Are All Construction Contracts Open Accounts in Louisiana?
On April 16, 2009
By Scott Wolfe Jr
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In February 2008, the Louisiana Supreme Court decided Frey Plumbing Co., Inc. v. Celeste Foster, 996 So.2d 969, which dealt with the question of whether an agreement between a homeowner and a plumber was an “open account” or a construction contract.
Distinguishing between open accounts and construction contracts is important for a number of reasons, and namely because one can statutorily recover attorneys fees and interest under Louisiana open account law.
At trial level, the court granted the homeowner’s summary judgment, agreeing that that plumbing agreement was a “construction contract” and not an open account. The trial and La. 4th Circuit based its decision on a jurisprudential “factors test.”
In Frey, the Supreme Court reversed this decision, and overruled all cases in Louisiana that relied on these “factors” to determine whether an agreement is a contract or an open account. The Supreme Court stated that the statute (§9:2781) must be simply applied as written.
Here is how “open accounts” are defined in the statute:
‘Open account’ includes any account forth which a part or all of the balance is past due, whether or not the account reflects one or more transactions and whether or not at the time of contracting the parties expected future transactions. ‘Open account’ shall include debts incurred for professional services, including but not limited to legal and medial services.
The defendant in Frey warned that such a liberal reading of the statute would be problematic:
Frey reads out the repeated references to ‘open account’ and ‘account’ and would have this Court hold that all unpaid debts fall within the purview of the statute. Frey’s interpretation of the statute is contrary to well established principals of statutory construction and leads to absurd results clearly unintended by the Legislature.
The Plaintiff in Frey didn’t deny this allegation, saying instead that there’s no explanation or indication that “this is not what the legislature mandated pursuant to the express provisions of the open account statute.”
The Louisiana Supreme Court did not comment on the debate between the parties as to the exact broadness of the open account statute. However, the court did make it clear that construction agreements are not automatically exempt from open account analysis.
The prior “analysis” was trashed, and the court now requires that the facts of the case be applied to the plain language of 9:2781(D).
The Frey decision dealt with an unwritten plumbing agreement that was billed to the property owner after the work was complete. Wolfe Law Group just this week filed a memorandum with the 22nd Judicial District Court analyzing the Frey decision and how it might apply to a more traditional lump-sum construction contract.
The memorandum can be read on JDSupra here.
We’ll update with the judge’s decision when received.
About the Author: Scott Wolfe Jr
Scott Wolfe, Jr. obtained his J.D. degree from Loyola University of New Orleans, and his B.A. from Southern Methodist University in Dallas, TX. In 2006, 2007, 2008 and 2009, Scott was recognized as a Leader in Law by CityBusiness Magazine. The son and grandson of general contractors, Scott is a construction litigator in the Pacific Northwest, and the founding member of the bi-coastal law firm, Wolfe Law Group. Scott is also the founder and CEO of Express Lien, Inc., a legal document preparation service for contractors. In 2008, City Business Magazine recognized Scott as one of its Innovators of the Year for the Express Lien concept. As an entrepreneur himself, Scott has a strong background in business and commercial transactions and laws. He focuses his practice on the legal issues facing the construction industry, and has represented clients in multi-million dollar construction disputes in litigation and alternative dispute resolution proceedings. Scott is a LEED AP.
