Jumping through procedural hoops is a constant struggle when dealing with lien law and bond claims. Even the smallest misstep can destroy chances at recovery, and failure to meet lien or bond claim deadlines is one of the most common reasons for the dismissal of claims. Like most states, the Bayou State takes procedure very seriously. This was put on display in a recent decision when two Louisiana claims for payment were dismissed.
The facts of the case are simple enough. The Non-Flood Protection Asset Management Authority (Non-Flood Protection Authority) hired GM&R Construction Company as general contractor for their “James Wedell Hangar Project,” a public project. GM&R hired subcontractors M&M Concrete (M&M) and Tom Branighan (Branighan) for concrete and electrical work, respectively. Both parties performed work on the project but ultimately went unpaid. A Certificate of Substantial Completion was filed on May 16, 2014.
On August 18, 2014, M&M mailed Non-Flood Protection Authority and GM&R a statement of claim and informed the parties that the statement of claim was filed with the parish on August 15, more than 45 days later. GM&R responded by informing M&M that the claim was untimely filed, so M&M cancelled the claim from the parish records. Branighan did not file a statement of claim with the parish, but did provide both GM&R and Non-Flood Protection Authority with a letter stating claims. In the letter, Branighan noted that GM&R and Non-Flood Protection Authority should consider the letter as a statement of claim.
With no claims on the project, the Non-Flood Protection Authority was then obligated to pay GM&R. Months passed by and M&M and Branighan remained unpaid. On December 23, Branighan finally filed a statement of claim in the Parish records. M&M refiled its claim the next day, informing the contractor and project owner that it may have cancelled its earlier claim in error. The subcontractors foreclosed their claims on April 13, 2015.
Under Louisiana law the awarding authority on a public project must take measures to protect subcontractors from nonpayment or face liability. La. R.S. 38:2242(B) states that an unpaid subcontractor may file a statement of claim with the parish within 45 days of the completion of a project. According to section (D) of the same act, authorities must not pay a general contractor in full when outstanding claims have been served on the project. The authority is then required to withhold the amount of outstanding claims.
The subcontractors did not argue that their statement of claim documents were timely filed with the parish. Rather, M&M and Barnighan argued that timely filing was not necessary because the statement of claims letters were sent to the Non-Flood Protection Authority before payment was made to GM&R. The subs claim that the statute provides that (B) filing a claim with the parish or (D) other notification is sufficient to put an authority on notice. They claim the letters sent to the Non-Flood Protection Authority created actual knowledge of the outstanding claims and that the authority now faces liability.
Unfortunately for the subcontractors, the court did not agree. According to the court the provisions must be read together, not separately. By reading sections (B) and (D) together, the rule is that an authority must withhold outstanding claim amounts from a general contractor’s pay when a claim for payment has been filed with the parish by the unpaid party. Such a claim must be filed within 45 days of the completion of the project. Here, the Certificate of Substantial Completion was filed on May 28, 2014 by the Non-Flood Protection Authority. M&M filed a statement of claim with he parish on August 15, more than 45 days later. M&M subsequently cancelled that claim due to untimeliness. On December 23 Barnighan filed a statement of claim. M&M refiled the following day. Because both of these claims were filed well beyond the 45 day deadline, their claims were dismissed.
Louisiana claims for payment, like most states, must strictly adhere to procedure. To preserve their rights, a claimant must be vigilant. Each state has their own laws on lien procedure, and knowledge of these rules and regulations may be one of the most important factors in protecting a right to payment. Louisiana contractors and subcontractors can expect more battles between public and private entities after recently passing P3 legislation. For a guide on navigating your state’s lien and bond laws, head over to our FAQs page and select your state.