Call to Action

The case of Golden Nugget Lake Charles, L.L.C. v. W.G. Yates & Sons Construction Company, No. 16-30496, — F.3d — (5th Cir. 2017), 2017 WL 892407, the United States Court of Appeals for the Fifth Circuit (“Fifth Circuit”) held that, where a project owner never took affirmative action to file a notice of substantial completion, a general contractor’s statutory lien under the Louisiana Private Works Act (“LPWA”) was timely even though recorded a year after substantial completion had actually been achieved.

In 2011, project owner Golden Nugget Lake Charles, L.L.C. (“Golden Nugget”) engaged W.G. Yates & Sons Construction Company (“Yates”) to serve as the general contractor for the construction of a casino, hotel, and spa (“the Project”).  On December 1, 2014, Golden Nugget and Yates signed a certificate of substantial completion, indicating that the Project was fit for occupancy but did not record it at the courthouse.  The Project has been in use ever since.  However, Golden Nugget acknowledged it had withheld approximately $18.7 million to protect itself against “estimated damages” caused by alleged contractual breaches by Yates.

On November 25, 2015, Golden Nugget filed a complaint in federal district court based on those alleged contractual breaches.  Yates filed a counterclaim on the basis of the $18.7 million withheld by Golden Nugget.  In its counterclaim, Yates indicated it would be “filing a statement of lien and privilege pursuant to [the Louisiana Private Works Act]” and would seek judicial enforcement of this lien.  When Yates followed through and actually filed its lien statement on December 23, 2015, Golden Nugget sought partial dismissal on the grounds that Yates had not filed its lien within sixty days of substantial completion as required by the Private Works Act.  The district court agreed with Golden Nugget’s interpretation of La. R.S. 9:4822, and dismissed Yates’ claim for a statutory lien with prejudice.  Yates filed a notice of appeal thereafter.

On appeal, the Fifth Circuit addressed the question of whether the phrase “substantial completion of the work” in La. R.S. 9:4822(B) refers to the occurrence of an event or the recordation of a document.  Yates contended that the term requires Golden Nugget, as the Project owner, to take affirmative action by filing either a notice of termination or a notice of substantial completion of the work in the local property records.  Because such a document was never actually filed by Golden Nugget, Yates claimed its lien statement – – filed over a year after the parties signed the certificate of substantial completion – – was nonetheless timely.  By contrast, Golden Nugget argued that the sixty-day period during which Yates could have filed its lien statement had long expired.  Golden Nugget drew support for its argument from the language of La. R.S. 9:4822(H), which defines substantial completion as an event; Yates drew support from language of La. R.S. 9:4822(F), clearly referencing the filing of a document.

The Fifth Circuit found the text of the Private Works Act ambiguous, so it looked to Louisiana courts’ interpretations.  While noting that Louisiana courts have not addressed the precise question at hand – – whether La. R.S. 9:4822(B), which applies to general contractors, considers “substantial completion” to be an event or a document – – cases involving subcontractors indicate that an owner must affirmatively file a notice to trigger the lien-filing clock.  Thus, the Fifth Circuit held that because Golden Nugget never actually filed a notice of substantial completion (or termination), Yates’s lien was timely:

The LPWA places the burden on an owner to take affirmative action to cut off potential claims when a contract has been recorded, whether it is a general contractor or a subcontractor.  The weight of Louisiana case law, in combination with the nearly identical language in subsections (B) and (F), suggest that the sixty-day period in 9:4822(B) begins to run when either a notice of termination or a notice of substantial completion is filed. 2017 WL 892407, at *5.

Construction project owners beware: Affirmative action is not controversial; it is required in the federal Fifth Circuit.