Recent Court Ruling Affects AZ Subcontractors and Suppliers
May 19, 2015

Recent Court Ruling Requires that Preliminary 20-Day Notices for Bonded Public Projects Must be Served by Registered or Certified Mail

A recent decision from the Arizona Court of Appeals holds that preliminary 20-day notices served on bonded projects under the Little Miller Act (“LMA”), A.R.S. § 34-223(A), must be served by registered or certified mail. As a result, subcontractors and suppliers wishing to preserve bond claims on public projects must deliver both their 20-day preliminary notice and their 90-day claim notice by certified or registered mail. Cemex Construction Materials South, LLC v. Falcone Brothers & Associates, Inc. et al, No. 2 CA-CV 2014-0044 (April 30, 2015) (“Cemex Decision”).

The LMA provides in pertinent part:

Every claimant who has furnished labor or material in the prosecution of the work [on a public project for] . . . which a payment bond is furnished . . . shall have the right to sue on such payment bond. . . provided however that any such claimant . . . shall have a right [to sue] upon such payment bond upon giving the contractor only a written preliminary twenty day notice, as provided for in section 33-992.01, subsection C, paragraphs 1, 2, 3 and 4 and subsections E and H, and upon giving written notice to such contractor within ninety days from the date on which such claimant performed the last of the labor or furnished or supplied the last of the material for which such claim is made. . . . Such notice shall be served by registered or certified mail, postage prepaid, in an envelope addressed to the contractor at any place the contractor maintains an office or conducts business, or at the contractor's residence.

A.R.S. § 34-223(A).

Under the Cemex Decision, service of preliminary 20-day notices by first class mail with a certificate of service – the manner in which 20-day notices are served for lien purposes – does not satisfy the LMA’s service requirement.

The holding provides a possible escape hatch for LMA claimants who fail to send their 20-day notices by registered or certified mail. In that case, a claimant may still proceed against the payment bond if the claimant can prove the general contractor actually received a 20-day notice. Of course, if a general contractor denies receiving the preliminary 20-day notice, then the claimant must prove “actual notice” in court, which would likely involve costly and uncertain litigation.

The Cemex Decision does not affect preliminary 20-day notices served under A.R.S. § 33-992.01 to establish a right to record a mechanic’s and materialman’s lien. Those notices may still be served by first class mail with a certificate of mailing. A.R.S. § 33-992.01(F).

This case may be subject to further review by the Arizona Supreme Court. Unless and until the case is reversed, however, all future preliminary 20-day notices served under the LMA should be served by registered or certified mail only. For bonded projects that are already underway, subcontractors and suppliers should check whether their preliminary 20-day notices were in fact served by certified or registered mail. If not, they may want to send another preliminary 20-day notice by certified or registered mail or take other steps to protect their interests. If you have any questions, the Construction Group at Lewis Roca Rothgerber is available to answer them.