Excessive Withholding Prompts Award of Interest, Attorney’s Fees and Penalties under Pennsylvania’s Prompt Payment Act
Imperial Excavating and Paving, LLC v. Rizzetto Constr. Mgmt., Inc., 935 A.2d 557 (Pa. Super. Ct. 2007)
Pennsylvania’s Prompt Payment Act (the “PPPA”) is intended to protect contractors and subcontractors by providing guidelines for prompt payment on construction projects. Under the PPPA, every subcontractor working on a project subject to the PPPA is entitled to payment, according to the proportion of the subcontract completed, within 14 days of the date when the contractor receives a progress payment on the project. 73 PA.STAT. §507(c). The contractor is, however, entitled to withhold such payment if it has a good faith claim for deficient performance. 73 PA.STAT. §511. If a contractor unreasonably withholds payment to the subcontractor, the contractor can be assessed interest on the payment (73 PA.STAT. §509) plus a penalty of 1percent per month of the amount that was wrongfully withheld. 73 PA.STAT. §512. The amount a contractor may withhold is proper if it “bears a reasonable relation to the value of any claim held in good faith.” See Ruthrauff, Inc. v. Ravin, Inc., 914 A.2d 880 (Pa. Super. Ct. 2006).
The Imperial Excavating case involved the construction of two soccer fields located at a high school. The grading subcontractor completed its work on the project and submitted an application for payment to the contractor. The contractor submitted its own application for payment to the owner for the subcontractor’s work, certifying that the sub’s work was completed in accordance with the contract documents. The owner paid the contractor’s application less retainage, and the contractor paid the subcontractor. Read More