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Noatex Corporation v. King Construction of Houston, L.L.C.

United States Court of Appeals, Fifth Circuit

October 10, 2013

NOATEX CORPORATION, a California Corporation, Plaintiff-Appellee,
v.
KING CONSTRUCTION OF HOUSTON, L.L.C., a Mississippi limited liability company; CARL KING, Defendants-Appellants,
v.
State of Mississippi, ex rel., JIM HOOD, Mississippi Attorney General, Intervenor-Appellant. NOATEX CORPORATION, a California Corporation, Plaintiff-Appellant,
v.
KING CONSTRUCTION OF HOUSTON, L.L.C., a Mississippi limited liability company; CARL KING, Defendants-Appellees,
v.
State of Mississippi, ex rel., JIM HOOD, Mississippi Attorney General, Intervenor.

Appeals from the United States District Court for the Northern District of Mississippi

Before STEWART, Chief Judge, and DAVIS and WIENER, Circuit Judges.

CARL E. STEWART, Chief Judge:

These appeals arise out of the district court's resolution of matters concerning an invocation of Mississippi's "Stop Notice" statute, Miss. Code Ann. § 85-7-181 ("Stop Notice statute"), by King Construction of Houston. The State of Mississippi ("the State") challenges the district court's determination that Mississippi's Stop Notice statute is facially unconstitutional. We AFFIRM. We DENY King's motion to dismiss its appeal.

In a separate appeal, No. 12-60586, Noatex challenges the district court's denial of its motion for further relief and stay of an appeal bond determination. We consolidated the cases for oral argument and we now consolidate them for disposition. We AFFIRM.

I. FACTS AND PROCEDURAL HISTORY

A. The Stop Notice Proceeding

Auto Parts Manufacturing Mississippi ("APMM") contracted with Noatex for the latter to construct an auto parts manufacturing facility in Guntown, Mississippi. Noatex subcontracted with King Construction to provide some materials and labor. Noatex alleges that APMM owes it money for goods and services that Noatex previously provided to APMM. A billing dispute also arose between Noatex and King Construction, in which Noatex questioned some of the invoices submitted to it by King Construction. In response to this dispute, King Construction notified APMM on September 23, 2011, pursuant to Mississippi's Stop Notice statute, that Noatex owed King Construction $260, 410.15, and that, therefore, King Construction was filing a "Laborer's and Materialman's Lien and Stop Notice" in Mississippi chancery court. On the date of notification, APMM owed Noatex $179.707.40.

The effect of this notice was that funds in the amount of $260, 410.15 were "bound in the hands" of APMM. See Miss. Code Ann. § 85-7-181 ("[T]he amount that may be due . . . shall be bound in the hands of such owner for the payment in full . . . ."). Further, under a related section of the Mississippi Code, § 85-7-197, [1] King Construction's filing of the stop notice in the lis pendens record of the chancery court had the effect of establishing King Construction's lien priority over the property that was the subject of the dispute. APMM later deposited the $260, 410.15 in the registry of the chancery court.

B. Procedural History

Three lawsuits resulted from this dispute. First, Noatex filed a declaratory judgment action against King Construction and its principal Carl King (collectively "King"), challenging the facial constitutionality and constitutionality-as-applied of the Stop Notice statute. The State intervened in that action to defend the constitutionality of its statute. Second, APMM filed an interpleader action in Mississippi chancery court, seeking resolution of the funds subject to King Construction's stop notice. Noatex removed this interpleader action to the district court.[2] Third, Noatex filed suit against King Construction for breach of contract in district court, claiming damages in excess of $500, 000.[3]

1. The Declaratory Action No. 12-60385

On April 12, 2012, the district court granted Noatex's motion for summary judgment in the declaratory action. The district court held that ยง 85-7-181, the Stop Notice statute, was facially unconstitutional because it deprived contractors of property without due process. King and the State appealed. King subsequently filed a purportedly unopposed motion to withdraw its appeal pursuant to Fifth Circuit Rule 42.1. Noatex filed a response in opposition to this motion, asserting that it had never consented to King's ...


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