7th Circuit Bars Payment Bond Claim Based on Paid if Paid Subcontract

09/23/2012

Earlier this summer in BMD Contractors, Inc. v. Fidelity and Deposit Company of Maryland (679 F.3d 643) the 7th Circuit looked at the question of whether a subcontract’s pay if paid clause bars its payment bond claim, concluding that it does. The case applies Indiana law, but that state’s law does not appear significantly different from Virginia law on this issue.

The case provides a good overview of the differences between pay when paid and pay if paid clauses, generally, and essentially follows the same rationale as the Virginia Supreme Court in the Galloway decision on that question. The case also provides a well reasoned rebuttal of the 4th Circuit’s 2000 in Moore Bros. (207 F.3d 717) decision about pay if paid clauses as they relate to payment bonds, and provides good insight to anyone seeking to avoid, distinguish or try and overturn that decision.

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