PA Supreme Court Holds CASPA Does Not Apply to Government Projects
In Clipper Pipe & Service, Inc. v. The Ohio Casualty Ins. Co.; Contracting Systems, Inc. II, the Pennsylvania Supreme Court held that the Pennsylvania Contractor and Subcontractor Payment Act, 73 P.S. §501 et seq. (“CASPA”) does not apply to any dispute between contractors public works projects. Specifically, the project at issue in the Clipper case was owned by the United States Department of the Navy. The general contractor was Contracting Systems, Inc. II who hired Clipper Pipe & Service, Inc. (“Clipper”) as a subcontractor. A dispute arose between Clipper and Contracting Systems, and Clipper brought suit in the United States District Court for the Eastern District of Pennsylvania. After a jury trial, Clipper prevailed and was awarded CASPA remedies. Contracting Systems appealed to the Third Circuit and the federal appeals court applied for certification of a question of law to the Pennsylvania Supreme Court. The Supreme Court found that CASPA does not apply to governmental projects because a governmental entity is not an “owner” as defined in CASPA because governmental entities do not fall within the definition of a “person” and an “owner” must be a “person.”
It is noteworthy that in Scandale Associated Builders & Eng’rs, Ltd v. Bell Justice Facilities Corp., 455 F.Supp.2d 271, 281 (M.D. Pa. 2006) a federal district court had predicted that Pennsylvania courts would find that a governmental entity may be an owner for purposes of CASPA.
The question of the applicability of CASPA to disputes between contractors on government projects has been the subject of argument for many years, and the Clipper case finally resolves this question — we now know that contractors statutory payment rights on government projects will be determined by Chapter 39 of the Commonwealth Procurement Code and not CASPA.