Real Estate Law Article Published August 5, 2014
Harper J. Dimmerman, Attorney at Law
Lawyers, Litigation, Attorneys Real Estate Law
Attorney Dimmerman has authored dozens of real estate law articles for a leading Pennsylvania law publication.
What follows is an excerpt of the article which was published on August 5, 2014
Superior Court Holds “Good Faith” Is Not a Defense in Granting Attorney Fees under the Contractor and Subcontractor Payment Act
By Harper J. Dimmerman and James M. Lammendola
When litigating matters in the Commonwealth, recouping attorneys’ fees for your clients can pose a formidable challenge. As a general rule, such fees are only recoverable when authorized by contract or statute. In the realm of contractor disputes, the Pennsylvania’s Contractor and Subcontractor Payment Act (CSPA), 73 P.S. sections 501-516 allows for reasonable attorney fees if a party qualifies as a “substantially prevailing party.” On June 30, the Superior Court handed down Waller Corporation v. Warren Plaza, Inc., 2014 Pa Super 134 (Waller), a 2-1 decision that examines issues related to a successful attorneys’ fee claim which is likely to cause a great deal of discussion in among practitioners in this area of law.
The facts in Waller are fairly straightforward. In November 2000, Warren (Appellant/Defendant), contracted with Waller (Appellee/Plaintiff), a general contractor. The project, a fifteen-unit building valued at approximately $1.304.900, was funded in large part by Housing and Urban Development (HUD). Warren was not involved in the process of memorializing changes to the project; those modifications were handled strictly by Waller and its architect or just the architect, depending upon the characterization of the change. Over the course of the project, more than eight change orders were submitted.
Two of these changes, concerning a flooring change and relocation of water heaters, are the basis of the underlying litigation. Warren neither signed nor submitted these orders to HUD for approval and eventually refused to pay Waller on the invoices. In turn, Waller commenced suit, seeking repayment for not only the invoices but also for statutory interest, penalties and attorney fees pursuant to the CSPA. After a bench trial, a $69,904.00 judgment in Waller’s favor was entered by the Washington County Court of Common Pleas. The breakdown was $23,470.00 compensatory damages, $12, 434.00 in interest and $33,000.00 in attorneys’ fees. Notably, a penalty was not assessed because the trial court determined that Warren withheld payment on the two orders on the mistaken assumption that Waller and the architect would resolve the dispute. On post-trial motions, the trial court increased the attorneys’ fees award to $78,071.00, finding that Waller was the “substantially prevailing party” and that the large fee was the result of Warren’s failure to resolve the dispute in a timely manner and its inability to successfully dispute that the fees were unreasonable.
The Superior Court summarily affirmed the judgment with regard to the project changes and reasonableness of the prices charged before addressing the attorneys’ fees issue. Warren’s chief contention was that Waller was not a “substantially prevailing party” under the CSPA. The court focused on the meaning “substantially prevailing party” as set forth in Section 512(b): “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.” Although 512(b) requires an award to a substantially prevailing party, the determination of whether a party qualifies as a substantially prevailing party is left to the discretion of the trial court . . .
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