Practice Update: Fourth Circuit Affirms Prior Decision on Premature Filing of Statements of Claim Under the Louisiana Public Works Act

April 21 2017 | Committees

Practice Update:  Fourth Circuit Affirms Prior Decision on Premature Filing of Statements of Claim Under the Louisiana Public Works Act

   By: Michael D. Lane


In Orleans Parish, a claimant under the Louisiana Public Works Act (“LPWA”) must file a sworn statement of claim in the public record during the 45-day window following the recordation of acceptance or default.  In April 2016, the Louisiana Fourth Circuit ruled in Gootee Construction, Inc. v. Dale N. Atkins (“Gootee I”)[1] that a subcontractor’s sworn statement of claim was premature under the LPWA because it was filed before the notice of acceptance was recorded.  The Gootee I court likewise ruled that the subcontractor’s claim against the payment bond surety was premature.  Following the Gootee I ruling, this author discussed the history of conflicting jurisprudence and the practical implications of the decision.  This article summarizes and analyzes recent developments in the Gootee matter in light of the decision rendered by the Louisiana Supreme Court in Pierce Foundations, Inc. v. JaRoy Construction, Inc. (“Pierce”)[2]

The Pierce Decision

After the Fourth Circuit rendered the Gootee I decision, the subcontractor filed an application for a writ of certiorari and/or review with the Louisiana Supreme Court.  On September 23, 2016, the Louisiana Supreme Court granted the writ application and remanded to the Fourth Circuit to reconsider its decision in light of Pierce

In a 4-3 decision, the Pierce court addressed the effect of a failure to file a sworn statement of claim under the LPWA where the claimant filed a lawsuit against the general contractor and its surety more than one year before the notice of acceptance was recorded.  This provision states:  “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.” 

The Pierce majority ruled that the failure to file a sworn statement under the LPWA does not bar a claimant from filing suit against the contractor and its surety.  The court focused on the inherent tension between La. R.S. § 38:2242(B) -- particularly the use of the permissive “may” -- and the language in La. R.S. § 38:2247, which refers to “the notice and recordation requirements of R.S. 38:2242(B).”[3]  The Pierce court found this confusing language created an ambiguity that had to be resolved in a manner that best comports with the statute, i.e., “to protect those performing labor and furnishing materials for public works.”[4]   The Pierce majority ultimately held that the failure of a claimant to comply with the notice and recordation requirements does not affect the claimant’s right to proceed directly against the contractor and its surety.[5]    

The Gootee II Decision

After remand from the Louisiana Supreme Court and additional briefing by the parties, the Fourth Circuit addressed the Pierce decision and affirmed its previous ruling in Gootee I that a sworn statement of claim must be filed during -- not before or after -- the 45-day window established by the LPWA.  Gootee Constr. Inc. v. Dale N. Atkins (“Gootee II”).[6]  According to the Fourth Circuit, any claim filed before the recordation of the notice of acceptance is premature.  After a lengthy discussion of the Pierce decision, the Gootee II court concluded that the questions before the Fourth Circuit were not addressed by the Louisiana Supreme Court.  The Fourth Circuit reasoned that Pierce was limited to its “unique circumstances,” namely, the claimant’s filing of a lawsuit prior to recordation of the notice of acceptance. 

Although the Fourth Circuit found its ruling consistent with Pierce, it is difficult to reconcile the reasoning in Gootee I and II with the Pierce decision.  The Pierce court recognized that the “cardinal rule of statutory interpretation [is] that the word ‘may’ is permissive” in La. R.S. § 38:2242(B), not mandatory.[7]  Nevertheless, the Gootee I and II court held that a statutory claim must be filed within the 45-day window.  Another inconsistency is the disparate treatment applied to situations not covered by the statute.  As the Louisiana Supreme Court recognized in its earlier Burko decision, the LPWA does not address the situation where suit is filed before the recordation of the notice of acceptance.[8] The same could be said of the situation where a statement of claim is filed before acceptance is recorded:  “R.S. 38:2242 gives no consequence of not filing and/or recording the sworn statement.”[9]  The Burko court also rejected the argument that a failure to file a statutory claim results in the loss of the privilege.[10]  These principles were clearly reaffirmed in Pierce, yet they do not factor into the Gootee II decision.

In a similar vein, the Gootee I and II decisions do not account for Pierce’s holding that the one-year deadline to file suit is “first and foremost a prescription provision, providing an additional year to parties filing suit after the acceptance of work or default notice is filed.”[11]  In so finding, the Pierce court construed the 45-day period and one-year period in the same fashion:  “Here, as in Burko, Pierce filed suit against the surety long before the event occurred that triggers the 45-day period during which a claimant may file and record his sworn statement under La. R.S. 38:2242, as well as the prescriptive period of one year during which suit may be filed in accordance with La. R.S. 38:2247.”[12]  The Fourth Circuit does not address this statement or explain why suit filed before the one-year period begins is valid but a sworn statement of claim filed before the 45-day period commences is not.

            Perhaps the most significant takeaway from the Pierce decision is the Court’s repeated admonition that an ambiguity in the LPWA should result in an interpretation that promotes the purpose of the statute.  Most practitioners are aware of the conflict between this approach and the strict constructionist principle applied by many courts, the result of which is often determinative of the outcome.  Pierce’s heavy emphasis on interpreting the LPWA to facilitate payment to claimants comes into conflict with the strict construction approach embodied in Gootee I and II.  This is not overlooked by Justice Knoll or Justice Hughes, who argue in dissent that the majority errs by failing to strictly construe the LPWA.  Gootee I and II reflect the approach taken by the dissenting justices rather than the Pierce majority.  It remains to be seen if a divided Louisiana Supreme Court will attempt to reconcile these seemingly contradictory holdings. 

Impact on the Construction Industry

Given the practical considerations implicated by these recent decisions, attorneys who represent public owners, sureties, general contractors, subcontractors, and suppliers would be well-served if the Louisiana Supreme Court or the Louisiana Law Institute provided some clarity.  It is not difficult to imagine the thorny issues that may arise if Gootee II remains good law.  The second-tier subcontractor in Pierce is a perfect example.  Pierce Foundations completed its installation of piles in November 2008 and filed suit in July 2009 to recover allegedly unpaid amounts.  Yet it was not until October 2011 that the public owner recorded the notice of acceptance, thereby triggering the 45-day period to file a claim.  This is a common occurrence on large construction projects, particularly for subcontractors and suppliers that provide services or materials related to demolition, site work, pile driving, foundations, etc.  

Whereas the filing of suit more than two years before the recorded acceptance comports with the LPWA according to Pierce, the subcontractor in this situation could not file a sworn statement of claim until three years after it completed its work under Gootee I and II.  This puts some claimants in an untenable position where they are forced to wait months or years after they finish work before they can perfect a claim.  An unintended consequence is that claimants have an incentive to file suit in lieu of filing a sworn statement of claim to protect their statutory privilege, potentially leading to a proliferation of unnecessary lawsuits.  This undesirable effect was obviously not what the drafters of the statute envisioned.

Absent an amendment to the LPWA, the most logical way, in the author’s opinion, to harmonize the language of the statute would be to allow claimants to record statements of claim at any time after the maturity of a claim, so long as it is filed prior to or during the 45-day period established in La. R.S. § 38:2242(B).  This can be readily accomplished by construing the phrase “maturity of his claim” as the time when an amount owed becomes overdue, not when the 45-day window is triggered.  This comports with the statute’s plain language, permitting sworn statements of claim to be recorded after “maturity” as well as “within forty-five days.”  Such an  interpretation adequately protects, rather than impedes, the rights of the intended beneficiaries of the LPWA, while resulting in minimal harm to public owners, sureties, and general contractors.  Until then, construction lawyers with clients that perform work in Orleans Parish should continue to vigilantly monitor the public records and make sure their clients file statutory claims within 45 days of a notice of acceptance or default. 

Note: The views of the author do not necessarily reflect those of the New Orleans Bar Association.

[1]       Gootee Constr., Inc. v. Dale N. Atkins, 2015-0376 (La. App. 4 Cir. 11/4/15); 178 So.3d 629, reh’g denied (La. App. 4 Cir. 12/1/15).

[2]       Pierce Foundations, Inc. v. JaRoy Constr., Inc., 2016-0021 (La. 9/23/16); 190 So.3d 298.

[3]       Id. at 304 (emphasis added).

[4]       Id. at 305 (quoting Wilkin v. Dev Con Builders, Inc., 561 So.2d 66, 70 (La. 1990)).

[5]       Id. at 304.  The court went on to hold that the LPWA creates an additional remedy to persons contributing to the construction of a public works and “is not intended to – and does not – affect rights between parties proceeding directly in contract….”  Id. at 305. 

[6]       Gootee Constr. Inc. v. Dale N. Atkins, 2015-0376 (La. App. 4 Cir. 12/21/16); --- So.3d ---.

[7]       Id. at 304 (quoting La. R.S. § 1:3 and Kelly v. State Farm Fire & Cas. Co., 2014-1921 (La. 5/5/15); 169 So.3d 328, 336).

[8]       Id. at 307 (citing “K” Constr., Inc. v. Burko Constr., Inc., 1993-1338 (La. App. 4 Cir. 12/16/93); 629 So.2d 1370, 1374).

[9]       Burko, 629 So.2d at 1372.

[10]     Id. (declining to adopt the surety’s argument that “may” as used in the statute means that a claimant has the option to either (1) file and “perfect” its statutory claim or (2) not file and not “perfect” its statutory claim).

[11]     Pierce, 190 So.3d at 305 (emphasis in original).

[12]     Id. at 307.

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