Ohio Supreme Court Clarifies Prompt Payment Act

Kegler Brown Construction Newsletter

Until the Ohio Supreme Court rendered its April 2004 decision in the Masiongale Elec. v. Construction One case, there was no definitive word as to what constituted a "disputed lien or claim" to allow withholding of a subcontractor's money when the general contractor had received payment from the owner. The Supreme Court has now partially answered that question in a manner favorable to subcontractors.

In the Masiongale case, the general contractor had withheld attorney's fees and mechanic's lien release bond premiums from the payments made to the subcontractor, claiming that the subcontractor breached the lien waiver and forum selection provisions of the subcontract. The Supreme Court found that these assertions were procedural in nature and unrelated to the substantive work performed by the subcontractor, and held that the only proper justifications for withholding payment under the Prompt Payment Act must relate to claims involving the performance of work itself.

This decision means that subcontractors are more likely to prevail on Prompt Pay claims when the excuse for non-payment does not relate to the actual work itself.