Missing Prompt Pay Act objection dates means money must be paid but bring defenses in the same case

Raise defenses AFTER paying amounts ‘deemed approved’ by the Prompt Pay Act //

Don’t enter judgement separately on Prompt Pay claims, try defenses after payment is made //

If the Prompt Pay Act applies, ‘too late to lien’ is no defense //

Mass SJC rules in Business Interiors v Graycor (2024) that missing Prompt Pay Act dates does not waive defenses for those who pay amounts 'deemed approved' first.

Construction project (movie theater in Boston’s North End) Parties

• Graycor Construction = GC
• Business Interiors = Subcontractor

Facts

Graycor failed to reject BI pay applications in time under the 22 day Prompt Pay Act rules (in the first months of the pandemic shutdown); they were ‘deemed approved’.  Graycor didn’t pay but wanted to assert its defenses. 

Trial court

BI sued Graycor to recover amounts deemed approved by the Prompt Pay Act.  Graycor asserted defenses in the case (breach of contract, indemnity, bad faith etc.). The Judge entered a Summary Judgment for BI “Separate and Final Judgment” for BI on its pay claim -  on fewer than all claims in the case, leaving Graycor’s claims to be tried sometime later. Graycor appealed.  

ISSUE  

What happens to legitimate defenses when the Prompt Pay Act requires that the subcontractor get paid?

RULING  

Defenses of the paying party are not lost and should be heard in the same case so long as the amounts  ‘deemed approved’ are already paid. Separate Judgment just for the Prompt Pay Act claim should not have been allowed.

REASONS  

Valid defenses are not lost just because an CM / GC fails to respond to the  subcontractor pay app in time for the Prompt Pay Act.  The requisitions are ‘deemed approved’ and the sub is entitled to the requisitioned pay but the case should not be broken  into parts while the CM/GC asserts its defenses. The SJC explicitly overruled the Appeals Court Tocci Bldg. Corp v IRIV Partners, LLC  101 Mass App Ct 133 (2022) which seemed to say all defenses are waived.

The law did not wipe out defenses and they can be asserted after paying amounts deemed approved. Defenses are still available in a “subsequent forum”. The contractor must pay first and later seek to disgorge such funds.

ISSUE 2                Did the Prompt Pay Act apply to this “contract for construction” if the time to lien the project had passed?

RULING 2 Yes

REASONS 2 Legislative aim to have subs get paid. Since this was a job that could have been liened, the Prompt Pay Act applied. Pay then litigate.

ISSUE 3 Can an injunction issue ordering immediate payment of outstanding invoices?

RULING It can be justified and can be a good idea rather than separate judgments arising of the same events.

ISSUE 4  In the case where requisitions are deemed approved and the CM wants to assert defenses, can a judgment to pay under the Prompt Pay Act be appealed immediately?

RULING 4 No Judges should only enter judgment separately after a hearing and a finding that there is no just reason for delay. 

REASONS 4 Breaking cases into pieces is disfavored and complicates the process.