Federal Court Holds That Under Louisiana Law, Actual Notice of Cause of Delay Satisfies Contractual Notice Requirement Despite Failure to Strictly Comply With the Notice Provision

Parkcrest Builders, LLC v. Hous. Auth. of New Orleans, 2017 U.S. Dist. LEXIS 125012 (E.D. La. August 8, 2017)

The Housing Authority of New Orleans (“the Authority”) contracted with Parkcrest Builders, LLC (“Parkcrest”) to construct a public housing project.  The Project was delayed and the Authority terminated Parkcrest prior to completion, and entered into a Takeover Agreement with Parkcrest’s Surety.  The Surety retained Parkcrest to complete the work, and later notified the Authority that it had achieved substantial completion.  The Authority asserted deficient and incomplete items remained on the project, which the Surety refused to complete.  The Authority then solicited bids for the remaining work, and awarded the work to a replacement contractor.

Parkcrest sued the Authority for breach of contract and also asserted that any delays on the Project were excusable and, therefore, not subject to liquidated damages.  The Authority counterclaimed against Parkcrest for added costs to complete the project.  The Surety intervened, also seeking a ruling that all delays were excusable.  The Authority then counterclaimed against the Surety for completion costs.

The Authority filed a motion for partial summary judgment seeking to dismiss all of Parkcrest and the Surety’s excusable delay claims, claiming that Parkcrest failed to provide written notice of the delay within ten days, as required by the contract.  The court found that Parkcrest did provide some notice prior to the start of the delays, but that this notice did not strictly comply with the contractual notice requirement.  However, the court found that the notice mentioned the Authority’s delay in supplying permanent power to the project, which impacted significant portions of the project.  There were also internal Authority documents evidencing knowledge of the permanent power delay and its impacts.  On that basis, the court found that the Authority had actual knowledge of the delays asserted by Parkcrest.  The court held that the purpose for the contractual notice requirement is to ensure that the Authority is aware of any delay and its cause.  Based on the actual knowledge of the Authority, and the fact that it suffered no prejudice based on Parkcrest’s failure to meet the strict notice requirements, the court dismissed the Authority’s motion.

The Authority also sought partial summary judgment claiming that neither Parkcrest nor the Surety achieved substantial completion.  Both Parkcrest and the Surety asserted that substantial completion had been achieved noting, inter alia, that a certificate of occupancy was issued before Parkcrest was terminated.  The contract provided that the architect determines substantial completion and the architect had denied certification based on missing or defective work.  However, Louisiana law provides that the court makes the factual determination as to whether substantial completion has occurred.  The court held that conflicting evidence existed as to whether substantial completion had occurred and denied the Authority’s motion.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

John H. Conrad

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