Justia Government Contracts Opinion Summaries

Articles Posted in Michigan Supreme Court
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Ingham, Jackson, and Calhoun County, Michigan (collectively, the Counties) filed an action alleging that they had a right to receive a decade’s worth of surplus contributions (surplus equity) made to the Michigan County Road Commission Self-Insurance Pool (the Pool). The Counties believed they were the successors in interest to their dissolved road commissions and, as such, were entitled to the surplus equity that the commissions might have received had they not been dissolved and withdrawn from the Pool. Jackson County made one other argument: because its road commission never formally withdrew from the Pool, the county said it had a right to receive surplus equity on the same terms as any current member. The Pool disagreed, contending the Counties had no right to surplus equity because the documents governing the Pool’s operations and its contracts with its various members provided the Pool with discretion in distributing surplus equity. This included, the Pool contended, the power to exclude former members should a distribution be made. The Court of Appeals sided with the Counties, holding that the Counties were the successors in interest to their dissolved road commissions and, as a matter of public policy, the Counties had a right to receive surplus equity for fiscal years in which their road commissions were members of the Pool. The Court of Appeals also determined that the dissolution of the Jackson County Road Commission did not disqualify Jackson County from membership in the Pool, and therefore, the county could receive surplus equity regardless of any public-policy considerations. The Michigan Supreme Court reversed. The Court agreed with the Pool that the Counties did not have a contractual right to receive surplus equity and that such an arrangement was not contrary to public policy. For Jackson County, the Court held that the dissolution of its county road commission did not transfer membership in the Pool from the road commission to the county itself, so the Pool could exclude Jackson County from post-dissolution distributions. View "County Of Ingham v. Michigan County Road Commission Self-Insurance Pool" on Justia Law

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In 2009 and 2010, the south wing of the Detroit Public Library was renovated. Defendant KEO & Associates, Inc. (KEO) was the principal contractor for this project. Defendant Westfield Insurance Company supplied KEO with a payment bond worth $1.3 million, as required by the public works bond act (PWBA). KEO was identified as the principal contractor and Westfield as the surety on the bond. KEO subcontracted with defendant Electrical Technology Systems, Inc. (ETS) to provide labor and materials for electrical work. The agreement between KEO and ETS included a pay-if-paid clause, obliging KEO to pay ETS only after KEO had been paid for the relevant portion of work performed. ETS in turn subcontracted with Wyandotte Electric Supply Company for materials and supplies, making Wyandotte a sub-subcontractor from KEO’s perspective. ETS and Wyandotte first formed a relationship in 2003, when they entered into an “open account” agreement that governed ETS’s purchases from Wyandotte. Over the course of the project, ETS paid Wyandotte only sporadically and the unpaid balance grew. Initially, Wyandotte supplied materials on credit and credited ETS’s payments to the oldest outstanding balance, but eventually Wyandotte began to ship materials only for cash on delivery. Wyandotte sent certified letters to KEO and Westfield asking for a copy of the payment bond related to the library renovation project. The letter, on Wyandotte’s letterhead, referred to the “Detroit Public Library South Wing with [ETS.]” According to Wyandotte, KEO provided a copy of the payment bond the next day. Wyandotte also sent KEO a 30-day “Notice of Furnishing” in accordance with MCL 129.207, explaining that it was one of ETS’s suppliers. Wyandotte also sent copies of the letter to Westfield, the library, and ETS. The issue this case presented for the Supreme Court's revie centered on whether actual notice was required for a sub-subcontractor to recover on a payment bond when that sub-subcontractor complied with the notice requirements set forth in MCL 129.207. Furthermore, this case raised the question of whether a PWBA claimant could recover a time-price differential and attorney fees that were provided for by the claimant’s contract with a subcontractor, but were unknown to the principal contractor holding the payment bond as well as the principal’s surety. The Supreme Court concluded that the PWBA contained no actual notice requirement for claimants that comply with the statute, that the trial court properly awarded a time-price differential and attorney fees on past-due invoices to Wyandotte, and that the trial court erred in awarding postjudgment interest under MCL 600.6013(7). Accordingly, the Court affirmed the Court of Appeals with regard to the first two issues and reversed with regard to the third. View "Wyandotte Electric Supply Co. v. Electrical Technology Systems, Inc." on Justia Law