In November 2010, the Georgia Court of Appeals interpreted the Georgia Prompt Pay Act to mandate the recovery of reasonable attorney fees to a prevailing party.
The Prompt Pay Act
Georgia’s Prompt Pay Act (the “Act”) generally provides additional remedies to a contractor or subcontractor where they perform construction work on property and the owner of the property fails to remit payment within statutory deadlines. Where the Act applies, it provides for an award of attorney fees and interest on late payments. In Electric Works CMA, Inc. v. Baldwin Technical Fabrics, Inc., the court explained that attorney fees are recoverable without the necessity of showing bad faith.
Background on the Case
A contractor provided electrical services during 2006 and submitted invoices to the owner for such services. When the owner failed to pay, the contractor informed the owner it would seek interest on unpaid invoices and attorney fees and costs under the Georgia Prompt Pay Act. After a jury trial, the trial court entered judgment in favor of the contractor for the unpaid invoices, but declined to award interest and attorney fees, citing the owner’s lack of bad faith.
Applicability of the Prompt Pay Act
The Act applies where a contractor or subcontractor improves non-residential real property, performs construction services, or performs construction management services for an owner, including private owners and most public owners. Contractors and subcontractors are entitled to payment within set statutory deadlines, subject to certain additional requirements such as compliance with the contract and subcontract payment conditions.
Is Bad Faith Required Under the Prompt Pay Act?
The contractor appealed the trial court’s denial of attorney fees under the Act. The Act provides that “the prevailing party is entitled to recover a reasonable fee for the services of its attorney.” The trial court believed that this provision required a showing of bad faith, similar to other statutory bases for recovery of attorney fees. The Court of Appeals disagreed and reversed the ruling. It abided by the plain language of the statute and refused to read a bad-faith requirement into the statute. The court held, “entitlement to attorney fees under the Prompt Pay Act does not require a showing of bad faith.” Therefore, it directed the trial court to enter judgment for the contractor in the amount of the unpaid invoices with interest, plus attorney fees.