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April 3rd, 2017
construction
FIFTH CIRCUIT ADDRESSES THE TRIGGER FOR LIEN FILINGS

In Golden Nugget Lake Charles, LLC v. W.G. Yates & Sons Constr. Co., No. 16-30496, 2017 WL 892407 (5th Cir. Mar. 6, 2017), the Fifth Circuit Court of Appeals determined the 60-day period for general contractors to file a lien against a project owner’s property under Louisiana Private Works Act § 9:4822(B) does not begin to run until the owner files either a Notice of Termination or a Notice of Substantial Completion.  The Court rejected the owner’s interpretation of the statute that the 60-day period begins when the event of substantial completion occurs, not when the Notice of Substantial Completion is filed.

In 2011, W.G. Yates & Sons Construction Company entered into a contract with the original owner of the Golden Nugget Lake Charles Hotel & Casino in Lake Charles, Louisiana to complete a casino, hotel, and spa.  A written notice of the contract was recorded in July 2012.  In 2013, Golden Nugget Lake Charles, LLC purchased the Project.  Yates and Golden Nugget signed a Certificate of Substantial Completion on December 1, 2014, but did not record the document as a Notice of Substantial Completion, as required by the statute. 

Golden Nugget filed a complaint on November 25, 2015, alleging breach of contract, breach of warranty and negligence in connection with the Project.  Yates filed a counterclaim on December 21, 2015, alleging Golden Nugget was wrongfully refusing and delaying payment on the Project.  Two days later, Yates filed a Statement of Lien and Privilege to secure payment for its work. 

Golden Nugget filed a Motion to Partially Dismiss Yates’ counterclaim, arguing Yates did not file the lien within the statutory time period.  The District Court determined the lien was untimely, because, under the District Court’s interpretation of the statute, Yates failed to file the lien within 60-days of substantial completion.

The Fifth Circuit reversed the District Court’s judgment, holding the phrase “substantial completion of the work” refers to a filed document, not an event.  The Fifth Circuit interpreted Louisiana Private Works Act § 9:4822(B) to place a burden on the project owner to take affirmative action to cut off potential claims when a contract has been recorded by either filing a Notice of Termination or a Notice of Substantial Completion.  At the time either of these documents is filed, the 60-day period for general contractors to file a lien begins to run.  The Fifth Circuit found that because Golden Nugget failed take the affirmative action of filing the Notice of Substantial Completion to start the 60-day time period and cut off potential claims, Yates had a valid lien.

The Fifth Circuit’s decision in this case affirms the importance of owners protecting themselves and fulfilling all filing requests. The filing allows general contractors to distinctly determine when the 60-day time period under Louisiana Private Works Act § 9:4822(B) begins to run.  While we think it is good practice for general contractors to file liens upon completion of a project, they should be aware that an owner’s failure to comply with procedural requirements may extend the lien period.

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