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The construction industry has been following with interest a stunning January 2012 decision by the Pennsylvania Superior Court to allow labor unions to assert mechanic’s lien claims against project owners under Pennsylvania’s Mechanic’s Lien Law, 49 Pa.C.S.A. §1101 et seq. In Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Company, 41 A.3d 16 (Pa.Super. 2012), the Pennsylvania Superior Court determined for the first time that labor unions fall within the definition of “subcontractor” under the Lien Law and therefore have standing to assert mechanic’s lien claims against real estate when the contractors with whom they have contracts default and fail to make payments into union benefit funds for work already performed on construction projects. The Bricklayers decision effectively exposes project owners, which have already paid contractors in full for completed work, to have a double indemnity obligation by allowing lien claims that encumber the owners’ real estate and subject the real estate to execution and sale. Under Bricklayers, the only way for an unsuspecting owner to avoid this statutory result under the Lien Law is to settle the labor union’s claim by paying more than the value of the owner/contractor contract to satisfy the obligation of a contractor that received payment in full but failed to make payments into union benefit funds. Since February 2012, labor unions have filed lien claims and complaints against numerous construction projects in the hope of recovering unpaid benefits from owners.
Not surprisingly, in Bricklayers the owner requested permission to appeal the Superior Court’s controversial decision to the Pennsylvania Supreme Court. Many industry professionals correctly predicted that the Pennsylvania Supreme Court would take an interest in this issue because the Superior Court decision represents a radical departure from prior court decisions under the Lien Law. On November 28, 2012, the Pennsylvania Supreme Court granted Scott’s Development Company’s petition for allowance of appeal. Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Company — A.3d —-, 2012 WL 5950657 (Pa.) The Supreme Court will address whether the Superior Court interpreted the Lien Law too liberally; whether a labor union has an implied subcontract with the project contractor that permits a union to assert a mechanic’s lien claim under the Lien Law; and whether even a liberal construction of the statute confers subcontractor status on labor unions.
If you are a project owner that has paid a contractor in full and are facing a mechanic’s lien claim asserted against your project by a labor union, you should not negotiate or pay the claim. Rather, you should consult with counsel about defending against the claim until such time as the Pennsylvania Supreme Court has decided the validity of these types of claims.
If you have any questions regarding Pennsylvania’s Mechanic’s Lien Law or construction issues generally, please contact Marianne J. Gilmartin at 570.343.1827 or the Stevens & Lee attorney with whom you regularly speak.
This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.
