BBigger companies squeezing out smaller ones is a never-ending problem for the construction project pay chain, but the state of Massachusetts and its subcontractors have been leaders in demanding better wage protections. State lawmakers adopted a law fourteen years ago that requires denied payment requests to include an explanation. No one was sure how it would be enforced, so it was often ignored. A case of 2022 lEft did not address the critical question of whether a company that innocently violates the state’s payment law also loses its right to later argue that the company seeking payment is not entitled to the funds.
Now, with a state court decision in June, there is more clarity and the law cannot be ignored. And the days of simply ghosting a payment request in Massachusetts are over.
However, the full picture of how the court decision came about has somehow been glossed over at the expense of Graycor, the prime contractor who neither approved nor rejected payments requested by a subcontractor.
The Illinois-based company, ranked No. 201 on ENR’s Top 400 Contractors, isn’t the payment scoundrel it may seem, according to some succinctly written accounts of the court decision in Business Interiors Floor Covering Business Trust v. Graycor et al.
A Massachusetts Supreme Court panel’s ruling, which came on Graycor’s appeal of a lower court verdict in favor of Business Interiors, put clearer teeth into the prompt payment law. It means that oneUnless an owner or prime contractor explains why it is denying a request for payment, that company will not be able to explain itself in a subsequent court proceeding without first making that payment.
State construction lawyers acknowledged the significance of the decision, and some of their legal interpretations are technically precise and, in the case of one published by ENR.com, limited in length.
My point is that they just didn’t say enough about the context of the project.
Bradley L. Croft of the RIW law firm notes that Graycor, in its appeal, argued that the common law defense of impossibility should bar the subcontractor’s claim. Why? Because the owner’s inability to make payment to the general contractor was due to the COVID-19 pandemic, the company said, which “said funds for the subcontractor’s work were not available to the contractor general”.
This comment hints that the pandemic had something to do with what happened in this case.
In another example, my learned friends at the law firm PretiFlaherty wrote a compelling analysis describing Graycor’s role as “general contractor for a movie theater project in Boston’s North End.” This provides more context but not enough.
And writing for ENR, Joseph A. Barra of Robinson & Cole mentions it the Business Interiors case arose from “certain floor work for a motion picture project in Boston.”
I’ll give you the rest of what I think is relevant.
In 2018, Graycor had signed an approximately $19 million contract with movie theater chain Pacific Theaters Exhibition Corp. to build a theater known as ARCLight Boston Garden, with Pacific Theaters as the tenant of the building’s developers. Graycor hired Business Interiors to provide flooring and with the change orders, the subcontractor’s total work came to $608,000. As the Covid-19 pandemic entered its first weeks in March, Business Interiors requested its 19th payment, for $75,745, and Graycor provided no written explanation for the non-payment.
In January, Graycor’s project manager traveled to the Pacific Theater headquarters in California to try to resolve issues related to the approximately $3 million in trade orders still pending on the project, but by March the chain had closed the theater doors, Boston Mayor Marty Walsh had banned. construction in the city and the money that Pacific Theaters had hoped to pay for the project stopped coming in.
Graycor relied on its contract
Business Interiors was one of several subcontractors who sued Graycor and the owner companies, alleging, among other things, breach of contract. To defend against that claim, Graycor relied on its contract with Business Interiors and the standard pay-if-paid clause, essentially arguing that impossible circumstances imposed by the pandemic prevented it from paying.
“Nobody expected,” Graycor’s lawyers argued in one of their motions, “…that there would be a global pandemic with the result that Pacific would stop accepting trade orders, stop making payments, shut down all its cinemas and that the leasehold interests in the project would be terminated or that Pacific would declare bankruptcy.”
Graycor, which opened an office in Boston for the first time in 2019, declined to comment to me on the matter as its various project lawsuits dragged on. I am glad that subcontractors, as well as prime contractors, are better protected under Massachusetts law. If it wasn’t clear before, homeowners and general contractors cannot withhold legitimate payment requests and simply say nothing.
I just want to point out that Graycor itself was also a payment victim on the project, and that the payment mess on the Boston theater project was not the result of an arbitrary whim of the prime contractor or even because Graycor thought that Business Interiors did not. don’t do your job
