In August 2017, the Superior Court of Pennsylvania affirmed a ruling by the Montgomery County Court of Common Pleas, molding a verdict in favor of a contractor to include attorneys’ fees, interest, and penalties under the Pennsylvania Contractor and Subcontractor Payment Act (“CASPA”). In Int’l Mgmt. Consultants, Inc. v. Sea-Z, Inc., the jury returned a verdict finding that the defendant, Sea-Z, breached its contract with International Management Consultants, Inc. (“IMC”) and failed to make timely payments to IMC without a good faith basis under CASPA to withhold payment. Int’l Mgmt. Consultants, Inc. v. Sea-Z, Inc., 2017 Pa. Super. Unpub. LEXIS 2969, 2017 WL 3328126 (Pa. Super. 2017). Thereafter, IMC filed a post-trial motion to mold the verdict to include statutory interest, penalties, attorneys’ fees and expenses under sections 505(d), 509(d), and 512(a) of CASPA. The trial court granted IMC’s post-trial motion and molded the verdict to include $65,204.88 in statutory interest, $65,204.88 in penalties, and $149,346.18 in attorneys’ fees. Sea-Z appealed to the Superior Court of Pennsylvania, arguing that the trial court erred in molding the verdict to include CASPA remedies; however, the Superior Court affirmed the trial court’s order awarding CASPA damages to IMC.
The Pennsylvania Contractor and Subcontractor Payment Act, located at 73 Pa. Stat. Ann. sections 501-516 and commonly referred to as “CASPA”, is a statute that protects contractors and subcontractors by ensuring prompt payment for work performed, as well as providing significant remedies, including interest, attorneys’ fees, and penalties to contractors and subcontractors who are not paid timely for their work. CASPA applies to all construction contracts within the Commonwealth with the exception of residential construction projects involving six or fewer residential units under construction simultaneously. Various types of construction work are covered by CASPA, including: alteration, demolition, excavation, clearing, grading, or filling of real property, including all or any part of a building or structure.
Under CASPA, a contractor or subcontractor is entitled to payment from the party with whom he or she has contracted upon performance of the contract. CASPA addresses the issue of timing of payments when the contract is silent on the subject. If the contract is silent on the timing of payment, CASPA provides that interim and final invoices shall be paid within twenty (20) days after the end of a billing period or twenty (20) days after delivery of the invoice to the owner, whichever is later. In the case of a subcontractor, payment is due to the subcontractor within fourteen (14) days after the contractor’s receipt of each progress or final payment or fourteen (14) days after receiving the subcontractor’s invoice, whichever is later.
CASPA provides remedies to contractors and subcontractors in addition to those that are available in a typical breach of contract action. Perhaps the most significant provisions of CAPSA are those that provide for the award of attorneys’ fees, interest, and penalties where an owner, contractor, or subcontractor fails to comply with CASPA. In an action to recover wrongly withheld payments, a contractor or subcontractor may be entitled to the award of interest calculated at 1% per month and penalties in the amount of 1% per month, as well as attorneys’ fees and expenses.
As evidenced in Int’l Mgmt. Consultants, Inc. v. Sea-Z, Inc., CASPA damages can be quite substantial. As such, CASPA is extremely beneficial to contractors and subcontractors who initiate litigation to recover fees for work performed in the Commonwealth. Conversely, owners and contractors should be careful when refusing to pay their contractors for work performed without a good faith basis for withholding payment due to the possibility of incurring attorneys’ fees, interest, and penalties pursuant to CASPA.
ABOUT KATHRYN PETTIT
Kathryn E. Pettit, an associate in the firm’s suburban Philadelphia office, focuses her practice on construction law. Before becoming an attorney, Ms. Pettit received her Bachelors of Science in Civil Engineering from Syracuse University. She brings her technical background and perspective to the representation of her clients.
Ms. Pettit has counseled and represented owners, construction managers, contractors, subcontractors, and design professionals in all phases of construction projects. She has experience representing clients in disputes arising from a wide array of construction projects, including both private and public. She has litigated numerous construction claims, from the owner, contractor, and design professional’s perspectives, in state and federal court, as well as arbitrations. Ms. Pettit also has extensive experience representing homeowners in suits against the builders of their properties due to building envelope defects, including stucco defects.
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