"Pennsylvania Contractor and Subcontractor Payment Act"

On October 10, 2018, the amendments to the Contractor and Subcontractor Payment Act, 73 P.S. § 501, et seq. (CASPA) will take effect and significantly impact the rights and duties of owners, contractors, and subcontractors on all Pennsylvania commercial construction projects and some residential projects.

First passed in 1994, CASPA was enacted as a tool for contractors and subcontractors to receive timely payment. As most in the industry know, the statute sets forth payment procedures and timetables, and it defines what constitutes a wrongful withholding of payment. Violations may result in significant penalties, such as statutory interest, penalty interest, and assessment of attorneys’ fees and costs.

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Owners and contractors should be aware of a significant October, 2009 Pennsylvania Superior Court decision, Zimmerman v. Harrisburg Fudd I, L.P., which clarifies the standard for the award of post-judgment interest and attorneys’ fees under the Pennsylvania Contractor and Subcontractor Payment Act (CASPA). In this case, the Superior Court held that a contractor who has obtained a judgment against an owner under CASPA may recover post-judgment interest and penalties, as well as attorney’s fees and expenses incurred to collect the money owed.

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The Pennsylvania Contractor and Subcontractor Payment Act

CASPA is a Pennsylvania statute that dictates the proper timing for payment for construction work. CASPA also provides for interest, penalties (when appropriate) and attorneys’ fees when owners or contractors fail to comply with these payment obligations. According to the Zimmerman Court:

The underlying purpose of [CASPA] is to protect contractors and subcontractors… [and] to encourage fair dealing among parties to a construction contract . . . The statute provides rules and deadlines to ensure prompt payments, to discourage unreasonable withholding of payments, and to address the matter of progress payments and retainages. Under circumstances prescribed in the statute, interest, penalty, attorney fees and litigation expenses may be imposed on an owner, contractor or subcontractor who fails to make payment to a contractor or subcontractor in compliance with the statute.

Background of the Zimmerman Case

In this case, Zimmerman, a contractor, entered into a construction contract with Fudd, an owner, for the installation of floor and wall improvements for a new restaurant that Fudd was building. Following completion of its work, Zimmerman submitted an invoice for $10,108.70. Over 4 months later, he was still waiting for payment.

Refusing to wait any longer, Zimmerman elected to invoke CASPA, and filed a claim for breach of contract against Fudd. On the day the matter was scheduled for compulsory arbitration, the parties agreed to the Board’s entry of a stipulated award in favor of Zimmerman for $21,673.99, consisting of the $10,108.70 contract claim plus $11,565.29 of statutory interest, penalty and attorneys’ fees.

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