A protracted legal dispute over payment for a public school construction project in California has been reignited after a state appellate court ruled in favor of a subcontractor seeking nearly $690,000 in unpaid compensation.

In a decision issued on May 21, the California Court of Appeal for the Second Appellate District reinstated a key portion of the lawsuit filed by Tarlton & Sons, Inc. against Great American Insurance Company. The court reversed part of a Ventura County Superior Court ruling that had previously dismissed all of Tarlton’s claims, allowing the contractor to proceed with its demand for payment under a public works bond.

At the center of the dispute is a 2021 school construction project in Oxnard, where Tarlton was subcontracted to perform drywall and framing work. The project originated in April 2021 when Fast Track Construction Corporation was hired by the Oxnard Union High School District to install HVAC systems at two local high schools. In compliance with California public works requirements, Fast Track obtained a payment bond from Great American to guarantee subcontractors would be paid.

Project Timeline and Contractor Shuffle

Trouble emerged later that year when the District’s relationship with Fast Track began to deteriorate. By November 2021, the District terminated Fast Track’s contract and appointed Viola Inc. as the new general contractor. Tarlton signed a revised subcontract agreement with Viola on November 29, 2021, to continue work, but claims it never received a formal notice that Fast Track had been officially removed from the project.

Despite the confusion, Tarlton said it continued working well into 2022 under the direction of general contractors. Meanwhile, the District itself kept issuing change orders to Fast Track as late as January 31, 2022, creating further ambiguity over who was contractually responsible for the ongoing work.

The Bond Claim and Legal Challenge

In April 2022, Tarlton submitted a claim to Great American Insurance, originally seeking $596,677.46, later revised upward to $688,353.66. Great American partially acknowledged the claim but required Tarlton to sign a release and waiver to receive payment. While the insurer indicated that Tarlton could pursue the remainder of its claim, efforts to settle the issue fell apart, prompting the subcontractor to file suit in April 2023.

A year later, the Ventura County Superior Court dismissed the suit, citing California’s strict six-month window for bond claims. Under state law, subcontractors must file within six months of when work ceases—referred to legally as the “cessation of labor.”

The lower court determined that Tarlton’s right to sue expired six months after November 12, 2021, the date it allegedly stopped work under the Fast Track agreement. But the appellate court disagreed, stating that Tarlton had presented credible allegations of continued work beyond that date and that the District’s ongoing change orders created a murky timeline.

Appellate Court Ruling

In reinstating Tarlton’s bond claim, the appellate court emphasized that “whether project labor actually ceased” is a factual question that cannot be resolved prematurely. That means the exact timeline of when Tarlton’s obligations ended must be determined through further legal proceedings—not tossed out at the pleading stage.

However, the appellate court upheld the dismissal of Tarlton’s additional claims for fraud, negligent misrepresentation, false promise, and promissory estoppel. These accusations stemmed from Great American’s letter agreeing to partial payment upon receipt of a signed waiver. The court ruled that this letter did not constitute a binding promise and that, because Tarlton never signed the waiver, the company could not pursue those claims.

Legal Implications

This case highlights how timing, documentation, and clarity of communication can make or break payment bond disputes in public works construction. The court's decision underscores the complexity of California's public contracting laws, particularly when projects change hands midstream.

For sureties and subcontractors alike, the ruling serves as a reminder that ambiguous transitions between contractors and unclear cessation dates can trigger lengthy litigation over what might otherwise appear to be a straightforward bond claim.

The outcome of this revived lawsuit could have broader implications for how subcontractors preserve their rights in public projects—and how insurers structure their response protocols under California's public bond law framework.

Originally reported by Matthew Sellers in Insurance Business MAG.