California "IOU" Class Action Litigation

California “IOU” Class Action Litigation

Wexler Wallace, with co-counsel, recently filed a class action lawsuit against the California State Controller and the California State Treasurer based on the State’s failure to provide timely payments to California’s small businesses for work performed on government contracts. The suit seeks to recover statutory late payment penalties owed to small businesses and for each day that the State failed to meet payment deadlines established under California law.

California’s Prompt Payment Act (CPPA) requires state agencies to pay small businesses within forty-five (45) days after receiving an invoice for work or services performed. However, starting in July 2009, rather than paying small businesses and within this statutory time period, the State provided them with IOUs which could not be redeemed at banks or other financial institutions. These IOUs were promises to pay and did not constitute payments owed by the State for its contractual obligations to small business. Under the CPPA, these businesses are entitled to late payment penalties based on .25% of the amount due for every calendar day that they were not timely paid until the invoice was fully paid. Between July 2, 2009 and September 4, 2009, the State issued 450,000 IOUs worth $2.6 billion.

Click here to view our complaint. If you would like more information about this action, please complete our online form or call our Sacramento Office at 916-492-1100.