Subcontractors on public projects are afforded protection in the form of payment bonds. Because subs and suppliers do not have access to mechanics liens (public land cannot be encumbered by a private party), surety bond claims provide much needed protection for unpaid parties down the chain. For federal projects, these bonds are required by the Miller Act. On the state level, Little Miller Acts provide the protection. But what about tribal lands?
We know that there are few mechanics lien rights when contracting with Native American tribes. Considering that Native American tribal lands have sovereign immunity, it should come as no surprise that Miller Act rights aren’t standard on tribal construction projects, either. However, a recent case involved a tribal project that included federal funding and contract provisions that made things a little more interesting. What’s more, the underlying land was owned by an Oklahoma county rather than the tribe. Ultimately, jurisdictional issues raised by sovereign immunity proved to be too strong. The subcontractor could not bring Miller Act claims against bonds provided by the general contractor.
Pursuant to the tribal transportation program, the Department of Transportation (“DOT”) made funds available to the Cherokee Nation in order to “perform the planning, research, design, engineering, construction, and maintenance of highway, road, bridge, parkway, or transit facility programs or projects that are located on or which provide access to the Cherokee Nation Reservation…” Because the project was to use federal funds, the planning stages included some federal oversight and cooperation with federal agencies. Further, another agreement (the tribe’s memorandum of agreement with the Mayes County, Oklahoma) stated that the adjoining agreement “shall be governed by, construed, and enforced in accordance with the laws of the United States and where applicable, the laws of the [Nation].” It’s important to note that project was to take place on land in Mayes County rather than tribal land.
When the Cherokee nation hired Bronze Oak, LLC as general contractor, the contract contained language stating that both tribal law and laws of the United States would apply to the contract. Bronze Oak later hired J.A. Manning Construction Co. (“Manning”) as subcontractor and issued a payment bond that listed the United States of America as obligee and included that the bond was “for the protection of persons supplying labor and materials” pursuant to the Miller Act.
Later on in the project, a payment dispute arose. Manning filed suit in a federal district court against Bronze Oak alleging breach of contract, unjust enrichment, and asserting a Miller Act claim against the payment bond. Bronze Oak countered, claiming that the court did not have jurisdiction over the tribal project. In response, Manning claimed that the project was a public project subject to the Miller Act and that the bond at issue was executed under United States law.
Tribal Construction Projects and the Miller Act
The court first assessed whether the Miller Act applied. In order to fall under the Miller Act the project had to be a “public work of the Federal Government.” While the Miller Act is not particularly helpful in defining such a work, courts use the following factors to see if a work applies:
- Whether the United States is a contracting party, obligee to the bond, an initiator or ultimate operation of the project
- Whether the work is done on property belonging to the United states
- Or whether the bonds are issued under the Miller Act
The court found that while the DOT did retain some control over the project, it was not a contracting party or an initiator/operator of the project. However, the United States was an obligee to the bond. On the second factor, the work was being done on land belonging to Mayes County rather than federal property. Regarding the final factor, the bonds were quite clearly issued under the Miller Act. So while the second factor was not fulfilled, the two others were (at least partially).
While Manning put forth a number of cases in support of its position, the court held fast. This was such a unique situation that no previous cases squarely discussed the issue. Had the funding for the project come from the Bureau of Indian Affairs rather than the DOT, Manning may have had other claims.
The takeaway here is to tread carefully when contracting for work either on tribal land or for the benefit of a tribe. Here, the court could not even approach the issue of whether the subcontractor had valid claims due to the complex array of laws that applied to the project. Normally federal funds may have invoked the Miller Act, or the project being on county land may have invoked Oklahoma’s Little Miller Act. While the general contractor did not personally benefit from sovereign immunity, the mere fact that the project was initiated by the Cherokee Nation was enough to bar the subcontractor’s claims.
Tribal construction projects aren’t the only ones to raise complex construction issues. For an easy break down of your state’s construction laws, check out our state-by-state Construction Payment Resources.