Yarrow, LLC v Laszlo Bodak Engr., P.C.

[*1] Yarrow, LLC v Laszlo Bodak Engr., P.C. 2009 NY Slip Op 50836(U) [23 Misc 3d 1119(A)] Decided on April 20, 2009 Supreme Court, New York County Kapnick, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through May 6, 2009; it will not be published in the printed Official Reports.

Decided on April 20, 2009
Supreme Court, New York County

Yarrow, LLC, Plaintiff,

against

Laszlo Bodak Engineer, P.C., Defendant.



602017/08



Plaintiff was represented by Brett B. Theis, Esq., Rosenberg & Estis, PC, 733 Third Avenue, New York, New York 10017,

Tel: 212-867-6000

Defendant was represented by Martin A. Schwartzberg, Esq., L'Abbate Balkan Colavito & Contini, 1001 Franklin Avenue, Garden City, New York 11530

Tel. 516-294-8844

Barbara R. Kapnick, J.

Plaintiff Yarrow, LLC moved by Order to Show Cause signed by the Hon. Eileen Bransten on July 9, 2008 for an Order pursuant to CPLR § 3034, directing settlement of the terms of the Statement and the determination of the controversy pursuant to the New York Simplified Procedure for Court Determination of Disputes provided for by CPLR §§ 3301-3037.

This action involves the alleged professional malpractice, breach of contract, negligence, misrepresentations and other wrongdoing by defendant Laszlo Bodak Engineer, P.C., a professional engineering firm ("LBE"), in connection with the design and construction of a geothermal HVAC system for Yarrow's 147,000 square foot mixed commercial and residential development project located at South Street Seaport in lower Manhattan (the "Front Street Development").

Pursuant to Paragraph 6.0 of the written Agreement entered into by the parties on May 28, 2003: [a]ny controversy between parties to this Agreement concerning this Agreement, or any portion thereof, or arising out of the work performed or to be performed pursuant thereto, or otherwise in connection with the construction contemplated, shall be submitted for determination to the Supreme Court of the State of New York, pursuant [*2]to the New York Simplified Procedure for Court Determination of Disputes, Section 3031 et. seq. CPLR of the State of New York. The execution of this Agreement by a party shall constitute consent of said party to the jurisdiction of the Supreme Court of the State of New York, County of New York. This Agreement shall be construed under New York law and the rights and obligations of the parties shall be governed thereby.

After a dispute arose between the parties, plaintiff sent its Statement of Claims and Defenses Under the New York Simplified Procedure for Court Determination of Disputes to defendant's counsel, as required by CPLR § 3031, with a letter dated August 13, 2007.

In response, defendant sent to plaintiff a Counter Statement of Claims and Defenses Under the New York Simplified Procedures For Court Determinations of Disputes dated September 14, 2007.

Plaintiff contends that the rules governing Simplified Procedures do not provide for Counter Statements. Moreover, plaintiff argues that the Counter Statement purports to implead Water Energy Distributors, Inc. ("WED") as a third-party defendant even though WED is not a party to the Agreement, is not in privity with Yarrow and has not consented to the Simplified Procedure. Thus, plaintiff urges this Court to reject the Counter Statement and to settle the terms of the Statement.

Defendant opposes the motion and submits that Yarrow's Statement should be rejected and instead defendant's Counter Statement be adopted in its entirety.

Defendant contends that CPLR § 3033[FN1] clearly anticipated the situation presented herein [*3]where the parties cannot agree upon a statement of claims and defense. Defendant insists that the Counter Statement was necessary due to the inaccuracies contained in the Yarrow Statement as well as glaring omissions therefrom.

It appears that on July 21, 2008, the return date of the Order to Show Cause, Justice Herman Cahn directed the parties to submit a Joint Statement which was submitted by Joint Submission dated August 13, 2008.

Yarrow is seeking at least $4,000,000 for monitoring, maintenance, redesign and repair costs related to the malfunctioning of the system, and demands recoupment of the $578,724 paid to LBE for its work. LBE counters that the problems with the system were a result of the negligence of Yarrow and the recommendations of WED, and seeks fees of $168,306 that it claims it is owed under the base contract and for later troubleshooting services.

In the Joint Submission, Yarrow asserts that LBE held itself out as an expert in the field of geothermal HVAC system design and construction and represented that the geological conditions of the Front Street Development site could support a geothermal HVAC system. Yarrow claims that LBE improperly recommended an "open loop" system, in which water circulates throughout the entire system, including the equipment within the interior of the building. Yarrow contends that LBE knew or should have known that the ground water in the area was chemically corrosive, with a salinity level equal to 70-75% of seawater, and that it contained sand, minerals, bacteria, and other debris and sediment which would cause excessive filter clogging and blockage, compressor failures, corrosion and early deterioration of pipes, valves and fittings. Yarrow alleges that the HVAC system has experienced multiple equipment and system component failures, including material failures, heat transfer failures, leaks, pump failures, variable speed drive failures and corrosion, as well as deterioration and failure of piping, control valves, well casing and various metallic system components.

Yarrow further asserts that even if an "open loop" system were feasible, LBE should have included appropriate filtration or particle removing devices such as sieves or centrifugal solids separators to keep debris out of the system. Yarrow also alleges that due to a design flaw, the manifolds failed repeatedly, resulting in the flooding of some wells, which caused damage to the common and retail areas of the building and to the electrical equipment rooms. The manifold failures also restricted the flow of water to other wells, causing pump motors to overheat, burn out and clog. [*4]

Ultimately, Yarrow alleges that it retained another engineering firm which recommended a hybrid "closed loop" standing column well system. However, although the new system protects the interior components, the exterior components are still exposed to corrosive water and debris and will eventually fail and require replacement.

In addition to seeking $168,306 in professional fees, LBE contends that the system flaws are largely the fault of non-party WED, a geothermal consultant that it was required to retain under the Agreement at the insistence of Yarrow. LBE also blames Yarrow for failing to retain contractors with experience in implementing a geothermal system in an urban environment. Additionally, LBE asserts that Yarrow failed to properly maintain the system; that the defects in the system were construction rather than design defects; that Yarrow modified and replaced the system before conducting a thorough analysis to determine the cause of the system malfunction; that Yarrow replaced the system without preserving necessary evidence; and that Yarrow made design and construction changes without consulting LBE or WED. Finally, LBE alleges that it would be entitled to an offset for any damages Yarrow is awarded in an arbitration proceeding that Yarrow commenced against F.J. Sciame Construction Co., Inc. ("Sciame") relating to the HVAC system.

Discussion

The "New York simplified procedure for court determination of disputes authorized by sections 3031 and 3033 ... is designed to promote the speedy hearing of such actions and to provide for such actions a procedure that is as simple and as informal as the circumstances will permit." CPLR § 3035(a). To this end, "[t]he simplified procedure for court determination of disputes contemplates a trial without a jury and with the rules of evidence relaxed" Mohegan Colony Assn. v Picone, 61 AD2d 809, 810 (2d Dept 1978). Once the parties have filed a statement of their claims, any party may file a note of issue setting a trial date without the necessity of a certificate of readiness (CPLR § 3036[6]). Furthermore, pursuant to CPLR § 3036[5]:

[a]t a pre-trial conference, or at any other time on motion of any party or on its own motion, on notice to the parties, and upon such terms and conditions as in its discretion may seem proper, the court may. . . (b) direct pre-trial disclosure of evidence and discovery and inspection of books, records and documents; (c) permit the taking of depositions for use at the hearing; (d) limit or restrict the number of experts to be heard as witnesses; (e) clarify and define the issues to be tried . . . (g) grant summary judgment in favor of any party as in rule 3212 provided. [*5]

Finally, CPLR § 3036(2) provides that the court may direct that evidence be obtained by an impartial expert, at the parties' expense, if the court concludes that such evidence "would be of material aid to the just determination of the action."

The court has reviewed the Joint Submission and determined that there are many issues of fact which cannot be resolved as a matter of law. The parties have stipulated to very little other than the identity of the parties and the existence of the Agreement. Consequently, the fact-laden questions regarding liability for the problems with the HVAC system are still sharply in dispute. Because the submissions are insufficient to establish which party is at fault, a trial is required Mohegan Colony Assn. v Picone, supra at 810.

By way of clarification, however, the Court will briefly address one issue relating to the status of WED in this proceeding. As plaintiff argued, WED apparently did not consent to this simplified procedure and cannot be made a party to this proceeding (see, Time Writers v Coleman, 67 Misc 2d 258 [Sup Ct Onondaga Co 1971] which held that "CPLR § 3031 is a consensual procedure. It requires the consent of all parties and must be signed by them or their respective attorneys. It is in effect, a submission of a controversy to the court with the consent of the parties. There must be an express provision agreeing to comply with the provisions of the simplified procedure". If defendant intends to seek indemnification against WED, it will have to commence a separate action for that relief. Nevertheless, defendant may by way of defense in this proceeding pursue its apparent theory that the HVAC problems were caused by WED acting in concert with plaintiff.

Accordingly, plaintiff is directed to file a note of issue on or before May 8, 2009 and appear for a pre-trial conference in IA Part 39, 60 Centre Street, Room 208 on May 27, 2009 at 10:00 a.m. The parties are also directed to exchange discovery demands and objections in advance of the conference to facilitate the issuance of a discovery scheduling order. Finally, the parties are directed to stipulate to the appointment of an impartial expert witness, or, if they cannot agree upon the witness, submit a list of names (with qualifications) from which the court will select the expert.

This constitutes the decision and order of this Court.

Dated: April 20, 2009 [*6]

BARBARA R. KAPNICK Footnotes

Footnote 1:CPLR § 3033(2) specifically provides that:

[i]f the parties to a dispute arising under a contract to submit a controversy to the court under section 3031 are unable to agree on a statement of claims and defenses and relief sought pursuant to that section, the court on motion shall settle the terms of the statement. In deciding the motion the court shall consider and determine any questions as to the existence of the contract or its validity or the failure of any party to perform it. If a substantial issue of fact be raised as to the making of the contract or submission or the failure to comply therewith, the court or judge shall proceed to trial of such issue without a jury, unless either party should demand a jury trial.