Dart Mechanical Corp. v. Johnson Controls, Inc.
MEMORANDUM & ORDER granting in part and denying in part 25 Motion for Summary Judgment; denying 26 Motion for Summary Judgment; For the foregoing reasons, Johnson's motion for summary judgment (Docket Entry 26) is DENIED, and Dart's motion for partial summary judgment (Docket Entry 25) is GRANTED IN PART and DENIED IN PART. Dart's motion is specifically GRANTED on the unjust enrichment claim, the trust fund diversion claim, and the claim for backcharges, but otherwise DENIED. So Ordered by Judge Joanna Seybert on 12/15/2015. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
DART MECHANICAL CORPORATION,
MEMORANDUM & ORDER
-againstJOHNSON CONTROLS, INC.,
Marvin Schechter, Esq.
Michael D. Ganz, Esq.
Turnstead & Schecter
500 North Broadway, Suite 101
Jericho, NY 11753
James Barriere, Esq.
Nathan Sabourin, Esq.
Hinckley Allen & Snyder LLP
30 South Pearl Street
Albany, NY 12207
SEYBERT, District Judge:
This case arises out of a subcontract between Plaintiff
Controls, Inc. (“Johnson”), in which Johnson agreed to furnish and
install an automatic temperature control system (“ATCS”) as part
of a larger construction project (the “Subcontract”).1
commenced this action arguing that Johnson failed to complete the
The Subcontract can be found at Barriere Aff. Ex. D., Docket
Entry 26-7, at 15-22.
For the purposes of this Memorandum and
Order, the Court will use the page numbers generated by the
Electronic Case Filing System when referring to the parties’
The parties have both moved for summary judgment.
(Docket Entries 25, 26.)
As discussed below, Johnson’s motion for
summary judgment is DENIED, and Dart’s motion for partial summary
judgment is GRANTED IN PART and DENIED IN PART.
On April 23, 2003, Dart contracted with the City of New
York (the “City”), acting by and through the City’s Department of
Sanitation (“DSNY” or the “Owner”), to install a bus garage in New
York City (the “Prime Contract” or the “Project”).
The following facts are drawn from the parties’ 56.1
statements, their affidavits, and any other supporting
Before providing a factual background, the Court must address
Johnson’s argument that Dart failed to comply with the Local
Civil Rules and this Court’s Individual Motion Practices.
Johnson argues that Dart failed to provide, among other things,
a notice of motion in support of its summary judgment motion.
(See Def.’s Opp. Br., Docket Entry 30, at 17-18.) As a result,
Johnson requests that the Court deny Dart’s motion for noncompliance. But “[a] district court has broad discretion to
determine whether to overlook a party’s failure to comply with
local court rules.” Holtz v. Rockefeller & Co., Inc., 258 F.3d
62, 73 (2d Cir. 2001); Somlyo v. J. Lu-Rob Enters., Inc., 932
F.2d 1043, 1048 (2d Cir. 1991) (noting that a district court has
“the inherent power to decide when a departure from its Local
Rules should be excused or overlooked”) (citation omitted).
Thus, since the parties were “fairly and adequately apprised of
the nature and basis of the application,” the Court will
consider Dart’s summary judgment motion. See Sentry Ins. A Mut.
Co. v. Brand Mgmt., Inc., No. 10-CV-0347, 2013 WL 5725987, at *2
(E.D.N.Y. Oct. 21, 2013).
Stmt., Docket Entry 26-2, ¶ 4.)
Nearly two years later, Dart and
Subcontract, in which York would install an ATCS in exchange for
(Def.’s 56.1 Stmt. ¶ 5.)
(Def.’s 56.1 Stmt. ¶¶ 6–7.)
After York began work,
The ATCS work included,
among other items, the installation of thermostats, air handling
units (“AHU”), heat and ventilation (“H&V”) units, and smoke
(See Settlement Agreement.)
According to Dart,
Johnson was also required to install a carbon monoxide, nitrous
oxide gas monitoring (“CO/NO2”) system. (See, e.g., Compl., Docket
Entry 1-1. ¶ 12.)
To date, the Project has not been finished.
56.1 Stmt. ¶ 8.)
Dart alleges that DSNY is completing the ATCS
work and backcharging Dart for all costs.
¶¶ 6, 9.)
(Pl.’s 56.1 Stmt.,4
Dart further alleges that the City owes Dart an
additional $4,005,622.44 for approved extra and additional work.
(See Karol Aff. in Opp. Ex. 5,5 ¶ 35, at 24.)
Plaintiff’s 56.1 Statement can be found at Docket Entry 24, at
Exhibit 5 to the Karol Affidavit in Opposition can be found at
Docket Entry 28-3, at 14-35.
compensation for the Project.
(See Karol Aff. in Opp. Ex. 5.)
The City answered and counterclaimed against Dart and the other
(See Karol Aff. in Opp. Ex. 6.6)
argues, among other things, that Dart “delay[ed] completion of its
work and the work of other contractors on the Project.”
Aff. in Opp. Ex. 6, ¶ 174.)
As a result, the City is seeking both
liquidated and compensatory damages in an unspecified amount.
(Karol Aff. in Opp. Ex. 6, ¶ 177.)
The City notes that the Prime
Contract provides an assessment of liquidated damages.
Aff. in Opp. Ex. 6, ¶ 175.)
The Subcontract contains two articles relevant to this
Article 17 of the Subcontract sets out the procedure to
make a claim for extra or additional work.
As discussed below,
the parties agreed that Dart must approve any claims for extra or
additional work in a written change order:
17.1 The SUBCONTRACTOR shall make no claim for
extra or additional work unless performed
pursuant to a written change order executed by
an officer of DART and by SUBCONTRACTOR.
17.2 To avoid disputes about whether or not
changes were directed to be made, it is agreed
that all such directions, to be valid, must be
supported by a written work order form with a
specific number, signed by an officer of DART
prior to SUBCONTRACTOR’S performance of such
It is specifically understood
Exhibit 6 to the Karol Affidavit in Opposition can be found at
Docket Entry 28-3, at 36-77.
that the fact that a written work directive
has been issued does not, in and of itself,
establish that the work covered thereby is in
fact a change to the Subcontract but that,
directive is a strict condition precedent to
the subsequent issuance of a formal change
order in an otherwise proper case. A Change
Order to the Subcontract must be in writing
and signed only by an officer of DART. All
changes in the WORK that may be made by the
SUBCONTRACTOR without such written direction
from DART shall have been made solely at the
SUBCONTRACTOR’S risk, and where such changes
involve additional cost, the SUBCONTRACTOR
hereby waives all claims for additional
(Subcontract at 7) (emphasis added).
Article 18 details the Subcontract’s notice of claim
As set forth below, Johnson was required to issue
a notice of claim to Dart within seven days after the claim arises:
18.3 If the SUBCONTRACTOR claims any WORK or
disputed work required by DART involves extra
or additional work not required by this
subcontract, the SUBCONTRACTOR within seven
(7) days of receipt of a written order from
DART directing the performance of such WORK or
disputed work shall make a claim in writing to
DART stating that the WORK is being performed
under protest, the basis of the claim and a
detailed breakdown of the cost of labor,
material, equipment and other changes.
SUBCONTRACTOR’S failure to submit written
notice of claim and protest for extra or
disputed work within the time and manner
specified shall constitute a waiver of same
SUBCONTRACTOR for any cost or damages for such
extra or disputed work.
(Subcontract 8) (emphasis added).
Dart commenced this action against Johnson in Nassau
Complaint, Dart is seeking $14.7 million in damages based on four
claims: (1) breach of contract in an amount no less than $1 million
(Compl. ¶¶ 6-20); (2) delays and impacts to Dart’s Prime Contract
in an amount no less than $2 million (Compl. ¶¶ 21-23); (3) Dart’s
exposure to liquidated damages in an amount no less than $2.5
million (Compl. ¶¶ 24-28); and (4) Dart’s exposure to additional
damages in an amount no less than $9.2 million (Compl. ¶¶ 29-31).
In sum, Dart argues that Johnson failed to complete certain change
order work and failed to properly supervise and coordinate its
work on the Project.
(See Compl. ¶¶ 6-31.)
Johnson has denied
Dart’s allegations and asserted three counterclaims: (1) breach of
contract, (2) unjust enrichment, and (3) trust fund diversion
under Article 3-A of the New York Lien Law.
(See Am. Answer &
Countercls., Docket Entry 4.)
During discovery, Johnson requested that Dart itemize
and explain its alleged $14.7 million damages claim.
56.1 Stmt. ¶ 13.)
In response, Dart submitted the following:
1. Dart “will be backcharged by the Owner [i.e., the City
and DSNY] . . . . ;”
On May 17, 2013, Johnson removed the action to this Court.
(Docket Entry 1.)
2. Dart’s damages “will be fully ascertain[able] at the end
of the Project;”
3. Dart’s “exposure to Liquidated Damage[s] will be fully
ascertain[able] at the end of the Project;” and
4. Dart “and its other subcontractors have exposure to
additional costs and damages which will be fully
ascertainable at the end of the Project.”
(Def.’s 56.1 Stmt. ¶ 14.)
Unsatisfied, Johnson challenged the
sufficiency of these responses, so Dart issued a supplemental
“The cost to remedy and complete Johnson’s
work cannot be ascertained because the Owner
is to correct and complete Johnson’s work.
Dart will supplement its response when the
Owner determines this cost for which it will
The cost to Dart due to
Johnson’s delay cannot be ascertained because
the [P]roject is not closed.
Prime Contract provides for liquidated damages
at $2,000.00 per calendar day.”
(Def.’s 56.1 Stmt. ¶¶ 16–18 (emphasis in original).)
has now ended.
Pending before the Court are the parties’ cross-motions
for summary judgment.
(Docket Entries 25, 26.)
Dart moves for
partial summary judgment on four grounds: (1) breach of contract
for extra work, (2) unjust enrichment, (3) trust fund diversion,
and (4) a claim for backcharges.
(See Pl.’s Br., Docket Entry 25-
2, at 2, 7, 10, 11.)
Johnson moves for summary judgment arguing that Dart has
failed to prove that it suffered any damages, much less $14.7
(Def.’s Br., Docket Entry 26-1, at 10.)
Johnson is seeking to dismiss the Complaint or, alternatively, to
limit Dart’s award to nominal damages.
In addition to its summary
judgment motion, Johnson previously suggested that it would seek
sanctions under Federal Rule of Civil Procedure 11.
CIV. P. 11.
See FED. R.
In its reply papers, however, Johnson states that it
withdraws any requests for sanctions.8
(Def.’s Reply Br., Docket
Entry 32, at 7.)
standard on a motion for summary judgment before turning to the
Summary judgment is appropriate where “the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
FED. R. CIV.
P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
By letter to the Court dated July 16, 2014, Johnson indicated
that it would seek Rule 11 sanctions against Dart. (Docket
Entry 17 at 3.) (“In addition to its motion for summary
judgment, [Johnson] will also seek F.R.C.P. Rule 11 sanctions
against [Dart] based on the inflated monetary demand in [Dart’s]
Complaint.”) Although Johnson never filed a formal motion, Dart
argues that “[t]he imposition of Rule 11 sanctions is
discretionary and should be reserved for extreme cases . . . .”
(Pl.’s Opp. Br., Docket Entry 28-2, at 8 (internal quotation
marks and citation omitted).) In its reply papers, however,
Johnson withdraws its request for sanctions and reserves to file
a motion at a later date. (Def.’s Reply Br. at 7.) Thus, the
Court will not consider this issue.
247-48, 106 S. Ct. 2505, 2509-10, 91 L. Ed. 2d 202 (1986); Celotex
Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L.
Ed. 2d 265 (1986).
“In assessing the record to determine whether
there is a genuine issue to be tried as to any material fact, the
permissible factual inferences in favor of the party against whom
summary judgment is sought.”
McLee v. Chrysler Corp., 109 F.3d
130, 134 (2d Cir. 1997).
“The burden of showing the absence of any genuine dispute
as to a material fact rests on the party seeking summary judgment.”
Id.; see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90
S. Ct. 1598, 1608, 26 L. Ed. 2d 142 (1970).
A genuine factual
issue exists if “the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.”
Anderson, 477 U.S. at
To defeat summary judgment, “the non-movant must ‘set forth
specific facts showing that there is a genuine issue for trial.’”
Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000)
(quoting Anderson, 477 U.S. at 256).
“[M]ere speculation or
conjecture as to the true nature of the facts” will not overcome
a motion for summary judgment.
Knight v. U.S. Fire Ins. Co., 804
F.2d 9, 12 (2d Cir. 1986); see also Williams v. Smith, 781 F.2d
319, 323 (2d Cir. 1986) (“Mere conclusory allegations or denials
will not suffice.” (citation omitted)); Weinstock, 224 F.3d at 41
(“[U]nsupported allegations do not create a material issue of
“The same standard applies where, as here, the parties
filed cross-motions for summary judgment . . . .”
Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d Cir. 2001) (citing
Terwilliger v. Terwilliger, 206 F.3d 240, 244 (2d Cir. 2000)).
Thus, even if both parties move for summary judgment and assert
the absence of any genuine issues of material fact, “a district
court is not required to grant judgment as a matter of law for one
side or the other.”
Heublein, Inc. v. United States, 996 F.2d
1455, 1461 (2d Cir. 1993) (citation omitted).
party’s motion must be examined on its own merits, and in each
case all reasonable inferences must be drawn against the party
whose motion is under consideration.”
Morales, 249 F.3d at 121
II. Johnson’s Motion for Summary Judgment
Breach of Contract Claim
Johnson moves for summary judgment arguing that Dart has
failed to provide evidence in support of its $14.7 million damages
(Def.’s Br. at 10.)
Dart, however, has stated that “[t]he
cost to remedy and complete Johnson’s work cannot be ascertained
because [DSNY] is to correct and complete Johnson’s work.”
further states that the damages due to Johnson’s purported delay
However, the Prime Contract provides for liquidated damages at
$2,000.00 per calendar day.” (Def.’s 56.1 Stmt. ¶¶ 16–18 (emphasis
and alteration in original).)
“Under New York law, ‘an action for breach of contract
requires proof of (1) a contract; (2) performance of the contract
by one party; (3) breach by the other party; and (4) damages.’”
First Inv’rs Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 168 (2d
Cir. 1998) (quoting Rexnord Holdings, Inc. v. Bidermann, 21 F.3d
522, 525 (2d Cir. 1994)).
Here, the first element is undisputed,
but the parties dispute the second and third elements, arguing
however, focuses on the fourth element of damages.
At the summary
judgment stage, “‘[t]he failure to prove damages is . . . fatal to
[a] plaintiff’s breach of contract cause of action.’”
USA, Inc. v. Bartscher, No. 02-CV-4082, 2005 WL 2367613, at *8
(E.D.N.Y. Sept. 27, 2005) (alterations and ellipsis in original)
(quoting Cramer v. Spada, 203 A.D.2d 739, 741, 610 N.Y.S.2d 662,
664 (3d Dep’t 1994)).
As the Second Circuit has made clear, “New York courts
do not require scientific rigor in the calculation of damages.”
Lexington Prods. Ltd. v. B. D. Commc’ns, Inc., 677 F.2d 251, 253
(2d Cir. 1982); see also W. L. Hailey & Co. v. Niagra County, 388
F.2d 746, 753 (2d Cir. 1967) (collecting cases).
“[s]peculation or conjecture” is not enough.
Wolff & Munier, Inc.
v. Whiting-Turner Contracting Co., 946 F.2d 1003, 1010 (2d Cir.
1991) (internal quotation marks and citation omitted).
must be “reasonably certain.”
Tractebel Energy Mktg., Inc. v. AEP
Power Mktg., Inc., 487 F.3d 89, 110 (2d Cir. 2007) (quoting Wakeman
v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 4 N.E. 264, 266 (1886))
(emphasis in original).
But the “certainty” principle “refers to
the fact of damage, not the amount.”
Id. (emphasis in original).
Thus, if a plaintiff can “demonstrate a genuine issue of fact as
to the existence of actual damages resulting from the breach of
contract, then summary judgment . . . is inappropriate even if the
V.S. Int’l, S.A. v. Boyden World Corp., No. 90-CV-
4091, 1993 WL 59399, at *7 (S.D.N.Y. Mar. 4, 1993).
million in damages based on four claims: (1) breach of contract in
an amount no less than $1 million (Compl. ¶¶ 6-20); (2) delays and
impacts to Dart’s Prime Contract in an amount no less than $2
million (Compl. ¶¶ 21-23); (3) Dart’s exposure to liquidated
damages in an amount no less than $2.5 million (Compl. ¶¶ 24-28);
and (4) Dart’s exposure to additional damages in an amount no less
than $9.2 million (Compl. ¶¶ 29-31). Throughout discovery, Johnson
has demanded a detailed breakdown on how Dart arrived at these
(Def.’s Br. at 11-13.)
Johnson’s First Request for
Interrogatories specifically demanded that Dart provide:
An itemization of the total incurred
by Plaintiff to complete its work under the
Details regarding payments made to
and by Plaintiff in connection with the Prime
Details regarding each and every
basis for claims asserted against Defendant;
Plaintiff alleged that Defendant failed to
perform and the damages incurred as a result;
Details regarding how Plaintiff
calculated its alleged $17.7 million in
(Barriere Aff., Docket Entry 26-3, ¶ 16.)
The Court will address
all four damages categories below.
First, as to actual damages, Johnson argues that Dart’s
damages are “based upon future events that had not yet occurred.”
backcharged Dart for $321,483 to complete the ATCS work on the
Project, including the CO/NO2 system. (Pl.’s Opp. Br., at 3; Karol
Aff., Docket Entry 25-1, ¶¶ 5-13.)
In support of this argument,
Dart submitted the affidavit of Dart’s President, Douglas Karol.
According to Mr. Karol, DSNY admonished Dart for failing to
complete the CO/NO2 system, among other ATCS-related work.
attests, under penalty of perjury, that “[t]his work was Johnson’s
(Karol Aff. in Opp., Docket Entry 28-1, ¶¶ 8-
Second, Johnson asserts that Dart submitted no evidence
against the City and DSNY.
(Def.’s Br. at 12.)
that DSNY advised Dart in various letters that “the majority of
[the ATCS work] . . . remains to be completed,” thus delaying the
(Karol Aff. in Opp. ¶ 8.)
As a result of Johnson’s
alleged failure, the City has sued Dart for liquidated damages at
liquidated damages have accrued, totaling $4,810,000.
Br. at 3; Karol Aff. in Opp., ¶ 5.)
points to Andrews International v. New York City Housing Authority
to bolster its assertions.
No. 08-CV-1580, 2008 WL 4974806, at *6
(S.D.N.Y. Nov. 24, 2008). In that case, the United States District
Court for the Southern District of New York granted summary
judgment for Andrews International (“Andrews”) because the New
calculation was “speculative” and “mere guesswork.” Id. According
to the court, NYCHA had failed to provide evidence or documentation
showing that Andrews failed to fulfill its responsibilities and
merited liquidated damages.
But Dart, unlike NYCHA, raised
a genuine issue of material fact by providing sworn testimony that
Johnson failed to complete its responsibilities--namely, the ATCS
As stated above, liquidated damages continue to accrue.
(Pl.’s Opp. Br. at 3; Karol Aff., ¶ 5.)
And finally, Johnson contends that Dart has failed to
provide any evidence or documents detailing the additional damages
that Dart may incur. (Def.’s Br. at 13.) Dart argues in opposition
that “Johnson’s breaches of contract will impact Dart’s delay claim
and its subcontractor’s delay claim against DSNY which total
(Pl.’s Opp. Br. at 6.)
Although Dart insists
that its “claim book” provides further support, (See generally
Karol Aff. in Opp. Ex. 7, Docket Entry 28-4.), Johnson states that
the “claim book” “expressly attributes several Project-related
difficulties and delays to various parties but never to [Johnson].”
(Def.’s Reply Br. at 5.)
Having examined the record, the Court finds that Dart
has submitted sufficient evidence on the damages issue.9
though Johnson demands more specificity, Dart has demonstrated
The Court notes that even if Dart failed to raise genuine
issues on its $14.7 million claim of actual damages, it could
still proceed to trial to recover nominal damages, assuming that
Johnson breached the Subcontract. See Contemporary Mission,
Inc. v. Famous Music Corp., 557 F.2d 918, 926 (2d Cir. 1977);
Hirsch Elec. Co. v. Cmty. Servs., Inc., 145 A.D.2d 603, 605, 536
N.Y.S.2d 141, 143 (2d Dep’t 1988) (“It is a well-settled tenet
of contract law that even if the breach of contract caused no
loss or if the amount of loss cannot be proven with sufficient
certainty, the injured party is still entitled to recover as
nominal damages a small sum fixed without regard to the amount
of the loss, if any.”) (citation omitted). However, because
Dart raised a genuine issue of material fact on actual damages,
this issue is moot.
(Def.’s 56.1 Stmt. ¶¶ 16–18.)
As the Second Circuit emphasized in
Tractebel, if a plaintiff can prove the existence of damages, the
plaintiff is entitled to some leeway in proving the precise amount
of damages at trial.
See 487 F.3d at 110-11.
And the Court acknowledges that Dart may not prevail on
its entire claim at trial. In fact, Johnson points out that Dart’s
$14.7 million damages claim dwarfs the value of the $1.4 million
(Def.’s Reply Br. at 6.)
But the role of the Court
is not “‘to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for
Cioffi v. Averill Park Cent. Sch. Dist. Bd. of Educ.,
444 F.3d 158, 162 (2d Cir. 2006) (quoting Anderson, 477 U.S. at
249, 106 S. Ct. at 2511).
And because Dart has “demonstrate[d] a
genuine issue of fact as to the existence of actual damages,” this
issue must be left for the factfinder.
V.S. Int’l, 1993 WL 59399
Thus, Johnson’s motion for summary judgment is DENIED.
III. Dart’s Motion for Summary Judgment
Breach of Contract Counterclaim for Extra Work
Dart first moves for partial summary judgment seeking to
dismiss Johnson’s counterclaim for extra work on the Project.
Dart’s position is that “the work was not over and above the
(Pl.’s Br., at 2.)
Alternatively, Dart asserts
that Johnson did not receive DSNY’s approval and that Johnson
(Pl.’s Br. at 4-7.)
In response, Johnson contends
that the parties repeatedly engaged in a course of dealing that
was inconsistent with the Subcontract.
(Def.’s Opp. Br., at 2.)
Dart’s first argument--that the extra work was required
under the Subcontract--is easily disregarded.
Dart makes this
conclusory statement without citing any evidence or the specific
sections of the Subcontract.
Instead, Dart’s argument indicates
that there is a genuine issue of material fact about the scope of
the Subcontract and any additional work Johnson completed. (Def.’s
Opp. Br. at 5.)
The next reason offered by Dart--that the absence of
Owner approval shows that Johnson is not entitled to any additional
compensation--is likewise without merit.
To be sure, various
portions of the Subcontract state that Johnson will not receive
any compensation for work not accepted by the Owner.
But a party “‘cannot rely on [a] condition precedent . .
consented to by itself.’”
Arc Elec. Constr. Co. v. Fuller Co., 24
N.Y.2d 99, 104, 247 N.E.2d 111, 113, 299 N.Y.S.2d 129 (1969)
(citing O’Neil Supply Co. v. Petroleum Heat & Power Co., 280 N.Y.
50, 56, 19 N.E.2d 676, 679 (1939)).
And “it is well established
that, where work has, in fact, been substantially performed in
accordance with the provisions of a contract, the withholding of
approval does not bar recovery.”
Id. at 104.
that Dart ceased work on the Project and alienated itself from the
Owner, thus preventing further Owner approvals.
(See Def.’s Opp.
Br. at 12-13; Barriere Aff. ¶¶ 9-10; Barriere Aff. Ex. E,10 16:1117:2.)
As a result, there is an issue of fact whether Dart has
waived the condition precedent of Owner approval.
But Dart also argues that even if the extra work went
over and above the Subcontract, Johnson failed to follow the
procedure for extra claims set forth in Articles 17 and 18 of the
(Pl.’s Br. at 4, 6.)
Under the Subcontract, Johnson
is not entitled to a price increase for extra work unless Dart
approves the increase in writing.
And if Johnson disputes the
extra or additional work, Johnson is required to submit a written
statement within seven days “stating that the WORK is being
performed under protest, the basis of the claim and a detailed
breakdown of the cost of labor, material, equipment and other
(Subcontract ¶ 18.3, at 8.)
The Court, however, is
engaged in a course of dealing that was inconsistent with the terms
of the Subcontract.
Barriere Affidavit Exhibit E is the deposition transcript of Mr.
Karol and can be found at Docket Entry 26-8.
A “‘course of dealing’” is “‘a sequence of previous
conduct between the parties to an agreement which is fairly to be
regarded as establishing a common basis of understanding for
interpreting their expressions and other conduct.’”
Co., Inc. v. F.C. Gerlach & Co., Inc., 421 F. Supp. 2d 533, 540
“‘Unless otherwise agreed, a course of dealing
between the parties gives meaning to or supplements or qualifies
Id. (quoting Restatement (Second) of Contracts
“Thus, notwithstanding a contract provision that any
extra work must be supported by a written authorization, when a
party knowingly receives and accepts the benefits of extra work
outside the scope of a construction contract orally directed by
himself and his agents, such conduct constitutes a waiver of the
S. Leo Harmonay, Inc. v. Binks Mfg. Co., 597 F.
Supp. 1014, 1032 (S.D.N.Y. 1984) (citations omitted).
Courts in this Circuit and elsewhere have determined
that summary judgment is inappropriate where the parties dispute
a regular course of dealing.
See, e.g., New Moon Shipping Co.,
Ltd. v. MAN B & W Diesel AG, 121 F.3d 24, 31 (2d Cir. 1997) (“An
inference of the parties’ common knowledge or understanding that
is based upon a prior course of dealings is [a] question of fact.”)
Transp., Inc., 965 F.2d 391, 395 (7th Cir. 1992) (“Whether a course
of dealing exists between parties to a transaction is a question
In Lewis Tree Service v. Lucent Technologies, for
example, the United States District Court for the Southern District
of New York denied a motion for summary judgment, in part, because
one party disputed whether the parties had engaged in a regular
course of dealings, “including what the precise nature of the
interaction between the parties was” and “the level and frequency
of those interactions.”
239 F. Supp. 2d 322, 331-32 (S.D.N.Y.
Here, the Court finds that there are issues of fact as
to whether a course of dealing existed between the parties.
Johnson asserts that “Dart made several payments to [Johnson] for
provisions or change order requirements . . . .”
(Def.’s Opp. Br.
In support of this factual assertion, Johnson offers the
affidavit and deposition of Wood G. Noel, Johnson’s Project Manager
for the Subcontract.
Mr. Noel states that “[t]he requirements
that Dart seeks to impose on this motion were not imposed on the
(Noel Aff., Docket Entry 30-2, ¶ 11; see also Karol
Aff. Ex. 7,11 32:25-33:10; 34:9-19.)
On that basis, the jury must
dealings, “including what the precise nature of the interaction
Karol Affidavit Exhibit 7 is the deposition transcript of Mr.
Noel and can be found at Docket Entry 25-3 at 75-104.
between the parties was” and “the level and frequency of those
Lewis Tree Serv., 239 F. Supp. 2d at 332.
Dart’s motion for summary judgment is DENIED as to Johnson’s extra
Next, Dart argues that Johnson’s unjust enrichment claim
is barred by the existence of the Subcontract.
(Pl.’s Br. at 7-
The Court agrees.
To establish unjust enrichment in New York, a plaintiff
require restitution.’” Beth Israel Med. Ctr. v. Horizon Blue Cross
& Blue Shield of N.J., Inc., 448 F.3d 573, 586 (2d Cir. 2006)
(quoting Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000)).
a quasi-contract remedy, unjust enrichment is “an obligation the
law creates in the absence of any agreement.”
Id. at 586-87
original). Generally, a party cannot maintain an unjust enrichment
claim when a valid and enforceable contract governs the dispute at
See Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70
N.Y.2d 382, 388, 516 N.E.2d 190, 193, 521 N.Y.S.2d 653 (1987).
True enough, a party may only proceed under “both breach of
contract and quasi-contract theories where there is a bona fide
dispute as to the existence of a contract.”
Curtis Props. Corp.
v. Greif Cos., 236 A.D.2d 237, 239, 653 N.Y.S.2d 569, 571 (1st
Dep’t 1997); see Nakamura v. Fujii, 253 A.D.2d 387, 390, 677
N.Y.S.2d 113, 116 (1st Dep’t 1998).
Here, there is no bona fide dispute: the Subcontract
governed the parties’ relationship, detailed the scope of the ATCS
Surprisingly, Johnson’s position is that “Dart has provided no
executed or otherwise agreed to assume the terms and conditions of
“responsible to perform all the work in the York/Dart Subcontract.”
(See Def.’s Reply to Pl.’s 56.1 Stmt., Docket Entry 24, ¶ 3 at
As a result, there is no legitimate factual dispute about
whether the Subcontract controlled the parties’ relationship.
Thus, Dart’s motion for summary judgment is GRANTED as to Johnson’s
unjust enrichment claim.
Trust Fund Diversion
Dart also seeks summary judgment on Johnson’s trust fund
diversion claim under Article 3-A of the New York Lien Law.
its amended answer, Johnson only alleges that Dart “may have
diverted trust funds.”
(Am. Answer & Countercls. ¶ 22 (emphasis
added).) The record, however, is bereft of any evidence supporting
that allegation, and thus, the claim must be dismissed.
Capitol Awning Co. v. Local 137 Sheet Metal Workers Int’l Ass’n,
698 F. Supp. 2d 308, 321 (E.D.N.Y. Mar. 18, 2010) (explaining that
the non-moving party cannot “rest solely on the pleadings”).
The purpose of the Lien Law is to “protect parties who
performed the construction work.”
Land-Site Contr. v. Marine
Midland Bank, 177 A.D.2d 413, 414, 576 N.Y.S.2d 255, 257 (1st Dep’t
1991). Under that rationale, Article 3-A creates a statutory trust
“out of certain construction payments or funds to assure payment
of subcontractors,” among others.
Caristo Constr. Corp. v. Diners
Fin. Corp., 21 N.Y.2d 507, 512, 236 N.E.2d 461, 463, 289 N.Y.S.2d
In other words, “[t]he Lien law declares that funds
improvement contracts, and the right to receive those funds, are
subcontractors and suppliers.”
F.2d 962, 969 (2d Cir. 1988).
S & D Maint. Co. v. Goldin, 844
And as soon as a statutory trust is
created, “its funds may not be diverted for non-trust purposes.”
Matter of RLI Ins. Co. v. N.Y. State Dep’t of Labor, 97 N.Y.2d
256, 263, 766 N.E.2d 934, 938, 740 N.Y.S.2d 272 (2002); see also
N.Y. LIEN LAW
Although Johnson is a trust beneficiary, Dart correctly
representative capacity, as required by statute.
See N.Y. LIEN LAW
§ 77(1) (McKinney 2015) (“[A] trust arising under this article may
representative action brought for the benefit of all beneficiaries
of the trust.”).
But numerous courts have allowed parties to cure
any procedural defects through class certification or joinder.
See, e.g., Atlas Bldg. Sys., Inc. v. Rende, 236 A.D.2d 494, 496,
653 N.Y.S.2d 694, 696 (2d Dep’t 1997) (remitting the matter to the
lower court to provide notice to trust beneficiaries and to obtain
class certification); U.S. Fid. & Guar. Co. v. Madison Fin. Corp.,
No. 01-CV-3998, 2002 WL 31731020, at *1–2 (S.D.N.Y. Dec. 4, 2002)
(permitting joinder to cure any procedural deficiencies).
even if the Court granted class certification or joined the
necessary parties, the claim itself is purely speculative.
Johnson has not provided any evidence, nor advanced any
argument, that Dart diverted trust assets.
(Pl.’s Br. at 10-11.)
In fact, Johnson does not even address this argument in its motion
(See generally Def.’s Reply Br.)
As such, Dart’s motion
Claim for Backcharges
Finally, Dart moves for summary judgment on its claim
Dart argues that it incurred costs because
(Pl.’s Br. at 11.)
According to Johnson, however,
“a simple reading of the backcharge reveals that it is devoid of
any reference to” Johnson or Johnson’s change orders with Dart.
(Def.’s Opp. Br. at 16-17 (citing Noel Aff. ¶ 8).)
Dart submitted the sworn affidavit of Mr. Karol, who points out
that “the City would not explicitly reference Johnson because the
City only has a contract with Dart . . . .”
(Karol Reply Aff.,
Docket Entry 31-1, ¶ 9.)
As an initial matter, the interpretation of a contract
is a question of law, including “the threshold question of whether
the terms of the contract are ambiguous.”
Alexander & Alexander
Servs., Inc. v. These Certain Underwriters at Lloyd’s, London,
England, 136 F.3d 82, 86 (2d Cir. 1998) (citation omitted). “Where
the language of the contract is unambiguous, and reasonable persons
could not differ as to its meaning,” summary judgment is proper.
See Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d
Cir. 1985) (collecting cases).
Contract language is unambiguous
when it has “‘a definite and precise meaning . . . concerning which
there is no reasonable basis for a difference of opinion.’”
Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d
Cir. 1989) (quoting Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351,
355, 385 N.E.2d 1280, 1282, 413 N.Y.S.2d 352 (1978)). By contrast,
an ambiguity exists when the contract language is “capable of more
JA Apparel Corp. v. Abboud, 568 F.3d 390,
296-97 (2d Cir. 2009).
There is no legitimate factual dispute about whether
Johnson is responsible for Dart’s backcharges.
On April 12, 2014,
DSNY issued Change Order No. 3-69 as a backcharge to Dart.
Karol Aff. Ex. 6, Docket Entry 25-3, at 69.)
Mr. Karol states
that Change Order No. 3-69 Items 1, 2, 3, 4, 5, 7, 7a, 7b, and 9
were Johnson’s responsibility and totaled $321,483.
Aff. ¶ 9.)
Simply stated, the scope of the Change Order work deals
with the installation of wiring and sensors for AHUs and H&V units
(Items 1, 2, and 5), the installation of thermostats (Items 3, 4,
and 7), the installation of wiring and sensors for CO/NO2-related
items (Items 7a and 7b), and the completion of ATCS training (Item
(Karol Aff. Ex. 6 at 73-74.)
was responsible for the ATCS work.
Under the Subcontract, Johnson
The Subcontract unambiguously
states that this work includes AHUs and H&V units, thermostats,
and CO/NO2-related items. (Subcontract at 15-22.) The Court finds
that a reasonably intelligent person viewing the Subcontract could
reach the same conclusion.
Thus, Dart’s motion for summary
judgment is GRANTED as to its claim for backcharges.
For the foregoing reasons, Johnson’s motion for summary
judgment (Docket Entry 26.) is DENIED, and Dart’s motion for
partial summary judgment (Docket Entry 25.) is GRANTED IN PART and
DENIED IN PART.
Dart’s motion is specifically GRANTED on the
unjust enrichment claim, the trust fund diversion claim, and the
claim for backcharges, but otherwise DENIED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
15 , 2015
Central Islip, New York
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