Plato Gen. Constr. Corp. v Dormitory Auth. of the State of New York
Annotate this CaseDecided on May 20, 2010
Supreme Court, Kings County
Plato General Construction Corp. Emco Tech Construction Corp., JV, LLC, Plaintiff,
against
Dormitory Authority of the State of New York, Defendants.
9446/05
Attorney for Plaintiff:
Chris Georgoulis, Esq.
45 Broadway, 14th Floor
New York, NY 10006
Attorney for Defendant:
Frederick R. Rohn, Esq.
Holland & Knight, LLP
195 Broadway, 24th Floor
New York, NY 10007
Carolyn E. Demarest, J.
A bench trial in this action seeking damages upon an alleged breach of contract for
renovation and construction of an addition to the Brooklyn College library (the "Project") was
commenced in February, 2009, following this Court's Decision dated December 2, 2008, denying
summary judgment upon plaintiff Plato General Construction Corp./EMCO Tech Construction
Corp.,JV. LLC ("Plato")'s and defendant Dormitory Authority of the State of New York
("DASNY")'s motions.[FN1]
Plaintiff is seeking damages for a 17 and a half month delay in the completion of the contract
based upon its claim that such extraordinary delay was caused by DASNY's failure to perform in
accordance with the terms of the contract requiring the creation and updating of a Critical Path
Method (CPM) schedule and its failure to properly oversee and co-ordinate construction.
Defendant argued that the contractual "no damage for delay clause" [*2]precludes plaintiff's recovery of such damages. This Court denied
the parties' motions for summary judgment based upon exceptions to the enforcement of such
clause recited in Corinno Civetta Construction Corp. v. City of New York, 67 NY2d 297
[1986], finding that questions of fact had been raised concerning whether DASNY had been
grossly negligent in performing its supervisory and management responsibilities under the
contract, whether DASNY and/or its construction manager Turner Construction Co. (Turner) had
caused the delays by breaching a fundamental obligation of the contract, whether the delays
experienced were within the contemplation of the parties at the time the contract was entered and
whether substantial design changes directed by DASNY fundamentally changed the Project so as
to constitute an abandonment of the contract as originally bid.
PHASE I TRIAL
At the conclusion of the first phase of trial addressing DASNY's liability for the delays, this Court dismissed defendant's first affirmative defense premised upon the "no damages for delay" provision in the contract, finding the evidence of unanticipated significant discrepancies between the plans for the Project as bid and the actual construction accommodations necessitated by various errors and other factors attributable to DASNY, which were not within the contemplation of the original contract and which resulted in substantial delays, sufficient, under the authority of Corinno Civetta, to overcome enforcement of such provision. The Court also found the testimony regarding the failure to integrate the various changes and delays into a viable CPM schedule, which was the contractual responsibility of defendant through its construction manager Turner, established defendant's failure to perform a fundamental obligation under the contract. It was further held that defendant's written representations, that plaintiff's requests for additional compensation and time extensions due to delays caused by the several design changes made as a result of defendant's errors and omissions would be negotiated and adjusted at a later time, constituted a waiver of the "no damages for delay" provision. The Court reiterated its prior rejection, in its December 2, 2008 decision, of defendant's lack of notice affirmative defense upon the evidence adduced during the phase 1 trial and dismissed the third-party action brought by DASNY against Plato/EMCO for indemnification of sums paid to the electrical contractor, Eaton, based upon a contractual provision which rendered each contractor liable to DASNY for damages sustained by any other contractor caused by that contractor, finding that DASNY had failed to make out a prima facie case for such recovery, particularly in light of testimony offered on plaintiff's case from Thomas Comins, Eaton's senior project manager, that plaintiff had not caused the delay problems experienced by Eaton for which it had been compensated by DASNY.
Among the factors which led this Court to a finding against DASNY with respect to potential liability for delay was the failure to promptly award a contract to an HVAC contractor so as to establish a reliable CPM schedule.[FN2] Under General Municipal Law § 101, known as the "Wicks [*3]Law", that governed the bidding and award for the construction of the Project, in addition to a general construction contract, which was awarded to plaintiff, separate prime contracts were required to be awarded for plumbing, heat, ventilation and air conditioning (HVAC) and electric wiring. According to expert witnesses called by both parties, a valid CPM schedule required input from each of the prime trades and, ultimately, co-ordination of the various activities in the appropriate sequence. By contract, the creation and maintenance of the CPM schedule was the responsibility of DASNY and its Construction Manager, Turner. (Plaintiff's Ex. 1, General Requirements § 01311.01)
In or about May, 1999, DASNY awarded contracts to Plato/EMCO, Eaton Electric (Eaton) and Almar Plumbing and Heating (Almar), but did not award an HVAC contract to Precision Mechanical, Inc. (Precision) until August 19,1999. Moreover, by "Separation Agreement" dated December 6, 1999, DASNY terminated the services of Precision, paying it $340,000, notwithstanding its dissatisfaction with Precision's performance.[FN3] By contract executed January 31, 2000, Roy Kay, Inc. (also known as RKI , which was subsequently purchased by KeySpan, to be known as "KSI") was substituted as HVAC contractor. However, it was revealed at trial that RKI, in making its bid, had been supplied with drawings already determined to be defective due to a failure to make accurate field measurements. As a result of design errors, the HVAC system had to be substantially reconfigured and plaintiff was later required to remove and repeat already completed work at significant cost and delay due to defendant's failure to account for the design changes in co-ordination drawings and design specifications, or in the scheduling of the various activities of the separate prime contractors. This was found to be "a critical deviation from the reasonable expectations under the contract" (Decision from the bench, March 27, 2009, Transcript p. 2618). In addition, at the beginning of the work on the Project, a chiller line, which was to have been completed in 30 days, was constructed by Morse-Diesel in conjunction with Con Edison across the worksite over a period in excess of four months, causing interruptions to plaintiff's work. Similarly, excavation was delayed by work in a steam tunnel that had to be ultimately done by an HVAC contractor separately retained for that purpose because no successor HVAC contract had been awarded.
In addressing the prima facie motions at the conclusion of the Phase I trial, the Court
declined to dismiss DASNY's affirmative defenses relating to change orders paid, or its claim for
liquidated damages for delay attributable to plaintiff's fault, noting that there had been no proof
of causation specific to the various items of delay, nor had there been proof adduced of actual
damages. The Court concluded "If there is no connection between the damages and whatever
[the particular reason for the delay], including the failure to provide a critical path method
schedule, . . . there will still be no recovery. . . . [Y]ou have that burden." (Decision of March 27,
2009 at 2625).
PHASE II TRIAL[*4]
The second phase of trial commenced on July 6, 2009, and concluded, following the testimony of ten witnesses over 14 days, on August 3, 2009. Post trial briefs were submitted on December 31, 2009, together with PLAINTIFF'S AND DEFENDANT'S JOINT PRELIMINARY STATEMENT ( hereinafter referred to as Joint Statement), containing a recitation of undisputed facts, including various contractual provisions deemed relevant by the parties.[FN4] The following constitute this Court's findings based upon the evidence adduced in both phases of trial.
Plaintiff's obligation under the Contract was to complete the Project "no later than March
20, 2001" , which was "an essential condition of the Contract". (Joint Statement at
¶¶ 10-12) Plaintiff was to be assessed $1000. in liquidated damages for each day of
default beyond the completion date. (Id.) This date was extended during the course of
construction, by agreement of the parties, to October 1, 2001. Beneficial occupancy of the library
was turned over to Brooklyn College on August 28, 2002, though final finishing work was still
ongoing after possession of the library was turned over. Thus, the Court finds a total overall
delay of 332 days from the agreed adjusted completion date of October 1, 2001, but 526 days
from the original contractually-specified date, March 20, 2001, to substantial completion.
Plaintiff demands judgment for damages on its own behalf of $16,297,880. based upon the
difference between its actual costs in completing the Project, including overhead and profit, of
$42,447,895. and compensation paid by DASNY, including extras and change orders, of
$26,150.015.[FN5] Plaintiff
has specifically predicated its claim on losses sustained as a result of the delay in concluding the
Project, which it contends was caused by defendant, eschewing any suggestion that its claim is,
at least partially, premised upon the nonpayment of change orders and denying defendant's claim
that it has been adequately compensated through such payments. The parties stipulated at the
conclusion of trial that all change orders had been paid. The issues at trial were, therefore, who
caused the delay and what was the impact of the various deficiencies in performance. Damages
remained to be ascertained.
FINDINGS OF
FACT
Initially it is noted that no undertaking of
the size and complexity of the construction project at issue here could be accomplished without
some unexpected problems arising related to the interface of the many elements of execution.
The Project required the construction of a completely new building, to be structurally integrated
with two existing structures, both of which were gut-renovated as a part of the Project. The
interface of the old and new imposed significant measurement and design responsibilities upon
DASNY and required careful and diligent co-ordination of all aspects of construction. The duty
of scheduling and co-ordination was, under the terms of the contract, that of defendant. This
court has already found that DASNY breached its contractual duty in that regard.
The Project was delayed from the outset by DASNY's failure to timely award an HVAC contract. It was conceded at trial that input from all four prime contractors was essential to the creation of a meaningful CPM baseline schedule, to which adjustments could be made as needed. Eugene Leung, DASNY's Project Manager, acknowledged that plaintiff had timely submitted its [*5]schedule in June 1999. Neither the plumbing, nor the electrical, contractor provided a schedule, but apparently both adopted plaintiff's proposal. The absence of an HVAC contractor at the initial stages proved critical, however, as Mr. Leung testified that the HVAC work was removed from the baseline schedule because of the lack of an HVAC contract. Much of the overall delay and additional cost to plaintiff is ultimately attributable to this threshold failure on defendant's part. It is noteworthy, moreover, that following termination of the initial HVAC contract, finally awarded to Precision on August 19, 1999, two months after plaintiff had commenced its work at the site, when Precision was replaced on January 31, 2000 by RKI, that contract provided for a completion date of June 19, 2001. Since plaintiff, as the General Construction Contractor, was the first to begin its work with the excavation for the new building and demolition in the existing structures, and would be the last contractor on site completing the interior finishes, it is clear that DASNY knew that the Project was behind schedule from the beginning and that plaintiff could not possibly meet the March 20, 2001 date, but refused to alter the completion date for plaintiff. Plaintiff struggled to meet the impossible completion date set forth in its contract, adding resources and manpower beyond what was anticipated in its bid.
In addition to the aforementioned steam line, the installation of a chiller line across the construction site in June, originally scheduled for later in the project and expected to take only 30 days, but which was not completed for nearly six months, impeded both the excavation for the foundation of the new building and demolition in the existing building. Under the contract, plaintiff was assured of unimpeded access to the entire site at the end of the school year in June, however, the removal of books from the library was not completed until October 1999, delaying the commencement of demolition which was to have begun on July 1 in that area. Although some interior demolition was commenced on August 9, 1999, the discovery of unexpected asbestos interrupted the work. As Mr. Leung admitted, this early setback impacted the performance of later masonry and brickwork, pushing these activities into the winter months when heat, and related firewatch personnel, became necessary to advance the work, at significant additional cost to plaintiff.
By letter dated October 25, 1999, Turner's Project Co-ordinator Robert Kilar wrote to Mr. Leung at DASNY documenting the consequences of the "terrible mistake" to run the chiller line through the construction site in June 1999 instead of February 2000 as originally planned (Plaintiff's Ex. 12). The excavation of the chiller line trench interrupted excavation for the new building already in progress and impeded the removal of the books from the library, thus also impeding the demolition to be done in the existing buildings. The presence of the trench prevented plaintiff from using a second demolition chute to remove the debris from the existing buildings and restricted access generally so that dump trucks were unable to efficiently enter and exit the site. The letter acknowledges additional, unanticipated costs to plaintiff and proposes compensation for a minimum of four weeks delay, which was never given.
Most egregious of defendant's breaches of duty, however, was the failure to have an HVAC contractor in place at the beginning of the Project and the supplying of plans known to be defective to the replacement HVAC contractor, RKI,ultimately resulting in a complete redesign of the HVAC system. Worse, in terms of DASNY's breach of its contractual duty of good faith and fair dealing, [*6]is the failure to notify plaintiff of the redesign.[FN6] As a result of extensive modifications to the design of the ducting to be installed by the HVAC contractor, plaintiff was required to constantly adjust the scheduling of finishing work throughout the job, including, among many other aspects of the finishing, framing, drywall, black iron, fin tubes, smoke dampers, millwork and painting, and ultimately was required to remove and re-do finished work in areas damaged by other trades because of improper sequencing caused by the lack of a reliable schedule to accommodate the design changes. All witnesses agreed that an accurate schedule and proper co-ordination of the various trades required accurate input from all primes and HVAC established the parameters for other work. Thus, the failure to retain an HVAC contractor early on, and to verify the accuracy of measurements used in the design of the HVAC work, caused substantial delay and additional costs to plaintiff which could not have been anticipated when the contract was entered.
By letter to DASNY dated November 8, 1999, Turner's Robert Kilar described the failures of HVAC contractor, Precision, to meet the needs of the Project. Noting that Precision was a late award on August 19, two months into the Project, Mr. Kilar indicated that Precision was behind schedule in its responsibility to re-route the steam lines and had failed to supply the needed co-ordination drawings and CPM schedule as late as November 4. Due to Precision's lack of organization and inadequate supervision, Kilar urged the termination of Precision, concluding, "[a]lthough terminating Precision Mechanical Inc. will have a negative effect on the immediate project schedule, not terminating Precision Mechanical would be more detrimental to the overall project schedule and budget".
The successor HVAC contract was not awarded until January 31, 2000. As a result of the failure of the architect and/or engineer to field verify the height of the beams in the existing structures, which was known to DASNY prior to the award to RKI, a change order was approved on February 14, 2000, just two weeks after the award of the contract to RKI, authorizing the labor and material necessary to "fabricate and install approximately 14,421 additional pounds of ductwork" so as to provide adequate air distribution and to maintain the proper ceiling height. New drawings needed to be prepared and approved, causing additional delay in construction, but no modification of the original schedule was authorized. Al Gelsomino, plaintiff's Project Manager, [*7]testified that, although defendant knew of the need for redesign in November 1999, Plato was never advised of the change and that he had learned of it from "guys on the site". As a result, the subcontract with S & S, which was hired to do most of the finishing work, did not reflect the redesign of the ductwork, an element that would have serious and substantial impact on its ability to perform timely and at reasonable cost.
Defendant's bad faith in failing to timely share a design change of such magnitude with its principal contractor is indicative of its pervasive disregard for its contractual responsibilities to Plato and the other primes. Turner's Project Superintendant, Joseph Dunning, acknowledged in a letter faxed to Kallen & Lemelson, the engineer retained by DASNY's architect, on April 20, 2000, that "coordination ha[d] been mired in the duct change issues" and that the needed drawings could not be prepared due to the lack of information (Plaintiff's Ex. 44). The consequences of the "massive" changes in ducting, including the impact on masonry and interior finishing, was also acknowledged by Turner's Frank Yozzo. On November 6, 2000, DASNY's Project Manager Leung notified RKI that, because of its delays in the submission of drawings and equipment specifications which were "delaying the work of the other prime contractors and jeopardizing the project completion date", the duct and sprinkler work would be removed from its contract if no improvement occurred within 72 hours (Plaintiff's Ex. 50). Mr. Leung testified that he didn't know when the co-ordination or shop drawings were completed. There was no indication that the drawings were actually distributed to other primes but, according to Leung, the drawings would be maintained in Turner's field office.
On January 4, 2001, Mr. Kilar wrote to Mr. Leung supplying an itemization of delays to be considered in granting a time extension to plaintiff. A total of 12.5 months, 3.75 of which was "Absorbed by Built-In Float", was allocated to the delay in the HVAC contract award, the book move delay, the steam tunnel re-route, additional asbestos abatement, parapet re-design, cornice steel redesign, chiller lines and masonry and concrete repairs. This eight and a half month delay was acknowledged well before some of the consequential delays from the redesign of the ductwork were yet known. Although RKI, which already had a completion date of June 19, 2001, requested a 90-day extension by letter to Turner dated August 8, 2000, Plato was held to a substantial completion date of April 20, 2001.
On July 13, 2001, DASNY notified Plato of its intent to terminate plaintiff's contract due to plaintiff's failure to "maintain the agreed upon project substantial completion date"and to provide sufficient manpower and for delays in executing various aspects of its contract. A meeting was held to devise a plan to "remedy the deficiencies" in Plato's performance (Plaintiff's Ex. 57). Following the meeting, in which plaintiff assured defendant that it would remedy various concerns and complete the Project, Lovett-Silverman, a consultant to plaintiff's surety, hired Michael Abi Aoun as an independent contractor to co-ordinate and oversee the job. This Court finds Mr. Abi Aoun to be a highly credible witness who was able to provide a perspective on the very chaotic situation he confronted on August 17, 2001.
Mr. Abi Aoun testified that, upon his arrival, he familiarized himself with the state of the Project by walking every area with various DASNY, Turner and Plato employees several times. The original completion date had already passed and a new October date, three months from the date he started, had been established which "was completely ludicrous" given the existing conditions (Trans. of 7/16/09 at 1033). He testified that, upon his arrival, the Project was "in partial states of construction on virtually all the floors" with framing on some floors, sheetrock work on others and [*8]taping on others, and some finished work "being knocked down because of the MEP trades" which were "all over the place", on every floor, "front to back" (Id. at 1034). On the fourth floor, framing tracks were "shot", pushed out and twisted, as a result of having to remove wall and ceiling components because HVAC ducts had not been installed in advance as required. There were constant stops and starts because there was no co-ordination and no schedule. Work was being performed based on two-week look-aheads in which the contractors would try to project what could be done within a two-week period. When this method proved unsuccessful, the work was progressed on one-week projections, which then became two-day look-aheads, and finally, day to day. As a result, it was impossible to estimate the cost of completing the job or fix a realistic date. Several subcontractors left the job or refused even to take the job as described because of the unpredictability. S & S, the subcontractor responsible for the carpentry and finishing work, ultimately was driven out of business.
According to Mr. Abi Aoun, there were no reliable sketches or plans and written plans were devised after the work had been done to reflect the "as built" condition. Ceiling heights as described in the original plans were incorrect and had to be adjusted to accommodate mechanical and electrical work. Plaintiff's Exhibit 31 is the set of original plans from which the entire Project was constructed. Every page is covered with sketches and requests for information relating to inadequate or modified details. Accurate co-ordination drawings, essential to the proper execution of the job, were not provided and any updates of the CPM which were provided by defendant were useless because they were infected with defective logic as a result of the failure to incorporate the many set-backs that had already occurred. James Gray, DASNY's Director of Construction and an expert scheduler, acknowledged that an accurate schedule is absolutely necessary, a conclusion with which Turner's Robert Kilar agreed. Defendant's own witnesses acknowledged that critical changes were not incorporated into the schedules provided by DASNY. Mr. Abi Aoun's testimony is replete with examples of instances, too numerous to mention, in which work could not be completed or finished work had to be torn out and reconstructed at a later point because of a conflict in the work of other primes or a defect in the plan plaintiff was trying to work from. These problems permeated the entire Project, continuing to the very end, and including such items as the millwork for the library which couldn't be measured for because of ductwork that had to be installed in the soffit first. Plaintiff's Exhibit 29 is two binders containing 891 daily Letters of Direction from Turner to Plato beginning on July 11, 2001 and concluding on November 25, 2002. On many dates, multiple directions were issued, often reflecting design changes and conflicts in the work of different contractors. Frank Yozzo, Turner's Project Superintendent who walked the job daily with Mr. Abi Auon, complained that the many Letters of Direction were necessitated by Plato's refusal to conform to oral directions without the written direction (Trans. of 7/28/09 at 1742-43). Given the substance of such directions, occasionally contradictory and often directing that existing work be torn out because of the need to accommodate the work of other trades, it is understandable that plaintiff would want a written record of such costly and duplicative efforts, caused entirely by errors and/ or changes by DASNY.
Plaintiff's suit is predicated on defendant's breach of its contractual obligation to supervise and co-ordinate this massively complex Project and, specifically, to provide an accurate CPM schedule upon which the work could be efficiently planned and executed. Plaintiff presented overwhelming evidence, including the admissions of nearly every witness who testified for [*9]defendant, that the schedules supplied by DASNY and Turner were inaccurate from the beginning and, at no time, was there a reliable schedule co-ordinating the work of all of the contractors working on site. Although defendant established that schedules and "updates" were issued from time to time sporadically (though not on the monthly basis required), thus refuting plaintiff's contention that there was never a baseline CPM, there is no dispute that, because the schedules never correctly reflected the actual interface of the various activities, they were useless. For example, in addition to the failure to incorporate the work of the HVAC contractor from the beginning of the job, or to account for the extensive delays resulting from the redesign of the ductwork in early 2000, when the design for the new building was altered, in January or February of 2000, from a single superstructure to two towers to be poured separately in order to expedite completion of the Project on schedule, this modification was not reflected in the CPM schedule distributed on February 9, 2000 (Plaintiff's Ex 9A). Such modification did appear, however, in the first update distributed on March 8, 2000 (Defendant's Ex. FV). As Mr. Leung explained in his affidavit of April 18, 2008, he did not believe monthly updating was appropriate in the early months of the Project because there were only a "small number of work activities in progress", blaming plaintiff for the inaccuracy of its scheduling information (Plaintiff's Ex. 91). It is difficult to comprehend how the accuracy of information supplied by Plato could have been responsible for the inaccuracy of defendant's schedule when Plato was not even aware of the extensive HVAC re-design already in progress, the need for which was known to defendant through the drawings supplied by Precision in November 1999. Of course, the true impact of these early modifications was experienced much later in the Project when the finishing work became repetitious and hopelessly inefficient because the changes were never reflected in the plans.
On January 9, 2002, DASNY issued a change order "to advance funds for a general conditions change that is under negotiation ...for extended project costs associated with an estimated 4 months extended completion. . . .[advising] A subsequent change order will be issued adjusting the amount of this change order upon conclusion of negotiations of the time impacts and verification of actual costs" (Plaintiff's Ex.26). Surprisingly, although 115 days of delay are acknowledged, there is no increase in the schedule for this delay. A second change order for a lesser sum, containing the identical language indicating that negotiation was under way and a further adjustment would be made when the actual costs could be ascertained, was issued on February 11, 2002 (Plaintiff's Ex. 27). Although denied at trial, Al Gelsomino, Plato's Project Manager, testified that Bob Kilar repeatedly told him "not to worry", that the delay costs would be covered, and that James Gray, DASNY's Director of Construction Administration, had similarly promised a reconciliation at the end of the Project.
In its effort to impeach plaintiff's claims that defendant's failure to schedule and co-ordinate caused the extraordinary delays that ultimately caused the Project to take nearly twice as long to complete as originally intended, defendant elicited evidence of various failings for which Plato was responsible, including delays in completion of the superstructure of the new building, errors in the brickwork and precast, an inadequate workforce to maintain the schedule for completion, substitution of subcontractors due to their inadequate performance, the failure to enclose the building so as to permit the finishing work to proceed on schedule and various other items too numerous to recite.
In analyzing defendant's contentions, it becomes apparent that plaintiff did contribute to some [*10]of the delay. Virtually none of the subcontractors retained by plaintiff for the various aspects of the job actually completed the scope of work in their contracts, even though several subcontractors were successors to the original defaulting subcontractor, requiring plaintiff to itself take over and complete the work of various trades. Plaintiff argues that it was defendant's failure to properly co-ordinate the work, and the resultant delay and attendant excessive costs, that drove their subcontractors off the job.[FN7] However, the pattern of default and plaintiff's lack of recourse to enforce the terms of the subcontracts suggest there is merit to defendant's contention that plaintiff selected unreliable, unbonded subcontractors in order to save money on their contract so as to underbid their competitors. A substantial cost to Plato resulted from their having to assume the work they had subcontracted to others.
One of the items cited as contributing significantly to the delay in enclosing the building was the prolonged period of masonry work and plaintiff's errors in performance. Because no accurate CPM schedule is available to analyze and compute the precise cause and extent of a particular delay, as explained by various witnesses is the purpose of the CPM, defendant was unable to provide the proof of plaintiff's degree of responsibility for any particular failing. However, there were clearly delays associated with errors in the installation of the brickwork. Approval of the mock-up, including cement blocks, bricks, concrete precast and window, for which plaintiff was responsible, was delayed. It appears, however, that defendant's specification of brick size was not consistent with that available from the manufacturer for hand-made bricks and contributed to the delayed approval for the actual brick used. The brickwork on the north wall of the existing building had to be taken down and replaced because of defects in work for which plaintiff was responsible. Plaintiff's subcontractor City Stone did not provide adequate manpower, as evidenced by the several letters sent by plaintiff demanding that City Stone correct deficiencies in performance. Ultimately City Stone walked off the job on December 5, 2000, never to return, because of union difficulties and because it was too cold to install the brick and plaintiff had made no provision to maintain the necessary temperature. At least a month was lost as a result. A subsequently hired subcontractor, Herrera Stone, also walked off the job in August, 2001. Various other inefficiencies attributable to Plato caused the brickwork/masonry to continue for more than a year, twice as long as contemplated under the baseline schedule prepared by Plato itself.
Defendant's attempt to attribute to plaintiff delay in the excavation and erection of the superstructure of the new addition is unavailing. It is clear, even by Turner's own admissions, that substantial delay at the beginning of the Project was attributable to defendant. Plaintiff made significant effort to recoup lost time, at considerable cost to itself, taking over and supplementing the work of its contractors in order to expedite the completion of the Project. Many of the set-backs experienced, such as the dewatering and the need to fill in soil under the existing Gideonse building, resulted from unanticipated conditions which were not plaintiff's fault. Defendant acknowledges in its Post-trial Brief (at 16) that one month of the superstructure delay was caused by additional rebar [*11]installation directed by the engineer, which was not the fault of plaintiff. Delays in enclosure of the building, making it water-tight so that interior finishing could be completed, while partially caused by plaintiff's masonry deficiencies, were also attributable to defendant's errors. For example, windows ordered by plaintiff pursuant to specifications turned out not to meet local code standards and had to be adjusted and then approved, causing delay. Similarly, defendant's claims of delay resulting from plaintiff's failure to order and/or install millwork in a timely fashion are unfounded. Although plaintiff's original subcontractor, Tricycle Enterprises, Inc., which was to do both the fabrication and installation, went out of business and was replaced by two separate companies, one to fabricate and one to install, the real cause for the delays related back to the incomplete ductwork which precluded the necessary measurement for this highly specialized and precise aspect of the work because walls and columns could not be closed as required preliminary to measurement and installation. Although there is evidence that plaintiff may have been responsible for some of the delay in completing the superstructure, as none of defendant's witnesses were able to attest to the length or impact of any delay on the ultimate completion, it is not possible to assess fault against plaintiff with specificity. However, the allocation of delay caused by plaintiff, infra, takes this element of delay into account.
Predictably, the testimony of plaintiff's witnesses was contradicted by the testimony of defendant's agents and employees, each party accusing the other of breaches of their responsibility. Given the complexity of this Project and the many design changes (over 500 change orders were issued), many of which, like the HVAC redesign, were pervasive, it is impossible to isolate the precise cause and effect of each incident of delay which ultimately caused the Project to be substantially completed 526 days after the original, contractually-specified date. Upon the massive evidence admitted at trial, including the minutes of many hundreds, if not thousands, of meetings, it is concluded, however, that plaintiff is responsible for approximately 6 months or 34% of the delay, equal to 179 days, and defendant, 11.5 months or 66%, equal to 347 days.
DAMAGES
Plaintiff correctly contends that, having established defendant's liability for the breach of its contract, it is entitled to recover the resultant damages sustained on the basis of quantum meruit. In Whitmyer Brothers, Inc. v. State of New York, the measure of damages for defendant's breach in impeding plaintiff's performance of its contract was "actual job cost plus allowance for [plaintiff's] overhead and profit minus the amounts thus far paid for the work performed" (47 NY2d 960, 962 (1979). More recently, while noting that damages must bear "a definite and logical connection" to the losses actually sustained (citing Mid-State Precast Systems, Inc. v. Corbetta Construction Co., Inc., 202AD2d 702, 704 (3d Dept, 1994)) and may not be speculative or conjectural (citing Berley Industries, Inc. v. City of New York, 45 NY2d 683 (1978)), the Third Department Appellate Division approved the use of claimant's actual expenses, plus profit and overhead as provided under the terms of the written contract, to calculate the damages based upon delay. Clifford R. Gray, Inc. v. State of New York, 251 AD2d 728 (3d Dept, 1998). This "total cost" approach to proving delay damages has been accepted in this state as long as such costs are properly connected to defendant's actions and are not merely speculative. See, e.g., Port Chester Electrical Co., Inc. v. State of New York, 103 AD2d 825 (2d Dept, 1984), and cases cited therein. In Scalamandre & Sons, Inc. v. Village Dock, Inc., the Appellate Division, Second Department, while noting in that case that the burden of proof had not been sustained to establish the connection between the contractor's costs and the delay for [*12]which its employer was at fault, stated: "When it is clear that some injury has occurred, recovery will not necessarily be denied to a plaintiff because the quantum of damages is unavoidably uncertain, beset by complexity or difficult to ascertain." (187 AD2d 496 (2d Dept, 1992), lv den, 81 NY2d 710(1993)).
In support of its claim for damages relating exclusively to delay caused by defendant, plaintiff offered the testimony of Thomas Novak, a partner in the accounting firm Sheehan & Company, which was retained in September, 2002, at the conclusion of the Project, by plaintiff to prepare plaintiff's claim for such damages and present it to DASNY. Mr. Novak testified that he began his verification of the actual costs of the Project to plaintiff by interviewing the several people directly involved in the work, as well as Plato's inside bookkeeping staff and its independent CPA, Gabriel & Scassia, which handled routine accounting and prepared financial statements. Over a period in excess of a thousand hours, five or six members of Mr. Novak's firm reviewed documents and records to verify the actual costs incurred by plaintiff. Gabriel and Scassia had already performed audits on the Project for 1999 and 2000, which were available to Novak. Using a separately-maintained Quickbooks program dedicated to this Project, Mr. Novak's staff searched the records, stored in file cabinets separate from those used for other activities of the business, to corroborate the information electronically maintained. Payroll records, tax returns and employee w-2's, general ledgers, daily reports of workers at the site, vendor invoices, cancelled checks and accounts payable relating to subcontractors were all among the sources consulted by the Novak team. In some cases, letters were written to suppliers to verify the costs noted in plaintiff's accounts. Subcontractor costs were also verified. Mr. Novak testified that the review he conducted far exceeded the standards of generally accepted accounting principles applicable to an audit, partially because plaintiff's surety demanded such level of scrutiny. Moreover, in the course of the submission of its claim to defendant prior to the commencement of litigation, plaintiff afforded DASNY the opportunity to conduct its own audit. Defendant failed to take advantage of this opportunity, suggesting that it did not seriously question the numbers upon which plaintiff's case is premised. This Court finds the testimony of Mr. Novak to be credible and extremely reliable. Defendant's efforts to impeach it are rejected.After adjusting for claims settled and deemed abandoned and costs not properly chargeable to defendant, like legal and consulting fees, and deducting $212,278 for unidentified "delayed costs, inefficiencies and corrective work caused by joint venture" (plaintiff), and adding $492,094 for unapproved changed orders, plus twenty percent for overhead and profit, based upon the testimony and other evidence, plaintiff claims it is presently entitled to recover $16,297,880 on a total cost basis of quantum meruit. In an effort to provide a foundation for assessing damages for delay relating to a specific aspect of the construction, i.e., concrete, masonry, carpentry, painting, millwork and general conditions, plaintiff also offered evidence breaking down its costs associated with each item. This Court does not find this evidence helpful or relevant in light of the evidence that the various facets of the work overlapped in time and that a particular cause of the delay damages sustained by plaintiff (for example, the HVAC redesign) impacted multiple later activities. Thus it is neither possible, nor appropriate, to assess damages based upon the costs relating to a particular isolated aspect of the job. The only appropriate measure must be based on total cost, apportioned to the amount of delay caused by defendant's breaches of its duties. See Thalle Construction Co., Inc. v. Whiting-Turner Contracting Company, Inc.,39 F3d 412, 419 (2d Cir. 1994) ("The total cost approach, however onerous it may be to apply in this case, [*13]is nonetheless required under New York law.")
However, there are a number of adjustments to be made in plaintiff's total cost basis that must be made prior to awarding delay damages to plaintiff. The addition of $492,094 for "capitalized costs on unapproved change orders", as reflected in Plaintiff's Exhibit 110, is unwarranted in light of plaintiff's insistence that its claim does not include such requests for change orders. The deletion of this sum obviates the need to further address defendant's affirmative defense relating to change orders, particularly since all sums paid on change orders are necessarily included within the credit given for sums paid and it was stipulated that all approved change orders have been paid. In addition, it was stipulated at trial that a number of change orders in which Plato was charged as a credit to DASNY, totaling $102,479, reflected in Defendant's Exhibit FK-7, are correct and that sum is also deducted from plaintiff's total cost. Such adjustments leave a total cost to plaintiff of $34,778,673, plus $6,955,734 for overhead and profit, totaling $41,734,407, from which must be deducted $26,150,015 in payments received from DASNY, resulting in a difference of $15,584,392, of which 66% is chargeable to DASNY for delay. Plaintiff is entitled to damages for delay in the sum of $10,285,698.
From this sum must be deducted liquidated damages in the sum of $1000. per day, as
provided in Paragraph 3 of the Contract and in Section 9.01D of the General Conditions, for each
of the 179 days of delay chargeable to plaintiff in completing the Project beyond the contractual
completion date. Accordingly, upon defendant's counterclaim for liquidated damages, defendant
is awarded $179,000 and, from plaintiff's award of $10,285,698, is deducted $179,000, leaving
$10,106,698. for which plaintiff may enter judgment.
THE S & S CLAIM
On May 31, 2000, plaintiff entered a subcontract with S & S Construction Group, Inc. ("S & S") for carpentry work including the installation of drywall partitions, acoustical and metal ceilings, firestopping and caulking relating to the drywall and ceilings, doors, and door frames (Defendant's Ex. 70). The contract price for the work was $2,150,000.
Beginning on or about June 2000, S & S performed some of the work described in its contract, but, based upon its failure to timely complete the work undertaken, on March 26, 2002, its contract was terminated. In 2003, plaintiff brought an action against S & S's surety in the Eastern District of New York claiming that S & S failed to complete the work in the subcontract and plaintiff had incurred $887,790.00 in costs exceeding the adjusted contract price to complete and correct the work required to be performed by S & S pursuant to the subcontract (Defendant's Ex. EC). S & S apparently interposed counterclaims against Plato, including a claim for damages for delay. During the pendency of the litigation, plaintiff and S & S entered into a liquidating agreement ("Liquidating Agreement") by which liability for the claims interposed against Plato for damages caused to S & S in the course of performing the subcontract was acknowledged and S & S agreed "to accept in full satisfaction and discharge of the SUBCONTRACTOR'S CLAIMS ...the amount, collected or recovered," in liquidation of such claims. Plaintiff was appointed S & S's attorney-in-fact for the purpose of prosecuting its claims against DASNY (Plaintiff's Ex. 146). The Liquidating Agreement contains a recitation of delay damages, analogous to those claimed by plaintiff, totaling $2,276,771, caused by DASNY and Turner's acts and omissions. Defendant argues that the Liquidating Agreement is invalid as it provides for the first proceeds of any recovery from the defendant to go to the plaintiff for its cost incurred in the completion of S & S's work, agreed to be "not less than [*14]$750,000", and therefore does not provide a proper pass through provision as required under New York law.
According to the terms of the Liquidating Agreement, in the event of a settlement, arbitration award, or judgment by the court, "S & S will receive the greater of (i) its ratable portion of the proceeds which is approximately 22%; or (ii) the amount specifically attributable to S & S's delay claim." However, prior to S & S receiving any disbursement of funds, the Liquidating Agreement provides for payment, first, of the amount due to plaintiff to complete S & S's work [FN8], and then 22% of the costs and attorney's fees incurred in prosecution of the claim and amounts due to S & S's surety "for payments made on behalf of [S & S] against Payment and Performance Bond Claims for the Project" (Liquidating Agreement ¶ 7).Further, the Liquidating Agreement indicates that it is the plaintiff's sole discretion to allocate the portion of a settlement or judgment to S & S and, in the event that S & S is dissatisfied with the plaintiff's allocation, S & S retains the right to demand arbitration to resolve the issue.
"General contractors on a construction project which have sustained no injury may not bring suit on behalf of a subcontractor for additional costs caused by the owner's delays. Subcontractors, lacking privity of contract, are precluded from bringing suit against the owners directly. A liquidation agreement is designed to overcome these legal impediments and allow contractors to bring an action against the owner on behalf of their subcontractors; such agreements have been uniformly upheld in this state." Bovis Lend Lease LMB Inc. v. GCT Venture, Inc., 285 AD2d 68, 69-70 (1st Dept 2001) (internal citations omitted). "Liquidating agreements have three basic elements: (1) the imposition of liability upon a party for a third party's increased costs, thereby providing the first party with a basis for legal action against the party at fault, (2) a liquidation of liability in the amount of the first party's recovery against the party at fault, and (3) a provision for the pass-through of that recovery to the third party." N. Moore St. Developers, LLC v. Meltzer/Mandl Architects, P.C., 23 AD3d 27, 31 (1st Dept, 2005); see Bovis, 285 AD2d at 70. "[L]iquidating agreements, which are generally enforceable, need not take any particular form. They may be memorialized in the subcontract or in a separate written agreement and may be assembled from several documents executed over a period of years." N. Moore St., 23 AD3d at 32.
The Liquidating Agreement at issue satisfies all the essential elements of a liquidating agreement since (1) plaintiff has admitted and acknowledged liability for S & S's increased costs as a result of design changes, the failure to have prerequisite work completed, inefficiencies due to scheduling problems, and repair work necessitated by damage to S & S's previously completed work; (2) S & S has agreed to liquidate such liability in the amount recovered by plaintiff on S & S's behalf; and (3) plaintiff is obligated to pass through to S & S the portion of the recovery allocated to damages suffered by S & S, less sums owed to plaintiff by S & S and the prorated costs of the litigation. See N. Moore St., 23 AD3d at 32. Defendant's argument that the Liquidating Agreement is invalid due to the lack of a proper pass through provision is unavailing. A liquidating agreement that provides for the pass through of only a portion of a recovery has been held to be valid. See N. [*15]Moore St., 23 AD3d at 32. Liquidating agreements are designed to overcome the legal impediment of a lack of privity between a subcontractor and owner so as to avoid the waste of public and private resources in the duplication of legal actions. See Bovis, 285 AD2d at 69-70; N. Moore St., 23 AD3d at 31. Invalidating this Liquidating Agreement would defeat it's purpose and require a duplicative trial between S & S and plaintiff as a predicate to the prosecution of plaintiff's claims herein, which are essentially identical to those of S & S. The provision for plaintiff's recovery of its costs of completing the work of its subcontractor out of the award to that subcontractor for damages caused by defendant does not defeat the viability of the Liquidating Agreementso long as plaintiff is not thereby receiving a double recovery. Plaintiff, in litigating its own claim for delay damages, scrupulously segregated its own claim from that of S & S. Accordingly, defendant's motion to dismiss S & S's claim based upon an invalid liquidating agreement is denied.
In support of S & S's claim, plaintiff produced Kevin Burke ("Burke"), project manager for S & S, who began work on the Project in November of 2000 , when S & S was approximately five months into the job. Mr. Burke testified that he was unable to complete work according to the subcontract schedule due to DASNY's lack of coordination, generally corroborating the testimony of other witnesses who testified on plaintiff's behalf. However, at least as early as August 29, 2000, plaintiff began sending letters to S & S noting S & S's failure to submit shop drawings as required by the subcontract (Defendant's Ex. BR, BW). Beginning on June 20, 2001, plaintiff sent letters to S & S noting numerous deficiencies in work with respect to window framing, drywall, and blocking (Defendant's Ex. CJ). Numerous correspondence were sent to S & S with respect to deficiencies in its performance between June and December 2001 (Defendant's Ex. CK, CL, CM, CN, CO, CP, CQ, CV). According to Joseph Patrick O'Reilly ("O'Reilly"), former accountant for S & S, plaintiff began making direct payments to S & S's vendors on June 25, 2001 due to S & S's financial distress at the time.
In October 2001, Turner ordered that an S & S employee be removed from the Project after the employee threw hand tools from a 5th floor window during a dispute over work being performed, causing a potential safety issue for other workers on the site (Defendant's Ex. CS, CT). From December 2001 through February 2002, on five separate occasions, Plato directed S & S to provide additional manpower with respect to carpentry, black iron work, taping, framing, sheetrocking, and the installation of metal pan ceilings, along with 72 hour notices to comply pursuant to the subcontract (Defendant's Ex. CX, CZ, DA, DC, DD). Beginning on February 6, 2002, Plaintiff began deleting work from S & S's subcontract, indicating that plaintiff would supplement S & S's manpower with plaintiff's labor and backcharge to the subcontract (Defendant's Ex. DB, DF, DG, DK DK, DO). On March 26, 2002, plaintiff terminated S & S's subcontract because S & S "failed to perform the obligations" of it's subcontract, including failure "to furnish sufficient manpower and/or sufficient number of properly skilled workmen to complete work in a timely manner and in accordance with [the] project schedule," and failure to prosecute the subcontract work "with promptness and diligence" (Defendant's Ex. GT).At trial, Mr. O'Reilly, testified as to the expenses S & S incurred on the Project. Mr. O'Reilly presented the Quickbooks accounting software records from S & S. However, all of the underlying invoices originally used to input the financial data into the Quickbooks file have been lost and were not available as exhibits at trial. S & S received $1,915,919.54 in payments from plaintiff for its performance on the Project. Plaintiff [*16]alleges that S & S's total damages, as a result of defendant's delays, are $1,108,390.45.[FN9]
S & S's failure to perform under the terms of its contract with plaintiff precludes its recovery of damages for delay against defendant. See ASKL Enterprises, Inc. v. NYNEX Long Distance Co., 7 AD3d 424, 425 (1st Dept, 2004); Grant Entertainment, Inc. v. Spike Lee, 186 AD2d 66 (1st Dept, 1992). The essential elements of a breach of contract claim are the formation of a contract between parties, performance by plaintiff, the defendant's failure to perform, and resulting damage to the plaintiff. See Furia v. Furia, 116 AD2d 694, 695 (2d Dept, 1986); Severo v. Rockefeller Univ., 19 Misc 3d 1122A (Sup Ct, New York County, 2008); Bonnie & Co. Fashions v. Bankers Trust Co., 945 F Supp 693, 711 (SDNY, 1996). While the lack of privity between S & S and the defendant was overcome by the Liquidating Agreement, and defendant's actions clearly hindered S & S's performance, it was plaintiff's burden to establish that S & S performed under the contract in order to recover damages. However, it is clear from the evidence at trial that S & S's work was deficient at numerous points in the Project and S & S was financially incapable of handling the subcontract work. Within three months of signing it's subcontract, S & S was notified that it was already delinquent in submitting drawings. Numerous correspondence from plaintiff to S & S with respect to deficient work, and 72 hour notices to comply with directions, established S & S's repeated failure to prosecute it's work as required under the subcontract. This finding is further supported by plaintiff's deletion of work from S & S's subcontract, plaintiff's ultimate termination of S & S's subcontract for it's failure to perform, and plaintiff's lawsuit against S & S for the costs incurred in completing and correcting S & S's work. It is noted that, by the terms of the Liquidating Agreement providing for initial payment of plaintiff's claim for damages incurred as a result of S & S's failure to complete the job, S & S has conceded that it defaulted and does not contest the legitimacy of its termination. Ultimately, S & S was paid $1,915,919.54 for it's work on a $2,555,028 subcontract after change orders. It did not complete the work in the subcontract and required the financial assistance of plaintiff to perform much of the work that it did perform on the Project. Accordingly, upon the proof submitted at trial, S & S's claim for delay damages is dismissed upon the failure to establish a basis for liability.
Furthermore, plaintiff failed to prove S & S's damages at trial. Mr. O'Reilly testified that he verified that S & S paid $2,520,258.33 for labor, materials, and general conditions, but was only paid $1,915,919.54 for it's work. Relying on a total cost basis to establish damages, plaintiff claims that, after the addition of a 20% mark-up for overhead and profit, S & S was damaged in the amount of $1,108,390.45. Mr. O'Reilly admitted, however, that most of the original invoices received by S & S in this matter have been lost and plaintiff relied extensively on Mr. O'Reilly's copy of the electronic Quickbooks file to establish it's costs on the Project. According to Mr. O'Reilly's testimony, he compared the Quickbooks entries to the original invoices on a regular basis at the time of the Project and believed they were an accurate account of S & S's total costs on the project. While the Quickbooks file did include the value and vendor for each entry, and each entry is coded to indicate that the payments were allegedly associated with the Project, there is no indication of what the payments were specifically for, thus preventing any verification that such payments were actually attributable to the Project. There was evidence at trial that S & S occasionally paid vendors for [*17]multiple invoices from different jobs in the same check. (Trans. of 7/20/09 at 1295-1297). S & S's Project Manager Burke testified that he and a driver had both worked at the Brooklyn College site and other projects at the same time and that their compensation could not be allocated with any degree of certainty (Trans. of 7/14 / 09 at 996-997; 1007-1008). Moreover, there was considerable proof adduced at this trial that plaintiff Plato paid many of S & S's costs directly.
In light of the unreliability of the proof offered (O'Reilly had no personal knowledge of the Project or of the connection to the Project of the entries made by others in the Quickbooks records), the evidence is insufficient to establish that any damages were sustained by S & S. Accordingly, S & S's claims for damages must be dismissed for failure of proof. See Berley industries, Inc. v. City of New York, 45 NY2d at 686-687; Alpha Auto Brokers, Ltd. v. Continental Insurance Co., 286 AD2d 309 (2d Dept, 2001); Manshul Construction Corp. v. Dormitory Authority of the State of New York, 79 AD2d 383, 387 (3d Dept, 1981).
CONCLUSION
Plaintiff is awarded judgment on its claim for damages for delay in the amount of $10,285,698, which is offset by judgment for defendant in the sum of $179,000 upon its counterclaim for liquidated damages, leaving $10,106,698 for which plaintiff may enter judgment, together with interest from March 30, 2005. Plaintiff's claim for damages sustained by S & S is dismissed.
This constitutes the decision, order, and judgment of the court.
ENTER:
J.S.C.
ATTACHMENT
SUPREME
COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
PLATO GENERAL CONSTRUCTION CORP./EMCO TECH CONSTRUCTION
CORP., JV, LLC,
Plaintiff,Index No. 9446/05
- against -
DORMITORY AUTHORITY OF THE STATE OF NEW YORK,
Defendant,
- against -
PLATO GENERAL CONSTRUCTION CORP./EMCO TECH CONSTRUCTION
CORP.,JV, ST. PAUL FIRE & MARINE INSURANCE CO. and ST. PAUL MERCURY
INSURANCE CO.,
Additional Counterclaim Defendants.
DORMITORY AUTHORITY OF THE
STATE OF NEW YORK,Index No. 15099/07
Third-Party Plaintiff,
-against-
PLATO GENERAL CONSTRUCTION CORP./ EMCO TECH CONSTRUCTION
CORP. JOINT VENTURE,
Third-Party Defendant.
PLAINTIFFS AND DEFENDANT'S JOINT
PRELIMINARY STATEMENT
GEORGOULIS & ASSOCIATES, PLLC
Attorneys for the Plaintiff
45 Broadway, 14th Floor
New York, New York 10006
HOLLAND & KNIGHT LLP
Attorneys for the Defendant
195 Broadway, 24th Floor
New York, New York 10007
PRELIMINARY STATEMENT
Plaintiff Plato General Construction Corp./Emco Tech Construction Corp., JV, LLC Plato General Construction Corp./Emco Tech Construction Corp., JV (named herein as additional counterclaim defendant) (each referred to as "Plato/Emco" except as otherwise indicated) and defendant Dormitory Authority of the State of New York ("DASNY") submit this joint preliminary statement of undisputed facts in connection with their respective post-trial briefs. Inclusion of Contract provisions herein is for ease of reference only and without agreement as to applicability of any provision. The parties may refer to other relevant provisions in their briefs.
Pages of the trial transcript are separately and consecutively numbered for each phase of the
trial. References with the designation 'Ph. I ___" refer to pages of the transcript of the first phase
of the trial, and references with the designation 'Ph. II ___" refer to pages of the transcript of the
second phase of the trial. Plaintiffs exhibits are designated with numbers and defendant's exhibits
are designated with letters. Exhibits are referred to as "Ex. ___."
A. Background
1. This action arises out of the renovation and expansion of Brooklyn College Library (the "Project" or "project"). The Project consisted of renovation of the existing library buildings - LaGuardia Hall and the Gidonse (often spelled as Gideonese) Building (the "Existing Structure" or "Existing Building") - and the construction of a new five-story addition (the "New Addition"), all [*18]of which were combined into a single structure.
2. Brooklyn College is part of the City University of New York ("CUNY").
3. CUNY and DASNY entered into a "Memorandum of Understanding" ("MOU") (Ex. 90) in March, 1998 setting forth their respective roles with respect to planning, design and construction of CUNY projects.
4. DASNY entered into an agreement (Ex. 5) with Turner Construction Company, Inc. ("Turner") under which Turner agreed to provide construction management services for the Project (the "Turner/DASNY Contract").
5. Pursuant to Municipal Law § 101, commonly known as "Wicks Law", DASNY publicly bid separate prime contracts for general construction work, electrical work, plumbing work, and heating, ventilation and air-conditioning work ("HVAC" or mechanical work) for the Project.
6. By letter dated May 20, 1999 (Ex. 3), DASNY advised Plato/Emco that DASNY intended to award a Contract to Plato/Emco for general construction work on the Project in the sum of $19,902,000 and directed Plato/Emco to proceed. DASNY and Plato/Emco executed a Contract for this Work (Ex. 1, excluding the tabs labeled "Indemnity Agr. Emco Tech" and "Indemnity Agr. Plato"). DASNY is referred to in the Contract as the "Owner" and Plato/Emco is referred to in the Contract as the "Contractor".
7.At or about the same time, DASNY entered into prime contracts with Eaton Electric, Inc. ("Eaton") and Almar Plumbing & Heating Corp. ("Almar") for the electrical and plumbing work, respectively.
8. Excluding the drawings and technical provisions (which also are part of the Contract), the Contract between Plato/Emco and DASNY consists of five main documents: (i) the Contract, (ii) the General Requirements, (iii) the Supplemental General Requirements, (iv) the General Conditions, and (v) a Bar Chart Schedule. Each of these documents is separately tabbed in Exhibit 1.
9. The General Requirements, Supplemental General Requirements, General Conditions, and
Bar Chart Schedule were the same for each of the prime contractors.
B. Contract Provisions
10. Paragraph 3 of the Contract provides: "[Plato/Emco] shall commence work on the
Contract at a time to be specified in a written notice to proceed issued by [DASNY] and
complete the project no later than March 20, 2001. [Plato/Emco] shall pay to
[DASNY], as liquidated damages, the sum of One Thousand and 00/100 Dollars ($1,000.00) for
each and every day that [Plato/Emco] shall be in default after the above time of completion."
(Emphasis in original.)
11. Section 9.01(A) of the General Conditions provides, in part, that "The Work shall
be commenced at the time stated in the Owner's written notice to proceed, and shall
be completed no later than the time of completion specified in the Contract." (Ex. 1, General
Conditions, p. 14).
12. Section 9.01(B) of the General Conditions provides in part that "...the time for completion of the Work, as specified in the Contract, is an essential condition of the Contract." (Ex. 1, General Conditions, p. 14)
13. Section 9.01C of the General Conditions provides in part that "The Contractor agrees that the Work shall be prosecuted regularly, diligently, and uninterruptedly at such-rate of progress as [*19]shall insure full completion thereof within the time specified." (Ex. 1, General Conditions, pp. 14-15).
14. Section 9.01D of the General Conditions provides in part that "if the Contractor shall
neglect, fail or refuse to complete the Work within the time specified, or any proper extension
thereof granted by the Owner, the Contractor agrees to pay to the Owner for loss of
beneficial use of the structure an amount specified in the Contract, not as a penalty,
but as liquidated damages, for each and every calendar day that the Contractor is in default." (Ex.
1, General Conditions, p. 15).
15. Section 9.01F of the General Conditions provides in part that "The Contractor shall not be charged with liquidated damages or any excess cost if the Owner determines that the Contractor is without fault and that the delay in completion is due: ... 2. to an unforeseeable cause beyond the control and without the fault of, or negligence of the Contractor, and approved by the Owner, including, but not limited to, acts of God or of public enemy, acts of the Owner, fires, epidemics, quarantine, restrictions, strikes, freight embargoes and unusually severe weather.... The contractor shall, within ten (10) days from the beginning of such delay, notify the Owner, in writing, of the causes of the delay." (Ex. 1, General Conditions, p. 15).
16. Paragraph L of Section 01800 of the Supplemental General Requirements provides as follows: In scheduling construction activities contractors should note that the existing library will be fully operational until June 1999. Contractors are cautioned that construction activities which disrupt the instructional program will not be permitted. Contractors will have complete access to the site after June 1999. Contractors are cautioned that construction activities, which disrupt the institutional program will not be permitted. (Ex. 1, Supplemental General Requirements, p. 31).
17. The Bar Chart Schedule includes a bar titled "Library Move Out." (Ex. 1, Bar Chart Schedule).
18. Section 01311.01 of the General Requirements provides that: A Critical Path Method (hereinafter referred to as CPM) shall be provided by [DASNY] or [Turner] and shall be used to schedule the progress of the Work. All Work shall be done in accordance with the Project CPM Schedule and the Contractor agrees to cooperate fully with [Turner] in the development, implementation and updating of the Project CPM Schedule. (Ex. 1, General Requirements, p. 5).
19. Section 01311.04A of the General Requirements provides in part that "Within two weeks after bids are opened, and before the Contract is executed, the apparent low bidder must submit to the Owner, in writing, a list of durations for all activities which appear on the Precedence Diagram." (Ex. 1, General Requirements, p. 6).
20. Section 01311.04(B) of the General Requirements provides as follows: To develop the Project CPM Schedule [DASNY] or [Turner] will review the durations submitted by the apparent low bidder together with those durations submitted by the apparent low bidders for the other work to be done concurrently with the Work under this Contract. [DASNY] or [Turner] will approve only those durations which in his opinion do not jeopardize the orderly completion of the Work on/or before the completion date, conform to all intermediate milestone dates [*20]included in the Precedence Diagram, conform to the sequence of the Work required by the Precedence Diagram, and do not interfere with the orderly completion of the work of other contractors. (Ex. 1, General Requirements, p. 6). [Reference to "Precedence Diagram" is deleted and substituted with "Outline Schedule" by Section 01311.02 of the Supplemental General Requirements. (Ex. 1, Supplemental General Requirements, pp. 13-14).]
21. Section 01311.05A of the General Requirements provides that "[a]fter the notice to proceed has been given to the Contractor, [DASNY] or [Turner] shall meet with the Contractor within one week to develop a comprehensive and detailed Project CPM Schedule. It shall be the Contractor's responsibility to ensure that the Project CPM Schedule includes all of the Contractor's Work and correctly represents the previously submitted and agreed upon sequence of, and time durations for, the work." (Ex. 1, General Requirements, p. 6).
22. Section 01311.06A of the General Requirements provides that "[t]he Contractor shall regularly review the reports generated by the Project CPM Schedule and use such reports as working tools to meet the Contractor's obligations under the Contract." (Ex. 1, General Requirements, p. 7).
23. Section 01311.06B of the General Requirements provides that "[t]he Contractor shall attend all scheduling meetings as directed by [DASNY] or [Turner]." (Ex. 1, General Requirements, p. 7).
24. Section 01311.06C of the General Requirements provides, in part, "The agenda for such meetings shall include the project CPM Schedule reports, the progress and current status of the Work, proposed solutions for problem areas and a review of schedules for future Work in order to meet the Contractor's objectives and his obligations under the Contract. Consideration shall be given to establishing actual start dates, actual completion dates, planned starts and finishes, quantities installed, man hours worked as well, as well as other dates relevant to performance of the Contract." (Ex. 1, General Requirements, p. 7).
25. Section 01311.06D of the General Requirements provides as follows: At least one week before each meeting described in subsection .06C, of this Division 01311, [Plato/Emco] shall furnish to, and in the form required by [DASNY] or [Turner) progress data for:
1. The status of all activities as of date determined by [DASNY] or [Turner].
2. list of actual start and completion dates for all activities.
3. Projected durations for completion of those activities in progress. 4. Relevant data for Submittals in progress including equipment releases and equipment in fabrication.5. All other information which in the discretion of [DASNY] or [Turner], may be required to complete the Project Schedule Update. (Ex. 1, General Requirements, pp. 7-8).
26. Section 01311.07 of the General Requirements provides: After [DASNY] or [Turner] has received the information required by subsection .06(D) above from the Contractor and all other Contractors doing work at the same location, [DASNY] or [Turner] shall compare the information and, if appropriate, will compile an update to the Project CPM Schedule to show how changes or delays [*21]will affect the scheduled completion of the Work. This Project CPM Schedule, as updated, shall become binding on the Contractor, providing the [Outline Schedule] milestones are not altered. The Contractor will be required to provide additional manpower, equipment, and other resources including overtime hours needed to keep the project on schedule, should the update uncover significant delays to the Work of the Contractor, caused by the contractor. (Ex. 1, General Requirements, p. 8).
27. Section 01200.03 of the General Requirements provides as follows: A. Job progress meetings shall be scheduled by [DASNY] or [Turner] during the course of construction. [Plato/Emco] or [Plato/Emco's] duly authorized representative and such Subcontractors as required by [Plato/Emco] or [DASNY] or [Turner] shall be present at all job progress meetings. The Contractors and Subcontractors shall answer questions on progress, workmanship, approvals required, delivery of material and other subjects concerning the Work. The purpose of such meetings is to coordinate the efforts of all concerned so that the Work proceeds without delay to completion as required by the Contract.B. [DASNY] or [Turner] may require any schedule to be modified so that changes in the Work, delays or acceleration of any segment of the Work shall be reflected in such schedule. Each Contractor shall cooperate with [DASNY] or [Turner] in providing data for such changes in or modifications of schedules. (Ex. 1, General Requirements, p. 4).
28. Section
13.01A of the General Conditions provides: "During the progress of the
Work, other contractors may be engaged in performing work. The Contractor shall
coordinate the Contractor's Work with the work of said contractors in such manner as the Owner
may direct." (Ex. 1, General Conditions, p. 19).
29. Section 13.02A of the General Conditions provides: "The Owner may award
other contracts, work under which may proceed simultaneously with the execution
of the Work. The Contractor shall coordinate the Contractor's operations with those of other
contractors as directed by the Owner. Cooperation shall be required in the arrangements for
access, the storage of material and in the detailed execution of the Work." (Ex. 1, General
Conditions, p. 20).
30. Section 01040.04(C) oftheSupplemental General Requirements provides, in part,
as follows:
Coordination drawings shall be required to show the work of all major trades and
without excluding the work of any particular trade, and shall include but not be limited to the
following:
1. Sheet metal (HVAC) subcontractor
2. Plumbing subcontractor
3. Steam fitter subcontractor
4. Sprinkler subcontractor
5. Electrical subcontractor
6. Acoustical ceiling subcontractor
7. Drywall subcontractor
8. Pneumatic tube system subcontractor
(Ex. 1, Supplemental General Requirements, p. 6). [*22]
31. Section 01340.01A of the Supplemental General Requirements provides: "Shop drawings are drawings, diagrams, illustrations, schedules, test data, performance charts, cuts, brochures and other data specifically prepared prior to the work and submitted by the Contractor or any subcontractor, manufacturer, supplier or distributor to illustrate some portion of the Work." (Ex. 1, Supplemental General Requirements, p. 14).
32. Section 01040.04B1 of the Supplemental General Requirements provides: "Shop drawings required under work of individual specification sections will not be approved until coordination drawings have been approved." (Ex. 1, Supplemental General Requirements, p. 6).33. Section 01340.04 of the General Requirements and Section 01340.06 of the Supplemental General Requirements both provide that "No portion of the Work shall be commenced until required Shop Drawings or samples are approved by the Architect." (Ex. 1, General Requirements, p. 11; Supplemental General Requirements, p. 19).
34. Section 20.15 of the Genra1 Conditions, entitled "Waiver of Remedies," provides as follows: Inasmuch as the Contractor can be compensated adequately by money damages for any breach of the Contract which May be committed by the Owner, the Contractor agrees that no default, act or omission of the Owner shall constitute a material breach of Contract entitling the Contractor to cancel or rescind the same or to suspend or abandon performance thereof; and the Contractor hereby waives any and all rights and remedies to which the Contractor might otherwise be or become entitled to because of any wrongful act or omission of the Owner saving only the Contractor's right to money damages. (Ex. 1, General Conditions, p. 45).
35. Section 17.06 of the General Conditions provides that
The Contractor shall maintain and keep, for a period of at least six (6) years after
the date of final payment, all records and other data relating to the Work, including records of
Subcontractors and material suppliers. The Owner or the Owner's Representative shall have the
right to inspect and audit all records and other data of the Contractor, Subcontractors and
material suppliers relating to the Work. (Ex. 1, General Conditions, p.
35).
C. The DASNY/Turner Contract
36. Appendix A to the DASNY/Turner Contract (Ex. 5) provides, in part, that
"[Turner] shall perform the following services in relation to:
7. Progressing the Work
a. Expedite and coordinate the work of all Contractors.
b. Expedite and coordinate the progress of Architects and other Consultants.c. Determine the cause of and responsibility for any delays. Recommend appropriate remedial action.
d. Be cognizant of potential delays and direct the Contractor(s) to take the necessary measures to eliminate circumstances which may lead to a delay.
(Ex. 5 at p. A2, §7).
D. The Award of the HVAC Contract
[*23]
37. By letter dated August 19, 1999 (Ex. 35), DASNY advised Precision Mechanical, Inc. ("Precision") that DASNY intended to award a contract to Precision for the HVAC work on the Project, in the sum of $9,684,000.00 and directed Precision to proceed.
38. On December 6, 1999, DASNY and Precision entered into a "Separation Agreement" whereby DASNY and Precision agreed to end the contractual relationship formed on August 19, 1999, and agreed that $340,000.00 as the final compensation to be paid under the terms of the contract.
39. By letter dated January 19, 2000 (Ex. 67), DASNY advised RKI that DASNY intended to enter into a contract with RKI in the sum of $9,448,000.00 for the HVAC.[FN10]
40. The DASNY-RKI contract was executed by the parties on January 31, 2000. (Ex. 67).
41. The completion date of the DASNY-R.KJ contract was June 19, 2001. (Ex. 67, Art. III).
E. Witnesses and Certain Exhibits
Witnesses testifying on behalf of Plato/Emco were Al Oelsomino, James Gray, Thomas Comins, Jr., Michael J. Abi-Aoun, Thomas J. Novak, Kevin Burke, Joseph Patrick O'Reilly, Stanley Steven Zinner and James Beach. Al Gelsomino was the project manager for Plato/Emco. James Gray was the Director of Construction Administration for DASNY. Thomas Comins, Jr. was the senior project manager for Eaton. Michael J. Abi-Aoun was employed as a general superintendent by the firm Lovett-Silverman, a surety consulting firm that provided consulting services and project assistance for Plato/Emco's surety. Thomas J. Novak is a partner in the accounting firm of Sheehan & Company, who was engaged by Plato/Emco to analyze costs and prepare a claim on behalf of Plato/Emco. Kevin Burke was a project manager for S & S Construction Group, Inc., a subcontractor to Plato/Emco. Joseph Patrick O'Reilly is a partner with PC Associates, a tax and business consulting firm, who provided accounting services to S & S in connection with the Project. Stanley Steven Zinner is an attorney who represented S & S in connection with its claims arising out of the Project. James Beach is the owner of James R. Beach and Associates, who was retained by Plato/Emco's counsel to provide expert testimony with respect to scheduling.
Witnesses testifying on behalf of DASNY were Robert Kilar, Eugene Leung, Frank Regnery, Michael Kolk and Frank Yozzo. Robert Kilar was the project manager for Turner. Eugene Leung was the project manager for DASNY. Frank Regnery is a principal with Deloitte Financial Services, who was retained by DASNY to conduct a schedule analysis of the Project. Michael Kolk was the Director of DASNY's CUNY program. Frank Yozzo was the project superintendent for Turner.
The evidence includes minutes of Project meetings termed "TAC" meetings (for Turner,
Architect and Contractor). These minutes are in evidence as Exhibit 15, which consists of three
binders with tabs separating the minutes at each meeting. The evidence also includes
Plato/Emco's daily reports, which are in evidence as Exhibit K consisting of five binders.
Dated: New York, New York
December 30, 2009
[*24]
GEORGOULIS & ASSOCIATES, PLLC
Attorneys for the P1aintiff
By:
George Sitaras, Esq.
Chris Georgoulis, Esq.
45 Broadway, 14th Floor
New York, New York 10006
(212) 425-7854
HOLLAND & KNIGHT, LLP
Attorneys for the Defendant
By:
Frederick R. Rohn, Esq.
195 Broadway, 24th Floor
New York, New York 10007
(212) 513-3200
Footnotes
Footnote 1:For a complete description of the
facts and legal context of this case, see Plato Gen. Constr. Corp./Emco Tech Constr. Corp., JV.
LLC v Dormitory Auth. of the State of New York, 21 Misc 3d 1138A [Sup Ct, Kings County
2008].
Footnote 2:Critical Path Method or "CPM"
is a term of art describing the method to be implemented in scheduling and administering
complex construction contracts. See Morrison Knudsen Corp.. v. Fireman's Fund Ins.
Co., 175 F3d 1221, 1232 (10th Cir., 1999), for a discussion of the significance of this
process in managing and co-ordinating the diverse tasks necessary to the efficient construction of
a project like that herein. As noted in Morrison, a delay on the critical path will delay the
entire project. Section 01311.01 of the General Requirements of the Contract (Plaintiff's Ex. 1)
required DASNY to provide a CPM schedule.
Footnote 3:In a letter dated November 8,
1999, from Turner to DASNY, Robert Kilar, Turner's Project Manager, recites Precision's
deficiencies in performance, acknowledging that the tardy award of an HVAC contract had
already delayed the Project and indicating that Precision's failure to provide necessary submittals
was further delaying construction of underground steam lines which were a necessary precursor
to excavation work to be performed by Plato, specifically reporting Precision's refusal to provide
a CPM schedule. (Plaintiff's Ex. 37)
Footnote 4:This document is appended to
this decision.
Footnote 5: Plaintiff has also claimed
damages for delay on behalf of one of its subcontractors, S & S Construction, based upon a
liquidating agreement with that contractor.
Footnote 6:"In New York, all contracts
imply a covenant of good faith and fair dealing in the course of performance [citations omitted].
This covenant embraces a pledge that neither party shall do anything which will have the effect
of destroying or injuring the right of the other party to receive the fruits of the contract'
(Dalton, 87 NY2d at 389, quoting Kirke La Shelle Co. v Armstrong Co., 263 NY
79, 87 [1933])." 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144,
153 (2002). That defendant never alerted plaintiff to the massive redesign of the HVAC system
and refused to accommodate plaintiff's need for additional time to complete the Project suggest
an unconscionable breach of good faith by defendant. Particularly telling is Michael Abi Auon's
testimony that, notwithstanding his intimate examination of and involvement in the Project, he
first learned of Plaintiff's Exhibit 68, the change order for the extensive redesign of the HVAC
system, a year prior to trial through plaintiff's counsel. (Trans. of 7/16/09 at 1055)Two of
defendant's witnesses, Michael Kolk and Robert Kilar, even admitted to deliberate
misrepresentations made to plaintiff. Daily Reports of progress from the beginning of the Project
to October 2000 were not admitted at trial because they could not be found in DASNY's records.
Similarly, minutes of monthly program meetings between DASNY and CUNY (the actual owner
of the library) from the start of the Project to April 2001 were not produced although such
minutes should have been in the possession of both DASNY and CUNY. Robert Kilar testified
that the contents of progress reports that were purportedly prepared by Turner were dictated by
Eugene Leung of DASNY who directed "what to include and what not to include". (Tr. of 8/3/09
at 2016).
Footnote 7: Plaintiff's first subcontractor for
the millwork, Tricycle, went out of business in March 2001, prior to completing any of the
millwork. Its successor, Cayuga, which was not initially approved by Turner, would not accept
the installation portion of Tricycle's contract because of the extraordinary delays experienced in
the Project, requiring Plato to contract with a second company, Darken, to do the installation at
additional cost.
Footnote 8:The Liquidating Agreement
notes that plaintiff demanded $887,790 from S & S's surety for the completion of work,
reserving the right to seek more. The incorporation of the provision for priority payment of a
minimum of $750,000 in compensation for S & S's non-performance works as an
acknowledgment by S & S of the legitimacy of plaintiff's termination of its contract for cause.
Footnote 9: Damages are calculated by
plaintiff as total costs incurred by S & S ($2,520,258.33) plus 20% overhead and profit
($504,051.66) minus payments received by S & S ($1,915,919.54).
Footnote 10: RKI was subsequently
puchased by KeySpan Inc. or "KSI," and may be referred to as such herein.
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