Maintenance Management v. Pelino, No. 1345-02 Cncv (Katz, J., Sept. 25,
2003)



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STATE OF VERMONT                          SUPERIOR COURT
Chittenden County, ss.:                   Docket No. 1345-01 CnCv

MAINTENANCE MANAGEMENT

v.

PELINO

                                  ENTRY

       Contractor Maintenance Management requests reconsideration of
our declining to apply the Prompt Pay Act, 9 V.S.A. § 4001–4009, and
requests under the Act that we grant attorneys fees to the substantially
prevailing party and a penalty of 1% interest per month.

        Whether the Prompt Pay Act applies to the relationship between
contractor and Pelinos depends on the language of the Act, which makes it
quite clear that it applies only when there is an oral or written contract, 9
V.S.A. § 4001 (5). Despite that language, there is no reason to foreclose its
application in implied contracts. See Jenkins, Inc. v. Walsh Bros., Inc.,

. This issue, however, is not dispositive.

        The Prompt Pay Act awards attorney fees to the “substantially
prevailing party.” 9 V.S.A. § 4007 (c). As this is contrary to the traditional
“American Rule” where parties pay their own attorney fees regardless of
who prevails, DJ Painting, Inc. v. Baraw Enters., Inc., 

, 246
(2001), it is a derogation of the common law and must be interpreted
strictly. Bruntaeger v. Zeller, 

, 255 (1986). Contractor argues
that there is no difference between “substantially prevailing party” and
“prevailing party.” For support, he cites to Buckhannon Board & Care
Home, Inc. v. W. Va. Dep’t of Health & Human Resources, 

(2001) and more generally to Union of Needletrades, Indus. & Textile
Employees v. I.N.S., 

(2d Cir. 2003). In the first case, the
Court does not even address the difference between “substantially
prevailing” and “prevailing.” In the second case, the Second Circuit draws
a very different distinction than what contractor argues. The Second
Circuit does not say that the two terms are synonymous. On the contrary,
the court rejects the “catalyst” interpretation of “substantially prevailing”
that previously gave it a broader application, which made it
indistinguishable with “prevailing.” 

(defining the
“catalyst” as basing application on the manner and method of recovery).
More importantly, both cases endorse a more restrictive interpretation of
“substantially” that would limit the application of attorney fee provisions
based on the amount or degree of recovery, thereby making “substantially
prevailing” a subset of “prevailing.” 

–08. Such an
interpretation also gives meaning to every word in the statute, Reed v.
Glynn, 

, 506 (1998), because “substantially” is no longer
superfluous. Finally, it emphasizes a measure of discretion in the court on
the question of whether to award fees. Without such discretion, a $1
victory would carry with it a fee award which might drive the case more
than would the merits. Applying this rationale, contractor has provided no
evidence, and has not argued, that he substantially prevailed. Given the
high bar set by 9 V.S.A. § 4007 (c) and the lack of evidence, Attorney fees
are inappropriate.

       As to the Prompt Pay Act’s penalty provisions, the plain language of
§ 4007 (a) allows an owner or contractor to withhold all or part of a
payment based on a good faith claim arising from “unsatisfactory job
progress” or “disputed work.” This provision appears to enunciate the
common sense principle that when there is a fundamental dispute over what
was owed, there cannot be punishment for litigation that resolves it.
Where, as here, the homeowner substantially prevails on a number of issues
that good faith is shown. Since Pelinos withheld their payment based on a
good faith dispute over the nature, amount, quality, and cost of the work, §
4007 (a) applies to prevent any penalties from attaching. Contractor
provides no reasoning why this section should not apply here.
       For the foregoing reasons, Maintenance Management’s motion to
reconsider is rejected.

      Dated at Burlington, Vermont________________, 2003.




                                         ________________________
                                         Judge