Ohio Subcontractor Denied Interest and Fees under Prompt Payment Act
In an April 25, 2013 opinion, the Ohio Court of Appeals refused to allow prejudgment interest and attorneys’ fees and costs under the Ohio Prompt Payment Act (Revised Code §4113.61) to a subcontractor, despite a unanimous jury verdict in favor of the subcontractor, Moderalli Excavating, Inc.. Moderalli performed work under a subcontract with Trimat Construction, Inc., on a public project known as the Newcomerstown Landfill Cap Project. After the project was more than 50% complete, problems arose on the project and Trimat began to withhold payments from Moderalli. Several months later Trimat terminated Moderalli from the Project. Moderalli filed a complaint against Trimat that included, among other claims, a claim for breach of contract for non-payment of invoices and a claim under the Ohio Prompt Payment Act.
The jury returned unanimous verdicts in favor of Moderalli and against Trimat on all claims. However, after post-trial motions, the trial court overturned the unanimous jury verdict on certain counts, reduced the total award, and denied Moderalli’s motions for interest and attorneys’ fees. Moderalli appealed those rulings, claiming that the trial court erroneously denied its claim for 18% interest and attorneys’ fees and costs under Ohio’s Prompt Payment Act.
The appellate court disagreed. The court looked to §4113.61(A)(1) of the Prompt Payment Act, which permits a contractor to withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the subcontractor. Courts interpret this language to mean that interest is not warranted under the Act where the contractor, in good faith, withholds amounts where there is a disputed claim. The court found that based on the evidence offered during the trial, the jury could have found in favor of Moderalli on its Prompt Payment Act claim, but not awarded any interest and attorneys’ fees damages if it also found that Trimat asserted a good faith basis for withholding the money. Because Moderalli did not submit any interrogatories to the jury and did not object to the jury verdict form (both of which would have aided the court in knowing the factors upon which the jury based its decision), there was nothing to indicate to the appellate court whether the jury concluded that the contractor had a good fatih basis for withholding payment. The appellate court therefore upheld the trial court’s denial of interest and attorneys’ fees to the subcontractor. In future Prompt Payment Act claims in Ohio, claimants would be well-served to specifically ask the jury whether the withholding of payment was made in good faith.