Pierce Foundations, Inc. v. JaRoy Construction, Inc.

Among Louisiana’s various rules of statutory interpretation, the cardinal rule applicable in the case of Pierce Foundations, Inc. v. JaRoy Construction, Inc.,1 is that the word “may” is permissive. The issue in Pierce Foundations stems from a public works contract, in which the general contractor, JaRoy Construction, Inc. (“Jaroy”), in accordance with La. R.S. 38:2241, et seq., furnished a bond to the Jefferson Parish Council (“Jefferson Parish”) in Terrytown, Louisiana, for the purpose of constructing a gymnasium (the “Project”). JaRoy subcontracted with Pierce Foundations, Inc. (“Pierce”) to provide and install the pilings for the Project.

At the time of Pierce’s completion of its scope of work in November of 2008, JaRoy had failed to pay Pierce the total sum that Pierce contended was due under its subcontract. In July of 2009, Pierce filed a “Petition for Damages in Contract” against JaRoy and subsequently amended their petition in July of the following year to include the surety on the bond, i.e. Ohio Casualty Insurance Company (“Ohio Casualty”). However, of particular importance in this case, Pierce failed to file a sworn statement of claim (a lien).

Upon substantial completion of the Project in October, 2011, Jefferson Parish filed a notice of acceptance of work. After the expiration of 45 days from Jefferson Parish’s filing of said acceptance, Ohio Casualty contended that Pierce could not recover any sums due from Ohio Casualty, due to Pierce’s failure to comply with the notice and recordation requirements of La R.S. 38:2242, requiring proper and timely notice and recordation within said 45 day period. Pierce asserted that the statutes in question did not affect Pierce’s right to proceed in contract; and, after the trial court’s and the Fifth Circuit’s reversal of same on appeal, the Supreme Court ultimately agreed with Pierce’s assertion.

In December of 2012, the trial court rendered judgement in favor of Pierce, to which Ohio Casualty appealed. The Louisiana Court of Appeal for the Fifth Circuit, disagreed with the trial court’s decision and found that Pierce’s failure to follow the notice and recordation requirements of La. 38:2242(B) deprived Pierce of a right of action against Ohio Casualty. The Louisiana Supreme Court granted Pierce’s writ of certiorari and subsequently reversed the appellate court’s decision, reinstating the decision of the trial court.

According to La. R.S. 38:2242(B) “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... file a sworn statement of the amount due him with the governing authority having the work done and recorded...” In the Supreme Court’s interpretation of this statute, the Court found that the Fifth Circuit erred in concluding that “the notice and recordation requirements of La. R.S. 38:2242(B) are necessary conditions for a right of action on a bond.” The Court notes that La. R.S. 1:3 states that, “the word ‘shall’ is mandatory and the word ‘may’ is permissive.” Therefore, the Court found that the Fifth Circuit’s rendering of the permissive “may” as mandatory was in error.

Furthermore, the Supreme Court found the Fifth Circuit’s interpretation of La. R.S. 38:2242(B) disregarded the principle provision set forth in La. R.S. 38:2247, which states that “action must be brought against the surety or the contractor or both within one year from the registry of acceptance of the work.” Because Pierce filed suit more than a year before final acceptance of the work, the Supreme Court found that “requiring additional notice under these unique circumstances [would be] futile and merely duplicative.”

Finally, the Court noted that La. R.S. 38:2241, et seq., the Public Works Act, does not affect the rights between parties in privity, as the above referenced statute creates a separate, “additional remedy” for recovery by the contractor or the subcontractor. Thus, given the referenced principles of law, the Supreme Court ultimately ruled that Pierce’s suit was timely filed against both JaRoy and its surety, and that failure to comply with the notice and recordation requirements of La. R.S. 38:2242(B) does not extinguish the claimant’s right to proceed in contract against the surety.

  1. Pierce Foundations, Inc. v. JaRoy Construction, Inc.  2015-0785(La. 5/3/16), 2016 WL 233805

This article is a product of Russel W. Wray (attorney) and Jenna E. Wray. Russel W. Wray is a partner in the firm of Wray & Pierce, L.L.P., in Baton Rouge, Louisiana. Questions or comments can be directed to Mr. Wray at russwray@wraylaw.com

© Russel W. Wray 2016