with contract safety

requirements), aff'd in part, rev'd in part, 654 F.2d 644 (9th Cir. 1981).

16

By dismissing this action, Hardaway has been denied the

opportunity to prove that the Corps breached an express duty of care,

as well as common law duties of due care. The scope of government's

duty to obtain proper bonding under the Miller Act and its liability to

contractors relying on the government to perform this duty has not

been addressed by this Court. Moreover, most cases decided against

subcontractors, like Hardaway, have relicd upon the same uniquely

governmental function exception expressly rejected by this Court. It

is submitted that certiorari should be granted to resolve this issue.

ONCLUSION

As the extent of the government's liability in circumstances

where it induces detrimental reliance in the performance of its duties

has not been addressed by the Court, this Court should grant

certiorari to resolve this issue. Moreover, the decisions of the circuit

courts in Smith and its progeny, creating an apparent exception to

FTCA liability, conflict with this Court's holding in Indian Towing.

Finally, there is disagreement amongst the circuits as to whether the

Miller Act constitutes a uniquely governmental function, precluding

the application of the FTCA when the government fails to acquire or

negligently approves Miller Act bonds.

Dated: May 25, 1993

Respectfully Submitted,

PAUL Z. LEWIS

Counsel of Record for Petitioners

Lewis & McKenna

82 East Allendale Road

Saddle River, New Jersey 07458

(201) 934-9800

Attorneys for Petitioner

On the Brief

Michael F. McKenna and

Frederick P. Alimonti

Appendix to Petition

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

THE HARDAWAY COMPANY

Plaintiff,

V. Case No. 90-1210

-Civ-T-3A98(B)

UNITED STATES ARMY, DEPARTMENT

OF THE ARMY, CORPS OF ENGINEERS,

Defendant.

ORDER

Before the Court for its consideration is defendant's motion to

dismiss the amended complaint. Upon due consideration, the motion

is GRANTED.

C. Ardavin Construction, Inc. (C. Ardavin) contracted with

the Corps of Engineers for the construction of roads at MacDill Air

Force Base in Tampa, Florida and then executed a subcontract with

plaintiff to provide the asphalt products for the construction project.

After C. Ardavin failed to pay plaintiff monies due on the completed

subcontract, plaintiff filed suit against C. Ardavin's individual sureties

under the Miller Act, 40 U.S.C. §270a et seq., and obtained a default

judgment in the principal amount of $255,366.95 but has been unable

to execute judgment. Plaintiff then filed the present suit under the

Federal Tort Claims Act (FTCA), 28 U.S.C. §§1346(b) and 2671 ef

seq., against the United States. The amended complaint seeks

damages in the amount of $255,366.95 and other relief.

A-2

Count I of the amended complaint alleges that the Corps

and/or its contracting officer was negligent in failing to investigate the

financial viability of C. Ardavin's individual sureties or was negligent

in any investigation it undertook of the individual sureties, thereby

violating both its statutory! and common law duties.

In subcontractor suits alleging the negligent failure of the

United States or its officers to require a primary contractor to post a

Miller Act bond, courts generally have held that there is no

jurisdiction under the FTCA. See United States v. Smith, 324 F.2d

622 (Sth Cir. 1963); Arvanis v. Noslo Engineering Consultants, Inc.,

739 F.2d 1287 (7th Cir. 1984); McMann v. Northern Pueblos

Enterprises, Inc., 594 F.2d 784 (10th Cir. 1979); Devlin Lumber &

Supply Corp. v. United States, 488 F.2d 88 (4th Cir. 1973); but see

J. M. Mechanical Corp. v. United States, 716 F.2d 190 (3d Cir.

1983) (subcontractor on construction project stated claim under

FTCA for HUD's negligent failure to investigate and verify payment

and performance bonds, negligence enforcement of its regulations,

negligent failure to notify subcontractors that bonds had been declared

counterfeit and negligent in failing to secure another security bonds or

other assurances of payment).

Section 1346(b) of the FTCA waives the sovereign immunity

of the United States for injuries

caused by the negligent or wrongful act

oromission of any employee of the Government while

acting within the scope of his office or employment,

under circumstances where the United States, if a

private person, would be liable to the claimant in

accordance with the law of the place where the act or

omission occurred.

Title 48 C.F.R. 28.203(a) provides in pertinent part that "[t}he

contracting officer shall determine the acceptability of individuals proposed as

sureties, and shall ensure that the surety's pledged assets are sufficient to cover the

bond obligation.”

—— jit a aie at ites ae |

| A-3

In Smith, the Fifth Circuit Court of Appeals reasoned that, as the

Miller Act deals exclusively with federal contracts, private persons

would never be in a position to require the posting of a Miller Act

bond by a contractor and so could not be liable for any negligent

failure to insist on the posting of such a bond. Therefore, the Court

concluded, since a private person could not be liable for such failure,

the United States could not be under the provisions of the FTCA. Jd.

at 624-25. The Court explained that the FTCA was not intended to

redress breaches of federal statutory duties and was concerned

primarily with providing redress for the garden variety common-law

torts recognized by state law. Jd. at 625. Such reasoning is

applicable to the amended complaint presently before this Court.

Nor, in any event, has plaintiff provided the Court with any

persuasive analogy that would make it conclude that a private cause

of action, similar to this one, exists under the law of the state of

Florida, thus enabling plaintiff to maintain its FTCA claim against the

United States. Finally, the Court observes that to allow plaintiff to

sue under the FTCA would allow plaintiff "to achieve by indirection a

result that [it] could not reach directly under the Miller Act."

Arvanis, 739 F.2d at 1292. While the result to the sureties may be

unjust, the problem is one for Congress to address.

Count II of the amended complaint seeks the imposition of a

constructive trust of any funds retained by the United States owing on

the contract with C. Ardavin. The Court finds that plaintiff lacks

standing to sue the United States for any compensation due it ‘under its

subcontract with C. Ardavin. See Arvanis, 739 F.2d at 1292-93;

United Electric Corp. v. United States, 647 F.2d 1082 (Ct.Cl.), cert.

denied, 454 U.S. 863 (1981). The Court notes, finally, the comment

of the Claims Court in United Electric Corp.:

As we have done before, we stress that the

United States may voluntarily choose to

make payment, . . . and we believe that it has

a nonenforceable obligation to do so, when

and if it becomes clear that [the

subcontractor] had a valid claim, that

2 In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981), the

Eleventh Circuit adopted as binding precedent all decisions of the former Fifth

Circuit handed down before October 1, 1981.

————EeEO EEE

A-4

contract retainages or other unexpended

funds under the contract are available for

such payment, and that, if those funds are not

paid out, the Government will be receiving a

windfall which it should not have."

Id. at 1087.

Upon due consideration and for the reasons stated, the Court

finds that this action is not cognizable under the FTCA and that

plaintiff lacks standing to sue for the imposition of a constructive

trust. Accordingly, the motion to dismiss filed by the United States is

GRANTED, and this case is DISMISSED.

DONE AND ORDERED in Chambers, in Tampa, Florida,

this llth day of April 1991.

/s/ William Castagna

UNITED STATES

DISTRICT JUDGE

B-1

United States Court of Appeals,

Eleventh Circuit

January 13, 1993!

No. 91-3435

The Hardaway Company,

Plaintiff-Appellant,

Vv.

United States Army Corps of Engineers,

Defendant-Appellee

Appeal from the United States District Court for the

Middle District of Florida

Before TJOFLAT, Chief Judge ANDERSON, Circuit Judge, and

ALAIMO*, Senior District Judge (Hon. Anthony A. Alaimo,

Senior U.S. District Judge for the Southern

District of Georgia, sitting by designation.)

PER CURIAM:

The Hardaway Company (Hardaway), a subcontractor on a

government construction project, appeals from the dismissal of its

complaint seeking recovery from the government under the Federal

Tort Claims Act (FTCA), 28 U.S.C. §§ 2671-80 (1988), for the

balance due under its subcontract. We agree with the district court

that Hardaway could not bring this claim under the FTCA and,

accordingly, we affirm.

l Reported at 980 F.2d 1415.

B-2

I.

In July 1986, C. Ardavin Construction, Inc., (Ardavin)

entered a general construction contract with the United States Corps

of Engineers (Corps) to build a road at MacDill Air Force Base in

Tampa, Florida. Before construction began, Ardavin posted the

payment and performance bonds required by the Miller Act, 40

U.S.C. §§ 270a-d (1988). Two individuals acted as the sureties for

Ardavin's bonds.

In January 1988, Hardaway, relying on the Corps' acceptance

of these individuals as Ardavin's sureties, entered into a subcontract

with Ardavin to perform the paving work portion of Ardavin's

contract with the Corps. Hardaway thereafter performed the

subcontract, but did not get paid. Apparently Ardavin had become

insolvent. In an effort to recover the subcontract price, Hardaway

sued Ardavin's sureties under the Miller Act. The sureties did not

defend the case and Hardaway obtained a default judgment against

them. Hardaway has been unable to obtain satisfaction of its

judgment because it cannot locate the sureties or any of their assets.

Hardaway turned to the FTCA for relief and brought this case

against the Corps in the United States District Court for the Middle

District of Florida. Hardaway claimed that the Corps negligently

investigated the financial worth of the sureties as required by

government, acquisition regulations. See 48 C.F.R § 28.202-

2(a)(1986).” Following the rule announced in United States v. Smith,

2 The version of the regulation in effect at the time of the underlying

conduct, 48 C.F.R. § 28.202-2(aX 1986), provides that:

Individual sureties are acceptable for all types

of bonds except position schedule bonds. The

contracting officer shall determine the acceptability of

individuals proposed as sureties. At least two

individual sureties must execute the bond and the net

worth of each individual must equal or exceed [the]

penal amount of the bond. Contracting officers shall

consider the number of amounts of other bonds upon

which a proposed individual surety is bound, and the

status of the contracts for which such bonds were

furnished, in determining the acceptability of the

individual surety . . ..

B-3

324 F.2d 622 (Sth Cir. 1963),” the district court found that Hardaway

could not state a claim under the FTCA and granted the Corps' motion

to dismiss. Hardaway then appealed.

II.

The FTCA describes government waiver of sovereign

immunity for claims brought by those who are injured by tortious

government action. It provides that "[t]he United States shall be liable

. .. In the same manner and to the same extent as a private individual

under like circumstances . . .." 28 U.S.C. § 2674.

The Smith court held that an unpaid subcontractor on a

government project could not recover under the FTCA for the general

contractor's failure to post a payment bond under the Miller Act. 324

F.2d at 625. The court stated that the government could not be

positioned "as a private individual under like circumstances." Jd. at

624. Simply, Smith held that because there is no private analogy to

subcontractor claims against the government alleging a contractor's

failure to procure a Miller Act bond, the government may not be

found liable under the FTCA. Jd. at 625.4 Smith clearly applies to

the instant case. Because there is no analogous private right of action

Section 28.202-2 has since been significantly modified. See 48 C.F.R. §

28.203 (1991).

; In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en

banc), this court adopted as binding precedent all decisions of the former Fifth

Circuit handed down prior to October 1, 1981.

" Three other circuits that have faced similar claims that Miller Act bonds

were not obtained or were insufficient have followed Smith's rationale. See

Westbay Steel, Inc. v. United States, 970 F.2d 648, 650 (9th Cir. 1992); McMann v.

Northern Pueblos Enters., Inc., 594 F.2d 784, 785-86 (10th Cir. 1979); Devlin

Lumber & Supply Corp. v. United States, 488 F.2d 88, 89 (4th Cir. 1973); of.

Arvanis v. Noslo Eng'g Consultants, Inc., 739 F.2d 1287, 1290-92 (7th Cir. 1984),

cert. denied, 469 U.S. 1191, 105 S.Ct. 964, 83 L_Ed. 2d 969 (1985) (Subcontractor

could not state a claim under the FTCA for the government's failure to ensure that a

payment bond was posted). But see JM Mechanical Corp. v. United States, 716

F.2d 190, 196-97 (3d Cir. 1983) (subcontractor made a valid claim under the

FTCA for the government's failure to procure replacement bonds).

B-4

for failing to investigate a surety on a Miller Act bond, Hardaway

cannot maintain an action against the Corps under the FTCA.

Hardaway contends that Smith and similar cases in the other

circuits are distinguishable from this case. It argues that the

subcontractors in those cases claimed that the government was

negligent in failing to require a contractor to post a Miller Act bond.

The Miller Act, Hardaway claims, requires contractors to post bonds,

but does not require the government to demand that bonds be posted.

40 U.S.C. § 270a(a).> Hardaway contends that this case is different

because here the government had an affirmative duty under 48 C.F.R.

§ 28.202-2(a) to investigate the financial worth of the surety, and

therefore an action under the FTCA may be maintained. We disagree.

Even if there is merit to Hardaway's argument that the

government breached its duty to investigate, Smith preserves the

government's sovereign immunity. There the court stated that the

FTCA “simply cannot apply where the claimed negligence arises out

of the failure of the United States to carry out a statutory duty in the

conduct of its own affairs." Smith, 324 F.2d at 624-25. Obviously, a

contracting officer should not approve a contract under the Miller Act

without ensuring that an adequate surety bond exists. See 40 U.S.C.

§ 270a(a). The dictates of the regulation in 48 C.F.R. § 28.202-2(a),

therefore, do not alter the government's basic obligations and should

not increase its liability. Smith establishes that the government cannot

be held liable under the FTCA when no bond exists. It would be

perverse to hold that the government can be liable under the FTCA

when a bond does exist, but proves to be inadequate. See Westbay

Steel, Inc., v. United States, 970 F.2d 648, 650 (9th Cir. 1992)

("[B]ecause liability is inappropriate when the United States approves

a contract without a bond, the approval of a contract with an

inadequate bond is likewise not actionable."). °

’ 40 U.S.C. § 270a(a) provides that "[bjefore any contract, exceeding

$25,000 in amount, . . . is awarded to any person, such person shall furnish to the

United States the following bonds. . . ."

6

Hardaway contends that this result necessarily depends upon the “unique

go tal functions” exception to the FTCA that the Supreme Court disallowed

in Indian Towing Co. v. United States, 350 U.S. 61, 64, 76 S.Ct. 122, 124, 100

L.Ed. 48 (1955). In light of the precedential force of Smith, as well as the

persuasive authority of Devlin, Arvanis, and McMann, this argument must fail.

We thus hold that a subcontractor may not state a claim

under the FTCA for the negligent failure to investigate the assets of a

surety. Any other result would permit subcontractors to achieve "by

direction a result they could not reach directly under the Miller Act."

Id. at 651 (quoting Arvanis, 739 F.2d at 1292). The district court

correctly dismissed Hardaway's complaint.

III.

For the foregoing reasons, we find that Hardaway cannot

recover against the government under the FTCA for its alleged

negligence in investigating the financial worth of the individual

sureties. Subcontractors may not circumvent the Miller Act by

seeking payment from the government under the FTCA. Accordingly,

the judgment of the district court dismissing Hardaway's amended

complaint with prejudice is affirmed.

AFFIRMED.

Hardaway also appeals the district court's refusal to impose a constructive

trust on any funds the Corps retained for Ardavin. A subcontractor does not have

standing under the FTCA to sue for the retainage. See Arvanis, 739 F.2d at 1292-

93, United Elec. Corp. v. United States, 647 F.2d 1082, 1083-84 (Ct.Cl.), cert.

denied, 454 U.S. 863, 102 S.Ct. 322, 70 L.Ed.2d. 163 (1981). Any other result

would subvert the Miller Act and would be "just the sort of direct raid on the

treasury" that warrants sovereign immunity. Arvanis, 739 F.2d at 1292. Because

we find that Hardaway's claim was property dismissed, we need not reach his other

arguments.

C-1

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT!

No. 91-3435

THE HARDAWAY COMPANY,

Plaintiff-Appellant,

versus,

UNITED STATES ARMY CORPS OF

ENGINEERS,

Defendant-Appellee.

Appeal from the United States District Court

for the Middle District of Florida

ON PETITION(S) FOR REHEARING

( January 13,1993 )

BEFORE TJOFLAT, Chief Judge, ANDERSON, Circuit Judge,

and ALAIMO,” Senior District Judge.

PER CURIAM:

The petition(s) for rehearing filed by Appellant,

THE HARDAWAY COMPANY, is DENIED.

ENTERED FOR THE COURT:

/s/ Tjoflat, Circuit Judge

United States Circuit Judge

1 Original stamped as filed February 25, 1993

* Honorable Anthony A. Alaimo

Senior U.S. District Judge

for the Southern District of Georgia,

sitting by designation.

Joa ee *

et eee, Wat

wa!

D-1

Excerpts from The Federal Tort Claims Act

§ 1346. United States as defendant

(a) The district courts shall have original jurisdiction,

concurrent with the United States Claims Court, of:

(b) Subject to the provisions of chapter 171 of this title, the

district courts, together with the United States District Court for the

District of the Canal Zone and the District Court of the Virgin

Islands, shall have exclusive jurisdiction of civil actions on claims

against the United States, for money damages, accruing on and after

January 1, 1945, for injury or loss of property, or personal injury or

death caused by the negligent or wrongful act or omission of any

employee of the Government while acting within the scope of his

office or employment, under circumstances where the United States, if

a private person, would be liable to the claimant in accordance with

the law of the place where the act or omission occurred.

§ 2674. Liability of United States

The United States shall be liable, respecting the provisions of

this title relating to tort claims, in the same manner and to the same

extent as a private individual under like circumstances, but shall not

be liabie for interest prior to judgment or for punitive damages.

If, however, in any case wherein death was caused, the law of

the place where the act or omission complained of occurred provides,

or has been construed to provide, for damages only punitive in nature,

the United States shall be liable for actual or compensatory damages,

measured by the pecuniary injuries resulting from such death to the

persons respectively, for whose benefit the action was brought, in lieu

thereof.

With respect to any claim under this chapter, the United

States shall be entitled to assert any defense based upon judicial or

legislative immunity which otherwise would have been available to the

employee of the United States whose act or omission gave rise to the

D-2

claim, as well as any other defenses to which the United States is

entitled.

With respect to any claim to which this section applies, the

Tennessee Valley Authority shall be entitled to assert any defense

which otherwise would have been available to the employee based

upon judicial or legislative immunity, which otherwise would have

been available to the employee of the Tennessee Valley Authority

whose act or omission gave rise to the claim as well as any other

defenses to which the Tennessee Valley Authority is entitled under

this chapter.

(As amended Nov. 18, 1988, Pub.L. 100-694,§§ 4, 9(c), 102 Stat.

4564, 4567.)

a

: Sa kcih

: oe > a3

aN

E-1l

The Miller Act, In Pertinent Part

§ 270a. Bonds of contractors of public buildings or works

(a) Type of bonds required

Before any contract, exceeding $25,000 in amount, for the

construction, alteration, or repair of any public building or public

work of the United States is awarded to any person, such person shall

furnish to the United States the following bonds, which shall become

binding upon the award of the contract to such person, who is

hereinafter designated as "contractor":

(1)

(2)

A performance bond with a surety or sureties

satisfactory to the officer awarding such contract,

and in such amount as he shall deem adequate, for the

protection of the United States.

A payment bond with a surety or sureties satisfactory

to such officer for the protection of all persons

supplying labor and material in the prosecution of the

work provided for in said contract for the use of each

such person. Whenever the total amount payable by

the terms of the contract shall be not more than

$1,000,000 the said payment bond shall be in a sum

of one-half the total amount payable by the terms of

the contract. Whenever the total amount payable by

the terms of the contract shall be more than

$1,000,000 and not more than $5,000,000, the said

payment bond shall be in a sum of 40 per centum of

the total amount payable by the terms of the contract.

Whenever the total amount payable by the terms of

the contract shall be more than $5,000,000 the said

payment bond shall be in the sum of $2,500,000.

(b) Waiver of bonds for contracts performed in foreign countries

The contracting officer in respect of any contract is

authorized to waive the requirement of a performance bond and

E-2

payment bond for so much of the work under such contract as is to be

performed in a foreign country if he finds that it is impracticable for

the contractor to furnish such bonds.

(c) Authority to require additional bonds

Nothing in this section shall be construed to limit the

authority of any contracting officer to require a performance bond or

other security in addition to those, or in cases other than the cases

specified in subsection (a) of this section.

(d) Coverage for taxes in performance bond

Every performance bond required under this section shall

specifically provide coverage for taxes imposed by the United States

which are collected, deducted, or withheld from wages paid by the

contractor in carrying out the contract with respect to which such

bond is furnished. However, the United States shall give the surety or

sureties on such bond written notice, with respect to any such unpaid

taxes attributable to any period, within ninety days after the date when

such contractor files a return for such period, except that no such

notice shall be given more than one hundred and eighty days from the

date when a return for the period was required to be filed under Title

26. No suit on such bond for such taxes shall be commenced by the

United States unless notice is given as provided in the preceding

sentence, and no such suit shall be commenced after the expiration of

one year after the day on which such notice is given.

(Aug. 24, 1935, c. 642,§ 1, 49 Stat. 793; Nov. 2, 1966, Pub.L. 89-

719, title I,§ 105(b), 80 Stat. 1139; Nov. 2, 1978, Pub.L. 95-585, 92

Stat. 2484.)