84 Lumber Company v. F.H. Paschen, S.N. Nielsen & Associates, LLC et al

Filing 296

ORDER AND REASONS granting in part and denying in part 272 Motion for Judgment on the Pleadings. The Court GRANTS defendants' motion for judgment on the pleadings with respect to the June 2012 statements of claim. The Court DENIES defendants' motion with respect to the November 2011 statement of claim. Signed by Judge Sarah S. Vance on 9/14/2017. (cg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
84 LUMBER COMPANY
VERSUS

CIVIL ACTION
NO. 12-1748

F.H. PASCHEN, S.N. NIELSEN &
ASSOCIATES, LLC, ET AL.

SECTION “R” (5)

ORDER AND REASONS
Defendants F.H. Paschen, S.N. Nielsen & Associates, LLC (“Paschen”),
Continental Casualty Company (“Continental”), Safeco Insurance Company
of America, and Fidelity and Deposit Company of Maryland (collectively,
“defendants”) move for judgment on the pleadings1 as to Count Six of the
second amended complaint. 2 For the following reasons, the Court grants in
part and denies in part defendants’ motion.

I.

BACKGROUND
This case arises out of two school construction projects in Louisiana. 3

Paschen entered into an agreement with the Louisiana Department of
Education to build a new elementary school at the Mildred Osborne School

1
2
3

R. Doc. 272.
R. Doc. 249.
R. Doc. 28 at 2-3 ¶ 5.

in New Orleans (“Osborne Project”).4 Paschen also entered into a contract
with the Plaquemines Parish School Board to build the South Plaquemines
High School (“South Plaquemines Project”).5 On both projects, Paschen was
the general contractor. 6 Both projects were subject to the provisions of the
Louisiana Public Works Act (“LPWA”), La. R.S. § 38:2241, et seq., and
therefore each project required the general contractors to post payment
bonds before construction could begin. 7 Continental, Safeco, and Fidelity
(collectively, “Sureties”) issued the required bonds. 8
Paschen subcontracted a portion of both projects to J & A Construction
Management Resources Company, Inc. (“J & A”). 9

J & A in turn

subcontracted a portion of its work on both projects to 84 Lumber. 10 84
Lumber alleges that Paschen and J & A have failed to compensate it for its
work on the projects. 11 As relevant here, 84 Lumber filed three statements
of claim under the LPWA. See La. R.S. § 38:2242(B). First, on November 2,
2011, 84 Lumber filed a statement of claim in the amount of $3,507.16 for

4
5
6
7
8
9
10
11

Id. at 3 ¶ 5.
Id.
Id. at 2 ¶ 5.
Id. at 3 ¶ 6.
Id.
Id. at 3 ¶ 7.
Id. at 3 ¶ 9.
Id. at 3-4 ¶ 9.
2

materials supplied on the Osborne Project.12 Second, on June 13, 2012, 84
Lumber filed a statement of claim in the amount of $808,520.39 for work
performed on the Osborne Project. 13 Third, also on June 13, 2012, 84
Lumber filed a statement of claim in the amount of $1,042,080.09 for work
performed on the South Plaquemines Project.14 As the Court explained in an
earlier order, 84 Lumber did not provide proper notice of the June 2012
statements of claim. 15 Specifically, although the statute required 84 Lumber
to provide written notice by registered or certified mail to Paschen, see La.
R.S. § 38:2247, 84 Lumber provided notice by email to Paschen’s counsel.16
Paschen and Continental deposited bonds as security for 84 Lumber’s
statements of claim to induce the project owners to release payment to

Id. at 5 ¶ 13.
Id. at 3-4 ¶ 9, 4 ¶ 13; see also R. Doc. 263 at 4.
14
Id.
15
R. Doc. 263.
16
Id. Although 84 Lumber acknowledged that its emailed
communications did not satisfy the precise terms of Section 2247, it argued
that all that is required under the statute is actual notice. This
interpretation essentially rewrites the statute. The Court notes that actual
notice is significantly broader than written notice “by registered or certified
mail,” potentially including notice by telephone or publication and
introducing evidentiary uncertainty into a statutory process obviously
designed to avoid issues about receipt of notice. While the Court is
sympathetic to 84 Lumber’s predicament, it will not rewrite a Louisiana
statute that should be “strictly construed such that the privileges granted
are not extended beyond the statute[].” Wilkin v. Dev Con Builders, Inc.,
561 So. 2d 66, 71 (La. 1990).
3
12
13

Paschen.17 See La. R.S. § 38:2242.2. Release bonds for the two Osborne
Project statements of claim were deposited on June 27, 2012, and January 4,
2013.18 The release bond for the South Plaquemines Project statement of
claim was deposited on August 3, 2012. 19
On July 5, 2012, 84 Lumber sued Paschen and the Sureties, alleging
that 84 Lumber was not paid in full for work performed on the Osborne and
South Plaquemines Projects.20 84 Lumber sued under the LPWA, seeking
payment on its June 2012 statements of claim from both Paschen and the
Sureties (Counts One and Two).21 84 Lumber also brought a claim of unjust
enrichment.22 On February 5, 2013, 84 Lumber amended its complaint to
add a breach of contract claim and to seek payment for materials provided
and extra work performed on the projects.23 84 Lumber again amended its
complaint on April 17, 2017, seeking recovery from the release bonds (Count
Six).24

17
18
19
20
21
22
23
24

R. Doc. 249 at 1-2 ¶¶ 1-3.
Id. at 1 ¶ 1, 2 ¶ 3.
Id. at 2 ¶ 2.
R. Doc. 1.
Id. at 4-5 ¶¶ 13-14, 16.
Id. at 6 ¶ 18.
R. Doc. 28 at 4 ¶ 10, 6 ¶ 20.
R. Doc. 249.
4

The Court granted summary judgment against 84 Lumber on Counts
One and Two, its initial LPWA claims, because its June 2012 statements of
claim lacked proper notice.25 The Court also granted summary judgment on
the unjust enrichment claim.26

Additionally, the Court dismissed 84

Lumber’s claim for extra work performed on the projects. 27 Defendants now
move for judgment on Count Six, 84 Lumber’s release bond claim. 28 84
Lumber responded, 29 defendants replied, 30 and 84 Lumber filed a surreply.31

II.

LEGAL STANDARD
A motion for judgment on the pleadings under Federal Rule of Civil

Procedure 12(c) is appropriate if the matter can be adjudicated by deciding
questions of law rather than factual disputes. Brittan Commc’ns Int’l Corp.
v. Sw. Bell Tel. Co., 313 F.3d 899, 904 (5th Cir. 2002). It is subject to the
same standard as a motion to dismiss under Rule 12(b)(6). Doe v. MySpace,
Inc., 528 F.3d 413, 418 (5th Cir. 2008). To survive a Rule 12(b)(6) motion to

25
26
27
28
29
30
31

R. Doc. 263 at 23.
Id. at 24.
R. Doc. 290.
R. Doc. 272.
R. Doc. 274.
R. Doc. 285.
R. Doc. 286.
5

dismiss, plaintiffs must plead enough facts to “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007)). A claim is facially
plausible “when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. at 678. A court must accept all well-pleaded facts as true and
must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S.
Unwired, Inc., 565 F.3d 228, 239, 244 (5th Cir. 2009). But the Court is not
bound to accept as true legal conclusions couched as factual allegations.
Iqbal, 556 U.S. at 678.
A legally sufficient complaint must establish more than a “sheer
possibility” that plaintiff’s claim is true. Id. It need not contain detailed
factual allegations, but it must go beyond labels, legal conclusions, or
formulaic recitations of the elements of a cause of action. Twombly, 550 U.S.
at 555. In other words, the face of the complaint must contain enough factual
matter to raise a reasonable expectation that discovery will reveal evidence
of each element of the plaintiff’s claim. Lormand, 565 F.3d at 257. If there
are insufficient factual allegations to raise a right to relief above the
speculative level, or if it is apparent from the face of the complaint that there

6

is an insuperable bar to relief, the claim must be dismissed. Twombly, 550
U.S. at 555.

III. DISCUSSION
Like Counts One and Two, which were subject to an earlier motion for
summary judgment, Count Six seeks payment for the work performed and
materials supplied by 84 Lumber on the Osborne and South Plaquemines
Projects. Count Six alleges a right to payment from Paschen and Continental
by virtue of the release bonds. 32 Defendants principally contend that the
release bond claim is not viable in light of the Court’s order granting
summary judgment on 84 Lumber’s LPWA claims in Counts One and Two. 33
Additionally, defendants argue that 84 Lumber’s release bond claims are
perempted by Section 2247’s one-year limitation period. 34
A.

84 Lumber’s Release Bond Claim Is Derivative of Its
Earlier-Asserted LPWA Claims

The purpose of the LPWA is “to protect those contributing to the
construction, alteration, or repair of public works.” Pierce Foundations, Inc.
v. Jaroy Constr., Inc., 190 So. 3d 298, 306 (La. 2016). To accomplish this

32
33
34

R. Doc. 249 at 3 ¶ 5.
R. Doc. 272-1 at 2.
R. Doc. 285 at 6-9.
7

purpose, the LPWA first requires that the contractor for projects like the
Osborne and South Plaquemines Projects post a bond “for the payment by
the contractor or subcontractor to claimants as defined in R.S. 38:2242.” Id.
at 301 (quoting La. R.S. § 38:2241(A)(2)). Section 2242 defines a “claimant”
as:
any person to whom money is due pursuant to a contract with
the owner or a contractor or subcontractor for doing work,
performing labor, or furnishing materials or supplies for the
construction, alteration, or repair of any public works . . . .
La. R.S. § 38:2242(A). The LPWA “further establishes a means for asserting
a claim”:
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.
Pierce, 190 So. 3d at 301-02 (footnote omitted) (quoting La. R.S. §
38:2242(B)). But before a subcontractor not in privity with the general
contractor may assert a right of action against the general contractor on the
bond, the subcontractor must provide proper notice. La. R.S. § 38:2247; see
also Elec. Supply Co., Inc. v. Great Am. Ins. Co., 973 So. 2d 827, 830 (La.
App. 2 Cir. 2007) (“[T]he notice referenced in [Section] 2247 is to be given

8

to the contractor to preserve the right of action against the contractor or the
surety.”).
In effect, these provisions “give certain classes of persons not enjoying
privity of contract with the general contractor or with the governing
authority a claim nevertheless against the general contractor and his surety
and in some instances a claim against the governing authority itself.” Wilkin
v. Dev Con Builders, Inc., 561 So. 2d 66, 71 (La. 1990); see also Pierce, 190
So. 3d at 301 (noting that the LPWA grants subcontractors “a privilege
against the unexpended fund in the possession of the public entity with
whom the original contract had been entered into,” instead of a lien on the
public work itself (quoting Wilkin, 561 So. 2d at 70)).
The public authority that owns the project becomes liable for these
claims if it “makes final payment to the contractor without deducting the
total amount of all outstanding claims . . . or without obtaining a bond from
the contractor to cover” that amount. La. R.S. § 38:2242(D). To avoid the
public authority’s liability, “any interested party may deposit” a bond, cash,
certified funds, or a certificate of deposit up to 125% of the amount asserted
in the claim. Id. § 38:2242.2(A). This deposit “guarantee[s] payment of the
obligation secured by the privilege,” and cancels the statement of claim in the
mortgage records.

Id. § 38:2242.2(A)-(B).
9

According to 84 Lumber,

Paschen and Continental deposited three release bonds under this provision
to induce the project owners to release payment without incurring the risk of
liability under Section 2242(D).35
84 Lumber now seeks to recover from these release bonds instead of
the payment bond. Count Six of the second amended complaint purports to
assert an additional right of action arising out of the release bonds. 36 But 84
Lumber fails to cite any legal authority recognizing a right to recover from
release bonds that is independent of its right of action under the LPWA.
The statute itself does not provide an independent right of action for
subcontractors to recover from release bonds. To the contrary, the LPWA
describes only one process for filing a statement of claim. See La. R.S. §
38:2242(B). If such a statement is filed, Section 2242.2 permits a contractor
(or any other interested party) to deposit a bond or other security in order
“to guarantee payment of the obligation secured by the privilege.” Id. §
38:2242.2(A). Thus, the statutory framework suggests that a release bond
provides security for the privilege created in favor of the claimant who
properly files a statement of claim under the LPWA.

35
36

R. Doc. 249 at 1-2 ¶¶ 1-3.
Id. at 3 ¶ 5.
10

Louisiana courts have interpreted similar release bond provisions in
this way. One court of appeal described the release bond authorized by the
Private Works Act as “merely another form of security substituted for the
lien.” Brunet v. Justice, 264 So. 2d 743, 746 (La. App. 4 Cir. 1972); see also
La. R.S. § 9:4841. The Brunet court further stated that “no greater rights can
[i]nure to the claimant under the bond than he possessed under the lien.” Id.
Another court of appeal applied the Brunet court’s holdings to the Public
Works Act, concluding that the release bond “secured payment for [the
plaintiff’s] claim under” that act. D & J Constr. Co. v. Mid-Continent Stone
Co., 571 So. 2d 762, 765 (La. App. 2 Cir. 1990). The D & J Construction court
also cited a law review survey for the proposition that filing a release bond
“should neither enlarge nor diminish the substantive rights of the claimant.”
Id. (quoting Thomas Harrell, Security Devices, The Work of the Louisiana
Appellate Courts for the 1972–1973 Term, 34 La. L. Rev. 197, 273 (1974)). A
third court of appeal also described release bonds under the Public Works
Act as “merely a form of security substituted for [the plaintiff’s] claims
against the funds held by the [public authority].” LeBlanc & Theriot Equip.
Co. v. H & S Constr. Co., 591 So. 2d 1274, 1277 (La. App. 3 Cir. 1991).
Based on the statutory framework and Louisiana caselaw, the Court
concludes that the filing of a release bond does not enlarge the substantive
11

rights of a subcontractor under the LPWA. Accordingly, 84 Lumber’s claim
against Paschen and Contintental on each release bond depends on a
statement of claim that satisfies the filing and notice requirements of the
LPWA.
84 Lumber’s counterarguments do not hold water. First, 84 Lumber
argues that Section 2247’s notice provisions cannot apply to release bond
claims.37 More specifically, 84 Lumber notes that Section 2247 refers to “the
bond furnished by the contractor,” while Section 2242.2 permits “any
interested party” to deposit a bond, cash, certified funds, or a certificate of
deposit. Compare La. R.S. § 38:2247, with id. § 38:2242.2. 84 Lumber
further contends that applying Section 2247 to release bond claims would
create an absurd result because Section 2247 requires notice of a statement
of claim within 45 days from the owner’s acceptance of the project, while
parties may file release bonds at any time.38 According to 84 Lumber, a
general contractor could deposit a release bond on the forty-sixth day after
acceptance and then obtain a release on any subsequent statement of claim
against the release bond because such claim would be late under Section
2247. These arguments are premised on a rigid distinction between release

37
38

R. Doc. 274 at 11-13.
Id. at 13.
12

bond claims and payment bond claims. Because no such distinction exists
under Louisiana law, these arguments are meritless.
Second, in attempting to distinguish D & J Construction and LeBlanc
& Theriot Equipment, 84 Lumber misreads Pierce, in which the Louisiana
Supreme Court discussed the two avenues of relief for claimants under the
LPWA. The first avenue, available only to parties in privity with the general
contractor, is a direct action against the general contractor and the sureties
on the payment bond. Pierce, 190 So. 3d at 303-04 & n.3. The second avenue
is to file a statement of claim under Section 2242(B) to obtain a “privilege
against the unexpended fund in the possession of the authorities with whom
the original contract had been entered into.” Id. at 305 (quoting Wilkin, 561
So. 2d at 70). If the subcontractor properly files and gives notice of this
statement of claim, Section 2247 guarantees the subcontractor’s right of
action against the contractor and sureties. La. R.S. § 38:2247. 84 Lumber
construes its earlier-asserted LPWA claims as following the first avenue and
its release bond claim as following the second. 39 But 84 Lumber is not in
privity with the general contractor and thus cannot maintain a direct action
against Paschen and the Sureties. Therefore, Count Six necessarily relies on
the same avenue of relief as Counts One and Two.

39

R. Doc. 274 at 9, 14-15.
13

As the Court explained in its earlier order, compliance with Section
2247 is a prerequisite to a subcontractor’s right of action against a general
contractor not in privity with the subcontractor. Because the Court has
found that 84 Lumber failed to give proper notice under Section 2247 of its
June 2012 statements of claim, 84 Lumber has no right of action under the
LPWA and cannot recover from the release bonds related to those claims.
The Court’s earlier order, however, did not apply to the November 2011
statement of claim for $3,507.16 in materials. And defendants expressly
stated that this November 2011 claim was not relevant to their motion for
summary judgment. 40 Thus, the Court’s earlier grant of summary judgment
does not bar recovery from the release bond related to 84 Lumber’s claim for
$3,507.16 in materials.
B.

84 Lumber’s Release Bond Claim Is Not Untimely

Defendants next argue that Count Six is untimely because the one-year
limitation period in Section 2247 is peremptive.41 A perempted claim under
Louisiana law cannot relate back to the original complaint under Federal
Rule of Civil Procedure 15(c). See D & S Marine Transp., L.L.C. v. S & K
Marine, L.L.C., No. 14-2048, 2015 WL 5838220, at *4 (E.D. La. Oct. 7, 2015).

40
41

R. Doc. 220-1 at 6.
R. Doc. 285 at 6-9.
14

But the Louisiana Supreme Court has twice referred to the limitation period
in Section 2247 as prescriptive, not peremptive. See Pierce, 190 So. 3d at
305 (“La. R.S. [§] 38:2247 is first and foremost a prescription provision . . .
.”); Honeywell, Inc. v. Jimmie B. Guinn, Inc., 462 So. 2d 145, 149 (La. 1985).
This Court will not deviate from such clear guidance.
Under Rule 15(c), 84 Lumber’s release bond claim may relate back to
an earlier pleading if it “arose out of the conduct, transaction, or occurrence
set out . . . in the original pleading.” Fed. R. Civ. P. 15(c)(1)(B). In its first
amended complaint, filed on February 5, 2013, 84 Lumber asserted a claim
for $3,507.16 in materials provided to Paschen.42 Thus, to the extent 84
Lumber’s release bond claim seeks recovery based on the November 2011
statement of claim for the same $3,507.16 in materials, the claim relates back
to February 5, 2013.

According to defendants, the public authorities

recorded their acceptance of both projects in Spring 2014, after 84 Lumber
filed its first amended complaint.43 Therefore, 84 Lumber’s release bond
claim is not prescribed by Section 2247.

42
43

R. Doc. 28 at 4 ¶ 11, 6 ¶ 21.
R. Doc. 285 at 7.
15

IV.

CONCLUSION
For the foregoing reasons, the Court GRANTS defendants’ motion for

judgment on the pleadings with respect to the June 2012 statements of claim.
The Court DENIES defendants’ motion with respect to the November 2011
statement of claim.

14th
New Orleans, Louisiana, this _____ day of September, 2017.

_____________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

16