It took a federal court to ask for guidance, but the Pennsylvania Supreme Court has finally formally declared as law a concept most construction lawyers already assumed to be the case: the Pennsylvania Contractor and Subcontractor Payment Act does not apply to public works projects.
The Supreme Court offered this opinion when asked by the federal Third Circuit Court of Appeals for guidance on the issue in the matter of Clipper Pipe & Service, Inc. v. The Ohio Casualty Insurance Company. The question arose after the District Court awarded CASPA damages against Ohio Casualty on work performed by Clipper Pipe under its agreement to help construct the Navy and Marine Corps Reserve Training Center in the Lehigh Valley. Citing conflicting case law, the District Court denied the defendants’ summary judgment motion and permitted an award of CASPA damages after Clipper was successful at trial.
The analysis focused on the rules of statutory construction and, more specifically, the definition of an owner. The Court agreed with Ohio Casualty that use of the word “association” in the statutory definition was insufficient to include a governmental entity. The owner of the project in this case – the Department of Navy – was too dissimilar to a corporate or business entity owner to make the analogy work either. This logic, in combination with another standard rule of statutory construction requiring laws which infringe on the sovereignty of a public body to be narrowly construed, necessitated a conclusion that CASPA does not apply to public projects.
Although one might have received different reasons why CASPA did not apply to public projects before this opinion, this decision by the Supreme Court confirms as black letter law in Pennsylvania that CASPA is not applicable to public projects and gives a reasoned opinion to support its conclusion.