In a departure from the usual rule, but not surprising given the facts of the case, the Commonwealth Court of Pennsylvania recently enforced a subcontractor’s claim for payment against a public owner.
In 2009, West Allegheny School District terminated Flaherty Mechanical Contractors, LLC, the prime contractor on a school alterations project, for failure to pay various subcontractors. After the termination, to prevent further delay, the school district asked F. Zacherl, Inc., the sheet metal subcontractor, to return to the project and complete the work remaining under its subcontract with Flaherty.
Zacherl orally agreed with school district, provided it was paid its then outstanding invoices. These invoices were paid, and Zacherl completed its work, but the school district made no further payments for either the work Zacherl had performed for Flaherty or the work Zacherl performed for the school district. Zacherl sued Flaherty’s surety and the school district for payment. The trial found in favor of Zacherl, with the surety liable for payment for Zacherl’s work for Flaherty, and the school district liable for Zacherl’s work for the school district. The school district appealed.
On appeal, the school district raised the bar of Section 508 of the Public School Code, and argued that, because the school board had never formally approved the oral agreement with Zacherl to return to the job site to complete Flaherty’s unfinished scope, it was not liable to Zacherl.
Section 508 provides:
The affirmative vote of a majority of all the members of the board of school directors in every school district, duly recorded, showing how each member voted, shall be required in order to take action on the following subjects:
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Entering into contracts of any kind, including contracts for the purchase of fuel or any supplies, where the amount involved exceeds one hundred dollars ($100).
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Failure to comply with the provisions of this section shall render such acts of the board of school directors void and unenforcible.
The Commonwealth Court flatly rejected the school district’s argument, holding that further approval by the school board was unnecessary for two reasons: first, because the school board had already approved Flaherty’s contract, and second, because the school district had also approved Zacherl to perform as a subcontractor to Flaherty.
The Commonwealth Court’s decision can be found here.
The moral of the story is that agreements with public owners do not always fit neatly into the statutory requirements for public contracts, and that failure to follow statutory requirements will not always be a bar to recovery. Where a contractor has performed work, and the public owner has received the benefit of that work, it is unlikely that a court is going to refuse to compensate the contractor, and here the facts were plainly in favor of Zacherl.
Of course, this case is an outlier, and my repeated advice to contractors performing public work is to always get it approved and in writing by the necessary officials. Performing public work, even change order work, without a written contract is an extremely perilous act.
If you need further assistance on this topic, call or email me for a free consultation.
Christopher I. McCabe, Esq.
