Opinion
No. 603022/2006 Index No.: 603022/2006
07-08-2022
PRODUCTION RESOURCE GROUP L.L.C. D/B/A SCENIC TECHNOLOGIES, Plaintiff, v. ROBERT CREAN, ADVANCED ANIMATIONS, ADVANCED ANIMATIONS, L.L.C. Defendant.
Unpublished Opinion
DECISION AFTER NON-JURY TRIAL
ROBERT R. REED, J.S.C.
This is a breach of contract case involving the development of a perimeter safety system for theatrical lifts at the Le Reve Aqua Theatre, located at the Wynn Resort in Las Vegas, Nevada. A bench trial was held from September 16, 2014 through December 12, 2014. For the reasons set forth below, the court finds in favor of defendants Robert Crean and Advanced Animations LLC.
BACKGROUND
Plaintiff Production Resource Group LLC ("PRG") is an entertainment technology company specializing in lighting, sound, and specialty construction for large scale entertainment and themed events. Defendant Advanced Animations LLC ("AA") is an animatronics company that creates animated figures and interactive exhibits for major theme parks, casinos and other retail and trade show events. Defendant Robert Crean ("Crean") was vice president of operations for Advanced Animations.
PRG contracted with the Wynn resort to design an underwater hydraulic lift system to be utilized during an entertainment piece at the hotel. Wynn's design team prepared the concept drawings, and PRG was responsible for the development, fabrication, and installation of the system.
PRG retained AA to develop and construct a safety system for the lift. Performance under the contract took place in stages. AA and PRG conferred on what materials to use, what design specifications were required, and PRG reviewed the final switch assemblies produced by AA in May of 2004. AA's project was fully delivered to PRG in the summer of 2004.
PRG commenced this action three years later alleging AA's system did not work. PRG claimed that AA furnished defective and substandard components, and negligently designed the safety system. According to the complaint, as a result of AA's purported failures, PRG was required to incur expense redesigning and completing the system.
PRG proceeded to trial against AA on a single claim of breach of contract.
FINDINGS OF FACT
Upon the evidence submitted at trial, the court makes the following findings of fact:
1. In 2002, PRG won a bid to design and build a hydraulic lift system for the Le Reve Aqua Theatre, located at the Wynn Resort in Las Vegas, Nevada (PTX1).
2. PRG had overall responsibility for the design, development, and installation of the project (PTX 3).
3. In accordance with PRG's agreement with Wynn resort, PRG was required to develop a safety system for use with the lifts (PTX 3).
4. In May of 2003, an engineer with PRG arrived at the concept for the design of a perimeter safety system (DTX E; Tr. 215:15-26 (Lehner)).
5. In June of 2003, PRG contacted AA seeking assistance with design concepts for the system (Tr. 1675:10-22,1677:11-25 [Crossley]).
6. PRG conferred with defendant Robert Crean, an employee of Advanced Animations LLC (Tr. 1241:24-1242:7 [Crean]). At all relevant times, Crean was acting within the scope of his employment as Vice President of Operations (Tr. 1336:25-1337:16 [Crean]).
7. PRG prepared a scope of work that set forth, in phases, what AA's work on the system would entail (Tr. 1246:23-1247:11 [Crean]).
Contract Agreement and Performance
8. The scope of work "description" provides "[d]evelop and manufacture a perimeter safety system to protect against personal injury and property damage for a series of theatrical stage lifts."
9. Development for the perimeter safety system was to proceed in phases identified as: (1) proof of concept; (2) development and documentation, and (3) prototype production and manufacture of deliverable items (PTX 4).
10. By letter dated June 16, 2003, AA offered to perform eight tasks identified in the first proof of concept phase, for $ 11,500.00 (PTX 5).
11. On June 17, 2003, PRG accepted the. offered terms (PTX 6), and paid an initial invoice of $5,750 (PTX 7).
12. In phase one, AA was responsible for:
1. Review the specifications, operational requirements and construction documents for the pool lift system.
2. Review the pool environment, corrosion protection concerns, electrical bonding requirements and STI control philosophy.
3. Review the concept drawings for the proposed pressure sensitive facing: PLS V-9-200andPLS.V-9-210.
4. Participate in identifying a list of performance specifications for evaluation of the system. These parameters may include:
a. Physical dimensions
b. Minimum operating pressure
c. Minimum impact velocity
d. Travel after contact
e. Insensitivity to ambient pressure
f. Level of redundancy
g. External appearance
5. Develop a plan for proving the viability of these concepts with physical prototypes and testing as may be required. Testing should include:
a. Operation at various speeds including the maximum vertical velocity of 6 in/sec in both lifting and lowering directions.
b. Operation in and out of water
c. "Splashdown," where the water is entered (or left) at maximum velocity.
d. Underwater operation at a minimum water depth of 21 '-6"
6. Prepare and test the physical prototypes. Iteration may be required in order to achieve a successful prototype.
7. Report on the outcome of the testing by preparing written descriptions and video of the outcome.
8. Prepare a cost estimate for the Development and Documentation phase"(PTX4).
13. AA built an initial prototype consisting of: (1) a tapeswitch-brand switch; (2) open-cell foam to provide for "overtravel," and (3) fabric to encase the switch and foam (Tr. 1259:8-11; 1260:20-1261:4 [Crean]).
14. AA wet-tested the prototype at its facilities with PRG present (Tr. 1251:16-20 [Crean]). The switch assembly worked as intended (Tr. 1721:4-14 [Crossley]).
15. PRG and A A discussed additional testing but did not arrive at any final conclusions (Tr. 1223:15-19 [Crossley]; Tr. 1720:21-23 [Crossley]; Tr. 1259:16-24 [Crean]). AA shipped the prototype to PRG for further testing (PTX 8, Tr. 62:14-19; 63:24-64:7; Tr. 231:22-23 [Lehner]; Tr. 1261:10-19 [Crean]).
16. On July 25, 2003, PRG met with Wynn representatives at PRG's facilities in New Windsor, New York. At the meeting, PRG presented two fabricated mock-ups for the purpose of testing and reviewing (DTX L; Tr. 235:2-8 [Lehner]). PRG presented AA's mock-up, and a mock-up of a mercury switch that PRG designed (Tr. 65:13-66:15 [Lehner]).
17. AA was not invited to attend the meeting with PRG and Wynn (Tr. 1261:20-21 [Crean]; DTX L).
18. AA's switch assembly prototype was accepted by PRG and Wynn (Tr. 236:22-237:24 [Lehner]). PRG abandoned its mercury-switch concept (Tr. 1697:16-22; 1698:6-9 [Gray]; DTX L).
19. PRG did not require AA to perform any additional testing in the first phase of the scope of work agreement (Tr. 227:14-23; Tr. 469:4-8 [Lehner]; Tr. 1260:12-14 [Crean]; Tr. 1690:5-16; 1688:23-1689:8; Tr. 1223:12-19 [Crossley]).
20. On August 4, 2003, PRG approved payment of the balance due to AA for the first phase of the scope of work (PTX 8, Tr. 62:14-19; Tr. 63:24-64:17 [Lehner]).
21. In August 2003, PRG sent AA a revised Scope of Work that included eleven tasks for the second phase of AA's work on the project (PTX 9, Tr. 68:9-22.)
22. On August 25, 2003, AA sent PRG a letter offering to perform the eleven tasks identified in the revised scope of work for a price of $6,950.00, subject to changes in the deadlines proposed by PRG (PTX 9).
23. On September 2, 2003, PRG approved an invoice for 50% of the price (PTX 10; Tr. 80:22-81:17; Tr. 1274:4-5 [Crean]).
24. PRG conducted further testing of AA's initial prototype on August 5,2003 (Tr. 238:11-15; 239:7-18 [Lehner]). PRG forwarded comments received from Wynn regarding the prototype and provided to AA comments based upon its own internal testing (Nov. 3 Tr. 1263:15-26; 1264:15-17; 1265:10-19; 1271:10-18 [Crean]; Tr. 800:5-11; 798:20-23 [Aubry]; Tr. 255:18-26 [Lehner]).
25. Based upon the comments and internal testing, PRG requested changes to the first prototype (Tr. 800:16-22 [Aubry]; Tr. 1271:10-22 [Crean]). PRG requested: (1) reduction of the drip rate (Tr. 800:16-22 [Aubry]; Tr. 1271:10-22 [Crean]); (2) use of closed cell foam material (Tr. 1263:15-26; 1275:9-12; Tr. 1380:6-11 [Crean]); (3) use of non-metallic fasteners in the production switch assemblies (PTX 9; Tr. 1296:2-9 [Crean]); (4) use of a seacon connector for the switch assemblies (Tr. 702:12-21 [Pierce]); (5) use of mesh or other permeable fabric (Tr. 1275:9-22 [Crean]), and (6) other aesthetic changes to the switch assemblies (Tr. 1699:21-1700:4 [Gray]; Tr. 43:15-18; 46:22-47:4 [Lehner]).
26. AA fabricated a second prototype and sent the second prototype to PRG for re-testing (Tr. 1275:2-1276:13 [Crean]; PTX 12; Tr. 87:17-88:6; Tr. 1276:10-13; PTX 18; Tr. 101:23-102:18).
27. AA was not present for PRG's testing of the second prototype (Tr. 1276:10-13 [Crean]).
28. PRG was satisfied with AA's performance on the second phase of the agreement. PRG approved and paid AA's invoices for its work on September 2, 2003, and October 10, 2003 (PTX 10; PTX 11, Tr. 80:22-26; 82:20-26).
29. By letter dated October 2,2003, AA offered to manufacture the approved modified switch assemblies for a price of $70,678.00 (PTX 12).
30. PRG accepted AA's offer on December 11, 2003 by issuing the first in a series of purchase orders to AA (PTX 13, 15, 16, 18, 22). In its purchase orders, PRG instructed AA to make improvements identified in the second phase of the agreement and incorporate changes resulting from PRG's testing of the second prototype (PTX 13, PTX 16, PTX 18, PTX 22).
31. AA modified and fabricated the switch assemblies to implement the design changes PRG specified in its purchase orders (DTX NNN; Tr. 1287:4-20, 1289:24-1290:5 [Crean]). To do so, AA relied on technical drawings from PRG (DTX AAA; Tr. 1434: 19-1435:11 [Conley]). The drawings provided specific measurements that were then forwarded, without substantive modification, to AA's vendors for manufacture. The pieces were assembled by AA(Tr. 1435:25-1438:9 [Conley]).
32. On May 13,2004, PRG reviewed the modified switch assemblies and performed an "acceptance test" (PTX 24; DTX NNN, Tr. 1682:26-1683-13 [Crossley]; Tr. 810:9-20 [Aubry]; Tr. 112:21-113:12 [Lehner]).
33. AA arranged the switch assemblies on a template to show PRG how they would be aligned underneath the lifts (Tr. 1288:11-1289:5 [Crean]). Photographs taken during the visit show the assemblies adhered to one another (DTX LL).
34. PRG accepted the assemblies and AA shipped them to PRG on May 17, 2004 (Tr. 811:11-15 [Aubry]; PTX 24; Tr. 111:18-112:12 [Lehner]; Tr. 1290:24-25 [Crean]).
35.. On or about May 21, 2004, PRG advised AA that some of the switch assemblies were damaged during shipping (PTX 26, Tr. 125:22-126:11 [Lehner]; Tr. 1291:3-11 [Crean]). PRG shipped the damaged bags back to AA, and AA repaired them (Tr. 1291:15-17; 1292:14-1293:2 [Crean]; Tr. 129:22-130:11 [Lehner]; Tr. 815:22-25 [Aubry]).
36. Between June 24, 2003, and May 10, 2004, AA issued nine invoices to PRG (PTX 7, 8, 10, 11, 14, 19, 20, 23, 24). PRG paid all of AA's invoices for the third (and final) phase of work in the agreement (Tr. 113:13-18; 115:5-8 [Lehner]).
37. The last payment was made to AA on May 10, 2004, following completion of additional acceptance testing by PRG (PTX 24; Tr. 112:13-20 [Lehner]).
38. AA was paid a total of $124,585.10 for all three phases of work (PTX 25).
39. PRG did not require onsite testing in Las Vegas prior to payment of AA's invoices (PTX 12; PTX 13; PTX 16; PTX 18; PTX 22).
Problems with the Perimeter Safety System
40. Installation of the prototype was performed by PRG (Tr. 502:20-24; 505:9-17 [Pierce]). AA was not present for and did not participate in the installation (Tr. 1293:3-1294:23 [Crean]; DTX PP, Tr. 1315:2-14; PTX 4; PTX 9).
41. On July 16, 2004, PRG notified AA of the following problems with the prototype: (1) Velcro was coming open; (2) there was visible safety bag deformation, and (3) false tripping (PTX 27, Tr. 131:13-18). PRG requested that AA repair the prototype in Las Vegas.
42. On August 30, 2004, AA visited the Wynn theatre to observe the condition of the prototype (1302:9-10). AA took photographs of the visit (DTX OO).
43. During the visit, several problems with the prototype were identified: (1) the switch assemblies were not properly installed and aligned; (2) the bags had significant gaps between them at different locations on the lifts; (3) the fascia was not installed correctly; (4) the wiring of the safety system was faulty, and (5) a donut lift utilized on site experienced lateral movement, causing the fascia to scrape during movement (DTX OO, Tr. 690:25-691:5-26 692:11- 18 [Pierce], 1258:11-14,1304:18-1305:9-17,1306:9-111309:9-13, 1310:17-24 1325:4-16 [Crean]).
44. AA sent field technician Christopher Nolan to Las Vegas to inspect the prototype and make repairs (Tr. 1444:3-19 [Nolan]). When he arrived, Nolan observed several conditions that were unrelated to AA's work on the prototype. The foam boxes were dirty (Tr. 1447:4-8), seacon connectors were damaged (Tr.l447:21-1448:4), wires were exposed, and open connectors were underwater (Tr. 1312:15-25 [Crean]).
45. Nolan spent two weeks at PRG's shop in Las Vegas, where he inspected the safety switches, reinforced the foam boxes, replaced several tapeswitches and added stainless steel fasteners to the textilene bags (Tr. 1444:3-1445:8 [Nolan]).
46. AA and PRG continued to work together on a new prototype design using open-cell foam to replace the closed-cell foam boxes (Tr. 1319:18-26 [Crean]). AA proposed a switch assembly design that included a revised mounting system and use of open-cell foam (DTX RR, Tr. 1317:25-1318:16; 1319:6-9 [Crean]). AA also continued to perform testing on the tap switches to determine what was causing the false tripping (Tr. 1407:17-1408:10; 1322:11-1323:26 [Crean]).
47. In November of 2004, AA sent another field technician to Las Vegas to assist PRG in the reconstruction of the switch assemblies (Tr. 1326:2-4,1419:9-11 [Crean], 1414:8-12 [Abar, by deposition designation]).
48. AA's involvement with the perimeter safety system switch assemblies came to an end around February 18, 2005, after PRG failed to respond to AA's offer of continued assistance with the switch assembly replacement (DTX XX, Tr.l333:4-18; 1334:9-1335:4 [Crean]).
Responsibility for Prototype Malfunction
49. Daniel Birket, a certified functional safety engineer, provided testimony as an expert in safety and control systems (Tr. 1485:17-19; 1488:16-24 1490:4-10; 1493:21-23 [Birket]).
50. Birket testified that AA supplied only one component of the safety system to PRG. AA supplied the tapeswitch sensor, and confirmed that it "was quite suitable, properly applied" (Tr. 1508:11-21,1509:11-18, 20-22 [Birket]).
51. PRG was solely responsible for installation of the switch assemblies (Tr. 502:20-24; 505:9-17 [Pierce]). PRG prepared the schematics that set forth how the tapeswitches should be wired (Tr. 1470:7-12; 1472:26-1473:7; 1473:14-17 [Galante]).
52. Birket opined that PRG's improper assembly of the system resulted in low current and tripping of the electrical circuit. He confirmed that problems with the design and wiring of the system resulted in malfunction (Tr. 1504:21-25 1505:4-1506:4,1514:11-18,1578:16-19; 1579:4-5; 20; 1580:16-25; 1587:12-22 [Birket]).
53. Birket testified that, to a reasonable degree of scientific certainty, the reliability problems with the safety system were caused by wiring too many tapeswitches on a circuit. It was PRG's decision to wire the tapeswitches in a daisy chain series (Tr. 1523:6-12; Tr. 1574:15-19 [Birket]).
54. AA had no responsibility with respect to the controller or the wiring of the perimeter safety system (PTX 4, PTX9, Tr. 1258:11-14; Tr. 1325:4-16 [Crean]).
55. Early in the design process, AA advocated using a "Guardstar" controller made by tapeswitch for use with its switches (Tr. 1679:13-16; 1678:25-1679:7; 1679:20-26 [Crossley]; Tr. 1257:21-1258:7 [Crean]). The Guardstar controller is designed to handle up to four tapeswitches on a single circuit. (Tr. 1313:24-1314:7 [Crean]).
56. Birket testified that the Guardstar interface supplied by the tapeswitch manufacturer should have been used in the Le Reve Aqua Theater pool system and would have resolved the problem of interfacing the Tapeswitches correctly (Tr. 1543:9-23 [Birket]).
57. PRG's operation manager testified that workers were not able to install the safety bags so that they were flush with the fascia, as per the design drawings. Design drawings were prepared by PRG (Tr. 690:25-691:5-26 692:11-18 [Pierce]).
58. PRG admitted that the lateral movement of the donut lift was an issue that preceded AA's involvement with the project. The issue was not resolved until September of 2004, after the installation of AA's safety bags and prototype (DTX R; 385:16-23, 387:9-12 [Lehner]; 698:21- 699:14; 777:14-778:6; 756:19-26 [Pierce]).
Damages and Remediation Costs
59. PRG compiled purchase orders, checks and documents reflecting costs associated with remediating the perimeter safety system. The documents reflected isolated charges that were purportedly attributable to AA's work on the safety system (PTX 35, PTX84, DTX O, 170:22-25, 172:7-12, 269:22-270:16 [Lehner]).
60. PRG Senior Vice President of design and build for global events later admitted that numerous invoices asserted as damages by PRG, predated the installation of the perimeter safety system and were not related to PRG's remediation (24:4, 272:15-273:4 [DTX O at P2001]; 273:5-274:12 [DTX O at P2007]; 274:13- 275:10 [DTX O at P2010]; 303:17-305:6 [DTX O at P2247-2248]; 305:7-22; 306:3-12 [DTX O at P2249]; 306:13-22 [DTX O at P2321]; 306:23-307:7 [DTX O at P2325]; 307:8-15 [DTX O at P2327]; 308:5-309:15 [DTX O at P2330]; 312:13-313:13 [DTX O at 2341]; 313:17-314:6 [DTX O at P2351]; 314:22-315:5 [DTX O at P2339]).
61. Kathleen Aubry, then PRG project manager, admitted that charges included in PRG's original damages spreadsheet, could not possibly be related to perimeter safety remediation because they were incurred prior to installation (PTX 84, PTX 85, 942:6-17; 942:18-22; 942:23-943:6; 943:18-26; 950:12-951:3; 951:4-8; 951:9-14; 951:15-20; 951:21-26; 953:13-22 [Aubry]).
62. PRG's compilation of purported remediation costs included several invoices that were unrelated to AA's work on the perimeter safety system. Specifically:
• an invoice for a $50,000.00 charge for "the fabrication of the donut lift damping assembly" (Tr. 302:10-303:13 [PTX 35, DTX O at P2225]).
• an invoice for shipping of hydraulic equipment to Fluid Power Corporation, a subcontractor for PRG (Tr. 278:25-280:5 [DTX O at P2024]).
• invoices for "hose assemblies" and "O-rings" that were used for the hydraulic system (Tr. 285:11-19; 289:9-25 [DTX O at P2054, P2084]).
• an invoice for shipping of "floor panels" (Tr. 309:16-310:10 [DTX O at P2331-P2333]).
• an invoice for "control component[]" that were unrelated to the safety system bags (Tr. 292:12-26 [DTX O at P2089]).
• a receipt for a $477 bill incurred at 3:51 A.M. at a Las Vegas club entitled "Anthony's of Hollywood" (Tr. 293:2-294:7 [DTX O at P2095]).
• a receipt for a $829.73 bill for a meal at Del Frisco's Steak House for a five-person "crew" (Tr. 294:19-295:16 [DTX O at P2111]); and
• charges for "mist system fascia drilling" related to work done by another subcontractor for a "series of special effects boxes and misters that were used during the show" (Tr. 300:25- 301:20 [DTX O at P2221]).
63. PRG's compilation of remediation costs contained some invoices that were too vague to be attributable to AA's work. For example:
• PRG seeks damages of $2,062.50 for work performed by its subcontractor, DPA Services, but those invoices indicate that only certain charges relate to the safety system (DTX O at P2020; PTX 85, Ref. No. 68, Tr. 1027:9-1028:13; Tr. 1077:7-16 [Cohen]).
• Various charges were related to tapeswitches and seacon connectors (PTX 85, Ref. Nos. 357, 385, 386, 388, 387, 389, 390, and 391; Tr. 1144:22-1145:17; 1147:8-20; 1150:18-22 [Cohen]), however, PRG's witnesses admitted that tapeswitches were used for other switch assemblies in the pool, and not just those provided by AA. Seacon connectors were also used throughout the pool, not just for the safety system created by AA (Tr. 702:12-21 [Pierce]; Tr. 1712:17-1713:4 [Lehner]). The evidence was insufficient to establish where in the pool the tapeswitches or seacon connectors were used or whether they were used for spare switch assemblies (DTX O at P2263- 83, P2297-320; Tr. 1145:22-25; 1146:14-1148:21; 1150:18-26 [Cohen]).
• Travel expenses by PRG were vaguely identified as "per diem" expenses but did not clearly relate to PRG's remediation of AA's work on the safety system (Tr. 1137:13-24 [PTX 85, Ref. No. 204 for $2,090]; 1137:25-1138:4 [PTX 85, Ref. No. 205 for $910]; 1138:5-23 [PTX 85, Ref. No. 208 for $260][Cohen]).
64. Other travel expenses identified by PRG were not fully supported by the evidence as having been sufficiently related to remediation of AA's work (Tr. 986:10-17 [Aubry]). Hotel expenses for an 8-day stay in Las Vegas by PRG employee Christopher Pierce, was contradicted by Pierce's time records that indicated Pierce was not in fact working at all (see DTX O at P2049-P2051; PTX 62A at 10).
65. PRG also included duplicative travel charges as part of its damages claim. PTX 85, Ref. Nos. 168 and 170, both include identical $307.70 charges of airfare. The records indicate that a PRG employee travelled from Albany to Las Vegas, purportedly for two separate dates in 2005. However, only a single trip was taken, and the charges were improperly documented on two separate dates (DTX O at P2066, P2073).
66. Similarly, PTX 85, Ref. Nos. 187 and 190, identify two separate $331.38 charges for ground transportation from JFK airport to Kingston, NY, despite the fact that the employee took only one trip (DTX O at P2077, P2045).
67. Shipping costs were identified by PRG as a measure of damages, but no evidence was provided to establish a connection with the perimeter safety system remediation (Tr. 1130:14-1132:13 [PTX 85, Ref. No. 331-FedEx charges]; 1132:14-1134:4 [PTX 85, Ref. Nos. 400, 401,402, 403 - Trans-Border Global Freight System charges]; 1134:5-8 [all Trans-Border Global Freight System charges on PTX 85]; 1134:9-20 [PTX 85, Ref. Nos. 408, 409410, 411, 412, 416 - United Parcel Service charges] [Cohen]).
68. PRG offered several invoices generated by Scenic Technologies Las Vegas ("STLV") in its damages calculations. Insufficient evidence was submitted to establish the relationship between Scenic Technology's labor charges and the perimeter safety system remediation (1128:18-21 [Cohen]; 937:12-24 [Aubry]; 684:11-685:3 [Pierce]).
69. A total of $41,436.38 in STLV invoices was for union labor provided by a company called Showpay (PTX 85, Ref. Nos. 323, 324, 326, 327, 328, 329; PTX 61, PTX 65, PTX 66, DTX O at P2116, P2181 -82). PRG offered no evidence at trial concerning how many laborers Showpay provided, how many hours those laborers worked, or whether any of that labor was related to remediation of the safety system (Tr. 1087:12-19; 1119:21-1120:7; 1122:2-13 [Cohen]; Tr. 936-937; 938:18-23; 942:3-5 [Aubry]; Tr. 741:15- 742:4 [Pierce]).
70. Labor charges directly from STLV were also included in the damages calculations, but PRG offered no time sheets or other evidence concerning what work those STLV employees were allegedly performing on the perimeter safety system remediation (Tr. 1085-25-1086:6; 1086:16-22 [Cohen]).
71. Materials charges from STLV were included by PRG, but insufficient evidence was provided concerning the costs or how the materials related to PRG's remediation efforts (PTX 85, Ref. No. 327; DTX O atP2181-P2182; Tr. 1125:4-18 [Cohen]).
72. PRG asserted its own labor charges for employees who purportedly worked on the safety system. However, certain employees admitted that their time sheets reflected generalized labor services provided to the project in whole (Tr. 9,24:8-19; Tr. 994:4-12 [Aubry]; 668:21-669:16 [Pierce]).
73. PTX 84 was an Oracle Project Management System summary that purportedly reflected all charges incurred as a result of PRG's remedying of the perimeter safety system (166:2-11; 167:4-8 [Lehner]). PTX 84 was prepared based upon conversations with PRG representatives regarding the work that was performed, three months after the dispute over AA's work arose (915:3-9; 958:4-9; 958:12-960:11 [Aubry]). PTX 84 captured all the costs of the perimeter safety system in total, and not those exclusive to remediation efforts (Tr. 952:6-953:12 [Aubry]).
74. PRG's damages expert, Mark Cohen, prepared a construction claims analysis (Tr. 1019:21-26; 1020:11-16; Tr. 1062:4-7 [Cohen]). To do so, Cohen utilized the cost summaries provided by PRG in PTX 84 and generated his own report containing charges for which Cohen determined there to be "adequate" or "reasonable" support in the construction records. Cohen's summary of PRG's construction losses, therefore, was based primarily upon records where he could find "matching documentation" to substantiate it (PTX 85; Tr. 1024:11-14; 1024:17- 20; 1028:10-17; 1041:10-26 [Cohen]).
75. This court did not find Cohen's testimony helpful in determining what, if any, damages PRG purportedly sustained by remediating AA's work on the perimeter safety system.
76. Cohen admitted that PRG failed to properly track and identify costs associated only with the safety system remediation (Tr. 1100:2-5 [Cohen]).
77. Cohen relied solely upon the direction of PRG personnel regarding what costs were attributable to the remediation of the perimeter safety system in his review of PRG's records (Tr. 1021:2-1022:3, 1022:14-1023:4,1140:16-24 [Cohen]).
78. Cohen could not offer an opinion as to how AA's safety system functioned at the Le Reve Theater, could not offer an opinion on the sufficiency of AA's materials utilized in the safety system, and did not offer any opinion on what remediation efforts were reasonable or necessary based upon AA's work (Tr. 1066:9-19; 1067:9-14 [Cohen]).
79. Cohen also did not make any determination as to whether the costs identified in his claims analysis were reasonable in the construction industry, and he did not remove from his analysis any duplicative expenses (Tr. 1041:17-26; 1042:15-1043:12; Tr. 1140:16-25; 1141:16-20 [Cohen]).
80. Cohen's expertise, therefore, was limited to organizing PRG's invoices and matching them with associated records. His testimony did not establish that PRG sustained damages due to failures in AA's work, or otherwise provide evidence that the costs incurred were legitimate or reasonable.
CONCLUSIONS OF LAW
The elements of a claim for breach of contract are well-established. To be entitled to relief, PRG must prove the existence of a contract, performance of the contract, breach, and damages resulting from the breach (¶arris v Seward Park Horn. Corp., 79 A.D.3d 425, 426 [1st Dept 2010], citing, Morris v 702 E. Fifth St. HDFC, 46 A.D.3d 478 [2007]).
PRG and AA Entered into a Valid and Enforceable Agreement
"To establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound (Kasowitz, Benson, Torres & Friedman, LLP v Reade, 98 A.D.3d 403, 405-06 [1st Dept 2012]; 22 N.Y. Jur. 2d, Contracts § 9); Kowalchukv. Stroup, 61 A.D.3d 118,121 [2009]).
This court finds that the parties entered into an agreement to develop and manufacture a perimeter safety system for theatrical stage lifts at the Le Reve Theater in Las Vegas (PTX4). The parties intended to be bound to one agreement, with performance to be undertaken in stages.
In the first phase, AA made an offer to perform eight tasks identified in the "proof of concept" phase of the agreement. In AA's offer, it expressly stated that once the first eight tasks were completed, additional phases of the agreement would be performed. PRG accepted the offered terms (PTX6), and AA prepared the initial prototype. PRG tested the prototype at its facilities, and then approved payment to AA.
Following that first phase, PRG prepared a revised scope of work with eleven tasks for the second phase of the agreement. The agreement terminated with completion of the third phase of work identified in the scope of work agreement, with payment issued by PRG on May 10, 2004.
The parties mutually intended to be bound by the scope of work agreement and performed in accordance with the terms. Subsequent correspondences that revised and/or modified the scope of work terms did not create a new contract or constitute a separate agreement. It is not relevant that the parties corresponded and agreed to payment of the contract phases in separate documents. Multiple writings can constitute one singular integrated agreement (see Nolfi Masonry Corp. v Lasker-Goldman Corp., 160 A.D.2d 186, 187 [1990] ["a binding agreement may be assembled from more than one writing"]).
Defendants have taken the position that the parties entered into three separate agreements. For purposes of assessing defendants' liability, the court finds that analyzing the parties' agreement through this lens is unnecessary.
The Parties Did Not Enter into a Design-Build Agreement
In a design-build agreement, an owner contracts with one entity to both design and build a project (33 NY Prac, New York Construction Law Manual §1:23). The contractor is responsible for every phase of the construction agreement from final design through subcontracting, construction and finishing. The process often involves bidding by prospective contractors, and involves negotiations based upon initial design concepts provided by the owner (id). The contractor is the single point of responsibility under a design-build contract and generally cannot shift liability (797 Broadway Grp., LLC v Stracher Roth Gilmore Architects, 123 A.D.3d 1250, 1251 [3rd Dept 2014], citing, 33 NY Prac, New York Construction Law Manual §1:23).
Also known as a "Turnkey" or a "Performance Specification" construction project and/or agreement (33 NY Prac, New York Construction Law Manual § 1:23).
In the case at bar, Wynn provided initial concepts and construction design for the hydraulic lift system. PRG was responsible for engineering, fabricating, designing, and installing the system (PTX 1, 3). PRG was the single point of contact for the Le Reve project and hired multiple contractors to construct the theatrical hydraulic lift system. PRG as contractor, and Wynn, as owner, entered into a design-build agreement (PTX 1-3).
Conversely, PRG's agreement with A A involved only the development of a safety system, a component of the pool lift (PTX 4). The scope of work agreement set forth specific tasks that presumably were intended to further the development of that system. AA was not responsible for the safety system's final design through subcontracting, construction and finishing. AA did not hire subcontractors and did not substantially design or install the safety system. In the court's assessment, A A and PRG did not enter into a design-build agreement.
Throughout trial, PRG relied upon the position that the parties entered into a design-build agreement. This court did not find sufficient evidence to substantiate that position. "The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent, [and that] [t]he best evidence of what parties to a written agreement intend is what they say in their writing" (Kasowitz, 98 A.D.3d at 405, citing, Greenfield v Philles Records, 98 N.Y.2d 562, 569[2002] [internal quotation marks and citation omitted]).
The initial scope of work (PTX 4), and all revisions and correspondences, are clear and unambiguous. The documents and subsequent revisions fail to identify the agreement as a design-build contract in any respect. The parties did not mutually intend to enter into a design-build agreement based upon the contractual language.
Further, the conduct of the parties does not support the argument that the parties entered into a design-build agreement. AA did not operate with the freedom afforded a contractor in a design-build (performance specification) contract (Stuyvesant Dredging Co. v United States, 834 F.2d 1576,1582 [Fed. Cir. 1987] [performance specifications, specify the results to be obtained, and leave it to the contractor to determine how to achieve those results]; CGM Const., Inc. v Sydor, 144 A.D.3d 1434, 1436 [3rd Dept 2016]; HaywardBaker, Inc. v CO. Falter Const. Corp., 104 A.D.3d 1253 [4th Dept 2013][in a design-build contract, a contractor is required to produce a specific result without specifying the particular method or means of achieving that result; this requirement allows for the contractor to have freedom in choosing the materials and methods employed to achieve that specific result]).
Here, A A provided initial prototypes to PRG, but PRG reviewed the systems, PRG tested the systems, and PRG determined what aesthetic changes were required. PRG gave specific instructions on what revisions to be make, instructed AA on what materials to be use, and provided drawings and specifications to manufacture the safety system. AA did not retain the autonomy and freedom to choose the means and methods of its work - a chief characteristic of a design-build agreement.
Rather, the evidence more clearly supports the finding that the parties entered a design-specification contract. A design specification contract requires an entity to follow the direction of the owner and/or hiring contractor (CGM Const. Inc. v Sydor, 144 A.D.3d at 1436; Fruin-Colnon Corp. v Niagara Frontier Transp. Auth., 180 A.D.2d 222, 229-230 [1992]). The hiring entity directs the project design, methods, and materials. The subcontractor merely follows the direction of the hiring agent and is responsible for the workmanship and quality of materials employed in following the hiring entity's design (id.; Stuyvesant Dredging Co. v United States, 834 F.2d 1576, 1582 [Fed. Cir. 1987][design specifications explicitly state how the contract is to be performed and permit no deviations]).
On at least two separate occasions, AA modified its original prototype to incorporate changes required by PRG. The changes were substantive and required AA to follow PRG's specifications and functionality requirements. Following each revision, AA's work was subject to PRG's testing and approval. Under these circumstances, AA and PRG were operating within a design-specification framework.
PRG Failed to Establish that AA Breached its Agreement
PRG's complaint alleges that AA was required to "design and build a safety system for the protection of performers and the public, to be incorporated into the Le Reve Aqua Theatre being built by PRG at Wynn Las Vegas." The complaint further alleges that AA produced a safety system that did not work, and negligently designed the safety system and furnished defective and substandard components and materials. This court finds that AA completed its obligations to PRG under the scope of work agreement.
In the first phase, AA completed all eight tasks. PRG disputes this argument by pointing out that AA did not test the prototype at a specific depth. The express language of the agreement required only that AA, "develop a plan for proving the viability of concepts and testing as may be required" (PTX 4 [emphasis added]). AA developed a plan to test the prototype by wet testing in AA's facility. It was admittedly not tested at specifically 21 feet, but the prototype was sent to PRG for further testing on a full-scale mockup. PRG did not reject the prototype and did not request further testing by A A prior to acceptance of the prototype and issuing payment. AA satisfied its obligations under the first phase of the agreement.
In the second phase of the agreement, AA completed all eleven tasks, including the fabrication of a second prototype to incorporate PRG and Wynn's design changes. PRG tested the second prototype at its own facilities and did not reject the prototype or identify any deficiencies.
Thereafter, having completed the second phase of the scope of work, A A manufactured the assemblies as required in the third phase of the contract. AA assembled the switch assemblies without any substantive modifications of PRG's design. AA then arranged the switch assemblies on a template for PRG's review, and PRG performed testing of the manufactured items. AA completed its performance of the third and final phase of the agreement.
If a party materially breaches a contract, the non-breaching party must either elect to terminate the contract and sue for damages, or continue it (Awards.com, LLC v Kinko's, Inc., 42 A.D.3d 178,188 [1st Dept 2007]; 14th Street Medical v Epstein, 192 A.D.3d 495 [1st Dept 2021]). If a party chooses to continue the contract, it loses its right to later terminate the agreement and claim default (Awards 42 A.D.3d at 188/ Here, PRG elected to continue its agreement with AA, by continuing to correspond with AA and request performance of the agreement's terms.
When PRG encountered difficulties with the system constructed by AA, PRG returned to AA for remediation, and paid all of AA's invoices. Although there was evidence before the court that following completion of AA's tasks, additional testing and further system modifications were required, PRG cannot now claim that AA materially breached the contract because the system ultimately didn't work. PRG waived its right to sue AA for damages arising out of its purported failure to fulfill its contractual obligations (Awards 42 A.D.3d at 188;. PRG continued to issue payments to AA, which confirmed its assent to continue the contractual relationship (Emigrant Indus. Sav. Bank v Willow Builders, 290 NY 133, 144 [1943][the failure to object to payments, coupled with continuation of discussions regarding the contract terms, is compelling evidence that the injured party chose to continue the contract]).
PRG Failed to Establish Damages Resulting; from Material Breach of the Agreement
PRG argued that it sustained significant financial damages in having to remediate AA's failure to deliver a working safety system. However, the evidence before the court was insufficient to warrant granting PRG relief.
PRG has the burden of proving its damages to a reasonable certainty (Manshul Constr. Corp. v. Dormitory Auth. of New York, 79 A.D.2d 383, 387 [1st Dept 1981]). Damages "may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes" (Kenford Co. v County of Erie, 67N.Y.2d257,261 [1986]).
PRG identified several issues with the system provided by AA. It alleged that the safety bags were opening and deformed, and claimed the electrical system was falsely tripping. However, many of the problems PRG identified in the system provided by AA were caused by improper installation or issues related to systems unrelated to AA's work. For example, a donut lift utilized onsite experienced lateral movement causing the fascia to scrape. The evidence before the court was sufficient to establish that the safety bags provided by AA were not deformed, but rather were possibly misshapen and ripped due to the improper lateral movement of the donut lift. Issues with the lift's functionality existed before AA's assemblies were installed and were likely compounded by the fact that the safety bags and the fascia were not properly installed by PRG. The responsibility for the functionality of the lifts, and the installation of the bags was PRG's.
Further, unrefuted expert testimony at trial established that PRG's significant problems with false tripping of the wiring system came about because the wiring was improperly done, and a proper safety relay was not utilized. AA was not responsible for the wiring in any capacity.
Many of the issues PRG encountered with the system prevented PRG from properly isolating and tracking costs associated with AA's switch assemblies. PRG's compilation of purported remediation costs included too many invoices that were unrelated specifically to AA's work and were too vague to be causally connected to PRG's remediation of the safety system (KenfordCo. v County of Erie, 67 N.Y.2d 257, 261 [1986]).
PRG's damages expert offered little to clarify in this regard. Cohen did not perform any reliable analysis to assess the true costs of PRG's perimeter safety system remediation. Cohen did not assess the reasonableness of the individual charges attributed to perimeter safety system remediation. He could not confirm which charges purportedly attributable to PRG's remediation was substantiated by construction industry standards and failed to put forth any testimony with firsthand knowledge regarding the work that was performed by PRG. Similarly, PRG's fact witnesses were unable to adequately connect the line-item damages provided by PRG to perimeter safety system remediation.
For breach of contract damages to be recoverable, they must be reasonably certain and directly traceable to the breach. The damages may not be the result of other intervening causes (id). This court was not persuaded that PRG's alleged damages were sustained solely due to AA's performance under the contract (Nat'l Mkt. Share, Inc. v Sterling Nat. Bank, 392 F.3d 520, 525 [2d Cir. 2004] citing, Wakeman v Wheeler & Wilson Mfg. Co., 101 NY 205, 209 [1886] [liability for breach of contract extends to direct and proximate damages that result from the violation]).
DETERMINATION
In summary, the court finds that plaintiff failed to carry its burden of proof at trial. PRG failed to demonstrate entitlement to relief, either for liability or damages, by a preponderance of the evidence..
As to PRG's first cause of action, this court finds that AA did not breach its agreement with PRG and further finds that AA did not negligently design a safety system or otherwise furnish defective and substandard components and materials.
Accordingly, it is hereby
ORDERED that judgment is granted in favor of defendants, and the Clerk of the Court is hereby directed to enter judgment dismissing the complaint in its entirety.
This constitutes the Decision and Order of the Court.