Seth SmileyThe Construction Payment Blog welcomes Seth Smiley, who contributes this guest post about payment bond claims in Louisiana. Seth is a partner at Wolfe Law Group, and a contributor to that firm’s Construction Law Monitor blog. He frequently writes and litigates about construction law issues ranging from payment bond claims, workmanship disputes, construction delay matters and green building challenges. Seth is a licensed attorney in Louisiana and California.

State and county construction in California has gone through the wringer over the past few years. California’s highly publicized budget problems really hit the construction industry.  This lead to a decrease in public works and – I think – an increase in public works claims.

The good news is that these problems are smoothing over and life in state construction is returning to normal in California. However, as anyone in the construction industry knows, this is not going to eliminate state bond claims on these state and county projects. If anything, the increase of state and county projects is only going to increase the volume of claims.

Unlike many other states (but similar to states like Louisiana), California has not adopted a version of the US Miller Act to govern payment bond claims in its state. It has a unique statutory framework that gives contractors bond claim rights and stop notice rights.

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The Payment Bond Claim Remedy

On all construction projects valued at more than $25,000, California Civil Code § 3247 requires a payment bond be posted. Any subcontractors or suppliers who are unpaid for work or materials furnished to a state or county construction project can bring a claim against the payment bond.

A claimant is not required to file a “Stop Notice” – explained below – before filing a bond claim. The two remedies are completely separate, and unpaid subcontractors or suppliers can file both a stop notice and a bond claim, or either of them alone.

While each can be filed independently of one another, it is absolutely essential to both claims that a 20-day Preliminary Notice be delivered to qualify to send either.

Bond claims must be filed directly with the prime contractor and the surety, and must be sent to them at anytime after the claimant has furnished its services or materials, but no later than 6 months after the Stop Notice deadline.  Stop Notices, and its deadline, are discussed below.

The Stop Notice Remedy

There is a great article on this ConstructionLienBlog that focuses on the Stop Notice remedy, and I highly recommend it: The Differences Between A Stop Notice And A Mechanics Lien.

California is one of the few states that statutorily provides for a Stop Notice filing. A subcontractor or supplier who is unpaid for services or materials sends off a Stop Notice to the public entity commissioning the work and the prime contractor, and upon receipt, the public entity is required to discontinue payments to the prime contractor in an amount sufficient to satisfy the claimant’s claim.

To file a Stop Notice on a California state project, a subcontractor or supplier must have delivered the required 20-day Preliminary Notice within 20 days of first furnishing labor or materials to the project.  Thereafter, it must use the proper Stop Notice form, and send it certified mail with return receipt requested to the public entity commissioning the work and to the prime contractor.

Stop Notices must be filed within the earlier of: (a) 30 days from the recording of a “Notice of Completion” for the project; or (b) If this notice is not recorded, within 90 days from the actual completion. Must file suit against the surety if claim remains unpaid, and suit must be brought no later than 6 months from the expiration of the Stop Notice period.