Levco, a subcontractor, sued the building owner (Whole Foods) directly for fraud after the general contractor (CCI) failed to pay. The court ruled that Levco could not recover from the owner, even though fraud was proven, because the subcontract's pay-if-paid clause and flow-down provisions limited Levco's claims to its direct contractor only. This means subcontractors cannot bypass their general contractor to sue the owner directly, regardless of fraud.
Pay-if-paid clauses block subcontractor claims against owners—you can only sue your direct contractor, not the owner, even if the owner committed fraud
Flow-down provisions in subcontracts tie your rights to the general contractor's contract terms; review these carefully before signing
Fraud findings alone do not override contractual payment limitations—you must pursue claims through your direct contractor first