Recording of Claims on Public Projects- How 2016 Cases Modified Our Understanding Regarding Their Timeliness and NecessityOn December 21, 2016, the Louisiana Fourth Circuit Court of Appeal confirmed its earlier ruling that the filing of a statement of claim on a public construction project is premature if done prior to the recordation of acceptance of the work or of notice of default. For all practical purposes, this ruling generally means that “liens” cannot be filed in connection with a public project until after the certificate of substantial completion is recorded.
The appellate court originally reached this conclusion in November 2015 in the case of Gootee Const., Inc. v. Atkins, 2015-0376 (La. App. 4 Cir. 11/4/15), 178 So. 3d 629. In that case, a sub-subcontractor on a public project recorded a statement of claim prior to substantial completion. The subcontractor then filed suit seeking for the statement of claim to be cancelled. The issue was governed by La. R.S. 38:2242(B), which provides:
Any claimant may after the maturity of his claim and within forty-five days after the recordation of acceptance of the work by the governing authority or of notice of default of the contractor or subcontractor, file a sworn statement of the amount due him with the governing authority having the work done and record it in the office of the recorder of mortgages for the parish in which the work is done.In reaching its decision, the appellate court interpreted the word “after” in the provision literally, explaining “[t]he statute does not state that the claim must be filed within forty-five days ‘of ’ the acceptance, but rather, within forty-five days ‘after’ the acceptance.” Accordingly, the appellate court held that the sub-subcontractor’s recorded claim was premature and affirmed the lower court’s ruling that it be cancelled from the public records.
In September 2016, the Louisiana Supreme Court directed the appellate court to reconsider its ruling in Gootee Const. in light of a Supreme Court decision in another case, Pierce Foundations, Inc. v. Jaroy Const., Inc., 2015-0785 (La. 5/3/16), 190 So. 3d 298. In Pierce, a surety which issued a payment bond in connection with a public project sought to dismiss a claim by a subcontractor on the basis that the subcontractor failed to record any statement of claim at all. The Supreme Court, however, rejected the surety’s argument and ruled that the subcontractor’s failure to file a “lien” did not affect the subcontractor’s rights against the surety. The Supreme Court held that the failure of the subcontractor to record a statement of claim only affected the subcontractor’s privilege against any unexpended funds which remain in the possession of the owner.
In the Fourth Circuit Court of Appeal’s December 2016 reconsideration of its prior decision in Gootee Const., the appellate court held that the Pierce case did not alter its previous November 2015 ruling. Therefore, as the law currently stands (unless additional relief is requested and granted by the Supreme Court), any “lien” filed on a public construction project prior to the recordation of substantial completion or default renders the “lien” premature.
This Fourth Circuit ruling in Gootee Const. clearly makes it much more difficult to record a valid statement of claim on a public project. For example, if a subcontractor or supplier is due money from the beginning of the project, it now must wait until the end of that job and catch the forty-five day window to preserve any rights it may have against the owner. On the other hand, under the Supreme Court’s ruling in Pierce, the recordation of a statement of claim itself is not quite as critical, at least for a subcontractor.
Both Gootee Const. and Pierce reflect significant changes with respect to public works lien laws. Notably, the statutes governing these issues have not been amended in the last year. However, as we are all aware, the application and effect of the statutes are seemingly ever-changing based upon new court analyses. For now, at least, the 2016 decisions in the Gootee Const. and Pierce cases reflect the current state of Louisiana construction law with respect to the timeliness and necessity of recording claims in connection with public projects. It remains to be seen what changes 2017 cases will bring.