F.D. Rich Co., Inc. v. Industrial Lumber Co., 417 U.S. 116 (1974)

F.D. Rich Co., Inc. v. United States for the

Use of Industrial Lumber Co.
No. 72-1382

Argued January 9, 1974
Decided May 28, 1974
417 U.S. 116

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Petitioner F. D. Rich Co., the prime contractor on a federal housing project in California, had two separate contracts for the project with Cerpac Co., one contract being for Cerpac to select, modify, detail, and install all custom millwork and the other being for Cerpac to supply all exterior plywood. Cerpac, in turn, ordered the lumber called for under the plywood contract from respondent. When Rich needed plywood for another project in South Carolina, one of the shipments called for by respondent’s contract with Cerpac was diverted to South Carolina. When Cerpac defaulted on its payments to respondent for the plywood, including the South Carolina shipment, respondent gave notice to Rich and its surety of a Miller Act claim, and thereafter brought suit in the Federal District Court for the Eastern District of California, where the California project was located. Finding that Cerpac was a "subcontractor" within the meaning of the Miller Act, rather than merely a materialman, that hence respondent could assert a Miller Act claim against Rich, and that venue for suit on the South Carolina as well as the California shipments properly lay, under 40 U.S.C. § 270b(b), in the Eastern District of California, the District Court granted judgment for respondent for the amount due on the unpaid invoices, but denied its claim for attorneys’ fees. The Court of Appeals affirmed in large part, but held that attorneys’ fees should be awarded respondent.

Held:

1. Based on the substantiality and importance of its relationship with the prime contractor, MacEvoy Co. v. United States ex rel. Tomkins Co., 322 U.S. 102, Cerpac was clearly a subcontractor for Miller Act purposes, considering not just its plywood contract, but also its custom millwork contract on the California project. Moreover, Cerpac and Rich had closely interrelated management and financial structures, and their relationship on the California project as the same as on many other similar projects; hence it would have been easy for Rich to secure itself from loss as a result of Cerpac’s default. Pp. 121-124.

2. Venue for suit on the South Carolina shipment properly lay in the Eastern District of California, since there was clearly a sufficient nexus for satisfaction of § 270b(b)’s venue requirements. The contract between Cerpac and respondent was executed in California, all materials thereunder to be delivered to the California worksite. California remained the site for performance of the original contract despite the diversion of one shipment to South Carolina. There was no showing of prejudice resulting from the case’s being heard in California, and considerations of judicial economy and convenience supported venue in the court where all of respondent’s claims could be adjudicated in a single proceeding. Pp. 124-126.

3. Attorneys’ fees were improperly awarded respondent. Pp. 126-131.

(a) The Court of Appeals erred in construing the Miller Act to require the award by reference to the "public policy" of the State in which suit was brought, since the Act provides a federal cause of action and there is no evidence of any congressional intent to incorporate state law to govern such an important element of Miller Act litigation as liability for attorneys’ fees. Pp. 127-128.

(b) The provision of the Miller Act in 40 U.S.C. § 270b(a) that claimants should recover the "sums justly due," does not require the award of attorneys’ fees on the asserted ground that, without such fee-shifting, claimants would not be fully compensated. To hold otherwise would amount to judicial obviation of the "American Rule" that attorneys’ fees are not ordinarily recoverable in federal litigation in the absence of a statute or contract providing therefor, in the context of everyday commercial litigation, where the policies which underlie the limited judicially created departures from the rule are inapplicable. Pp. 128-131.

473 F.2d 720, affirmed in part and reversed in part.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. DOUGLAS, J., filed an opinion dissenting in part, post, p. 131.