California has a law that requires a general contractor in a construction project to pay subcontractors their share of any payments received by the owner.  These prompt pay statutes impose severe penalties.  However, the law also states that if there  is a good faith dispute a percentage of the disputed amount can be withheld to avoid these penalties.

It seems that if the dispute is not in good faith and payments are wrongfully being withheld, the penalties will still apply.