GET THE GRINCH TO PAY UP!

By Matthew H. Fry, Esq.

Superior Court decides when attorneys’ fees can be recovered by contractors who are not paid for their work.

What are your options as a contractor or subcontractor when a general contractor or owner fails to make prompt payment on a commercial construction project?  What if the work was approved by the owner or general contractor yet they are making excuses to withhold your payment?  You may be able to benefit from a Pennsylvania law that allows recovery of attorneys’ fees, interest and penalties by contractors on large commercial construction projects whose payment is unjustly withheld by an owner or general contractor.  A recent case decided by the Pennsylvania Superior Court has now set the standard as to when attorneys’ fees can be recovered on construction contracts under the Pennsylvania Contractor and Subcontractor Payment Act (CSPA).

In the case of Waller Corporation v. Warren Plaza, 95 A.3d 313 (Pa. Super. 2014), the Superior Court of Pennsylvania held that attorneys’ fees were warranted to the Plaintiff contractor even though the withholding of the payment was not done in bad faith.  Typical in large construction projects such as the one described in Waller, changes are required by the general contractor or architect that require modifications not contemplated by the original agreement.  These modifications, or change orders, may result in additional charges, which must be signed off by the owner to change the agreement and secure payment.  When an owner fails to pay its contractor or a contractor refuses to pay its subcontractors, a claim may be made under the CSPA.  In the Waller case, the owner signed off on several change orders but refused to sign off on the last two, believing that the changes should have been made at no cost.  However, the contractor was compelled to make the changes at an additional cost, as at least one of the changes was required by the City of Pittsburgh to obtain an occupancy permit.

At trial, the Court found that the owner mistakenly withheld payment and awarded the full amount of the change orders to the contractor.  The Court further found that the owner was the cause of several delays taking the case to trial. The Waller Court found that by recovering the full amount of the change orders at trial, and the delay in the litigation caused by the defendant owner, the contractor had shown that it was entitled to attorneys’ fees, despite a finding that the payments were not withheld in bad faith.

This ruling now allows contractors and subcontractors to recover attorneys’ fees under the CSPA if they prevail on their claims for payment even if the defendant owner or general contractor had a good faith basis, although mistaken, to withhold payment.

If you are a contractor, subcontractor or other business owner who needs legal advice about your business contracts or collections, the attorneys at DiOrio & Sereni, LLP can help you answer the tough questions. Contact Matthew H. Fry, Esquire at 610-565-5700, or send an e-mail at [email protected]

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