Arizona Clarifies Service Requirements for Public Projects

Prepared by: Matthew B. Meaker, attorney with Sacks Tierney PA

In Cemex Construction Materials South, LLC v. Falcone Bros. & Assoc. Inc., Division Two of the Arizona Court of Appeals decides that Preliminary Twenty-Day Notices being sent pursuant to Arizona’s Little Miller Act must be served via certified mail or registered mail.

Arizona’s Little Miller Act requires a general contractor on a public project to post a bond to ensure that all who supply labor or materials to the project are paid. Both a payment and a performance bond must be posted before public work begins. Arizona’s Little Miller Act applies to most non-federal public works projects. To maintain an action on the bond, a claimant must comply with the notice requirements of ARS § 34-223(A) which require that:

a) the claimant must have a direct contract with a subcontractor of the prime contractor but no contractual relationship, express or implied, with the prime contractor;

b) the claimant provide a written Preliminary 20-Day Notice pursuant to ARS § 33-992.01(C)(1) - (4), (D), (E), and (I) THAT MUST BE SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PRIME CONTRACTOR;

c) the claimant provide a written notice to the prime contractor within 90 days of the date on which the claimant performed the last of labor or supplied the last of materials to the project. This notice must also be served by registered or certified mail to the prime contractor.

Both Cemex and the Arizona Rock Products Association (who filed an amicus brief with the Court) noted that this holding could increase the cost of construction and runs counter to what the industry has relied upon for more than 30 years. While the Court of Appeals acknowledged these arguments, they were not persuasive.

WHAT DO WE DO NOW?

It is unlikely that this matter will be appealed to the Arizona Supreme Court, so unless a legislative fix is attempted and successful, this is the law that must be followed. Contractors and suppliers who are involved in public works should review their protocols and procedures on the issuance of Preliminary 20-Day Notices to determine whether they need to make changes. If a contractor or supplier uses a prelim company, they should follow up with them to make sure they understand the change in the law and that they are taking steps to protect contractors and suppliers. When in doubt, consult with legal counsel knowledgeable on this issue.