Source: http://www.neworleansbar.org/news/committees/practitioners-beware-fourth
Timestamp: 2019-04-18 12:35:24+00:00

Document:
A recent appellate court decision may force construction law practitioners and their clients to change how they preserve their rights on public and private projects. In Gootee Construction, Inc. v. Dale N. Atkins, the Louisiana Fourth Circuit applied a novel interpretation of the timeliness requirements in the Louisiana Public Works Act (“LPWA”). The court found a claimant’s sworn statement of claim on a public project to be premature because it was filed before the notice of acceptance was recorded. The court likewise ruled that the claim against the payment bond surety was premature for the same reason. A writ application has been filed with the Louisiana Supreme Court and is still pending.
The decision arose from a payment dispute over work performed on the Orleans Parish Sheriff’s Office. Gootee Construction, Inc. (“Gootee”), a subcontractor on the project, entered into a subcontract with Land Coast Insulation, Inc. (“Land Coast”) for certain insulation work and materials. The action was initiated when Gootee filed a mandamus petition seeking an order compelling Land Coast to cancel a statement of claim from the public records. Among several arguments, Gootee argued that Land Coast’s filing was improper since the project had not been accepted by the owner and, therefore, the period to file statements of claim had not commenced. The district court agreed and granted a writ of mandamus compelling the Clerk of Court to cancel Land Coast’s statement. Land Coast appealed the judgment.
On appeal, the Fourth Circuit employed a de novo standard of review. After noting that the express purpose of the LPWA is to protect those who perform work on a public works project, the court focused its analysis on La. R.S. § 38:2242(B), which states: “Any claimant may after the maturity of his claim and within forty-five days after the recordation of acceptance of the work by the governing authority or of notice of default of the contractor or subcontractor, file a sworn statement of the amount due him 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.” The Fourth Circuit construed this provision to mean that a statement of claim may only be filed within the 45-day window triggered by acceptance, but not before or after.
The Gootee court justified its interpretation by observing that the statute does not say “within forty-five days of,” but rather states “within forty-five days after” the recordation of acceptance. The court opined that any other interpretation “would require a claimant to be omniscient so as to know when to file a claim both prior to and within forty-five days of the filing of the acceptance.” Interestingly, the court did not address the meaning of the phrase “after the maturity of his claim,” which precedes the 45-day requirement. An alternative reading of the statute would suggest that the period to file a statement begins not when the acceptance is recorded, but when the claim matures, i.e., when the unpaid amount becomes overdue. Under this interpretation, the claimant could file a statement of claim any time after the unpaid amount becomes overdue, even if the claim matures before the notice of acceptance is recorded.
Aside from its novel interpretation of the statutory language, the Gootee court relied upon only one decision to support its ruling. However, a close reading of the cited decision reveals that it is not germane to the question in Gootee. The case did not involve the timeliness of a statement of claim under the LPWA; it dealt with whether an action had been timely filed within the 1-year period after the recordation of the notice of acceptance. In fact, the statement of claim in that case had been filed by the claimant within the 45-day window after notice of acceptance was filed, making it easily distinguishable from the facts before the Gootee court.
The Fourth Circuit next addressed the timeliness of a claim against a surety pursuant to La. R.S. § 38:2247. This provision in the LPWA has generally been interpreted to require a claimant to comply with the recordation requirements in La. R.S. § 38:2242(B) as a prerequisite to asserting a claim against a statutory payment bond. Under its reading of the statute, the Gootee court ruled that because Land Coast’s statement of claim was premature, Land Coast’s claim against the surety was likewise premature. The court summarized its ruling as follows: “Until an acceptance or notice of default has been filed, a claim [against the surety] under the Act, like the Statement in the instant matter, is premature.” Thus, the Gootee decision stands for the proposition that a claimant may not file a statement of claim in the public records or assert a claim against the payment bond until after the notice of acceptance is recorded.
This decision departs from holdings by other Louisiana appellate courts. In the first reported case on point entitled Levingston Supply Co. v. American Empire Insurance Co., the First Circuit rejected a similar argument when it held that the LPWA “does not require acceptance on the part of the owner as a condition precedence [sic] to demand for payment or the filing of a lien by a subcontractor.” In refusing two writs, the Louisiana Supreme Court indicated that it found no error of law in the First Circuit’s ruling. In a more recent opinion, the Second Circuit implicitly endorsed Levingston and held that a statement of claim filed four months before the recordation of a certificate of substantial completion was valid under the LPWA.  Finally, in a case involving the DOTD Public Works Act, La. R.S. § 48:256.5(B) (which is virtually identical to the LPWA in this respect), the Third Circuit concluded that a statement of claim was timely even though it was filed prior to the DOTD’s notice of acceptance was recorded. The timeliness question presented in these opinions has not been squarely addressed by the Louisiana Supreme Court, which means the Gootee decision is binding law in the Fourth Circuit unless it is reversed or addressed by the legislature.
The Gootee ruling has already had enormous practical consequences for construction lawyers and their clients. One could argue that any statement filed prior to notice of acceptance have been effectively rendered invalid in Orleans Parish. On projects where the 45-day window has closed, claimants are left without recourse. And on projects where the period has not yet expired, claimants must either re-file their statements (and, in some cases, incur another premium when it is bonded off a second time), or face the prospect of losing a statutory privilege.
It is customary for subcontractors, suppliers, and other claimants under the LPWA to file their statements long before the project is substantially complete and the notice of acceptance is recorded. This is particularly true when a claimant performs work or furnishes materials near the beginning of a job, often years before the project is complete. These claimants have no mechanism to enforce their right to payment other than filing a statement of claim or asserting a claim against the bond. If the Gootee decision stands, LPWA claimants will be forced to bear the burden of the owner’s non-payment for months and potentially years until the notice of acceptance is recorded and the 45-day period is triggered. Claimants will also need to stay apprised of when the notice of acceptance is recorded, because they do not have the benefit of requesting notice from the owner, as permitted under La. R.S. § 9:4822(K) of the Private Works Act. There is no corollary to this provision in the LPWA.
The effect of this ruling could extend beyond the LPWA. Each subsection of the Private Works Act that establishes the respective lien filing deadlines for claimants on private projects contains a variation of the “shall file within . . . days after” language relied upon by the Gootee court. For example, the Private Works Act states that a general contractor “shall file a statement of his privilege within sixty days after the filing of the notice of termination or substantial completion of the work.” It is not a stretch for a court applying the Gootee reasoning to conclude that a lien on a private project is premature if it is filed before the notice of termination of substantial completion is recorded. Absent clarification from the Louisiana Supreme Court or an amendment of the LPWA by the legislature, practitioners should be aware that the statutory filing requirements for private and public jobs may become a contested issue if the lien or statement is recorded before the notice of acceptance, termination, or substantial completion.
Written by: Michael Lane, Kingsmill Riess, L.L.C.
 Gootee Construction, Inc. v. Dale N. Atkins, 2015-0376 (La. App. 4 Cir. 11/4/15); 178 So.3d 629, reh’g denied (La. App. 4 Cir. 12/1/15).
 Id. at 634 (emphasis in original).
 Id. (citing D & J Constr. Co. v. Mid-Continent Stone Co., 571 So.2d 762, 763 (La. App. 2 Cir. 1990)).
 Levingston Supply Co. v. Am. Emp. Ins. Co., 216 So.2d 158, 161 (La. App. 1 Cir. 1968) (on rehearing).
 See 218 So.2d 902 (La. Feb. 24, 1969); 227 So.2d 596 (La. Nov. 12, 1969).
 VVP America, Inc. v. Design Build Dev’t Servs., Inc., 41,652 (La. App. 2 Cir. 1/31/07); 951 So.2d 461.
 Gilchrist Constr. Co. v. Terral Riverservice, Inc., 2001-1617 (La. App. 3 Cir. 5/1/02); 819 So.2d 362, 366.
 See La. R.S. § 9:4822(A), (B), & (C).
 La. R.S. § 9:4822(B) (emphasis added).

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