Posted by: Alan Haley | April 23, 2010

Claims Under the Louisiana’s Private Works Act and Louisiana’s Public Works Act

COLLECTION RIGHTS AND PRACTICES ON PUBLIC
AND PRIVATE CONSTRUCTION PROJECTS AND THE
PROPER AND TIMELY PRESERVATION OF STATUTORY
CLAIMS UNDER THE LOUISIANA PRIVATE WORKS
ACT AND LOUISIANA PUBLIC WORKS ACT
BY:
MARK W. FRILOT
April 20, 2010
I. INTRODUCTION
The purpose of today’s presentation is to provide a brief overview of certain statutory claims for payment available under Louisiana law to various parties on construction projects.
Those claims are, of course, in addition to any contractual claims that may be available. The presentation will discuss certain requirements under the Louisiana Private Works Act, La. R.S. 9:4801, et seq., and the Public Works Act, La. R.S. 38: 2241, et seq., both of which provide certain statutory rights for payment regardless of contractual privity. The discussion will include the proper and timely preservation of claims against the owners, contractors, and/or sureties on both private and public construction projects, as well as certain additional actions required by certain parties.
Certain other claims and rights regarding prompt payment on construction projects will also be addressed. Those prompt payment statutes may result in the recovery of additional penalties and attorneys’ fees in certain circumstances.
II. THE LOUISIANA PRIVATE WORKS ACT
A. Claims and Privileges Provided
The Louisiana Private Works Act provides certain claimants (subcontractors, materialmen, laborers, consultants, subconsultants, and lessors) a claim against the owner and a claim against the contractor on a project to secure payment for the price of the work and/or materials used. La. R.S. 9:4802(A); La. R.S. 9:4801. The claims against the owner are secured by a privilege on the immovable upon which the work was performed. La. R.S. 9:4802(B); La. R.S. 9:4801. Thus, the Act provides for two rights for those who work and/or supply materials on immovable property, regardless of contractual privity: (1) the right to sue the owner and contractor personally for the amounts owed; and (2) the right to assert a lien or privilege against the property to secure the claim against the owner. See La. R.S. 9:4802(A) & (B); see also Michael H. Rubin, Ruminations on the Louisiana Private Works Act, 58 La. L. Rev. 569, 574 (1998). A general contractor also is provided a claim against the owner, secured by a privilege on the project property. La. R.S. 9:4801.
The Private Works Act is strictly construed, and additional requirements must be met by some claimants, including general contractors, material suppliers, consultants, subconsultants, and lessors, to preserve properly and timely a claim and privilege under the Private Works Act.
Although generally applicable to work performed on immovable property, the Private Works Act is inapplicable to (1) the drilling of oil, gas, or water wells, as well as other activities related thereto;1 (2) the construction or other work on the permanent bed and structures of a railroad; or (3) public works performed by the state or any state board or agency or political subdivision of the state.
1 Claims and privileges related to such oil and gas well work are provided in La. R.S. 9:4861, et seq., not covered herein.
B. Amounts Secured by Claims and Privileges
The claims and privileges provided under the Private Works Act secure payment of principal amounts of the obligations owed, including expenses related to the cost of delivery of movables (if owed under the contract), interest, and the fees paid for the filing of a statement of claim or privilege. La. R.S. 9:4803(A)(1) & (2). The recovery of attorneys’ fees and costs for the enforcement of claims and privileges is not specifically provided.
The claim or privilege granted the lessor of movables is limited to and secures only that part of the rentals accruing during the time the movable is located at the site of the immovable for use in a work. La. R.S. 9:4803(B). A movable is deemed not located at the site of the immovable for use in a work after: (1) the work is substantially completed or abandoned; (2) a notice of termination of the work is filed; or (3) the lessee has abandoned the movable, or use of the movable in a work is completed or no longer necessary, and the owner or contractor gives written notice to the lessor of abandonment or completion of use. Id.
C. Owner, Contractor, General Contractor, and Subcontractor Defined
“An owner, co-owner, naked owner, owner of a predial servitude or personal servitude, possessor, lessee, or other person owning or having the right to the use or enjoyment of an immovable or having an interest therein” is deemed an owner under the Private Works Act. La. R.S. 9:4806(A). However, the claims against an owner are “limited to the owner or owners who have contracted with the contractor or to the owner or owners who have agreed in writing to the price and work of the contract of a lessee, wherein such owner or owners have specifically agreed to be liable for any claims granted by the provisions of La. R.S. 9:4802.” La. R.S. 9:4806(B). If more than one owner has contracted, each is solidarily liable. Id. Nevertheless, the privileges granted under the Private Works Act affect only the interest in or on the immovable enjoyed by the owner. La. R.S. 9:4806(C).
“A contractor is one who contracts with an owner to perform all of a part of a work.” La. R.S. 9:4807(A). A general contractor is a contractor who contracts to perform all or substantially all of a work or who is deemed to be a general contractor under the Private Works Act. La. R.S. 9:4807(B). “A subcontractor is one who, by contract made directly with a contractor, or by a contract that is one of a series of contracts emanating from a contractor, is bound to perform all or a part of a work contracted for by the contractor.” La. R.S. 9:4807(C).
2 Claims and privileges related to such railroad related work are provided in La. R.S. 9:4901, et seq., not covered herein.
3 Claims on public projects are provided in La. R.S. 38:2241, et seq., discussed below.
D. Work under the Private Works Act
Under the Private Works Act, “[a] work is a single continuous project for the improvement, construction, erection, reconstruction, modification, repair, demolition, or other physical change of an immovable or its component parts.” La. R.S. 9:4808(A). A portion of a project can be deemed to be a work separate and apart from other portions if a written notice of contract and bond are filed timely and properly. La. R.S. 9:4808(B). However, even without those filings, [t]he clearing, leveling, grading, test piling, cutting or removal of trees and debris, placing of fill dirt, leveling of the land surface, demolition of existing structures, or performance of other work on land for or by an owner or the owner’s contractor, in preparation for the construction or erection of a building or other construction thereon to be substantially or entirely built or erected by a contractor, shall be deemed a separate work to the extent the preparatory work is not a part of the contractor’s work for the erection of the building or other construction. La. R.S. 9:4808(C).
E. Notice of Contract
Under the Private Works Act, if the price of the work stipulated or reasonably estimated
in the contract exceeds $25,000, a general contractor does not enjoy a privilege on the owner’s property, i.e., the right to file a lien on the property, unless a notice of contract is filed timely. La. R.S. 9:4811(D). Note, however, that at least one court has held that the failure of a general contractor to file a notice of contract does not preclude entirely the general contractor’s right to lien the project. See Burdette v. Drushell, 2001-2494 (La. App. 1 Cir. 12/20/02), 837 So.2d 54, writ denied, 2003-0682 (La. 5/16/03), 843 So.2d 1132. Rather, the First Circuit held that, although such a general contractor has no right to file a lien regarding work performed or materials supplied by its subcontractors, the general contractor still has lien rights as a “contractor” for work it performed with its own forces. Id.
A notice of contract must be filed with the recorder of mortgages of the parish in which the work is to be performed before the contractor begins work. La. R.S. 9:4811(A); La. R.S. 9:4831(A).
A notice of contract:
(1) Shall be signed by the owner and contractor.
(2) Shall contain the legal property description of the immovable upon which the work is tobe performed and the name of the project.
(3) Shall identify the parties and give their mailing addresses.
(4) Shall state the price of the work or, if not price is fixed, described the method by which the price is to be calculated and give an estimate of it.
(5) Shall state when payment of the price is to be made.
(6) Shall describe in general terms the work to be done.
La. R.S. 9:4811(A).
“A notice of contract is not improperly filed because of an error in or omission from the
notice in the absence of a showing of actual prejudice by a claimant or other person acquiring rights in the immovable.” La. R.S. 9:4811(B). However, “[a]n error or omission of the identity of the parties or their mailing addresses or the improper identification of the immovable shall be prima-facie proof of actual prejudice.” Id.
F. Notice of Termination
If a notice of contract is properly and timely filed, non-general contractor claimants to whom a claim or privilege is granted under the Act must file a statement of claim or privilege, i.e. “lien,” and deliver to the owner a copy of the lien within thirty (30) days after the filing of a notice of termination of the work. La. R.S. 9:4822(A). Note that, as discussed below, if a notice of contract is timely and properly filed, the lien period does not commence until a proper notice of termination is filed, regardless of substantial completion, abandonment, or occupancy of the work.
Under the Act, a notice of termination of the work:
(1) Shall reasonably identify the immovable upon which the work was performed and the work to which it relates. If the work is evidenced by a notice of contract, reference to the notice of contract as filed or recorded, together with the names of the parties of the contract, shall be deemed adequate identification of the immovable and work.
(2) Shall be signed by the owner or his representative.
(3) Shall certify that:
(a) The work has been substantially completed; or
(b) The work has been abandoned by the owner; or
(c) A contractor is in default under the terms of the contract.
(4) Shall be conclusive of the matters certified if it is made in good faith by the owner or his representative.
La. R.S. 9:4822(E).
Contractors often file into the mortgage records a copy of the architect’s certificate of substantial completion. However, although the architect’s certificate of substantial completion may contain most of the information required by the Act, if it does not clearly reference a properly filed notice of contract or provide a proper legal property description, the certificate may not comply with the requirements of the Act. Indeed, based on a strict interpretation of the lien periods discussed more fully below, if a notice of contract is filed, but a notice of termination is not filed or filed improperly, courts have held that the lien period for claimants never commences, even if the project is substantially complete or occupied. See Bernard Lumber Co., Inc. v. Lake Forest Constr. Co., Inc., 572 So.2d 178, 181-82 (holding that when a notice of contract is filed, but no notice of termination is filed, the lien period for claimants was never activated); Rowley Co., Inc. v. Southbend Contractors, Inc., 517 So.2d 1260, 1261-62 (La. App. 4 Cir. 1987), writ not considered, 519 So.2d 139 (La. 1988) (holding that when a notice of contract is filed, but neither the notice of contract nor subsequent notice of termination contains a proper legal description, the lien period for claimants never commenced); see also In re Whitaker Constr. Co., Inc., 439 F.3d 212, 221-26.
G. Consultants and Subconsultants
Under the Act, “[r]egistered or certified surveyors or engineers, or licensed architects, or their professional subconsultants” employed by the owner on a project have a claim and privilege “for the price of professional services rendered in connection with a work that is undertaken by the owner.” La. R.S. 9:4801(5). Likewise, “[p]rime consultant registered or certified surveyors or engineers, or licensed architects, or their professional subconsultants” employed by the contractor or subcontractor also are granted a claim and privilege “for the price of professional services rendered in connection with a work that is undertaken by the contractor or subcontractor.” La. R.S. 9:4802(A)(5).
“Professional subconsultant” is defined as “a registered or certified surveyor or engineer, or licensed architect employed by the prime consultant.” La. R.S. 9:4802(A)(5)(a); see also La. R.S. 9:4801(5). Subconsultants employed by a direct consultant to an owner must provide notice to the owner within thirty (30) days after the subconsultant enters into a contract of employment. La. R.S. 9:4801(5). The notice must include the name and address of the subconsultant, the name and address of its employer, and the general nature of the work to be performed by the subconsultant. Id.
Likewise, both prime consultants and subconsultants employed by a contractor or subcontractor must provide written notice to the owner on a project within thirty (30) working days after the date the prime consultant or professional subconsultant is employed. La. R.S. 9:4802(A)(5). The notice must include the name and address of the prime consultant or subconsultant, the name and address of his employer, and the general nature of the work to be performed by the prime consultant or subconsultant. Id.
H. Material Suppliers
To be entitled to a privilege against the owner, the seller of movables must deliver a notice of nonpayment to the owner at least ten (10) days before filing a statement of claim or privilege. La. R.S. 9:4802(G)(2). “The notice shall be served by registered or certified mail, return receipt requested, and shall contain the name and address of the seller of movables, a general description of the materials provided, a description sufficient to identify the immovable property against which a lien may be claimed, and a written statement of the seller’s lien rights for the total amount owed, plus interest and recordation fees.” Id. Further, if a notice of contract has been recorded, and the seller of movables has not been paid by a subcontractor, such a seller must send notice of nonpayment to the general contractor and owner on or before seventy-five (75) days from the last day of the month in which the material was delivered or no later than the statutory lien period, whichever comes first. La. R.S. 9:4802(G)(3).
I. Subcontractors and Material Suppliers to Subcontractors
If a claimant has a direct contractual relationship with a subcontractor, but no direct relationship with the contractor, before that claimant has a right of action against the contractor or the surety, written notice must be given to the contractor by registered or certified mail within thirty (30) days from the recordation of notice of termination of the work, “stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor or service was done or performed.” La. R.S. 9:4822(J).
J. Lessors of Movables
For a privilege to arise in favor of lessors of movables, the lessor must deliver a copy of the lease to the owner and to the contractor not more than ten (10) days after the movables are first placed at the site of the immovable for use in a work. La. R.S. 9:4802(G)(1).
K. Statement of Claim or Privilege
If a notice of contract is properly and timely filed, a claimant, other than a general contractor, including a professional consultant or subconsultant employed by a contractor or subcontractor, must, within thirty (30) days after the filing of a notice of termination of the work (1) file a statement of claim or privilege and (2) deliver to the owner a copy of the statement of claim or privilege. La. R.S. 9:4822(A). A general contractor must file a statement of claim or privilege within sixty (60) days after the filing of the notice of termination or substantial completion of the work. La. R.S. 9:4822(B).
If a notice of contract is not filed, those non-general contractor claimants must file a statement of claim or privilege within sixty (60) days of the filing of a notice of termination of the work or the substantial completion or abandonment of the work, if a notice of termination is not filed. La. R.S. 9:4822(C). Professional consultants employed by an owner and their subconsultants must file their statements of claim or privilege within sixty (60) days after the latter of (a) the filing of a notice of termination of the work that the services giving rise to the privilege were rendered; or (b) the substantial completion or abandonment of the work if a notice of termination is not filed. La. R.S. 9:4822(D).
As defined by the Act, the work is substantially complete when (1) the last work is performed on, or the materials are delivered to the project site or to that portion with respect to which a notice of partial termination is filed; or (2) the owner accepts the improvement, possesses or occupies the immovable, or that portion to which a notice of partial termination is filed, regardless of minor or inconsequential matters to be finished or minor defects or errors in the work to be remedied. La. R.S. 9:4822(H).
A statement of claim or privilege:
(1) Shall be in writing.
(2) Shall be signed by the person asserting the same or his representative.
(3) Shall reasonably identify the immovable with respect to which the work was performed or movables or services were supplied or rendered and the owner thereof.
(4) Shall set forth the amount and nature of the obligation giving rise to the claim or privilege and reasonably itemize the elements comprising it including the person for whom or to whom the contract was performed, material supplied, or services rendered.
La. R.S. 9:4822(G).
Unlike sworn statements filed under the Public Works Act, discussed below, note that there is no requirement that a Private Works Act statement of claim or privilege be sworn. Id.
Statements of claim or privilege must be filed for registry in the mortgage records of the parish in which the work was performed. La. R.S. 9:4831(A). With regard to the property description required, the description must be sufficient to clearly and permanently identify the property. La. R.S. 9:4831(C). “A description which includes the lot and/or square and/or subdivision or township and range shall meet the requirements of this Subsection. Naming the street or mailing address without more shall not be sufficient to meet the requirements of this Subsection.” Id.
If a statement of claim or privilege is not filed timely or properly in accordance with the specific requirements of La. R.S. 9:4822, the claim and privilege are extinguished. La. R.S. 9:4823(A)(1).
L. Requiring Notification of Substantial Completion/Termination from Owner
If, before substantial completion, termination, or abandonment of the work, a claimant gives notice to the owner of outstanding amounts owed, the nature of the work or services performed, and his mailing address, the owner must notify the claimant within three (3) days of (1) the filing of a notice of termination; or (2) the substantial completion or abandonment of the work, if no notice of termination is filed. La. R.S. 9:4822(L). If an owner fails to provide the required notice within ten (10) days of the commencement of the lien filing period, the owner is liable for the costs and attorneys’ fees incurred by the claimant for the establishment and enforcement of the claim and privilege. La. R.S. 9:4822(L)(2). Note, however, that the owner’s failure to provide the required notice does not extend the period for filing claims and privileges. Byron Montz, Inc. vs. Conoco Const. Inc., 2002-0195 (La.App. 4th Cir. 7/24/02), 824 So.2d 498, 503-504.
M. Request for Authorization to Cancel Claims and Privileges
If a statement of claim or privilege is improperly filed, or if the claim or privilege preserved thereby is extinguished, an owner or another interested person may require the claimant to give written authorization to the recorder of mortgages to cancel the statement of claim or privilege. La. R.S. 9:4833(A). One who, without reasonable cause, fails to deliver the requested written authorization within ten (10) days after receiving the written request, shall be liable for damages suffered by the person requesting cancellation and for attorneys’ fees incurred in causing the statement to be canceled. La. R.S. 9:4833(B).
N. Bonds and Other Security
An owner is relieved of both the claim against it and privilege against its property if a bond of a solvent, legal surety is provided by the contractor and attached to the notice of contract when it is filed. La. R.S. 9:4802(C); La. R.S. 9:4812(A). If the price of the work or the contract is less than ten thousand dollars ($10,000), the bond must be one hundred percent (100%) of the price. La. R.S. 9:4812(B)(1). If the price is more than ten thousand dollars ($10,000), but less than one hundred thousand dollars ($100,000), the amount of the bond must be at least fifty percent (50%) of the contract price, but not less than ten thousand dollars ($10,000). La. R.S. 9:4812(B)(2). If the price is more than one hundred thousand dollars ($100,000), but less than one million dollars ($1,000,000), the amount of the bond must be at least thirty-three and one third percent (33.33%) of the price, but not less than fifty thousand dollars ($50,000). La. R.S. 9:4812(B)(3). Finally, if the price is more than one million dollars ($1,000,000), the amount of the bond must be at least twenty-five percent (25%) of the price, but not less than three hundred thirty-three thousand three hundred thirty-three dollars ($333,333). La. R.S. 9:4812(B)(4).
Under the bond, the surety must guarantee:
(1) To the owner and to all persons having a claim against the contractor, or to whom the contractor is contractually liable for work done under the contract, the payment of their claims or of all amounts owed them arising out of the work performed under the contract to which it is attached or for which it is given.
La. R.S. 9:4812(C)(1).
(2) To the owner, the complete and timely performance of the contract unless such a guarantee is expressly excluded by the terms of the bond. La. R.S. 9:4812(C)(2).
Thus, notably, unless specifically excluded, a bond provided an owner by a contractor is considered both a payment and performance bond. Id.
Although the surety is not bound for a sum in excess of the bond, the bond is deemed to include the following conditions:
(1) Extensions of time for the performance of the work shall not extinguish the obligation of the surety, but the surety who has not consented to the extensions has the right of indemnification under the original terms of the contract. La. R.S. 9:4812(E)(1).
(2) No other amendment to the contract, or change or modification to the work, or impairment of the surety’s rights of subrogation made without the surety’s consent shall extinguish the obligations of the surety, but if the change or action is materially prejudicial to the surety, the surety shall be relieved of liability to the owner, and shall be indemnified by the owner for any loss or damage suffered by the surety. La. R.S. 9:4812(E)(2).
(3) A payment by the owner to the contractor before the time required by the contract shall not extinguish the obligation of the surety, but the surety shall be relieved of liability to the owner, and shall be indemnified by the owner for any loss or damage suffered by the surety. La. R.S. 9:4812(E)(3).
To facilitate cancellation of an already-filed statement of claim or privilege, any interested party may deposit with the recorder of mortgages a bond of a lawful surety company licensed to do business in Louisiana, cash, certified funds, or a federally insured certificate of deposit. La. R.S. 9:4835(A). The amount deposited is to guarantee payment of the obligation secured by the privilege or that portion as may be lawfully due together with interest, costs, and attorneys’ fees to which the claimant may be entitled, and therefore, must be up to a total amount of one hundred twenty-five percent of the principal amount of the claim as asserted in the statement of claim or privilege. Id. Notice must be given to the owner, the lien holder, and the contractor by certified mail. La. R.S. 9:4835(C).
If the recorder of mortgages finds that the amount on deposit and the terms of deposit are in conformity with the Act’s requirements, he or she is to note approval on the bond and/or other deposit, make note thereof in the margin of the filed statement of claim or privilege, and cancel the statement of claim or privilege from the mortgage records. La. R.S. 9:4835(B). The bond or other deposit is not recorded, but is simply retained in the recorder of mortgages’ records. Id.
Only the privilege against the owner is extinguished if such a bond is filed by the owner. La. R.S. 9:4823(D). However, both the claim against the owner and the privilege securing it are extinguished if the bond is filed by the contractor. La. R.S. 9:4823(E). Note, however, that the bond or other deposit is merely another form of security substituted for the privilege and, therefore, the claimant can have no greater rights under the bond than he possessed with the statement of claim or privilege. See Brunet v. Justice, 264 So.2d 743, 746 (La. App. 4 Cir. 1972).
The surety is liable without the benefit of discussion or division. La. R.S. 9:4812(A). If the total amount owed to persons to whom the surety is liable exceeds the total bond amount, the surety’s liability is discharged as follows:
(1) First, and pro rata, to all persons who properly preserve their claims. La. R.S. 9:4813(B)(1).
(2) Second, and in the order in which they present their obligations to the surety, to persons who did not preserve properly their claims, but to whom the contractor is otherwise liable. La. R.S. 9:4813(B)(2).
(3) Third, to the owner. La. R.S. 9:4813(B)(3).
O. Filing Suit to Preserve Claim and Privilege and Notice Lis Pendens
The claim and privilege against the owner and the claim against the contractor are extinguished if the holder thereof does not institute an action against the owner, the contractor, or the surety within one (1) year after expiration of the applicable lien filing period of La. R.S. 9:4822. La. R.S. 9:4823(A)(2); see also La. R.S. 9:4813(E). However, the effect of filing for recordation of a statement of claim or privilege and the privilege preserved by it ceases as to third parties unless a notice of lis pendens is filed within one year after the date the statement of claim or privilege was filed. La. R.S. 9:4833(E). In addition to the general requirements of Louisiana Code of Civil Procedure article 3752, the notice must identify the suit to enforce the claim or privilege, reference the notice of contract, if one is filed, or reference the recorded statement of claim or privilege if a notice of contract is not filed. Id. Therefore, in order to ensure proper preservation of rights against all persons, an action should be instituted within one (1) year of the date the statement of claim or privilege was filed.
III. THE LOUISIANA PUBLIC WORKS ACT
A. The Public Works Act Generally
The Public Works Act protects laborers and materialmen involved in public works projects by offering them a vehicle by which they can recover monies owed to them for material and labor spent on behalf of a public works project. United States Pollution Control, Inc. v. National American Ins. Co., 95-153 (La. App. 3 Cir. 8/30/95), 663 So.2d 119, 121. Since laborers and materialmen cannot place a lien against the actual public property that is the subject of the public works project, the Public Works Act allows them to assert their claims against the unexpended funds financing the public work or the surety required by the Act. Id.; James A. Teague Rental Equip., Inc. v. Audubon Park Commission, 93-1728 (La. App. 4 Cir. 1/27/94), 631 So.2d 1299, 1301.
The Public Works Act provides exclusive remedies to parties in public construction work. Siemens Building Technologies, Inc. v. Jefferson Parish, 298 F.Supp.2d 415, 419 (E.D. La. 2004); United States Pollution Control, 663 So.2d at 122. Additionally, the Public Works Act is strictly construed such that the claims granted are not extended beyond the statutes. Id.
B. Written Contract and Bond
If a contract is in excess of twenty-five thousand dollars ($25,000), the public entity must require that the contractor provide a bond with a good, solvent, and sufficient surety in a sum of not less than fifty percent (50%) of the contract price for the payment by the contractor or subcontractor to Public Works Act claimants. La. R.S. 38:2241(A)(2). The bond is a statutory bond, and “no modification, omissions, additions in or to the terms of the contract, in the plans or specifications, or in the manner and mode of payment shall in any manner diminish, enlarge, or otherwise modify the obligations of the bond.” Id. Any bond failing to contain any of the requirements set forth in the Public Works Act is deemed to incorporate all of the requirements set forth therein. La. R.S. 38:2241(C). Additionally, language in any bond containing obligations beyond the requirements of the Public Works Act is deemed surplusage and read out 11of the bond. Id. Accordingly, sureties and contractors executing payment bonds for public projects are immune from liability for or payment of any claims not required by the Public Works Act. Id. The Act’s bond requirements cannot be waived by contract. La. R.S. 38:2241(F).
The bond must be executed by the contractor with a surety approved by the public entity and must be recorded with the contract between the owner and contractor with the recorder of mortgages for the parish where the work is to be performed no later than thirty (30) days after the work has begun. La. R.S. 38:2241(B).
C. Claimant Defined – Who Is Entitled to Assert a Claim?
The Public Works Act defines a claimant as: [A]ny person to whom money is due pursuant to a contract with the owner or a contractor or a subcontractor for doing work, performing labor, or furnishing materials or supplies for the construction, alteration, or repair of any public works, or for transporting and delivering such materials or supplies to the site of the job by a for-hire carrier, or for furnishing oil, gas, electricity, or other materials or supplies for use in machines used in the construction, alteration, or repair of any public works, including persons to whom money is due for the lease or rental of movable property used at the site of the immovable and leased to the owner, contractor, or subcontractor by written contract, and including registered or certified surveyors or engineers or consulting engineers, or licensed architects, or their professional subconsultants employed by the owner or by the contractor or subcontractor in connection with the building of any public work. La. R.S. 38:2242(A).
Under the specific language of the statute, suppliers to material suppliers are not entitled to claims under the Public Works Act. Id.; see also Siemens, 298 F.Supp.2d at 419; Thurman v. Star Electric Supply, Inc., 307 So.2d 283 (La. 1975).
D. Architects and Engineers
If an architect or engineer has not been employed by the contractor or subcontractor, he or she has no claim on the funds due the contractor or subcontractor, nor shall he or she be within the coverage of the payment and the performance bond provided by the contractor. La. R.S. 38:2242(E).
E. Lessors of Movables
To be entitled to assert a claim under the Public Works Act, a lessor of movables must deliver a copy of the lease to the owner not more than ten (10) days after the movables are first placed at the site of the immovable for use in the work. La. R.S. 38:2242(C)(1). The claim granted the lessor of movables is limited to and secures only the part of the rentals accruing during the time the movable is located at the site of the immovable for use in a work. La. R.S. 38:2242(C)(2). A movable is deemed not located at the site of the immovable for use in the work after: (1) the work is substantially completed or abandoned; (2) the notice of termination of the work is filed; or (3) the lessee has abandoned the movable, or use of the movable in a work is completed or no longer necessary, and the owner or contractor gives written notice to the lessor of abandonment or completion of use. Id.
F. Material Suppliers and Subcontractors to Subcontractors
If a material supplier has not been paid by the subcontractor, notice of nonpayment must be sent to the owner and general contractor by certified mail before seventy-five (75) days from the last day of the month in which the material was delivered, or no later than the statutory lien period, whichever comes first. La. R.S. 38:2242(F).
Further, to be entitled to a right of action against the contractor or surety, a claimant with a direct contractual relationship with a subcontractor but no contractual relationship with the contractor must give written notice to the contractor, by registered or certified mail, within fortyfive (45) days of the recordation of the notice of acceptance by the owner, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor or service was done or performed. La. R.S. 38:2247.
G. Period of Time for Filing Sworn Statement and Where to File
A claimant must file a sworn statement of claim with the governing authority having the work done and record it in the office of the recorder of mortgages for the parish in which the work is done within forty-five (45) days of the governing authority’s recordation of acceptance of the work. La. R.S. 38:2242(B).
H. Formal Requirements for Sworn Statement
Unlike the Private Works Act, the Public Works Act contains no particular formal requirements for the statement of claim, but unlike the Private Works Act, requires the statement to be sworn. La. R.S. 38:2242(B); see also Dixie Building Material Co., Inc. v. Liberty Somerset, Inc., 94-13373 (La. App. 4 Cir.), 656 So.2d 1041, writ denied, 95-1828 (10/27/95), 661 So.2d 1346; Cole’s Constr. Co., Inc. v. Knotts, 619 So.2d 876 (La. App. 3 Cir. 1993).
I. Bond or Other Security Filed to Cancel Sworn Statement
To facilitate cancellation of an already-filed sworn statement of claim, any interested party may deposit with the recorder of mortgages a bond of a lawful surety company licensed to do business in Louisiana, cash, certified funds, or a federally insured certificate of deposit. La. R.S. 38:2242.2(A). The amount deposited is to guarantee payment of the obligation secured or that portion as may be lawfully due together with interest, costs, and attorneys’ fees to which the claimant may be entitled, and therefore, must be up to a total amount of one hundred twenty-five percent of the principal amount of the claim as asserted in the sworn statement. Id. Notice must be given to the public entity, the claimant, and the contractor by certified mail. La. R.S. 38:2242.2(C).
If the recorder of mortgages finds that the amount on deposit and the terms of deposit are in conformity with the Act’s requirements, he or she is to note his or her approval on the bond and/or other deposit, make note thereof in the margin of the filed statement of claim, and cancel the statement of claim from the mortgage records. La. R.S. 38:2242.2(B). The bond or other deposit is not recorded, but is simply retained in the recorder of mortgages’ records. Id.
J. Request for Authorization to Cancel Sworn Statement
If a sworn statement is improperly filed, or if the claim preserved thereby is extinguished, the public entity, contractor, or subcontractor, or other interested person may require the claimant to give written authorization to the recorder of mortgages to cancel the sworn statement. La. R.S. 38:2242.1(A). One who, without reasonable cause, fails to deliver the requested written authorization within ten (10) days after receiving the written request, shall be liable for damages suffered by the person requesting cancellation and for attorneys’ fees incurred in causing the statement to be canceled. La. R.S. 38:2242.1(B).
K. Concursus Proceeding Instituted by Public Entity
If, at the expiration of the forty-five (45) day period for filing claims, any filed and recorded claims remain unpaid, the public entity shall file a petition in the proper court of the parish where the work was done, citing all claimants and the contractor, subcontractor, and surety on the bond asserting whatever claims it has against any of them and requiring the claimants to assert their claims. La. R.S. 38:2243(A).
L. Instituting an Action to Enforce a Sworn Statement
An action to enforce a sworn statement must be brought against the contractor or surety or both within one (1) year from the registry of acceptance of the work or of notice of default of the contractor. La. R.S. 38:2247. However, the effect of filing for recordation of a sworn statement of claim ceases as to third parties unless a notice of lis pendens is filed within one (1) year after the date the sworn statement was filed. La. R.S. 38:2242.1(F). In addition to the general requirements of Louisiana Code of Civil Procedure article 3752, the notice must identify the suit to enforce the claim, reference to the notice of contract, if one is filed, or a reference to the recorded statement of claim or privilege if a notice of contract is not filed. Id. However, the failure to institute an action within one (1) year of the owner’s recordation of acceptance cannot be cured by the institution of an action and filing of a notice of lis pendens within one (1) year of the date the sworn statement is filed. See Leblanc & Theriot Equip. Co., Inc. v. H&S Constr. Co., Inc., 591 So.2d 1274 (La. App. 3 Cir. 1991).
M. Direct Action Against Owner
If the awarding authority makes final payment to the contractor without deducting the total amount of all outstanding claims that have been served on it or without obtaining a bond from the contractor to cover the total amount of all outstanding claims, the awarding authority can be held liable for the amount of the claims. La. R.S. 38:2242(D).
N. Attorneys’ Fees
After amicable demand has been made on the principal and surety and thirty (30) days have elapsed without payment being made, a claimant recovering the full amount of a timely and properly recorded claim is entitled to ten percent (10%) attorneys’ fees. La. R.S. 38:2246(A).
To the contrary, if the court finds that a claimant’s action was brought without just cause or in bad faith, the principal and surety can be awarded a reasonable amount of attorneys’ fees for defending the action. La. R.S. 38:2246(B).
IV. OTHER POTENTIAL STATUTORY PAYMENT CLAIMS AVAILABLE
A. Prompt Pay Claims
Under Louisiana law, if a contractor receives payment from an owner for improvements to an immovable, with our without issuance a certificate of payment from the architect, the contractor must promptly pay the money received to each of its subcontractors and suppliers in proportion to the percentage of work completed prior to the issuance of payment. La. R.S. 9:2784(A). If less than full payment is received, the contractor must disburse only the funds received on a prorated basis with the contractor, subcontractors, and suppliers, each receiving a prorated portion based on the amount due on the payment. La. R.S. 9:2784(B). Likewise, when a subcontractor receives payment from the contractor, the subcontractor must pay promptly the money received to each sub-subcontractor and supplier in proportion to the work completed. La. R.S. 9:2784(A).
If, without reasonable cause, the contractor or subcontractor fails to make any payment to his subcontractors or suppliers within fourteen (14) days of receipt of payment from the owner, the contractor or subcontractor must pay to the subcontractors and supplier, in addition to the payment, a penalty in the amount of one-half of one percent of the amount due, per day, from the expiration of the fourteen (14) day period, plus attorneys’ fees. La. R.S. 9:2784(C). However, the total amount of penalties cannot exceed fifteen percent (15%) of the total outstanding amount. Id.
Note that the “reasonable cause” must relate to the project at issue. When a general contractor withholds payment from a subcontractor based on disputes regarding an unrelated project, courts have held that such withholding is unreasonable under the statute, and the award of attorneys’ fees and penalties is proper. See Unis v. JTS Constructors/Managers, Inc., 541 So.2d 278, 282 (La. App. 3 Cir. 1989).
If the court finds the claim to be without merit, the claimant shall be subjected to the reasonable costs and attorneys’ fees for the defense of the claim. Id. Further, the statute is not applicable to improvements to an immovable used for residential purposes. Id.
The Private Works Act also contains its own prompt pay statute. If a contractor, subcontractor, or agent of a contractor or subcontractor has received money on account of a contract for the construction erection, or repair of a building, structure, or other improvement and knowingly fails to apply the money received as necessary to settle claims of sellers of movables or laborers due for the construction, it may be liable for damages, plus costs, attorneys’ fees, and civil penalties. La. R.S. 9:4814.
The civil penalties are as follows:
(1) When the amount misapplied is one thousand dollars ($1,000) or less, the civil penalties shall not be less than two hundred fifty dollars ($250) or more than seven hundred fifty dollars ($750). La. R.S. 9:4814(B).
(2) When the amount misapplied is greater than one thousand dollars ($1,000), the civil penalties shall not be less than five hundred dollars ($500) or more than one thousand dollars ($1,000) for each one thousand dollars in misapplied funds. La. R.S. 9:4814(C).
V. CONCLUSION
Although we hope today’s presentation has provided you a brief overview of the statutory claims and rights available on both public and private construction projects in Louisiana, we recognize that all projects and disputes are different. Therefore, should a dispute arise, we encourage you to contact an attorney. Of course, if you have any questions concerning today’s presentation or the material covered herein, please do not hesitate to contact us.
About the Presenter: Mark W. Frilot, attorney in the Mandeville office, concentrates his practice on construction law, construction litigation and commercial litigation. Mr. Frilot has particular experience in contractor licensing and design professional liability as well as public and private works claims and bidding disputes. Mr. Frilot can be contacted at 985-819-8417 or mfrilot@bakerdonelson.com. His profile may be found here.
*Ed’s note: We appreciated Mark’s time and presentation very much. His presentation was excellent – he is clearly very knowledgeable about construction law in Louisiana. We highly recommend him if you have legal needs in this area.
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