Opinion
99 Civ. 11681 (SAS)
September 18, 2000
Donald J. Camerson, II, Esq. and Daniel T. Surtz, Esq., Bressler, Amery Ross, New York, New York, For Plaintiff.
Todd R. Metz, Esq., Watt, Tieder, Hoffar Fitzgerald, LLP, McLean, Virginia, For Defendants.
OPINION AND ORDER
Plaintiff Marmer Brothers Construction, LLC ("Marmer") is suing defendants for breach of contract due to the alleged failure of Midwest Steel, Inc. ("Midwest") to remit the unpaid balance on a construction subcontract (the "Subcontract").
Midwest has counterclaimed for the costs of sheeting removal, additional concrete costs, and damage to a manhole. Jurisdiction is based on diversity of citizenship. Plaintiff has moved for summary judgment pursuant to Federal Rule of Civil Procedure 56 seeking judgment on its breach of contract claim and dismissal of the counterclaims. For the reasons that follow, plaintiff's motion is granted in part and denied in part.
I. FACTS
On January 2, 1997, Midwest was awarded Contract TB-18 for the Rehabilitation of Anchorages at the Triborough Bridge ("TB-18") from the Triborough Bridge and Tunnel Authority ("TBTA"). See Letter from Kevin B. O'Connor, TBTA Manager, Construction Contracts, Ex. A to the Affidavit of Daniel T. Surtz, plaintiff's attorney, dated July 14, 2000 ("Surtz Aff."), at 1. As part of TB-18, Midwest was required to install steel sheeting and production piles to secure the foundation portion of the Queens Anchorage at the Triborough Bridge. See TB-18, Section 02178 02360, Ex. A to the Affidavit of Stuart C.L. Eccles, Midwest's Project Manager, dated August 8, 2000 ("Eccles Aff.").
Midwest sought bids from subcontractors to perform installation of steel sheeting and production piles. Marmer provided its first proposal to Midwest on April 29, 1998, which stated, in part:
There are 8 pile caps with 4 piles in each cap for a total of 32 piles.
* * *
Our proposed approach is to install a sheeted pit at each of the eight pile cap locations. You then excavate and dispose of the spoil to reach the bottom of the pile cap. . . . We would then cut off the piles and leave the sheeting in place for your use in constructing the balance of the work.
April 29, 1998 Proposal, Ex. C to the Affidavit of Kevin E. Barber, Marmer's Vice President, dated July 14, 2000 ("Barber Aff."), at 1 (emphasis added). The prices quoted were $213,800 for the sheeting and $278,300 for the piles. Id. at 2. Marmer's April 29, 1998 proposal also contained several material terms including the following:
6. MARMER BROTHERS is to have easy access to the work area for its labor force and equipment. The work area must be clear of all obstructions, above and below ground, that will interfere with our operation. If obstructions are encountered you will excavate and remove them above bottom of pile caps.
7. MARMER BROTHERS will not be responsible for any bent, deviated, or out of plumb piles due to any above or below ground obstructions. . . . No redesign, added concrete or reinforcing costs caused by these obstructions will be borne by MARMER BROTHERS.
* * *
11. MARMER BROTHERS is not responsible for any above or below ground existing utilities. We must be notified of any of these locations prior to commencing our operation.
Id. at 2-3.
On May 11, 1998, Marmer sent a second proposal to Midwest which adjusted the price for the piles to $248,300. See May 11, 1998 Proposal, Ex. D to Barber Aff., at 1. This second proposal also included the above quoted paragraphs. Id. at 2-3.
Then, on October 5, 1998, Marmer sent a third proposal to Midwest which also incorporated the above conditions but added several others. See October 5, 1998 Proposal, Ex. E to Barber Aff., at 2-3. Specifically, the October 5, 1998 proposal stated the following: "If the terms of the Subcontract and this Proposal conflict, the Proposal terms shall govern." Id. at 3. The October 5, 1998 proposal also included the following fee-shifting provision:
15. If any litigation shall ensue as a result of the performance of the Subcontract, the prevailing party shall be entitled to recover all costs, expenses and reasonable attorneys' fees incurred in prosecution or defense thereof.
Id. at 4.
In December 1998, Midwest drafted and forwarded to Marmer a Subcontract which identified Marmer's Scope of Work as follows:
ITEM CO1
1. Sheeted Pits $213,192
ITEM CO1A
2. Production Piles $248,300
ITEM CO1A
3. Production Piles $ 8,840 Driven through Overburden
See Subcontract, Ex. G to the Barber Aff., at 1.
The Subcontract also contained an add provision based on unit prices which would increase the Subcontract price if additional work above the following base quantities was performed:
1. Sheeted Pits — Base quantity is 4,536 SF total. For additional sheeting in excess of 4,536 SF, the Unit Price is $47.00/Square Foot.
2. Piles — Base quantity is 1,700 linear feet from cut-off to anticipated rock level. For additional piles driven in excess of 1,700 LF, the Unit Price is $128.00/Linear Foot.
Id. at 2. There was no deduct provision if the sheeting and piles driven fell below the base quantities. With regard to price, the Subcontract stated:
The total amount to be paid to the Subcontractor for the performance of the Work is Four Hundred Seventy Thousand Three Hundred Thirty Two Dollars and No Cents ($470,332.00) in U.S. funds . . . which amount shall be subject to adjustment in accordance with the terms hereof.
Id. (emphasis added).
The Subcontract incorporated by reference various other documents. First, with regard to TB-18, the Subcontract incorporated
all the General and Special Conditions, Drawings and Specifications and Addenda and other documents forming or by reference made a part of the contract between the Owner [TBTA] and the Contractor [Midwest] (hereinafter called the "Prime Contract") all of which are hereby made a part of this Subcontract, insofar as applicable, generally or specifically, to the materials to be furnished and Work to be performed under this Subcontract and to the satisfaction and approval of the Owner or [its] Architect or Engineer and of the Contractor.
Id. at 1 (emphasis added). Second, Kevin E. Barber, Marmer's Vice President, made certain handwritten revisions to the Subcontract, one of which stated that: "Subcontractor proposals and the terms and conditions therein are expressly incorporated into this Agreement." Id. at 3. After making the handwritten revisions, Marmer executed the Subcontract on January 7, 1999. Id. at 4. Midwest executed the Subcontract, including the handwritten revisions, on April 9, 1999. Id. See Defendant Midwest Steel, Inc.'s Response to Plaintiff Marmer Brothers Construction, LLC's Rule 36 Request for Admission of Facts, Request No. 5, Ex. D to Surtz Aff., at 5 (wherein Midwest admitted that Lloyd Stark, Midwest's Project Manager, signed the Subcontract with the handwritten deletions and additions indicated with "KEB").
As to the work performed by Marmer, the parties stipulated to the following:
1. Marmer drove 4 sheeted pits.
2. Marmer drove 32 production piles.
3. The total length of production piles driven was 883.5 feet.
4. The 4 sheeted pits driven by Marmer were approved and accepted by the TBTA.
5. The 32 piles driven by Marmer were approved and accepted by the TBTA.
6. Marmer did not remove the steel sheeting it installed for the 4 sheeted pits.
7. Midwest received payment from the TBTA for the 4 sheeted pits driven by Marmer.
Apparently, the TBTA has paid Midwest in full for items CO1 and CO1A under TB-18. See Plaintiff's Statement of Material Facts On Motion for Summary Judgment Pursuant to Fed.R.Civ.P. 56, ¶ 19, admitted by Midwest.
See Stipulation by the Parties of Undisputed Facts. For the work performed by Marmer, which had an adjusted contract price of $482,668.14, Midwest only paid $247,000. See Application For Payment dated October 26, 1999, Ex. H to Barber Aff., at MAR0000048. Midwest, claiming that the Subcontract price was not lump sum but rather based on unit prices, now contends that it only owes Marmer $58,849.27 on the Subcontract. See Variable Quantities Breakdown Analysis, Ex. I to Barber Aff. Presumably, Midwest would like to offset this amount by its counterclaims, namely, $10,000 for failure to remove sheet piling; $25,000 for damage to manhole and drain; and $25,200 for extra concrete to enlarge pile caps due to misaligned piles. See Defendant's Rule 26(a)(1) Disclosures, Computation of Damages, Ex. N to Surtz Aff., at 2.
Midwest admits that if Marmer had driven all of the sheeted pits, installed and removed the sheet piling, installed 1700 linear feet of production piles, and driven eight production piles through overburden, then the amended contract price would have been $482,668.14. See Eccles Aff. ¶ 9.
In calculating the amount due Marmer on a unit price basis, Midwest is relying on Articles 4.03 and 4.04 of TB-18. Article 4.03, entitled "Extra Work," provides, in pertinent part:
(a) The Authority reserves the right to order changes which may result in additions to or reductions from the amount, type or value of the Work shown in the Contract Documents and which are within the general scope of the Contract in accordance with this Article.
See Article 4.03, Ex. A to Eccles Aff., at 4-1. Article 4.04, entitled "Change Order Procedure and Basis for Payment," provides that "Extra Work shall result in an equitable adjustment (increase or decrease) to the Total Contract Price representing (i) the reasonable costs or the reasonable financial savings related to the change in the Work, and (ii) Allowable Impact Costs." See id., Article 4.04(a).
The primary objective in interpreting a contract is to give effect to the intent of the parties "as revealed by the language they chose to use." Sieden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992) (citation omitted). Summary judgment is proper where the contract's words convey a definite and precise meaning, i.e., where the language of the contract is "wholly unambiguous." See Schiavone v. Pearce, 79 F.3d 248, 252 (2d Cir. 1996) (quoting Mellon Bank, N.A. v. United Bank Corp. of New York, 31 F.3d 113, 115 (2d Cir. 1994)). Whether contract language is plain or ambiguous is a question to be determined by the court as a matter of law. See Schiavone, 79 F.3d at 251 (citing Sayers v. Rochester Tel. Corp. Supplemental Management Pension Plan, 7 F.3d 1091, 1094 (2d Cir. 1993)).
B. Subcontract Requires Lump Sum Payment
Midwest's argument that Articles 4.03 and 4.04 of TB-18 somehow entitles it to change the pricing structure from lump sum to unit based pricing is meritless. While it is true that the Subcontract incorporated the General and Special Conditions of TB-18, it did so only with regard to the "materials to be furnished and Work to be performed . . . to the satisfaction and approval of the [TBTA] . . . and [its] Contractor [Midwest]." See supra pp. 5-6. The conditions thus incorporated, as limited with respect to their applicability, cannot be read to override an express pricing provision. The Subcontract clearly states that Marmer is to be paid $470,332. No provision required any reduction in this figure if the subcontractor supplied amounts that fell below the unit based quantities provided for in the Subcontract's add provision. See Deposition of Kevin E. Barber, Ex. B to Barber Aff., at 21 ("there is no deduct provision in that contract").
Furthermore, there is no evidence that the length of the piles driven was the result of actions taken by the TBTA, which further supports the non-applicability of Articles 4.03 and 4.04 to the Subcontract's pricing provision.
Thus, it is perfectly clear that Marmer was to be paid a lump sum payment for its work in connection with TB-18. That was Marmer's intent with which Midwest expressly agreed. See id. at 14. ("We would not do it on a unit price basis. What we negotiated was it would be a certain baseline footage and that anything above that baseline footage, we would be paid for.").
Midwest is a sophisticated business entity that knows how to structure a contract based on unit pricing. See, e.g., Manhattan Demolition Contract, Ex. A. to Reply Affidavit of Daniel T. Surtz, at 2 ("The total amount to be paid to the Subcontractor for the performance of the Work is Based on Unit Price 370 CY =/- @ $400.00 Per CY."). If Midwest was not willing to accept the Subcontract, it should not have signed it. Having struck the bargain it did, Midwest must now live with it.
Midwest's transparent attempt to avoid its payment obligations by relying on inapplicable extra-contractual provisions is rejected.
Summary judgment is therefore granted in Marmer's favor on its breach of contract claim.
C. Midwest's Counterclaims
Before discussing each counterclaim, it is first necessary to address Midwest's argument that Marmer's proposals create a material and disputed question of fact. In his Affidavit, Stuart C.L. Eccles states that he reviewed the documents attached to the Barber Affidavit constituting the April 29, May 11 and October 5, 1998 proposals and that no copies of these documents are in Midwest's possession. See Eccles Aff. ¶ 4. This statement is highly suspect given that the Subcontract expressly incorporates Marmer's proposals. If Midwest never received the proposals, what was it agreeing to when it signed the Subcontract which clearly referred to these proposals? The incorporation of these proposals into the Subcontract provides irrefutable proof that all three proposals were mailed to Midwest. See Affidavit of Michael M. Blendy, Marmer's Professional Engineer and Vice President, ¶¶ 3-5 (stating that Blendy authored, signed and mailed all three proposals to Midwest). Because Midwest does not contend that it never received the proposals, only that the proposals are not in its current possession, its inability to now locate these proposals does not raise a material issue of fact.
Midwest next argues that the proposals were not authenticated and should therefore be rejected. Pursuant to Federal Rule of Evidence 901, authentication is established by evidence sufficient to support a finding that the matter in question is what it purports to be. See Fed.R.Evid. 901(a).
Authentication may be supported by the testimony of a witness with knowledge that the matter is what it is claimed to be. See Fed.R.Evid. 901(b)(1). The proposals were initially attached to Barber's Affidavit, a person with personal knowledge of the proposals, and later re-submitted with the affidavit of the proposals' author, Michael M. Blendy, who attested to their trueness and correctness. Given these two affidavits, the proposals are sufficiently authenticated.
Given their authentication and receipt by Midwest, the next question is whether the proposals were properly incorporated into the Subcontract. Although neither the Subcontract nor TB-18 appear to contain a choice of law provision, I will presume that New York law applies as the Subcontract was sent from Midwest's New York office and relates to work that was to be performed in New York. "Under New York law an interpretation of a contract that has `the effect of rendering at least one clause superfluous or meaningless . . . is not preferred and will be avoided if possible.'" Galli v. Metz, 973 F.2d 145, 149 (2d Cir. 1992) (quoting Garza v. Marine Transport Lines, Inc., 861 F.2d 23, 27 (2d Cir. 1988)). Instead, an interpretation that "gives a reasonable and effective meaning to all terms of a contract is generally preferred to one that leaves a part unreasonable or of no effect." Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir. 1985) (citations omitted).
In the Subcontract, the sixth paragraph, entitled "Entire Agreement" is deleted in handwriting and initialed by KEB. The deleted provision stated: "This Subcontract is the entire agreement between the parties relating to the Work and replaces any earlier agreements, and the parties agree that there are no other agreements, representations, collateral agreements, or warranties other than expressed herein." See Ex. G to Barber Aff. If this provision had not been deleted, it would be inappropriate to consider the terms and conditions contained in the proposals. However, the inserted handwritten provision expressly incorporates the terms and conditions of the proposals.
To ignore this provision would render it a nullity. This would be at odds with the rules of contract interpretation requiring that every clause in a contract be given legal effect.
Accordingly, the handwritten provision, which was accepted by Midwest, effectively incorporates the terms and conditions of the three proposals into the Subcontract. The next question is whether Midwest's counterclaims can survive once the terms are incorporated into the Subcontract.
1. Removal of Sheeting
Midwest has counterclaimed for the costs of removing the sheeting originally installed by Marmer. In support of this counterclaim, Midwest relies on that portion of the Subcontract that incorporates the General and Special conditions of TB-18 as they relate to the work to be performed. While TB-18 defines temporary steel sheet piling work to include furnishing, installing and removal of steel sheet piling, see Eccles Aff., Ex. A, at 02178-1, Marmer's April 29, 1998 proposal expressly states: "We would then cut off the piles and leave the sheeting in place for your use in constructing the balance of the work." See Barber Aff., Ex. C, at 1. In addition, Marmer's October 5, 1998 proposal provides: "If the terms of the Subcontract and this Proposal conflict, the Proposal terms shall govern." See id., Ex E, at 3. Thus, while the Subcontract may have incorporated the removal of sheeting by reference to TB-18, the April 29, 1998 proposal expressly excludes sheeting removal from the scope of the work. Because proposal terms trump Subcontract terms in the event of a conflict, Marmer cannot be held responsible for the removal of sheeting. Accordingly, Midwest's counterclaim seeking the costs of such removal must be dismissed.
2. Additional Concrete Costs
Midwest has counterclaimed for the costs of additional concrete resulting from pile deviations. Marmer claims that it is not responsible for additional concrete costs resulting from any bent, deviated or out of plumb piles due to any above or below ground obstructions. See Barber Aff., Ex. C, at ¶ 7.
Moreover, Marmer claims that the additional concrete costs were incurred because piles had to be driven with existing obstructions which caused some of the piles to shift or "walk."
See Affidavit of Nestor Luis Martinez, Marmer's President, dated July 14, 2000 ("Martinez Aff.) ¶ 5. According to Martinez, "underground obstructions caused the piles to walk and are the reason why the pile cap size was increased and additional concrete was used in the pile caps." Id.
If one accepts Martinez's reason for the additional concrete costs, Marmer would not be responsible and Midwest's counterclaim would be dismissed. However, as Marmer's President, Martinez is an interested party whose conclusions as to the cause of the deviation cannot be so readily accepted. Midwest asserts that the piles were misaligned and that this was the cause of the additional concrete costs. The true reason is a question of fact, making summary judgment inappropriate. Plaintiff's motion to dismiss this counterclaim is denied.
3. Damages to Manhole
Midwest has counterclaimed for damage allegedly caused by Marmer to a manhole and drain. Marmer denies liability citing paragraph 11 of its three proposals which states: "MARMER BROTHERS is not responsible for any above or below ground existing utilities. We must be notified of any of these locations prior to commencing our operation." See Barber Aff., Exs. C, D, E, at ¶¶ 11. According to Marmer's President, Midwest never notified Marmer of the locations of any utilities such as electrical conduits and manholes. See Martinez Aff. ¶ 3.
This does not, however, end the inquiry. Midwest's Project Manager has stated that, "[u]tility locations were identified in the TB-18 Contract drawings, including Drawing SF-4." See Eccles Aff. ¶ 9; see also id., Ex. A, Drawing SF-4. Whether the incorporation of that drawing by reference to TB-18 provided Marmer with reasonable notice of the location of the manhole is a question that must be resolved by the trier of fact. Plaintiff's motion for summary judgment dismissing this counterclaim is denied.
D. Attorneys' Fees
Because the terms and conditions of the proposals have been effectively incorporated into the Subcontract, the attorneys' fees provision found in the October 5, 1998 proposal is binding on Midwest. Under that provision, a prevailing party is entitled to recover all costs, expenses and reasonable attorneys' fees incurred in litigation resulting from the performance of the Subcontract. Marmer has prevailed on its breach of contract claim against Midwest. Accordingly, Marmer is directed to file an affidavit detailing its costs, expenses and reasonable attorneys' fees within twenty days of the date of this Opinion and Order. Midwest may reply within two weeks of receipt of Marmer's submission.
III. CONCLUSION
For the foregoing reasons, plaintiff's motion for summary judgment is granted in part and denied in part. Summary judgment is granted in plaintiff's favor on its breach of contract claim and dismissal of defendants' first counterclaim regarding the removal of sheeting. Summary judgment is denied as to the remaining counterclaims. A conference is scheduled for September 22, 2000 at 11:00 a.m.
SO ORDERED.