A Subcontractor’s Failure to Submit the Proper Notice Proves Costly in $5M Georgia Construction Project Dispute

Poole Huffman, LLC

When you’re dealing with construction projects and contracts, whether you’re a contractor or a subcontractor, invoicing and payment of invoices are critical parts of the process. If you’re the invoicing party, you want to ensure you’ve done everything necessary to ensure you get paid what you’re owed. If you’re the party receiving the invoice(s), you want to be sure you’re paying only what you’re legally obligated to pay. Either way, advice and representation from a knowledgeable Atlanta commercial contracts lawyer can go a long way toward maximizing the protection of your business interests and your rights.

Unpaid invoices — and a lien waiver — were at the center of one recent federal court contract dispute here in North Georgia. To set the stage, the parties were: a Houston-based contractor specializing in “engineering, procurement, and construction” services and its subcontractor, a Missouri-based site development company. The work centered around a construction project just outside Savannah. The parties’ contracts called for the subcontractor to provide pipes, rack modules, process modules, and pipe insulation, as well as to install certain pipe racks and process modules.

Along the way, the subcontractor submitted roughly $5.2 million worth of invoices for which it never received payment. The contractor asserted a procedural basis for its argument that it didn’t owe the invoiced amounts. The subcontractor failed to “file a claim of lien or affidavit of nonpayment within sixty days of signing a lien waiver,” which was a statutory requirement. The contractor argued that the subcontractor’s failure to file that notice effectively extinguished its right to receive payment on those invoices.

The federal district court for the Northern District of Georgia agreed with the contractor. The relevant Georgia law — the “Waiver Statute” — was clear and straightforward. The law says that when you execute a lien waiver under O.C.G.A. Section 44-14-366 (which this contractor and subcontractor did,) a party “shall be conclusively deemed to have been paid in full,” even if they have not received payment unless that party files an Affidavit of Nonpayment or a Claim of Lien within 60 days. The subcontractor didn’t do that, so it lost its right to receive payment.

In ruling for the contractor, the federal court looked at a Georgia Court of Appeals case from 2019 with similar facts. In that earlier case, the subcontractor submitted its invoices and also submitted a lien waiver under the waiver statute. The subcontractor did not, however, submit any notices regarding the unpaid invoices.

Binding for All Purposes, Including Arguments Under Contract Law

The subcontractor in that case — like the subcontractor in this case — lost. The court said that the waiver statute was unambiguous in its intention for a lien waiver “to be binding against the parties for ‘all purposes,’ not just for the purposes of preserving the right to file a lien on the property.” That included arguments made under contract law.

The impact of the waiver statute, according to the court, is both clear and strict: once you sign a lien waiver pursuant to the waiver statute, you immediately take on a statutory obligation either to file a Claim of Lien or else an Affidavit of Nonpayment if you want “to keep the debt alive beyond 60 days.”

In a commercial setting, whether you’re the party invoicing for work you’ve done or you’re the party paying the invoices, it’s extremely important to know your rights… and your obligations. A failure to engage in a required procedural step can be the difference between having a right to be paid… or not, which can make a difference of millions of dollars. The knowledgeable Atlanta commercial contract dispute attorneys at Poole Huffman, LLC are here to help, ensuring that our clients’ legal rights and business interests are fully protected. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation today.17

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