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Eleventh Circuit Interprets Georgia’s Prompt Pay Act

In Fatt Katt Enterprises, Inc. v. Rigsby Construction, Inc., a dispute arose between the general contractor, Rigsby, and one of its subcontractors, Fatt Katt, over Rigsby’s failure to pay Fatt Katt amounts allegedly owed under a construction contract. 2019 WL 972043 (11th Cir. 2019). Fatt Katt asserted Rigsby violated the State of Georgia’s Prompt Pay Act, O.C.G.A § 13-11-1, et. seq., and sought damages for work that Fatt Katt allegedly performed.

The relevant portion of the Georgia Prompt Pay Act, which governs the timing of payments between contractors and subcontractors, states:

“When a subcontractor has performed in accordance with the provisions of its subcontract and the subcontract conditions precedent to payment have been satisfied, the contractor shall pay to that subcontractor . . . the full amount received for such subcontractor’s work and material based on work completed or service provided under the subcontract . . .”

O.C.G.A. § 13-11-4(b).

This section suggests that a contractor must receive payment from the property owner before being obligated to pay a subcontractor for work performed “in accordance with the provisions of its subcontract.” The Court explained, “payment to the contractor is a condition precedent to the contractor’s duty to pay the subcontractor.” The lower district court held that since the property owner did not pay Rigsby in the first place, Fatt Katt could not successfully bring a claim under § 4(b).

Fatt Katt argued that the alleged oral agreement between it and Rigsby regarding the timing of the payments should supersede the language of § 4(b). Fatt Katt cited to O.C.G.A. § 13-11-7(b) to support its argument:

“Nothing in this chapter shall prohibit owners, contractors, and subcontractors from agreeing by contract to rates of interest, payment periods, and contract and subcontract terms different from those stipulated in this Code Section, and in this event, these contractual provisions shall control.”

Fatt Katt asserted that Rigsby agreed to pay invoices received upon receipt, and that this agreement should control under § 7(b), instead of the claim being barred under § 4(b).  However, the district court concluded that § 7(b) did not apply to Fatt Katt’s claims because it falls under the Prompt Pay Act’s heading of “Interest on Late Payments,” and should thus only apply in the context of late interest payments.

The Eleventh Circuit agreed with the district court’s holding that § 7(b) does not except Fatt Katt’s claim from the default requirements of § 4(b). Likewise, Fatt Katt must meet the requirements under § 4(b) to prevail on its Prompt Pay Act claim. This would have required Fatt Katt showing that Rigsby received payment from the property owner. Fatt Katt failed to present any such evidence.

This case stands for the proposition that, under Georgia’s Prompt Pay Act, oral agreements will not supersede default statutory provisions, unless expressly allowed for in the statute. This holding implies that written agreements would not supersede either. It is important for contractors and subcontractors to know the controlling statutory provisions before attempting to form agreements that deviate from statutory default provisions.