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NJ Court Denies Contractor Summary Judgment On Subcontractor’s Claim For Contract Balances And Compensation For Extra Work – Duty Of Good Faith And Fair Dealing, “Pay-If-Paid” Clause, Payment Release, And New Jersey Trust Fund Act Considered
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Titan Stone, Tile & Masonry v. Hunt Construction Group, Inc.
Civ. No. 05-3362, 2007 U.S. Dist. LEXIS 19489 (D.N.J. March 19, 2007)
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| The Court decided several motions for summary judgment filed by a prime contractor to claims of a subcontractor. Among the motions decided, the Court addressed the duty of good faith and fair dealing attendant to an obligation to evaluate payment applications, the breadth of a “pay-if-paid” clause, whether a monthly release executed with a payment application barred claims for extra work performed after the pay period in the attendant payment application and whether the plaintiff adequately plead its claim for violation of the New Jersey Trust Fund Act.
The College of New Jersey hired Hunt Construction Group, Inc. (“Hunt”) as the contractor for the construction of a library (the “Project”). Hunt entered into a subcontract with plaintiff, Titan Stone Tile & Masonry, Inc. (“Titan”) whereby Titan would install the exterior panelized wall system for the Project (the “Subcontract”). Titan filed suit against Hunt alleging that Hunt failed to fulfill its obligation under the Subcontract by failing to provide adequate design drawings in a timely manner, delaying Titan’s progress on the Project, failing to make payment for work properly performed under the Subcontract and failing to pass through payment that Hunt received from the Owner for work performed by Titan. Titan also filed suit against Hunt’s surety claiming that it failed to honor its payment and performance obligations under the respective bonds issued for the Project.
Among several motions filed for partial summary judgment, Hunt and its surety (collectively “Defendants”) moved for partial summary judgment alleging that Titan is barred from claiming entitlement to certain progress payments and retainage because the Subcontract required Titan to submit a “Monthly Statement of Subcontract” to Hunt with each payment application and Titan failed to submit the statement with payment applications 14 through 16. Titan argued that it would submit a pencil copy, or draft payment application, during each pay period. Hunt would then either suggest changes or approve the pencil copy payment application before Titan would submit its final payment application. Titan argued that Hunt never responded to the pencil copies for the payment applications 14 through 16 and thus Titan’s obligation to submit a “Monthly Statement of Subcontract” had not arisen. Titan concluded that Hunt’s failure to respond to the pencil copies was a breach of Hunt’s implied duty of good faith and fair dealing and therefore the Hunt could not rely on its own bad faith conduct to evade payment responsibilities. The Court denied Defendant’s motion for partial summary judgment, concluding that a genuine issue of material fact remained as to whether Hunt’s failure to respond to pencil copies of payment application constituted a breach of Hunt’s duty of good faith and fair dealing.
Defendants also moved for partial summary judgment, relying on the Subcontract’s “pay-if-paid” clause, asserting that Titan was not entitled to retainage because the Owner had not released retainage to Hunt under the general contract. For its part, Titan argued that under New Jersey law, a “pay-if-paid” clause cannot be read to shift the risk of collection to Titan. Further, the clause is merely designed to postpone payment for a reasonable period of time after the work was completed. The Court denied Defendant’s motion for partial summary judgment, holding that there remains a genuine issue of material fact as to whether any provision under the Subcontract constitutes a clear indication that Titan and Hunt had agreed that the collection risk would shift to Titan.
Defendants also moved for partial summary judgment asserting that Titan waived its overhead and extra work claims because it executed a monthly release on February 3, 2005. Specifically, Defendants argued that the monthly release waived and released all claims of any kind that arose before each release was submitted. In turn, Titan argues that the monthly releases did not apply to Titan’s claims for extra work and overhead because the release pertained to work performed up to November 18, 2004 – the end date of the payment period for the attendant payment application. Titan claimed that the monthly releases specifically excluded work performed and properly completed after the date of the payment application. The Court denied Hunt’s motion for partial summary judgment holding that there remains an issue of material fact as to whether the waiver provision should be read to waive all existing claims as of the date of the release or only claims arising prior to the attendant application for payment.
Additionally, Hunt moved for partial summary judgment on the grounds that Titan failed to adequately plead its claim for violation of the New Jersey Trust Fund Act (the “Trust Fund Act”). The Trust Fund Act protects those who have claims for labor, material and other charges incurred in fulfilling the contract between the governmental body and its contractor. Accordingly, money paid by the government to a public contractor constitutes a trust fund for contractor’s laborers or materialmen. Hunt’s primary argument was that Titan must be able to show that Hunt received money in trust from the Owner that was not distributed to other subcontractors. The Court denied Hunt’s motion, holding that under the Trust Fund Act, Hunt would be liable to Titan even if the funds to which Titan was entitled had been forwarded to another subcontractor.
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the permission of LexisNexis).
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General Contractor Unable to Enforce Subcontract Bid Which Disclaimed Intent to Be Bound
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Fletcher-Harlee Corp. v. Pote Concrete Contractors, Inc.
2007 U.S. App. LEXIS 7808 (3d Cir., Apr. 5, 2007 )
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| The United States Court of Appeals for the Third Circuit held that, despite the commercial practice to the contrary, a subcontractor was not bound by the qualified bid it submitted to a general contractor. The subcontractor’s bid plainly stated that the price was for information purposes only and should not be relied on by the recipient.
General Contractor Fletcher-Harlee solicited subcontract bids for concrete work. As is an industry custom, Fletcher-Harlee stated in its solicitation letter that bids must be held open for a minimum of 60 days and also that the subcontractor must agree to be accountable for the prices and proposals submitted. Pote Concrete Contractors submitted a written bid. However, Pote included a disclaimer in its submission. In the bid, Pote stated that the price quote was for informational purposes only, was not a firm offer, should not be relied on and that Pote did not agree to be held liable for any of the terms that it submitted.
Despite the limitations in Pote’s bid, Fletcher-Harlee relied on the bid in preparing its general bid. When Fletcher-Harlee sought to enter into a written contract based on the terms Pote initially submitted, Pote refused to be bound and raised its price. As a result, Fletcher-Harlee was forced to use a different concrete subcontractor, increasing its cost on the job by $200,000.
Fletcher-Harlee brought suit in the United States District Court of New Jersey under the theories of breach of contract and promissory estoppel. The district court granted Pote’s motion to dismiss both claims. Fletcher-Harlee appealed to the Third Circuit.
On appeal, the Court applied basic principals of contract interpretation in affirming the motion to dismiss both claims. Following the contract principle that documents must be interpreted based on their plain meaning, the Court reasoned that “[w]hen the text of a subcontractor’s bid, which would typically be a firm offer, specifically states that it is not one, we must follow that text.” The Court’s rationale was that Fletcher-Harlee’s bid solicitation was not an offer, but was merely a request to submit an offer. Likewise, Pote’s response was not a firm offer, but was nothing more than a counteroffer since its terms materially differed from Fletcher-Harlee’s solicitation letter. Critical to the determination that Pote’s submission was not an offer was Pote’s disclaimer of intent to be bound by its submission. Without an offer and acceptance, there was no contract for Pote to breach.
Dismissal of the promissory estoppel claim was also appropriate because the because, in light of the disclaimers, Fletcher-Harlee’s reliance on the bid was not reasonable--a key element in establishing promissory estoppel.
Click here to view full opinion as PDF (provided with the permission of LexisNexis). |
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Pennsylvania Department Of General Services’ Conduct In Withholding Memorandum Disclosing Unsuitable Soil Conditions From Bidders Was Vexatious, Entitling Contractor To Recover Penalty Interest And Attorney Fees Under Prompt Payment Act
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DGS v. Pittsburgh Building Co.
2007 Pa. Commw. LEXIS 160 (Pa. Commw. Ct. April 5, 2007)
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| The Pennsylvania Commonwealth Court held that a contractor was entitled to recover penalty interest and attorney fees under the Pennsylvania Prompt Payment Act from the Department of General Services (“DGS”) when DGS had engaged in arbitrary and vexatious conduct by withholding payment for costs associated with a five-month suspension and unsuitable soil conditions when DGS was aware of, yet failed to disclose, problematic soil conditions.
DGS entered into a contract with the Pittsburgh Building Company (“PBC”) for the construction of a one-story armory building on a 22-acre site in Pennsylvania. PBC issued a subcontract to Fire-R Excavating, Inc. (“Fire-R”) to perform site work pursuant to DGS specifications. DGS issued a Notice to Proceed with a ten-month completion time on October 10, 2003. According to the bid documents, including a geotechnical survey provided by DGS, the Project consisted of a balanced site, where materials from higher elevations could be used to fill lower elevations without the need for borrowing fill outside the site for excavation purposes.
Shortly after PBC and Fire-R commenced work, they encountered soil with excessive moisture. After two-weeks of unsuccessful attempts to dry out the soil, PBC notified DGS that they were delayed due to “weather and soil conditions.” The design professional proposed suspending the Project or utilizing shale or other imported crushed stone to use as fill at the site.
Due to cost concerns, DGS suspended work effective November 19, 2003. DGS notified PBC that it was suspending work pursuant to Article 12.1 of the General Conditions of the Contract, permitting the suspension of work when a contractor unduly risks damage to a structure or installation. DGS stated that while it would grant an extension of time, it would not pay any additional costs to PBC.
DGS ended the suspension on April 9, 2004 and directed PBC to recommence work by April 15, 2004 with a revised completion date of January 10, 2005.
Upon restarting work, PBC and Five-R continued to encounter problems with the wet soil. In May 2004, when the soil conditions worsened, PBC ordered a study of the soil and discovered that it contained a large amount of clayey soils that were unsuitable for fill pursuant to the Project specifications. On June 18, 2004, PBC was directed to use soil from an adjacent hillside for fill. On June 28, 2004, PBC and Five-R restarted the excavation work under protest, using the acceptable material from the adjacent hillside. As a result, the Project suffered an eleven-month delay to all subsequent work.
After DGS refused to pay PBC additional compensation, PBC filed a claim with the Board of Claims seeking to recover costs for the Project suspension and for increased costs due to unsuitable soil and concealed subsurface conditions. The Board awarded PBC $867,171.00 in damages for the five-month suspension and the unsuitable soil conditions. The Board found that DGS’ suspension of the work was for its own convenience, and was not justified under Article 12.1 as PBC was not causing undue risk to a structure or installation, thus entitling PBC to recover damages.
The Board also found that PBC properly relied upon DGS’ geotechnical report of the soil conditions, provided as part of the bid documentation, as PBC did not have time during the bid process to conduct its own investigation. DGS’ geotechnical report failed to accurately reveal the extent of the clayey soils and the subsurface seeps and springs.
The Board also found that DGS failed to disclose an August 1999 memorandum that incorporated a report identifying a significant presence of clayey materials and concluded that “the site is unsuitable for earthwork in winter and early spring.” Based on the withholding of the August 1999 memorandum, the Board found that the geotechnical report, by itself, was a material misrepresentation. The Board held that DGS engaged in constructive fraud, breach of contract, and active interference with PBC’s performance of its contractual duties. The Board found that the contractual provisions relieving DGS of its liability for additional costs and damages were unenforceable due to DGS’ constructive fraud and active interference.
The Board declined, however, to award PBC penalty interest and attorney fees under the Prompt Payment Act, holding that (1) penalty interest and attorney fees are only available when a progress payment is withheld and (2) DGS’s conduct did not rise to the level of arbitrary and vexatious.
On appeal, the Commonwealth Court affirmed the Board’s findings except for the denial of penalty interest and attorney fees under the Prompt Payment Act. Recognizing that the Prompt Payment Act provides for the recovery of penalty interest and attorney fees upon a showing of bad faith, the Court held that DGS engaged in vexatious conduct when it withheld payment for costs associated with the five-month suspension and the unsuitable soil conditions.
The Court found that since DGS knew of the soil conditions as confirmed by the August 1999 memorandum, yet directed PBC to proceed with work on the Project regardless, DGS’ conduct was in bad faith. The court also found that DGS’ conduct was vexatious when it claimed that PBC’s conduct put the Project at risk and thus justified the Project suspension in the first place. Further, the Court noted that withholding the August 1999 memorandum was a material misrepresentation of the site conditions.
The court emphasized that the findings of constructive fraud and active interference confirmed that DGS did not have sufficient grounds to withhold payment for costs related to the suspension of the work and the soil conditions. The Court remanded the case for a proper determination of penalty interest and attorneys fees due to PBC.
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Contractor’s Negligent Supervision Claims Against Construction Manager Require Privity, But Negligent Representation Claims Do Not
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Dynalectric Co. v. Whittenberg Constr. Co.
2007 U.S. Dist. LEXIS 27025 (W.D. Ky. Apr. 10, 2007)
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| Defendant project-owner Luther F. Carson Four Rivers Center, Inc. contracted with Whittenberg Construction Company to serve as general contractor in the construction of a fine arts facility and with defendant Ray Black & Son, Inc. to serve as construction manager. Whittenberg contracted the electrical contracting work to Plaintiff Dynalectric. Dynalectric brought suit against Four Rivers and Black, alleging that they had caused its work to take longer and cost more than anticipated and as a result Dynalectric had not been fully compensated for its work on the project.
Black moved for dismissal pursuant to Fed. R. Civ. P. 12(b)(6), contending that the claims against it were not viable, and requesting to be dismissed from the action. As a threshold matter, Black argued that Dynalectric’s claims were barred by a one year statute of limitations under K.R.S. §413.245 which provides that a civil action arising out of the rendering of “professional services” must be brought within one year of the occurrence. Professional services are defined under K.R.S. §413.243 as “any service rendered in a profession required to be licensed, administered and regulated as a profession in the Commonwealth of Kentucky.” The preliminary issue was whether the services provided by Black were “professional services” within the meaning of the statute. Black submitted that because it had been retained for its expertise in the construction process, that its services were professional and the statute of limitations was applicable. The court held otherwise, finding that Black was not an architectural firm and that nothing in the pleadings indicated that Black was licensed, administered, or regulated as a professional. Accordingly, the one year statute of limitations was inapplicable to Dynalectric’s claims.
Count I of Dynalectric’s complaint alleged that “[a]s a direct and proximate result of intentional or negligent information or representations by Whittenberg, Four Rivers and/or Black, Dynalectric ha[d] been economically harmed.” Count II alleged that Black’s negligent design and negligent administration had caused Dynalectric economic harm. Black contended that the only claims against it were those in Count II. The District Court determined however that although Black was not included in the caption of Count I of the complaint, that under the standards of notice pleading, Black had been fairly informed of the negligent representation claims against it.
In analyzing the substance of the claims, the District Court turned first to Count II and Black’s contention that Dynalectric’s negligent design and negligent administration claims sounded in contract law and did not make out a cognizable cause of action under tort law. Under Kentucky law, if a claim is based in contract law, there must be contractual privity for a claim to proceed. Dynalectric did not address Black’s argument regarding contractual privity, but rather asserted that Black, as an agent of the Owner, was liable for its own torts. The issue then became whether the claims sounded in contract or tort.
In making that determination, the District Court applied the Kentucky Supreme Court case of Presnell Construction Managers, Inc. v. EH Construction, LLC, 134 S.W.3d 575 (Ky. 2004). In that case, a contractor had filed suit against the construction manager for economic harm allegedly caused by the construction manager’s negligent supervision of the project. The contractor had contracted directly with the owner and the agreement did not provide for a duty to run from the construction manager to the contractor. On those facts, the Kentucky Supreme Court dismissed the contractor’s negligent supervision claim, holding that it did not set forth a claim independent of the construction manager’s duties under the contract and therefore no tort claim could stand. It further held that because there was no contractual privity between the contractor and the construction manager, there was no basis for a contractual claim.
Applying the rule of Presnell to the case before it, the District Court observed that there was no contract creating privity between Black and Dynalectric and that Dynalectric’s negligent design and negligent administration claims were substantially similar to the negligent supervision claims in Presnell. Thus, under the Presnell standard, it held that Dynalectric’s Count II negligent administration claims failed as a matter of law could not proceed against Black.
In turning to Dynalectric’s Count I claims of negligent representation, the court again looked to the Kentucky Supreme Court’s analysis, noting that Presnell is also the controlling case on claims of negligent information. Black argued that in Presnell claims similar to those asserted by Dynalectric had been dismissed. But the District Court pointed out that only negligent supervision claims had been dismissed based on lack of privity and that Presnell had expressly found that “privity was not necessary to maintain a tort action.” The Dynalectric court observed that the Supreme Court had adopted section 552 of the Restatement Second of Torts and found that “the tort of negligent representation defines an independent duty for which recovery in tort for economic loss is available” in holding that negligent representation is an actionable tort in Kentucky.
Following the Presnell precedent, the District Court held Dynalectric had alleged a viable claim of negligent representation and that portion of the claim could proceed. The court declined Dynalectric’s request for leave to amend its complaint, stating that due to the lack of contractual privity, an amendment of the negligent administration claim would be futile. The court allowed Dynalectric’s Count I negligent representation claims to proceed and dismissed the Count II negligent administration claims.
Click here to view full opinion as PDF (provided with the permission of LexisNexis).
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Pennsylvania Court Holds Waiver Of Subrogation Provision Contained In AIA General Conditions Bars Insurer's Claim Even Though It Did Not Consent To Or Have Notice Of The Waiver
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Universal Underwriters Insurance Co. v. A. Richard Kacin, Inc.
916 A.2d 686 (Pa. Super. Ct. 2007)
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| The Superior Court of Pennsylvania held that the American Institute of Architects’ (“AIA”) form waiver of subrogation clause barred a subrogation claim even where the loss was created by the contractor’s own negligence. Relying on Penn Avenue Place Assoc., L.P. v. Century Steel Erectors, Inc., 798 A.2d 256 (Pa. Super. Ct. 2002), the court held that a warranty provision did not invalidate the waiver of subrogation and opined that the warranty provision provided a remedy only to the extent that losses were not covered by insurance. The court further held that an insurer does not need to be party to the contract containing the waiver of subrogation clause nor does the insurer need to consent to or have notice of the waiver of subrogation clause in order for it to be enforceable.
A. Richard Kacin, Inc. and Bassett Masonry, Inc. (collectively, the “Contractors”) were the general contractor and a subcontractor respectively on a construction project for Watson Chevrolet Oldsmobile (“Watson”). The Contractors’ work was performed in accordance with a standard AIA construction contract executed in 1999. In 2002, a rainstorm hit the project and a wall collapsed. Following the collapse, Watson received payment under its property insurance policy for the property damage and the insurer, Universal Underwriters Insurance, Co. (“Universal”), instituted a subrogation action against the Contractors and others alleging breach of contract and negligence seeking reimbursements for amounts paid to Watson. Universal alleged that the Contractors’ deficient construction caused the collapse. The trial court granted the Contractors’ motions for partial summary judgment, concluding that the waiver of subrogation provisions contained in the contract barred Universal’s claims.
Universal appealed the trial court’s ruling, first arguing that the warranty provisions of the contract would be superfluous or ambiguous if the waiver of subrogation provision was given effect. The Superior Court rejected this argument concluding that a clause waiving subrogation for “damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to” the contract was enforceable regardless of whether the damages were caused in any way by the contractor’s own negligence. To the extent that Watson’s damages were not covered by property insurance and hence subject to the waiver of subrogation provisions, the court opined that the warranty provisions afforded Watson with a means by which to pursue the Contractors for uninsured losses. The court based its decision on the basic contract principle requiring that various contract provision be harmonized with one another and not be read as to render any clause meaningless.
With respect to Universal’s second argument – that the waiver provisions were not enforceable against Universal because it was not a party to the contract nor did it have notice of or give consent to the waiver – the court found that neither notice nor consent were necessary to give effect to a waiver of subrogation provision. In rendering its decision on this issue of first impression in Superior Court of Pennsylvania, the court noted that there is a split among other state appellate courts as to whether notice and/or consent was required for a waiver of subrogation clause to be enforceable. The court first determined that the parties were free to agree to share the burden of either’s negligence by requiring the purchase of insurance and giving waivers of subrogation. The court next reasoned that in Pennsylvania “subrogation is a contingent and derivative right” thus an insurer can only recover the type of damages the insured could assert. Simply put, the waiver of subrogation served as a wavier by Watson of recovering any damages that were covered by the insurance policy, thereby extinguishing Watson’s cause of action against the Contractors and, in turn, Universal’s derivative claim.
The Court explained that its ruling allows for parties to contract as they wish. It noted, however, that, among other things, insurers can protect themselves from such waivers of subrogation by writing exclusions into their insurance policies denying coverage in the face of a subrogation waiver, by increasing premiums to offset loss of subrogation rights, by ascertaining whether their insured has waived subrogation rights prior to issuing an insurance policy, by obligating its insured not to waive subrogation, or by obtaining reinsurance.
Click here to view full opinion as PDF (provided with the permission of LexisNexis).
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Contractor’s Insistence That Subcontractor Execute Release Not Required By Subcontract As Condition To Final Payment Permits Imposition Of Penalty Interest Under Pennsylvania Contractors And Subcontractors Payment Act
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Scandale Associated Builders & Engineers, Ltd. v. Bell Justice Facilities Corp.
No. 4:03-CV-1773, 2007 U.S. Dist. LEXIS 25112 (M.D. Pa. April 4, 2007)
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| In January 2001, Scandale Associated Builders & Engineers, Ltd. (“Scandale”) entered into a subcontract (“Subcontract”) with Bell Justice Facilities Corporation (“Bell”) for work on the construction of the U.S. Penitentiary/Federal Prison Camp at Canaan, Pennsylvania (“Prison”). The Subcontract required Scandale to perform cast-in-place concrete work on the Prison. Bell was the general contractor and the United States through the Federal Bureau of Prisons was the Owner.
Scandale began its work in May, 2001 and completed its work in July, 2003. The project was delayed by, among other things, suspension of the earthwork for 54 days. The 54 day delay led to Bell’s earthwork subcontractor abandoning the project which increased the delay substantially.
After presentation of the Scandale’s case in chief, Bell submitted a Motion for Judgment as a Matter of Law (“Rule 52 Motion”) as to the three remaining counts of the complaint, 1) breach of contract 2) delay and impact costs claim; and 3) Pennsylvania Contractors and Subcontractors Payment Act (“PCSPA claim”).
Scandale submitted its brief in opposition to Bell’s Rule 52 Motion and the Court found that Bell was entitled to judgment as a matter of law on the delay and impact costs claim, but not as to the PCSPA claim. (Bell conceded that Scandale was entitled to judgment as a matter of law on its breach of contract claim in the amount of $287,307).
Bell contended that it was entitled to a judgment as a matter of law with respect to Scandale’s delay and impact costs claim because, among other reasons, 1) the “no damages for delay” provision in the Subcontract was enforceable and 2) Change Order 11 constituted a full accord and satisfaction.
The Court recognized that in Pennsylvania, an owner or general contractor cannot enforce a “no damages for delay provision” when the owner or general contractor affirmatively interferes with a contractor’s work or fails to act in some essential matter necessary to the prosecution of the work. Accordingly, because Scandale presented evidence that Bell actively interfered and failed to act in some essential matters, its delay claim was not as a matter of law barred by the “no damages for delay” clause.
However, the language in Change Order 11 was found to explicitly release all claims, precluding Scandale’s delay claim. Change Order 11 stated, in relevant part, “This Change order represents full and final settlement for time and money for the work required in this change, including delays…and other impact costs associated with this change.” The Court found that Change Order 11, executed by Scandale, contained comprehensive release language and regardless of Scandale’s claimed intent not to release delay claims, it in fact did so.
With respect to the PCSPA claim, the Court found that the PCSPA claim remained a viable claim and judgment thereon would be reserved until after Bell had a chance to put on its case once the trial resumed.
Specifically, the Court determined that although Bell contended Scandale, pursuant to the contract, was required to sign a final waiver prior to final payment, no such provision existed in the Subcontract and therefore Bell’s contention failed. Further, the Court rejected Bell’s argument that because it tendered the contract balance to Scandale, Bell was in compliance with the PCSPA. However, because the tender was predicated upon Scandale signing a final waiver, again, not required by the Subcontract, Bell’s qualified offer did not indicate it was in compliance with the PCSPA. Finally, the Court concluded Bell’s contention that it acted in good faith when it tendered payment to Scandale and therefore it fell within the “good faith exception” to the PCSPA’s penalties was insufficient. The Court agreed with Scandale, that Bell’s actions were motivated by its desire to have Scandale execute a final waiver and that was the type of behavior the PCSPA was designed to prevent.
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Prime Contractor Wins Summary Judgment Upholding Right to Terminate Subcontractor For Failure To Provide Submittals And Sufficient Work Force
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Quality Trust Inc. v. Cajun Contractors, Inc.
2007 U.S. Dist. Lexis 25431 (D. Kan. 2007)
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| The District Court granted the prime contractor summary judgment on its right to terminate a subcontractor for failure to provide submittals and sufficient work force, while at the same time holding that the contractor was not entitled to summary judgment on the subcontractor’s claims for delay damages and contract balances.
Prime contractor, Cajun Contractors, Inc. (“Cajun”), entered into a general contract with the United States Army Corps of Engineers ("COE") for the construction of a wastewater facility at Fort Riley, Kansas. The project entailed the partial demolition of an existing facility and the construction of a new facility. Cajun subcontracted with Quality Trust, Inc. (“QTI”) to erect eight metal buildings as part of the new facility. Under the subcontract, Cajun was to construct the concrete building pads, to procure the buildings through a third party supplier, and to provide the buildings for QTI to erect and finish.
Cajun terminated QTI for cause on June 26, 2004 due to QTI's failure to complete its work in a timely and qualified manner. At the time of its termination QTI had partially erected four of the eight metal buildings. QTI sued Cajun in breach of contract, alleging wrongful termination. Cajun filed for summary judgment on its right to terminate QTI, alleging that QTI's work did not meet the COE’s Critical Path Method (“CPM”) schedules as established in the subcontract, that QTI did not correct the concerns raised by Cajun in various correspondence, that QTI failed to provide proper submittals and to procure needed materials, and that QTI's workmanship, manpower and submittals, insurance and safety compliance were inferior to the Project's requirements.
Simultaneously, Cajun filed a counterclaim against QTI for breach of contract, alleging deficiencies in QTI’s work and seeking damages for increased completion costs subsequent to QTI’s termination. QTI filed for summary judgment on Cajun’s counterclaim, alleging that Cajun unreasonably delayed providing the concrete pads and metal buildings to QTI, demanded that QTI erect the buildings within an unreasonably short period of time and manner, wrongfully terminated the contract for cause, and refused to pay the QTI accordingly. Cajun’s defense to QTI’s summary judgment argument was that it released work to QTI consistent with the COE's CPM schedule.
The Court granted Cajun’s motion for summary judgment as to QTI’s wrongful termination claim, finding that Cajun met its summary judgment burden in proving that it repeatedly notified QTI that it had failed to complete and provide the submittals required by the subcontract and that it was not diligently performing the subcontract with a sufficient workforce to complete the buildings on schedule. The Court found that prior to Cajun's notices of default, QTI never furnished a written notice of unsuitable work conditions or a written notice of delay to Cajun. Having failed to avail itself of its express rights under the subcontract for extensions and delays and having no substantive proof to controvert all of the claims material breaches in its performance, the Court found that QTI's breach of contract claim for unjustified termination was subject to summary judgment.
The Court also granted Cajun’s motion regarding its counterclaim for breach of contract and damages. However, the Court denied Cajun’s motion for summary judgment as to QTI’s claims under the Miller Act and its breach of contract claim for unnecessary and unreasonable delays and interference with performance.
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