Did a supplier satisfy the requirements for making a payment bond claim by sending the notice of claim by e-mail? Johnson-Lancaster & Assocs. v. H.M.C., Inc. United States District Court (Maryland) (2021), by Hugh Anderson

Summary: Plaintiff Johnson-Lancaster supplied (and apparently installed) food service equipment as part of the renovation of the Prince George’s County Courthouse cafeteria. The subcontractor that had engaged Johnson-Lancaster failed to pay for the materials and services, resulting in a reported balance owed of $175,571. Johnson-Lancaster submitted a copy of its claim to the prime contractor, and made repeated requests for a copy of the project’s payment bond; eventually the prime contractor complied.

The payment bond had been issued by Hudson Insurance Company in compliance with the Maryland Little Miller Act. (The Miller Act is a federal law that requires performance and payment bonds on specified federal contracts; most states have enacted similar statutes called “Little Miller Acts.”) The Maryland Little Miller Act sets various requirements for making a payment bond claim—for example, an unpaid lower-tier supplier must give written notice to the prime contractor within 90 days after last furnishing labor or materials. Another specific requirement states that a “notice under this subsection…shall be sent by certified mail to the contractor…at a place where the contractor has an office or does business.” Johnson-Lancaster plainly complied with all the various procedural requirements, with one exception: it sent the notice of claim and claim form to the prime contractor (and the surety) by e-mail, not certified mail.
To enforce its claim Johnson-Lancaster initiated a lawsuit contending, in part, that the surety was liable to Johnson-Lancaster under the payment bond. The surety filed a motion for partial summary judgment based on Johnson-Lancaster’s failure to comply with the certified mail requirement.

Decision: The district court denied the surety’s motion for partial summary judgment. The court stated that it was not willing to comply with the surety’s urging that the court “simply and blindly apply strict construction to the words ‘certified mail’ without looking to the purpose of the statute.” The Maryland Little Miller Act’s preamble indicates that the statute’s “main purpose” is to provide “greater protection to subcontractors [including suppliers] on contracts awarded by the state.” By contrast, the notice requirements serve the lesser purpose of protecting the interests of the sureties and intermediate general contractors.
The court cited with approval a 1940 U.S. Supreme Court decision in which the high court drew a pertinent distinction between the statutory provisions stating the fundamental conditions necessary to bring a Miller Act claim, on the one hand, and provisions concerning the manner of service of notice, on the other hand. As to the latter, the Supreme Court had held that Congress’s intent in requiring certified mail was to provide a method that would afford sufficient proof of service. Applying that point to the Johnson-Lancaster claim, the Maryland district court concluded:

The purpose of certified mail is to protect the parties—for a plaintiff that notice was sent and received, and for a defendant the date of receipt of such notice. In this case and under these specific facts, Plaintiff [Johnson-Lancaster] has an email record of that receipt and [Hudson Insurance] was on notice of the claim and had a record of the receipt.

There is no showing of prejudice nor can there be since [Hudson] received timely notice.

The court also made the following points in favor of allowing the Johnson-Lancaster claim to proceed:

  • To grant summary judgment would provide an “unjust windfall” to the surety.
  • Summary judgment would thwart the primary purpose of the Little Miller Act.
  • The content of the notice was not at issue.
  • The timeliness of the notice was not at issue.
  • The surety’s and prime contractor’s receipt of notice was not at issue. “Receipt of the claim was ensured by email which provided a digital history of delivery.”

Decision: The district court denied the surety’s motion for partial summary judgment. The court stated that it was not willing to comply with the surety’s urging that the court “simply and blindly apply strict construction to the words ‘certified mail’ without looking to the purpose of the statute.” The Maryland Little Miller Act’s preamble indicates that the statute’s “main purpose” is to provide “greater protection to subcontractors [including suppliers] on contracts awarded by the state.” By contrast, the notice requirements serve the lesser purpose of protecting the interests of the sureties and intermediate general contractors.

The court cited with approval a 1940 U.S. Supreme Court decision in which the high court drew a pertinent distinction between the statutory provisions stating the fundamental conditions necessary to bring a Miller Act claim, on the one hand, and provisions concerning the manner of service of notice, on the other hand. As to the latter, the Supreme Court had held that Congress’s intent in requiring certified mail was to provide a method that would afford sufficient proof of service. Applying that point to the Johnson-Lancaster claim, the Maryland district court concluded:
The purpose of certified mail is to protect the parties—for a plaintiff that notice was sent and received, and for a defendant the date of receipt of such notice. In this case and under these specific facts, Plaintiff [Johnson-Lancaster] has an email record of that receipt and [Hudson Insurance] was on notice of the claim and had a record of the receipt. There is no showing of prejudice nor can there be since [Hudson] received timely notice.

The court also made the following points in favor of allowing the Johnson-Lancaster claim to proceed:

  • To grant summary judgment would provide an “unjust windfall” to the surety.
  • Summary judgment would thwart the primary purpose of the Little Miller Act.
  • The content of the notice was not at issue.
  • The timeliness of the notice was not at issue.
  • The surety’s and prime contractor’s receipt of notice was not at issue. “Receipt of the claim was ensured by email which provided a digital history of delivery.”

Comment: At first review, this decision is somewhat jarring—the statute says notice by certified mail, period. However, the court’s reasoning is supported by its determination of the fundamental purpose of the Maryland Little Miller Act—to provide a payment bond remedy to unpaid lower-tier contributors—and case law that allowed exceptions to the formalistic notice requirements. The decision may also be a concession to the universal use of email in the 21st century business world.

EJCDC’s Standard General Conditions allow written notice “by e-mail to the recipient, with the words ‘Formal Notice’ or similar in the e-mail’s subject line.” EJCDC® C-700 (2018), Standard General Conditions of the Construction Contract, Paragraph 18.01.A.3.