New Jersey Prompt Payment Act Supports Recovery of Fees that Exceed Contract Balance Due

A subcontractor owed $30,500, who had to jump through multiple hoops to recover its money, was entitled to recover legal fees and costs exceeding the contract balance due.

JHC Industrial Services, a second-tier sub, performed demolition work for Centurion Services. Centurion was paid in full by the general contractor. For reasons never explained, Centurion simply refused to pay JHC the $30,500 balance due.

In fact, Centurion tried to make a mockery of the court system. First it allowed a default to enter, and then vacated the default but moved to compel arbitration. When the court held that there was no agreement to arbitrate, Centurion balked at court-ordered mediation, resulting in another motion by JHC. Centurion failed to respond to discovery, and then refused to confirm deposition dates, requiring JHC to file discovery motions to seek relief. Motions for summary judgment were filed, heard and denied, and the case went to trial.

At trial, Centurion dismissed its counterclaims. In a non-jury trial, the judge awarded JHC the amount sought under its Prompt Payment Act claim. When JHC sought to recover the fees and costs actually incurred, totaling $104,670, the trial judge held that the legal fees and costs recoverable should be proportional to the contract amount recovered, and awarded JHC $12,250 in fees and $4,125 in costs as a result.

But the Appellate Division disagreed with that outcome:

As the clear purpose of the Prompt Payment Act is to ensure that subcontractors are fully and promptly paid for their work, a mandatory award of reasonable costs and attorney fees is necessary to vindicate the Act's salutary purposes. Because the trial court erred in imposing a proportionality requirement where none exists, we vacate the fee award and remand for the trial court to award plaintiff reasonable costs and attorney fees under the relevant [appellate court decision] factors.

The Appellate Division further noted that it would “rarely disturb” a trial court decision on attorneys’ fees, but in this instance held that the trial judge’s decision “was based on a clear error of law.” It further noted that the attorneys’ fee provision is “one of the deterrent aspects” of the Prompt Payment Law. The Appellate Division, on remand, directed the trial court to consider the actions taken by Centurion throughout the case, in evaluating the reasonableness of the legal fees incurred and sought by JHC.

Thus, a contractor who owed and failed to pay $30,500, and who dragged its opponent through the legal thicket, may find itself liable for attorneys’ fees that are more than three times the amount of the unpaid contract balance. The case is JHC Indus. Servs., LLC v. Centurion Cos., Inc., 2021 N.J. Super. LEXIS 124 (Sept. 17, 2021).

About Stan Martin

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Stan Martin holds a law degree and an undergraduate degree in architecture. He has been involved with the construction industry for more than 45 years, working in construction prior to law school and beginning his construction law practice. During his career, he has been actively involved with the Associated General Contractors of Massachusetts, the Boston Society of Architects, the American Arbitration Association, and the Massachusetts Building Congress.

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