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Decisions from New York courts on construction-industry-related topics will be summarized here periodically. Some of the decisions will be from appellate courts, which establish new law or clarify existing law. Others will be from trial courts, whose decisions on construction disputes generally are not reported to the industry or public. Nevertheless, these trial court decisions reflect how common construction contract disputes are likely to be resolved in similar cases.

Many of the decisions are accessible in full online, and links are provided to them. For those not available online, the full text can be obtained in hard copy by e-mailing Richard P. Dyer at rpdyer@thelen.com.

By Richard P. Dyer
Thelen Reid Brown Raysman & Steiner LLP

The electrical prime contractor on a multi-prime project sued New York City and a public agency for failure to default the prime general construction contractor long before that party withdrew from the project. In a summary judgment motion, defendants argued that a "no damages for delay" clause barred the claim. The court found that the defendants attempted to address the general contractor's failings and thus there was no evidence of intentional or reckless wrongdoing. The court further held that the delay was not unreasonable nor of a type not contemplated by the underlying contract, as other contractor delays were referenced in the contract. The court also found that the claim was barred because the plaintiff's failed to comply with the unusual notice and filing provisions of the contract -- a written notice of claim and commencement of an action within 60 days afterward. Here, plaintiff filed the action and served a notice of claim after the filing. Sound Electric Corp. v. City of New York; Supreme Court, New York County; Judge Stallman; June 2, 2000.

Dispute Board Decisions Get Deference Upon Review

The contractor sought review of a Contract Dispute Resolution Board determination in favor of the City of New York. Contractor sought to overturn the board's determination that the contract at issue included the cost of protecting certain cable television lines. The court rejected the contractor's claim, holding that the board's determination could be reviewed only for "fraud, bad faith, or palpable error," based on the language in the contract, with palpable error determined to be "equivalent to bad faith." In considering the board's decision, the court followed the rule of interpretation that all provisions of a contract are to be given meaning and determined that the decision did not reflect palpable error.

Cipico Construction Inc. v. City of New York; Supreme Court, New York County; Judge Moskowitz; October 5, 1999.

Motion Granted Based on Lack of Notice

Contractor sued the City of New York seeking the balance of funds allegedly due on a contract for a plumbing job, disputed additional work and damages due to withholding of information regarding concealed site conditions. The project entailed the renovation of a landmark historical building for a police station. City moved for partial summary judgment, asserting that plaintiff did not comply with the written notice and contemporaneous document submission requirements of the contract. The court granted the motion, ruling that the contractor did not comply with the notice of claim requirements.

Pace Plumbing Corp. v. Stein Partnership; Supreme Court, New York County; Judge Gangel-Jacob; October 18, 1999.

No Damage for Delay Clause Held Inapplicable

Plaintiff electrical contractor on a multi-prime project with a construction manager alleged that defendant school district impeded and delayed its performance of a construction contract, causing damages. After a seven-day bench trial, the court found that the construction manager had prepared only two coordinated construction schedules, which were incomplete, provided late and provided without later updates. The contract contained a no-damage-for-delay provision, the sole remedy being a time extension. The construction manager subsequently was terminated for default. The court found that the no-damage-for-delay clause was enforceable but would not bar plaintiff's claim for damages because defendant breached a fundamental obligation of the contract and the delays were not contemplated by the parties when the contract was entered -- both well-recognized exceptions to the no-damage-for-delay clause.

The fundamental obligations breached included the failure to schedule and coordinate the work (the construction manager's failures being attributed to its principal, the school district), which caused the electrical contractor's work to be performed in an inefficient, timely economical manner. The court further found that the delays were not contemplated by the parties. While the court acknowledged that the contractor could only recover damages after it provided written notice, such notice requirement was satisfied by a letter that asserted a claim for delay and inefficiencies, the specifics of which were set out in attached meeting minutes, correspondence and videotapes.

The court's decision was less instructive on damages. The contractor was denied recovery for extended home office overhead because of a lack of proof that delay caused an increase in home office overhead. No recovery was allowed for a warehouseman and warehouse truck for similar reasons. Without further discussion, the court set out recoverable damages for extended site overhead, labor increases, loss of productivity, small tools/consumables at 2 percent and profit at 10 percent.

Clifford R. Gray, Inc. v. City School District of Albany; Supreme Court, Albany County; Judge Maney; June 24, 1999.

Bonds' Expiration Strictly Enforced

Village sued surety company to enforce construction performance and maintenance bonds and to recover costs incurred due to defective work discovered after completion of the work. The court granted summary judgment, dismissing the action because the bonds and the contractor's guarantee expired one year after substantial completion, well before the discovery of the claimed defects.

Village of Rockville Centre v. Federal Insurance Co.; Supreme Court, New York County; Judge Cahn; March 3, 1999.

Rejection of Delayed Claim Affirmed

Contractor, awarded a contract to repair several train stations, challenged respondent's dismissal of its claim for additional compensation. After an agreed-upon design change, the contractor proposed that no change in the contract price would be necessary. The public owner, however, indicated that it would review the change for a possible credit due the owner. Seven months later, the contractor submitted a request for an increase in price that was swiftly rejected. The trial court affirmed the chief engineer's rejection because of the contractor's failure to submit a notice of claim within five days.

Anthony Marino Construction Corp. v. Nagaraja; Supreme Court, New York County; Judge Gammerman; February 19, 1999.

No-Damage-for-Delay Clause Enforced

Subcontractor sued contractor contending that the contractor failed to properly coordinate the work and administer the job, causing plaintiff to suffer delays. The court, after a three-day trial, found in favor of contractor.

The general conditions of the prime contract were referred to in a simple incorporation by reference clause in the subcontract. The court held that despite federal decisions to the contrary, state decisions supported the incorporation of the prime contract's no damage for delay clause, notice of claims provisions and shortened statute of limitation. The court found that the defense that the action was not commenced within the shortened period provided in the prime contract was a compulsory affirmative defense, which was not raised in the answer and thus was waived.

As for the 10-day notice of claims requirement, that provision was interpreted by the court as not constituting a "condition precedent" to recovery and, thus, did not have a preclusive effect on the claims. In any event, the evidence supported a finding that notice had been given both in writing and orally.

Finally, the court determined that the no-damage-for-delay clause barred the subcontractor's claims because the subcontractor failed to establish that the events complained of (failure to coordinate deliveries of materials required for the subcontractor to perform its erection operations) were uncontemplated by the parties or fell into any of the other three recognized exceptions to application of the clause set down by the Court of Appeals in Corinno Civetta Construction Corp. v. City of New York, 67 N.Y.2d 297, 502 N.Y.S.2d 681, 493 N.E.2d 905 (1986). Furthermore, plaintiff failed at trial to prove damages because of the lack of expert testimony, the failure of the job foremen to testify and the lack of evidence from daily logs, which were not admitted into evidence.

Burt Welding & Automotive Repair v. U.W. Marx Inc.; Supreme Court, Albany County; Judge Maney; January 6, 1999; aff'd 707 N.Y.S.2d 548 (3rd Dept. 2000).

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For more information about the issues covered in this report, please contact Richard P. Dyer in our New York office at 212-895-2117 or at rpdyer@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.





©2000 Thelen Reid Brown Raysman & Steiner LLP