CASPA was replaced by PPA as the statute for determining remedies in payment disputes
The Pennsylvania Supreme Court has revised the standards for determining remedies for contractors and subcontractors in payment disputes on public works projects.
This decision directly affects companies working on state and municipal projects in Pennsylvania and has the potential to indirectly influence similar court decisions in other jurisdictions.
Jason C. Tomasulo and Daniel E. Fierstein, in an article in Construction Law Now, discuss Clipper Pipe & Service Inc. v. The Ohio Casualty Insurance Co. In this case “the Court held that the Contractor and Subcontractor Payment Act (CASPA), which is a statute that addresses when payments are to be made on construction projects and provides remedies for noncompliance, does not apply to public works construction projects.”
The ruling stipulates that remedies are to be determined using “Pennsylvania’s Prompt Payment Act (PPA).”
This is not good news for contractors and subcontractors because the PPA remedies are less favorable for them than the provided by CASPA.
Under CASPA, courts were required to award attorney’s fees to the prevailing party; under PPA courts may do so at its discretion “if the party withholding payment acted in bad faith.”
CASPA stipulated that contractors could be paid 1 percent per month interest on unpaid balances; the PPA rate is 0.25 percent per month.
The authors note that PPA remedies add a degree of uncertainty to the ability of contractors to recover for unpaid invoices. This places them in a less favorable bargaining position.
Will this decision set precedent for similar decisions in other jurisdictions? Contractors throughout the country will be adversely affected if it does.
Pennsylvania Supreme Court Clarifies Applicability of Contractor and Subcontractor Payment Act, Jason C. Tomasulo and Daniel E. Fierstein, Construction Law Now, June 26, 2015.