On December 4, 2013, the Minnesota Supreme Court issued its opinion in Safety Signs, LLC v. Niles-Wiese Construction Co., Inc., No. A12-0370. The Court’s decision contains important clarifications to the Minnesota payment bond statute, Minn. Stat. § 574.31, subd. 2(a), and has significant implications for potential payment bond claimants in Minnesota. In Safety Signs, the court held that a bond claimant must strictly comply with the statutory notice requirement, which mandates that the claimant provide notice to the surety and contractor at the address listed on the bond. In doing so, the court rejected arguments that substantial compliance with the notice requirement is sufficient. The Safety Signs opinion confirms that a party seeking to make a bond claim must take care to strictly comply with the service requirements listed in Section 574.31, subd. 2(a), or risk the loss of its claim.
Discussion
The Safety Signs case involved an airport construction project for the City of Owatonna. The general contractor on the project, Niles-Wiese Construction Company, received payment from the City, but failed to pay Safety Signs, a subcontractor on the project. Accordingly, Safety Signs sent a notice of a bond claim to Niles-Wiese’s surety, Westfield Insurance Company. Safety Signs sent the notice in an attempt to company with Section 574.31, subd. 2(a), which requires that a bond claimant provide written notice of its claim to the address of the contractor and surety “at their addresses as stated in the bond.” However, Safety Signs mailed the bond claim to Niles-Wiese at the address listed on its subcontract, rather than the address listed on the bond. Safety Signs then served a complaint asserting its bond claim against Westfield and Niles-Wiese. The district court entered judgment for Safety Signs, concluding that Safety Signs had substantially complied with the notice requirements of Section 574.31, subd. 2(a), and holding that substantial compliance was sufficient to allow the claim to proceed. The Minnesota Court of Appeals reversed, and Safety Signs appealed to the Minnesota Supreme Court.
The Minnesota Supreme Court sided with Westfield, and affirmed the decision of the Court of Appeals. In doing so, the court addressed for the first time whether a claimant must strictly comply with the statutory directive to serve notice on the surety and general contractor “at their addresses as stated in the bond,” or whether substantial compliance with this requirement was sufficient. The court examined the statutory language, and concluded that it unambiguously required service at the address listed on the bond. The court acknowledged that its strict interpretation of the notice requirement in Minn. Stat. § 574.31, subd. 2(a), created a trap for the unwary and could result in the loss of meritorious claims. However, the court concluded that the statute left no room for any other interpretation.
In conclusion, the Safety Signs decision establishes beyond doubt that any failure to comply with the service requirements of Minn. Stat. § 574.31, subd. 2(a), however minor, is fatal to a payment bond claim. In the aftermath of this decision, contractors, subcontractors and materials suppliers who may be the beneficiaries of a payment bond should take special care to ensure that any bond notices required by the statute are properly served on the address provided on the bond.