Introduction
On June 26, 2026 the Massachusetts Supreme Judicial Court issued its decision in J.C. Cannistraro, LLC v. Columbia Construction Co.—a holding that sits at the intersection of Prompt Pay Act compliance and the Massachusetts Arbitration Act.[1]
Most already know that the Massachusetts Prompt Pay Act (PPA) imposes strict timing and certification requirements for rejecting payment applications and proposed change orders on projects valued at $3 million or more. Most notably, the PPA requires the paying party to give the payee written notice of its approval or rejection of progress applications and proposed changes within 15 days of receipt, which notice must include a “factual and contractual basis for the rejection” and must be “certified as made in good faith.”[2] In the absence of a timely certified notice, payment is “deemed to be approved” unless the payor properly rejects payment before it comes due.[3]
What many still struggle with, however, is what happens when an owner or contractor fails to strictly comply with these requirements. If an invoice becomes deemed approved, does the money irrevocably belong to the payee, or can the payor claw the money back at a later time? What must the payor do to reserve its rights to the money? And what power does an arbitrator have to resolve these issues? Cannistraro elucidates these questions, especially when read together with the decisions in Tocci Building Corp. v. IRIV Partners, LLC (“Tocci”)[4] and Business Interiors Floor Covering Business Trust v. Graycor Construction Co. (“Graycor”).[5]
The Facts in Cannistraro
Cannistraro arose from the construction of a manufacturing facility in Walpole, which was subject to the PPA. J.C. Cannistraro, LLC (“Cannistraro”) was the HVAC and plumbing subcontractor to Columbia Construction Company (“Columbia”), the general contractor. The subcontract provided that, at the sole election of Columbia, all disputes arising between Columbia and Cannistraro were subject to binding arbitration under the AAA’s Construction Industry Rules.
The dispute in Cannistraro concerned Columbia’s decision to withhold progress payment and reject change orders that included over $950,000 in labor inefficiency damages. Columbia timely notified Cannistraro of its grounds for withholding invoices and rejecting proposed changes, but omitted the required written certification attesting that withholding was done in good faith. Columbia withheld payment applications beyond the date they came due, though it did send a belated certification of good faith withholding three months later. The parties proceeded to arbitration, where Cannistraro argued that payment of all amounts not timely subject to the requisite PPA certification were deemed approved, with interest.
How Tocci Shaped the Arbitration Ruling
While Columbia and Cannistraro were in the early stages of arbitration, the Massachusetts Appeals Court was set to issue its decision in Tocci—the first major appellate case to interpret the PPA’s certification requirements. There, the Appeals Court held that the good-faith certification requirement is not a technicality or formality, but forms an essential component of the statutory scheme, writing: “The Legislature required this certification if a rejection is to be effective, and we are not free to ignore that requirement by deeming it merely ministerial – to do so would be to read the requirement out of the statute.”[6]
Deferring his decision until Tocci became published law, the arbitrator found the facts to be indistinguishable. In sum, Tocci enshrined the PPA certification requirement; and because Columbia failed to timely rectify its omission before payment became due, over $950,000 (plus interest) was deemed to be approved, due, and owing immediately to Cannistraro. In compliance with the arbitrator’s order, Columbia delivered payment while reserving all claims and counterclaims for arbitration.
The Importance of Procedural Arbitration Rules
By agreeing to arbitration under the AAA Construction Industry Rules, Cannistraro bound itself to the procedural nuances of those rules. Under the Massachusetts Arbitration Act,an arbitrator’s interpretation and application of procedural rules is committed to his discretion and is not reviewable by the courts in Massachusetts. As explained in Stancioff v. Hertz, the AAA Rules “were for the arbitrator to interpret and apply. His interpretation, like an arbitrator’s ruling of law, is not reviewable by us.”[7] This principle would prove material as the parties proceeded to arbitrate what rights Columbia had to recover money paid pursuant to a deemed admission.
The Recoupment Question
After making payment as ordered by the arbitrator, Columbia invoked AAA Rule R-6 and sought leave to assert a counterclaim for recoupment of the money paid to Cannistraro. The arbitrator allowed that amendment. After a hearing, the arbitrator found a large portion of Cannistraro’s invoices and proposed change orders lacked merit. The arbitrator awarded Cannistraro $375,000—far less than what had been “deemed approved” by his previous order. For its counterclaim, Columbia was awarded the balance of the payment made—$579,855.05, with interest dating back to the date Columbia made the payment. Although Cannistraro never received the statutory certification mandated by the PPA, the arbitrator noted that Cannistraro had received timely notice of the grounds for rejection of the invoices in question.
Recoupment is a common law remedy and, therefore, implicated the decision in Graycor. There, the question was: If a contractor fails to reject an invoice in conformity with the statute, is it barred from raising common-law defenses to the subcontractor’s payment claim? The SJC said no, holding that failure to comply with the PPA does not automatically or irrevocably waive defenses. The Graycor court wrote as follows:
We conclude that common-law defenses are not precluded by the act, even if a contractor fails to approve or reject an application for payment as required. However, a contractor that does not approve or reject an application for payment in compliance with the time periods and other requirements of the act must pay the amount due prior to, or contemporaneous with, the invocation of any common-law defenses in any subsequent proceeding regarding enforcement of the invoices. In the instant case, no such payment was made.[8]
In other words, “payment of overdue approved invoices must be made prior to, or contemporaneous with, raising common-law defenses, or the defenses cannot be raised.”[9] Because the contractor in Graycor never made any payment to the subcontractor before raising its affirmative defenses, the SJC affirmed summary judgment in favor of the subcontractor.
Cannistraro’s Appeal to the Superior Court
Cannistraro appealed the arbitrator’s decision to the Massachusetts Superior Court for Norfolk County, asking to vacate the portion of the award granting recoupment to Columbia. Specifically, Cannistraro argued that the arbitrator had exceeded his authority under the Massachusetts Arbitration Act by permitting Columbia to assert a recoupment claim.
The trial judge agreed and, on December 6, 2024, vacated the recoupment award.[10] Relying on Graycor, the Superior Court judge in Cannistraro concluded that Columbia had forfeited all common law defenses because it failed to raise those defenses prior to making payments as ordered by the arbitrator. The Court found that “by allowing recoupment, the arbitrator, ‘awarded relief prohibited by law” and “exceeded his powers.”[11]
Why the Supreme Judicial Court Reversed
One key feature of Cannistraro is the limited nature of the question on appeal. The SJC was not asked to decide from scratch whether recoupment was the correct merits result under the PPA. Rather, it was deciding a much narrower question: whether the arbitrator had exceeded his authority in awarding recoupment to Columbia. Under the Massachusetts Uniform Arbitration Act,[12] courts must confirm arbitration awards unless one of the limited statutory grounds for vacating applies. One such ground is where the arbitrator exceeded his authority. But that does not mean every legal error by an arbitrator compels vacating.
The SJC emphasized a crucial distinction that awarding relief prohibited by law is different from merely making an error of law. A court may vacate an award in the first circumstance, but not in the second.
That distinction controlled the outcome. The SJC noted that the PPA does not expressly state whether a recoupment counterclaim may or may not be pursued after an invoice becomes deemed approved because of a failure to timely provide the good-faith certification. The court also noted that in Graycor it had already recognized that the PPA does not expressly preempt all common-law defenses. Because the statute did not expressly prohibit the recoupment relief awarded by the arbitrator, the award was not relief “prohibited by law.” Even if the arbitrator’s application of Tocci or Graycor were arguably wrong, that alone would not justify vacating the award.
The SJC also rejected Cannistraro’s public policy argument. Cannistraro contended that allowing recoupment after noncompliance with the PPA undermined the statute’s fundamental purpose. The SJC disagreed, emphasizing that Columbia had paid the disputed invoices before pursuing recoupment in arbitration, which aligned with the central sequencing principle later articulated in Graycor. The court also noted that although Columbia failed to timely provide the formal good-faith certification, it had timely communicated the reasons for rejecting the invoices. While that did not cure the statutory defect, it helped explain why the arbitrator’s later recoupment ruling did not rise to the level of a public policy violation requiring judicial intervention.
Taking The Three Cases Together
Read together, Tocci, Graycor, and Cannistraro now provide a fuller picture of Massachusetts Prompt Pay Act and what it means to comply with that statute.
Tocci established the baseline rule. A rejection must be timely, in writing, explain the factual and contractual basis for the rejection, and be certified as made in good faith. Missing the certification is not a harmless technical defect. It makes the rejection ineffective, and the invoice is deemed approved.
Graycor clarified that a contractor’s or owner’s common law defense, including recoupment and first material breach, do not automatically disappear just because the Prompt Pay Act was violated. But the statute changes the order of operations. Once an invoice is deemed approved, payment must come first. Only then may the payor pursue contract or common-law defenses.
Cannistraro completes the picture in the arbitration setting. It confirms that failure to timely certify a rejection has real consequences: the invoice becomes deemed approved and must be paid. But it also confirms that payment does not necessarily end the dispute. At least where arbitration is involved and the arbitrator is acting within the scope of broad remedial authority, a later recoupment claim may still survive judicial review.
Practical Lessons for Developers, General Contractors, and Subcontractors
For owners, developers, and general contractors, the practical lessons are straightforward.
First, tighten invoice rejection procedures. A rejection that omits the good-faith certification may be no rejection at all under Massachusetts law. Standardized rejection templates should include every statutory element: written rejection, factual basis, contractual basis, and explicit good-faith certification. Architects and owner representatives responsible for reviewing payment applications and proposed change orders should be educated and instructed clearly on this term.
Second, train project teams, not just in-house or outside counsel. Many PPA problems begin at the project-management level. The person sending the rejection letter or email may not appreciate that partial compliance is insufficient. A timely explanation without a certification may still fail under the statute.
Third, understand that Prompt Pay Act noncompliance usually creates a sequencing problem, not always a total-loss problem. Graycor and Cannistraro show that even where a rejection is defective, later defenses or recoupment may remain available. But if payment has to be made first, the failure to comply can still create major leverage and cash-flow consequences.
Fourth, take arbitration clauses seriously. Cannistraro is also a reminder that once a dispute is sent to arbitration under broad AAA rules, the arbitrator’s procedural and remedial decisions may be difficult to undo. Courts reviewing an award will not ask whether the arbitrator got every legal issue exactly right. They will ask whether the arbitrator awarded relief that the law expressly forbids. That is a high bar for vacating an arbitrator’s decision.
Finally, if a PPA misstep occurs, evaluate “pay now, recover later” strategies early. Once an invoice is deemed approved, immediate payment may be necessary to preserve downstream defenses or recoupment arguments. The worst outcome is often not the statutory violation itself, but the failure to respond strategically once the violation has occurred.
Cannistraro is not a free pass for sloppy payment practices. The safest course remains strict compliance with the PPA’s rejection requirements. If a party intends to reject an invoice, it should do so on time, in writing, with the required factual and contractual explanations, and with an express certification that the rejection is made in good faith.
But Cannistraro also provides useful reassurance. A defective rejection does not necessarily mean the payor has lost the underlying dispute forever. In many cases, the consequence is procedural rather than substantive: the invoice must be paid first, and the merits fight comes later.
For Massachusetts contractors and developers, the practical rule emerging from Tocci, Graycor, and Cannistraro is simple and worth remembering: reject properly, or pay first and fight later.
[1] 497 Mass. 732 (2026), 2026 WL 1837295.
[2] G. L. c. 149, § 29E.
[3] Id. § 29E(c).
[4] 101 Mass. App. Ct. 133 (2022).
[5] 494 Mass. 216 (2024).
[6] 101 Mass App. Ct. 133, 139 (Jun. 7, 2022).
[7] 10 Mass. App. Ct. 843, 844 (1980) (citing Trustees of Boston & Maine Corp. v. MBTA, 363 Mass. 386, 390 (1973)).
[8] 494 Mass. at 225.
[9] Id. at 226.
[10] Norfolk County Superior Court Case No. 2082-00738, Dkt. 28.
[11] Id. at 6.
[12] G.L. c. 251, § 12(a),
