Is the Futility Doctrine Futile?

The construction industry is not only riddled with a web of technical rules, regulations, and contractual scenarios, the lawyers in this industry often rely on such technicalities to prevail in litigation on behalf of their clients – occasionally contrary to what appears just and fair.  However, from time to time, the courts step up and say “enough! We must be governed by the spirit, not just the letter, of the law.”  This brief article discusses the United States District Court for the Middle District of Florida’s (Tampa Division) recent application of the futility doctrine in the context of a Miller Act claim in U.S. f/u/o Cemex v. EPB, 2012 WL 831610 (M.D. Fla. March 12, 2012).

In EPB, subcontractor, EPB, sub-subcontracted with John Carlo, Inc., to complete a portion of a government project for the United States Air Force.  John Carlo purchased materials from Cemex in connection with its sub-subcontract.  EPB and John Carlo’s contract provided that John Carlo was to supply EPB “with sworn statement(s), lien waiver(s), guarantee(s) and other reasonably requested documents,” as a condition precedent to final payment.  “EPB withheld Carlo’s payment because Carlo had not provided the lien waivers and all of the releases required” per their contract.  However, Cemex (John Carlo’s assignee) argued it had met the conditions precedent because it provided John Carlo with a lien waiver, conditioned upon EPB’s payment.  EPB argued the letter of the law; that John Carlo and other sub-subcontractors of John Carlo had not provided the required documentation and therefore John Carlo (and by extension)
Cemex were not entitled to payment.

Cemex argued it was entitled to summary judgment because the “lien” period had expired under the Miller Act and therefore providing lien waivers would be futile.  The Middle District noted that “[u]nder the doctrine of futility, a party may be excused from performing a condition precedent to enforcement of the contract, if performance of the condition would be futile.” Alvarez v. Rendon, 953 So. 2d 702, 708-709 (Fla. 5th DCA 2007).  However, the court held that genuine issues of material fact remained as to “whether there were other effectual purposes for the [subject] documents.”  The court further held that EPB could require John Carlo and its other sub-subs to provide general releases of liability.

While the Middle District denied Cemex’s motion for summary judgment, it recognized the futility doctrine in the Miller Act context and implicitly held that the futility issues could be addressed by the trier of fact and, ultimately, prove dispositive at trial.  Thus, the futility doctrine in this context is seemingly not futile.