The last few years have been a hectic time in Louisiana Courts when it comes to contractors getting paid on public construction jobs. Since 2015, the First, Fourth, and Fifth Circuit Courts of Appeal, which include major cities in East Baton Rouge, Orleans, and Jefferson Parishes, have rendered decisions which decidedly favor contractors.
What is the Louisiana Prompt Pay Statute?
The Prompt Pay Statute, which is codified in Louisiana Revised Statute 38:2191 and has undergone multiple revisions over the past few years, provides that all public entities shall pay all obligations arising under public contracts when they become due and payable under the contract. If a public entity fails to make a payment within forty-five (45) days following its receipt of a certified request for payment without reasonable cause, the public entity can be held liable for reasonable attorney fees and interest charged at one-half percent accumulated daily, not to exceed fifteen percent. In order to force payment, the general contractor can file a writ of mandamus, which orders the state entity or official to properly fulfill their official duties and correct any abuse of discretion.
In 2014, the First Circuit held that the aforementioned mandamus relief is NOT conditioned on the funds remaining available. In Wallace C. Drennan, Inc. v. St. Charles Parish, the Louisiana Fifth Circuit doled out another win for contractors when it held that payment for work is a mandatory duty of the public entity, and the mandatory language used in the Prompt Pay Statute subjects public entities to mandamus proceeding to compel payment of sums due under contract.
The most radical and potentially impactful decision came from the Fourth Circuit in 2018. In Woodrow Wilson Construction, LLC v. OPSB, the Court gutted a public entities’ reliance on rights to liquidated damages as a defense to withholding retainage. The Fourth Circuit has also held that formal, final acceptance is not necessary to seek mandamus relief for payment and is only required when the aggrieved party seeks attorney’s fees.
In Woodrow Wilson¸ the Orleans Parish School Board attempted to withhold final payment of retainage to the general contractor claiming that it was entitled to do so over the liquidated damages incurred by Woodrow. The GC filed a petition for a writ of mandamus pursuant to LA R.S. 38:2191, and while the trial court denied their writ, the appellate court found that the contractor was entitled to its final payment despite the existence of OPSB’s not yet proven liquidated damages claim. The Court held that the School board had a ministerial duty to issue final payment and had no discretion to withhold based on separate claims. Further, the Contractor was entitled to attorney’s fees.
Naturally, seeking mandamus relief involves filing a lawsuit and is best left to an attorney. We will work hard for your company to ensure payment to your company so that you can continue on to other projects without having to look in the rear-view mirror.
Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.