A recent decision by the 5th Circuit Court of Appeals (in Noatex Corp. v. King Construction of Houston, LLC, 5th Cir., Oct. 10, 2013) held that Mississippi’s Stop Payment statute is unconstitutional, thus taking away one of the few remedies available to subcontractors and suppliers on a private construction project in Mississippi. The court found that the statute interferes with a prime contractor’s right to due process, by depriving the prime contractor of an important property interest: The right to receive payment from the owner. As a result, the statute was found to be unconstitutional.
In Mississippi, a mechanic’s lien claim is only available to a person who has a contract with the owner. Subcontractors and suppliers are not entitled to assert mechanic’s lien rights. However, by statute Mississippi allowed subcontractors and suppliers to serve a “Stop Notice” and assert a lien against funds held by the owner. As a result of this recent ruling, the lien against funds remedy is no longer available to subcontractors and suppliers. As it stands, the only option now available for a subcontractor or supplier on a private project is to proceed with a lawsuit against its customer.