On June 7, 2022, the Massachusetts Appeals Court issued an opinion of first impression regarding the Massachusetts Prompt Payment Act, G.L. c. 149 § 29E (the “Act”). In Tocci Building Corp. v. IRIV Partners, LLC, Appeals Ct. Nos. 21-P-393, 21-P-733, the Appeals Court affirmed the decision of the Superior Court which held that when an owner objects to a contractor’s payment application, the owner must strictly follow the Act’s protocols in order to preserve its right to withhold payment. The Act likewise applies to the contractor/subcontractor relationship.
The case concerned whether an owner had wrongfully withheld payment on seven of the contractor’s invoices because it failed to comply with the Act’s protocols, namely, that the rejection be timely, explain the factual and legal reasons for withholding payment, and expressly certify that the decision to withhold payment is made in good faith. The Appeals Court found that the Owner failed to timely respond to the seven applications at issue or, for those it did respond to timely, failed to include a certification of good faith. Accordingly, each pay requisition was “deemed approved by operation of law . . . and the defendants were not entitled to withhold payment as they did.”
A focal issue on appeal concerned whether the owner’s failure to reject the payment applications in accordance with the Act represented a waiver of both its right to withhold payment as well as its right to argue that the contractor’s work was defective. The Appeals Court held that the owner’s noncompliance with the Act resulted only in a waiver of its right to withhold payment, not its right to later argue that the contractor breached an important contract obligation. More specifically, the Court reasoned that while each of the contractor’s payment applications were, by operation of law, due and payable, the Owner’s right to assert claims for breach of contract are unaffected as “they may recoup any money they may be owed.” Joseph A. Barra, Esq., a construction attorney in Robinson+Cole’s Boston office submitted an amicus brief on behalf of the Associated Subcontractors of Massachusetts.