How to Use Louisiana Prompt Pay Laws & Get Paid | Webinar

How to Use Louisiana Prompt Pay Laws & Get Paid

In this webinar, Sara Huffman, an attorney with the Smiley Law Firm in New Orleans, and Seth Bloom, the Senior Director of Attorney Services, will discuss how contractors and suppliers can leverage the Louisiana prompt pay statute to get paid what they’ve earned.

 

Who’s covered by the Louisiana prompt pay statute?

(01:42) The parties who this statute protects or covers or allows the additional remedy are going to be subcontractors and suppliers who haven’t received payment from a subcontractor or contractor that has received payment. Now, just because you’re a subcontractor or supplier doesn’t mean that you automatically qualify under the statute. You’re going to have to have a contractual relationship. The parties that are liable under the statute, which means the parties who will be penalized, are the contractor or subcontractor that has received payment but is withholding payment to the subcontractor or supplier that’s unpaid. It has to be an unreasonable withholding.

 

How can contractors recover attorney’s fees under the Louisiana prompt pay statute?

(03:42) So attorney’s fees are recoverable if you assert a cause of action under the statute; you can easily just cite the statute in a demand. If you’re certain that you check all the boxes and meet all the requirements, then you’ll get interest and attorney’s fees. Interests would be for up to 30 days from the date that payment’s due under the statute, and you can recover reasonable attorney’s fees that you incur when pursuing against the non-paying contractor or subcontractor. Without filing suit, you can claim the attorney’s fees, but really that’s going to come when you get a judgment from the court to get the interest in attorney’s fees under the statute. But this is especially useful where you have a purchase order or you have an informal agreement which does create a contractual relationship.

 

What are the causes of actions? How does the Louisiana prompt pay statute arise?

(05:13) There’s basically two scenarios under this statute, which are if you’re working on a project with an architect or engineer or if you’re working on a project without an architect or engineer. When there is an architect or engineer and a certificate of payment is issued, a contractor receives payment from the owner and payment is not made within 14 days of the issuance of the certificate of payment, then you would be able to assert a claim. If there isn’t, it’s very simple. 14 days from the contractor’s receipt of payment from the owner on day 15, your rights under the statute arise and you’re entitled to the full payment and then interest in the amount of half a percent per day for up to 30 days. So it’s up to 15% of the amount that you recover and then attorney’s fees.

 

Where does a cause of action under Louisiana’s prompt pay statute arise?

(06:58) It can apply to public and private works specifically on an immovable but it cannot be an immovable that’s used for residential purposes. An immovable would be a building, basically any construction at the common law and in every other state other than Louisiana, which is referred to as real property. A building and the land that it’s on. So anything used to improve that immovable would qualify as long as the immovable is not used for residential purposes. If you’re working on a project that’s mixed use, that’s one of those situations where it’d be in your best interest to contact an attorney and discuss the same with them.

 

Why would a party assert a cause of action under the Louisiana Prompt Pay statute?

(08:34) It’s basically a way for you to recover those contractual damages where your contract might not have provided for it or it’s an implied relationship. So this is additional; it’s not the only cause of action you’ll be able to assert.

Full Webinar Transcript

Seth: I’m Seth Bloom and I work over at Levelset working on the expert center over there, which is an awesome new feature where people can ask questions to lawyers and other experts. So I’m happy to have Sara Huffman today with the Smiley Law Firm here in New Orleans who primarily practices construction law. So I guess the topic today that we asked you to come on with is the prompt payment step, prompt pay statute. So Sarah, I thought you could maybe just introduce yourself and kind of get us started on that and tell us how that works.

Sara: Yeah, so as Seth said, my name is Sara Huffman. I’m an attorney with the Smiley Law firm, in New Orleans and we primarily handle construction cases and property disputes all over the state. But we do also have attorneys licensed in Texas and California, so we can help you out with issues there as well. But specifically today we’re going to be talking about Louisiana’s prompt pay statute which is a really neat mechanism that can be used as an additional way to put pressure on and nonpaying contractor or subcontractor. There are a few requirements involved with this. But just as a general aside you know, many people get confused because they think that the prompt pay statute is included under the private works act because it’s kind of found within the same section of the Louisiana or by statutes. It’s specifically found at title nine, section 27 84. So yes,

Seth: So Sara, I have a question. Who’s covered by the Prompt Payment, Prompt Pay statute.

Sara: So the parties that were standing under the prompt payment statute are subcontractors and suppliers.

Seth: Tell everyone, tell everyone what standing means.

Sara: Standing means you have the ability to claim something in the most rudimentary term. So the, the parties who this statute protects or covers or allows the additional remedy are going to be subcontractors and suppliers who haven’t received payment from a subcontractor or contractor that has received payment. Now, just because you’re a subcontractor or supplier doesn’t mean that you automatically qualify under the statute, you’re going to have to have a contractual relationship. So going back to the parties that are liable under the statute, which means the parties who will be panelized. So that’s going to be a contractor or subcontractor that has received payment but is withholding payment to the subcontractor or supplier that’s unpaid. Now it’s just not any scenario of withholding. It has to be an unreasonable withholding. And so that means that you know, there, there can’t be any just causes for the payment being withheld. The courts have recently found that a contractor is reasonable and withholding payment where the amount due under the contract is unclear. So maybe there’s a dispute as to you know, what, what the subcontractor was responsible for. They performed more work. Then was included in the scope of work or you know, maybe there are liquidated damages being asserted as you know, as typically seen.

Seth: Sara, what about, what about, I’m sorry to catch up. What about attorney fees and something like this? How does that work?

Sara: So attorney’s fees are recoverable if you assert a cause of action under the statute. Now you can easily just cite the statute in a demand. You know, if you’re certain that you, you check all the boxes and so then you’ll get interest and attorney’s fees. Interests would be for up to 30 days from the date that payment’s due under the statute. And then reasonable attorney’s fees that you incur when pursuing against the non-paying contractor or subcontractor. Now without filing suit, the, you mean, you can, you can claim the attorney’s fees. But really that’s going to come when you get a judgment from the court to get the interest in attorney’s fees would be, you know, through filing suit under the statute. But this is especially useful where, you know, you have a purchase order or you have an informal agreement which does create a contractual relationship. It’s, you know, a way for you to recover those penalties that would otherwise be created in a construction contract that, that you don’t have because there is, you know, no relationship reduced to writing.

Seth: And I guess, you know, one thing that, that I, I have a question about is you know, how does the, the use of the well, you know, what, what are the causes of actions? Like how does the Prompt Pay statute arise? And I know, I know it’s, it’s really about who is involved, whether it’s an engineer or architect and or other people. Is there, is there any way you can elaborate on that just so our audience can understand that piece of the legal process?

Sara: Yeah, so there’s basically two scenarios under this statute is if you’re working on a project with an architect or engineer or if you’re working on a project without an architect or engineer, essentially there, there are two scenarios. Under the statute is when there is an architect or engineer and when there’s not, when there is an architect or engineer and a certificate of payment is issued, a contractor receives payment from the owner and payment is not made within 14 days of the issuance of the certificate of payment. Then you would be able to assert a claim. Now that’s if there’s an engineer architect. If there isn’t, it’s very simple. 14 days from the contractor’s receipt of payment from the owner on day 15, your rights are the statute arise and those rights would be, you’re entitled to the full payment and then interest in the amount of half a percent per day for up to 30 days. So it’s, it’s up to 15% of the amount that you recover and then attorney’s fees. So that’s, that’s a pretty nice penalty. You don’t really find attorney’s fees awarded, so when, when the legislature is providing it or when the States, the States giving you the, okay, that’s definitely a scenario where you want to go after and get those attorney fees.

Seth: Alright, so where does a cause of action under Louisiana’s Prompt Pay statute arise? Where is it?

Sara: So it can apply to public and private works specifically on an immovable but it cannot be an immovable that’s used for residential purposes.

Seth: All right, well explain to everyone maybe, and especially our out of state audience, what an immovable is.

Sara: So an immovable would be, you know, a building, basically any construction at the common law and in every other state other than Louisiana, it’s referred to as real property. So just, you know, a building, the land that’s on it. So anything used to improve that immovable would qualify as long as the immovable is not used for residential purposes. So, you know, that’s usually a pretty clear cut determination. But what happens if you’re working on a project that’s mixed use, say residential and commercial that’s one of those situations where it be in your best interest to contact an attorney and discuss the same with them. Especially with this statute there hasn’t been a lot of judicial interpretation. So that means that there’s some wiggle room and gray areas, which you know, where you think you wouldn’t necessarily have a cause of action. There could be one. So, you know, whenever you’re in doubt, I’d definitely consult, legal advice.

Seth: And I know there’s, you know, when there are disputes and litigation and construction law, there’s, you know, there’s various ways that some of these disputes can be settled. So why would a party assert a cause of action under the Louisiana Prompt Pay statute?

Sara: So again, like I mentioned earlier, it’s, it’s basically a way for you to recover those contractual damages where your contract might not have provided for it or it’s an applied, an implied relationship. So this is additional, it’s not the only cause of action you’ll be able to assert. Of course, you know, if there, you have to have a contractual relationship to have rights under the statute. So you can also proceed under a breach of contract theory. But you know, when you do breach of contract, you don’t get the additional interest and attorney’s fees. So asserting this along with your breach of contract action, would be the best way to recover. You know, those amounts spent in trying to get paid.

Seth: Sara, maybe you want to make a few final comments and I just wanted to say how much we thank you for coming on today and you and everyone else at the Smiley Group, a law firm in New Orleans, what it means to us to come on and kind of help our customer and client base with understanding some of the nuances in construction law and especially here in Louisiana.

Sara: So just general takeaways to remember with this statute. First and foremost is that you need to have a contractual relationship. And second, this applies to both public and private works. It’s independent and separate from the public works act and the private works act. So don’t shy away if you know, you think you only have a cause of action under those two acts. This is independent from that. The, you also have to be sure that the payment is withheld unreasonably. You know, if there’s a contractual provision that allows for withholding payment, you won’t be able to assert this cause of action. And if the amount due under the contract is unclear you won’t be able to assert a cause of action under this as well. And also just, you know, where there’s any doubt or confusion to go ahead and consult you know, an expert ask us on here.

Sara: We’re happy to answer your questions. You know, or to contact an attorney just to make sure that you have rights under the statute because if, um, a cause of action is asserted under the statute and it’s found to be without merit the party bringing the action will actually be tasked with the attorney’s fees and costs of the defendant or the non-paying contractor or subcontractor. So you just want to make sure that, you know, you have all your I’s dotted and T’s crossed before bringing a suit under this because the penalties for baseless suits are pretty hefty.

Seth: Well, thank you for all that information and we really appreciate it. Thanks so much Sara. And that’s all for us. Thank you for tuning in, and we look forward to doing more of these webinars in the near future with some, some great construction ideas.