United Riggers & Erectors, Inc. v. Coast Iron & Steel Co.
232 Cal. Rptr. 3d 428
| Cal. | 2018Background
- Universal hired Coast Iron as direct contractor for a theme-park ride; Coast Iron subcontracted metal installation to United Riggers.
- Contracts provided monthly progress payments with a 10% retention; United Riggers completed work and later claimed additional sums via change orders.
- Universal released the retention to Coast Iron; Coast Iron delayed forwarding United Riggers’ share (~$149,602) while disputing unrelated extra payment claims by United Riggers.
- United Riggers sued under California prompt-payment/retention statute (Civ. Code § 8814) and common law; Coast Iron later paid the retention but statutory penalties and fees remained contested.
- Central legal question: Does § 8814’s “good faith dispute” exception permit withholding when any dispute exists between contractor and subcontractor, or only when the dispute concerns entitlement to the specific retention payment withheld?
- Trial court denied relief; Court of Appeal reversed on the statutory prompt-payment claim; Supreme Court granted review to resolve split in authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 8814 permits withholding retention funds for any bona fide dispute between contractor and subcontractor, or only for disputes about entitlement to the specific retention payment | United Riggers: § 8814 must be read in context of prompt-payment scheme; withholding allowed only when the dispute concerns the specific payment/retention itself | Coast Iron: plain text allows withholding whenever a good faith dispute exists between the parties; no express limit in § 8814 so any dispute suffices | Court: § 8814 ambiguous but, read in context and consistent with remedial purpose and related statutes, withholding is limited to good‑faith disputes over entitlement to the specific monies withheld (disapproving contrary authority) |
Key Cases Cited
- Cates Construction, Inc. v. Talbot Partners, 21 Cal.4th 28 (Cal. 1999) (describing progress payments and retention function)
- Yassin v. Solis, 184 Cal.App.4th 524 (Cal. Ct. App. 2010) (discussing retention practice and prompt-payment protections)
- Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc., 179 Cal.App.4th 1401 (Cal. Ct. App. 2009) (held any bona fide dispute permits withholding; disapproved here)
- East West Bank v. Rio School Dist., 235 Cal.App.4th 742 (Cal. Ct. App. 2015) (restricted withholding to disputes related to the retention’s purpose)
- Denver D. Darling, Inc. v. Controlled Environments Construction, Inc., 89 Cal.App.4th 1221 (Cal. Ct. App. 2001) (applied the 150% rule and assessed excess withholding)
- Blois Construction, Inc. v. FCI/Fluor/Parsons, 245 Cal.App.4th 1091 (Cal. Ct. App. 2016) (explaining prompt-payment statutes’ remedial aim)
- Wm. R. Clarke Corp. v. Safeco Ins. Co., 15 Cal.4th 882 (Cal. 1997) (mechanics‑lien and remedial statutes construed liberally)