Surety and General Contractor Awarded Attorneys: Fees in Defense of Bond and Retainage Claim by Union Benefit Trust
- Posted by Bruce A. Cohen
- On July 3, 2014
Washington’s bond and retainage statutes provide for an award of attorneys’ fees, but only to the claimant party if it prevails on its claims. See RCW 39.08.030 and RCW 60.28.030. However, in a recent decision by the U.S. District Court for the Western District of Washington, the surety and general contractor found a way around the “one way” attorneys’ fee provisions in the bond and retainage statutes by successfully utilizing Washington’s public works offer of settlement statute (RCW 39.04.240) to obtain an award of attorneys’ fees against the claimant, a union benefit trust.
In Puget Sound Electrical Workers Health and Welfare Trust v. Lighthouse Electrical Group, the Trust initially filed suit against an electrical subcontractor to collect unpaid benefits arising out of a public works contract at Seattle Central Community College. 2014 WL 2619921 (W.D. Wash. June 12, 2014). The Trust later added the surety, general contractor, and the State of Washington as parties, asserting retainage and payment bond claims. The State of Washington was eventually dismissed from the case by the Trust.
The surety and general contractor served an offer of settlement on the Trust under the public works offer of settlement statute (RCW 39.04.240). The offer of settlement statute allows a party involved in a public works construction dispute to serve an offer of settlement on the opposing party 30 to 120 days after service of the Complaint. If the party serving the offer ultimately obtains a result more favorable than the offer, it is entitled to an award of fees as the prevailing party. Although the Court’s opinion provides few details on the basis of the defenses, there was no dispute that the surety and general contractor prevailed and then petitioned the Court for an award of attorneys’ fees under the offer of settlement statute.
In defending against the general contractor/surety’s attorneys’ fees claim, the Trust argued that RCW 39.04.240 did not apply to the underlying claims in the case because the claims did not “arise out of public works contract” as required by the statute. The Court rejected that argument, noting that the payment bond and retainage claims asserted by the Trust, by necessity, only arise on a public works contract and that the statute’s language was not ambiguous. The Trust also argued that the offer of settlement statute did not apply because there was no “public agency party” in the action as required by RCW 39.04.240(1). The Court partially agreed with the Trust on this issue, limiting the defending parties’ attorneys’ fee recovery to only that period where the State of Washington was a party in the case.
Comment: This case was decided in federal court and it is unclear whether a state court would construe RCW 39.04.240 in the same manner, thereby, awarding fees to the defending party. The case does, however, illustrate a creative strategy that can be employed to level the playing field in defending against bond and retainage claims.