The Louisiana Fourth Circuit Court of Appeal and the Louisiana Supreme Court have been engaged in an extended “conversation” about the significance or the necessity of filing a statement of claim (“lien”) under the Louisiana Public Works Act, a conversation which is turning lien law as practiced for 30 years by Louisiana construction lawyers on its head.
In May 2016, the Louisiana Supreme Court held in Pierce Foundations, Inc. v. JaRoy Construction, Inc., 2015-0785 (La. 5/3/16); 190 So. 3d 298, that a subcontractor in contractual privity with a general contractor did not have to file a lien on a public works contract in order to pursue a lawsuit against the project surety. The decision in that matter should be held to the facts in that case. There, a first-tier subcontractor filed suit against the project contractor and its surety long before the filing of the notice of acceptance or default – – and without filing a sworn statement of claim in the mortgage records. The Supreme Court found that La. R.S 38:2242 and La. R.S. 38:2247, concerning filing a public works lien, use “confusing – – even conflicting – – language,” because the first provision uses the permissive “may” when talking generally about filing a lien and the second the restrictive term “requirements” when describing whether a lien must be filed to have a “right of action” on the Public Works Act bond. In other words, while section 2242 provides that a claimant “may” file a sworn statement of the amount claimed, section 2247 suggests that a claimant is required to comply with 2242’s notice and recordation “requirements” in order to proceed against the bond. As what a scathing dissent called “nothing more than legislating from the bench,” the Pierce majority ultimately held that the first-tier subcontractor’s failure to file a lien resulted in the loss of its privilege against the public owner, but did not affect a subcontractor’s right to proceed directly against the contractor and its surety. This holding was important because, under this specific set of facts, it preserved a first-tier subcontractor’s right to pursue the surety, even absent a filed Public Works Act lien.
In Gootee Construction, Inc. v. Dale N. Atkins, 15-0376 (La. App. 4 Cir. 11/4/15); 178 So. 3d 629 (“Gootee I”), the Louisiana Fourth Circuit Court of Appeal found a public works act lien was premature under La. R.S. 38:2242 because it was filed prior to the recordation of acceptance by the project’s owner and not “within” the forty-five day window running from recordation of acceptance. The Gootee I opinion did not expressly consider the subcontractor’s rights against the surety bond. Last year, the state Supreme Court granted writs and ordered the Fourth Circuit Court of Appeal to reconsider its ruling “in light of” Pierce. The Fourth Circuit was thus presented with a golden opportunity to revise its decision in Gootee I – – or expand or contract the reach of Supreme Court’s ruling in Pierce.
On reconsideration, the Louisiana Fourth Circuit held that “the Pierce Court holding is limited to a subcontractor’s rights to proceed directly against a surety despite his failure to comply with notice and recordation as provided by La. R.S. 38:2242.” The Fourth Circuit did not revise its holding in Gootee I, distinguished Pierce, and held tight to its view that the lien-filing period does not begin to run until notice of acceptance or default is filed. The Supreme Court recently denied writs, so this saga is complete – – at least for now.
Thus, for better or worse, a ready rule is that a first-tier subcontractor can only file a public works lien strictly within the forty-five days following the recordation of the notice of acceptance by the owner or notice of default, and not beforehand. Depending on the facts, filing a statement of claim prematurely may not affect the subcontractor’s rights to sue the contractor or surety, but it also may not preserve its privilege against the public owner.