Public or State Owned
There has been an uptrend in construction projects on land owned by the State of Louisiana or one of its arms, including local municipalities such as the City of New Orleans or Parish of Jefferson to give local examples. As previously discussed, there are three types of construction projects in the eyes of the law and they are privately owned, state owned or public, and Federal which are called Miller Act projects. This post is the second in our series of four and it will discuss public or State-owned projects.
If the property is State-owned, then the lien enforcement will involve the Louisiana Public Works Act. La. R.s. 38:2241 et seq.
The Public Works Act is not a “lien and privilege” statute, since public property cannot be subjected to lien claims, although it is commonly referred to as filing a “lien” on a public project. Rather, the Act requires the general contractor to obtain a bond which secures its obligation to pay claimants. The Act allows claimants to assert their claims against the unexpended funds financing the public work or the surety required by the Act. The reasoning behind not allowing a lien on the property is that property that owned by the State cannot be taken away.
The Act provides protection to claimants who have been hired by a general contractor for the construction or repair of public works. Potential claimants include any person to whom money is due pursuant to a contract with a contractor or subcontractor for doing work, performing labor, or furnishing materials or supplies.
Supplier To A Supplier Has No Rights
However, under the specific language of the statute, suppliers to material suppliers are not entitled to claims under the Public Works Act. See Thurman v. Star Electric Supply, Inc., 307 So.2d 283 (La. 1975). This is the same as the Private Works Act as discussed in the first post in this series.
Notice Requirements: The Notice Of Nonpayment
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, whoever comes first. See La. R.S. 38:2242(F). They key here is that the notice must be sent within 75 days of any month where materials were delivered to the project.
The notice of nonpayment requirement mirrors the Private Works Act. Even though the requirements are nearly the same for both, this tends to be one of the most confusing aspects of the Act and leads to complete loss of lien rights if not followed correctly. The best practice for a material supply company is to pick one day of each month, typically around the 10th of the month to go back and look to see if there are outstanding invoices from materials delivered two months prior. Confused yet?
Example Of How Notice Of Nonpayment Plays Out In Real Life
For example, if you deliver materials on January 18 (or any day in January) you have until 75 days from January 31st (the last day of the month) to send your notice of nonpayment. In this example, on April 10th you will look to see if all of your January deliveries have been paid. If not, then you need to send a notice of nonpayment to the owner and the general contractor via certified mail for any unpaid materials that were delivered in January. You can take this example and apply it to any month.
I advise against companies using the 15th of the month for the date to look at all of this because many months have 31 days and there are some instances where there are two 31 day months back to back. I have had clients lose hundreds of thousands of dollars of lien rights because they missed sending the notice by one or two days. Remember that December and January both have 31 days, as does July and August. Therefore materials delivered in November or June which are not paid, need to have a notice sent out earlier in the month than other months. Please contact my office if you have questions about these rules, I am happy to talk this out with anyone, because it is confusing.
Formal Requirements Of Sworn Statement
Enough about notices, here is where the real money is made or rights secured. The notice is a prerequisite, but the actual document filed in the public records at the mortgage office is the Sworn Statement Of Amount Due. I attach a link to an article I wrote years ago that still rings true.
The Public Works Act does not have any particular formal requirements for the statement of claim, which is different from the Private Works Act. Another difference between the Public and Private Works Act is the requirement for the statement to be sworn. See La. R.S. 38:2242(B); see also Dixie Building Material Co., Inc. v. Liberty Somerset, Inc., 94-13373 (La. App. 4th Cir. 1995), 656 So.2d 1041, writ denied, 95-1828 (La. 10/27/95). This means it needs to be signed before a notary public. We typically style this document just like a Private Works Act lien, and then add in the notary section.
Time Period For Filing And Where To File
A claimant must file a sworn written 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. See La. R.S. 38:2242(B).
Bad Judicial Holding That Affects All Public Jobs And Lien Rights
There is currently a circuit split with respect to the proper timing of filing the sworn written statement. In Gootee Construction, Inc. v. Dale N. Atkins, 2015-0376 (La. App. 4 Cir. 11/4/15); 178 So.3d 629, rehearing denied (La. App. 4 Cir. 12/1/15), the Louisiana Fourth Circuit applied a novel interpretation of the timeliness requirements in the Public Works Act. The Gootee court ruled that the filing of a claim before the 45 day window after the acceptance is recorded, deems that claim premature. A claim against a surety is also premature if before the acceptance of th work is filed. This is crazy because it only allows claims to be filed in that very specific 45 day window after the acceptance of th work has been filed.
In addition to the Smiley Law Firm article on Gootee linked above, Michael Lane of Kingsmill Ries, L.L.C. goes into great detail on the Gootee holding in his May 10, 2016 article on the New Orleans Bar Association’s blog.
The Louisiana Supreme Court has yet to rule with clarity on this timeliness issue. There are some appeals pending but no ruling on point has been published as of this post. Gootee is the ruling law until overturned or the Louisiana Legislature drafts a new or amending statute.
So, the best practice here is to file the Sworn Statement of Amount Due within the 45 day window after the work has been accepted by the owner and filed into the public records. The only way to ensure this is done properly is to check the public records in that parish where the job is located each month to see if the acceptance was filed.
Talk about labor intensive and overly burdensome! The alternative is to file your lien after the work has been performed and you have not been paid, then get ready to litigate all the way to the Louisiana Supreme Court in order to have the bad ruling overturned. This endeavor will only take years and cost hundreds of thousands of dollars in attorney fees. We have our judiciary to thank for this one!
If after the forty-five (45) day period for filing claims has expires, 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 assert their claims. See La. R.S. 38:2243(A). Concursus is a summary proceeding, which means it moves more quickly and without all the procedural formalities of an ordinary proceeding. However, this axe swings both ways. Quick is not always better and you should consult with your attorney on the best strategy to handle securing payment at the end of a public job.
Instituting An Action To Enforce A Sworn Statement
An action to enforce a sworn statement must be brought against the contractor or surety within one year from the registry of acceptance of the work or of notice of default of the contractor. La. R.S. 38:2247. This means you have to file your law suit to preserve the Sworn Statement of Amount Due within one year from the acceptance of the work is filed.
Direct Action Against Owner
“When an awarding authority makes final payment to the contractor without deducting the total amount of all outstanding claims so served on it or without obtaining a bond from the contractor to cover the total amount of all outstanding claims, the awarding authority shall become liable for the amount of these claims.” See La. R.S. 38:2242(D).
Clients always want to know if they will be able to recover their attorneys fees if they are correct when trying to collect. In the Private Works Act there is no such statute. However, in the Public Works Act, there is an attorney fees statute. This is good, but it is rarely put into play. The main reason for the lack of usage, is because of the requirement to recover the full amount of a properly lien. It is rare for a lien claimant to get the exact dollar amount correct on the lien. Also, many cases settle before a judge can rule on the correctness of the claim, therefore the attorney fee provision is seldom applied.
For reference, here is what the statute says regarding attorney fees:
“after amicable demand for payment has been made on the principal and surety and thirty days have elapsed without payment being made, any claimant recovering the full amount of his timely and properly recorded or sworn claim, whether by concursus proceeding or separate suit, shall be allowed ten percent attorney’s fees which shall be taxed in the judgment on the amount recovered.” See La. R.S. 38:2246(A).
However, watch out for a frivolous claim because part B states that:
“if the trial court finds that such an action was brought by any claimant without just cause or in bad faith, the trial judge shall award the principal or surety a reasonable amount as attorney’s fees for defending such action.” See La. R.S. 38:2246(B).
Well if you have made it this far reading the post, then I applaud your efforts. This material is dense, but it is the legal landscape that we navigate daily here at Smiley Law Firm. There are so many outcomes that are possible when you apply a set of facts to the current law. It is always best to seek legal counsel before taking on any of the tasks above such as sending out notices of nonpayment, filing a Sworn Statement of Amount Due or suing to collect on your lien. Please contact my office anytime to find out more helpful information on these or any legal topics.