Opinion
Index No. 63094/2022
01-11-2024
WDF Inc., Plaintiff, v. Arnell Construction Corp., Defendant.
Michael J. McDermott, Esq - counsel for pltf Forchelli Deegan Terrana LLP. - counsel for Defts
Unpublished Opinion
Michael J. McDermott, Esq - counsel for pltf
Forchelli Deegan Terrana LLP. - counsel for Defts
Robert S. Ondrovic, J.
In a breach of contract action, defendant moves to dismiss certain causes of action pursuant to CPLR 3211(a)(1), (a)(5), and (a)(7) (Motion Seq. 1).
Papers Considered NYSCEF Doc. Nos. 19-23, 27-33, 35
1. Notice of Motion/Affirmation of Joseph P. Asselta, Esq./Exhibits 1-2/ Memorandum of Law
2. Affirmation of Michael J. McDermott, Esq. in Opposition/Exhibits 1-5/ Memorandum of Law in Opposition
3. Reply Memorandum of Law
Discussion
By way of background, plaintiff commenced this breach of contract action by filing the summons and verified complaint on August 3, 2022. The dispute relates to a construction project at Public School 96 located at 2385 Olinville Avenue in the Bronx. It is alleged that defendant Arnell Construction Corp. (Arnell) and New York City School Construction Authority (SCA) entered a prime contract, wherein Arnell agreed to furnish labor, materials, services, and equipment for the renovation and construction at the project site. Thereafter, Arnell (as contractor) and WDF (as subcontractor) entered a subcontract dated July 17, 2013, wherein WDF agreed to furnish labor, service, materials, and equipment for HVAC work for an agreed upon price of $5,350,000.00. It is alleged that that the total aggregate price of the subcontract, with approved change orders and extra work, was $5,612,073.00, of which $58,857.00 has not been paid, although payment has been duly demanded.
In addition, it is alleged that at the request of Arnell, WDF performed labor and supplied materials and equipment for a purchase order (WDF PCO No.28 entitled "Mixed Air Damper") in the amount of $14,696.00, which has not been paid, although payment has been duly demanded.
Per the subcontract, WDF was due to commence its work on August 1, 2014 and that work was to be substantially completed by May 31, 2015. Upon information and belief, SCA declared the project substantially complete on December 28, 2016. It is alleged that in July and August 2015, WDF submitted to Arnell notices of delay due to being denied access to the job site and Arnell's and/or SCA's inability and/or refusal to approve design changes to the work site.
Beyond the outstanding payments on the subcontract and the purchase order (collectively demanded in the amount of $74,553.00), it is alleged that WDF suffered additional damages due to acts and/or omissions of SCA and Arnell resulting in increased costs and expenses incurred by WDF in the amount of $700,094.65, which WDF demanded from SCA and Arnell (WDF's Delay Claim). WDF alleges that in April 2016 it submitted its Delay Claim to Arnell and Arnell informed WDF that Arnell would incorporate same into Arnell's overall claim against SCA for damages suffered during the project. Upon information and belief, Arnell commenced an action in Supreme Court, Queens County against SCA, but despite repeated requests by WDF, Arnell has failed to provide updates or a copy of the claim encompassing WDF's Delay Claim. WDF alleges that Arnell failed to properly present, prosecute, and preserve WDF's Delay claim in Arnell's action against SCA.
Arnell Construction Corporation v New York City School Construction Authority, Supreme Court, Queens County, Index No. 717514/2017.
The complaint asserts eight causes of action: (1) breach of contract (related to outstanding payments due on the subcontract and purchase order); (2) account stated (same); (3) quantum meruit (same); (4) breach of contract (related to increased costs/impacts/delays in performance of subcontract); (5) breach of contract (related to WDF's Delay Claim); (6) breach of implied covenant of good faith and fair dealing; (7) breach of fiduciary duty; and (8) unjust enrichment.
Defendant now moves pre-answer to dismiss the third, fourth, fifth, sixth, seventh, and eighth causes of action pursuant to CPLR 3211(a)(1), (a)(5), and (a)(7).
In sum, defendant contends that (i) causes of action related to WDF's Delay Claim (namely the fourth, fifth, sixth, seventh, and eighth causes of action) should be dismissed to the extent WDF seeks to hold Arnell liable for damages caused by SCA; (ii) the fourth and fifth causes of action should also be dismissed because Arnell had no contractual obligation to assert WDF's Delay Claim against SCA; (iii) the sixth cause of action should also be dismissed as duplicative of the breach of contract causes of action; (iv) the seventh cause of action should also be dismissed because (a) there is no fiduciary relationship between the parties and (b) it is duplicative of the breach of contract causes of action; and (v) the causes of action related to quasi-contract claims (the third and eighth causes of action) should be dismissed because it is undisputed that a written subcontract exists.
Dismissal pursuant to CPLR 3211 (a)(1) is only appropriate "where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mut. Life Ins. Co., 98 N.Y.2d 314, 326 [2002]).
On a motion to dismiss pursuant to CPLR 3211(a)(7), the pleadings must be afforded a liberal construction and the Court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994]; Connaughton v Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 141 [2017]; Bass v D. Ragno Realty Corp., 111 A.D.3d 863, 863 [2d Dept 2013]). "In assessing a motion under CPLR 3211 (a)(7) a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one" (Leon, 84 N.Y.2d at 88 [internal quotation marks and citations omitted]).
Although defendant's application mentions CPLR 3211(a)(5), the application is devoid of any substantive arguments in support of relief under that subsection and therefore that subsection will not be addressed herein.
Arnell's liability for damages caused by SCA
Defendant contends that causes of action related to WDF's Delay Claim (namely the fourth, fifth, sixth, seventh, and eighth causes of action) should be dismissed to the extent it seeks to hold Arnell liable for damages caused by SCA.
"[A]bsent a contractual commitment to the contrary, a prime contractor is not responsible for delays that its subcontractor may incur unless those delays are caused by some agency or circumstance under the prime contractor's direction or control" (Triangle Sheet Metal Works, Inc. v James H. Merritt & Co., 79 N.Y.2d 801, 802 [1991]; see also Phoenix Elec. Contracting v Lehr Constr. Corp., 219 A.D.2d 467, 467-468 [1st Dept 1995]).
Here, the complaint does not allege that SCA was under Arnell's direction or control, but the complaint alleges delays and interference caused by SCA and/or Arnell. For example, the complaint alleges:
10. As set forth herein, by reason of the acts and/or omissions of the SCA and Arnell, the progress of WDF's work was negatively impacted, resulting in increased costs and expenses incurred by WDF.
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16. Continuing in August 2015, WDF submitted to Arnell notices of delay as a result of Arnell's and/or the SCA's inability and/or refusal to approve design changes to the work site (complaint at paras. 10 & 16 [emphasis added]).
Specific to the fourth cause of action for breach of contract related to increased costs, impacts, and delays in performance of the subcontract, the complaint alleges:
51. due to, inter alia, the SCA and Arnell's failure to coordinate and sequence the trade contractor's completion of predecessor work, WDF was forced to complete work in a piecemeal fashion and out of the anticipated sequence.
52. By reason of the foregoing, WDF's work was delayed by, inter alia, the above delays, interferences, inefficiencies, impacts to productivity, impediments, and extra and additional work that were caused by the SCA and Arnell.
53. As a result of the compressed schedule imposed by the SCA and Arnell, WDF suffered damages from delays, loss of productivity, work inefficiencies and redundant work.
54. In addition, the SCA and Arnell directed WDF employees to work overtime at premium rates and WDF was also caused.
55. The SCA and Arnell actively interfered with WDF's work and failed to properly and efficiently coordinate the Project, and as a result, WDF was forced to perform its work in unplanned, overcrowded conditions and concurrent with other trades (id. at paras. 51-55 [emphasis added]).
Similar references to Arnell and SCA are alleged in the fifth cause of action.
Although plaintiff may not ultimately be entitled to any damages caused solely by SCA, the complaint does not specify which entity caused the alleged delays and interference and therefore this branch of defendant's application is denied at this time to the extent the causes of action encompass delays and interference caused by circumstances under Arnell's direction or control (see Triangle Sheet Metal Works, 79 N.Y.2d at 802). Arnell's contractual liability to assert WDF's Delay Claim against SCA
Defendant also contends that the fourth and fifth causes of action should be dismissed because Arnell had no contractual obligation to assert WDF's Delay Claim against SCA.
In support, defendant submits the subject subcontract between WDF and Arnell and argues that the subcontract, citing section 15, only obligates Arnell to prosecute claims against SCA (as the owner of the project) for extra work performed by WDF and not any claims for delays caused by SCA.
Section 15 of the subcontract provides:
The Subcontractor hereby agrees that no work shall be considered as extra hereunder unless, before said work shall have been done, a separate written estimate therefor shall have been submitted to the Contractor in the same manner as is provided in the Principal Agreement. If the Contractor and/or the Owner refuses to approve the estimate for extra work, the Subcontractor shall nevertheless perform expeditiously the work called for, and in that event, should the Owner refuse to give such approval, if the Subcontractor so desires, the Contractor shall institute suit on behalf of the Subcontractor for compensation for such work providing that any and all suit fees and reasonable attorney's fees arising form such suit will be borne by the Subcontractor. This clause in no way obligates the Contractor to pay the Subcontractor's claim for extra work unless such work was first approved by the Owner. Notwithstanding anything to the contrary herein contained the Contractor shall at all times have the right to direct the Subcontractor to proceed forthwith to do any and all portions of the work hereunder regardless of any dispute between the Contractor and/or the Owner, and the Subcontractor (defendant's exhibit 2, subcontract at section 15 [NYSCEF Doc. 22] [emphasis added]).
First, to the extent the fourth cause of action attributes increased costs, impacts, and delays in performance of the subcontract to both Arnell and SCA, this branch of the motion to dismiss the fourth cause of action is denied because, as noted above, it encompasses damages due to Arnell's acts or omissions.
Second, the fifth cause of action consists of 11 paragraphs, the last eight of which are identical to the last eight paragraphs of the fourth cause of action. Only the first three paragraphs of the fifth cause of action differ:
64. WDF repeats, re-alleges and reiterates each and every allegation set forth in paragraphs 1 through 63 of its Verified Complaint as if fully set forth at length herein.
65. Further, as a result of acts and omissions of the SCA and Arnell, WDF suffered damages as documented in the WDF Delay Claim for extended general conditions costs incurred by WDF as a result of an approximately 8-month delay in achieving substantial completion on the renovation of the existing school building at the Project and related labor impacts.
66. The additional extended duration costs of construction for the WDF Delay Claim is $700,094.65 (id. at paras. 64-66 [emphasis added]).
Here, too, the complaint invokes actions by Arnell. To the extent WDF's Delay Claim includes damages caused by Arnell, the complaint sufficiently alleges a breach of contract vis-à-vis Arnell's acts and/or omissions that negatively affected plaintiff's performance under the subcontract as documented in WDF's Delay Claim (see Triangle Sheet Metal Works, 79 N.Y.2d at 802). The Court declines to narrowly interpret the fifth cause of action as limited to Arnell's alleged breach of the disputed obligation to assert WDF's Delay Claim against SCA.
As such, defendant is not entitled to dismissal of the fourth and fifth causes of action.
Breach of implied obligation of good faith and fair dealing
Defendant also contends that the sixth cause of action should be dismissed as duplicative of the breach of contract causes of action.
"The implied covenant of good faith and fair dealing is a pledge that neither party to the contract shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct" (Gutierrez v Government Empls. Ins. Co., 136 A.D.3d 975, 976 [2d Dept 2016]). Moreover, "[s]uch a cause of action is not necessarily duplicative of a cause of action alleging breach of contract" (id.).
Here, the sixth cause of action differs from the breach of contract causes of action (i.e., the fourth cause of action for breach of contract related to increased costs, impacts, and delays in performance of the subcontract) in that the sixth cause of action alleges Arnell, acting in bad faith, unilaterally modified the terms of the subcontract:
by imposing onerous and unforeseen requirements without additional compensation and sought to deprive WDF of the benefits of the Subcontract (complaint at para. 76);
and further alleges:
Arnell refused to authorize WDF to pursue its claims directly with the SCA and/or to appeal any determinations issued by the SCA and Arnell abrogated its contractual responsibility to seek appropriate compensation and time extensions for circumstances that negatively impacted the Subcontract and its ability to seek redress, and were beyond its control (id. at 79).
These allegations create daylight from the allegations set forth in the breach of contract causes of action (see Gutierrez, 136 A.D.3d at 977). To be clear, the complaint alleges Arnell breached its implied obligation of good faith and fair dealing by, among other things, preventing WDF from pressing its claims against SCA on its own, which is not encompassed by its breach of contract causes of action.
As such, defendant is not entitled to dismissal of the sixth cause of action.
Breach of fiduciary duty
Defendant also contends that the seventh cause of action should be dismissed because (a) there is no fiduciary relationship between the parties and (b) it is duplicative of the breach of contract causes of action.
"In order to establish a breach of fiduciary duty, a plaintiff must prove the existence of a fiduciary relationship, misconduct by the defendant, and damages that were directly caused by the defendant's misconduct" (Kurtzman v Bergstol, 40 A.D.3d 588, 590 [2d Dept 2007]). "Whether a fiduciary relationship has been established is an inquiry that is necessarily fact-specific. In undertaking that determination, we have noted that two essential elements of a fiduciary relation are de facto control and dominance" (Marmelstein v Kehillat, 11 N.Y.3d 15, 21 [2008] [internal citation and quotation marks omitted]).
Here, the complaint alleges that Arnell prevented WDF from pressing its claims against SCA and that Arnell informed WDF it would pursue claims on behalf of WDF. To the extent WDF relied on Arnell to press WDF's claims against SCA, the complaint alleges facts, when presumed to be true as they must be at the pleading stage, establish Arnell's de facto control and dominance of WDF's Delay Claims against SCA.
Moreover, defendant disputes it even had an obligation to press WDF's Delay Claim against SCA. To the extent no obligation exists, no duplication can lie.
As such, defendant is not entitled to dismissal of the seventh cause of action.
Quasi-contract claims
Defendant also contends that the causes of action related to quasi-contract claims (the third and eighth causes of action for quantum meruit on the subcontract/purchase order and unjust enrichment, respectively) should be dismissed because it is undisputed that a written subcontract exists.
"Quantum meruit and unjust enrichment theories are equitable in nature, and are appropriate only if there is no valid and enforceable contract between the parties covering the dispute at issue" (Stephan B. Gleich & Assoc. v Gritsipis, 87 A.D.3d 216, 223 [2d Dept 2011]).
"Quantum meruit may be pleaded in the alternative where there is a bona fide dispute as to the existence of a contract, or where the contract does not cover the dispute in issue" (Tutor Perini Corp. v State of New York, 209 A.D.3d 692, 698 [2d Dept 2022]).
"Where...the existence of a contract...is in dispute, a plaintiff may allege a cause of action to recover damages for unjust enrichment as an alternative to a cause of action alleging breach of contract" (F&R Goldfish Corp. v Furleiter, 210 A.D.3d 643, 646 [2d Dept 2022]).
Here, defendant argues that these two causes of action should be dismissed "based on the undisputed existence of the written subcontract between Plaintiff and Arnell" (defendant's mem. of law in support at 12). Assuming counsel's statement is a valid concession on behalf of Arnell such that the existence and validity of the subject subcontract are not in dispute, the analysis does not end there.
The third cause of action (quantum meruit) includes damages alleged under the purchase order, but defendant's application is silent as to the validity of that instrument. As such, defendant is not entitled to dismissal of the third cause of action.
The eighth cause of action (unjust enrichment) includes damages related to Arnell's obligation to press WDF's Delay Claim against SCA. Given that defendant disputes it had a contractual obligation to press WDF's Delay Claim against SCA, defendant is not entitled to dismissal of the eighth cause of action.
All other remaining contentions have been considered and are either without merit or rendered moot by the above determination.
Based on the foregoing, it is hereby
ORDERED that defendant's pre-answer motion to dismiss the third, fourth, fifth, sixth, seventh, and eighth causes of action pursuant to CPLR 3211(a)(1), (a)(5), and (a)(7) is DENIED in its entirety; and it is further
ORDERED that defendant shall answer the complaint within twenty (20) days of entry of this Decision and Order.