Parkcrest Builders, LLC v. Housing Authority of New Orleans
ORDER AND REASONS. It is ORDERED that the Motion for Partial Summary Judgment on the Issue of Substantial Completion (Rec. Doc. 230 ) filed by HANO is DENIED. It is FURTHER ORDERED that the Motions for Partial Summary Judgment on the Issue of HANO 's Damages Arising Out of Work Completed by Colmex (Rec. Docs. 236 and 247 ) filed by Liberty and Parkcrest are DENIED. It is FURTHER ORDERED that the Motion for Partial Summary Judgment to Dismiss All Delay Claims (Rec. Doc. 237 ) filed by HANO is DENIED. Signed by Judge Carl Barbier. (Reference: ALL CASES)(gec)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PARKCREST BUILDERS, LLC
HOUSING AUTHORITY OF NEW
ORDER AND REASONS
Before the Court are four separate motions for partial summary
The Housing Authority of New Orleans (“HANO”) has filed
a Motion for Partial Summary Judgment on the Issue of Substantial
Completion (Rec. Doc. 230) 1 and a Motion for Partial Summary
Judgment to Dismiss Delay Claims Alleged by Liberty and Parkcrest
(Rec. Doc. 237). 2
Liberty Mutual Insurance Company (“Liberty”)
and Parkcrest Builders, LLC (“Parkcrest”) each filed a separate
Motion for Partial Summary Judgment on the Issue of HANO’s Damages
Arising out of Work Completed by Colmex Construction, LLC. (Rec.
Docs. 236 and 247), which the Court construes as one motion. 3
Liberty and Parkcrest each filed oppositions to this motion (Rec. Docs. 254
and 252), and HANO filed a reply (Rec. Doc. 280). HANO also filed a supplemental
memorandum in support of its motion (Rec. Doc. 300) and Liberty filed a surreply (Rec. Doc. 313).
2 Liberty and Parkcrest each filed oppositions to this motion (Rec. Docs. 255
and 253), and HANO filed a reply (Rec. Doc. 282).
3 Parkcrest’s motion adopts and incorporates by reference Liberty’s motion.
HANO filed an opposition to this motion (Rec. Doc. 250), and Liberty filed a
reply (Rec. Doc. 286).
Having considered the motions and legal memoranda, the record, and
the applicable law, the Court finds that all four motions should
FACTS AND PROCEDURAL BACKGROUND
This case arises out of disputes that occurred during the
construction of affordable housing units in New Orleans.
4, 2013, HANO entered into a contract (“Prime Contract”) with
Parkcrest whereby Parkcrest would serve as the contractor for the
construction of the Florida Avenue: New Affordable Housing Units
construction of twenty-six separate buildings, which would contain
fifty-one living units and one management office, 4 as well as the
infrastructure elements within the Project area.
Project fell within the ambit of the Louisiana Public Works Act,
Parkcrest was obligated to obtain a statutory performance and
payment bond, and it sought the bond from Liberty.
a payment and performance bond naming Parkcrest as principal and
HANO as obligee in connection with the Project.
contract price was $11,288,000.00 and the initial completion date
was to be July 27, 2014.
The Prime Contract initially called for fifty-two separate living units.
Progress on the Project was hampered by numerous delays.
Parkcrest claims that the delays were caused by issues out of its
HANO, on the other hand, asserts that the delays were
caused by Parkcrest’s “failure or inability to execute the work”
specifications by performing deficient, poor quality, and non-code
Whatever the cause, the parties agreed to enter
a change order that extended the completion date to September 14,
during the course of the Project and on April 10, 2015, HANO
terminated Parkcrest prior to completion.
HANO then called upon
Liberty to perform its obligations as surety for Parkcrest.
June 9, 2015, HANO and Liberty entered into a Takeover Agreement
executed, Liberty retained Parkcrest as its completion contractor
and the parties resumed work.
However, the Project continued to
be plagued by delays and disagreements about their cause.
Agreement immediately after signing it by failing to pay money it
already owed, improperly reducing amounts approved for payment,
For further discussion of the Takeover Agreement and disputes regarding it,
see the Court’s Order and Reasons issued on June 5, 2017 granting in part and
denying part Liberty’s motion for judgment on the pleadings (Rec. Doc. 207).
failing to respond timely to change order proposals submitted by
Parkcrest, and failing to timely issue punch lists.
these allegations and says that all delays are attributable to
Nevertheless, Liberty informed HANO on May 17, 2016 that
it considered the Project to be substantially complete.
9, 2016, Mark Clayton, the primary project manager for Perez, APC,
The letter sent by Clayton included
attachments of hundreds of pages of punch lists that identified
work he determined to be unfinished or deficient.
On June 14,
2016, Liberty sent HANO a letter in which Liberty reaffirmed its
position that the Project was substantially complete and informed
HANO that it would only maintain its insurance and security on the
insurance for the Project effective July 1, 2016 and informed
Liberty that it would arrange for a third party contractor to
complete the Project.
On October 4, 2016, HANO entered into a
contract (“Completion Contract”) with Colmex Construction, LLC
(“Colmex”) to perform all necessary work to complete the Project.
On March 25, 2017, HANO granted a certificate of substantial
completion to Colmex for the Completion Contract.
Parkcrest instituted this suit against HANO on May 8, 2015,
alleging that HANO breached the contract by terminating Parkcrest
HANO filed a counterclaim against Parkcrest
alleging that delays in the project were attributable solely to
On September 1, 2016, Liberty intervened in this
lawsuit to allege breach of the Takeover Agreement, bad faith
breach of contract, and wrongful termination claims against HANO.
In response, HANO filed a counterclaim against Liberty alleging
that Liberty breached the terms of the Takeover Agreement in bad
faith and that it induced HANO to sign the Takeover Agreement
through fraudulent misrepresentation.
The parties have filed multiple motions for partial summary
judgment, all of which are now before the Court.
Each motion is
fully briefed and will be discussed separately.
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R.
Civ. P. 56); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th
Cir. 1994). When assessing whether a dispute as to any material
fact exists, a court considers “all of the evidence in the record
but refrains from making credibility determinations or weighing
the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness
Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All reasonable
inferences are drawn in favor of the nonmoving party, but a party
cannot defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075. A court
ultimately must be satisfied that “a reasonable jury could not
return a verdict for the nonmoving party.” Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991). The nonmoving party can then defeat the motion by either
countering with sufficient evidence of its own, or “showing that
the moving party’s evidence is so sheer that it may not persuade
the reasonable fact-finder to return a verdict in favor of the
moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in the
record is insufficient with respect to an essential element of the
nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden
then shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a
genuine issue exists. See id. at 324. The nonmovant may not rest
upon the pleadings, but must identify specific facts that establish
a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d
HANO’s Motion for Partial Summary Judgment to Dismiss Delay
Alleged by Liberty and Parkcrest
HANO moves the Court to dismiss all delay claims alleged by
Liberty and Parkcrest because it argues that Parkcrest failed to
comply with procedures set forth in the contract for identifying
the cause of delay as unforeseeable.
More specifically, HANO
argues that Parkcrest failed to comply with the requirement that
it provide HANO with written notice of the cause of any delay.
Thus, HANO argues that no delays in the
stipulated damages as a matter of law.
Liberty and Parkcrest oppose the motion, arguing that strict
Parkcrest argue that HANO had actual knowledge of the cause of the
delays and so written notification was unnecessary.
Parkcrest also emphasize that they are not seeking additional
compensation for the delays; rather, they intend to prove the
delays were excusable in order to avoid liability to HANO for the
Liberty and Parkcrest argue that HANO has suffered no
prejudice because it had actual notice.
Finally, Liberty and
requirement by failing to provide written notice to Parkcrest when
HANO’s contracting officer was replaced by another person.
A. Relevant Factual Background
Construction Contracts – Public Housing Programs” (the “General
(Rec. Docs. 1-17 and 1-18.)
The General Conditions
set forth the responsibilities and obligations of the contractor
(Parkcrest) and the public housing authority (HANO).
Conditions also supply a variety of definitions and procedures for
addressing termination of the contractor and who bears the burden
in case of delay.
The General Conditions gave HANO full authority to terminate
Parkcrest from the Project.
However, the General Conditions
prescribed different outcomes depending on whether HANO terminated
termination is one that happens because the contractor refuses or
fails to complete the work “with the diligence that will insure
its completion within the time specified in this contract.”
Doc. 1-18 at 1.)
If HANO were to terminate Parkcrest for cause,
provision requiring Parkcrest to pay HANO $1,189 for each day of
But the General Conditions stipulated a different result
if HANO were to terminate the contract because it “determined that
such termination is in the best interest of [HANO].” A termination
on this ground is considered a termination for “convenience.”
If HANO were to terminate Parkcrest for convenience, then
HANO would be liable to Parkcrest for reasonable and proper costs
resulting from the termination.
Section 32 of the General Conditions stated that Parkcrest
would not be charged with liquidated damages if the delays were
unforeseeable causes beyond the control and without the fault or
negligence of [Parkcrest].” 6
Id. at 2.
The second requirement is
6 The General Conditions provides a non-exhaustive list of examples of such
acts of God, or of the public enemy, (ii) acts of the [public
or other governmental entity in either
its sovereign or contractual capacity, (iii) acts of another
contractor in the performance of a contract with the [public
housing authority], (iv) fires, (v) floods, (vi) epidemics,
(vii) quarantine restrictions, (viii) strikes, (ix) freight
embargoes, (x) unusually severe weather, or (xi) delays of
subcontractors or suppliers at any tier arising from
unforeseeable causes beyond the control and without the fault
that “[t]he Contractor, within days (10 days unless otherwise
indicated) from the beginning of such delay (unless extended by
the Contracting Officer) notifies [HUD’s] Contracting Officer in
writing of the causes of delay.”
If Parkcrest were to satisfy
these requirements, then the General Conditions required HANO to
The Contracting Officer shall ascertain the facts and
the extent of the delay. If, in the judgment of the
Contracting Officer, the findings of fact warrant such
action, time for completing the work shall be extended
by written modification to the contract. The findings of
the Contracting Officer shall be reduced to a written
decision which shall be subject to the provisions of the
Disputes clause of this contract.
As described above, it is undisputed that the Project was
supposed to be completed by September 14, 2014 7 and that the work
was not complete by that date.
It is also undisputed that
Parkcrest only sent one written notification of delay on September
12, 2014, a mere two days before the Project was supposed to be
(Rec. Doc. 1-8 at 1.)
The letter stated that the
Project was delayed due to multiple factors outside Parkcrest’s
or negligence of both the Contractor and the subcontractors
(Rec. Doc. 1-18 at 2.)
7 The parties initially set the completion date as July 27, 2014.
But in a
“Contract Amendment/Change Order” signed by HANO’s project manager on October
7, 2013, the completion date was extended by forty-nine days. (See Rec. Doc.
237-4 at 5.)
infrastructure, delays in the electric power pole relocation,
approval of the sewer and water connections, and coordination
Because this letter was delivered to HANO more than
ten days from the beginning of all said delays, HANO argues that
Parkcrest failed to comply with the contract.
Although Parkcrest did not strictly comply with the written
notification requirement, summary judgment is not warranted.
caused delays, one of which is the supply of permanent power
infrastructure to the Project worksite. 8
Parkcrest alleges, and
HANO does not dispute, that HANO was responsible for contracting
with Entergy to design and construct the underground electrical
infrastructure for the Project.
Parkcrest also contends that the
progress of this electrical infrastructure was discussed on a
regular basis during the weekly construction progress meetings,
The other four issues that Parkcrest alleges delayed its progress on the
Project are: 1) delay related to site lighting; 2) delays in obtaining accounts
for gas meters which were installed by Entergy; 3) issues related to roof design
and ventilation; and 4) a design change made to the sewer system. Parkcrest
provides evidence that HANO was aware of all these delays. Because Parkcrest
provides the most evidence in support of its assertion that HANO was aware of
delays related to the installation of the electrical infrastructure, the Court
focuses on that alleged cause of delay.
and minutes from the meetings support this argument. 9
argues that it relied on HANO to take certain steps necessary to
Parkcrest had no control over the progress of the installation.
On June 12, 2014, HANO’s project manager, Hollie DeHarde,
sent what appears to be an internal HANO email titled “Florida Entergy Underground Utility Work.”
(Rec. Doc. 253-2 at 15.)
the email, Ms. DeHarde stated that HANO was “having issues with
Entergy relative to starting underground utility work” at the
Ms. DeHarde then asked if there was anyone “at
Entergy with whom HANO could discuss how critical starting the
underground work at Florida is and the impact continued delays are
having on the construction schedule[.]”
In another email
sent to an employee at Entergy on June 18, 2014, Ms. DeHarde
stated, “The situation is becoming critical with regard to the
Id. at 17.
On July 7, 2014, Ms. DeHarde and Patrick Kennedy sent an
internal memorandum titled “Entergy” which purported to provide a
“recap of meetings, discussions and communications” between HANO
and Entergy regarding the Project.
Id. at 13.
9 Meeting minutes from as early as July 3, 2013 include references to “Entergy
Work.” (Rec. Doc. 253-6 at 1) (“S. Saraff clarified that T-poles will be in
place. The service call to Entergy has been made. As of this meeting, there is
no power to the construction site.”)
identifies a list of Entergy-related delays experienced by HANO,
The contractor’s deadline for Entergy to start the
scheduled completion date was June 17, 2014.
today, July 07, 2014, the project is 21 days behind
The contractor is unable to proceed with
certain aspects of the project without infrastructure on
Id. at 14 (emphasis added).
This memorandum and the above-
referenced emails provide persuasive evidence that HANO was aware
of the delays related to the underground electrical infrastructure
well before September 12, 2014.
A thorough reading of section 32
of the General Conditions reveals that the purpose behind the
authority of the delay’s existence and its cause.
(See Rec. Doc.
1-18 at 2.) This purpose becomes clear when reading the procedures
set forth in the General Conditions for determining whether a delay
The notification requirement exists in order
to allow the public housing authority’s Contracting Officer an
opportunity to “ascertain the facts and extent of the delay.”
Here, Parkcrest and Liberty have provided sufficient evidence to
demonstrate that HANO was aware of the delays and their cause and
that HANO had the opportunity to ascertain the facts surrounding
The written notice requirement of a contract may be waived
when “the consistent actions of the two parties” lead to such a
Nat Harrison Assocs., Inc. v. Gulf States Utilities
Co., 491 F.2d 578, 583 (5th Cir. 1974) (quoting Pamper Corp. v.
Town of Marksville, 208 So. 2d 715 (La. 3 Cir. App. 1968)).
facts in this case suggest that such a waiver occurred here.
was aware of problems with the electrical grid at least as early
as July 13, 2013 and was reminded of these problems on a weekly
basis during the progress meetings. Thus, it suffered no prejudice
based on Parkcrest’s failure to comply with the General Conditions’
strict written notification requirement.
HANO is not entitled to
stipulated damages and to the dismissal of all of Liberty and
Parkcrest’s delay claims based on Parkcrest’s failure to notify
when HANO was fully aware of the delay.
See 4A Bruner & O’Connor
Construction Law § 15:71 (noting that “an owner's right to timely
notice may also be deemed waived if the owner in fact was aware of
the condition, conducted its own investigation into the merits of
the claim without raising lack of timely notice, or cannot prove
that it was prejudiced by lack of timely notice”).
cases in Louisiana and this district to have required strict
compliance with written notice requirements dealt with instances
where a contractor failed to comply with a contract’s requirement
that the contractor provide written notice of a claim within a
particular time period.
See Hartford Cas. Ins. Co. v. MDI Const.,
L.L.C., No. CIV.A. 10-4369, 2012 WL 4970210, at *2 (E.D. La. Oct.
17, 2012) (dismissing the contractor’s claims when it failed to
comply with the contract’s requirement that all claims be initiated
within twenty-one days after the claimant recognizes conditions
giving rise to the claim); Guinn Bros., LLC v. Jones Bros. of
Tennessee, 287 F. App'x 298, 302 (5th Cir. 2008) (same result when
the contract required the contractor to provide written notice of
any claims within one week of the event or condition upon which
the claim was to be made and the contractor did not comply); Meaux
v. S. Const. Corp., 159 So. 2d 156, 158 (La. App. 3 Cir. 1963).
By contrast, Parkcrest here did not violate a requirement that it
provide written notice of a claim; rather, it failed to comply
with a requirement to provide written notice of the cause of the
delay in order have it deemed excusable.
This distinction is
sufficient to render these above-referenced cases inapplicable,
and the motion must be denied.
Judgment on the Issue of HANO’s Damages arising out of Work
Completed by Colmex
Liberty and Parkcrest argue that any damages they potentially
owe to HANO should not be based on the amount that HANO agreed to
pay Colmex to complete the Project.
Liberty and Parkcrest argue
that HANO violated the Louisiana Public Bid Law, Louisiana Revised
Statutes § 38:2211, et seq., by accepting Colmex’s bid, which used
the wrong unit price form.
Because of this violation, Liberty and
Parkcrest argue that any damages to which HANO may be entitled
should be limited to quantum meruit.
There is no genuine dispute that HANO violated the Public Bid
Louisiana Revised Statute § 38:2212(A)(1)(a) requires a public
entity such as HANO to “advertise and let by contract to the
lowest responsible and responsive bidder who bid according to the
bidding documents as advertised, and no such public work shall be
done except as provided in this Part.”
This statute requires that
a bid be in strict compliance with the advertisement for the bid,
and no provision stated in the advertisement for bid may be waived
by the public entity.
Hamp's Const., L.L.C. v. City of New
Orleans, 2005-0489 (La. 2/22/06), 924 So. 2d 104, 110 (noting that
“the public entity should not include any requirements in its
advertisement for bids or bid form that it considers insignificant
or waivable, because once included, these requirements are nonwaivable as a matter of law”).
Any contract entered into in
violation of the Public Bid Law is “null and void.”
After Liberty and Parkcrest were removed from the Project,
HANO issued an invitation for bids to complete the Project on
August 12, 2016.
This bid invitation instructed all bidders to
break down the pricing of their bids into separate unit prices
using a Unit Price Form (“original Unit Price Form”).
invitation also stated a public bid range of $1.3 to $1.7 million.
On September 1, 2016, HANO issued an addendum in connection with
the Bid Documents which included a “Revised Unit Price Form” and
instructed all bidders to use the Revised Unit Price Form rather
than the original Unit Price Form.
Despite this directive, Colmex
used the Original Unite Price Form in its bid.
As a result, Colmex
included a price for three items that were not listed in the
unrequested bidding. 10
On October 4, 2016, HANO and Colmex entered
into the Completion Contract at Colmex’s requested price of $1.7
million and on November 16, 2016, Colmex was directed to proceed
with the work.
Because Colmex used the wrong Unit Price Form, its
bid was defective. Thus, there is no question that HANO violated
the Public Bid Law by accepting Colmex’s defective bid.
But this is not the end of the inquiry.
Section 2220 provides
a framework for “the attorney general, or any interested party” to
have a contract that violates the Public Bid Law deemed null.
Colmex included the following unit prices: $890.00 to “Remove and Adjust
Existing Cleanout and Concrete Pad to New Grade”; $128,040.00 to “Add Fill,
Regrade Area to Provide Positive Drainage and Re-Sod”; and $31,520.00 to
“Remove, Replace Existing Light Pole Base and Re-Install Light Poles.”
The district attorney in whose district a violation of
this Part occurs, the attorney general, or any
interested party may bring suit in the district court
through summary proceeding to enjoin the award of a
contract or to seek other appropriate injunctive relief
to prevent the award of a contract which would be in
violation of this Part, or through ordinary proceeding
to seek appropriate remedy to nullify a contract entered
into in violation of this Part.
§ 38:2220(B) (amended 1990). Although the statute does not provide
a prescriptive period within which a movant must request relief,
Louisiana courts have put outer limits on when such an action is
Parkcrest are not timely and should be denied.
The Court agrees.
The seminal case on the timeliness requirement under section
2220 is Airline Construction Company, Inc. v. Ascension Parish
568 So. 2d 1029 (La. 1990).
In Airline, the
Louisiana Supreme Court stated that “an unsuccessful bidder on a
rejection of its bid must seek injunctive relief at a time when
the grounds for attacking the wrongful award of the contract were
known or knowable to the bidder and when corrective action as a
practical matter can be taken by the public body.”
Id. at 1035.
The court also noted that “an unsuccessful bidder should not be
allowed to sit on its knowledge of the violation” until so much
time has passed that the public agency can no longer remedy it.
Id. at 1034-35.
Although Airline was decided when section 2220(B)
relief, 11 courts have applied its timeliness requirements to the
statute as it currently exists.
See MBA Med., Inc. v. Jefferson
Par. Hosp. Serv., 97-997 (La. App. 5 Cir. 1/27/98), 707 So. 2d
467, 470 (noting that Airline’s “rule of law has been applied to
the statute as amended”); Webb Const., Inc. v. City of Shreveport,
27,761 (La. App. 2 Cir. 12/6/95), 665 So. 2d 653, 656 (“We do not
unsuccessful bidder from the necessity of taking prompt action to
remedy an alleged violation of public contracts law.”)
There is no bright line rule for what constitutes timeliness
and it “is necessarily a fact-specific inquiry.”
Gen. Elec. Co.
v. W. Feliciana Par. Hosp. Serv. Dist. No. 1, No. CV 16-449-JWDRLB, 2016 WL 7007504, at *14 (M.D. La. Nov. 29, 2016).
generally look to “the diligence of the party challenging the bid”
Id. at *11.
The Louisiana First Circuit Court of
Appeal found an unsuccessful bidder’s petition for preliminary
When Airline was decided, La. Rev. Stat. 38:2220(B) provided:
The district attorney in whose district a violation of this Part
occurs, the attorney general or any interested party possesses a
right of action to bring suit for appropriate injunctive relief in
the district court to nullify a contract entered into in violation
of this Part.
The Statute was amended in 1990 by Act No. 869.
injunction to be untimely when it was filed six months after the
Enterprises, Inc. v. Ascension-St. James Airport & Transp. Auth.,
582 So. 2d 198, 201 (La. 1 Cir. Ct. App. 1991).
In that case, the
project was over ninety percent complete when the hearing for the
injunction took place.
Id. at 200.
Another state appellate court
found that the district court was not unreasonable in sustaining
an exception of prescription when the unsuccessful bidder filed
suit eleven months after it learned that the contract had been
Executone Sys. Co. of La. v. Jefferson Par. Hosp. Serv.
Dist. No. 2 for Par. of Jefferson, 15-569 (La. App. 5 Cir.
2/24/16), 186 So. 3d 1210, 1217.
There, the unsuccessful bidder’s
untimely request for injunctive relief was filed after the first
phase of a two-phase project was complete and work on the second
phase was under way.
Id.; see also Ramelli Grp., L.L.C. v. City
of New Orleans, 2008-0354 (La. App. 4 Cir. 10/22/08), 997 So. 2d
612, 617-18 (holding that a losing bidder’s petition to have city
contract nullified was untimely when it waited eight months from
the awarding of the contract before filing suit).
In cases where
the work agreed to in the contract under attack is either totally
or nearly fulfilled, courts tend to find actions to nullify the
See, e.g., Percy J. Matherne Contractor, Inc.
v. Grinnell Fire Prot. Sys. Co., 915 F. Supp. 818, 824 (M.D. La.
1995) (finding an action attacking the validity of a contract
unreasonable when the project was seventy-eight percent complete);
see also Airline, 568 So. 2d at 1031 (same result when the public
entity asserted that the project was substantially complete by the
time the plaintiff filed suit).
In this case, HANO issued its first invitation for bids to
complete the Project on August 12, 2016 and issued its addendum on
September 1, 2016.
On October 4, 2016, HANO and Colmex entered
into a contract for Colmex to complete the Project and on November
16, 2016, Colmex was directed to proceed with the work.
has performed under the contract and on March 25, 2017, HANO issued
a certificate of substantial completion.
Neither Liberty nor
Parkcrest claim that they were unaware or could not have determined
that Colmex had been awarded the contract or that the bid should
have been rejected.
See Airline, 568 So. 2d at 1034 (noting that
months after the contract was awarded “although there was no
apparent reason why plaintiff did not know or could not have
determined that Picou’s bid . . . should have been rejected”).
Moreover, the work agreed to pursuant to the contract between HANO
and Colmex is now complete.
Accordingly, application of the
Airline analysis leads to the clear conclusion that Liberty and
Parkcrest’s motions to have the contract deemed null are not
Liberty and Parkcrest argue that even if their motions are
not timely under the Airline analysis, the contract between Colmex
and HANO was an absolute nullity and therefore an action to nullify
it cannot prescribe.
Some legal authority exists in support of
A contract made in violation of the Public Bid
Law is absolutely null and void.
Pittman Const. Co. v. E. Baton
Rouge Par., 493 So. 2d 178, 190 (La. App. 1 Cir. 1986). “A contract
is absolutely null when it violates a rule of public order, as
when the object of a contract is illicit or immoral. A contract
that is absolutely null may not be confirmed.”
La. Civ. Code art.
Furthermore, “[n]ullity may be raised at any time as a
defense against an action on the contract, even after the action
for annulment has prescribed.”
La. Civ. Code art. 2032.
Liberty and Parkcrest argue that the rule for prescription in Civil
Code article 2032 is incompatible with the rule set out by Airline
and its progeny.
Because Liberty and Parkcrest bring these
motions pursuant to both Civil Code article 2032 and Louisiana
Revised Statute § 38:2220(B), they argue that the rule set out in
Civil Code article 2032 should prevail.
In Executone Systems Company of Louisiana, Inc. v.
Jefferson Parish Hospital Service District No. 2 For the Parish of
Jefferson, the Louisiana Fifth Circuit addressed a case where the
unsuccessful bidder on a public contract sought injunctive relief,
a declaratory judgment, damages, and other relief.
186 So. 3d at
The district court found that the plaintiff’s claims were
Id. at 1214.
On appeal, the plaintiff argued that the
contract attacked in the suit was an absolute nullity and therefore
any action to have it declared null would not prescribe.
circuit court first applied the Airline analysis and found no error
in the trial court’s determination that the plaintiff was untimely
in seeking injunctive relief.
Id. at 1217.
The court then
proceeded to determine whether a claim that is subject to the
prescriptive rule established by Airline and its progeny could
also be subject to the prescriptive rule of Civil Code article
2032 and, thus, would not prescribe.
The court decided that the
pursuant to La. C.C. art. 2030, but rather pursuant to both La.
C.C. art 2030 and La. R.S. 38:2220.”
Id. at 1219 (emphasis in
However, the Executone court noted that the plaintiff in that
case was an unsuccessful bidder to a public bid and not a party to
Because the plaintiff was not a party to the
contract, the court held that “the timeliness standard associated
with [plaintiff’s] claims against defendants brought pursuant to
the public bid law also applies to [plaintiff’s] nullity claim
against these same defendants.”
Subsequently, a federal
district court has applied Executone’s logic to a very similar
case. Gen. Elec. Co., 2016 WL 7007504, at *18. In General Electric
Company v. West Feliciana Parish Hospital Service District No. 1,
the court posited that “[s]urely the Louisiana Supreme Court was
mindful of Civil Code articles 7 and 2032 at the time it rendered
its ruling in Airline . . . .”
Ultimately, the court held
that the plaintiff’s nullity claim was “bound by the timeliness
constraints of Airline.”
This Court is persuaded by the
rationale set forth in Executone and General Electric Company.
Accordingly, the prescriptive period applicable to the motions
filed by Liberty and Parkcrest is set forth by Airline and its
progeny and not by Civil Code article 2032.
prescription set out by Airline and its progeny is not applicable
challenging the contract as a defense to HANO’s breach of contract
claims rather than as a cause of action.
Liberty and Parkcrest
argue that Civil Code article 2032 is the applicable prescriptive
rule for these motions because it states that nullity may be raised
as a defense against an action on the contract “even after the
action for annulment has prescribed.”
different than almost all other actions brought under section
Nearly every other cited case entails an action brought
by an aggrieved unsuccessful bidder to a public bid process.
Percy J. Matherne Contractor, Inc., 915 F. Supp. at 823 (finding
that a movant had “dubious standing” when “unlike the usual case,
it is not a prime contractor claiming to be the low bidder who was
However, it is not apparent to the Court why this
constraints of the Airline rule.
Parkcrest and Liberty have not
identified any case to support their theory, nor has the Court
They are not entitled to avoid the constraints of
the Airline rule simply because they wish to bring their motions
as a defense rather than as a cause of action.
The very reason
that Liberty and Parkcrest argue the contract with Colmex is null
and void is that it violates the Public Bid Law.
It would be
counter-intuitive, then, to allow Liberty and Parkcrest to bring
a nullity action on the ground that it violates the Public Bid Law
and then to eschew the timeliness requirements that the Louisiana
Supreme Court has explicitly set out for such a claim.
especially true because, just as in Executone and General Electric
Company, neither Liberty nor Parkcrest were a party to the contract
they wish to have declared null.
For all these reasons, the
motions by Liberty and Parkcrest are denied.
III. HANO’s Motion for Partial Summary Judgment on the Issue of
In this motion, HANO seeks a declaration from the Court that
completion of the Prime Contract.
HANO argues that the architect
on the Project had the authority to determine whether and when
substantial completion was achieved.
Thus, HANO argues that the
architect’s refusal to grant substantial completion was final and
forecloses any further debate on the issue.
HANO also argues that
the facts in the record demonstrate that substantial completion
certificates of occupancy were granted on the project is entirely
irrelevant to determining whether substantial completion occurred.
HANO argues that the Project entailed much more than building
housing and therefore the fact that the City of New Orleans
Department of Safety and Permits (“City”) granted certificates of
occupancy has no bearing on whether substantial completion of the
entire Project was achieved.
In their oppositions, Liberty and Parkcrest argue that the
Project was substantially complete on December 2015 when the City
Alternatively, they argue that substantial completion had been
attained on or before June 30, 2016, when they assert that Liberty
was terminated from the Project.
Liberty and Parkcrest contend
that the architect’s determination on substantial completion is
reviewable and is not the final word on the issue.
that whether substantial completion has been achieved is a factual
question to be determined by the court.
Further, they argue that
a factual dispute exists over whether substantial completion was
achieved according to the terms of the contract and that summary
judgment should therefore not be granted.
Finally, Liberty and
Parkcrest claim that because the Project’s architect was not a
determination on substantial completion.
A. Relevant Factual Background
On May 17, 2016, Liberty informed HANO that it considered the
Project substantially complete and that it intended to remove its
trailer from the Project on May 23, 2016 and end its builder’s
risk insurance coverage on May 31, 2016.
On May 20, 2016, HANO
objected to Liberty’s abandonment, prompting Liberty to maintain
its insurance for the Project and security at the site until June
On June 9, 2016, Mark Clayton sent HANO a letter stating that
he was unable to grant substantial completion on the Project
because he stated that multiple deficiencies still existed.
Clayton was an employee of Perez, APC, which was
the architect for the Project.
Clayton served as Perez, APC’s
primary project manager for the Project.
In his June 9, 2016
letter, Clayton listed multiple items that he claimed were either
incomplete or unacceptable.
His letter included an attachment of
many punch lists, each of which was stamped “NOT APPROVED FOR
Liberty decided to maintain its insurance for the site until
July 1, 2016 in order to address the issues raised by Clayton.
But Liberty left the site on July 1, 2016 and HANO still found
that the Project needed work to be complete.
As a result, HANO
entered into the Completion Contract with Colmex to perform all
necessary work on the Project.
Colmex was granted a certificate
of substantial completion on March 25, 2017.
B. Who Determines Substantial Completion?
The first issue presented by this motion is who decides
whether substantial completion has been met.
HANO argues that its
completion had been achieved.
Thus, HANO argues that as a matter
of contract, the architect’s determination that the Project was
not substantially complete is final. By contrast, Parkcrest argues
that whether substantial completion has been achieved is a matter
for the court to decide.
The Public Bid Law provides the following definition of
“Substantial completion” is defined for the purpose of
this Chapter, as the finishing of construction, in
accordance with the contract documents as modified by
any change orders agreed to by the parties, to the extent
that the public entity can use or occupy the public works
or use or occupy the specified area of the public works
for the use for which it was intended.
La. Rev. Stat. § 38:2241.1(B).
It is clear from this provision
that the definition of substantial completion is determined by the
In this case, the procedure for determining
substantial completion is set out in section 20(j) of the General
Conditions, which states:
The Contractor shall notify the Contracting Officer, in
writing, as to the date when in its opinion all or a
designated portion of the work will be substantially
completed and ready for inspection. If the Architect
determines that the state of preparedness is as
represented, the [public housing authority] will
promptly arrange for the inspection. Unless otherwise
specified in the contract, the [public housing authority]
shall accept, as soon as practicable after completion
and inspection, all work required by the contract or that
portion of the work the Contracting Officer determines
and designates can be accepted separately. Acceptance
shall be final and conclusive except for latent defects,
fraud, gross mistakes amounting to fraud, or the [public
(Rec. Doc. 1-18 at 8.)
This provision sets forth a three-step
The first step is for the contractor to notify the
public housing authority’s contracting officer in writing when the
contractor believes substantial completion has been achieved.
second step is for the architect to make a determination as to
whether he concurs that substantial completion has been achieved.
substantial completion has been achieved. In that case, the public
housing authority is to promptly arrange for inspection.
architect determines that substantial completion has not been
achieved, then the process never proceeds to the third step. Thus,
the architect’s determination that a project has not achieved
substantial completion is determinative as to whether the public
housing authority will arrange for inspection and, ultimately,
grant substantial completion.
Here, the architect for the Project was Perez, APC, and Perez,
APC’s primary project manager was Mark Clayton.
It is undisputed
that on June 9, 2016, Clayton informed HANO that he was unable to
determination that multiple deficiencies existed over the Project.
Accordingly, it is clear that HANO had the authority to determine
whether the Project had reached substantial completion and it is
equally clear that HANO made this determination in compliance with
procedure set forth in section 20(j) of the General Conditions.
However, Louisiana courts have often reiterated that “whether
substantial completion has occurred is a factual determination to
be made by the trial court.”
Utley-James of Louisiana, Inc. v.
State, Div. of Admin., Dep't of Facility Planning & Control, 942504 (La. App. 1 Cir. 10/6/95), 671 So. 2d 473, 475; see also O &
M Const., Inc. v. State, Div. of Admin., 576 So. 2d 1030, 1035
(La. App. 1 Cir. 1991) (determining whether substantial completion
“substantial performance . . . is a factual determination to be
made by the trial court); All Seasons Const., Inc. v. Mansfield
Hous. Auth., 40,490 (La. App. 2 Cir. 1/25/06), 920 So. 2d 413,
416; Cent. Elec. Co. of Alexandria v. England Econ. & Indus.
Development Dist., 2012-302, 2012 WL 5933040, at *2 (La. App. 3
Cir. 11/28/12) (unpublished) (“The determination of whether there
has been “substantial completion” on a public works project, as
defined in La.R.S. 38:2241.1, is a question of fact left to the
broad discretion of the trier of fact.”)
Thus, a determination
made by HANO in compliance with the General Conditions is not
beyond review by this Court.
Two Louisiana cases support the conclusion that a court can
determine whether substantial performance has occurred after the
owner has already made a determination. 12
In Allen v. A & W
Contractors, Inc., the plaintiff building owner entered into a
contract with a contractor to build a second floor addition to the
building. 433 So. 2d 839, 839 (La. App. 3 Cir. 1983). The contract
stated that: “The Date of Substantial Completion of the Work or
designated portion thereof is the Date certified by the Architect
when construction is sufficiently complete, in accordance with the
Id. at 840.
The architect supervising the
project prepared a certificate of substantial completion and set
HANO refers the Court to Plaquemines Parish Government v. Burk-Kleinpeter
Inc., 2015-1152, 2016 WL 915393 (La. App. 4 Cir. 3/9/16) (unpublished) in
support of its contention that the procedure for determining the substantial
completion date is simply a matter of contract. In that case, the defendant
contractor filed an exception of peremption on the parish government’s claims,
and the peremptive period began to run on the date of substantial completion.
Id. at *2; see also § 38:2189. The court was therefore tasked with determining
the date of substantial completion in order to set the date from which the
peremptive period began to run. The contract between the parish government and
the contractor stated that the design engineer had the authority to select the
date of substantial completion. Id. at 3. The design engineer eventually set
a date for substantial completion. However in opposition to the exception of
peremption, the parish government argued that the date of substantial completion
was actually later than the date set by the design engineer. Although the court
acknowledged “that the public owner should have some input into the selection
of the date of substantial completion,” it found that the parish government had
“voluntarily ceded its input” to the design engineer. Id.
The court noted
that “there was no apparent disparity in the parties’ bargaining power and the
authority to designate the date of substantial completion did not inherently
violate public policy.” Id.
Accordingly, the court found that the date of
substantial completion for purposes of peremption was set by the parties in the
The Plaquemines Parish Government court was careful to limit the
application of its holding. It stated that “the right to select the substantial
completion date does not deprive [the parish government] or any public entity
of the right to file suit against the contractor for any perceived failure to
perform the contract terms. The date’s selection simply limits the right to
file suit against the contractor to within five years of the date of substantial
completion.” Id. at 5. This Court’s reading of Plaquemines Parish Government
is that its holding is not to be expanded outside the context of setting the
date for the peremptive period.
the date as April 23, 1981.
The case eventually was sent to
substantial completion was March 2, 1981.
appealed, arguing that the arbitrator exceeded his powers but the
Id. at 841.
The court acknowledged that the
contract provided that the date of substantial completion was to
be established by the architect.
Nevertheless, the court
concluded: “We do not consider this provision to be sacrosanct if
the facts show substantial completion at a date earlier than that
certified by the owner's architect.”
Authority, the Louisiana Second Circuit held that the trial court
was not manifestly erroneous when it found that the contractor on
a public bid project achieved substantial completion on a different
date than the date determined by the local housing authority.
40,490 (La. App. 2 Cir. 1/25/06), 920 So. 2d 413, 418.
Seasons, the contractor informed the housing authority’s architect
in writing that the project was complete except for punch list
items not yet received.
Id. at 415.
In the letter dated April
18, 2000, the contractor requested a certificate of substantial
completion as of that date. Id. The housing authority’s architect
substantially complete as of that date because work still needed
to be complete.
Instead, the architect issued a certificate
of completion for the project on August 18, 2000.
contractor disputed the date that substantial completion had been
Id. at 416.
After hearing all the evidence, the trial
court determined that substantial completion occurred on April 28,
2000, a date not identified by either the contractor or the housing
The appellate court affirmed the trial court’s
determination, finding that the record demonstrated “the majority
of the work had been performed on time.”
completion is to be determined by the trial court.
Woodrow Wilson Const. Co. v. Fashion Cafe, L.L.C., 99-0677 (La.
App. 4 Cir. 10/20/99), 745 So. 2d 763, 766 (holding that “although
the record contains a certificate of substantial completion,” it
also contained evidence that a condition in the agreement had not
The Court is satisfied that it has the authority to
review HANO’s determination that substantial completion had not
been achieved under the terms of the Prime Contract.
C. Whether Substantial Completion was Achieved Under the Terms
of the Prime Contract
As mentioned above, substantial performance has been defined
under the Public Bid Law as “the finishing of construction, in
accordance with the contract documents as modified by any change
orders agreed to by the parties, to the extent that the public
entity can use or occupy the public works or use or occupy the
specified area of the public works for the use for which it was
Substantial completion, sometimes
referred to as substantial performance, can be achieved even when
All Seasons, 920 So. 2d at 416 (citing O & M
Const., Inc., 576 So. 2d at 1035); see also Urban's Ceramic Tile,
Inc. v. McLain, 47,955 (La. App. 2 Cir. 4/10/13), 113 So. 3d 477,
The contractor bears the burden of proving that substantial
completion has been achieved, and the owner “bears the burden of
proving the existence and nature of alleged defects.”
Derrick Servs., L.L.C. v. LONESTAR 203, 547 F. App'x 432, 439 (5th
Courts look to the following factors when determining
whether substantial performance has been achieved: “the extent of
the defect or non-performance, the degree to which the purpose of
the contract is defeated, the ease of correction, and the use or
benefit to the owner of the work performed.”
O & M Const., Inc.,
576 So. 2d at 1035.
HANO presents evidence to support its claim that neither
Parkcrest nor Liberty achieved substantial completion by the time
Liberty left the Project worksite.
First, HANO points to an
inspection conducted by Clayton of one of the buildings on December
(Rec. Doc. 230-27).
In a letter Clayton sent to HANO
on December 30, 2015, Clayton stated that he identified numerous
items in his December 17, 2015 inspection that prevented him from
Additionally, Clayton’s June 9, 2016 letter to HANO identified
numerous deficiencies, including: “accessibility issues, non-codecompliant stairs and railings, non-working HVAC systems, nonworking electrical systems, non-working water systems, cracking
continuing failure of Parkcrest to provide evidence of final
acceptance of the project streets and infrastructure by the City
of New Orleans and the Sewerage and Water Board of New Orleans.”
(Rec. Doc. 230-15.)
(Rec. Doc. 230-33.)
HANO also relies in this motion on a letter
ILSI was a subcontractor of Perez, APC that
served as the engineer of record for the street, water, and
sewerage portions of the Project (Rec. Doc. 230-3 at 10.)
22, 2016, ILSI sent a letter to Perez, APC stating that it did
“not find the civil site work substantially complete at this time.”
(Rec. Doc. 230-33.)
This letter included its own separate punch
list identifying nine pages of items in need of further attention.
completion had been achieved, either by December 2015 or June 2016.
They point fundamentally to the fact that by December 2015, the
City had granted certificates of occupancy for each of the units
in the Project.
(See Rec. Docs. 252 at 9; 252-1 at 14; 252-5).
compliance with the applicable provisions of the New Orleans
Amendments to the International Building Code and Comprehensive
(See Rec. Doc. 252-5.)
Liberty and Parkcrest
submit the report of their expert, architect Jerry Watts, which
certificates for occupancy were granted because the Project could
then be used for its intended purpose.
(Rec. Doc. 252-3.)
Liberty and Parkcrest also use pay applications from the
Project to demonstrate that the vast majority of the work was
complete by June 30, 2016.
They use the amount of money they were
paid by HANO to reach this conclusion.
HANO ultimately paid
Parkcrest $10,763,763.76 of the $11,394,172.02 contract price.
(Rec. Doc. 252-2 at 6.)
These payments were certified by Perez,
APC and approved by HANO. In each certification of payment, Perez,
APC attested to HANO that “the Work has progressed as indicated,
Documents, and the Contractor is entitled to payment of the AMOUNT
(See Rec. Doc. 252-6 at 3.) The amount paid to
Parkcrest constitutes 94.5% of the total contract price; thus,
Liberty and Parkcrest argue that Parkcrest completed 94.5% of the
Project in accordance with the Contract.
Liberty and Parkcrest
further argue, based on their expert’s report, that when the amount
of work that was complete but not approved for payment is added to
the total, the Project could be considered 98% complete by that
Liberty and Parkcrest also take issue with the punch lists
issued by Perez, APC on June 9, 2016 upon which HANO relies.
expert report of Jerry Watts states that the punch lists were
“excessive and redundant.”
The expert report further states that
many items on the punch list had been corrected prior to the time
that the punch lists were actually received.
Watts also stated in
his expert report that the most important items listed in the June
9, 2016 punch lists were either corrected “or in the process of
being corrected” by June 30, 2016.
Liberty and Parkcrest point
out that Clayton testified in a deposition that he would have
recommended that HANO grant substantial completion if these items
were addressed. 13
This testimony of Clayton is used as support by Liberty in its Motion in
Limine to Limit HANO’s Use of Non-Red Items Regarding Substantial Completion
(Rec. Doc. 235). The Court expresses no opinion as to the merits of Liberty’s
motion in limine in this Order.
Finally, Liberty and Parkcrest provide evidence undermining
HANO’s claim that the streets and associated infrastructure had
not reached substantial completion.
They first attack the letter
that ISLI sent to HANO on June 22, 2016 stating that it could not
recommend the granting of a certificate of substantial completion.
In deposition testimony, ILSI’s corporate representative testified
that her definition of substantial completion was not based upon
whether the Project could be used for its intended purpose. 14 (Rec.
Doc. 252-10 at 6.)
Liberty and Parkcrest also present an email
sent by an employee of the City of New Orleans Department of Public
Works (“DPW”) to Parkcrest dated May 10, 2016, which states that
the DPW found the construction of the streets and associated
infrastructure to be acceptable.
(Rec. Doc. 252-9 at 6.)
email instructs Parkcrest to “accept this email as DPW’s final
acceptance of the street pavement, catch basins, sidewalks, curbs,
and ADA ramps within your project boundaries.”
testimony from the DPW employee who wrote the email confirms that
the email was meant to convey that Parkcrest’s work on the street
pavement, catch basins, sidewalks, curbs and ADA raps within the
During the deposition, ISLI’s corporate representative was asked about the
definition of substantial completion she “had in [her] mind” when she stated
that she could not recommend the Project for substantial completion.
particular, she was asked whether “there [was] ever an analysis that you made
or a consideration you gave to if the thing you’re looking at or talking about
can be used for its intended purpose?”
ISLI’s corporate representative
responded: “I did not look at it from that standpoint.” (Rec. Doc. 252-10 at
Project boundaries met the DPW’s standards.
Id. at 4-5.
this evidence, Liberty and Parkcrest argue that the street and
infrastructure work was substantially complete.
Liberty and Parkcrest have presented ample evidence to create
a genuine issue of material fact as to when and whether substantial
completion was achieved in accordance with the contract.
IT IS ORDERED that the Motion for Partial Summary Judgment on
the Issue of Substantial Completion (Rec. Doc. 230) filed by HANO
IT IS FURTHER ORDERED that the Motions for Partial Summary
Judgment on the Issue of HANO’s Damages Arising Out of Work
Completed by Colmex (Rec. Docs. 236 and 247) filed by Liberty and
Parkcrest are DENIED.
IT IS FURTHER ORDERED that the Motion for Partial Summary
Judgment to Dismiss All Delay Claims (Rec. Doc. 237) filed by HANO
New Orleans, Louisiana this 8th day of August, 2017.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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