Louisiana’s lien and notice laws changed on January 1, 2020, so some information in this post might be outdated. You can learn what changed and what rules apply here: Louisiana Mechanics Lien FAQs and Louisiana Notice FAQs.
Louisiana is generally a “non-notice state,” meaning that the traditional preliminary notice (i.e. must be sent within x days from start of a project) is not required of subcontractors and suppliers. Nevertheless, there are nuanced notice requirements buried throughout the states’ private and public lien statutes. One particular notice, which is sometimes required from material suppliers, is the subject of a controversial appeals court decision out of the state’s First Circuit: J. Reed Constructors, Inc. v. Roofing Supply Group, LLC.
This article will review the court’s decision, the dissent, the underlying requirement, and what it means to companies supplying materials in the Bayou State.
The Notice of Non-Payment Requirement for Suppliers in Louisiana
The Roofing Supply Group case analyzes Louisiana’s “Notice of Non-Payment” (Free Example Louisiana Notice of Nonpayment Form) requirement for material suppliers. This requirement exists within the Private Works Statute, which governs private construction project (La R.S. 9:4802(G)(3)) and the Public Works Statute, which governs public construction projects (La. R.S. 38:2242(F)).
The requirement is largely the same for both public and private works.
The notice requirement only applies to material suppliers, and only applies when a notice of contract has been filed with the county recorder by the GC or owner. First, the “notice of nonpayment” requirement only applies to material suppliers. While both statutory schemes fail to define who exactly qualifies as a “seller of movables” or “materialman,” construing these terms with an understanding of the industry and the definitions of other more defined parties (i.e. contractors) suggests that the notice only applies to parties who are supplying materials and not labor. A party providing materials and labor would more likely be classified as a “contractor” under the statutes, and accordingly, not subject to the notice requirement.
Second, the notice of non-payment is only required if the general contractor or owner records the contract with the proper parish recorder’s office. Presumably, the contract must be recorded pursuant to the statute’s timing requirements (i.e. within 30 days from beginning of work on public works, and before work begins on private works).
Third, the notice of nonpayment must be delivered “on or before seventy-five days from the last day of the month in which the material was delivered…”
It is this third requirement causing controversy in Louisiana courts, and specifically within the Roofing Supply Group decision.
Important: Notice requirements change on January 1, 2020
Must Notice of Non-Payment Be Delivered After Last Furnishing, or After Every Month Of Material Delivery?
The question of law presented in the Roofing Supply Group case is whether the notice of non-payment requirement is triggered by the last delivery of materials, or triggered by every delivery of materials. The First Circuit’s majority found the language to suggest the latter:
We find [the language] is clear and unambiguous. To preserve his right to file a privilege or lien on the immovable property, the materialman SHALL deposit in the U.S. Mail, via certified mail, notice of nonpayment before seventy-five days from the last day of the month in which material was delivered…Regardless of the month of delivery or the number of deliveries, the seventy-five day period commences on the last day of that month.
While the majority declared that the language was “unambiguous,” it doesn’t take much imagination to see two different ways to interpret the language.
The statute requires notice within 75 days from the “last day of the month in which the material was delivered.” The language could be read such that the trigger event — ‘material was delivered’ — occurs when all materials within an open account are delivered, or occurs each and every time a material delivery is made. Although ambiguity is denied by the First Circuit’s majority opinion, the Louisiana statute is poorly worded.
The majority’s decision renders Louisiana’s notice of non-payment requirement similar to the expensive and frustrating monthly notice requirements in Texas and Tennessee. In those two states, the law clearly requires that notices be sent repeatedly for each and every month that materials are delivered and go unpaid. The language in these statutes are clear to that extent:
Tennessee: …shall serve [notice of nonpayment] within ninety (90) days of the last day of each month within which…[labor or materials are furnished] Tenn. Code Annotated § 66-11-145.
Texas: claimant must give…notice…not later than the 15 day of the third month following each month in which…[labor or materials are furnished] Texas Property Code 53-056.
Louisiana’s Notice of Non-Payment is clearly not a traditionally preliminary notice, which requires notice be sent within a certain number of days from the start of furnishing. Further, it is not clearly a traditional “notice of intent to lien,” which is required in 8 different states — which requires a warning some time before filing a mechanics lien or bond claim that the same will be filed.
In support of the majority opinion, if the legislative intent were to be examined, this weird Louisiana notice is by far more similar to the Texas and Tennessee notices than it is to any other type of notice across the country. It lacks the specificity of these states’ notices, however, which clearly require a delivery for each month of delivery. In support of the majority opinion, if the legislative intent were to be examined, this weird Louisiana notice is by far more similar to the Texas and Tennessee notices than it is to any other type of notice across the country (i.e. a standard notice of intent to lien). It lacks the specificity of these states’ notices, however, which clearly require a notice for each month of delivery. Conversely, the requirement also fails to specify the opposite, that the notice is due only from the “last” delivery.
Agreeing with the majority opinion in Roofing Supply Group requires ignoring that the language does not require notice after “each” month of delivery. Agreeing with the dissent, which is discussed in more detail in the next section, requires ignoring that the language suggests notice after the delivery of material, and not after the “last” delivery of material.
So, with this ambiguity (again, denied by the majority)…what should the court have done?
Strict v. Liberal Construction Debate Is Pivot Point Between Majority and Dissent
Just as there is a battle of financial risk shifting between general contractors and sub-tier contractors and suppliers, there is too a nationwide battle between the legal scrutiny that should be given to lien and bond claim questions.
Litigants at the top of the contracting chain, and courts sympathetic to their positions, maintain that lien and bond claim laws should be strictly construed because they are in degradation of the law and restrict property rights. Litigants at the bottom of the contracting chain and their supportive courts, on the other hand, contend these laws should be liberally construed to achieve the law’s explicit purpose of protecting sub-tier contractors and suppliers against non-payment.
This is a very complicated legal issue, and the tug-of-war is front and center in the Roofing Supply Group case.
In the Roofing Supply Group matter, the majority opinion begins its legal analysis with a review of the legal construction mandated by the legal question presented:
Public contract laws are to be strictly construed such that the privileges granted are not extended beyond the statutes…
The dissent, however, looks at the same legal question and concludes that liberal construction should actually be applied:
The Louisiana Supreme Court has already determined many years ago that the [Public Works Act] is intended to protect those supplying labor and furnishing materials for public works projects…While protecting those who supply labor and furnish materials, the risk of loss is shifted to the general contractor and the surety. It is with this stated legislative intent in mind, that we should interpret the notice-of-nonpayment provisions…
So, is the law supposed to be strictly construed against lien and bond claims, or must it be liberally construed to achieve its public policy protective purpose?
This legal tussle is playing out in courts across the country, and Louisiana may be well served by reading the Washington State Supreme Court decision from 2011 in the controversial Williams v. Athletic’s Field case. The Washington case was similar to the Louisiana situation because it required an interpretation of the lien laws where the result pivoted on whether strict or liberal construction is applied. While the First Circuit in Roofing Supply Group didn’t explicitly pick out this “strict v. liberal” issue as the backbone of the decision and the dissent, it is clear that the approach taken by each side is what influenced the ultimate result.
With this in mind, the Louisiana supplier, litigant, and judge must ask themselves: What type of construction should apply?
In Williams v. Athletics’ Field, the Supreme Court resolved a two decade old mess and split between the circuits, and restored liberal construction to the growing strict construction sentiment across the state, explaining as follows:
We agree with Hos [defendant in Williams] that the appropriate way to view the competing canons of strict and liberal construction is found in our early cases. The strict construction rule, at its origin, was invoked to determine whether persons or services came within the statute’s protection. Expanding the rule of strict construction beyond this inquiry effectively nullifies RCW 60.04.900. As Hos explains, “applying a ‘liberal construction’ to RCW 60.04.091 only after a valid lien is deemed to attach would make no sense. At that point – when by definition the claimant has a valid lien – nothing in RCW 60.04.091 would matter to the claimant.” Appellant’s Reply Br. at 3. To the extent Lumberman’s or other cases suggest that the statute’s mandate of liberal construction has been supplanted by a common law rule of strict construction, we disapprove them.
The dissent in Roofing Supply Group points out that the Louisiana Supreme Court has already determined that the Public Works Act is intended to protect those supplying labor and furnishing to a public works project, but this isn’t exactly a mandate that liberal construction must be applied in these interpretation questions. On the contrary, the majority opinion in this Roofing Supply Group case explicitly applied “strict construction,” citing a Louisiana Supreme Court case from 1990 that addresses public contract laws in general, as opposed to laws related specifically to the protection of sub-tiered contractors and suppliers.
Is this case really about how to construe the public works act and the private works act? And regardless, what does the First Circuit opinion say about this question?
The Decision Is Limited In Applicability…For Now
One key question for those furnishing materials in Louisiana is how, and to what extent, this Roofing Supply Group decision affects them. At the current time, the decision has limited applicability.
First, the decision only affects parties when the underlying notice of nonpayment is required by law. As explored at the beginning of this article, the notice of nonpayment is only required from material suppliers when a notice of contract was properly and timely filed by the general contractor or owner. If a company furnishing labor, either with or without materials, the notice provision (and this case) will not apply. And further, if a notice of contract is not recorded (which happens a lot, especially on private projects), the notice provision (and case) will not apply.
Second, the decision itself is not yet final, and once it is final, it may not be mandatory authority statewide. Attorneys for Roofing Supply Group, LLC have filed an “Application for Rehearing,” asking the First Circuit to reconsider their decision. To date, this application has not been accepted or rejected. If the application is rejected, the next step would be a writ to the Louisiana Supreme Court, rendering this decision a bit of a lame duck until the Supreme Court weighs in and ratifies, or refuses the writ.
If the writ is refused, the decision would be considered good law in the First Circuit, but only “persuasive” authority in the other Louisiana circuits. It’s very possible that the same issue could get presented to another circuit, and the other circuit could rule in an opposite way.
To the extent that the notice of nonpayment requirement applies, companies should proceed with caution and deliver a notice after each month that they are furnishing materials and are not paid (i.e. similar to Texas and Tennessee). However, there may be room for powerful legal arguments to overrule or sidestep the Roofing Supply Group decision if the notice is not sent and rubber meets the road in an argument over this question.
Call On the Louisiana Supreme Court To Clarify and/or Louisiana Legislature To Make Changes
Regardless of what happens in the Roofing Supply Group rehearing application resting now with the First Circuit, Louisiana law is now unclear on the notice of nonpayment requirement. Accordingly, it’s time to call upon the Louisiana Supreme Court and/or the legislature to clarify this issue.
At first glance, the issue presented by this case may seem simple and technical related to the reading of the provision that triggers delivery of the notice of nonpayment. It would nice if the Louisiana Supreme Court weighed in on this simple and technical question, but unfortunate if they are too narrow in their scope of review. Instead, it would be a service to those in the construction industry if they clarified the reading of this particular provision by setting forth a clear standard for construing lien and bond claim laws in the state.
Louisiana, in other words, should join in the national trend of clarifying this “liberal v. strict” divide in lien jurisprudence. In my opinion, they should join in with the majority of states that bless liberal construction as a means to the end of protecting the legislative purpose of these laws: placing financial risk of a project on the top of the contracting chain, and not the bottom, and accordingly, protecting sub-tiered contractors and suppliers.
The Louisiana legislature could jump in on the fun as well by clarifying the notice of nonpayment question, which, frankly, is a pretty dumb and unorthodox notice requirement to begin with. There are many example lien and bond claim statutes across the country that are clean, fair, and easily understood, and the Louisiana statutes could use a make-over to achieve those ends.