Legal Intelligencer article – June 23, 2023, By: Aleeza Furman

A trial court judgment awarding $3.2 million to a group of subcontractors against a construction project’s owner and general contractor left both sides of the dispute seeking a different outcome.

But instead of getting the larger award they were after, the subcontractors lost the one they had already obtained.

A Superior Court ruling vacated the lower court’s multimillion-dollar judgment for the subcontractors, and the judges determined that the subcontractors must pay the opposing parties’ attorney fees.

In the 69-page opinion entered Tuesday, a three-judge panel ruled that the construction project’s subcontractors—AAA Demolition & Recycling Inc., Moses Construction Inc., Eden Plumbing & HVAC Inc. and Moshe Attias—could not prove their unjust enrichment claim against the project’s owner WPHS Venture Partners LLC and general contractor SDSP LLC.

The court further held that WPHS and SDSP are entitled to attorney fees and expenses under Pennsylvania’s Contractor and Subcontractor Payment Act because the judgment was rendered in their favor.

Lamb McErlane partner Maureen McBride, who represented WPHS and SDSP in the appeal, said in an email that she’s pleased with the outcome. “We were especially impressed,” she added, “with the court’s meticulous review of the record and its thoughtful analysis of important construction-related and CAPSA issues.”

The panel determined that the trial court erred when it found in favor of the subcontractors’ claim that WPHS was unjustly enriched because it did not pay for work the subcontractors completed outside the scope of their trade subcontracts.

“It is well settled that, for unjust enrichment actions against owners in construction cases, the existence of an enrichment is determined by the value of the benefit to the owner, not by the value of the invoice submitted by the subcontractor,” Senior Judge Correale Stevens ruled in the opinion. “Here, subcontractors did not produce evidence of whether/how the value of WPHS’s property was increased or enhanced due to the changes.”

In their cross-appeal, the subcontractors contended that they should have been awarded an additional $1.1 million in damages, as well as interest, penalty and attorney fees under CASPA (The Pennsylvania Contractor and Subcontractor Payment Act). The Superior Court, however, rejected the subcontractors’ argument that they proved they were entitled damages for their breach-of-contract claim, which the trial court had rejected.

The opinion reversed and affirmed various elements of the trial court’s ruling, which dealt with numerous claims and cross-claims the parties had brought against each other in two different suits that were consolidated for trial.

Zimolong LLC’s Wally Zimolong, who represented WPHS and SDSP at trial, called the outcome “a complete vindication” of his clients.

Zimolong said the ruling makes clear the burden subcontractors must meet to hold an owner liable for unjust enrichment and reiterates that CAPSA is a loser-pay statute.

“Attorneys that are representing subcontractors need to take a hard look at the merits of their claim before bringing a case because they may end up incurring attorneys fees,” he said.

Pamela Tobin, a principal at Kaplin, Stewart, Meloff, Reiter & Stein, represented the subcontractors and declined to comment.

The Superior Court’s ruling remands the matter to the trial court for a determination on attorney fees and costs owed to WPHS and SDSP.

Zimolong said he is still determining what the attorney fees will amount to. Still, he estimated they will be well into six figures, saying they “are quite significant because of the litigation tactics of the subcontractor and the length of the dispute.”

Read the article on Law.com here.