Commercial Division Blog

Posted: June 15, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Categories Commercial, Quantum Meruit

Alleging "Cardinal Changes" in Construction Work Sufficient to Warrant Granting Leave to Amend Complaint to Add Quantum Meruit Claim

On April 20, 2022, in L&M Fabrication & Mach., Inc. v. Lane Constr. Corp, Index No. 152899/2021, Justice Joel Cohen of the New York County Commercial Division granted plaintiff leave to file an amended complaint adding a cause of action for quantum meruit based on alleged “cardinal changes” in the construction work at issue.  The Court explained:

Under CPLR 3025 [b], leave to amend "shall be freely given" "in the absence of evidence of substantial prejudice or surprise or that the proposed amendments were palpably insufficient or patently devoid of merit" (JPMorgan Chase Bank, N.A. v Low Cost Bearings N.Y. Inc., 107 AD3d 643, 644, 969 N.Y.S.2d 19 [1st Dept 2013]). Defendants do not contend that Plaintiff's proposed amendment would cause "prejudice or surprise," so the only issue here is whether the proposed amendment is "palpably insufficient or patently devoid of merit." And in deciding that issue, "the court must examine the underlying merits of the causes of action asserted therein, since to [**2] do otherwise would constitute a waste of judicial resources" [*2] (Glenn Partition, Inc. v Trs. of Columbia Univ. in N.Y., 169 AD2d 488, 489, 564 N.Y.S.2d 361 [1st Dept 1991]). Therefore, "[a] proposed amendment that cannot survive a motion to dismiss should not be permitted" (Scott v Bell Atl. Corp., 282 AD2d 180, 185, 726 N.Y.S.2d 60 [1st Dept 2001]).

Here, the proposed quantum meruit claim is not "palpably insufficient or patently devoid of merit." Recovery in quantum meruit may be appropriate "in the face of a 'cardinal change' to a construction contract, where the change "effect[ed] an alteration to the essence of [the] contract sufficient to constitute an intentional abandonment of the original contract" (Laquila Group, Inc. v Hunt Const. Group, Inc., 997 N.Y.S.2d 99, 44 Misc 3d 1203[A], *11-12, 2014 NY Slip Op 51007[U] [Sup Ct, Kings County 2014]). To constitute a cardinal change, the change to the work must "affect 'the essential identity or main purpose of the contract,' such that it 'constitutes a new undertaking' (Tutor Perini Corp. v City of New York Off. of Admin. Trials and Hearings Contr. Dispute Resolution Bd., 193 AD3d 665, 666, 148 N.Y.S.3d 64 [1st Dept 2021], quoting Albert Elia Bldg. Co. v New York State Urban Dev. Corp., 54 AD2d 337, 388 N.Y.S.2d 462 [4th Dept. 1976]). "Whether there has been a cardinal change sufficient to invalidate a contract is generally a question of fact" (Laquila, 44 Misc 3d 1203[A], *12, citing Bovis Lend Lease LMB v GCT Venture, 6 AD3d 228, 229, 775 N.Y.S.2d 259 [1st Dept 2004]).

In the proposed FAC, L&M alleges that "the changes to the work orchestrated by Unionport were radical and fundamentally changed the essential identity and main purpose of the Purchase Order from that planned for and otherwise contemplated by the parties" (FAC ¶ 37). Among other things, as a result of the changes "L&M was required to provide permanent steel components for the Project, rather than the initially contemplated [*3] temporary steel components," which L&M alleges increased the cost, time, and complexity of its work (id. [emphasis in [**3] original]). In the end, L&M asserts that the changes nearly doubled the cost of its work (see id. ¶¶ 37-43).

The attorneys at Schlam Stone & Dolan frequently litigate claims requiring an in-depth knowledge of New York civil procedure. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.