The Supreme Judicial Court of Massachusetts (SJC) recently heard oral arguments in a crucial case in construction law that deals with the terms of the Massachusetts Prompt Pay Act (PPA), G.L. c. 149, § 29E. The implications of the eventual ruling could be sizeable.

The construction lawyers at the Katz Law Group are closely watching the case as it moves forward.

The Massachusetts Prompt Pay Act (PPA)

The case deals with the PPA, which lays out the timeline for payments to be made in both private and public construction projects. Under the law, there is an initial period when invoices are received and either accepted or rejected by the payor, and then a subsequent period when approved invoices must be paid. The length of these time periods depend on the circumstances and the relationship between the parties.

The goal of the PPA is to ensure that general contractors pay their subcontractors soon enough after work is performed that the subcontractor is not left financially unstable.

The PPA was in the news recently, as the SJC ruled on it in 2024. In that case, Business Interiors Floor Covering Business Trust v. Graycor Construction Company Inc., et al., or “Graycor,” the court was presented with a situation where a payor had neither approved nor rejected an invoice before the time period to do so elapsed. Under the PPA, these invoices are “deemed approved.” In Graycor, the SJC had decided that the payor could only raise legal defenses to invoices that had been “deemed approved” after it had paid the amount at issue – a limitation that is not mentioned in the PPA.

New Case Turns on Whether Rejection of Invoice was Valid

The case that the SJC is currently considering is J.C. Cannistraro, LLC v. Columbia Construction Co., or “Cannistraro.” In this case, an HVAC subcontractor billed the general contractor with nearly a million dollars of cost increases. The general contractor rejected the bill, but did not include the certification of good faith required by the PPA. The subcontractor sued, the general contractor raised several legal defenses, and the court pushed them into arbitration.

The arbitrator then ruled that, because the general contractor's rejection did not have a certification of good faith in it, it was not a true rejection. That meant that the inflated HVAC bills were “deemed approved” under the PPA, and that meant that the general contractor couldn't raise legal defenses until they paid the bills.

The general contractor immediately paid them and they went back to arbitration, which ended with a finding that the HVAC bills were inflated by $600,000 and that the subcontractor owed that amount to the general contractor.

The HVAC contractor appealed to Superior Court, arguing that the general contractor had violated the “pay now, fight later” rule from the earlier case, Graycor, and had therefore waived its legal defenses to the inflated bills.

The Superior Court agreed, and the general contractor appealed to the SJC.

Construction Lawyers at the Katz Law Group are Watching the Case

According to construction attorney David S. Katz, “Cannistraro is a great example of how messy the Prompt Payment Act has become. It seems absurd that the HVAC contractor would get to keep the $600,000 that the arbitrator found was overcharged, all because the general contractor did not state ‘this is in good faith' in its rejection of the bills. But the terms of the Act do require this in a rejection. We'll see if the SJC chooses to do justice in this particular case, or if it will adhere to a strict reading of the Act and the harsh result it would produce. One way out for the court would be to rely on the fact that the arbitrator's award came before the Graycor ruling. In the meantime, all construction contractors should add language to their boilerplate rejection forms.”

Call the Katz Law Group at (508) 480-8202 or contact them online for legal representation in central Massachusetts.