Material Suppliers – – Maybe the 75-day notice is not required?

Material Suppliers – – Maybe the 75-day notice is not required?
Woodrow Wilson Constr., LLC v. Amtek of Louisiana[1]

On August 6, 2018 the Louisiana First Circuit Court of Appeal held that a materialman who failed to provide notice per La. R.S. 38:2242(F) could still pursue a claim against the general contractor and the surety on the payment bond on a public works project pursuant to La. R.S. 38:2247.  In doing so, the First Circuit has arguably recognized that the 75-day notice set forth in La. R.S. 38:2242(F) is no longer required in order for a materialman to assert a claim against a public works payment bond under the Louisiana Public Works Act.

What is the 75-Day Notice?

          The 75-day notice at issue is the time period in which materialman/suppliers must notify general contractors of non-payment by subcontractors.  Simply put, a materialman must provide notice of non-payment to a general contractor when it has not been paid by a subcontractor and must do so on or before 75 days from the last day of the month in which material was delivered.  Per the sample time-line below, a materialman that delivered materials to a jobsite on January 5 who was not paid by a subcontractor would have to provide the 75-day notice on or before April 16.

Background

Woodrow Wilson Construction, LLC (“Woodrow Wilson”) as contractor entered into a contract with the Orleans Parish School Board (“OPSB”) as owner for construction of the New Alice Harte Elementary School in July 2012 (“Project.”)  Western Surety supplied the required performance and payment bond to Woodrow Wilson for the Project.  Woodrow Wilson then entered into a subcontract with Amtek of Louisiana, Inc. (“Amtek”) to perform site work on the Project.  Amtek then subcontracted with Baton Rouge Winwater Works Co. (“Winwater”) as a materialman to supply various materials, such as drainage pipe, in-line drains, and pipe for use on the Project.  Amtek billed Woodrow Wilson and Woodrow Wilson billed the OPSB for all materials supplied by Winwater for the Project, and the OPSB paid Woodrow Wilson for all materials supplied by Winwater.  Disputes arose on the Project, and Woodrow Wilson terminated Amtek.  Unfortunately, no payments were made to Winwater for the materials it supplied to the Project.

Due to the non-payment, Winwater sent notice of non-payment to Woodrow Wilson via certified mail on October 29, 2014 and again via fax on November 24, 2014.  A certificate of substantial completion was recorded on December 2, 2014.  Then, on January 5, 2015, Winwater filed a statement of claim alleging it was owed $79,240.00 for materials and costs of filing the statement of claim.  On that same day, Winwater also sent demand letters and copies of its statement of claim via certified mail to Woodrow Wilson, Amtek, and the surety – Western Surety.  On January 27, 2015, Winwater sent a second demand via certified mail to Western Surety.  Eventually, Winwater filed suit against Woodrow Wilson, Amtek, and Western Surety for its claim.

Outcome at Trial Court

 After trial, the district court held that Winwater failed to provide the 75-day notice set forth in La. R.S. 38:2242(F) to Woodrow Wilson concerning Amtek’s non-payment until after a lapse in time for issuing notice of non-payment.[2]  Thus, the trial court dismissed Winwater’s claims against Woodrow Wilson and Western Surety with prejudice finding that they have no duty to pay Winwater.

The Appeal

Winwater appealed the holding of the district court claiming that it has a right to recover against Woodrow Wilson and Western Surety under La. R.S. 38:2242(B) and La. R.S. 38:2247 because Winwater timely filed its statement of claim per La. R.S. 38:2242(B) and complied with the notice requirements of La. R.S. 38:2247.[3]

Woodrow Wilson and Western Surety argued that in order for Winwater to pursue a claim against Woodrow Wilson and Western Surety on the bond, Winwater must first comply with the requirements of both La. R.S. 38:2242(B) and La. R.S. 38:2242(F).  Thus, a materialman such as Winwater would have to timely submit its statement of claim and also provide the required 75-day notice of nonpayment of La. R.S. 38:2242(F) in order to pursue a claim against the payment bond.

In reviewing La. R.S. 2242(B), the First Circuit cited the Louisiana Supreme Court’s holding in Pierce Foundations, Inc. v. Jaroy Construction, Inc. [4] for the position that a claimant “may” file a sworn statement and this privilege is an additional remedy provided by the Public Works Act.[5]  The First Circuit then held that a materialman’s failure to provide the 75-day notice of La. R.S. 38:2242(F) results only in the materialman’s loss of the right to file a privilege against any contract funds held by the public entity.[6]

The Court also looked at La. R.S. 38:2247 and noted that La. R.S. 38:2247 includes the requirements for a claimant, such as Winwater, to file suit on the bond against a contractor and/or the surety.  The requirements in La. R.S. 38:22247 refer to the recordation requirements of La. R.S. 38:2242(B) and notice requirements if the claimant does not have a direct contract with the general contractor.  However, the Court noted that (1) there is no mention of La. R.S. 38:2242(F)’s materialman 75-day notice of nonpayment and (2) La. R.S. 38:2247 specifically states that “[n]othing in this part shall be construed to deprive any claimant…. of his right of action on the bond.”[7]

Going back to Pierce Foundations, Inc., the First Circuit noted that just as the failure of a subcontractor to comply with the requirements of La. R.S. 38:2242(B) does not affect the right of a subcontractor in contractual privity with a general contractor to proceed against the general contractor and its surety under La. R.S. 38:2247 – –  a materialman’s failure to comply with the 75-day notice in La. R.S. 38:2242(F) does not affect the materialman (who also gave required notice under La. R.S. 38:2247) from proceeding directly against the contractor and the surety on the bond pursuant to La. R.S. 38:2247.[8]  The failure to provide the 75-day notice in La. 38:2242(F) prevents the materialman from enforcing a privilege on any funds held by the public entity.  However, according to the First Circuit, a materialman can still assert a claim against a contractor and a surety on the bond as long as it complies with the requirements of La. R.S. 38:2247.

Conclusion

This decision of the First Circuit arguably stands for the position that materialman claimants who fail to provide the 75-day notice set forth in La. R.S. 38:2242(F) can still proceed against the general contractor and a surety on a payment bond as long as the materialman complies with the requirements of La. R.S. 38:2242(B) (records a timely statement of claim) and the requirements of La. R.S. 38:2247 (provides required notice to the general contractor).


[1]           2018 WL 3719719, 2017-1156 (La. App. 1 Cir. 8/6/18); The opinion has not been released for publication in permanent law  reports.  Until released, it is subject to revision or withdrawal.

[2]           Id. at *2, *5.

[3]           Id. at *5.

[4]           2015-0785 (La. 5/13/16), 190 So. 3d 298, 305.

[5]           Woodrow Wilson at *7.

[6]           Id.

[7]           Id.

[8]           Id. at *8.