VDOT Subcontractor Pass-Through Claims: APAC-VA revisited

03/28/2011

Subcontractor “pass-through” claims for VDOT projects were rejected by the Virginia Court of Appeals in the APAC-Virginia case based on the premise that the statute only allowed a contractor to assert claims respecting which it was the “real” party in interest. Because the subcontractor did not have a contract with VDOT there was no “privity” between them and the court dismissed the pass-through claims as not statutorily allowed.

The same court’s later decision in the Tyger Constr. case suggested the law was not so clear and allowed that contractor to “plead around” the APAC-Virginia result by pleading that the contract was in fact the aggrieved party. There things sat for over 10 years.

Then in a 2005 decision the Virginia Supreme Court cited to APAC-Virginia with approval of its holding as an appropriate statement of the law in a footnote to that case, XL Specialty. This footnote is “dicta” to the ultimately decision, but appears to approve of the earlier decision rejecting subcontractor pass-through claims because of lack of privity and the subcontractor being the real party in interest.

This analysis avoids the practical realities of construction projects. But it also clearly points out the pitfalls of relying upon a “pass-through” as a means of obtaining relief from an owner. By statute, such pass-through claims are now authorized (Virginia Code Sec. 33.1-192.1 was expanded to expressly reference subcontractor claims), but there is no similar provision for other types of construction projects.

Where this ultimately leads remains to be seen.

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