RKI Construction, LLC v. WDF Inc. et al
MEMORANDUM AND ORDER denying 103 Motion for Summary Judgment by RKI Construction LLC ("RKI") and granting 101 Motion for Summary Judgment by Citizens Insurance Company of America ("Citizens"). For the reasons in the attached M emorandum and Order: (1) plaintiff RKI's motion for summary judgment on its claim against WDF Inc. ("WDF") is denied; (2) RKI's motion for summary judgment on WDF's counterclaim is denied; and (3) Citizens' motion for su mmary judgment against WDF's third-party claim is granted, and WDF's third-party claim against Citizens is dismissed. The remaining parties shall provide a joint pretrial scheduling order within twenty-one (21) days of this Memorandum & Order. Ordered by Judge Kiyo A. Matsumoto on 4/3/2017. (Grover, Vanish) (Entered: 04/03/2017)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
RKI CONSTRUCTION, LLC,
MEMORANDUM AND ORDER
14-cv-1803 (KAM) (VMS)
LIBERTY MUTUAL INSURANCE CO.;
ANDRON CONSTRUCTION CORP.; and
TRAVELERS CASUALTY AND SURETY CO. OF
-againstCITIZENS INSURANCE CO. OF AMERICA;
LEROY KAY; and
on the Third-Party Claims.
MATSUMOTO, United States District Judge:
Plaintiff RKI Construction, LLC (“RKI”) commenced this
breach of contract action against WDF, Inc. (“WDF”),1 which filed
a counterclaim against RKI and a third-party claim against Citizens
Insurance Company of America (“Citizens”) for breach of contract.2
Andron Construction Corp. (“Andron”) and Liberty Mutual Insurance Company
(“Liberty”) were originally named as defendants in this action. On April 18,
2016, Andron and Liberty settled with RKI and were dismissed by RKI, without
(See Dkt. 98, Stipulation of Partial Settlement and Partial
Dismissal Without Prejudice.) Travelers Casualty and Surety Company of America
(“Travelers”) is also a defendant but has not asserted any counterclaims.
2 Although WDF characterizes its claim against Citizens as a “counterclaim,” it
is mischaracterized. The court will utilize the term “third-party claim” to
describe WDF’s claims against Citizens.
RKI moves for partial summary judgment on (1) its breach of
contract claim against WDF, and (2) on WDF’s counterclaim for
breach of contract.
Citizens moves for summary judgment on WDF’s
third-party claim against it for breach of contract.
foregoing reasons, the court DENIES RKI’s two motions for partial
summary judgment against WDF, and GRANTS Citizens’ motion for
summary judgment against WDF.
RKI commenced this action on March 20, 2014, and filed
the operative amended complaint on March 11, 2015.
Amended Complaint (“Am. Compl.”).)
WDF filed its answer to the
Amended Complaint, counterclaim against RKI, and third-party claim
against Citizens on March 25, 2015. (Dkt. 38, Answer to Am. Compl.
May 12, 2016.
The summary judgment motions were fully submitted on
Oral argument was heard on December 22, 2016.
The following facts are undisputed between the parties
or are not materially contested. The claims before the court arise
out of a series of construction contracts and subcontracts to build
an elementary school in Ridgewood, Queens.
In December 2011,
Andron Construction Corp. and the New York School Construction
construction of the 5-story school, known as PS 290, in Ridgewood,
(Dkt. 103-1, RKI Statement of Material Facts (“RKI SOF”)
¶ 1; Dkt. 105-1, Local Rule 56.1 Counter-Statement of Undisputed
Facts as to RKI (“WDF RKI CSOF”) ¶ 1.)
(Dkt. 101-4, Declaration of Alice Kay in Support of
Motion for Summary Judgment (“Alice Kay Decl.”) Ex. B, Revised
Andron Subcontract dated Sept. 26, 2012.) The Andron-WDF agreement
indicates that it was a revised version of an earlier, undated,
Id. at Citizens 01044.
Also, in or around October
2012, WDF and RKI executed an agreement, pursuant to which RKI
Declaration of David Kay, Member of and Project Manager for RKI
(“David Kay Decl.”), Ex. A, WDF Subcontract Agreement dated May
30, 2012 and executed in October 2012.)
RKI agreed with WDF to
perform HVAC piping work at the agreed price of $1,252,000.00.
(Dkt. 103-1, RKI SOF ¶ 4; Dkt. 105-1, WDF RKI CSOF ¶ 4.)
a change order, the total value of the sub-subcontractor agreement
agreement, RKI retained Citizens, as surety, to issue a performance
bond on behalf of RKI.
Id. ¶ 6.
RKI, Citizens, and WDF entered
into the A312 Subcontractor Performance Bond (“performance bond”)
on January 4, 2013.
(Dkt. 101-5, Declaration of Bogda M. B.
Clarke, attorney for Hanover Insurance Group, an affiliate of
Citizens, in Support of Motion for Summary Judgment (“Clarke
Decl.”) Ex. A, A312 Subcontractor Performance Bond.)
a. Project Workflow as Directed by Andron
As the general contractor, Andron was responsible for
coordinating the work of all of the contractors on the job site,
which included dictating the project schedule and workflow.
103-1, RKI SOF ¶ 7; Dkt. 105-1, WDF RKI CSOF ¶ 7.)
provided a written project schedule or priority project schedule
to RKI or WDF.
Id. ¶ 8.
Andron had a whiteboard on the worksite,
which included various dates that related to the flow of work of
many of the trades, including the mechanical, engineering and
plumbing (“MEP”) work.
(See Dkt. 103-3, Declaration of Michael S.
Zicherman, attorney for RKI (“Zicherman Decl.”), Ex. C, emails
from WDF Senior Project Manager Denis Limanov, and Ex. D, email
Project Manager John Cutrone.)
Andron sometimes referred to the
significance and relevance of the whiteboard schedule to whether
or not RKI was completing its work in accordance with project
schedule is disputed by the parties.
During the entirety of the
project, Andron’s work and the completion of the project as a whole
(Dkt. 103-1, RKI SOF ¶ 16; Dkt. 105-1, WDF RKI CSOF
b. RKI’s Performance
Several issues regarding the adequacy and timeliness of
RKI’s performance remain disputed.
However, it is undisputed that
RKI began preliminary work for the project in May 2012, when it
began preparing shop drawings and attending project meetings.
(Dkt. 103-1, RKI SOF ¶ 12; Dkt. 105-1, WDF RKI CSOF ¶ 12.)
MEP rough-in work, RKI’s performance of which is a point of
contention, was not scheduled by Andron to commence prior to April
Id. ¶ 14.
Throughout the project, WDF repeatedly insisted and
communicated to RKI that RKI was behind schedule and required
additional manpower to complete the job.
Id. ¶ 25; (see also Dkt.
McLaughlin (“McLaughlin RKI Decl.”), Ex. B, emails from John
RKI did not have workers onsite for a full five day
work week until July 2013.
(Dkt. 105-1, WDF RKI CSOF ¶ 7; Dkt.
104-1, Response to WDF Local Rule 56.1 Statement of Material Facts
(“RKI SOF Response”) ¶ 7.)
On August 15, 2013, WDF issued a field
directive to RKI requiring RKI immediately to staff the project
with 14 men, which RKI disagreed with at the time.
RKI SOF ¶¶ 26-28; Dkt. 105-1, WDF RKI CSOF ¶¶ 26-28.)
22, 2013, John Cutrone, WDF’s acting project manager, sent an email
to RKI complaining that RKI was behind schedule, and setting
various milestones for completion.
(Dkt. 103-2, David Kay Decl.
incorporate the changes required in Bulletin No. 7, discussed
below, and specified additional deadlines.
RKI responded to
Mr. Cutrone’s email on August 22, 2013, contesting the deadlines.
(Dkt. 103-2, David Kay Decl. Ex. D, email from David Kay).
c. SCA Issues Bulletin No. 7
On April 28, 2013 the SCA issued Bulletin No. 7, making
certain changes to the project.
(Dkt. 103-3, Zicherman Decl. Ex.
F, Schedule update at SCA-01456.)
Bulletin No. 7 impacted the
HVAC work, including RKI’s piping work
the pipes be rerouted.
RKI CSOF ¶ 22.)
because it required that
(Dkt. 103-1, RKI SOF ¶ 22; Dkt. 105-1, WDF
WDF did not issue a written change order to RKI
with respect to Bulletin No. 7, but disputes that one was required.
Id. ¶ 24.
The SCA issued a change order for Bulletin No. 7,
although it is not clear from the record whether that change order
was issued to Andron or WDF.
(Dkt. 101-2, Joint Deposition
Transcript Appendix (“JDTA”) Ex. C, Gentile Dep. at 88:22-89:09
$139,440, but not stating to whom the change order was issued.)
d. WDF’s Nonpayment of RKI
RKI was required to submit invoices to WDF for which WDF
could seek reimbursement from Andron and the SCA.
that it was not paid for all of the work it performed from January
through June 2013.
(See Dkt. 103-2, David Kay Decl. ¶¶ 21-38;
Citizens, in Support of Citizens’ Motion for Summary Judgment
(“Lepelstat Decl.”), Ex. U, checks paid from WDF to RKI prior to
WDF concedes that it did not pay all of the money
that RKI requested; rather, it states that it paid all of the money
that it believed RKI was entitled to.
Decl. ¶¶ 29-33.)
(Dkt. 105-2, McLaughlin RKI
WDF claims that it made significant reductions
inflated and requested money for assignments that RKI had not
completed, which RKI disputes.
The parties also dispute
whether RKI was aware that WDF, Andron, and/or the SCA were
modifying the invoiced percentages of the RKI work completed.
WDF has also withheld money from RKI based on RKI’s work
on the project from June through September 2013.
WDF states that
it received $134,274.07 from Andron for work performed by RKI
between June and September 2013.
Id. ¶ 40.
WDF asserts that
$134,274.07 was credited to RKI as an offset to money owed to WDF
by RKI because WDF completed RKI’s work under the sub-subcontractor
agreement after RKI’s purported breach.
RKI claims that it
has not been paid $299,310.84, the amount due for all work by RKI
through September 16, 2013.
(Dkt. 103-2, David Kay Decl. ¶ 39.)
approximately $8,000, that had been approved by WDF, for work
performed in June 2013.
e. WDF Issues Notice of Default
On August 28, 2013, Liam McLaughlin, Vice President of
Operations at WDF, sent RKI and Citizens a “48-Hour Notice”
advising RKI that WDF was considering declaring a default because
RKI was not providing the appropriate amount of manpower necessary
to complete the project on time.
(Dkt. 103-1, RKI SOF ¶ 35; Dkt.
105-1, WDF RKI CSOF ¶ 35; Dkt. 103-2, David Kay Decl. Ex. E, letter
from Liam McLaughlin.)
In the letter, WDF demanded that RKI
complete various tasks within 48 hours.
performance bond issued by Citizens.
Also in the letter,
The letter demanded a
meeting between the three parties, WDF, RKI, and Citizens.
On August 29, 2013, RKI responded to the letter, disagreeing with
WDF’s statement that RKI was not providing the proper amount of
manpower to maintain the project schedule, and stating that RKI
had been diligently working towards the milestones provided by Mr.
Cutrone in his August 22 letter.
F, letter from David Kay.)
(Dkt. 103-2, David Kay Decl. Ex.
In the response, RKI also asserted
that it could not complete the cellar piping because it had not
received a change order from WDF for Bulletin No. 7.
On Friday, September 13, 2013 at 5:23 P.M., Becky Tung,
WDF’s in-house counsel, sent an email to various individuals at
Citizens and RKI stating that “[w]e intend to issue a notice of
Declaration of Becky Tung, General Counsel for WDF (“Tung RKI
Decl.”), Ex. C, email dated September 13, 2013, from Tung and Ex.
D, email dated September 13, 2013, from Tung.) The parties dispute
whether Ms. Tung’s email satisfies the requirement of the subsubcontractor agreement that WDF provide a second 48-hour written
(Dkt. 103-1, RKI SOF ¶ 60; Dkt. 105-1, WDF RKI CSOF ¶ 60.)
On Monday, September 16, 2013, WDF sent RKI a “Notice of
Default” stating that it was declaring RKI in default of the subsubcontractor
Article 26 of the sub-subcontractor agreement.
(Dkt. 103-1, RKI
SOF ¶ 59; Dkt. 105-1, WDF RKI CSOF ¶ 59; Dkt. 103-2, David Kay
Decl. Ex. G, letter from Liam McLaughlin.)
f. Citizens’ Performance Bond
On September 16, 2013, Ms. Tung sent an email to Bogda
Clarke, an attorney for Hanover Insurance Group, which is an
affiliate of Citizens, regarding WDF’s termination of RKI.
102-3, Declaration of Becky Tung (“Tung Citizens Decl.”) Ex. E,
email from Tung.) Ms. Tung requested a proposed plan of completion
for the project from Citizens, and explained that WDF would be
performing RKI’s work in the interim.
She further noted that
any work done by WDF in the interim would be charged to RKI and
On September 24, 2013, Citizens sent WDF
a letter advising that Citizens was undertaking an investigation
into WDF’s demand that Citizens perform in accordance with the
terms of the performance bond.
(Dkt. 102-3, Tung Citizens Decl.
Ex. F, letter from Jonathan Bondy.)
On October 21, 2013, Citizens
sent WDF a letter denying WDF’s claim under the bond based on: 1)
a contractor default because WDF did not pay RKI as was required;
and 2) because Citizens did not find RKI to be materially in breach
of their obligations under the sub-subcontractor agreement.
Ex. G, letter from Jonathan Bondy.
In the amended complaint, RKI brings claims against WDF
for breach of the sub-subcontractor agreement (Dkt. 32, Am. Compl.
¶¶ 26-28, 68-91); account stated, id. ¶¶ 29-33; quantum meruit,
id. ¶¶ 34-38; unjust enrichment, id. ¶¶ 39-43; violation of New
York General Business Law § 756-a, id. ¶¶ 44-48; and enforcement
of mechanic’s lien, id. ¶¶ 56-67.
WDF alleges a counterclaim against RKI and a third-party
claim against Citizens. In its answer, WDF alleges that RKI failed
to progress the work in accordance with the project schedule and
that WDF had to complete the work that RKI did not complete.
38, Answer ¶¶ 32-37.)
WDF’s third-party claim against Citizens
alleges failure to make a payment to WDF under the performance
misrepresentation third-party claim against Alice Kay and LeRoy
Kay, which is not currently before the court.
Id. ¶¶ 43-53.
RKI moves for summary judgment on the grounds that WDF
breached the sub-subcontractor agreement because it improperly
terminated RKI based on (1) the failure of WDF to comply with the
notice and cure provisions of the sub-subcontractor agreement, and
(2) WDF’s arbitrary and subjective performance standards.
103-4, RKI Memorandum of Law in Support of Plaintiff’s Motion for
Summary Judgment (“RKI Mot.”) at 14-29.)
Citizens moves for
summary judgment against WDF’s third-party claim, based on WDF’s
failure to comply with the conditions precedent of the performance
(Dkt. 101-1, Memorandum of Law in Support of Motion for
Summary Judgment by Counterclaim Defendant Citizens Insurance
Company of America (“Citizens Mot.”) at 14-22.)
bond required WDF to (1) pay RKI for the work completed, (2)
properly terminate RKI, and (3) agree to pay the balance of the
contract price to Citizens or to a subcontractor selected to
complete the sub-subcontract.
Id. at 14-22.
Citizens also argues
that it is not liable to WDF because RKI is not liable to WDF, and
Citizens’ liability is derivative of RKI’s liability.
Id. at 23-
WDF opposes the motion for summary judgment of RKI,
termination was proper because RKI failed to perform under the
(Dkt. 105, Memorandum of Law in
Opposition to the Motion by RKI Construction, LLC for Summary
Judgment (“WDF RKI Opp.”) at 3-9.)
With respect to Citizens’
motion, WDF contends that it did not fail to comply with the
Memorandum of Law in Opposition to the Motion of Citizens Insurance
Company of America for Summary Judgment (“WDF Citizens Opp.”) at
Summary Judgment Standard
Pursuant to Federal Rule of Civil Procedure 56, summary
judgment is appropriate if the movant demonstrates that there is
no genuine dispute as to any material fact, and the movant is
Catrett, 477 U.S. 317, 323-24 (1986).
“A dispute is not genuine
unless the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.”
Shiflett v. Scores Holding
Co., 601 F. App’x 28, 29 (2d Cir. 2015) (internal quotation marks
and citations omitted).
A court is required to “construe all
evidence in the light most favorable to the nonmoving party,
Dickerson v. Napolitano, 604 F.3d 732, 740 (2d Cir. 2010).
The moving party bears the burden of proof that no genuine issues
of fact exist, but, once it satisfies this initial burden, the
burden then shifts to the nonmoving party to present evidence that
there is a genuine issue for trial.
Celotex, 477 U.S. at 330-31.
“Summary judgment is appropriate where the record taken as a whole
could not lead a rational trier of fact to find for the non-moving
Rosenfeld v. Hostos Cmty. Coll, 554 F. App’x 72, 73 (2d
Cir. 2014) (internal quotation marks and citation omitted).
RKI’s Motion for Summary Judgment
a. Notice and Cure Provision
RKI asserts that WDF is liable for breach of contract
because it improperly terminated the sub-subcontractor agreement.
Specifically, RKI argues that WDF violated Article 26 of the subsubcontractor agreement because it did not provide a second written
notice after the August 28, 2013 notice.
(Dkt. 103-4, RKI Mot. at
WDF contends that Ms. Tung’s September 13, 2013, email
satisfied the second notice requirement and that the termination
of RKI was proper.
(Dkt. 105, WDF RKI Opp. at 3-5.)
reasons set forth below, the court denies RKI’s motion for summary
judgment against WDF on the issue of WDF’s allegedly improper
termination of the sub-subcontractor agreement because there are
disputed issues of material fact as to whether RKI performed and
therefore was properly deemed by WDF to be in default, and whether
WDF breached the notice and cure provision of the sub-subcontractor
Article 26 of the sub-subcontractor agreement specifies
several events that constitute default by RKI.
Kay Decl. Ex. A, at Citizens 00023-24.)4
(Dkt. 103-2, David
It permits the WDF the
[I]n every such event, if any, each of which shall
constitute a default hereunder by Subcontractor,
Contractor shall . . . after giving Subcontractor
written notice of default and forty-eight (48) hours
within which to cure said default, have the right to
exercise any one or more of the following remedies: . .
(iii) after giving Subcontractor an additional fortyeight (48) hours written notice (at any time following
the expiration of an initial forty-eight (48) hours
notice and curative period), terminate this Subcontract
in whole or part . . . .
Id. at Citizens 00024.
Article 10 of the sub-subcontractor agreement governs
Id. at Citizens 00011.
It states that “written notice
provided for in this [sub-subcontract] shall be deemed given if
delivered personally to an officer or partner or similar principal
position, as the case may be, of a party or sent by certified mail,
return receipt requested, in the custody of the United States
Postal Service to the authorized executive or representatives of
a party at its address.”
The sub-subcontractor agreement between WDF and RKI refers to WDF as the
“Contractor” and RKI as “Subcontractor.”
WDF sent RKI an initial termination notice on August 28,
2013, but it is unclear if the notice was delivered personally to
an officer, partner, or similar principal of RKI. (Dkt. 103-2,
David Kay Decl. Ex. E, letter from Liam McLaughlin.)
September 13, 2013, Ms. Tung sent an email to Michael Zicherman,
counsel for RKI, David Kay, a member of RKI, and various other
individuals at RKI and Citizens stating that “[w]e will default
RKI on Monday [September 16] per the performance bond terms.”
(Dkt. 105-3, Tung RKI Decl. Ex. D, email from Becky Tung at
The email was not sent by certified mail or personal
Generally, “[u]nder New York law, ‘strict compliance
with contractual notice provisions need not be enforced where the
adversary party does not claim the absence of actual notice or
prejudice by the deviation.’”
Schweizer v. Sikorsky Aircraft
Corp., 634 F. App’x 827, 829 (2d Cir. 2015) (citing Fortune
Limousine Serv., Inc. v. Nextel Commc’ns, 35 A.D.3d 350, 826
N.Y.S.2d 392, 395 (N.Y. App. Div. 2006)); see Vista Outdoor Inc.
v. Reeves Family Trust, --- F. Supp. 3d ----, No. 16-cv-5766, 2017
WL 571017, at *7 (S.D.N.Y. Feb. 13, 2017) (email notice rather
than written notice sufficient where defendants received notice
and did not claim any prejudice).
RKI’s reliance on Dale v. Indus. Ceramics, Inc., 150
Misc. 2d 935, 571 N.Y.S.2d 185 (N.Y. Sup. Ct. 1991) for the
proposition that strict adherence to the notice provision should
be enforced, (Dkt. 104, RKI Reply at 3-4), is unavailing as it is
contrary the aforementioned Second Circuit and New York State
Appellate Division case law.5
See also, e.g., Suarez v. Ingalls,
282 A.D.2d 599, 599-600, 723 N.Y.S.2d 380, 381 (N.Y. App. Div.
consequences of a failure to strictly comply,” strict compliance
will be required.
Schindler Elevator Corp. v. Tully Constr. Co.,
(dismissing claim where notice was insufficient because notice
clause set forth that failure to strictly comply would be deemed
waiver of any claims); see also Northgate Elec. Corp. v. Barr &
Barr, Inc., 61 A.D.3d 467, 468-69, 877 N.Y.S.2d 36 (N.Y. App. Div.
2009) (distinguishing a contract that did not involve a condition
precedent-type notice provision setting forth consequences of
failure to strictly comply with a notice clause that provided “in
default of such notice the claim is waived”).
because of its method of delivery are unpersuasive.
RKI has not
The additional authorities RKI cites to in its motion for summary judgment
are inapposite because the offending party in those cases either did not provide
actual notice of termination or failed to provide the contractual cure period
before terminating; here, WDF provided the requisite actual notice of
termination, albeit not precisely by the means of delivery described in the
sub-subcontractor agreement. (See Dkt. 103-4, RKI Mot. at 15-21.)
claimed that it did not receive actual notice, nor has it claimed
that it was prejudiced as a result of the sending of an email
instead of written notice as defined in the sub-subcontractor
See Thor 725 8th Ave. LLC v. Goonetilleke, 138 F. Supp.
3d 497, 509-510 (S.D.N.Y. 2015) (actual notice to a location other
than the location specified in the contractual notice provision is
sufficient where defendants received actual notice and were not in
any way prejudiced as a result of the deviation); Thurston v.
Sisca, No. 14-cv-1150, 2016 WL 4523930, at *6 (N.D.N.Y. Aug. 22,
2016) (email notice did not violate the notice provision because
it did not “undermine any of the objectives of the noticerequirement provision contained in . . . the Purchase Contract .
. . .”).
Nor does RKI persuasively argue that the notice clause
precedent type notice provision.”
The notice provision does not
include any of the “linguistic conventions to create conditions
precedent,” such as “‘if,’ ‘on condition that,’ ‘provided that,’
‘in the event that,’ [or] ‘subject to.’”
See Israel v. Chabra,
537 F.3d 86, 93 (2d Cir. 2008) (quoting Ginett v. Computer Task
Grp., 962 F.2d 1085, 1100 (2d Cir. 1992)). Therefore, RKI’s motion
for summary judgment on the grounds that WDF’s notice improperly
terminated the sub-subcontractor agreement is denied.6
RKI’s argument that WDF is estopped from arguing that the mode of service is
effective, (Dkt. 104, RKI Reply at 4-5), is not considered here because it was
b. RKI’s Performance
RKI also argues that it is entitled to summary judgment
terminated the contract.
(103-4, RKI Mot. at 23-29.)
that “the terminating party (in this case WDF) has the legal burden
to establish that the other party (in this case RKI) has materially
breached its contract . . . .”
Id. at 23.
RKI claims that WDF
did not base its decision to terminate the contract “on any
objective verifiable criteria.”
Id. at 26. WDF counters that the
demands by WDF were reasonable and permitted under Article 7 of
the sub-subcontractor agreement.
(Dkt. 105, WDF RKI Opp. at 5-
Because there are triable issues of fact as to whether or not
RKI performed under the contract, and whether WDF properly deemed
RKI to be in default, RKI’s motion for summary judgment on its
claims against WDF, and on WDF’s counterclaim against RKI, is
Under New York law, the elements for a breach of contract
claim are a “contract, the plaintiff’s performance under the
contract, the defendant’s breach, and damages resulting from the
Nature’s Plus Nordic A/S v. Natural Organics, Inc., 980
F. Supp. 2d 400, 408 (E.D.N.Y. 2013) (internal citation omitted).
raised for the first time in the reply.
104, 118 n.2 (2d Cir. 2011).
See Mullins v. City of N.Y., 653 F.3d
Article 26(a) of the sub-subcontractor agreement permits WDF to
declare a default if RKI “fail[s] to supply the labor, materials,
sufficient quantities for sufficient durations and of required
quality to perform the Work with the skill, conformity, promptness
and diligence required hereunder . . . .”
(Dkt. 103-2, David Kay
subcontractor agreement prescribes RKI’s obligation to timely
perform under the sub-subcontractor agreement.
Id. at Citizens
acceleration of the Work in order that it may be performed in
Subcontractor shall increase its staff or work overtime, or both.”
Id. at Citizens 00008.7
The record is replete with disputed issues of material
fact regarding RKI’s purported failure to perform, particularly in
light of WDF’s contemporaneous requests that RKI increase manpower
at the project site.
WDF submits evidence, disputed by RKI, that
RKI was perpetually behind schedule and otherwise failed to perform
RKI’s citation to United States v. O’Brien, is inapposite as the contract at
issue in O’Brien did not appear to have a diligence clause similar to Article
220 U.S. 321, 327 (1911) (“Under its terms the United States was not
concerned with the stages of performance, but only with the completed result.
. . . [I]t would be a very severe construction of the contract . . . to real
the reservation of a right to annul for a want of diligence not otherwise
promised . . . .”) (Emphasis added).
Liam McLaughlin, the Vice President of Operations
for WDF, testified that he was able to tell that RKI was not
performing its work properly and on time based on his forty years
of construction experience.
Dep. at 24:17-28:16.)
(Dkt. 101-2, JDTA Ex. A, McLaughlin
Antonio Gentile, the SCA’s Project Officer,
also testified at his deposition that RKI was behind schedule and
construction site. (Dkt. 101-2, JDTA Ex. C, Gentile Dep. at 20:0317; 137:03-139:25.)
Robert M. Loweke, Citizens’ expert witness,
testified at his deposition that some of RKI’s work required
(Dkt. 101-2, JDTA Ex. D, Loewke Dep. at 15:14-20.)
WDF has also submitted evidence that it viewed RKI as not supplying
sufficient manpower to adequately perform its work.
complaining to RKI that RKI was not supplying sufficient manpower
to adequately complete the job); see also Dkt. 105-3, Tung RKI
Decl. Ex. C at WDF02872 (email from the SCA expressing “grave
concerns” about RKI’s manpower on site).)
RKI disputes WDF’s
evidence and asserts that that it “did perform its work in an
adequate and timely manner, and did not delay the work of other
(Dkt. 104-2, Reply Declaration of David Kay (“David Kay
Reply Decl.”) ¶ 2.)
RKI counters Mr. Gentile’s testimony by
stating that the SCA never told RKI that it needed more manpower
or that RKI was delaying the project, and that “even if Mr.
McLaughlin’s friends at the SCA did ask RKI to add more workers on
the job, this does not mean that RKI was objectively behind
schedule . . . or that it was in default of its contractual
Id. ¶ 13.
Further, RKI states that no project
schedule was ever provided to RKI by WDF.
(Dkt. 103-1, RKI SOF ¶
whiteboard schedule did not show dates for their work; RKI claims
that this shows that WDF’s deadlines were arbitrary.
1, RKI SOF ¶ 33; Dkt. 103-2, David Kay Decl. ¶ 46; id. Ex. D.)
WDF argues that the lack of dates on Andron’s whiteboard schedule
shows that RKI’s performance was so poor that completion dates
could not even be estimated.
(Dkt. 105-2, McLaughlin RKI Decl. ¶¶
Neither party has presented the court with evidence or
testimony from Andron interpreting the whiteboard schedule and
evidence whether RKI’s performance was deficient.
Finally, the parties dispute whether or not the work
prescribed by Bulletin No. 7 was within the scope of the subsubcontractor agreement.
(Compare Dkt. 105-2, McLaughlin RKI
Decl. ¶ 20 (explaining that, at the time of this motion, Andron
still had not yet issued a change order to WDF under the AndronWDF agreement) with Dkt. 104-2, David Kay Reply Decl. ¶ 23 (stating
that the SCA issued a change order to Andron for Bulletin No. 7).)
The parties have not provided the court with a copy of Bulletin
No. 7, but have only provided a letter from Andron to the SCA
(Dkt. 103-3, Zicherman Decl. Ex. F at SCA-01455-
Nor have the parties presented testimony from Andron, SCA,
or any other witness regarding whether or not the work described
in Bulletin No. 7 was within the scope of the sub-subcontractor
Because of the numerous issues of material fact,
including those described above, the court denies RKI’s motion for
counterclaim for breach of contract.
Citizens’ Motion for Summary Judgment
Citizens moves for summary judgment on WDF’s third-party
claim because WDF failed to strictly comply with the conditions
precedent set forth in the performance bond. (Dkt. 101-1, Citizens
Mot. at 1, 14-22.)
The court agrees, and grants Citizens’ motion
for summary judgment.
Citizens argues that WDF failed to comply with the third
requirement under the performance bond, that the “Contractor has
agreed to pay the Balance of the Contract Price to the Surety in
accordance with the terms of the Construction Contract or to a
subcontractor selected to perform the Construction Contract in
accordance with the terms of the contract with the Contractor.”
(Dkt. 101-5, Clarke Decl. Ex. A § 3.3.)
Citizens argues that this
requirement is a condition precedent, and therefore WDF’s failure
to comply with it discharges Citizens from its obligations.
101-1, Citizens Mot. at 19-20.)
WDF does not dispute that it did
Instead, WDF contends that it was never
given the opportunity to “agree to tender the contract price to
[Citizens] since Citizens had denied WDF’s Bond claim before there
was any indication that Citizens would have otherwise taken over
the Project in accordance with the Bond.”
(Dkt. 102, WDF Citizens
Opp. at 5.)
Pursuant to the performance bond, Citizens’ obligations
arise only if WDF has notified Citizens that it was considering
placing RKI in default, WDF has declared RKI in default, and WDF
has agreed to pay the balance of the contract price to Citizens or
to a subcontractor selected to perform the construction contract.
(Dkt. 101-5, Clarke Decl., Ex. A § 3.1-3.3.) Citizens’ obligations
pursuant to paragraph 4 of the performance bond, to arrange for
completion of the construction or to pay WDF, arise after WDF “has
satisfied the conditions of Paragraph 3.”
Id. § 4.
As Citizens points out, Paragraph 3 of the performance
bond sets forth strict conditions precedent to its duties under
the performance bond, and courts have required strict adherence in
cases involving similar bond provisions.
Archstone v. Tocci Bldg.
Corp of N.J., Inc., 119 A.D.3d 497, 498, 990 N.Y.S.2d 44 (N.Y.
App. Div. 2014) (“[P]aragraph 3 of the subject AIA A312 performance
bond contains express conditions precedent to the liability of the
surety under the bond.
Since the plaintiffs failed to strictly
comply with the conditions of the bond, the Supreme Court properly
granted [surety’s] motion for summary judgment [for the claims
against it].”); East 49th St. Development II v. Prestige Air &
Design, LLC, 938 N.Y.S.2d 226 (Table), 2011 WL 4599708, at *9-10
(Sup. Ct. Kings. Cnty. Oct 6, 2011) (finding that where plaintiffs
did not offer contract balance pursuant to § 3.3, claims against
surety must be dismissed).
The Second Circuit has reached the same conclusion as
state courts in analyzing bond requirements that “were in the form
of” an American Institute of Architects A312 bond at issue here.
See U.S. Fidelity and Guar. Co. v. Braspetro Oil Services Co., 369
F.3d 34, 58 (2d Cir. 2004) (“As another condition precedent to the
declaring the Consortium in default, were required to pay the
Sureties the ‘Balance of the Contract Price’ in each of the
Contracts . . . a not atypical provision.”)
The Second Circuit
concluded that the condition precedent was satisfied where the
obligee sent a letter stating that “Pursuant to paragraph 3.3 of
the [bond] . . . [obligee] agrees to pay the [B]alance of the
Contract Price to the [S]urities.”
Id. at 59.
WDF unpersuasively argues that “WDF could never agree to
tender the contract price to [Citizens] since Citizens had denied
WDF’s Bond claim before there was any indication that Citizens
would have otherwise taken over the Project in accordance with the
(Dkt. 102, WDF Citizens Opp. at 5.)
WDF does not offer
any plausible excuse or reason for its failure to satisfy the
express conditions precedent before Citizens denied payment, or
any contrary interpretation of the performance bond or case law.
Further, WDF does not dispute that it failed to offer to pay
Citizens the balance of the construction contract.
the notice provision of the sub-subcontractor agreement, discussed
above, paragraph 3 of the performance bond constituted a strict
condition precedent with which WDF failed to comply.
Citizens’ motion for summary judgment is granted, and WDF’s thirdparty claim against Citizens is dismissed.8
Because the court grants Citizens’ motion for summary judgment on the above
mentioned grounds, it need not reach Citizens’ argument regarding WDF’s payment
to RKI and associated setoffs. (Dkt. 101-1, Citizens Mot. at 15-19.)
For the reasons stated herein: (1) RKI’s motion for
summary judgment on its claim against WDF is DENIED; (2) RKI’s
motion for summary judgment on WDF’s counterclaim is DENIED; (3)
Citizens’ motion for summary judgment against WDF’s third-party
claim is GRANTED, and WDF’s third-party claim against Citizens is
The remaining parties shall provide a joint pretrial
scheduling order within twenty-one (21) days of this Memorandum &
April 3, 2017
Brooklyn, New York
Kiyo A. Matsumoto
United States District Judge
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