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Louisiana and News Update

Summer 2010 Construction Law Update Better three hours too soon than a minute too late Micro-waiver On a publicly bid project in Richland Parish, the A plaintiff subcontractor in Texas second low bidder lodged an objection to the Carpet, Inc. v. Echelon Construction Services, winning bid on the basis that the low bid was turned L.L.C., 2010 U.S. Dist. LEXIS 52320 (E.D. La.), in too late at the December 1, 2008, bid opening. sought to recover unpaid subcontract sums totaling On January 12, 2009, the for the $348,750.46 from the general contractor’s payment parish accepted the low bid, effectively awarding bond on a St. Tammany Parish private the contract at that time. The second low bidder project. At issue in the litigation were periodic eventually – on February 26, 2009 – filed a waivers executed by the subcontractor and seeking injunctive relief to enjoin the Police Jury of submitted with pay applications, and the by the parish “from executing any contract” with the the surety that the lien waivers absolved the surety low bidder. of potential liability to the subcontractor...... The Police Jury responded to the lawsuit, and The lien waivers were required by the subcontract, effectively filed a counterclaim for declaratory and provided in pertinent part that the subcontractor on the issue of whether it was proper for acknowledged receipt of certain monies. However, In this issue: the Police Jury to have accepted the bid of the low the lien waivers also set forth that the purpose bidder. The Police Jury also argued that as of the of the lien waiver was to “induce” the general • Construction award on January 12, 2009, the aggrieved bidder no contractor to make a payment to the subcontractor Law Update longer had a right to seek injunctive relief. A (and, correspondingly, for the owner to make on the merits ensued, and testimony reflected that disbursements to the general contractor in • Surety there was indeed a potential problem with the low connection with the subcontractor’s payment Decisions and bid. However, the award of the contract to the low request). bidder was upheld by the trial . Non-Louisiana The surety argued that the lien waivers effectively Cases The Court of Appeal in Smith v. Richland Parish released the surety from claims and demands to Police Jury, 31 So.3d 538 (La. App. 2nd Cir. 2010), the extent the amounts sought in the litigation • Upcoming affirmed the trial court judgment. From the appellate were the subject of a lien waiver. The federal court’s point of view, the principal issue before it district court disagreed. The court found the lien Construction was the unexplained delay between the December waivers to be “ambiguous” as to whether or not Law Seminars 1, 2008, bid opening and February 26, 2009, the subcontractor had already been paid (which it filing of suit by the aggrieved bidder. The Court clearly had not) when it submitted the lien waivers of Appeal noted that the reflected that to the general contractor, as well as on the issue of second low bidder believed as early as the date of whether the “lien waivers were conditioned on [the the bid opening that the low bidder’s bid envelope subcontractor] actually receiving payment.” Finding ...... was turned in too late, and was also aware that the lien waivers to be susceptible of more than one the Police Jury took a contrary view and intended interpr