Donaldson Interiors, Inc. v Cauldwell-Wingate Co., LLC

[*1] Donaldson Interiors, Inc. v Cauldwell-Wingate Co., LLC 2018 NY Slip Op 50303(U) Decided on March 8, 2018 Supreme Court, New York County Reed, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 8, 2018
Supreme Court, New York County

Donaldson Interiors, Inc., Plaintiff,

against

Cauldwell-Wingate Company, LLC, Defendant.



653550/2014



Plaintiff: Donaldson Interiors, Inc.

CULLEN AND DYKMAN LLP

44 Wall Street

New York, NY 10005

By: Evi Kallfa

Defendant:Cauldwell-Wingate Company, LLC

Marcus Rosenberg & Diamond LLP

488 Madison Avenue

New York, NY 10022

BY: MICHAEL TODD CONTOS
Robert R. Reed, J.

Defendant Cauldwell-Wingate Company, LLC (Cauldwell) moves, pursuant to CPLR 3211 (a) (1) and (7), for an order dismissing the second amended complaint (Complaint) of plaintiff Donaldson Interiors, Inc. (Donaldson), or, in the alternative, pursuant to CPLR 2201, for an order staying this action.

The Complaint alleges that, on or about April 26, 2007, Cauldwell entered into a contract with the General Services Administration (GSA) for construction services on an infrastructure upgrade of the Thurgood Marshall United States Courthouse (the Courthouse), located at 40 Centre Street, New York, New York (the Prime Contract). On May 15, 2009, Donaldson and Cauldwell entered into a subcontract for renovation and infrastucture work on the Courthouse (the Subcontract). According to the Complaint, under the Subcontract, Donaldson was to perform interior work on the Courthouse project, including, among other things, drywall, carpentry, ceilings and temporary projection work, for a lump sum base price of $6,500,000.00. The Complaint alleges that, due to the landmark status of the Courthouse, work was conducted on a piecemeal and ad hoc basis in an effort to avoid unnecessary demolition and to preserve the historical character of the Courthouse, and because of the need for coordination among the various trades that were working on the project.

The Complaint further alleges that design changes, related defects, and extra work on the [*2]project resulted in an approved increase in the price of the Subcontract by $4,355,901.93, relating to approximately 266 written change order proposals, for a total contract value of $10,855,901.93. In addition, as a result of those changes, related defects, and extra work, Donaldson allegedly incurred $1,102,044.60 in change order costs relating to approximately 220 written change order proposals, and $202,557.03 in base contract work (for a total of $1,304,601.63), that was not paid by Cauldwell.

The Complaint alleges that, in connection with the design changes, instead of issuing written Subcontract change orders, Cauldwell issued verbal and written directives to Donaldson detailing the additional work to be done, and that Donaldson immediately complied with those directives, because the work of other trades depended on Donaldson's prompt performance of its work.

PROVISIONS OF THE SUBCONTRACT:

Extra Work:

According to the Complaint, Section 5 of the Subcontract, entitled CHANGES, provides as follows:

"The scope of Work shall be subject to change only by additions, deletions, or revisions thereto by the CONTRACTOR. The SUBCONTRACTOR shall be notified of such changes by receipt of a Subcontract Change Order ("SCO") specifying additional and/or revised drawings, specifications, exhibits, or written orders. SUBCONTRACTOR shall respond to the SCO within seven (7) days of receipt with a lump sum price to complete the revised scope of Work. No Work shall be done under the SCO without the written approval of the Project Construction Manager."

Second Amended Complaint, ¶ 25.

Claims:

Section 7.0 of the Subcontract requires Donaldson to provide Cauldwell with written notice of an event that may give rise to a change, as follows:

"SUBCONTRACTOR shall give CONTRACTOR written notice within seven (7) calendar days after the happening of any event which SUBCONTRACTOR believes may give rise to a claim by SUBCONTRACTOR for (i) an increase in the SUBCONTRACT price or (ii) additional time for performance. SUBCONTRACTOR shall continue performance of the Work during the time any claim by SUBCONTRACTOR hereunder is pending. The CONTRACTOR shall not be bound by any adjustments in the SUBCONTRACT price or schedule unless expressly agreed to by CONTRACTOR in writing."

Jureller aff, exhibit 2 (Subcontract), exhibit A, Subcontract Terms and Conditions, ¶ 7.0 at A-4.

In addition, Rider A to the Subcontract provides that:

"All financial claims due to extra work performed, delays or damages must be submitted within ten (10) business days of demobilization. Any financial claims made beyond this date will be null & void. Verbal agreements will not be acceptable; all claims must be in writing."

Jurieller aff, exhibit 2 (Subcontract), Rider A, ¶ 36.

Withholding of Payments by Cauldwell:

According to Donaldson, the Subcontract also incorporates Section 118 (e) and (g) of the [*3]Prime Contract, which require Cauldwell to furnish Donaldson with written notice of "the amounts to be withheld," "the specific causes for the withholding under the terms of the subcontract," and "the remedial actions to be taken by the subcontractor in order to receive payment of the amounts withheld," prior to the due date of any payment to any subcontractor that is subject to withholding. Second Amended Complaint, ¶ 28.

Dispute Resolution:

Section 15.0 of the Subcontract Terms and Conditions states:

"The Subcontractor acknowledges that the General Contract commits certain decisions and factual and legal determinations to the representative of the Owner designated the Contracting Officer including, but not limited to, decisions and/or determinations as to the quality of the work, the existence of differing site conditions, suspensions, or changes, and the appropriate compensation for any of the foregoing, or for any delay, impact or disruptions. The Subcontractor agrees that any decisions and/or determinations of the Contracting Officer shall be as binding upon the Subcontractor as upon Contractor. The Subcontractor further agrees that any factual and legal determinations by any Court, Board of Contract Appeals or other administrative tribunal that are binding upon Contractor shall also be binding upon the Subcontractor."

Jureller aff, exhibit 2 (Subcontract), exhibit A, Subcontract Terms and Conditions, ¶ 15.0 at A-5 - A-6.

Alternate Dispute Resolution:

Several sections in the Subcontract relate to alternate dispute resolution. Section 15.0 of the Subcontract, entitled "Dispute Resolution," provides in relevant part, as follows:

"The parties recognize that problems and disputes between them may occur and that it is preferable for them to reach an amicable resolution of same without the need to resort to formal dispute resolution procedures. In that regard, they each pledge to participate in good faith in voluntary and non-binding Alternate Dispute Resolution (ADR) procedures. However, in the event that such disputes are not resolved by mediation or another ADR procedure as Contractor and the Subcontractor may agree that such disputes shall be resolved at Contractor's sole option either in the manner and forum pursuant to which disputes between the Owner and Contractor are to be resolved under the terms of the General Contract, or according to law." Id. at A-6.

In addition, section 19.0 of the Subcontract provides for the incorporation of certain provisions of the Prime Contract into the Subcontract, including section 8 of the Prime Contract, which provides:

"(a) Nothing contained in the contract shall be construed as creating any contractual relationship between any subcontractor and the government....***"(c) The Government will not undertake to settle any differences between or among the Contractor, subcontractors, or suppliers."

Second Amended Complaint, ¶ 28.

The Complaint alleges that, on September 9, 2014, prior to filing the original complaint [*4]in this action,[FN1] Donaldson wrote to Cauldwell, in accordance with section 15.0 of the Subcontract governing alternate dispute resolution, seeking to resolve Donaldson's outstanding claim. That letter stated:

"[w]hile Donaldson's legal claim to the money owed is apparent and unassailable on the face of the contracts, and the supporting documents, this letter is provided in accordance with § 15 of the TMCH Subcontract Terms and Conditions and constitutes Donaldson's good faith effort to resolve this dispute without resorting to litigation. We ask that you reach out to the undersigned to discuss Donaldson's claims and Cauldwell Wingate's breach of the contracts in order for the parties to reach an efficient resolution of this matter."

Dee affirmation, exhibit A (Second Amended Complaint), exhibit 1 at 2.

Donaldson allegedly received no response to that letter and, on September 25, 2014, again wrote to Cauldwell stating:

"We would still like to resolve this dispute informally, however, we will pursue all available avenues to protect Donaldson's interest, up to and including litigating this claim to trial. To that end, please find attached a draft complaint that we will prepare and file if a response is not forthcoming. Again, Donaldson would prefer to avoid the expense that litigation would entail, but as your company has still not paid the full amounts owed for the work Donaldson performed, we will be compelled to file the complaint by Friday October 3, 2014 if we do not receive a response to our correspondence. A copy of our prior correspondence is attached for your reference."We ask that you reach out to the undersigned to discuss Donaldson's claims and Cauldwell Wingate's breach of the contracts to resolve this matter without resort to legal process." Id., exhibit A, exhibit 2 at 1-2.

On September 30, 2014, counsel for Cauldwell wrote to counsel for Donaldson apologizing for the delay in responding, discussing Donaldson's substantive claims, and annexing a copy of a decision in the case of New Am. Restoration v WDF, Inc., 2014 WL 4467736, 2014 US Dist LEXIS 120176 (SD NY, Aug. 27, 2014, No. 10 Civ 3638 [RMB]), which limited the contractor's liability to the subcontractor to the amount the contractor received from the property owner. The letter indicated that the Subcontract was similar to that in New Am. Restoration, and noted that Donaldson had joined Caldwell's delay claim to GSA. However, the letter did not respond to Donaldson's request to resolve the matter without resort to litigation.

On November 14, 2014, counsel for Donaldson wrote to counsel for Cauldwell indicating that a complaint had been filed, dealing with both the courthouse project and a project involving the Columbia Doctors Eastside project (Columbia Project), but stating:

"We have attached the filed complaint for your reference and would like to resolve this dispute without having to incur the expense and delay litigation will entail. As noted above, we would expect a response in the next ten days, otherwise we will serve the filed complaint on Cauldwell and prepare to litigate Donaldson's claims for payment. Please contact the undersigned, so we may avoid prosecuting the suit."Id., exhibit A, exhibit 4 at 2.

Donaldson now asserts four causes of action against Cauldwell in connection with its claims for unpaid change order costs and unpaid contract costs: 1) breach of contract - pending change order claim; 2) breach of contract - contract balance claim; 3) quantum meruit, and 4) unjust enrichment.

Cauldwell moves to dismiss, arguing, first, that Donaldson failed to comply with section 7.0 of the contract, which requires Donaldson to give written notice to Cauldwell within 7 days of the happening of an event which may give rise to a claim for an increase in the Subcontract price, and with section 36 of the rider to the Subcontract, requiring that all financial claims due to extra work performed, delays or damages be submitted in writing within 10 days of demobilization. Submitting a copy of the Subcontract, Cauldwell argues that, since neither of these requirements were met by Donaldson, the complaint must be dismissed based on documentary evidence.

Donaldson argues that the Complaint alleges that the course of conduct of the parties during the project modified the requirements of the contract. For example, according to Donaldson, Cauldwell failed to provide Donaldson with written subcontract change orders regarding changes in the work, as required by section 5 of the Subcontract, and Cauldwell did, in fact, approve and pay for some of Donaldson's costs caused by work changes in the project, despite the fact that those requests for payment did not conform to the requirements of section 7.0 of the Subcontract. Thus, according to Donaldson, the course of conduct of the parties resulted in a waiver of the written notice requirements. See Peter Scalamandre & Sons, Inc. v FC 80 Dekalb Assoc., LLC, 129 AD3d 807, 809 (2d Dept 2015)("[U]nder New York law, oral directions to perform extra work, or the general course of conduct between the parties, may modify or eliminate contract provisions requiring written authorization or notice of claims" [internal quotation marks and citations omitted]). Therefore, according to Donaldson, the documentary evidence does not "utterly refute" the allegations of the complaint. Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 (2002) ("motion to dismiss on the ground that the action is barred by documentary evidence . . . may be appropriately granted only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law").

On a motion to dismiss pursuant to CPLR 3211, the pleadings must be "afforded a liberal construction" and the allegations accepted as true, giving the plaintiff "the benefit of every possible favorable inference." Leon v Martinez, 84 NY2d 83, 87 (1994). "[A] dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Id. at 88.

Here, as described above, the complaint alleges that the provisions in the contract governing the manner in which the Subcontractor was required to notify the Contractor regarding changes that might affect the contract price (see Subcontract Terms and Conditions, ¶ 7.0) were altered as a result of the practices of the parties (see Complaint, ¶¶ 35-45). The court notes that, although Caldwell submits the affidavit of its President and Chief Executive Office Steven F. Jureller in support of its motion to dismiss, Jureller never directly addresses the allegations in the complaint about the course of conduct of the parties.

The court, therefore, concludes that the Subcontract does not utterly refute the allegations in the complaint and is, therefore, insufficient to justify dismissal at this stage of the litigation.

Cauldwell next argues that, in May 2014, Donaldson submitted a claim to GSA for $1,556,101.12 for delay damages as part of Caldwell's claim to GSA, and that, pursuant to paragraph 15.0 of the Subcontract Terms and Conditions, Donaldson has agreed that the determination of such claim by the GSA shall be binding upon Donaldson as upon Cauldwell, that Donaldson shall not be entitled to assert any claim that is inconsistent with GSA's decision, and that any lawsuit by Donaldson should be stayed during the pendency of the claim to GSA. According to Cauldwell, Donaldson's claim in this action, for $1,304,601.63, is for "essentially, the same damages" as the delay damages claim made to GSA in May 2014 through Cauldwell. Jureller aff, ¶ 17. Cauldwell argues that, by participating in Cauldwell's claim to GSA, Donaldson waived its right to maintain this action.

Quoting the footnote to the Summary of Additional Costs that is part of its Request for Equitable Adjustment,[FN2] Donaldson contends that the delay damage claim, that it submitted to GSA as part of Cauldwell's claim, is for different expenses resulting from the changes in the Courthouse project. That footnote states, "[t]his submittal excludes contract balance and disputed extra work for which Donaldson reserves its rights for payment. Donaldson expressly reserves its rights to amend this request to include or exclude costs as may be necessary or undetermined as of this time." Jureller aff, exhibit 3, Request for Equitable Adjustment at 4 (emphasis supplied).

That footnote contained in Donaldson's submission to GSA, at least raises a question about the validity Jureller's conclusory assertion that Donaldson's GSA claims, and the claims that form the basis for this action, are "essentially the same damages." Jureller's assertion is, therefore, insufficient to justify dismissal or a stay of this action. Donaldson may try to establish, as a factual matter, that the damages it claims in this litigation are indeed different from the claim submitted to GSA through Cauldwell.

Cauldwell next argues that the Complaint must be dismissed because of Donaldson's failure to comply with the Alternative Dispute Resolution provision which, according to Cauldwell, permits Cauldwell to select the method of binding dispute resolution.

In response, Donaldson contends that, on two occasions prior to serving Cauldwell with the initial complaint in this action, it wrote to Cauldwell seeking to resolve the dispute without recourse to litigation, and made a similar overture in the letter accompanying the served complaint.

As Donaldson argues, it appears that Cauldwell never responded to Donaldson's requests to discuss alternate dispute resolution. It is also not clear on what basis Cauldwell contends that it was deprived of its right to select the method of dispute resolution, when it apparently never bothered to respond to Donaldson's repeated requests. Cauldwell's motion to dismiss based on the alternate dispute resolution provisions of the contract, therefore, fails.

Finally, Cauldwell seeks dismissal of Donaldson's third and fourth causes of action, for quantum meruit and unjust enrichment, as duplicative of the breach of contract causes of action, citing Clark-Fitzpatrick, Inc. v Long Is. R.R. Co. (70 NY2d 382, 388 [1987])("The existence of a [*5]valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"); see also Selinger Enters., Inc. v Cassuto, 50 AD3d 766, 767 (2d Dept 2008).

Donaldson argues that, at this stage of the litigation, it is not required to elect between legal and equitable remedies. Citing On the Level Enters., Inc. v 49 E. Houston LLC (104 AD3d 500 [1st Dept 2013]), Donaldson contends that, until it seeks dispositive relief, it may plead inconsistent remedies, noting that CPLR 3014 specifically permits such inconsistent pleading. See CPLR 3014 ("Separate causes of action or defenses shall be separately stated and numbered and may be stated regardless of consistency"[emphasis supplied]).

"A 'quasi contract' only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment." Clark-Fitzpatrick, Inc., 70 NY2d at 388. Here, there are questions of fact regarding whether the express contract was altered by the parties as part of their course of conduct during the project. Therefore, it cannot be determined, at this stage of the litigation, to what extent the contract applies to the dispute.

Were this a motion for summary judgment by plaintiff, it would be required to select between its contract and quasi contract causes of action. Jones Lang Wootton USA v LeBoeuf, Lamb, Greene & MacRae, 243 AD2d 168, 177 (1st Dept 1998)("summary judgment being the procedural equivalent of a trial, a litigant must elect among inconsistent positions upon seeking expedited disposition"); see also Wilmoth v Sandor, 259 AD2d 252, 254 (1st Dept 1999)(plaintiff required to elect remedy at trial or on motion for summary judgment). This is, however, defendant's motion to dismiss the causes of action based on quasi contract and unjust enrichment; at this stage, plaintiff is not required to select between its seemingly inconsistent causes of action.

Accordingly, it is hereby

ORDERED that the motion of defendant Cauldwell-Wingate Company, LLC to dismiss or stay the litigation is denied; and it is further

ORDERED that defendant is directed to serve an answer to the Second Amended Complaint within 20 days after service of a copy of this order with notice of entry; and it is further

ORDERED that counsel are directed to appear for a status conference in Room 581, 111 Centre St., on April 5, 2018, at 11:00 AM.

Dated: March 8, 2018

ENTER:

______________________________

J.S.C. Footnotes

Footnote 1:The original complaint in this action was filed on Nov. 14, 2014.

Footnote 2:The summary lists 10 schedules of claims, including categories such as Carpenter Foremen Wage Escalation, Carpenters Wage Escalation, etc. amounting to $1,260,817.83, plus overhead, profit and a bond of 2%, for total additional costs of $1,556,101.12.