Eighth District Court of Appeals Confirms Strict Application of Ohio’s Prompt Pay Act

In Broadway Concrete Investments, LLC v. Masonry Contracting Corp., et al, Case No. CV-18-903809, 2022-Ohio-19 (January 6, 2022) [1] the Eighth District Court of Appeals confirmed that Ohio’s Prompt Pay Act, at R.C. 4113.61, obligates a subcontractor to pay its lower-tier subcontractors and suppliers for work performed and invoiced to the subcontractor, within ten days of receiving payment from the owner or general contractor, so long as the lower-tier subcontractor or supplier submitted its invoice in time for the subcontractor to include the invoice in the payment request.

During the construction of the Nord Family Greenway on the campus of Case Western Reserve University, Platform Cements, Inc., a subcontractor providing concrete excavation, site concrete, and hard case services, entered into a subcontract with Mason Contracting and paid for initial services. After the prepayment, Mason Contracting subcontracted with Pompili to provide concrete supplies.   It is the prepayment made by Platform Cements to Mason Contracting that the trial court relied on to determine that Mason Contracting received “project funds” which triggered its obligation to pay Pompili for services performed within ten days of receiving an invoice.

The Court of Appeals rejected the trial court’s conclusion: “That is not the law. The ten-day clock clearly and unambiguously begins to run upon payment by the contractor of the subcontractor’s pay application that contained the material supplier’s invoice; it does not start running when the lower tier material supplier submits its invoice.” In reaching its conclusion and rejecting the trial court's determination, the Court of Appeals reasoned that because the Prompt Pay Act is a penal statute, courts must strictly construe the statute and must read the language “without expansion beyond its letter.” Thus, the trial court inappropriately expanded the Prompt Pay Act by requiring “[Mason] to pay Pompili from funds it received on pay applications that did not include any Pompili invoices.” With its decision, the Court of Appeals reversed the trial court’s judgment, including an award of attorney fees and statutory interest awarded to Pompili.