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Posted: January 9, 2020

Questions of Fact Regarding Defendant’s Alleged Misconduct Precluded Dismissal Based on Construction Contract’s No Damages for Delay Clause

On December 26, 2019, the First Department issued a decision in Tyrek Hgts. Erectors, Inc. v. WDF, Inc., 2019 NY Slip Op. 09386, holding that questions of fact regarding a defendant’s alleged misconduct precluded dismissal based on a construction contract’s no damages for delay clause, explaining:

Plaintiff has met its burden of pointing to evidence raising triable issues of fact as to whether WDF engaged in intentional misconduct by willfully interfering with plaintiff’s timely performance of its subcontracts. It is undisputed that the subject projects suffered extensive delays when a high-voltage cable owned by the Long Island Power Authority (the LIPA cable) was discovered running alongside the subway line on which the work was being performed. Subsequent to this development, an internal WDF claim position document authored by its then-COO states that it had been the logic of the team to delay doing work and try to blame it on the LIPA issue. Other documentary evidence indicates that WDF deliberately delayed work by not providing enough manpower to perform work when power on the LIPA cable is off. Another of WDF’s COOs likewise confirmed in deposition testimony that WDF would sometimes minimize the workforce, reducing the amount of work being done when the LIPA cable was de-energized. Record evidence indicates that WDF took advantage of the LIPA cable issues and other delays to make up for WDF’s underbid of the Projects.

Against this evidence of willful delay by WDF, the evidence of delays to plaintiff’s performance of its subcontract work, at least viewed in the light most favorable to plaintiff, takes on a hue of being willfully inflicted. Thus, WDF’s Five Stations Project Superintendent confirms that, contrary to industry custom, WDF refused to hire a surveyor to chart out areas where concrete needed to be “chopped” preliminary to structural work by plaintiff. Instead, WDF insisted on doing the surveying work itself, leading to many errors in the chopping and consequent delays for plaintiff. WDF also breached a contractual requirement to provide plaintiff with fixed platform shields for performance of elevated work, instead supplying it with less efficient man-lifts, and, even then, at times removing the man-lifts without explanation. WDF also, without explanation, and, according to the Three Stations Project Manager, arbitrarily, excluded plaintiff from the work staging area, hindering its ability to store equipment and materials. Finally, the Three Stations Project Manager testified that he objected to WDF’s issuance to plaintiff of notices of default, calling them not warranted, and was subsequently punished by WDF by being put in the cafeteria for a month.

Hence, we find that there is a triable issue of fact as to whether WDF acted in bad faith and with deliberate intent delayed the plaintiff in the performance of its obligation, which, if demonstrated at trial, would remove plaintiff’s claims under the 19th cause of action from the ambit of the contractual no-delay damages clause. We accordingly modify to deny so much of defendants’ summary judgment motion as sought dismissal of plaintiff’s 19th cause of action relating to the Five Stations Project. We note that, at this juncture, we leave undisturbed that portion of the motion court’s decision to hold in abeyance the portion of defendants’ motion seeking dismissal of plaintiff’s claims relating to the Three Stations Project, pending resolution of WDF’s claims against NYCTA, since it is still possible that the claim may be impacted or superseded by the outcome of the WDF-NYCTA dispute.

(Internal quotations and citations omitted).

One of the reasons parties often choose to have their contracts governed by New York law is that courts generally enforce agreements as written. Here, the contract provided that the plaintiff was not entitled to damages caused by a construction delay. As this decision discusses, there are circumstances when such clauses will not be enforced. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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Posted in Commercial, Contracts
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