exaggeRaTedBondClaimBaRsReCoVeRy
Construction Law Section Co-Chairs: AlexSarsfield – Adams & ReeseLLP & MartiniqueSmith – CarltonFields
a“ minormistake” or“ good-faithdispute” doesnotdefeatan otherwisevalidclaim.
Florida’ s Fourth District Court of Appeal affirmed summary judgment in favor of a contractor and surety, holding that a supplier’ s claim on a payment bond was fraudulent where the amount sought was willfully exaggerated. 1
In K & M Electric Supply, Inc. v. Brown Electrical Solutions, LLC, GlobalTech, Inc.(“ GlobalTech”) served as the general contractor on a public construction project and obtained a payment bond from Arch Insurance Company(“ Arch”) pursuant to section 255.05, Florida Statutes. 2 GlobalTech subcontracted electrical work to Brown Electrical Solutions, LLC(“ Brown”). 3 In turn, Brown contracted with K & M Electric Supply, Inc.(“ K & M”), to
supply Brown with materials for use on the project. 4
After Brown failed to make payments, K & M submitted a claim against the payment bond seeking approximately $ 123,000 for materials supplied and legal fees. 5 However, Brown’ s subcontract on the project was worth only approximately $ 99,000, and based on K & M’ s own affidavit, only about $ 56,000 worth of the materials it supplied were ultimately incorporated into the project. 6
GlobalTech and Arch moved for summary judgment, arguing that K & M’ s notice of nonpayment was“ fraudulent” within the meaning of section 255.05( 2)( a) 2, Florida Statutes. 7 They argued the claim improperly included legal fees and other charges not allowed to be claimed and materials outside the subcontract’ s scope. 8 The trial court granted summary judgment. 9
On appeal, the Fourth District affirmed. 10 The court stated that under Florida law, a material supplier may recover under a public construction bond only for materials“ specially fabricated or actually incorporated into the improvement.” 11 Because K & M’ s materials were not specially fabricated, recovery was limited to those“ actually incorporated” into the project. 12 The court explained that, pursuant to § 255.05( 2)( a) 2, Florida
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