Attorney’s fees were properly awarded to a general contractor (GC) in its breach of contract action under the Contractor and Subcontractor Payment Act, 73 Pa. Stat. Ann. §§ 501-516, because the GC was the “substantially prevailing party” under 73 Pa. Stat. Ann. § 512(b) and the fees charged were reasonable.
Owner hired GC to construct a fifteen-unit apartment building. During the project, at least eight change orders were memorialized. Two of those change orders were never signed by the Owner who, ultimately, refused to pay the costs associated with the changes. When the owner failed to pay the GC for the invoices, the GC filed a breach of contract action seeking repayment for the unpaid invoices as well as penalties, interest and attorney’s fees under Pennsylvania’s Contractor and Subcontractor Payment Act (CSPA), 73 P.S. §§ 501-516.
- The relevant provision relating to the award of attorney’s fees under the CSPA states: “Notwithstanding any agreement to the contrary, the substantially prevailing party in any proceeding to recover any payment under this act shall be awarded a reasonable attorney fee in an amount to be determined by the court or arbitrator, together with expenses.”
- In addition, under the CSPA a party (owner, contractor, subcontractor) who has withheld payment in bad faith can be subjected to a 1% monthly penalty. 73 Pa.C.S.A. § 512(a).5 Payments withheld by a contractor or other non-paying party under the CSPA, in good faith, are not considered to be “wrongfully withheld” within the meaning of section 512(a) for purposes of imposing a penalty.
- Sections 506 and 511 of the CSPA allow owners and contractors to withhold payment for “deficiency items”, so long as the withholding is based on good faith claims. 73 P.S. §§ 506, 511.
- Whether a “substantially prevailing party” shall be awarded attorney’s fees, under the CSPA, is a matter left to the trial court’s discretion.
- The fact that a party withholds funds in good faith is relevant to a determination of whether a party is entitled to statutory interest and penalties under the CSPA, but not relevant to attorney’s fees.