Thought Leadership

The Pennsylvania Superior Court decided a matter of first impression regarding the assignment of a claim by one contracting party, against another contracting party, to a non-contracting party without the would-be defendant’s consent, despite an anti-assignment clause in the contract. Let me explain.

A construction project involved a contract directly between a school district and an architect. That contract provided that neither party “shall assign this agreement without the written consent of the other.” The construction project was delayed, and the general contractor sued the school district for non-payment of project costs and additional delay-related costs. That dispute was settled, with the school district paying the general contractor a fixed dollar amount, plus an assignment of the school district’s claims against the architect for losses incurred by the school district. Specifically, the general contractor received the right to sue the architect and to retain 85% of any recovery obtained. And so the general contractor sued the architect, asserting the school district’s claimed losses.

The architect asserted the non-assignment clause in the contract and pointed to two prior cases holding that an assignment is “void” in light of anti-assignment clauses in those relevant contracts. But in Gito, the Superior Court distinguished those cases. The contract in one case prohibited assignment of the duty to perform under the contract; the other expressly prohibited the assignment of the right to payment under the contract. But the clause and facts in Gito did not mirror those cases. Instead, the anti-assignment clause was read to prohibit only the right to performance of contracted duties—that is, to subcontract the work. And in fact, the assignment was of the claims of legal liability and compensable damages, which were not addressed in the anti-assignment clause. Thus, the Superior Court held that the general contractor properly had standing to assert the school district’s claimed losses in a suit against the architect, notwithstanding a general anti-assignment clause.

One of the first things to ask on the defense side when receiving a new case is: Does the plaintiff have standing to sue? In Gito, the Superior Court pronounced on an issue of first impression that, despite appearances to the contrary, maybe your plaintiff does.
 

^{Case Law Alerts, 1st Quarter, January 2022 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2022 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}