Baldwin Haspel Burke & Mayer LLC

Construction Law Update – July 2018

John Stewart, Jr. - 

The Construction Law Update is published by Baldwin Haspel Burke & Mayer, LLC for the benefit of its clients and others having an interest in the construction industry. It includes discussions of Louisiana state and federal court decisions, legislative developments and tax issues concerning construction-related matters. To subscribe to BHBM’s electronic Construction Law Update, please click here. For further information on the decisions and legislative developments, contact John Stewart, Jr. at (504) 585-7846 – jstewart@bhbmlaw.com.

Download a PDF of the July 2018 Construction Law Update by clicking here.

TARIFFS ON STEEL AND ALUMINUM

As everyone is probably already aware, President Trump recently imposed a 25% tariff on steel imports and 10% on aluminum imports, with few exceptions. Contractors are encouraged to review their contracts to determine if a price adjustment would be allowed as a result of the tariffs. Additionally, it would be advisable to consider such provisions for future contracts.

AMENDMENT TO STATUTE ASSESSING PENALTIES FOR A PUBLIC ENTITY FAILING TO MAKE TIMELY PROGRESSIVE STAGE AND FINAL PAYMENTS

L.R.S. 38:2191(B) provides that any public entity failing to make progressive stage payments within 45 days following the receipt of a certified request for payment without reasonable cause shall be liable for reasonable attorneys fees, and any public entity failing to make final payment after formal final acceptance and within 45 days following receipt of a clear lien certificate shall also be liable for reasonable attorneys fees. The Louisiana legislature during its 2018 Regular Session, amended the statute to provide additionally for interest at the rate of ½% accumulated daily, not to exceed 15%. Any interest received by a contractor pursuant to that section is to be disbursed on a prorated basis among the contractor and subcontractors, each receiving a prorated portion based on the principal amount due within ten days of receipt of the interest. Act No. 566, 2018. The amendments are effective August 1, 2018.

ORAL CONTRACT TO SUPERVISE CONSTRUCTION SUFFICIENT TO AUTHORIZE A LIEN

In a matter in which there was no written contract between an owner and a contractor to build a house, but an oral agreement to supervise construction, the Louisiana First Circuit Court of Appeal held the definition of the term “contractor” as contained in the Private Works Act was satisfied. The “contractor” was, thus, authorized under the Private Works Act to assert a privilege for payment. Schouest v. Voclain, 2017-0706 (La.App. 1 Cir. 12/21/17), 240 So.3d 224.

LIABILITY OF AN ARCHITECT LIMITED FOR CONTRACT ADMINISTRATION AND CLAIM FOR UNJUST ENRICHMENT DISALLOWED

The United States District Court for the Eastern District of Louisiana found an architect for a project was accorded limited protection from claims by a takeover contractor operating under an agreement with the State of Louisiana and a completion contract with a surety. The takeover contractor alleged, among other things, the architect was responsible for professional negligence in administering the contract. The takeover contractor represented the architect was slow to respond to the contractor’s requests for information regarding the details of the contract documents and its failures caused it to incur increased expenses. Further, the architect acted unreasonably in withholding payments to the contractor for work the architect declined to certify, and the surety and architect continued to demand unreasonable punch list work. Ultimately, the takeover contractor abandoned the project and the State terminated the takeover agreement and re-bid the project.

The architect moved for partial summary judgment on the claims for professional negligence in administering the contract on the basis of exculpatory, or limitation of liability, clauses contained in the general conditions. The general conditions of the contract between the State and the original contractor, to which the takeover contractor agreed as part of its completion contract, contained several provisions which limited the liability of the architect. Section 4.2.6 of the General Conditions provided that the architect had the authority to reject work that did not conform to the contract documents, and neither this authority nor a decision made in good faith either to exercise or not to exercise such authority would give rise to a duty or responsibility of the architect to the contractor. Section 4.2.11 provided that the architect’s response to requests to interpret and decide matters concerning performance under the requirements of the contract documents would be made in writing within any time limits agreed upon or otherwise with reasonable promptness. Section 4.2.12 stated that in making such interpretations and decisions, the architect would not be liable for the results or interpretations or decisions rendered in good faith.

The court found the exculpatory, or limitation of liability, clauses were valid and could be enforced against the takeover contractor, and served to limit, but not eliminate, the contractor’s claim for negligent contract administration. Louisiana law allows a person to waive their right to assert another’s negligence. The fact that the takeover contractor was not a party to the original construction contract was not a bar to the enforcement of the clauses to which it agreed in the completion contract. The takeover contractor could not recover for acts of contract administration made by the architect in good faith.

The takeover contractor also claimed it was entitled to damages for unjust enrichment. The court held under Louisiana law such a claim could only be brought when there is no other remedy available. Generally, a plaintiff may not plead a claim for unjust enrichment alongside another legal theory. Because the court already found that the completion contract limits, but does not bar, the takeover contractor’s claim for negligent administration, the contractor had a delictual remedy available to recover its damages. The claim for unjust enrichment was dismissed. Patriot Contracting, LLC v. Star Insurance Company, 15-6634 (E.D. La. 3/1/18), 2018 WL 1123586.

PRIVATE WORKS LIENS & OBLIGATIONS OF A SURETY

Hudson Construction Company of Tennessee was the general contractor for a Wal-Mart Supercenter store in New Roads, Louisiana. Hanover Insurance Company provided a payment bond for the project as Hudson’s surety. Amtek of Louisiana, Inc. was a subcontractor to Hudson. Bear Industries, Inc. supplied limestone and sand materials to Amtek under a Joint Check Agreement between Hudson, Amtek and Bear. A dispute arose between Hudson and Amtek, and Hudson stopped making payments. Bear filed a Statement of Claim and Privilege.

Hudson and Hanover claimed that the Notice of Commencement filed by Wal-Mart in the public records did not contain the statutory requirements for a Notice of Contract under L.R.S. 9:4811, and Bear’s lien was untimely. The court of appeal found the Notice of Commencement set forth the parties and their addresses, the legal property description and general description of the improvements. The performance and payment bonds were attached to the Notice and stated the price for the project. Although the Notice of Commencement did not comply with all of the requirements of L.R.S. 9:4811 for a Notice of Contract, there was no proof of prejudice, and there was substantial compliance with the notice requirements of the statute.

Since the requirements of the statute for filing a notice of contract were found to be satisfied, the 30-day period of L.R.S. 9:4822A for filing a statement of claim was applicable. L.R.S. 9:4822A provides that liens subject to its provisions should be filed within thirty days after filing of a notice of termination of the work. L.R.S. 9:4822C, which requires that liens be filed within sixty days after notice of termination of the work or substantial completion when a notice of contract is not filed, was not applicable. A notice of termination was not filed and the 30-day period for filing a statement of claim never began to run. The statement of claim or privilege filed by Bear was timely.

Hudson and Hanover contended Bear failed to give the 10-day notice required under L.R.S. 9:4802G(2). The last sentence of that statute states that its requirements shall apply to a seller of movables sold for use or consumption in work on an immovable for residential purposes. The court of appeal held that provision limited the statute to residential projects and did not apply in this instance.

The court of appeal rejected Hanover’s argument that a “pay if paid” clause in the subcontract was a defense available to it to the payment of sums owed to subcontractors. It found that allowing a surety to assert a “pay if paid” clause to defeat payment of a subcontractor on the basis that the contractor has not received full payment from the owner, where the owner has escaped liability to the subcontractor by relying on the bond under L.R.S. 9:4802C, would render the protections afforded to laborers and suppliers on private works projects set forth in the Private Works Act meaningless. Further, the surety was not entitled to read into its bond provisions contained in the Joint Check Agreement, which would defeat any obligation owed by the surety. Bear Industries, Inc. v. The Hanover Insurance Company, 2017-0301 (La.App. 1 Cir. 1/4/18), 241 So.3d 1159.

AGENT OF A CONTRACTOR FOR PURPOSES OF PENALTY STATUTE

L.R.S. 9:4814 provides for penalties to be assessed against a contractor or subcontractor or its agent for knowingly failing to apply money received as necessary to settle claims of sellers of movables or laborers. The Louisiana First Circuit Court of Appeal held the allegations of a petition against several individuals, one of whom was the sole member for a contractor LLC, and two others who were its qualifying parties for purposes of the State Licensing Board for Contractors statute, failed to demonstrate they were agents of the LLC. A “qualifying party” under the statute for the State Licensing Board of Contractors is not an agent. The court found the scope of representation under the statute of an individual identified as a “qualifying person” was limited to his interactions with the State Licensing Board in connection with the issuance and maintenance of a contractor’s license.

L.R.S. 12:1311 and L.R.S. 12:1317, with respect to management of LLCs, do not establish a default rule that a sole member of a limited liability company is an agent of the company. Both statutes, instead, require a party dealing with a member to refer to the articles of organization and/or written operating agreement to determine whether the member is an agent, and if so, the scope of that agency. The lone factual assertion that an individual is a sole member of an LLC is insufficient to support a legal assertion that he is an agent of the company for purposes of L.R.S. 9:4814. Spinks Construction, Inc. v. Quad States Construction, LLC, 2017-0580 (La.App. 1 Cir. 12/21/17), 240 So.3d 215.

PROVISIONS OF INSURANCE POLICIES REQUIRING THAT CONTRACTS BE IN WRITING AND SPECIFY CERTAIN CONDITIONS ENFORCED PRECLUDING COVERAGE

Advantage Roofing and Construction of Louisiana, Inc. contracted to perform roofing work. Advantage subcontracted the work to Arrow, LLC d/b/a Central Roofing. The work was shutdown by the owner and Advantage when it was discovered Central Roofing had installed unapproved substituted materials for a portion of the work. Advantage alleged the roof assembly was not water tight when the work was stopped and rain and wind caused the roof to leak damaging the entire roof assembly. Advantage sued its insurer, Landmark American Insurance Company, and Central Roofing and its insurer, FCCI Insurance Group. Landmark moved for summary judgment.

There was no written contract between Advantage and Central Roofing. The Landmark policy required that all of Advantage’s subcontracts be in writing and that the contracts require Advantage be named as an additional insured in the policies. Further, the Landmark coverage would be excess to that provided by a subcontractor. The FCCI policy provided that contracts requiring the designation of additional insureds must be in writing. The district court enforced the policy provisions requiring that subcontracts be in writing. It also found Landmark was prejudiced as a result of the failure of Advantage to comply with its policy requirements; Advantage was not made an additional insured under the Central Roofing policy, and the Landmark policy was not excess over the Central Roofing policy as required by the Landmark policy.

The motion for summary judgment of Landmark was granted. All claims against it were dismissed with prejudice. Advantage Roofing and Construction of Louisiana, Inc. v. Landmark American Insurance Company, 16-677 (M.D. La. 3/13/18), 2018 WL 1955516.

FAILURE OF AN OWNER TO ESTABLISH THE COST OF REPAIRS RESULTED IN SUMMARY JUDGMENT FOR CONTRACTOR

The owner of a project for the construction of a new home failed to pay the contractor for work performed, alleging defects and substandard work, and sued the contractor for damages. The contractor reconvened for the sums due under the contract and moved for partial summary judgment to dismiss the owner’s claim for damages and to dissolve the contract as to any future performance owed. Previously, the property was foreclosed upon and sold at a sheriff’s sale. The trial court granted the motion, which was not opposed by the owner, reserving to the contractor his reconventional demand for funds due under the contract. The owner appealed.

The contractor in his motion for partial summary judgment argued the owner failed to demonstrate costs incurred to correct the alleged defects. Further, the property had been foreclosed upon and sold at a sheriff’s sale, and the owner no longer had the ability to prove additional damages since he could not obtain bids or authorize repairs after he lost ownership. Although the owner did not file an opposition to the motion for summary judgment, he, nevertheless, argued on appeal that he was entitled to the cost of expenses which he did incur. He, however, failed to satisfy his burden on summary judgment of establishing those costs, which would support the existence of a genuine issue of material fact to defeat summary judgment. Accordingly, the court of appeal affirmed summary judgment in favor of the contractor. Hester v. Burns Builders, 17-824 (La.App. 3 Cir. 4/25/18), 2018 WL 1940503.

RIGHT TO MANDAMUS PROCEEDING TO RECOVER RETAINAGE AND ATTORNEYS FEES FOR FAILURE TO TIMELY PAY

Woodrow Wilson Construction, LLC contracted with the Orleans Parish School Board for the construction of a new school. The School Board issued a certificate of substantial completion. Wilson then submitted an application for final retainage payment along with lien waivers and a copy of a clear lien and privilege certificate. The School Board failed to pay the retainage. Wilson filed a petition for a writ of mandamus to compel payment. The School Board claimed in its answer, affirmative defenses and reconventional demand that it could withhold payment because it was entitled to liquidated damages for delays. The trial court denied Wilson’s petition for a writ of mandamus and designated the judgment a partial final judgment from which Wilson appealed.

L.R.S. 38:2191 provides that public entities shall promptly pay all obligations arising under public contracts. Further, any public entity failing to make progressive stage payments within forty-five days following receipt of a certified request for payment without reasonable cause shall be liable for reasonable attorneys fees, and any such entity failing to make final payment after formal acceptance and within forty-five days following receipt of a clear lien certificate shall be liable for reasonable attorneys fees. The statute, additionally, provides that its requirements shall not be subject to waiver by contract and the public entity shall be subject to mandamus to compel payment.

The court of appeal found the payment of retainage was required both by statute and by Wilson’s contract. The School Board had a ministerial duty to make payment and had no discretionary authority to withhold it. Any argument by the School Board that the payment was not required by the contract was ill founded since the statute prohibits waiver of its requirements.

The court of appeal found the School Board’s argument that it was entitled to liquidated damages was not a right, but simply a claim for damages which must be tried in an ordinary proceeding. A public entity’s separate claims against a contractor are secondary to a contractor’s right to prompt payment under L.R.S. 38:2191. The School Board was barred from asserting a separate claim for ordinary relief to defeat a mandamus action.

The judgment of the trial court denying Wilson’s petition for a writ of mandamus was reversed. The matter was remanded to the trial court to issue the writ of mandamus and to determine the amount of attorneys fees and interest due Wilson. Woodrow Wilson Construction, LLC v. Orleans Parish School Board, 2017-0936 (La.App. 4th Cir. 4/18/18), 2018 WL 1835817.

THIRD-PARTY DEMAND FOR INDEMNITY PEREMPTED

The City of Youngsville contracted with C.H. Fenstermaker & Associates, LLC for engineering services for a roadway. The City contracted with Glenn Lege Construction, Inc. as the general contractor to build the road. The City opened the road in 2009. Months later, the roadway began to fail. Lege performed repair work. The City recorded a notice of acceptance of the work on August 27, 2010. Failures continued over the next few years. The City hired a new engineer in 2015 and filed suit against Fenstermaker on August 19, 2015, within five years of acceptance. Fenstermaker filed a third-party demand against Lege on December 23, 2015 for indemnity. Lege filed an exception of peremption to Fenstermaker’s claims. The trial court granted the exception. Fenstermaker appealed.

L.R.S. 9:2772 provides a five-year peremptive period for claims against contractors. The statute, by its terms, applies, among other things, to indemnity and third-party claims. The statute, which begins to run in most instances from the date acceptance is recorded, states that if within ninety days of the expiration of the five-year peremptive period, a claim is brought against any person or entity included within the provisions of the statute, such person or entity shall have ninety days from the date of service of the main demand, or in the case of a third-party defendant, within ninety days from service of process of the third-party demand, to file a claim for contribution, indemnity or a third-party claim against another party. Here, the City filed the main demand against Fenstermaker on August 19, 2015, within ninety days of the expiration of the five-year period, which began on August 27, 2010 and ended on August 27, 2015. Lege argued Fenstermaker had ninety days from the date of service of the main demand on Fenstermaker within which to file a third-party demand. Service of the main demand was made on Fenstermaker on August 21, 2015, but Fenstermaker did not file a third party against Lege until December 23, 2015, after the ninety-day period elapsed. Fenstermaker contended the damage to the roadway was discovered by the new City engineer in March and June 2015. The trial court believed the problems with the roadway were ongoing from the time it was originally built. The court of appeal held the record supported that conclusion. The court of appeal found Fenstermaker had ninety days from the date it was served by the City to bring its third-party demand against Lege under L.R.S. 9:2772. It did not do so.

Lege argued L.R.S. 9:2772C was applicable and allowed the third-party demand. That subsection states that if an injury occurs within the fifth year after the date the peremptive period begins to run, an action to recover damages may be brought within one year after the date of the injury, but in no event more than six years after the date the period starts to run. The court of appeal held that provision does not apply to third-party demands. It is written to benefit the injured party in the main demand. Additionally, the court of appeal found Fenstermaker had not yet suffered damages as required by that provision.

The court of appeal held Fenstermaker did not file its third-party demand timely and affirmed the trial court’s judgment sustaining the exception of peremption. City of Youngsville v.C.H. Fenstermaker & Associates, LLC, 2017-1065 (La.App. 3 Cir. 4/18/18), 2018 WL 1835434.

PAYMENT UPON SUBSTANTIAL COMPLETION, REDUCTION IN THE CONTRACT BALANCE FOR REPAIRS AND DENIAL OF EXPENSES FOR ATTEMPTED REPAIRS

The Louisiana Third Circuit Court of Appeal held a contractor is entitled to recover the contract price even though defects and omissions are present when he has substantially completed his obligations under a contract. Substantial performance is a question of fact as to whether the construction is fit for its intended purpose despite deficiencies. Factors that may be considered in determining whether substantial performance has been achieved include the extent of the defects or non-performance, the degree to which the purpose of the contract has been impaired, the ease of correction, and the use or benefit to the owner of the work performed. Where evidence of the cost of completion of the work or correction of defective work is presented, the contract price may be reduced by that amount.

In this instance, in a dispute between a general contractor and a subcontractor, the general contractor received the full negotiated contract price from the owner. The court found the subcontractor substantially completed its work, but the general contractor was entitled to a reduction in the contract price for the cost of repairs. The general contractor also sought to recover expenses for attempted repairs. The court found the attempts were unlikely to succeed and were not prudent decisions. The amount due the subcontractor was not reduced by those expenses. Direct Tech Drilling, LLC v. Danrik Construction, Inc., 17-324 (La.App. 3 Cir. 11/22/17), 235 So.3d 1173, writ denied, 2018-0459 (La. 5/11/18).

PAYMENT FOR EXTRA WORK WITHOUT A WRITTEN ORDER ALLOWED

The Louisiana Fifth Circuit Court of Appeal affirmed the decision of the trial court allowing a general contractor to recover for extra work despite a provision in its contract with the owner that alterations or deviations from the specifications involving extra costs of material or labor would be executed on written order. There was no written order. The owner admitted, however, he did, in fact, request the additional work and changes. The owner never requested that the extra work and changes should not be executed because a written work order had not been presented initially. Vinet v. D and M Renovation, LLC, 17-161 (La.App. 5 Cir. 12/20/17), 235 So.3d 1304.

REJECTION OF ALL BIDS BY A PUBLIC ENTITY

The City of New Orleans advertised two public road paving projects. The invitation to bid for each required that bidders submit a Louisiana contractor’s licensing number with two specific classifications: 1) Public Works Construction, and 2) Highway, Streets and Bridge Construction. The contractor’s licensing law does not provide a classification for Public Works Construction, although it does for Municipal and Public Works Construction. When the City discovered it issued flawed invitations to bid, it decided to reject all bids for both projects and to re-advertise them. Protests were lodged, resulting in a lawsuit for each project. The lawsuits were consolidated.

The court of appeal held that the public bid law must be strictly construed. Because no bidding contractor complied with the invitation to bid, nor could any bidder comply, the City was entitled to disqualify all bidders as non-responsive and had just cause to reject all of the bids for both projects. Command Construction Industries, L.L.C. v. The City of New Orleans, 2017-0551 (La.App. 4 Cir. 6/20/18), 2018 WL 3046136.

RESPONSIBILITY FOR DELAYS AND OTHER ISSUES

In a lawsuit between the owner of a construction project and the contractor over disputes primarily involving claims related to delays, the United States District Court for the Eastern District of Louisiana issued judgment following a bench trial, holding, among other things:

(1) As a result of using two prime contractors, the owner owed the prime contractor, which was a party to the litigation, an implied duty of cooperation and non-hindrance so that the work between the two of them could be effectively coordinated;

(2) The owner’s failure with respect to the prime contractor which was not a party to the litigation caused unforeseen delays to the project which were beyond the control and without the fault or negligence of the prime contractor which was a party to the litigation;

(3) The architect owed a duty to the contractor and surety to take reasonable steps to ensure the project plans and specifications were as accurate as possible;

(4) The architect breached its duty to the contractor and surety as to utility tie-ins which were not located where they were depicted on the civil engineering drawings, there being no evidence the architect took any steps to ensure the accuracy of those drawings despite actual knowledge that the utility tie-ins would likely not be located where indicated;

(5) The architect as the owner’s agent caused unforeseen delays;

(6) The civil engineer caused unforeseen delays in failing to respond timely to an RFI;

(7) The Sewerage and Water Board caused unforeseen delays in delaying approval of revised civil site drawings;

(8) The owner contended claims for delay were not properly preserved under the notice provisions of the general conditions, but the court held it waived the ability to rely on the notice provisions through its consistent actions acknowledging the existence of delays;

(9) Because delays caused by the owner directly or through its design professional were excusable, the contractor was not in default;

(10) Since the contractor was not actually in default when it was placed in default by the owner, its termination, according to the contract, was converted to one for convenience;

(11) Because termination of the contractor was for convenience, the owner was liable under the contract for reasonable and proper costs resulting from termination;

(12) Because the contractor’s delay or non-performance was excused, liquidated damages could not be assessed against it by the owner;

(13) Citing L.R.S. 38:2216(H) as authority, the contract provision, to the extent it waived, released or extinguished the contractor’s delay claims, was void and unenforceable;

(14) Again, citing L.R.S. 38:2216(H) as authority, the owner was precluded from asserting the contractor was not entitled to extensions of time or other equitable adjustment for concurrent delays;

(15) The owner, as the party seeking to recover delay damages, had an affirmative duty to show its actions did not constitute a concurrent cause for the delays;

(16) An owner waives its rights to reject, or is estopped from rejecting, any work subsequent to inspection and approval by its representatives;

(17) To the extent any delay to the project was deemed a concurrent delay, the owner’s termination of the defendant prime contractor’s right to proceed with the work constituted a breach of the prime contract;

(18) Because the owner’s termination of the contractor was wrongful and must be considered a termination for convenience, the surety’s performance obligations were not triggered under its bond, and, as a matter of law, the owner was not entitled to damages under the takeover agreement, as enforcing its terms under the circumstances presented would constitute an unlawful cause;

(19) Substantial completion can be obtained prior to final completion and does not require total satisfaction of the contract specifications;

(20) Substantial completion can result even though deficiencies exist;

(21) The takeover agreement entered into between the owner and the surety could not be terminated once the surety had achieved substantial completion;

(22) As a result of the owner’s breach of the takeover agreement, the surety’s performance thereunder was excused, and the owner was not entitled to recover any damages it contended it incurred to complete the project after the surety’s termination under the takeover agreement;

(23) Where one party substantially breaches a contract, the other party has a defense and an excuse for non-performance;

(24) Once the project was substantially complete, the owner was required to give the surety and contractor notice and an opportunity to repair any defective and/or non-conforming work before hiring a third-party completion contractor.

(25) Although a subcontractor’s lien claim was time barred, it could maintain an action under the Open Account Statute, L.R.S. 9:2781, to collect the amount due under its time and materials contract plus reasonable attorneys fees for prosecution and collection.

In conclusion, the court found the defendant prime contractor and its surety were not liable to the owner, the owner was liable to the surety, and the prime contractor was liable to the subcontractor under the Open Account Statute. Parkcrest Builders, LLC v. Housing Authority of New Orleans, 15-1533 (E.D. La. 6/8/18), 2018 WL 2766067.

THIRD-PARTY DEMAND FOR INDEMNITY WAS PREMATURE AND PEREMPTED

The Louisiana First Circuit Court of Appeal held that a third-party claim for defense and indemnity by a general contractor against a subcontractor pursuant to a contractual requirement was perempted under L.R.S. 9:2772, which establishes a five-year peremptive period for construction, notwithstanding the claim was also premature since the indemnitee had not yet been cast in judgment, and had not discharged any liability for which it could seek reimbursement. J.D. Fields & Company, Inc. v. Nottingham Construction Co., LLC, 2017-1220 (La.App. 1 Cir. 4/13/18), 2018 WL 1773301.

CLAIM UNDER THE PUBLIC WORKS ACT SATISFIED THE STATUTORY REQUIREMENTS

Brunt Construction, Inc. contracted with the St. Tammany Parish School Board for additions and renovations to the Abita Springs Elementary School. Mid-Continent Casualty Company was Brunt’s surety. Brunt subcontracted the electrical work to Axis Construction Group, LLP. Nu-Lite Wholesalers, LLC provided electrical supplies to Axis.

Axis failed to pay for the electrical supplies. On September 30, 2010, Nu-Lite sent a notice to the School Board, Brunt and Mid-Continent, by certified mail, advising of its intent to file a sworn statement of claim or privilege. The notice included a copy of the statement of the claim. On October 1, 2010, Nu-Lite recorded its statement of claim or privilege in the St. Tammany Parish mortgage records. Nu-Lite sued Brunt, Mid-Continent and Axis on May 11, 2011. On December 12, 2011, the School Board recorded a certificate of substantial completion. On May 22, 2012, Mid-Continent issued a bond to release the claim made in the mortgage records.

Brunt and Mid-Continent filed an exception of no right of action averring that because Nu-Lite failed to comply with the notice provisions of the Louisiana Public Works Act, it had no right of action. The trial court concluded Nu-Lite’s claim was untimely since it was filed before notice of acceptance and not within forty-five days after notice of acceptance, as required by L.R.S. 38:2242B. Nu-Lite, accordingly, had no right of action to enforce its claims against Brunt and Mid-Continent.

The court of appeal found that, although the statement was filed and notice sent to the School Board before the School Board filed its notice of acceptance, it was not detrimental to Nu-Lite’s claim. The court of appeal, relying on prior jurisprudence under a statute applicable to the Dept. of Transportation and Development, held that notice to the general contractor was sufficient to comply with the mandatory required filing of a statement of the amount due in the mortgage records. The record clearly established that Brunt and Mid-Continent had actual notice of Nu-Lite’s claim within forty-five days of notice of acceptance, and Nu-Lite, thus, satisfied the requirements of the statute. The judgment of the trial court sustaining the exception of no right of action was reversed and the matter remanded for further proceedings. A discussion of whether Brunt and Mid-Continent waived their right to an objection of prematurity of Nu-Lite’s petition by failing to file a dilatory exception was pretermitted. Nu-Lite Electrical Whoesalers, LLC v. Axis Construction Group, LLC, 2017-1204 (La.App 1 Cir. 4/9/18), 2018 WL 1703964.

OBJECTION TO CONFIRMATION OF AN ARBITRATION AWARD FOUND UNTIMELY

The Louisiana First Circuit Court of Appeal held, relying primarily on federal jurisprudence related to federal arbitration law, that an objection to confirmation of an arbitration award was untimely. The successful party in the arbitration proceeding petitioned the trial court to confirm an arbitration award. The responding party answered the petition and opposed confirmation.

Louisiana law, L.R.S. 9:4209, provides that within one year after an award, any party to an arbitration proceeding may apply to the court for an order confirming the award. L.R.S. 9:4213 states that notice of a motion to vacate, modify, or correct an award must be served within three months after the award. The party objecting to the arbitration award did not file or assert any challenge within the three-month period, but argued it could raise its challenge as an affirmative defense to the confirmation of the award. The court of appeal disagreed, found the objection untimely, and considered the objection waived. St. George Fire Protection District No. 2 v. J. Reed Constructors, Inc., 2017-1006 (La.App. 1 Cir. 2/20/18), 2018 WL 946960.

PRIVATE WORKS ACT LIEN HELD INVALID

The Louisiana Fourth Circuit Court of Appeal held that a materials supplier to a subcontractor for other than a residential project must send notice of nonpayment to the general contractor and the owner; otherwise, it will lose its right to file a privilege or lien on immovable property. L.R.S. 9:4802(G)(3). “The return receipt indicating that certified mail was properly addressed to the last known address of the general contractor and the owner and deposited in the U.S. Mail on or before 75 days from the last day of the month in which the material was delivered, regardless of whether the certified mail was actually delivered, refused, or unclaimed satisfies the notice provision hereof or no later than the statutory lien period, whichever comes first.” Id. The material supplier did not produce evidence that notice of nonpayment was given. The court of appeal found, as a result, genuine issues of material fact existed, and summary judgment in favor of the material supplier was not appropriate. AP Interiors, LLC v. Coryell County Tradesmen, LLC, 2017-0230 (La.App. 4 Cir. 3/21/18), 239 So.3d 393.

PUBLIC BODY REQUIRED TO PROCEED WITH A CONSTRUCTION CONTRACT

The Plaquemines Parish Government advertised a project to renovate a building intended for the future use of its district attorney’s office. CDW Services, LLC was the lowest responsible bidder. The interim Parish President, Ed Theriot, accepted the bid and awarded the contract to CDW. Between the time the project was let for bids and the completion of the required documentation process, Amos Cormier was installed as the new Parish President. Cormier rejected all bids and refused to certify the availability of funds for the project. The district attorney filed a petition for a writ of mandamus to compel the Parish to execute the contract with CDW, and a petition for a temporary restraining order seeking to prohibit the Parish from alienating or encumbering the funds previously appropriated. The trial court granted the mandamus and denied the preliminary injunction. All parties appealed.

The court of appeal held mandamus will issue only where an action sought to be compelled is ministerial in nature. A ministerial duty is a simple, definite duty, arising under conditions admitted or proved to exist, and imposed by law. The court also held that the Public Bid Law allows the governing authority to reject a bid for just cause. However, once the public entity has exercised its option and accepted a lowest responsible bidder, it cannot reject all bids and re-advertise the project. At that point, it no longer has the option of rejecting all bids, even for just cause. The public entity is then required to award the contract to the lowest responsible bidder. It is at this point that a ministerial duty arises, and a mandamus action is an appropriate remedy.

There was no issue as to whether CDW was a responsible entity with a valid contractor’s license, and no issue that would prevent it from completing the contract as bid. Indeed, the public body awarded the contract to CDW. The court of appeal held the Parish could not avoid its ministerial duty to sign the contract. Any arguments relating to reasons for the failure to sign the contract in an attempt to establish just cause for rejecting the bid were irrelevant. Mandamus was justified.

As to the preliminary injunction, the trial court reasoned that the relief sought by the district attorney was to prevent the Parish from using the funds identified for the renovation of the building for any other purpose. That would amount to a mandate to the Parish on how to fund a construction project. The manner in which the Parish funded the project was discretionary and not appropriate for mandamus pursuant to the Public Bid Law. The judgment of the trial court granting mandamus, but denying the application for a preliminary injunction, was affirmed. Ballay v. Cormier, 2017-0512 (La.App. 4 Cir. 12/13/17), 234 So.3d 1013.

PEREMPTION AS TO CLAIMS AGAINST A SUBCONTRACTOR AND RELATION BACK

The First Circuit Court of Appeal held that although a claim against a builder under the New Home Warranty Act is governed by the time limitations of that statute, claims against a subcontractor were subject to the peremptive requirements of L.R.S. 9:2772, and not those of the Act. Additionally, the court held that claims against the subcontractor did not relate back to date of the filing of an earlier petition for purposes of peremption, and the claims were perempted. Shields v. Alvin R. Savoie & Associates, Inc., 2017-0602 (La.App. 1 Cir. 11/1/17), 233 So.3d 694.

FEDERAL PROMPT PAYMENT ACT AND THE MILLER ACT AND ATTORNEYS FEES

The United States District Court for the Eastern District of Louisiana, in a claim made by a subcontractor against a general contractor and its surety, held the Federal Prompt Payment Act, 31 U.S.C § 3901, et seq., does not create a private right of action in addition to the Miller Act or breach of contract claims. There is no private right of action between contractors under the Federal Prompt Payment Act.

The court also found that while the Miller Act does not expressly incorporate state law remedies such as attorneys fees, it did not preclude the pursuit of such state law remedies in addition to Miller Act claims. Siboney Contracting Co. v. Berkley Insurance Co., 17-9681 (E.D. La. 2/28/18), 2018 WL 1123624.

AWARD TO OWNER REVERSED AND DENIAL OF CONTRACTOR’S RECONVENTIONAL DEMAND FOR ADDITIONAL PAYMENTS AFFIRMED

Doucette and Associated Contractors, Inc. contracted with Donna and Gerald Phillips to build a four-unit apartment building in Jefferson Parish for a fixed price. Performance of the work was impaired and delayed by Hurricane Katrina, and the parties agreed to increase the amount of the contract. Doucette later filed a lien claiming he was entitled to additional costs in the amount of $40,000 as a result of the hurricane. The Phillipses sued for damages of approximately $400,000 for failure to complete the project timely, defective work and filing an improper lien. Doucette reconvened claiming additional payments. The trial court awarded the Phillipses $20,000 and attorneys fees, and dismissed Doucette’s demand. In awarding $20,000 to the Phillipses, the trial court did not state in its reasons the basis for the award. Doucette appealed.

The court of appeal found the evidence contradicted the Phillips’s claim and was inconsistent and implausible on its face. The award in favor of the Phillipses in the amount of $20,000 was reversed. The denial of the claim of Doucette for additional costs necessitated by Hurricane Katrina was affirmed. The court of appeal found the parties entered into a fixed-price contract, and Doucette did not bear its burden of proving by a preponderance of the evidence that, although the parties agreed to modify the contract price as a result of Hurricane Katrina, that the Phillipses agreed to any further changes in the cost. Phillips v. Doucette, 17-93 (La.App. 5 Cir. 10/25/17), 229 So.3d 667.

INDEPENDENT CONTRACTOR RELATIONSHIP

Irby Burleigh was injured while viewing a home built by D.R. Horton, Inc.-Gulf Coast. Burleigh was injured while descending a pull-down ladder for the attic. The ladder detached from the ceiling causing Burleigh to fall. Burleigh sued Horton and also John Mincey Construction. It was alleged Horton engaged Mincey to install the ladder. Horton moved for summary judgment alleging Mincey was an independent contractor, and it was absolved of any liability as a result. The trial court granted summary judgment in favor of Horton. Burleigh appealed.

If Mincey was an independent contractor, and there was no master-servant relationship between Horton and Mincey, Horton would not be liable for Mincey’s negligence. It was undisputed Mincey was not a licensed contractor. The court stated that to the extent the evidence showed Horton engaged Mincey to act as a contractor, as defined under the Louisiana contractor licensing law, the contract would be an absolute nullity. The evidence showed the contract between Horton and Mincey was for work described in purchase orders separate and distinct from work described on any other purchase order. The court of appeal found the value of the work for any specific purchase order did not satisfy the threshold requirement of $50,000 or more for the definition of a contractor under the licensing law. L.R.S. 37:2150.1(4)(a). Thus, Mincey was not required to be licensed. It rejected the contention that the agreement between Horton and Mincey was invalid and an absolute nullity since Mincey was not licensed.

The court of appeal also examined the issue of whether the work which Mincey was engaged to perform was for a specific period of time or was terminable at the will of either party. To establish an independent contractor relationship, the court stated there must be a showing that the contract was for a specific time and not subject to termination or discontinuance at the will of either party without a corresponding liability. The court of appeal found the evidence indicated the duration of work under the agreement was terminable at will with no corresponding remedy in the event Horton failed to allow Mincey to complete the work under a purchase order. The trial court’s finding that Mincey was an independent contractor was reversed. Burleigh v. Lee, 2017-0335 (La.App. 1 Cir. 3/12/18), 2018 WL 1279830.


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