PHILADELPHIA – On June 15, the Supreme Court of Pennsylvania ruled the Contractor and Subcontractor Payment Act (CASPA) did not extend to government projects.
The Supreme Court ruled CASPA, which is applicable to projects involving construction contracts, did not apply to Quakertown-based Contracting Systems Inc.’s arrangement with Clipper Pipe & Service Inc. of Eddystone. Clipper Pipe performed duct system work for a U.S. Navy/U.S. Marine Corps Reserve Training Center in Hanover Township.
Saylor said the state Legislature “did not design CASPA to apply independently to subcontracts in scenarios in which the foundational contract resides outside its boundaries.”
“Although we do not discount that the policy of CASPA would seem to be served by applying it to the present circumstances, such application is too disharmonious with the statutory mechanics to support the extension,” Saylor said.
The U.S. Department of the Navy chose general contractor Contracting Systems, Inc. to make renovations to the Hanover military training facility in 2010, per court records.
In turn, Contracting Systems sub-contracted with Clipper Pipe to perform the mechanical and heating, ventilation and air conditioning work associated with the project.
After the work was concluded, Clipper Pipe sued Contracting Systems and its insurer Ohio Casualty Insurance Co. in U.S. District Court, claiming Contracting Systems failed to pay it$150,000, which they believed was in breach of their contract, in addition to CASPA.
Contracting Systems and Ohio Casualty disagreed, claiming “governmental entities” were not “owners”, and therefore, the law was not applicable. Rather, they felt the Prompt Pay Act governed a case of this nature.
However, the federal court denied the motion, and a jury later awarded Clipper Pipe not only the disputed amount of $150,000, but an additional $121,000 comprised of interest, penalties and attorney’s fees. Subsequently, Contracting Systems and Ohio Casualty appealed to the U.S. Court of Appeals for the Third Circuit, continuing to disagree over the relevance of CASPA in action. According to court records, they did pay the $150,000 in question to Clipper Pipe.
“Upon review, we agree with appellants’ position that CASPA does not apply in the context of public works projects,” Saylor said.
“We recognize that the government is not directly involved in the present dispute between CSI, a contractor in the generic sense, and its subcontractor, Clipper. Where there is no “owner” for purposes of CASPA – because a ‘person’ did not commission the construction in the first instance – there also can be no ‘contractor’ under the statute, given that a “contractor” must be engaged by an “owner.”
Saylor stated although the Court “did not discount that the policy of CASPA would seem to be served by applying it to the present circumstances, such application is too disharmonious with the statutory mechanics to support the extension.”
Saylor and his fellow justices concurred with the position of Contracting Systems and Ohio Casualty.
“In summary, we conclude that CASPA does not apply to a construction project where the owner is a governmental entity. The matter is returned to the Third Circuit,” Saylor said.
Justices J. Michael Eakin, Max Baer, Debra McCloskey Todd and Correale F. Stevens joined Saylor’s opinion.
The appellants are represented by Walter Flamm, Robert Krandal and Christopher Curci of Flamm Walton, in Blue Bell.
The appellee is represented by Patrick Henigan of Eckell Sparks Levy Auerbach Monte Sloane Matthews & Auslander, in Media.
The Supreme Court Of Pennsylvania case 59 EAP 2014
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com