The Saiber Construction Law Column: July/August 2022 | Saiber LLC

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The June 2022 edition of Magazine on site mentioned the case of J&M Interiors v. Centerton Square Owners, which dealt with a contractor’s right to be paid under New Jersey’s Prompt Payment Act (“PPA”). Several months after publishing his J&M Interiors decision, the Appeals Division issued another decision which also demonstrated that the PPA is a powerful tool that contractors and subcontractors can use not only to get paid, but also to recover attorneys’ fees.

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In JHC Indus. Servs., LLC v. Centurion Co., Inc., the trial court ruled in favor of Jhc, a subcontractor, after suing the general contractor for failing to pay Jhc in full, even though the general contractor had been paid for work performed by Jhc. After being successful in its claim against the general contractor, Jhc sought attorney fees in the amount of $104,670.51 pursuant to the fee transfer provision of the PPA. However, the trial judge only awarded Jhc fees and expenses of $16,375.73 because the judge felt that the amount of fees sought by Jhc was disproportionate to the judgment of $30,500 that he had recovered against the general contractor.

The Appeals Division reversed, rejecting the trial court’s finding that the amount of fees awarded should be commensurate with the amount of damages won. The appeals court noted that the New Jersey Supreme Court ruled in 1995 that New Jersey’s fee transfer laws did not require proportionality between recovered damages and attorney’s fees, even though the litigation . . . does not assert any rights other than those of the plaintiff”.

The Appeals Division succinctly summarized its decision as follows: “The statutory fee transfer provisions are intended to both punish and deter behavior prohibited by law, in this case the failure to pay promptly to a subcontractor the total amount due; that the entrepreneur who does not pay beware. The Court of Appeal sent the case back to the trial court with clear instructions on how Jhc’s award of legal costs should be determined, including consideration of how the general contractor increased Jhc’s legal costs by his own legal maneuverings and stubborn approach to action. In doing so, the Appellate Division gave the PPA some real teeth and gave Jhc a real win rather than a hollow win.

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Each issue’s legal construction column will discuss a recent decision from the New Jersey courts or courts in other states that may be of interest to people in the construction industry.

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