United Riggers & Erectors, Inc. v. Coast Iron & Steel Co., 2018 Cal. Lexis 3510 (May 14, 2018)

This post was published in the August 16, 2018 issue of eNews published by National Association of Credit Management (NACM).

In 2010, Universal City (“Universal”) hired Coast Iron & Steel Co. (“Coast Iron”) to build a new ride at the Universal Studios Hollywood.  Coast Iron subcontracted the installation of the metalwork to United Riggers & Erectors, Inc. (“United Riggers”).  The initial subcontract between Coast Iron and United Riggers was for $722,742 but was increased by change orders to approximately $1.5 million.  United Riggers completed its work to Coast Iron’s satisfaction.  In August 2012, Universal made its final retention payment to Coast Iron.  However, Coast Iron refused to pay any retention to United Riggers due to disputes over change order requests from United Riggers to increase the subcontract price by approximately $350,000.  United Riggers then filed suit to collect these sums, including prompt payment penalties under California Civil Code Section 8814 for failure to timely pay retention.  Coast Iron ultimately paid all of the $149,602.52 in retention owed to United Riggers during the litigation.  After a bench trial, the trial court entered judgment in favor of Coast Iron.  The Court of Appeal reversed the trial court’s ruling on the statutory claim for failure to make timely retention payments.  The California Supreme Court affirmed.

Continue Reading Under California’s Prompt Payment Statute, a Direct Contractor May Not Withhold Retention From a Subcontractor Simply Because a Dispute Exists Between the Parties. To Allow Withholding, the Dispute Must Relate Directly to the Specific Retention Amount Due.

Woodrow Wilson Constr. LLC v. Orleans Par. Sch. Bd.,  2018 La. App. LEXIS 762 (April 18, 2018)

The Orleans Parish School Board (“OPSB”) awarded a prime contract to Woodrow Wilson Construction (“WWC”) for the construction of a new elementary school (the “Project”).  On May 23, 2016, WWC submitted its request for payment of final retainage to OPSB.  OPSB withheld payment from WWC, claiming that WWC owed liquidated damages for the delays in completion of the Project, which allegedly exceeded the amount due to WWC.  WWC filed a petition for writ of mandamus pursuant to La. R.S. 38:2191(D) (the “Act”), which provides that “[a]ny public entity failing to make any … any final payment when due as provided in this Section, shall be subject to mandamus to compel the payment of the sums due under the contract …”  The trial court denied the petition and WWC appealed.  The question on appeal was whether OPSB may withhold final payment due under the Act because of alleged delays in the Project, despite the fact that liability for the delays had not yet been adjudicated.

Section A of the Act provides that “[a]ll public entities shall promptly pay all obligations arising under public contracts when the obligations become due and payable under the contract.  All … final payments shall be paid when they respectively become due and payable under the contract.”  Under the prime contract, retainage was due upon the occurrence of six enumerated requirements.  The Court determined that these requirements were all satisfied as of May 23, 2016 and therefore final retainage was due to WWC as of that date.  The Court further found that upon satisfaction of these requirements, the public entity owed a ministerial duty to issue final payment.  By providing the right to mandamus relief in the Act, the legislature intended to eliminate the public entity’s discretion to withhold payment from a contractor.

Continue Reading Under Louisiana Payment Act, Once Contractor Meets Contractual Requirements for Final Payment, Public Entity Has a Duty to Issue Final Payment and Has No Discretion to Withhold Payment Based on a Separate Claim Against Contractor

Scott Enters., Inc. v. City of Allentown, 2016 Pa. LEXIS 1503 (Pa. July 19, 2016)

The Supreme Court of Pennsylvania reversed an order of the Commonwealth Court and held that the prompt payment provisions of the Commonwealth Procurement Code, 62 Pa. C.S. §3931-3939 (the “Prompt Payment Act”), do not mandate an award of penalty interest and attorneys’ fees upon a finding that the government withheld payments from the contractor in bad faith.

Continue Reading Supreme Court of Pennsylvania Holds That Under Prompt Payment Act, Imposition of Penalty and Attorneys’ Fees Is Discretionary, Not Mandatory, Upon Finding of Bad Faith

Clipper Pipe & Service, Inc. v. The Ohio Cas. Ins. Co., 2015 Pa. LEXIS 1275 (PA  June 15, 2015)

The Supreme Court of Pennsylvania held that CASPA, 73 P.S. §§501-516, “does not apply to a construction project where the owner is a governmental entity.”  The decision once and for all resolved the issue of whether the Contractor and Subcontractor Payment Act (“CASPA”) applies to payment disputes between prime contractors and subcontractors on public works projects,  either instead of, or in addition to, the prompt payment provisions of the Commonwealth Procurement Code, 62 Pa.C.S. §§ 3931-3939 (commonly referred to as “the Prompt Payment Act”).

Continue Reading Supreme Court of Pennsylvania Holds Contractor and Subcontractor Payment Act (“CASPA”) Inapplicable to Public Works Projects

An amended version of this post was published in the March 16, 2015 AGC Construction Law in Brief, the weekly newsletter for the Associated General Contractors of America.

Since 1994, Pennsylvania law has provided enhanced remedies for prevailing in a payment dispute arising out of a construction project.  The prevailing party in a recent jury trial discovered uncertainty in the precise contours of those available remedies.  There was no clear precedent governing recovery of fees of a testifying expert, necessary to overcome the complex accounting and delay claims asserted by the defendant in response to the invoice dispute, and the method of calculating pre-judgment and post-judgment interest and penalty interest under the statute.  Because of the large sums at issue, the difference in calculation methods was significant.  Entitlement to these matters was unclear in spite of 20 years of precedent under the Pennsylvania Contractor and Subcontractor Payment Act.

Continue Reading Analysis: Prevailing Party In Jury Trial Finds Uncertainty In Remedies Available Under Pennsylvania Contractor And Subcontractor Payment Act

KNL Construction, Inc. v. Killian Construction Co., Inc., 2014 U.S. Dist. LEXIS 58269 (M.D. Pa. Apr. 28, 2014)

This action arose out of the construction of the Mohegan Sun Hotel in Luzerene County, Pennsylvania.  General contractor Killian Construction Co., Inc. (“Killian”) retained KNL Construction, Inc. (“KNL”) as a subcontractor to perform certain work on the project.  The parties executed a subcontract which contained a forum selection clause mandating that disputes thereunder be litigated in Greene County Missouri, or if federal jurisdiction is applicable, in the District Court for the Western District of Missouri.
A dispute arose over KNL’s performance under the subcontract, eventually leading to its termination.  In response, KNL brought suit in Pennsylvania state court for breach of contract and related claims premised on payments allegedly owed by Killian, including a claim under Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”).  Killian removed the case to the Middle District of Pennsylvania on diversity grounds and filed a motion to dismiss for improper venue, or, in the alternative, transfer for forum non conveniens.  In support of its motion, Killian argued that the clear language of the forum selection clause designates Missouri as the exclusive venue for litigation.

Continue Reading District Court in Pennsylvania Concludes that CASPA Prompt Payment Act Does Not Override Unambiguous Forum Selection Clause

VSI Sales, LLC v. Griffin Sign, Inc., 2014 U.S. Dist. LEXIS 57620 (D. Del. Apr. 25, 2014)

The Delaware Department of Transportation awarded a contract for a highway construction project. Defendant Griffin Sign, Inc. (“Griffin”) was hired as the subcontractor responsible for installation of road signage on the project. Griffin then subcontracted with Plaintiff VSI Sales, LLC (“VSI”) for the supply of overhead highway sign structures, accompanying hardware, and installation materials.

A dispute arose regarding VSI’s right to payment for work performed on the project. Griffin disputed that it owed VSI payment and contended that VSI’s performance was untimely and deficient. In its seven count complaint against Griffin and its payment bond surety, VSI asserted a claim for violation of the Delaware Construction Prompt Payment Act, Del. C. §§ 3501-3509. The defendants sought to dismiss the Payment Act claim on the basis that the work performed by Griffin and VSI—the supply and installation of highway signs—was outside the scope of the Act.

Continue Reading Federal Court in Delaware Rejects Road Signage Supplier’s Claim Under Delaware Construction Prompt Payment Act, Holding that Act Applies Only to Construction of Buildings

DGS v. Pittsburgh Building Co.
2007 Pa. Commw. LEXIS 160 (Pa. Commw. Ct. April 5, 2007)
The Pennsylvania Commonwealth Court held that a contractor was entitled to recover penalty interest and attorney fees under the Pennsylvania Prompt Payment Act from the Department of General Services (“DGS”) when DGS had engaged in arbitrary and vexatious conduct by withholding payment for costs associated with a five-month suspension and unsuitable soil conditions when DGS was aware of, yet failed to disclose, problematic soil conditions.
Continue Reading Pennsylvania Department Of General Services’ Conduct In Withholding Memorandum Disclosing Unsuitable Soil Conditions From Bidders Was Vexatious, Entitling Contractor To Recover Penalty Interest And Attorney Fees Under Prompt Payment Act