Service Area: Notice and Mechanic’s Lien Services

Private, Public, or Federal: The Importance of Project Type for Lien Rights

Posted on July 11, 2022 by wpengine - Mechanic's Liens & Bond Claims

Whether You Protect Mechanic’s Lien or Bond Claim Rights Depends on the Project Type: Private, Public, or Federal

If you are supplying materials or labor to a construction project, you can (and should) secure your receivables through the mechanic’s lien or bond claim process.

Mechanic’s liens and bond claims are two separate remedies, and you should ensure you secure the right one – but how do you know whether you should file a mechanic’s lien or serve a bond claim?

Determining your rights for any project requires you to know 3 key pieces of information:

Know where your customer falls in the contractual chain
Know the project type
Know the state where the project is located

If you are sitting there a bit befuddled, don’t fret, here’s an example of those 3 vital pieces of information. Let’s say you are supplying to the general contractor, on a public project in Ohio. So, here’s what we know:

We know where our customer falls in the contractual chain = general contractor.
We know the project type = public.
We know the state where the project is located = Ohio.

“OK, well I know who my customer is & I know where the project is, but I don’t know the project type. And what does “project type” even mean?”

In the U.S., construction projects are categorized as private, public or federal. (Bonus: in Canada projects are categorized as private, public or federal crown.)

Private: a private project is a private improvement contracted by a private entity, e.g. a person, company or corporation.
Public: a public project is an improvement of public works or building under formal contract made by any government authority, e.g. the state, county, city or political subdivision.
Federal: a federal project is a contract for the construction, alteration or repair of any public building or public work of the United States.

“I’m supplying materials to a fast food restaurant & since it’s open to the public it must be a public project, right?”

Nope! Just because the general public has access to a particular place, it does not necessarily mean that it is a publicly owned property.

The key is in the property ownership.

“Could you please provide me with some more examples?”

Please remember, as with most situations, there are ALWAYS exceptions! Sometimes projects may appear to be public and federal or even appear to be federal on private property. The examples provided below are just that, examples – when in doubt, you should seek a legal opinion.

Private Projects: office buildings, restaurants, stores/retail, churches

Public Projects: public schools, city hall, Dept. of Transportation

Federal Projects: United States Post Office, United States Air Force, Ft. Hood, U.S. Army

“Wait, the city owns the property, but a private company is leasing it! Now what should I do?!”

This is precisely what I was referring to in the last section – an exception. When property is leased, whether it’s publicly or privately owned, you may encounter a lien on leasehold interest.

A lien on leasehold interest is real property held by a lessee under lease. When liening a tenant improvement, the statutes vary by state as to whether a mechanic’s lien would be available against the property, the leasehold interest of the tenant, or both.

Interested in learning more about securing mechanic’s lien or bond claim rights? Contact us!

Protect Your Purchase Money Security Interest in Goods

Posted on June 27, 2022 by wpengine - UCC Financing Statements

What is a Purchase Money Security Interest (PMSI)?

Section 9-103 of the UCC defines a PMSI as a security interest in goods that are collateral for an obligation that arises in connection with the sale of the goods. When the required steps are met a PMSI can give a creditor a first or priority security interest in the goods even if other secured parties hold prior perfected security interests in the same collateral.

How Does the Creditor Stay Compliant with PMSI Requirements?

Article 9-324 (b) outlines the requirements for a secured party to obtain a PMSI in inventory:

the purchase-money security interest is perfected when the debtor receives possession of the inventory;
the purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
the holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and
the notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.

An Example of How a Secured Party Can Lose Priority

Secured parties must strictly comply with the Article 9 PMSI requirements. This process is an exception to the “first to file” priority rule. Let’s use the case of T. Gluck & Co., Inc. v. Craig Drake Mfg., Inc., 2013 N.Y. Misc. LEXIS 2384 (N.Y. Sup. Ct. June 4, 2013) to demonstrate how a secured party can lose priority if it does not comply with the requirements.

Craig Drake Mfg., Inc. (the “Debtor”), a jewelry manufacturer, entered into a revolving credit agreement in 1989 with a lender that later sold the loan and security interest to Sovereign Bank (collectively, the “Bank”).

The revolving credit agreement granted the Bank a security interest in the current and future accounts and inventory.

On July 27, 1989, the Bank perfected its security interest in the Debtor’s assets by filing a financing statement. The bank protected its security interest in 1994, 1999, 2004 and 2009 by filing continuation statements.

T. Gluck & Co. (“Gluck”) contracted to supply diamonds to the Debtor on consignment in 1997. Gluck sent a notice to the Bank later in 1997 to protect its interest in the consigned goods and filed a financing statement soon after.

12 years later in 2009, the Debtor retained a firm to manage a going-out-of-business sale. The sale lasted several months with most of the proceeds going to the bank. Gluck was not paid for a portion of the goods consigned to the Debtor.

Gluck then brought a lawsuit against the Bank at the end of 2009, alleging that it held the priority interest in the consigned goods. The bank disputed Gluck’s allegations. The court determined that under the UCC, Gluck’s interest in the consigned goods was a PMSI in inventory. Gluck had to prove it complied with the PMSI requirements to have the priority interest in the goods.

Gluck originally sent The Bank a PMSI notice in 1997. Unfortunately for Gluck, they never sent another notice of its claimed security interest in the consigned goods.

The court concluded that the PMSI notice expired in 2002 and was never re-sent and Gluck was not entitled to PMSI priority. The general rule of “first to file”, “first in line” would be applied. The Bank had first priority because it was the first to file in 1989.

Lesson Learned: Always re-send a PMSI notice.

Steps to Comply with Article 9 PMSI Requirements

It is very important, as we learned in the case above, that a secured party that claims a PMSI in inventory must re-send the authenticated notification every five years. The general priority rules state that failure to resend a notice renders the secured party’s security interest subordinate to prior perfected security interests.

The best practice is for the secured party to resend its PMSI notices prior to the time it continues the financing statement every 5 years to avoid the result found in the case of T. Gluck & Co., Inc. v. Craig Drake Mfg., Inc.

Have you successfully perfected your Purchase Money Security Interest? NCS is here to help!

What’s Included in a California Mechanic’s Lien?

Posted on June 20, 2022 by wpengine - Mechanic's Liens & Bond Claims

What Information Should be Included in Your California Mechanic’s Lien?

We serve preliminary notices, file mechanic’s liens, and serve bond claims ALL DAY EVERY DAY for clients throughout the country. And, as I take a bite of humble pie, might I add we are truly awesome at it? Although we are the best in the biz, there are many suppliers, subcontractors, and general contractors who prefer to handle the documentation on their own. So, today’s post is for all you DIY-ers. Here’s a breakdown of the information you should include within your California mechanic’s lien.

[NOTE: this information is provided simply for educational purposes and is no way legal advice. We always recommend seeking professional, legal guidance.]

Ah, California Mechanic’s Liens and the California Civil Code

If that title doesn’t grab you and suck you right into the story, I have no idea what will! Let’s get to it.

According to 8416 of the California Civil Code, the mechanic’s lien should include the following information:

ARTICLE 2. Conditions to Enforcing a Lien [8410 – 8424]

8416.(a) A claim of mechanics lien shall be a written statement, signed and verified by the claimant, containing all of the following:

(1) A statement of the claimant’s demand after deducting all just credits and offsets.

(2) The name of the owner or reputed owner, if known.

(3) A general statement of the kind of work furnished by the claimant.

(4) The name of the person by whom the claimant was employed or to whom the claimant furnished work.

(5) A description of the site sufficient for identification.

(6) The claimant’s address.

(7) A proof of service affidavit completed and signed by the person serving a copy of the claim of mechanics lien pursuant to subdivision (c). The affidavit shall show the date, place, and manner of service, and facts showing that the service was made in accordance with this section. The affidavit shall show the name and address of the owner or reputed owner upon whom the copy of the claim of mechanics lien was served pursuant to paragraphs (1) or (2) of subdivision (c), and the title or capacity in which the person or entity was served.

(8) The following statement, printed in at least 10-point boldface type. The letters of the last sentence shall be printed in uppercase type, excepting the Internet Web site address of the Contractors’ State License Board, which shall be printed in lowercase type:

Clear as Mud, Right?

I know, it’s a lot of statutory language, maybe this will help translate.

(1) A statement of the claimant’s demand after deducting all just credits and offsets.

This would be your claim amount or the amount you’re owed.

(2) The name of the owner or reputed owner, if known.

The owner of the property and/or project. You should be able to identify this information through proper title work.

(3) A general statement of the kind of work furnished by the claimant.

A description of the labor or materials you provided to the project. It should be specific enough that parties involved could identify your contribution. It doesn’t have to be a lengthy description.

(4) The name of the person by whom the claimant was employed or to whom the claimant furnished work.

This would be your customer’s information.

(5) A description of the site sufficient for identification.

This is the project address or the parcel ID number (aka APN).

(6) The claimant’s address.

If you are filing the lien, you are the claimant, so you will list your address.

This is proof you served the mechanic’s lien upon the correct parties and that it was served timely.

This is important. Many states have requirements as to font size and specific language that must appear within the lien. There are instances where lien claimants have lost their lien rights because they failed to comply with the statutory language. Make sure you follow the statute’s instructions carefully.

Reminder About California Mechanic’s Lien Rights

Generally, to protect your mechanic’s lien rights on private California projects, you should serve your preliminary notice within 20 days from your first furnishing. You can serve a late notice, but the lien will only be effective for your furnishings provided 20 days prior to the service of the notice and any furnishing thereafter.

In the event you are unpaid, subcontractors and material suppliers should file your mechanic’s lien after you’ve completed furnishing but within 30 days from the recording of the Notice of Completion or 90 days from completion if the Notice of Completion isn’t recorded. (Remember, Completion is entire project completion – completion of the General Contract – not just completion of your furnishing.) Conservatively, and for the sake of your cash flow, you may want to file your lien sooner rather than later – Completion could be a long way off and you don’t want to wait months, or worse, years, for your money.

If the lien does not prompt payment, you should file suit to enforce your lien within 90 days from filing the lien.

Um, Maybe I Shouldn’t Do This on My Own

If you can handle it on your own, by all means, please do. But, if you have even the slightest hesitation, I recommend using NCS. Mechanic’s liens can be fickle creatures and you certainly don’t want to lose your right to recover payment because of avoidable mistakes. We’re here and ready to help!

Bonding Off a Mechanic’s Lien: What Is It?

Posted on June 13, 2022 by wpengine - Mechanic's Liens & Bond Claims

hand holding question mark with exclamation point in the background

Bonding Off a Mechanic’s Lien: What Is It & What Does It Mean for You?

Once a mechanic’s lien is filed, there is an opportunity for the lien to be removed from the property with the filing of a discharge bond (also known as a transfer bond). Discharge bonds may be substituted for a mechanic’s lien. The process of replacing the lien with a bond is sometimes referred to as bonding around a lien, bonding off a lien, or bonding over a lien. Or, in some instances, a prevention bond may be provided at the start of the project, to ensure no liens attach to the property.

Bonding off a mechanic’s lien does not mean your mechanic’s lien rights are eliminated. Rather, your rights change; instead of pursuing a claim against the property, you pursue a claim against the bond.

Let’s imagine that one of those inflatable dancing tube people is the mechanic’s lien. The inflatable dancing tube guy must be attached to something, or he will blow away, in this case he is attached to the building and the only way to remove him from the building is to give him something else to attach to. So, the GC obtains a discharge bond and the dancing tube guy dances himself away from the building and attaches himself to the discharge bond, which is weighted down with the backing of a surety. The dancing tube guy is still secured, it’s just that now he is secured by the weight of a surety instead of the frame of the building.

You still have security. The security is different and the rules for maintaining that security may be different, but you typically have security to the same extent that you had security under the lien.

What about deadlines? Although it is state specific, you will likely follow the same deadlines as you would for the lien – to be safe, check statute or speak with an attorney.

3 Popular Reasons a Mechanic’s Lien is Bonded Off

1. No Lien Clause.

There may be a clause within the general contract requiring the General Contractor to ensure the owner’s property remains free and clear of any mechanic’s liens. This is sometimes referred to as a “no lien clause.” Although this clause is most frequently seen in general contracts, it is possible for this clause to appear within contracts throughout the ladder of supply.

2. Disputes.

There may be contractual disputes between parties within the ladder of supply, and although the disputes could be resolved, the parties will withhold payment. Disputes can take significant time to resolve and bonding off the lien provides parties with more time.

3. The Owner

If liens have been filed, the owner may withhold payment from the general contractor until the liens have been removed. The general contractor will then post a bond to remove the liens and the owner will remit payment. The owner may also bond off liens if they are trying to refinance loans on their property; banks aren’t fans of refinancing when the collateral (the property) is encumbered by other parties.

The Process for Bonding Off a Mechanic’s Lien

First, a lien must be filed against the property. Then, a bond (or a cash deposit) is filed with the register of deeds or court, as a substitute for the encumbered property. The amount of the bond may vary based on state statute, though frequently is 110% to165% of the amount of the lien. So, if the lien is for $100,000 and the state requires the bond to be 110% of the lien amount, the bond will be for $110,000. Often, the general contractor is the party bonding off the lien and is listed as the principal on the bond. However, anyone within the ladder of supply could bond off the lien.

Once the action moves to suit, the surety and principal of the bond (e.g., the general contractor) will be named in the suit action, instead of naming the owner. (Remember, once a bond is in play, the owner’s property is no longer part of the equation.)

Does the mechanic’s lien have to be released? This is a hotly contested question. Legal professionals fall on both sides: release the lien, don’t release the lien. Generally, we recommend not filing a release of lien, because the lien is attached the bond. However, it’s best to have an attorney carefully review your situation.

Have Questions?

Having your lien bonded off can be a bit overwhelming because it’s a new process. But don’t worry, we’ve got you covered! Contact us today and let us help you navigate.

Georgia Mechanic’s Liens & Bond Claims

Posted on June 11, 2022 by wpengine - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Here’s What You Should Know about Georgia Mechanic’s Liens & Bond Claims

Sweet Georgia Mechanic’s Liens & Bond Claims on My Mind. Songs aren’t quite the same with “mechanic’s liens and bond claims” in the lyrics, but would-be claimants will certainly feel peachy with secured Georgia lien and bond claim rights on their minds.

In today’s post, we’ll look at the steps necessary to protect your lien or bond claim rights for projects in Georgia.

“Georgia, Georgia, the Whole Blog Post Through”

Regardless of whether you furnish to a private or public project, the Notice to Contractor should be served within 30 days after first furnishing or the filing of the Notice of Commencement. The primary difference between the private and the public notice lies with who needs to be served.

Private Projects

Notice to Contractor:

Serve Notice to Contractor upon the owner or the agent of the owner and the prime contractor within 30 days after first furnishing materials or services, or within 30 days from the filing of the Notice of Commencement, whichever is later.

Public Projects

Notice to Contractor:

Serve Notice to Contractor upon the prime contractor within 30 days after first furnishing materials or services, or within 30 days from the filing of the Notice of Commencement, whichever is later.

As a best practice, we recommend always serving a notice and serving the notice upon all parties within the ladder of supply, including registered agents. However, the Notice to Contractor may not always be required. For example, if you contract directly with the prime contractor or if a Notice of Commencement hasn’t been filed, or wasn’t filed timely, you may not need to serve a notice.

“Georgia Claimed Her… Mechanic’s Lien & Bond Claim”

If you are furnishing to a private project, you must file your mechanic’s lien within 90 days after your last furnishing date. Then, within two business days from filing the lien, send a copy of the lien to the owner and the prime contractor. Keep in mind, Georgia is an unpaid balance lien state; file the lien as soon as possible to protect your rights.

Has a payment bond been issued for the private project? In that case, you should serve the bond claim notice in accordance with the terms and conditions of the payment bond. Frequently, a bond claim notice is required within 90 days from your last furnishing.

For those furnishing to public projects, the bond claim notice should be served on the prime contractor within 90 days from last furnishing.

Can Lien or Claim Rights be Waived Before Furnishing?

No, according to Georgia’s statute for private projects, lien and/or bond claim rights cannot be waived before furnishing:

“A right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services, or materials. Any purported waiver or release of lien or bond claim or of this Code section executed or made in advance of furnishing of labor, services, or materials is null, void, and unenforceable.” – O.C.G.A. § 44-14-366

Remember, Sweet Georgia has Statute Specific Lien Waivers

Georgia is one of the 13 states that has statutory requirements for lien waivers. Georgia’s statute dictates the waiver should be in “12 point font” and, depending on whether it’s a final or interim waiver, certain language should appear within the document.

Here’s the text, as prescribed by Georgia statute, for an Interim Waiver and Release upon Payment:

WAIVER AND RELEASE OF LIEN AND PAYMENT BOND RIGHTS UPON INTERIM PAYMENT

STATE OF _____________________
COUNTY OF ___________________

THE UNDERSIGNED MECHANIC AND/OR MATERIALMAN HAS BEEN EMPLOYED BY _____________________ TO FURNISH _____________________ FOR THE CONSTRUCTION OF IMPROVEMENTS KNOWN AS _____________________ WHICH IS LOCATED IN THE CITY OF _____________________, COUNTY OF _____________________, AND IS OWNED BY _____________________ AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

[Project Address Line]

(DESCRIBE THE PROPERTY UPON WHICH THE IMPROVEMENTS WERE MADE BY USING EITHER A METES AND BOUNDS DESCRIPTION, THE LAND LOT DISTRICT, BLOCK AND LOT NUMBER, OR STREET ADDRESS OF THE PROJECT.)

UPON THE RECEIPT OF THE SUM OF $ ___________________, THE MECHANIC AND/OR MATERIALMAN WAIVES AND RELEASES ANY AND ALL LIENS OR CLAIMS OF LIENS IT HAS UPON THE FOREGOING DESCRIBED PROPERTY OR ANY RIGHTS AGAINST ANY LABOR AND/OR MATERIAL BOND THROUGH THE DATE OF __________________________ (DATE) AND EXCEPTING THOSE RIGHTS AND LIENS THAT THE MECHANIC AND/OR MATERIALMAN MIGHT HAVE IN ANY RETAINED AMOUNTS, ON ACCOUNT OF LABOR OR MATERIALS, OR BOTH, FURNISHED BY THE UNDERSIGNED TO OR ON ACCOUNT OF SAID CONTRACTOR FOR SAID BUILDING OR PREMISES.

GIVEN UNDER HAND AND SEAL THIS _____ DAY OF _____________________, ___________.

___________________________(SEAL)

_______________________

(WITNESS)
_______________________
(ADDRESS)

NOTICE: WHEN YOU EXECUTE AND SUBMIT THIS DOCUMENT, YOU SHALL BE CONCLUSIVELY DEEMED TO HAVE WAIVED AND RELEASED ANY AND ALL LIENS AND CLAIMS OF LIENS UPON THE FOREGOING DESCRIBED PROPERTY AND ANY RIGHTS REGARDING ANY LABOR OR MATERIAL BOND REGARDING THE SAID PROPERTY TO THE EXTENT (AND ONLY TO THE EXTENT) SET FORTH ABOVE, EVEN IF YOU HAVE NOT ACTUALLY RECEIVED SUCH PAYMENT, 90 DAYS AFTER THE DATE STATED ABOVE UNLESS YOU FILE AN AFFIDAVIT OF NONPAYMENT PRIOR TO THE EXPIRATION OF SUCH 90-DAY PERIOD. THE FAILURE TO INCLUDE THIS NOTICE LANGUAGE ON THE FORM SHALL RENDER THE FORM UNENFORCEABLE AND INVALID AS A WAIVER AND RELEASE UNDER O.C.G.A. §44-14-366.

Sweet Like a Georgia Peach

Georgia peaches are sweet, but Georgia statute is not as lenient as some other states. It’s important for would-be claimants to carefully follow statutory requirements and seek legal guidance!

*Post was recently updated to include changes to Georgia’s waivers.

Non-Statutory Notices: 3 Great Reasons to Serve Them

Posted on May 16, 2022 by wpengine - Preliminary Notices & Construction Credit

why you should serve non-statuatory notices graphic

Three Great Reasons Why You Should Serve Non-Statutory Notices

If you are furnishing to a construction project, you probably already know the immense benefit of serving preliminary notices to protect your mechanic’s lien and bond claim rights. But what should you do if there isn’t a required preliminary notice? Do nothing? Of course not. You should serve a non-statutory notice and I have three great reasons why!

What are Non-Statutory Notices?

First, let’s address the difference between statutory and non-statutory. Statutory is “enacted by statute” and statute is the law. So, if we say you need to serve a statutory notice to protect your lien rights, we are referring to the preliminary notice that is required by the statute or law. That means, if something is non-statutory, it is not required by statute or law

A non-statutory notice is a notification to an owner that its property has been or will be improved by the goods or services supplied.

There are instances where a preliminary notice isn’t required. If you are furnishing to a project in a state where there is no statutory or required notice, we recommend you serve a non-statutory notice.

“Um, why would I send a notice if it’s not required?” I’m glad you asked!

#1: It Promotes Transparency

By serving a notice, you are giving everyone in the ladder of supply a heads up that you are furnishing material or services to the project. Often, parties toward the top of the ladder (like the owner and GC) have no idea who the various suppliers and subcontractors are. View this notice as a courtesy to those parties. You are letting them know you are involved and while you don’t anticipate any payment problems, you do expect to be paid timely.

#2: Makes You a Payment Priority

This ties into number one. Because you are notifying everyone of your involvement, you are also making yourself a payment priority. How? Well, now they know your company name, they know what you are providing to the project, they know how to get in touch with you, and they know that you know how to protect yourself in the event you aren’t paid.

Think of it another way – what if something goes awry with the GC, and the owner starts remitting payment to the subs and suppliers directly. Don’t you want to be front of mind for the owner? Better yet, wouldn’t it be nice if the owner has all contact information for you because they received a notice about your involvement? Think of all the subs and suppliers the owner doesn’t know about – how quickly are those folks going to get paid? Probably not very quickly; in fact, it’s more likely that those folks would have to proceed with a lien or a bond claim.

Which leads me to number 3.

#3: Reduces the Need for Mechanic’s Liens and Bond Claims

Although I just covered this, let me recap. If the owner/GC gets a copy of your notice, they know you’re on the job and they know they need to pay you, which means you will likely be a payment priority (front of the line). And that means you are less likely to need the leverage of a mechanic’s lien or a bond claim.

Need a 4^th Reason? How About a Sample?

Need a fourth reason? Non-statutory notices are an excellent way to pick up additional project information. Let’s face it, job information (aka project information) can be tough to find. Wouldn’t it be nice if you could just throw the “ASK” out there? An easy way to ask for additional information is to include it right within your non-statutory notice.

Here’s a sample notice with the “ASK” included:

[Date]

Project Name/Address:

Dear Sir or Madam:

[Company Name] has or will be furnishing [description of materials or services being furnished] for the above construction project.

We serve notices on all projects to promote transparency and open communication. Transparency helps ensure payment for the materials and/or services we have supplied, and we want you to be fully informed about who may have lien rights on your property.

Please understand, this is in no way a reflection on the credit worthiness of any party. If you have any questions about this notice, or if you can provide any additional information (such as a copy of payment bond) or notice incorrect information, please contact us.

Sincerely,

[Contact Name]

[Company Name]

[Company Address, Phone/Fax, Email]

Need help serving notices? We are ready to take the task off your plate – contact us today!

Bankruptcy Proof of Claim Is Late

Posted on May 9, 2022 by wpengine - Credit Risk Management, In Other Commercial Credit News

“Judge, My Bankruptcy Proof of Claim is Late, But I Have a Good Reason!”

And What’s the Reason? “Um, I Forgot My Password.”

We’ve discussed bankruptcy proofs of claim before and the importance of filing them timely (i.e., don’t miss the bar date!). And when this case crossed my desk, I couldn’t help but share it with you. Why? Because it’s a $53 million example of the bankruptcy courts not messing around. When the bar date is set, you’d better have a darn good excuse for missing it, because a deadline is a deadline – you miss it, you lose it. What’s a good excuse? Well, I’ll give you a hint, waiting until the last minute and forgetting your password is not a good excuse, as one attorney discovered.

Briefly, What Is a Bankruptcy Proof of Claim?

A proof of claim is a document filed within the bankruptcy court that alerts the court, debtor, Trustee, and other interested parties that a creditor wishes to register a claim against the assets of the bankruptcy estate. This document is important because it provides proof that the claim is valid and owed and it notifies the Trustee of the creditor’s claim as well as to what class the claim should be associated.

The Bar Date is a Deadline, Don’t Miss It

The Case: In re U-Haul Co. of W. Va., 2:21-bk-20140 (Bankr. S.D.W. Va. Dec. 10, 2021)

Quick Backstory: About 10 years prior to the bankruptcy filing, there was a class action lawsuit against U-Haul. The Ferrell Class (the class action claimant) was comprised of over 320,000 claimants and sought over $53 million in compensation from the lawsuit.

Fast Forward to Bankruptcy Case: U-Haul Co. of W. Va. filed for bankruptcy protection June 2021. On July 23, 2021, the Clerk of Court set the bar date for August 25, 2021 (So, all parties with claims had a little over a month to file their claim.)

A separate order was entered to allow the Ferrell Class to file claims on behalf of the entire class – which makes sense — what a pain it would be to deal with 320,000+ individual claims. When the court entered the order for the Ferrell Class to file its claim, it included the following:

“The deadline for the Class Claims is August 25, 2021 at 11:59 p.m. The Class Claims must be actually received by the Clerk of the Court on or before that date and time, or such claims shall be forever barred.”

The order also included the various ways to submit the claims: file electronically, in person, via mail, etc.

Claim is Late, Debtor Wants the Claim Barred: OK, I’m going to paraphrase here, but essentially the attorney filing the claim on behalf of the Ferrell Class sat down at his computer late in the day on August 25. He goes to log in to PACER (court electronic filing system) to file the claim, but he can’t remember the login information. I picture someone saying “Uh, the dog ate my homework” but circa 2021/2022 with “Um, Judge, I can’t remember my password.” Because it’s after business hours, there is no one to help him reset his online access, AND since he waited till the last minute, he scrambled to try and do the next best thing… email?

According to the court opinion, the attorney “emailed the Ferrell Class Claim to all counsel in the case one hour and twenty-six minutes late and filed the claim nine hours and 45 minutes late upon obtaining the correct filing credentials.”

The court was not amused. I’m picturing a student being scolded by a teacher – “You’ve had ample time. You’ve done this correctly before. I don’t understand what the problem is.” Of course, the court wasn’t quite so casual or crass, and heard the attorney out.

But It’s an Honest Excusable Mistake: Ultimately, the debtor wanted the Ferrell Claim barred because it was late. The attorney for the Ferrell Class argued that “technical difficulties” (i.e., I can’t remember my password) made it impossible for him to file his claim, and the claim should be allowed as timely under the “excusable neglect” standard.

I will save you from the cringeworthy efforts and excuses (though you can click here to read it in the opinion) and summarize: the attorney pleaded with the court to not punish the class for the missteps of the attorney.

Alas, the court determined the attorney’s neglect was inexcusable. “The reason for the delay in filing was entirely within the control of counsel to the Ferrell Class… the Ferrell Class had ample notice of the Bar Date as well as the dire consequences that would result from missing the deadline.”

Oh boy, here it comes:

“This failure to plan and allot necessary time to file the proof of claim was not due to any “technical difficulties” as the Ferrell Class asserts. The Ferrell Class does not allege that the late filing was caused by any defect of the CM/ECF system. It is no excuse that the Clerk’s office was closed when counsel attempted to file the claim after business hours on the night it was due. Counsel had over a month to file the claim, during which he could have contacted the Clerk’s office during business hours at his convenience. The deadline was missed in this case due to a careless disregard for the Bar Date, applicable Bankruptcy Rules, and the explicit terms of the Bar Date Order. Compliance with the deadline (or not) was entirely within the control of counsel to the Ferrell Class, and the failure to comply under these circumstances is inexcusable.”

What’s the saying?

“A lack of planning on your part does not constitute an emergency on my part.”

Yeah… it fits.

This is a painful – $53M painful – lesson in missed deadlines.

Creditor in a Bankruptcy? Always Remember

Be on Time: Too often, creditors miss the bar date to file. Today’s case in point!
Know your Claim: Include all amounts owed for all accounts and affiliates.
Secured or Unsecured: Know whether you are a secured creditor and file properly. (Note, a creditor can have a secured & unsecured claim in the same bankruptcy.)

Need Help? NCS can assist in filing your bankruptcy proof of claim, contact us today!

Material Suppliers’ Mechanic’s Lien Rights in Indiana

Posted on April 18, 2022 by wpengine - Mechanic's Liens & Bond Claims

Material Suppliers’ Mechanic’s Lien Rights for Projects in Indiana

In a significant legal reversal, a material supplier selling to a material supplier now has mechanic’s lien rights in Indiana. For over 100 years Indiana statute has dictated mechanic’s lien rights aren’t available to material suppliers if they are selling to another material supplier. But now… NOW… material suppliers rejoice! Let’s review the case that got us here and look at the steps to secure mechanic’s lien rights in Indiana.

The Case That Made the Difference for Indiana Material Suppliers

On March 10, 2022, the Indiana Supreme Court issued a ruling in the case of Service Steel Warehouse Co., L.P. v. United States Steel Corp. A ruling that reverses a 125-year-old precedent. Material suppliers selling to material suppliers now have mechanic’s lien rights.

United States Steel Corp. (the project owner) hired Carbonyx, Inc. (the GC). The GC contracted with Troll Supply, who was hired to fabricate steel for the project. Service Steel Warehouse Co., LP (Service Steel) sold steel to Troll Supply for fabrication.

Troll Supply failed to pay Service Steel $452,825.03 for the steel. Service Steel filed a mechanic’s lien and later sued to enforce its mechanic’s lien. The owner argued Service Steel wasn’t entitled to mechanic’s lien rights because Troll Supply did not perform any labor on the jobsite, and under Indiana statute, there are no lien rights for a material supplier to a material supplier. At the time, the trial court agreed and issued a decision in favor of the owner. Service Steel appealed.

The trial court’s decision was reversed when the case went before the Court of Appeals. The Court of Appeals determined the mechanic’s lien statute doesn’t require that Troll Supply provide on-site work, because the significant fabrication work Troll Supply completed off site counted as “substantial portion of the prime contract,” which makes Troll Supply a subcontractor, not a material supplier. If Troll Supply is a subcontractor, then Service Steel’s mechanic’s lien is valid, because supplier-to-supplier is no longer the issue. (I actually wrote about this appeal, you can check it out here.) Then, the project owner appealed the Court of Appeals decision and here we are.

In its decision, the Supreme Court said (and this might be my favorite line from the court opinions I have read) “A mechanic’s lien is a statutory tool to help collect payment for labor and materials that improve real property… It prevents landowners from enjoying their improved property while those who provided the labor and materials get the shaft.”

The Indiana Supreme Court acknowledged Indiana mechanic’s lien law had “long been interpreted to only confer lien rights on suppliers who furnished materials to a recipient who performed on-site work, which meant a contractor or subcontractor.” But the long-standing interpretation is wrong because it “conflicts with the statute’s plain language, which unambiguously allows any person who furnishes materials for the erection of a building to have a lien.”

The decision dives deeper into review of some previous case decisions. The court said there may be times when material supplier to material supplier’s lien could be invalid, but those decisions “rest with the legislature, not the court.” Ultimately, if a material supplier furnishes materials to a project, it is entitled to lien the project for which it supplied materials.

“Under Indiana’s mechanic’s lien statute, a supplier that furnished materials for the erection of a building, regardless of the recipient, can have a lien on that building and the accompanying land. Of course, the supplier must have furnished the materials ‘for the particular building upon which’ it bases its lien.”

Mechanic’s Lien Rights for Private Commercial Projects in Indiana

You aren’t required to serve a preliminary notice; we recommend you serve a non-statutory notice to let everyone on the project know you are furnishing materials and/or services. In the event you are unpaid, you should file your sworn statement and notice of intention to lien with 90 days from your last furnishing. Then, if needed, you should file to suit to enforce the lien within 1 year from filing the lien.

A Win!

Congratulations to Service Steel and its attorney, Joshua Casselman of Rubin & Levin, P.C., for fighting the good fight. Mechanic’s liens are a tremendous tool in construction credit; it’s wonderful to see the good guys win and pave the way for future material suppliers.