Getting Paid with the Power of Payment Acts: Cohen Seglias Turns a Wrongfully Withheld $125,000 into $500,000+ Judgment

Payment abuses are common in the construction industry. It is not unusual to see parties withhold money based on flimsy reasoning—or no explanation at all. To fight this, nearly every state has enacted laws to curb these payment abuses, which we refer to as “payment acts.”

Payment acts typically provide unpaid parties with strong legal rights to help even the playing field when payment is improperly withheld. Edward Seglias and Matthew Skaroff recently used Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA) to obtain a significant judgment for one of their clients.

Ed and Matt represented a concrete contractor in the Philadelphia area. The contractor entered contracts worth over $70 million to perform the concrete work for the “Riverwalk Project” that included two luxury high-rise towers in Center City Philadelphia along the Schuylkill River.

As the contractor’s work neared completion, the owner decided it wanted additional concrete poured for an outdoor patio space at one of the buildings. At the same time, the owner claimed that the contractor’s work at the patio was defective and demanded that they pour the additional concrete for free. When the contractor refused, the owner hired another contractor to pour—and then back-charged our client $125,000 for it, which our client rejected.

When it came time to close out the project, our client was owed more than $800,000.  The owner refused to make any final payment to the contractor—including the undisputed amounts—unless the contractor accepted the disputed back charge and waived all claims. Instead, the contractor filed suit.

CASPA and many other payment acts require payment for undisputed work, even when other amounts remain in dispute. For any payments wrongfully withheld, CASPA specifically provides for 1% monthly interest, 1% monthly penalty and the recovery of attorneys’ fees. Together, the interest and penalty accrue at 24% per year, all before attorneys’ fees.

More than a year after the contractor submitted its final payment application—and after they repeatedly pressed that the owner had no legal basis to withhold the undisputed amounts—the owner finally released approximately $680,000 to the contractor. The remaining fight at trial focused on the $125,000 back charge and the contractor’s remedies under Pennsylvania’s Private Payment Act.

But the damage was already done. Following a bench trial, the Philadelphia Court of Common Pleas entered an award in our client’s favor. The owner’s effort to improperly withhold $125,000 turned into $500,000+ judgment for our client once interest, penalties and attorneys’ fees were applied—more than four and a half times the amount withheld. And that does not include the owner’s attorneys’ fees and costs incurred in defending the case.

Payment acts offer serious leverage to contractors and subcontractors. Every contractor and subcontractor should know which payment acts apply to their projects—and the rights and remedies those acts provide—before a payment dispute ever arises. If you are a contractor or subcontractor who may benefit from CASPA, reach out to our Construction group.