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Strang Scott Prevails In Arguing that Public Awarding Authorities Have a Duty to Verify Validity of Payment Bonds

A Superior Court judge recently ruled in Kapiloff’s Glass, Inc. et.al. v. University of Massachusetts (UMASS), et.al., MICV2014-08766, that Massachusetts awarding authorities on public construction projects do, in fact, have a duty to confirm that the payment bonds submitted by general contractors are valid.

Strang Scott brought suit on behalf of four subcontractors who provided labor and materials on the University of Massachusetts at Lowell Dry Lab Renovations construction project. The general contractor failed to pay the subcontractors in full, so the subcontractors requested copies of the payment bond from the awarding authority. Soon after filing suit, the subcontractors learned that the general contractor was filing for bankruptcy, and that the payment bond was fake.

As discussed in a previous article, Strang Scott, in a case of first impression, argued that awarding authorities on public construction projects have statutory obligations under M.G.L. c. 149, s. 29 to verify that the payment bonds provided to them by general contractors are legitimately issued by sureties registered with the Massachusetts Division of Insurance. The University of Massachusetts argued that it was not an officer or agent of the Commonwealth within the meaning of the statute. The court ruled that this defense was “neither logical nor in accord with common sense.

The court decision explained in great detail the remedial nature of the statute, and how its express purpose is to protect subcontractors, and not the Commonwealth. It cited many prior court decisions opining that the statute should be construed liberally to accomplish its intended purpose of getting subcontractors and material suppliers paid for their work.

Whether courts will find additional duties for awarding authorities on public construction projects in the future is uncertain, nor do we know whether the University of Massachusetts will appeal this decision. However, at least for now, this decision provides some comfort for subcontractors and material suppliers that some form of payment security should exist when they perform public work.