Trustees of the Construction Industry and Laborers Health and Welfare Trust v. Hartford Fire Insurance Company
Filed August 24, 2009
Cite as 04-16546

Trustees can File Case Even without Notice to General Contractor

Richardson Construction, Inc. (RCI) was the general contractor for a number of Nevada public works projects. Hartford Fire Insurance Company (Hartford) and its related entities agreed with RCI to act as a surety on a number of statutorily required payment bonds. RCI subcontracted some of the work to Desert Valley Landscape and Maintenance, Inc. (DVL).

According to the collective bargaining agreement (CBA) with Local 872, DVL agreed to pay certain trusts in behalf of the union members but it failed to do so. Consequently, the trustees sued DVL under ERISA before the federal district court.

The trustees sued RCI under Nev. Rev. Stat. § 608.150 making general contractors liable for their subcontractors’ nonpayment of labor and materials. The suit against Hartford was based under Nev. Rev. Stat. § 339.035(1), which allows “any claimant who has performed labor or furnished material” under a bonded public works contract to bring an action on the bond to recover the amount due.

The trustees amended their complaint to include RCA and Hartford when DVL filed for bankruptcy.

RCI and Hartford argued that they were not given notice before the trustees sued on the bond.

The district court granted summary judgment against RCI and Hartford holding them liable for DVL’s default judgment. They were also made liable for liquidated damages and attorneys’ fees DVL owed under the CBA. RCI and Hartford appealed.

The United States Court of Appeals affirmed the district court’s judgment against RCI but reverse the judgment against Hartford.

In affirming the judgment, the appeal court ruled that where DVL failed to make certain payments to a trust administered on behalf of union members pursuant to a CBA, trust was not required to provide statutory notice to RCI to recover under Nevada Revised Statute 339.035. However, it was required to provide written notice to the surety before suing under bond. Hence, trustees’ claims against Hartford should fail for lack of notice.

Moreover, the appeal court ruled that the district court had supplemental jurisdiction to decide over state law claims since it already granted the trustees’ default judgment. Under Nevada law, a contractor is liable for "the indebtedness for labor" incurred by its subcontractor. This included damages and attorney fees arising from a CBA.

Further, RCI and Hartford’s equitable estoppel claim failed as a matter of law.

The court also ruled that RCI being a general contractor was not entitled to an offset based upon a payment to any other entity than the trust.