Matter of Pile Found. Constr. Co. Inc. v New York City Dept. of Envtl. Protection
Annotate this CaseDecided on February 2, 2010
Supreme Court, Kings County
In the Matter of the Application of Pile Foundation Construction Company, Inc., Petitioner,
against
The New York City Department of Environmental Protection, Respondent.
13661/08
Petitioner's counsel
Mark A. Rosen, Esq. of the firm of
McElroy, Deutsche, Mulvaney & Carpenter, LLP
88 Pine Street, 24th Floor
New York, New York 10005
212 483 9490
Respondent's counsel
Elaine Windholz, Esq. (appearing counsel)
Michael A. Cardozo
Corporation Counsel of the City of New York
100 Church Street, Room 3-105
New York, New York 10007
212 788 1187
Francois A. Rivera, J.
By notice of petition and petition filed on May 6, 2008, Pile Foundation Construction Company (PFCC) brings a proceeding pursuant to Article 78 of the CPLR to vacate the determination of the New York City Department of Environmental Protection's (DEP) that PFCC was in default of its contract with DEP. By verified answer dated August 4, 2009, DEP opposes the petition.
[*2]BACKGROUND
On
April 10, 2002, DEP awarded petitioner PFCC a contract (CSO-4B or "the "contract") for the
Paerdegat Basin Water Quality Facility Foundations and Substructures. Over the course of the
next several years PFCC went about performing work pursuant to the contract. The contract end
date was originally set for December 25, 2005. On September 29, 2006, DEP gave PFCC an
opportunity to be heard and to demonstrate why it should not be held in default. On April 12,
2007, DEP gave PFCC another opportunity to be heard. On December 11, 2007, DEP issued a
letter to PFCC by facsimile transmission advising PFCC that it was in default under Article 48 of
the contract.
MOTION PAPERS
On May 6, 2008, PFCC filed a notice of petition and petition with three annexed exhibits labeled A through C. Exhibit A is a letter dated October 16, 2007 sent by Michael Borsykowsky, DEP Director of Facilities Construction, to Anthony Rivara, President of PFCC, informing him of DEP's intention to proceed with default in accordance with Article 48 of the contract without affording PFCC any additional opportunity to be heard. Exhibit B is Mr. Rivara's response in which he demands an opportunity to be heard before DEP takes action to declare a default. Exhibit C is a letter from Steven Lawitts, First Deputy Commissioner of the DEP, to Mr. Rivara announcing DEP's determination of PFCC's default.
DEP opposes the petition way of a verified answer with forty four annexed exhibits labeled A through RR. Exhibit A is the notice of petition and petition. Exhibit B is a notice (dated August 31, 2006) sent from DEP to PFCC to appear for an opportunity to be heard in September of 2006. Exhibit C is a letter, dated October 3, 2006, from DEP to PFCC directing that a meeting take place between representatives of the parties to the contract. Exhibit D is an internal memo dated October 17, 2006 by Robert Pedenzin, Acting Resident Engineer at the Paerdegat Basin Facility stating that he received PFCC's revised contract Critical Path Management schedule (CPM) as well as Mr. Pedenzin's opinion that the schedule is "not aggressive" and that PFCC is not adequately manning the project. Exhibit E is a notice dated March 30, 2007 from DEP to PFCC to appear for what it terms as a "reconvening of the Opportunity to be Heard hearing originally held on September 29, 2006." Exhibit F is the same as Exhibit A annexed to the petition. Exhibit G is the same as Exhibit C annexed to the petition. Exhibit H includes portions of Article 48 of the contract which contains the default provisions. Exhibit I is a letter dated February 14, 2006 from DEP to PFCC directing that a revised CPM schedule be furnished to DEP. Exhibit J is a letter sent in April of 2006 from DEP to PFCC which claims that PFCC failed to furnish the revised CPM demanded by DEP in the February 14 letter and expresses concern over "the recent lack of progress that you have made with your limited manpower, which in our opinion is insufficient to complete this contract". Exhibit K is a memo dated March 8, 2006, from Mr. Pedenzin to Mr. Rivara complaining of lack of progress on the project, insufficient manpower, and issuing an ultimatum of [*3]March 15, 2006, by which"you will leave us no choice but to have the work done by others... and force a credit change order to your contract for the cost." Exhibit L is described as being CPM Schedule Update No. 42. Exhibit M is an addendum to the contract signed by both parties in April of 2002. Exhibit's N through BB and DD through JJ are memos from the DEP to PFCC between May of 2005 and February of 2007 in response to a series of CPM Updates all of which request that certain information regarding the anticipated progress of the work be added to future CPM updates and indicate DEP's determination that submitted CPM schedules are inadequate. Exhibit CC is a letter from DEP to PFCC expressing concern over progress toward completion of the contract. Exhibit KK is a copy of a decision of the Office of the Comptroller of the City of New York (the "Comptroller") dated November 7, 2008. Exhibit LL is a decision by the Contract Dispute Resolution Board dated April 15, 2009. Exhibit MM is a memo dated June 12, 2007 to PFCC from DEP acknowledging a "Notice of Condition Causing Delay" made prior by PFCC to DEP. Exhbit NN is Article 27 of the contract. Exhibit OO is Section 1A of the DEP's "Information for Bidders." Exhibit PP is Section 4-09 of the Procurement Policy Board ("PPB") Rules. Exhibit QQ is Article 49 of the Contract. Exhibit RR is a series of letters from DEP to PFCC including the notice of default.
PFCC replied to the verified answer by way of a reply memorandum of law as well as a reply affidavit by Mr. Rivara, President of PFCC.
DEP countered PFCC's reply papers with a sur-reply affidavit by Robert Pendenzin, Acting Resident Engineer for a private engineering firm hired as "construction manager" on the project which is the subject of this litigation.
DEP's reply affirmation in support of the motion to dismiss the petition as well as DEP's
supplemental affirmation in support of motion to dismiss the petition were not considered in this
opinion as they pertain to the motion to dismiss based on statute of limitations which was denied
for having failed to demonstrate the date upon which this Article 78 proceeding accrued.
LAW AND APPLICATION
Article 78 of the CPLR provides an expeditious and essentially uniform procedure for judicial review of matters that were cognizable at common law under the prerogative writs of certiorari, mandamus and prohibition. For the most part, Article 78 proceedings are used to challenge action (or inaction) by agencies and officers of state and local govermnent (Vincent C. Alexander, Practice Commentaries, McKinney's CPLR 7801 at 7801:1). Mandamus to review is the modern name for judicial review of "administrative" determinations involving the exercise of discretion. (See eg. Marburg v. Cole, 286 NY 202 [1941], (Vincent C. Alexander, Practice Commentaries, McKinney's CPLR C7801:3).
The Court of Appeals has summarized the contours of mandamus to review as follows: "In a proceeding in the nature of mandamus to review,... a court examines an administrative action involving the exercise of discretion. Mandamus to review resembles certiorari, except that in a certiorari proceeding, a quasi-judicial hearing normally is required and the reviewing court has the benefit of a full record. The standard of review in a certiorari proceeding is substantial [*4]evidence'... In a mandamus to review proceeding, however, no quasi-judicial hearing is required; the petitioner need only be given an opportunity to be heard' and to submit whatever evidence he or she chooses and the agency may consider whatever evidence is at hand, whether obtained through a hearing or otherwise. The standard of review in such a proceeding is whether the agency determination was arbitrary and capricious or affected by an error or law." Scherbyn v. Wayne-Finger Lakes Bd. Of Co-op. Educational, 77 NY2d 753 [1991], (Vincent C. Alexander, Practice Commentaries, McKinney's CPLR 7801 at C7801:3).
The Court of Appeals explained the nature of the arbitrary and capricious standard, (See, Matter of Pell v. Board of Ed. Of Union Free School Dist. No. 1, 34 NY2d 222 [1974]), "Arbitrary action is without sound basis in reason and is generally taken without regard to the facts."( Id.) At 231. The question, said the Court, is whether the determination has a "rational basis." (Id.) In a proceeding in the nature of mandamus to review, the petitioner "has an initial burden of presenting factual allegations of an evidentiary nature or other competent evidence" (See, Poster v. Strough, 299 AD2d 127 [2002] citing Matter of Rodriguez v. Goord, 260 AD2d 736.)
DEP previously moved to dismiss the petition as untimely. By order of this court dated March 31, 20009, DEP's motion to dismiss the petition as untimely was denied for failure to demonstrate the accrual date of PFCC's petition. The court will, therefore, address the merits of the petition.
On September 29, 2006 and on April 12, 2007, DEP gave PFCC an opportunity to be heard and to demonstrate why it should not be held in default. The first hearing was held approximately fourteen months and the second and last hearing was held approximately eight months prior to DEP's finding that PFCC was in default. The parties dispute whether these hearings were sufficient to satisfy the mandate of Article 48.2 of the contract. Article 48.2 of the contract required that PFCC have an opportunity to be heard prior to being found in default.
DEP's set forth the reasons for its determination of default in is its letter to PFCC dated December 6, 2007 (declaration of default letter). In sum and substance, DEP referenced the following history of PFCC's failure to perform and complete the contract in a timely fashion and to comply with the progress schedule set after two opportunities to be heard. The first opportunity to be heard was held on September 29, 2006. At that time, PFCC was allowed to show how it intended to meet a critical path management (CPM) schedule. At that time, PFCC agreed to add manpower to complete the contract in a timely manner. Thereafter, PFCC was given another opportunity to be heard on April 12, 2007. At that time, PFCC represented that September 12, 2007 was a realistic completion date. To meet this objective some work was deleted from PFCC's contract and give to another contractor. PFCC agreed to pay the other contractor's overhead and profit and to complete the balance of the contract by January 11, 2008 according to its CPM schedule.
Satisfactory progress was not made and on October 16, 2007, DEP sent another letter about PFCC's lack of progress and failure to augment its manpower. After some additional discussion, DEP chose to declare PFCC in default.
DEP's declaration of default letter stated that the grounds for default were spelled out in two prior letter which were annexed. The letters were dated August 31, 2006 and March 30, 2007.The two predicate notices outline identical grounds for default. Each notice informed [*5]PFCC that the bases for each opportunity to be heard were: "[1] Pile Foundation has, without just cause, reduced its working force to a number which, if maintained, would be insufficient, in the opinion of the Commissioner, to complete the Work in accordance with the Progress Schedule. [2] The Commissioner is of the opinion that Pile Foundation is or has been unnecessarily or unreasonably or willfully delaying the performance and completion of the Work. [3] The Commissioner is of the opinion that Pile Foundation is or has been willfully or in bad faith violating any of the provisions of this Contract. [4] The Commissioner is of the opinion that the Work cannot be completed within the time herein provided therefore or within the time to which such completion may have been extended, and that the impossibility of timely completion is, in the Commissioner's opinion, attributable to conditions within the Contractor's control."
DEP and PFCC conceded that the construction work to have been performed was governed by the contract and that Chapter X, Article 48 of the contract contained provisions pertaining to default. DEP cite A.S. Rampell, Inc. v. Hyster Co., 3 NY3d 369, 382 [1957] for the proposition that courts are obliged to enforce as written a termination clause to which parties to a contract have agreed. In the instant case Article 48 of Chapter X is just such a termination clause which this Court is obliged to enforce as written.
PFCC contends that the September 2006 and April 2007 opportunities to be heard were insufficient to satisfy the mandate of Article 48 of the contract and that another opportunity for PFCC to be heard had to occur before the December 2007 declaration of default. DEP contends otherwise.
In addition to an enumeration of instances in which the Commissioner of the DEP shall have the right to declare the Contractor in default, Article 48 includes the following language: "48.2Before the Commissioner shall exercise his/her right to declare the Contractor in default, the Commissioner shall give the Contractor an opportunity to be heard, upon not less than two (2) days notice."
The plain meaning of this provision is merely that the PFCC was entitled to a hearing at which it may have attempted to persuade DEP that its performance pursuant to the contract had been satisfactory. The plain meaning of this provision does not encompass a requirement that a default determination be made within a given time period following the hearing and PFCC has presented this court with no reason for reading such a requirement into it.
So long as DEP's stated grounds for holding a default proceeding prior to its issuance of the default declaration were the same as those grounds it stated to be bases for issuing the default declaration, that prior default proceeding suffices to satisfy the mandate of Article 48.
DEP stated in its notification to PFCC of its default: "The grounds for default are those specified in Agency Chief Contracting Officer Carl E. Fenves' letter to you, dated March 30, 2007, and Ms. Fenves' previous letter of August 31, 2006." The two letters referred to are the predicate notices for the two opportunities to be heard held on April 12, 2007 and September 29, 2006. Thus, the stated grounds for holding the two default proceedings prior to the default declaration are identical to the grounds stated for being bases for the default declaration. These two prior default proceedings consequently suffice to satisfy the mandate of Article 48.
In the present case, DEP surpassed the requirement of Article 48 by giving PFCC not one but two opportunities to be heard on those grounds for which it found PFCC in default.
In order to meet its initial burden, PFCC would be required to present this court with [*6]factual allegations of an evidentiary nature or other competent evidence that DEP's determination that PFCC was in default lacked a rational basis. Inasmuch, as DEP delineated four bases upon which its finding of default rested, PFCC would have the initial burden of attacking the rationality of all four of DEP's stated bases for the default determination.
PFCC failed to address all of DEP's declared bases for the default determination.
All four of DEP's bases for the default stem from specific provisions in the contract
and PFCC only cited one such provision, Article 48.1.4, as a subject for attack. Article 48.1.4
states the following ground for finding PFCC in default:
"[Petitioner] shall, without just cause, reduce its working force to a number which,
if maintained, would be insufficient, in the opinion of the Commissioner, to complete the Work
in accordance with the Progress Schedule."
PFCC has presented this court with factual allegations of an evidentiary nature attacking the rationality of the default determination based this provision. According to PFCC, of 20 items of work identified by DEP in its answering papers as remaining the obligation of PFCC to complete at the time of the default declaration, "virtually all" of that work had been deleted from the contract by DEP pursuant to "duly issued change orders" a month prior to the declaration of default. PFCC contends that 15 of those 20 work items had been deleted from the contract by DEP pursuant to change orders. These allegations, construed in a light most favorable to PFCC, might be construed to be well tailored enough to assault the rationality of two of the three other stated grounds for default which are based on Articles 48.1.9[FN1] and 48.1.11[FN2] of the contract.
Even if this Court opted to so construe these allegations, there would remain a stated basis for default which PFCC completely failed to mention, address, or counter. This uncontested basis for the default stems from provisions of a duly executed addendum to the contract (attached to DEP's answer as Exhibit M). The addendum states in pertinent part: "Pile shall provide a detailed CPM [Critical Path Management] schedule for approval to the City... Pile... agrees that it will strictly adhere to the approved CPM schedule and that it shall not deviate from [it] by more than five percent during the term of the Contract, provided that any such deviation is not attributable to an impediment beyond Pile's control... The City, in the event that Pile shall fail to comply with any of the provisions or requirements contained in [the addendum], may immediately terminate the contract for cause in its sole discretion...."
DEP alleges that PFCC violated these provisions by repeatedly failing to provide an adequate CPM update schedule. In essence, DEP alleges that PFCC never committed itself to a time table for completing the project.
In support of this allegation DEP indicated in its answer that by way of 25 memoranda and notices issued between May of 2005 and February of 2007 it requested and directed PFCC to furnish their revised CPM schedule reflecting the current status of the project, correct logic and realistic durations for the remaining work to be performed, and to indicate accurate time allotted for each work activity. All of these notices and memoranda are annexed to Repondent's answer as Exhibits I, J, and N through JJ. [*7]
DEP identified PFCC's failure to provide it with satisfactory CPM schedules as a basis for determining that PFCC was in default. DEP properly afforded PFCC not only one, which would have sufficed, but two opportunities to be heard on this basis for default. In this Article 78 proceeding in the posture of a mandamus to review, PFCC has failed to meet its initial burden of presenting factual allegations of an evidentiary nature or other competent evidence which might demonstrate that DEP's determination and declaration of PFCC's fault lacked a rational basis.
An administrative decision may not be interfered with by the court "unless there is no rational basis for the exercise of discretion or the action complained of is arbitrary and capricious" (See, Kammerer v. Crouchley, 205 AD2d 629 [1994] citing Matter of Pell v. Board of Ed. Of Union Free School Dist. No. 1, 34 NY2d 222.)
As PFCC has failed to meet its initial burden, this Court must respect the administrative determination of PFCC's default. In reaching this decision this Court does not delve into whether the factual allegations of an evidentiary nature which PFCC saw fit to mention suffice to undermine the rationality of the three bases of DEP's determination which might be construed as being under attack.
PFCC's petition to vacate the determination of the DEP finding PFCC in default of its contract is denied and the petition is dismissed.
The foregoing constitutes the decision and order of this court
ENTERx
Francois A. Rivera, J.S.C.
Footnotes
Footnote 1: In pertinent part: "[DEP] is of
the opinion that [PFCC] is or has been unnecessarily or unreasonably or willfully delaying the
performance and completion of the Work...."
Footnote 2: In pertinent part: "[DEP] is of
the opinion that the Work cannot be completed within the time herein provided therefore or
within the time to which such completion may have been extended; provided, however, that the
impossibility of timely completion is, in [DEP's] opinion, attributable to conditions within the
Contractor's control."
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