Split panel of Superior Court disagrees with prior opinion allowing “good faith” defense to attorney fees under CASPA

In Waller v. Warren Plaza, 2014 Pa. Super. 134, a split panel rejected the holding of another panel of the Superior Court in Zimmerman v. Harrisburg Fudd I, 984 A. 2d 497 (Pa. Super. 2009), with respect to whether a finding of good faith constitutes a defense to a claim for attorney fees under the Pennsylvania Contractor and Subcontractor Payment Act. (CASPA, 73 P.S. sections 501-506).

Under CAPSA, a court has discretion to award attorney fees to a “substantially prevailing party”. In Waller, the trial court awarded attorney fees of $78,071 to a contractor as the substantially prevailing party without regard to the owner’s claim that it withheld payment in good faith based on its mistaken assumption that the contractor and the architect, who solely were responsible for change orders on the project, would resolve the dispute on additional claims by the contractor based on those change orders, between themselves. Notably, the trial court only awarded $23, 470.00 in compensatory damages to the contractor.

The owner in Waller relied upon a the prior Superior Court opinion in Zimmerman, which found that in order to recover attorney fees as a “substantially prevailing party”, a claimant must establish that payment was withheld without good faith reasons. The panel in Waller undertook an examination the statutory language of CASPA, determined that an analysis of “good faith” only applied to the issue of whether a party is entitled to statutory interest and penalties, not attorney fees. It also found that its sister panel in Zimmerman failed to properly analyze various Federal Court opinions on which it relied for the opposite proposition. It is worth noting that the Pennsylvania Supreme Court previously denied a Petition for Allowance of Appeal in Zimmerman. 992 A.2d 890 (2010).

In a dissenting opinion, Justice Bender disagreed with the majority on the issue of the award of attorney fees, stating that Zimmerman constitutes binding precedent which the court was required to accept, citing Commonwealth v. Hull, 705 A.2d 911, 912 (Pa. Super. 1998)(“It is beyond the power of a panel of the Superior Court to overrule a prior decision the Superior Court”).

By Jeffrey Ludwikowski of Picadio Sneath Miller & Norton, P.C.