Pennsylvania Supreme Court Grants Appeal of Decision Holding Individual Owner of an LLC May Not Be Liable for CASPA Damages
The Pennsylvania Supreme Court recently granted allowance of appeal of the Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC case that we blogged about in February of this year. As described more fully in our prior blog post, in Scungio Borst, the Superior Court of Pennsylvania (i.e. the intermediate level court) held that Robert DeBolt, the President and 50% shareholder of 410 Shurs Lane Developers, LLC did not qualify as an “owner” as defined in Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”), and therefore, could not be held personally liable for sums that the 410 Shurs Lane Developers, LLC failed to pay to a general contractor.
On July 28, 2015, however, Pennsylvania’s highest Court agreed to hear an appeal of that decision. The Court summarized the issue before it as follows:
Did the lower court commit an error of law or abuse its discretion in granting summary judgment to [Robert] DeBolt under [the Contractor and Subcontractor Payment Act (“CASPA”), 73 P.S. §§ 501 et seq.], where: (a) CASPA makes the owner [(410 Shurs Lane Developers, LLC)] and the “agent of the owner acting with the owner’s authority” (DeBolt) liable to contractors such as [Petitioner], (b) DeBolt is a fifty percent owner of [410 Shurs Lane Developers], (c) [Petitioner] consistently dealt with DeBolt and received his authorizations for change orders, (d) [Petitioner] never received payment for the change orders, and (e) [Petitioner’s] construction of CASPA is consistent with the courts’ construction of the Wage Payment and Collection Law[, 43 P.S. §§ 260.1et seq.]?
Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC, No. 30 EAL 2015, 2015 WL 4545986, at *1 (Pa. July 28, 2015) (alterations in original).
While it is still far too early to tell how the Pennsylvania Supreme Court will answer the above question, the mere fact that the Court agreed to hear the appeal – a discretionary act that the Court exercises for only a select few cases every year – raises concerns that individuals possessing a significant ownership interest the corporation or limited liability company may become personally liable for the CASPA damages for unpaid change orders that they authorize on behalf of the corporation or limited liability company in which they hold a significant ownership interest.
Babst Calland will continue to monitor the Scungio Borst case and will post updates on its Construction Law Blog as they become available.