SDSP, LLC v. Attias, 2023 Pa. Super. Unpub. LEXIS 1518

The Superior Court of Pennsylvania vacated a multimillion-dollar award to subcontractors arising from a payment dispute, and remanded the matter to the trial court for an attorney’s fees award to the developer who prevailed on appeal. This is a strong reminder to all tiers of the construction chain that Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA) allows substantially prevailing parties — whether owners, contractors, or subcontractors — to recover fees incurred in proceedings involving payment claims.

The dispute concerned the conversion of a Philadelphia high school into an apartment building. WPHS Venture Partners, LLC (WPHS) purchased the school and formed SDSP, LLC (SDSP) to develop the project (WPHS and SDSP are referred to collectively as the developer). SDSP hired three subcontractors to perform demolition, painting, carpentry, masonry, plumbing, flooring, structural steel, HVAC, tiling, and window installation work (the subcontractors). During construction, the developer and subcontractors had a series of payment disputes. The developer asserted that the subcontractors were overpaid for work and the subcontractors claimed they performed out-of-scope work, for which they were never paid. Ultimately, the subcontractors suspended work and the developer terminated their subcontracts.

The developer filed suit against the subcontractors seeking compensation for costs incurred to complete their work. The subcontractors initiated a separate proceeding and asserted claims for breach of contract, unjust enrichment, and violation of CASPA. After consolidating the actions, the trial court found in favor of the subcontractors on their claim for unjust enrichment against WPHS in the amount of $2.7 million, consisting of amounts due for work performed that was “not reasonably inferable” from their subcontracts.

On appeal, the court identified several errors in the trial court’s decision. Notably, the court vacated the trial court’s judgment in favor of subcontractors on their claim of unjust enrichment against WPHS. The court explained that “it is axiomatic” that the subcontractors must have established a benefit or enrichment conferred upon WPHS to prevail on a claim of unjust enrichment. The court concluded that the subcontractors did not meet this burden because they did not demonstrate an unjust benefit to WPHS resulting from allegedly additional work performed.

Additionally, the court concluded that the trial court erred by failing to award the developer its attorneys’ fees and costs under CASPA. The court explained that while CASPA’s attorneys’ fees provision requires an award of fees and expenses to the substantially prevailing party (including a defendant), “the issue of whether any party to a lawsuit substantially prevailed is left to the trial court’s discretion.” The court concluded that because the subcontractors failed to establish that they were entitled to additional payment for out-of-scope work, there was no evidence that the developer failed to comply with CASPA’s “mandate of prompt payment.” The court, therefore, concluded that the trial court erred in failing to award the developer its attorneys’ fees and expenses and remanded the matter to the trial court to determine the award of fees and costs.