Major Construction Decision Holds that CASPA Does not Apply to Government Entities

The Commonwealth Court came out with a hallmark case in Pennsylvania construction law on March 6, 2015, definitively holding that the Prompt Payment Act applies to government entity owners and CASPA does not.  East Coast Paving & Sealcoating, Inc. v. North Allegheny School District, No. 751 C.D. 2014, ___ A.3d ___ (Pa. Cmwlth. 2015).  (This opinion is attached below for easy reference and review.)  The Court reached this conclusion through analyzing not only the plain language of the text (the Prompt Payment Act explicitly calls out payments made by a “government agency,” whereas CASPA calls out payments made by an “owner” or “party”), but also by comparing the threshold requirements to receive attorneys fees and penalties under both Acts. The requirements to impose penalties and attorneys fees under CASPA are relatively lower, requiring a showing that payments were “wrongfully withheld” and that the contractor has “substantially prevailed in litigation.” The Prompt Payment Act requires an outright showing that the government agency acted in bad faith.

The Court reasoned that the legislature could not have intended equal application of CASPA and the Prompt Payment Act to government agencies, as such an application would effectively render the Prompt Payment Act, with its higher burdens, meaningless. If the law were so, savvy plaintiffs would always choose to pursue their claims through CASPA, as it would be easier to obtain attorneys fees and penalties against a non-paying contractor/owner.

Of note, the Commonwealth Court also issued an important caveat in a footnote, directing the bar’s attention to the fact that Supreme Court will soon be issuing a decision on the matter – meaning that this Commonwealth Opinion’s precedential reign may be short lived. The Court noted that “[T]he Pennsylvania Supreme Court has granted the Third Circuit’s Petition for Certification of a Question of State Law in order to answer whether, under Pennsylvania law, CASPA applies to a project where the owner is a governmental entity.’ Until then, the Commonwealth Court’s opinion stands. Going forward, a Pennsylvania state court plaintiff must make sure that he raises the applicable Act in his Complaint, depending on the identity of the defendant.

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