A Federal Appeals Board has reinstated disputes against a Financial Services Group Inc. entity in connection with a security bond issued to a federal subcontractor.
Hughesville, Maryland-based Aarow / IET LLC is a subcontractor who performed electrical work on the Basic School Student Officer Quarters at Marine Corps Base Quantico in Virginia under a May 2014 agreement with San Diego-based Harper Construction Co., according to Thursday's decision of the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in United States ex rel. Aarow / IET LLC v Hartford Fire Insurance Co. and Harper Construction Co.
Hartford unit Harford Fire Insurance Co. provided a payment bond to Aarow and other subcontractors who supplied labor and materials to Harper in accordance with the requirements of the Miller Act, which protects companies engaged in federal construction projects.
During the subcontracting, Aarow agreed to carry out construction and civil engineering work for a basic contract amount of $ 5,345,000 and similar work for a further phase of the project. [1
After Harper refused to pay, Aarow filed a lawsuit. against Hartford in the U.S. District Court in Alexandria, Virginia, which seeks repayment under its Miller Act. An amended complaint then added Harper as defendant and accused it of breach of contract.
The district court dismissed the case, which was reinstated by a unanimous panel court with three judges.
The district court had ruled that in Aarow's "request for fair adjustment", its claim against Harper was not a breach of contract but a delay claim, which was ruled out by the subcontractor, the decision states.
"Contrary to the Court's decision, REA makes clear a claim for a treaty," the decision states.
The district court's dismissal of the Miller Act claim rested on the premise that Aarow had failed to state a breach of contract claim against Harper. "The court erred in rejecting the breach of contract, which means that the first of these premises was defective," the decision said.  "On that basis, we conclude that the court also erred in rejecting the Miller Act claim," the panel said. when it emptied the district court's decision and restored the case for further negotiation.
Lawyers in the case did not respond to the request for comment.