Under Louisiana Payment Act, Once Contractor Meets Contractual Requirements for Final Payment, Public Entity Has a Duty to Issue Final Payment and Has No Discretion to Withhold Payment Based on a Separate Claim Against Contractor

Woodrow Wilson Constr. LLC v. Orleans Par. Sch. Bd.,  2018 La. App. LEXIS 762 (April 18, 2018)

The Orleans Parish School Board (“OPSB”) awarded a prime contract to Woodrow Wilson Construction (“WWC”) for the construction of a new elementary school (the “Project”).  On May 23, 2016, WWC submitted its request for payment of final retainage to OPSB.  OPSB withheld payment from WWC, claiming that WWC owed liquidated damages for the delays in completion of the Project, which allegedly exceeded the amount due to WWC.  WWC filed a petition for writ of mandamus pursuant to La. R.S. 38:2191(D) (the “Act”), which provides that “[a]ny public entity failing to make any … any final payment when due as provided in this Section, shall be subject to mandamus to compel the payment of the sums due under the contract …”  The trial court denied the petition and WWC appealed.  The question on appeal was whether OPSB may withhold final payment due under the Act because of alleged delays in the Project, despite the fact that liability for the delays had not yet been adjudicated.

Section A of the Act provides that “[a]ll public entities shall promptly pay all obligations arising under public contracts when the obligations become due and payable under the contract.  All … final payments shall be paid when they respectively become due and payable under the contract.”  Under the prime contract, retainage was due upon the occurrence of six enumerated requirements.  The Court determined that these requirements were all satisfied as of May 23, 2016 and therefore final retainage was due to WWC as of that date.  The Court further found that upon satisfaction of these requirements, the public entity owed a ministerial duty to issue final payment.  By providing the right to mandamus relief in the Act, the legislature intended to eliminate the public entity’s discretion to withhold payment from a contractor. 

OPSB argued that the prime contract allowed it to collect liquidated damages in any manner available including withholding final payment.  The Court rejected this argument and found that under the express terms of the prime contract any alleged right to withhold payment from WWC only arose when payment becomes “due to the Contractor.”  However, once final retainage payment became due, the duty to tender payment arose and, under Section C of the Act, this duty to issue payment cannot be waived by contract.

Finally, the Court found that if a public entity could simply defeat a mandamus action by asserting a separate claim for damages, the Act would be rendered meaningless.  The Court acknowledged that OPSB’s alleged delay claims will be tried in a contested, civil proceeding and it is the protracted nature of such proceedings which the legislature intended to avoid by providing contractors a right to mandamus relief under the Act.

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

Luke Nicholas Eaton

 

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