Summary
The Fifth Circuit affirmed a district court ruling concerning whether a supplier could recover interest and attorneys’ fees under a Louisiana Public Works Act payment bond. The court held that the bond language was ambiguous but that recovery was governed by the statutory bond restrictions, precluding interest and limiting attorneys’ fees to ten percent of the amount recovered.
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Practice areas
Questions Presented
- Whether the payment bond's reference to recovery of sums justly due unambiguously incorporated the 18% interest and attorneys' fees obligations in Service Steel's separate agreement with H&H.
- Whether the Louisiana Public Works Act limited Service Steel's recovery under the statutory payment bond by precluding interest and capping attorneys' fees at ten percent of the amount recovered.
- Whether the rider recognizing Service Steel as a claimant converted the statutory payment bond into a contractual bond not subject to the Louisiana Public Works Act's restrictions.
Holdings
- The payment bond was ambiguous, was properly construed against the defendant-appellee drafters, and entitled Service Steel to some remedy under the bond; however, the bond did not incorporate the 18% interest and reasonable-attorneys' fees provisions of Service Steel's separate agreement with H&H.
- The Louisiana Public Works Act applied to the statutory payment bond and precluded recovery of interest while limiting attorneys' fees to ten percent of the amount recovered.
Key quotations
“We agree with the district court that the bond language is ambiguous and should be construed against the drafters, Defendants-Appellees.” (at 871)
“We find no basis in the record for concluding, as Service Steel argues, that the parties intended to convert the statutory bond, which is subject to the LPWA’s restrictions, into a contractual bond, which is not subject to those restrictions.” (at 872)
Factual background
McDonnel-Archer, a joint venture, contracted to construct administrative buildings in New Orleans and obtained a $144,929,000 labor and material payment bond under the Louisiana Public Works Act. McDonnel-Archer subcontracted with H&H Steel Fabricators, which purchased steel from Service Steel. Service Steel and H&H had a prior agreement requiring 18% interest on past-due amounts and reasonable attorneys' fees, and the sureties later executed a rider recognizing Service Steel as a claimant under the bond. H&H failed to pay for steel supplied by Service Steel.
Procedural history
Service Steel sued the project joint venture and its sureties after subcontractor H&H Steel Fabricators failed to pay for steel supplied for a public-works project. The parties filed cross-motions for partial summary judgment on whether Service Steel could recover 18% interest and attorneys' fees under the bond. The district court held that the bond was ambiguous, allowed a remedy under the bond, denied interest, and limited attorneys' fees to ten percent of the amount recovered. The Fifth Circuit affirmed.