Prompt Payment Act
Much fanfare has been made over New York’s Prompt Payment Act (“PPA”), General Business Law Article 35-E. The PPA applies to nonpublic construction jobs in New York whose total cost is at least $150,000. The PPA provides that when the owner, contractor or subcontractor receives an invoice, it “shall approve or disapprove all or a portion of such invoice within twelve business days”. Any idea that an owner, contractor or subcontractor who receives an invoice and misses the 12 business day time limit has no right to contest it was rejected by the courts. (Donninger Constr. v C.W. Brown, 113 A.D.3d 724; Precast Restoration v. Global Precast, 131 A.D.3d 873). The PPA does provide some remedies. If the 12 day deadline is missed, there is a right to expedited arbitration (Capital Siding v Alltek Energy Sys., 2016 NY Slip Op 31043[U]) and 1% per month interest (Gibraltar Contr. v Atria Bldrs., 2011 N.Y. Misc. LEXIS 6951. These remedies may not mean much. Even though the American Arbitration Association is a not-for-profit organization, arbitration is expensive and not such a quick remedy in any event. See “Beware of Arbitration Clauses,” Article dated Nov. 29, 2011, in this web site. Even a contingent fee lawyer who advances nominal court costs is not advancing the cost of filing for arbitration. New York grants 9% interest automatically. A court order is required to get the extra 3% interest given by the PPA. There is one provision in the PPA that may be quite valuable. Any provision in the construction contract for disputes to be heard in another state or subject to another state’s law is void. Many large companies insist on contract provisions that all disputes must be litigated in the state where they are headquartered. For instance, any Costco contract requires the vendor to arbitrate in Washington State and suffer attorney fees if the vendor loses in an effort to sue in New York. (Ipcon Collections v. Costco Wholesale Corp., 2011 U.S. Dist. LEXIS 95468). Under the PPA, such a provision is barred.