For this weeks Guest Post Friday here at Construction Law Musings, we welcome Adam Stone and Kaytie Pickett for the first time. Adam and Kaytie practice construction and commercial law with Jones Walker, LLP, a full-service law firm with offices spanning the Gulf Coast states. Adam has twenty years’ experience drafting construction contracts and successfully litigating and arbitrating construction disputes for owners, sureties, contractors, design professionals, subcontractors, and material suppliers. He is LEED certified and has published on Green Building Development and on state procurement procedures. Adam is rated AV Preeminent by Martindale-Hubbell and has been named a Rising Star in the area of Construction/Surety law in Mid-South Super Lawyers. K
aytie has worked with Adam for five years. Her practice includes complex commercial and construction disputes, with an emphasis on written advocacy, including appeals. Before joining the firm, Kaytie served as a law clerk to the Hon. Rhesa Barksdale of the United States Court of Appeals for the Fifth Circuit. She has served as a professor of appellate advocacy and has published on the Federal Arbitration Act.
Mississippi was once one of the only states in the country that offered subcontractors no lien rights on a construction project. Instead, subcontractors could assert a stop payment notice and make a claim on monies in the hands of the owner. The U.S. Fifth Circuit Court of Appeals struck down Mississippi’s stop payment law as unconstitutional, however, and subcontractors were left with no statutory payment protections on un-bonded jobs.
This spring, Mississippi subcontractors effectively lobbied the Mississippi Legislature to create lien rights for subcontractors, sub-subcontractors, and material suppliers for the first time. Governor Bryant signed Senate Bill 2622 on April 15 2014, and the law immediately became effective.
Although subcontractors may be excited about having new bargaining power, the law is full of procedural pitfalls. Not only do unlicensed subcontractors have no lien rights, but any general contractor contracting with an unlicensed subcontractor loses its lien rights as well. Mississippi case law allows unlicensed contractors to recover for the value of their services, and therefore, some subcontractors may have lacked motivation to maintain licensure. This new statute may change those motivations.
Furthermore, the law contains numerous notice provisions. If asked, a general contractor asserting a lien must have furnished to the owner a complete list of
subcontractors within a reasonable time; otherwise, lien rights are forfeited. Likewise, a subcontractor, if requested by the general contractor, must furnish a complete list of its sub-subcontractors and/or material suppliers to recover. Sub-subcontractors and materialmen of subcontractors have more onerous duties: they must give notice, whether asked to or not, to the general contractor (or owner, if there is no general) of the labor or materials provided to the project. The notice must be given within 30 days of first providing labor or materials to the job.
The timing provisions are very short. Liens must be filed within 90 days of work last performed, and an action to enforce a lien must be brought within 180 days of filing the lien. Owners and general contractors have a powerful tool to put even more pressure on subcontractors: If, after a lien is filed, the owner or general contractor files a notice of contest, then the lien claimant must bring its suit within 90 days of filing the claim.
Owners also have several affirmative defenses. If payments have been made in reliance on lien waivers, then the owner has a complete defense to the lien action. The owner or contractor can discharge the lien upon filing a bond with the chancery clerk. The bond must be for 110% of the lien claim and must promise to pay the lien, if due, upon judgment that such payment is due. If the owner has obtained lien waivers or sworn contractor’s statements that the lien claimant has been paid, then the total amount of liens in favor of anyone who does not have a direct contract with the owner cannot exceed the unpaid contract balance on the owner’s contract with the general contractor.
Finally, lien litigation may increase, given that the law changes the usual rule in Mississippi and awards the prevailing party attorneys’ fees. On the other hand, the law penalizes false liens with treble damages. Under the old statutory scheme, Mississippi case law held that a company relying on its lawyer’s advice in filing a lien would not be subject to wrongful lien penalties; it’s not clear if that case law is now superseded.
In sum, the landscape of Mississippi construction litigation is about to change. It remains to be seen how much of this new law can be contracted around, though it is clear that lien rights cannot be wholly contractually waived. The foregoing discussion is just a brief preview of the new lien law; the actual law contains many more complex provisions, especially regarding lenders’ rights and priority of liens. Careful study of the language of the statute, as well as case law from other jurisdictions interpreting similar statutes, will be necessary as litigation arises under this new law.
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