The Court narrowly construed the “good faith” exception to the general rule that a direct contractor must make retention payments to its subcontractors within 10 days of receiving any retention payment.
On May 14, 2018, the California Supreme Court issued its opinion in United Riggers & Erectors, Inc. v. Coast Iron & Steel Co., No. S231549, slip. op. (Cal. Sup. Ct. May 14, 2018). In it, the Court narrowly construed the “good faith” exception to the general rule that a direct contractor must make retention payments to its subcontractors within 10 days of receiving any retention payment. The exception provides that “[i]f a good faith dispute exists between the direct contractor and a subcontractor, the direct contractor may withhold from the retention to the subcontractor an amount not in excess of 150 percent of the estimated value of the disputed amount.” Cal. Civ. Code section 8814(c).
Reprinted courtesy of Erinn Contreras, Sheppard Mullin and Joy O. Siu, Sheppard Mullin
Ms. Contreras may be contacted at econtreras@sheppardmullin.com
Ms. Siu may be contacted at jsiu@sheppardmullin.com