Bienville Parish School Board v. Thrash Construction Services, LLC, American Testing Lab, LLC, Yeager, Watson & Associates, Inc., Keystone Retaining Wall Systems, Inc., Lewis Stone, LLC, and North American Specialty Insurance Company

• Court: Louisiana Court of Appeal
• Decided: December 18, 2024
• Docket: 56,021-CA
• Status: Published

Opinion

Judgment rendered December 18, 2024. Application for rehearing may be filed within the delay allowed by Art. 2166, La. C.C.P.

No. 56,021-CA

COURT OF APPEAL SECOND CIRCUIT STATE OF LOUISIANA

*****

BIENVILLE PARISH SCHOOL Plaintiff-Appellant BOARD

versus

THRASH CONSTRUCTION Defendants-Appellees SERVICES, LLC, AMERICAN TESTING LAB, LLC, YEAGER, WATSON & ASSOCIATES, INC., KEYSTONE RETAINING WALL SYSTEMS, INC., LEWIS STONE, LLC, AND NORTH AMERICAN SPECIALTY INSURANCE COMPANY

Appealed from the Second Judicial District Court for the Parish of Bienville, Louisiana Trial Court No. 44-637

Honorable Charles Glenn Fallin, Judge

COOK, YANCEY, KING & GALLOWAY Counsel for Appellant By: Robert Kennedy, Jr.

KEAN MILLER, LLP Counsel for Appellee, By: Michael D. Lowe Thrash Construction Services, LLC KREBS FARLEY, PLLC Counsel for Appellee, By: Jonathan S. Ord North American Specialty Insurance Company

PIPES, MILES, BECKMAN, LLC Counsel for Appellee, By: Emily Ellis Ross North American Specialty Insurance Company

HAILEY, McNAMARA, MAYER, Counsel for Appellee, SMITH, BERNARD, LLC American Testing Lab, By: Darren Albert Patin LLC

MAYER, SMITH & ROBERTS, LLP Counsel for Appellee, By: Caldwell Roberts, Jr. Yeager, Watson & Associates, Inc.

BERNHARD, LLC Counsel for Appellee, By: Matthew J. Guy Keystone Retaining Wall Systems, Inc.

COLVIN, SMITH, McKAY & BAYS Counsel for Appellee, By: James Henry Colvin, Jr. Lewis Stone, LLC

Before COX, HUNTER, and ELLENDER, JJ. ELLENDER, J.

The Bienville Parish School Board (“BPSB”) appeals a judgment that

sustained peremptory exceptions of peremption and dismissed all claims

against two defendants, Thrash Construction Services LLC (“Thrash”) and

its bond issuer, North American Specialty Insurance Company (“NASIC”).

For the reasons expressed, we affirm.

FACTUAL BACKGROUND

In 2014, BPSB sought to upgrade its athletic facility at Gibsland-

Coleman High School by installing an all-weather track. It obtained a bond

issue, hired an architect, and put the project out for bid. In December 2014,

it awarded the contract to Thrash, executing a standard-form agreement (“the

Agreement”) for $2,455,898. NASIC underwrote the performance and

payment bonds. BPSB issued a notice to proceed in January 2015, with a

projected completion date of January 10, 2016.

The architect’s plans specified building three MSE (mechanically

stabilized earth) retaining walls; Thrash hired a subcontractor for this.

However, at some point in the process, after a major rain event, Thrash

discovered the MSE walls were unstable; in fact, they were moving. The

parties brought in a professional engineer, who inspected and reported in

January 2017 that the MSE walls would have to be destroyed. After several

meetings seeking remediation, on May 25, 2018, BPSB terminated the

Agreement.

PROCEDURAL HISTORY

Even before termination, on January 8, 2018, BPSB filed this suit

against Thrash and NASIC, the architects, subcontractors, and others. Without mentioning the Public Works Act, the petition sought damages for

defective design, construction, and workmanship of the project.

Thrash and NASIC responded with dilatory exceptions of prematurity

seeking to dismiss or stay the action. In the Agreement, the parties had

elected to include a binding dispute resolution clause.1 The general

conditions of the Agreement, § 15.4.1, recited that a demand for arbitration

“shall be made in writing, delivered to the other party to the Contract, and

filed with the person or entity administering the arbitration.” With respect to

the time of the demand, § 15.4.1.1, stated:

A demand for arbitration shall be made no earlier than concurrently with the filing of a request for mediation, but in no event shall it be made after the date when the institution of legal or equitable proceedings based on the Claim would be barred by the applicable statute of limitations. For statute of limitations purposes, receipt of a written demand for arbitration shall constitute the institution of legal or equitable proceedings based on the Claim.

After a hearing in July 2018, the district court granted the exceptions.

By judgment of August 7, 2018, the court ordered that all claims against

Thrash and NASIC were “stayed, pending completion of arbitration.”

Over five years later, in August 2023, Thrash filed a peremptory

exception of peremption; NASIC soon filed its own similar exception. They

asserted that any claim against a contractor or its surety in connection with a

public works project was subject to a five-year peremptive period under the

Public Works Act, R.S. 38:2189. They showed that since the stay issued,

BPSB had never instituted a claim for arbitration and, thus, had missed the

five-year deadline incorporated by § 15.4.1.1. They argued the claim was

extinguished and the suit should be dismissed.

1 The Agreement is an AIA® Document A101™-2007. 2 BPSB opposed the exceptions. It conceded that R.S. 38:2189 was a

peremptive period but argued that its timely suit interrupted or suspended

this, and that the claim was viable “pending completion of arbitration.”

Since the stay was still in force, BPSB contended, the claim was still alive

even though over five years had passed with no request for arbitration.

After a hearing in November 2023, the district court granted the

exceptions of peremption and rendered judgment dismissing BPSB’s claims

against Thrash and NASIC. BPSB appealed.

APPLICABLE LAW

Contracts have the effect of law for the parties. Bonilla v. Verges

Rome Architects, 23-00928 (La. 3/22/24), 382 So. 3d 62; Warsaw Country

Store LLC v. Bryan Ashley Enters. Inc., 55,403 (La. App. 2 Cir. 1/10/23),

378 So. 3d 757. Interpretation of a contract is the determination of the

common intent of the parties. La. C.C. art. 2045. When the words of a

contract are clear and explicit and lead to no absurd consequences, no further

interpretation may be made in search of the parties’ intent. La. C.C. art.

2046. Bonilla v. Verges Rome Architects, supra.

A provision in any written contract to settle by arbitration a

controversy thereafter arising out of the contract shall be “valid, irrevocable,

and enforceable, save upon such grounds as exist at law or in equity for the

revocation of any contract.” La. R.S. 9:4201. Louisiana law strongly favors

arbitration. Aguillard v. Auction Mgmt. Corp., 04-2804 (La. 6/29/05), 908

So. 2d 1; Iberia Bank v. Dalton Const. LLC, 52,752 (La. App. 2 Cir.

6/26/19), 277 So. 3d 829.

The relationship between arbitration and litigation is stated in the

Louisiana Binding Arbitration Law, La. R.S. 9:4202: 3 If any suit or proceedings be brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which suit is pending, upon being satisfied that the issue involved in the suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until an arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with the arbitration.

The time limit for asserting a claim on a public contract is stated in the

Public Works Act, specifically La. R.S. 38:2189:

Any action against the contractor on the contract or on the bond, or against the contractor or the surety or both on the bond furnished by the contractor, all in connection with the construction, alteration, or repair of any public words let by the state or any of its agencies, boards or subdivisions shall prescribe 5 years from the substantial completion * * * or acceptance of such work, whichever occurs first, or of notice of default of the contractor unless otherwise limited in this Chapter.

The five-year period of 38:2189 is peremptive. State v. McInnis Bros.

Constr., 97-0742 (La. 10/21/97), 701 So. 2d 937; Bossier Parish Sch. Bd. v.

LeBlanc, 45,632 (La. App. 2 Cir. 9/22/10), 48 So. 3d 355, writ denied, 10-

2396 (La. 12/17/10), 51 So. 3d 13. Peremption is a period of time fixed by

law for the existence of a right. Unless timely exercised, the right is

extinguished upon the expiration of the peremptive period. La. C.C. art.

3458; Jenkins v. Starns, 11-1170 (La. 1/24/12), 85 So. 3d 612; Chemical

Insulation Co. v. Arco Bldrs. Inc., 55,230 (La. App. 2 Cir. 8/9/23), 369 So.

3d 483, writ denied, 23-01235 (La. 11/21/23), 373 So. 3d 449. Unlike

prescription, which merely prevents the enforcement of a right by legal

action, peremption extinguishes or destroys the right. Law Indus. LLC v.

Dept. of Educ., 23-00794 (La. 1/26/24), 378 So. 3d 3; Coté v. Hiller, 49,623

(La. App. 2 Cir. 2/27/15), 162 So. 3d 608.

4 Except as otherwise provided by law, peremption may not be

renounced, interrupted, or suspended. La. C.C. art. 3461; Borel v. Young,

07-0149 (La. 11/27/07), 989 So. 2d 42; Chemical Insulation Co. v. Arco

Bldrs., supra. According to legislative commentary, an action subject to

peremption is exercised, and thus not lost, when it “has been commenced or

served as provided in Article 3462.” La. C.C. art. 3461, Rev. Comment (c).

Under Art. 3462, the related concept of prescription is interrupted “when the

obligee commences action against the obligor, in a court of competent

jurisdiction and venue.”

If evidence is introduced at the hearing on the peremptory exception

of peremption, the district court’s findings are reviewed under the manifest

error-clearly wrong standard of review. Lomont v. Bennett, 14-2483 (La.

6/30/15), 172 So. 3d 620; Regions Bank v. Eymard, 21-0926 (La. App. 1 Cir.

5/23/22), 342 So. 3d 908, writ denied, 22-00977 (La. 10/18/22), 348 So. 3d

731. Factual findings pertinent to the interpretation of a contract are subject

to manifest error review. Campbell v. Melton, 02-1637 (La. 6/27/03), 817

So. 2d 69; Warsaw Country Store v. Bryan Ashley Enters., supra.

BPSB’S POSITION

BPSB designates one assignment of error: the court erred in finding

the five-year peremptive period of R.S. 38:2189 had extinguished BPSB’s

cause of action against Thrash and NASIC where (a) BPSB timely

commenced an action against Thrash and NASIC in a court of competent

jurisdiction and venue, (b) the causes of action remained pending completion

of arbitration, and (c) BPSB did not file for arbitration prior to the lapse of

the five-year period.

5 At the outset, BPSB concedes that, under Art. 3461, peremption may

not be renounced, interrupted, or suspended. However, it shows that an

action asserting a right subject to peremption is deemed exercised when the

obligee commences or serves an action asserting that right in a court of

competent jurisdiction and venue. La. C.C. art. 3461, Rev. Comment (c). It

concludes that its suit against Thrash and NASIC, filed within the five-year

period of R.S. 38:2189, exercised its right and prevented its extinguishment

by peremption.

As a “second step,” BPSB contends the district court’s stay order of

August 2018 had no effect on the established law of Arts. 3461 and 3462.

Further, the arbitration provision, § 15.4.1.1, incorporates the applicable

statute of limitations. BPSB argues that the applicable statute of limitations

is stated in Arts. 3461 and 3462, with provisions for the exercise of the right,

and not in R.S. 38:2189, which sets a uniform five-year peremptive period.

Finally, BPSB submits the district court, Thrash, and NASIC all

labored under a “fundamental misunderstanding of the effects of a stay.”

BPSB argues a stay is different from a dismissal in that it avoids the risks

presented by the statute of limitations. In support, it cites various cases in

which Federal courts applied Colorado River abstention to stay federal cases

in deference to duplicative state-court actions.2 BPSB suggests that the

reprieve from time limits recognized in these Federal abstention cases

applies equally here. It concludes this is grounds for reversal.

2 The concept was articulated in Colorado River Conservation Dist. v. United States, 424 U.S. 800, 96 S. Ct. 1236 (1976). Cases cited by BPSB that applied the stay and noted the advantage of avoiding the statute of limitations include Rosser v. Chrysler Corp., 864 F. 2d 1299 (7 Cir. 1989); Lumen Constr. Inc. v. Brant Constr. Co., 780 F. 2d 691 (7 Cir. 1986); Attwood v. Mendocino Coast Dist. Hosp., 886 F. 2d 241 (9 Cir. 1989); Carr v. Grace, 516 F. 2d 502 (5 Cir. 1975); Moorer v. Demopolis Waterworks & Sewer Bd., 374 F. 3d 994 (11 Cir. 2004). 6 DISCUSSION

The five-year period for asserting a claim on a public contract, under

R.S. 38:2189, is peremptive. State v. McInnis Bros. Constr., supra; Bossier

Parish Sch. Bd. v. LeBlanc, supra. Peremption may not be renounced,

interrupted, or suspended. La. C.C. art. 3461. However, if the right is

exercised timely, it is not extinguished by peremption. La. C.C. art. 3458;

Jenkins v. Starns, supra; Chemical Insulation Co. v. Arco Bldrs., supra. The

crux of the case is whether BPSB properly exercised its right within the five-

year period.

BPSB executed the Agreement with Thrash and NASIC. As with any

contract, the Agreement has the effect of law for the parties. Bonilla v.

Verges Rome Architects, supra; Warsaw Country Store v. Bryan Ashley

Enters., supra. By the Agreement, these parties accepted arbitration as the

method of binding dispute resolution. Further, they agreed that the demand

for arbitration must be “made in writing, delivered to the other party * * *,

and filed with the person or entity administering the arbitration.” § 15.4.1.

In addition, the demand must be made no later than “the date when the

institution of legal * * * proceedings based on the Claim would be barred by

the applicable statute of limitations.” § 15.4.1.1. The statute of limitations

setting forth the peremptive period for a claim on a public contract is five

years. R.S. 38:2189. The parties concede, and the record confirms, that

BPSB did not make the required written demand for arbitration within the

five-year period. Hence, the district court’s finding of peremption is not

plainly wrong.

BPSB strongly contends that it did, in fact, exercise its right, by filing

suit in district court in January 2018. In support, it cites the Revision 7 Comments, particularly Comment (b) to La. C.C. art. 3462, which states that

the filing of a suit in a court of competent jurisdiction and venue “interrupts

any kind of prescription.” In the general situation, not regulated by an

arbitration agreement, filing suit would obviously be an exercise of BPSB’s

right. Here, however, the Agreement elected arbitration as the method of

binding dispute resolution, specified the method of asserting a claim, and

adopted the five-year period of R.S. 38:2189 as a time limit. To apply a

different procedure and time limit would be to disregard the “valid,

irrevocable, and enforceable” nature of the Agreement. La. R.S. 9:4201.

Given the intent of the parties and the clear provisions of the Agreement, the

district court did not err in finding BPSB’s suit ineffective to exercise its

contract claim.3

This analysis negates any suggestion that the mention of “applicable

statute of limitations” in § 15.4.1.1 incorporated not only R.S. 38:2189 but

also the possible impact of C.C. art. 3462. The suit in district court was not

in the jurisdiction and venue contemplated by the Agreement and thus

cannot be deemed as exercising the right.

In addition, the Agreement states that the parties shall commence all

claims “in accordance with the requirements of the final dispute resolution

method selected in the Agreement within the time period specified by

applicable law,” and any claims not so commenced are waived. § 13.7.

This passage reinforces the peremptive effect of R.S. 38:2189 and confirms

that the failure to follow the Agreement extinguished the claim.

3 Thrash also argues that comments to Civil Code articles do not constitute the law, Sims v. Amer. Ins. Co., 12-0204 (La. 10/16/12), 101 So. 3d 1. This is a correct statement of the law, although some flexibility is perhaps warranted when the comment explicitly incorporates an article by reference, as when Art. 3461, Rev. Comment (c), refers to the procedure “provided in Article 3462.” 8 BPSB also argues that the district court misinterpreted the August

2018 judgment, which stayed all claims “pending completion of arbitration.”

In essence, BPSB contends, as long as arbitration has not been completed,

the claims remain viable. However, the 2018 judgment stayed the lawsuit

“until arbitration has been had in accordance with the terms of the

agreement,” under La. R.S. 9:4202. Before the dispute arose, these parties

agreed to arbitration, with a method and a time limit for asserting any

claims. After, BPSB filed a suit but then performed no acts in accordance

with the Agreement. The judgment staying the “suit pending completion of

arbitration” could not extend BPSB’s rights beyond those provided in the

Agreement. These arguments lack merit.

In light of this resolution, we pretermit any consideration of Colorado

River abstention and its potential benefit in avoiding statutes of limitations.

CONCLUSION

For the reasons expressed, the judgment is affirmed. BPSB has

prepaid all costs. La. R.S. 13:5112.

AFFIRMED.