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.

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.”

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

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”

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

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”