Contractor and Subcontractor Payment Act Not Applicable to Government Construction Projects

Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA), 73 P.S. §§501-516, does not apply to a construction project where the owner is a governmental entity, the Pennsylvania Supreme Court decided in Clipper Pipe & Service, Inc. v. Ohio Cas. Ins. Co., __ A.3d __ (No. 59 EAP 2014, filed June 15, 2015). The general contractor in this case, Contracting Systems, Inc. II (CSI), contracted with the U.S. Navy to renovate its training center in the Lehigh Valley. CSI subcontracted with Clipper Pipe & Service, Inc. to perform mechanical and heating, ventilation and air conditioning work. Subsequently, Clipper Pipe filed suit in federal court (E.D. Pa.) against CSI and its surety, Ohio Casualty, for non-payment of $150,000 and seeking relief under CASPA. Ohio Casualty moved for summary judgment, arguing that CASPA does not cover public works projects. The district court denied the motion, relying in part on a prior federal district court decision predicting that Pennsylvania courts would allow such a claim. The case proceeded to trial, where Clipper Pipe prevailed and was awarded interest, penalties and counsel fees under CASPA. On appeal, the U.S. Court of Appeals for the Third Circuit applied to the Pennsylvania Supreme Court for certification of the issue raised by Ohio Casualty. The Court accepted certification.

In a unanimous opinion authored by Chief Justice Saylor, the Court held that CASPA is not applicable to a public works project. The Court observed that CASPA establishes rights and duties among “owners,” “contractors” and “subcontractors,” with the term “owner” having paramount importance. The Court concluded that a governmental entity is neither a “person” nor an “association” under CASPA and, therefore, not an “owner.” While acknowledging that the government was not directly involved in the present dispute between CSI and Clipper Pipe, the Court explained that where there is no “owner” for purposes of CASPA there also can be no “contractor” under the statute. Only where the foundational contract is covered by CASPA will subcontracting parties be able to invoke its remedies.

Note: while this matter was pending, the Commonwealth Court reached a similar result in E. Coast Paving & Sealcoating, Inc. v. N. Allegheny Sch. Dist., 111 A.3d 220 (Pa. Cmwlth. 2015), which was the subject of a previous PBI Now blog entry.

By | 2017-05-19T22:51:28+00:00 June 30th, 2015|Categories: Government Law, Municipal Law|Tags: , , , , , , , |Comments Off on Contractor and Subcontractor Payment Act Not Applicable to Government Construction Projects

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