In a recently decided case, Caltrans has been ordered to pay not only the principle sought by the contractor but in additional sums representing California Prompt Payment Penalties including a penalty of 2% per month on the principle amount due until judgment is entered, and more importantly the payment of mandatory attorney fees to the prevailing contractor.

Andrade & Associates (A&A) represented a general contractor in a claim against the State of California Department of Transportation (Caltrans) seeking to recover among other things the wrongful retention withheld from the contractor by Caltrans and also the recovery of California's Prompt Payment Penalties since Caltrans withheld the Contractors money without a good faith dispute. Caltrans position was that the withheld money, $226,800.00 represented 40 days of liquidated damages based upon Caltrans refusal to stop the contract calendar days even though Caltrans had taken beneficial possession of the project and had opened the highway up for use by the public over 21 days before the extended contract completion date.

A&A was able to establish that the contractor was entitled to a 40 day contract extension due to delays caused by Caltrans. Despite the granting of the 40 contract extention days which worked to wipe out the liquidated damages assessed, Caltrans nonetheless took the position that since last minute change order work involving a sign already installed and accepted by Caltrans was not completed by their calculations until 40 days after the extended contract completion, that Caltrans was still entitled to charge liquidated against the contractor in the amount of $226,800.00 due to the change order work which was not part of the original contract scope.

A&A successfully argued that the change order work added at the end of the project and which involved making changes to work already performed and accepted by Caltrans could for the basis upon which Liquidated Damages could be assessed and in any event could not establish a good faith dispute still pending against the contractor. A&A successfully convinced the arbitrator to award a sum of approximately $700,000.00 based upon the return of the Liquidated Damages assessed, penalty interest of 2% per month for 40 months on the unpaid Liquidated Damages, and mandatory attorneys's fees and costs.

In my career spanning over 300 trials, this was the first case that I have been involved with that Caltrans was forced to pay the penalties, interest and mandatory attorney fees associated with California's Prompt Payments statutes. So in the future, litigation might not be Caltrans first choice now that they have been proven not to be beyond the reach of the Legislative Penalties. Caltrans long standing policy of withholding money due the contractor an inordinate amount of time without a good faith dispute that the contractor owes any money or further performance on the contract may finally come to an end.