Opinion
No. HHD-CV-075011827
August 10, 2010
MEMORANDUM OF DECISION ON DEFENDANT'S MOTION TO DISMISS (#121)
In this action, a general contractor alleges that the state of Connecticut has breached a state construction contract by failing to make payments allegedly due under the contract. The present motion seeks to dismiss on sovereign immunity grounds two counts that allege what are sometimes referred to as subcontractor "pass-through claims." For the reasons set forth below, the motion is granted in part and denied in part.
The plaintiff, Worth Construction Company, Inc., filed a five-count complaint against the defendant, state of Connecticut Department of Public Works, on July 17, 2007. All five counts allege breach of contract claims. The following facts, alleged in the complaint, are pertinent to the resolution of the present motion.
On or about May 29, 2001, the plaintiff entered into a written contract with the state (the contract) to construct additions and renovations to Engleman Hall on the campus of Southern Connecticut State University (the project). The original commencement date for the project was June 12, 2001, and the duration for completion was 1,068 calendar days. Acting as general contractor, the plaintiff commenced work on the project on or about June 1, 2001. Through no fault of the plaintiff, as alleged, the state delayed and extended the project completion date for 394 days. The plaintiff substantially completed the project on or about November 10, 2005, and the state issued a certificate of acceptance of the work and of the project.
The original contract price for the project amounted to $33,497,050.00, and following two approved change orders, the final agreed upon contract price was $38,118,742.15. Count one alleges that the plaintiff has billed the state for the base contract and approved change orders, and also submitted requests for adjustment because of increased and additional costs. Despite these requests, and demand for payment, the plaintiff alleges that the state has breached its contract and refused to pay the remaining balance due of $1,434,068.87.
Count two alleges that the state caused additional costs and damages to the plaintiff by a breach of contract through interference and favoritism to an electrical subcontractor on the project, and as a result, the plaintiff expended $553,389.53 in extra costs to complete the electrical work for the project. Despite requests for adjustment and demand for payment, the plaintiff alleges that the state has breached its contract and refused to pay that amount.
Count three alleges that the state breached its contract and delayed the plaintiff in completing its work on the project within the original calendar days schedule provided in the contract. As a result of the state's alleged breaches and delays in completing the project, the plaintiff suffered increased costs. Despite requests for adjustment and demand for payment, the plaintiff alleges that the state has refused to pay the remaining balance due of $951,690.55, owed as loss and damages under the contract.
Counts four and five allege that due to the extension of the original completion date of the project, the plaintiff has been subjected to other significant claims of subcontractors for cost escalations and adjustments that could not have been reasonably anticipated at the time the plaintiff and its subcontractors submitted bids for the project. Count four alleges that the plaintiff has received and accepted claims for increased costs for subcontractor M.J. Daly (Daly) in the amount of $319,151.00. Count five alleges that the plaintiff has received and accepted claims for increased costs for subcontractor New England Drywall Acoustical, LLC (New England) in the amount of $163,225.32. According to the plaintiff, the state breached its contract and is at fault for and caused the increased costs. The plaintiff asserts that it has liquidated the amounts and is liable to Daly and New England for the balances due and argues that the state should pay as damages those liquidated amounts.
Further, the plaintiff alleges that although it has submitted requests for equitable adjustment for Daly and New England and has made demand for payment, the state has refused to pay the balances due. On or about April 20, 2007, the plaintiff filed a notice of claim pursuant to General Statutes § 4-61. Despite the notice, the state has still refused to pay the plaintiff, and as a result, the plaintiff has allegedly suffered liability to Daly and New England and incurred further loss and damage. Attached to the complaint as "Schedule #1," is a "Notice of Claim Pursuant to General Statutes § 4-61."
On October 2, 2007, the state filed an answer and special defenses to the plaintiff's complaint. On February 6, 2008, the state filed a request to amend its answer and special defenses, as well as an amended answer, special defenses and counterclaims. The state filed three counterclaims, alleging claims for liquidated damages, breach of contract and unjust enrichment.
On January 8, 2010, the state filed a motion to dismiss counts four and five of the complaint on sovereign immunity grounds, as well as a memorandum of law in support of its motion. Attached to the memorandum are two documents: (1) a "Claim Acknowledgment and Liquidation Agreement" purportedly executed by and between the plaintiff and New England; and (2) a "Claim Acknowledgment and Liquidation Agreement" purportedly executed by and between the plaintiff and Daly. On March 24, 2010, the plaintiff filed a memorandum of law in opposition to the state's motion. The motion was heard at the short calendar on June 7, 2010.
The documents submitted by the state were not properly authenticated in compliance with Practice Book § 17-45; see New Haven v. Pantani, 89 Conn. App. 675, 678-79, 874 A.2d 849 (2005); but the plaintiff conceded at the short calendar on June 7, 2010, that they were true and accurate copies and did not object to the court relying on them.
DISCUSSION
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Caruso v. Bridgeport, 285 Conn. 618, 627, 941 A.2d 266 (2008). In the present matter, the state has moved to dismiss counts four and five for lack of subject matter jurisdiction.
"The motion to dismiss shall be used to assert . . . lack of jurisdiction over the subject matter . . ." Practice Book § 10-31. "[T]he doctrine of sovereign immunity implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss." (Internal quotation marks omitted.) Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 134, 918 A.2d 880 (2007). "Jurisdiction of the subject-matter is the power [of the court] to hear and determine cases of the general class to which the proceedings in question belong . . . A court has subject matter jurisdiction if it has the authority to adjudicate a particular type of legal controversy. Such jurisdiction relates to the court's competency to exercise power, and not to the regularity of the court's exercise of that power." (Citation omitted; internal quotation marks omitted.) Castro v. Viera, 207 Conn. 420, 427, 541 A.2d 1216 (1988). "[T]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430, n. 12, 829 A.2d 801 (2003).
"When a trial court decides a jurisdictional question raised by a pretrial motion to dismiss on the basis of the complaint alone, it must consider the allegations of the complaint in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader . . .
"In contrast, if the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motion to dismiss . . . other types of undisputed evidence . . . [or] public records of which judicial notice may be taken . . . the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint . . . Rather, those allegations are tempered by the light shed on them by the [supplementary undisputed facts] . . . If affidavits [or] other evidence submitted in support of a defendant's motion to dismiss conclusively establish that jurisdiction is lacking, and the plaintiff fails to undermine this conclusion with counter affidavits . . . or other evidence, the trial court may dismiss the [count] without further proceedings . . . If, however, the defendant submits either no proof to rebut the plaintiff's jurisdictional allegations . . . or only evidence that fails to call those allegations into question . . . the plaintiff need not supply counter affidavits or other evidence to support the complaint, but may rest on the jurisdictional allegations therein." (Citations omitted; emphasis in original; internal quotation marks omitted.) Conboy v. State, 292 Conn. 642, 651-52, 974 A.2d 669 (2009).
Specifically, the state moves to dismiss counts four and five of the plaintiff's complaint on the ground that the claims alleged in counts four and five fall outside the state's limited waiver of sovereign immunity set forth in § 4-61. "The principle that the state cannot be sued without its consent, or sovereign immunity, is well established under our case law." C.R. Klewin Northeast, LLC v. Fleming, 284 Conn. 250, 258, 932 A.2d 1053 (2007). "[T]he sovereign immunity enjoyed by the state is not absolute. There are [three] exceptions: (1) when the legislature, either expressly or by force of a necessary implication, statutorily waives the state's sovereign immunity . . . (2) when an action seeks declaratory or injunctive relief on the basis of a substantial claim that the state or one of its officers has violated the plaintiff's constitutional rights . . . and (3) when an action seeks declaratory or injunctive relief on the basis of a substantial allegation of wrongful conduct to promote an illegal purpose in excess of the officer's statutory authority . . .
"For a claim made pursuant to the first exception, [the Supreme Court] has recognized the well established principle that statutes in derogation of sovereign immunity should be strictly construed . . . Where there is any doubt about their meaning or intent they are given the effect which makes the least rather than the most change in sovereign immunity . . . In the absence of a proper factual basis in the complaint to support the applicability of these exceptions, the granting of a motion to dismiss on sovereign immunity grounds is proper." (Citations omitted; internal quotation marks omitted.) Columbia Air Services, Inc. v. Dept. of Transportation, 293 Conn. 342, 349-50, 977 A.2d 636 (2009). "The state's sovereign right not to be sued may be waived by the legislature, provided clear intention to that effect is disclosed by the use of express terms or by force of a necessary implication." (Internal quotation marks omitted.) Dept. of Transportation v. White Oak Corp., 287 Conn. 1, 9, 946 A.2d 1219 (2008). "In the absence of a statutory waiver of sovereign immunity, the plaintiff may not bring an action against the state for monetary damages without authorization from the claims commissioner to do so." Columbia Air Services, Inc. v. Dept. of Transportation, supra, 351.
GENERAL STATUTES § 4-61
Section 4-61(a) provides in relevant part: "Any person, firm or corporation which has entered into a contract with the state, acting through any of its departments, commissions or other agencies, for the design, construction, construction management, repair or alteration of any highway, bridge, building or other public works of the state or any political subdivision of the state may, in the event of any disputed claims under such contract or claims arising out of the awarding of a contract by the Commissioner of Public Works, bring an action against the state to the superior court for the judicial district of Hartford for the purpose of having such claims determined . . ." (Emphasis added.) Section 4-61 "is the sole Connecticut statute that expressly waives sovereign immunity for specifically enumerated [public works] contract actions." (Emphasis in original.) 184 Windsor Avenue, LLC v. State, 274 Conn. 302, 311, 875 A.2d 498 (2005). "Thus, a party who seeks to litigate or arbitrate a disputed claim arising under a public works contract bears the burden of proving that the claim fits precisely within the narrowly drawn reach of § 4-61." Dept. of Transportation v. White Oak Corp., supra, 287 Conn. 9.
There is no dispute between the parties that, as required by § 4-61, the plaintiff entered into a contract with the state, acting through the department of public works, for the construction, construction management, repair or alteration of a state building or other public works of the state. The parties' dispute is whether the plaintiff's alleged claims in counts four and five are "disputed claims under such contract," as required by the language of § 4-61(a).
In interpreting the use of the phrase "disputed claims under such contract" in § 4-61(a), our Supreme Court has concluded: "The legislature's use of the word `under,' as opposed to a broader term such as `related to,' `connected with' or `derived from,' indicates an intent to authorize only those disputed claims against the state that fall directly under the contract itself. To permit an action against the state for a claim that is related to or connected with a public works contract would expand the limited waiver of immunity inherent in § 4-61 beyond the statute's plain language." Dept. of Public Works v. ECAP Construction Co., 250 Conn. 553, 559, 737 A.2d 398 (1999). In ECAP Construction Co., the Supreme Court held that although it was undisputed that an original demand for arbitration by the plaintiff "fell `under' the parties' original contract and was, therefore, arbitrable pursuant to § 4-61"; id., 562; the plaintiff's amended demand for arbitration concerning the state's alleged breach of a purported settlement agreement was not arbitrable under § 4-61 because "although related to the [parties'] original contract, [the purported agreement did] not arise `under' that contract." Id.
In Federal Deposit Ins. Corp. v. Peabody, N.E., Inc., 239 Conn. 93, 101, 680 A.2d 1321 (1996), the issue presented on appeal was "whether a general contractor has a `disputed [claim] under [its] contract' with the state, within the meaning of § 4-61(a), if the general contractor's claim against the state takes the form of a claim for indemnification that is based upon the pending claim of a subcontractor." In that case, like the present, only the general contractor had a contract with the state. Id., 102. The subcontractor "had no contract with the state and, therefore, could not sue the state directly." Id. Due to this fact, the subcontractor's successor in interest brought suit against the general contractor with whom the subcontractor did have a contract. Id. The court noted that "the only existing `disputed claim' at [that] point . . . [was] between the general contractor and the subcontractor." Id. Thereafter, the general contractor attempted to implead the state for indemnification, because the subcontractor's claims for damages were based on the state's alleged failure to properly compensate the subcontractor. Id., 96.
The Supreme Court stated: "In § 4-61(a), the legislature did not, as it has done in the context of private sector claims, allow suits invoking the contingent liability of parties who `may be liable' at some point in the future . . . Thus, under the plain language of § 4-61(a), and applying the strict construction that we must apply to statutory language in derogation of sovereign immunity . . . we are persuaded that a general contractor who has entered into a contract with the state cannot bring a third party action against the state based on the mere prospect that the contractor may be liable to a subcontractor at some point in the future. That scenario does not constitute a disputed claim by the contractor against the state." (Citations omitted; emphasis in original.) Id., 102-03.
Relying on the legislative history of § 4-61, the Peabody court further noted that "[i]f general contractors on state construction projects were allowed to deny liability to subcontractors and then simply implead the state each time a subcontractor brought suit against them, the subcontractors effectively would be able to prosecute their claims against the state indirectly through the general contractors, increasing the complexity and volume of litigation against the state. Section 4-61(a) expressly grants the right to sue the state only to contractors who have `entered into a contract with the state' and who have a dispute `under such contract.' Nowhere in § 4-61 or elsewhere in the General Statutes is there any provision that grants a subcontractor, who does not have a contract with the state, the right to sue the state . . .
"In the absence of an expressed legislative intent to the contrary, it would be incongruous for the legislature in enacting § 4-61(a) to have limited the right to sue the state to contractors having a direct contract with the state, but to allow subcontractors who have no contract with the state to sue the state indirectly through the procedural vehicle of a third party complaint. We conclude, therefore, that a contractor cannot implead the state in an action against the contractor by a subcontractor unless the contractor admits liability to the subcontractor and incorporates the subcontractor's claim into its own, so that the contractor then has a disputed claim under its own direct contract with the state." (Citation omitted.) Id., 104-05.
The factual situation in Peabody is not identical to the present matter because Peabody involved a subcontractor's action against a general contractor, and a subsequent attempt by the general contractor to implead the state into that action for indemnification, while the present matter involves an action initially filed by a general contractor directly against the state. Moreover, the plaintiff here has not alleged that it is entitled to indemnification by the state, but rather, appears to have alleged what are sometimes referred to as "pass-through claims." Because the meaning of the term "pass-through" claim is not self-evident, its meaning is discussed below.
"PASS-THROUGH CLAIMS"
Although some judges of the Superior Court have used the term "pass-through claim" before; see, e.g., Paragon Construction Co. v. State, Superior Court, judicial district of Hartford, Docket No. 05 5019140 (February 1, 2007, Wagner, J.T.R.); neither those judges nor Connecticut appellate courts have previously explained the meaning of the term. Other jurisdictions have done so. See Interstate Contracting Corp. v. Dallas, 135 S.W.3d 605, 610, rehearing denied (Tex. 2004).
In Interstate Contracting Corp., the Texas Supreme Court provided a helpful description of "pass-through claims" as well as a survey of federal and state law applicable to such claims. "A pass-through claim is a claim (1) by a party who has suffered damages . . . (2) against a responsible party with whom it has no contract . . . and (3) presented through an intervening party . . . who has a contractual relationship with both . . . Instead of one lawsuit between a subcontractor and general contractor and another between the general contractor and the owner, pass-through claims permit a contractor to pursue its subcontractor's claims directly against the owner . . .
"Under the typical pass-through arrangement, the contractor remains liable to the subcontractor, but only to the extent the contractor receives payment from the owner . . . A liquidation or consolidation-of-claims agreement determines the manner and procedure by which the contractor presents the subcontractor's claim to an owner . . . A liquidation agreement may be included in the subcontract or may take the form of a separate agreement . . . In a liquidation agreement: (1) the contractor acknowledges its liability to the subcontractor, thereby providing the general contractor with a basis for legal action against the owner; (2) the general contractor's liability is liquidated to the extent of its recovery against the owner; and (3) the general contractor agrees to pass its recovery to the subcontractor . . . Thus, under a liquidation agreement, the subcontractor releases all claims it may have against the contractor in exchange for the contractor's promise to pursue those claims against the owner and remit any recovery to the subcontractor." (Citations omitted.) Interstate Contracting Corp. v. Dallas, supra, 135 S.W.3d 610.
Following the above description of typical pass-through claims, the Texas Supreme Court then summarizes the federal common law on pass-through claims. "In breach of contract actions against the federal government, contractors have long been permitted to present subcontractors' claims on a pass-through basis against the government, even though the no-privity rule would otherwise bar subcontractors from recovering directly against the government . . . In United States v. Blair [ 321 U.S. 730, 737-38, 64 S.Ct. 820, 88 L.Ed. 1039, rehearing denied, 322 U.S. 768, 64 S.Ct. 1052, 88 L.Ed. 1594 (1944)], the Supreme Court articulated the policy rationale for allowing pass-through claims, stating that: `[I]t does not follow that [the contractor] is barred from suing for this amount. [The contractor] was the only person legally bound to perform his contract with the Government and he had the undoubted right to recover from the Government the contract price for [the work] whether that work was performed personally or through another. This necessarily implies the right to recover extra costs and services wrongfully demanded of [the contractor] under the contract, regardless of whether such costs were incurred or such services were performed personally or through a subcontractor. [The contractor's] contract with the Government is thus sufficient to sustain an action for extra costs wrongfully demanded [of the contractor] under that contract.' . . . The federal pass-through procedure has become the standard method by which such claims are resolved . . .
"Pass-through claims evolved because . . . federal law provides that subcontractors under government contracts do not have standing to sue the government without first establishing privity of contract . . . Under the federal pass-through doctrine, however, as long as the general contractor remains liable to the subcontractor for the subcontractor's damages, the general contractor can bring an action against the government for the subcontractor's damages . . . Federal courts construe this continued liability to the subcontractor as giving the contractor standing to pass the subcontractor's claims through to the government . . .
"In [ Severin v. United States, 99 Ct. Cl. 435, 442-43 (1943), cert. denied, 322 U.S. 733, 64 S.Ct. 1045, 88 L.Ed. 1567 (1944)], however, the United States Court of Claims held that a contractor suing on behalf of its subcontractor could not recover from the government because the subcontract contained a clause that completely exculpated the contractor from liability . . . The court reasoned that the contractor was barred from pursuing a claim on its subcontractor's behalf because the exculpatory clause extinguished any claim the contractor could have asserted for damages resulting from the government's breach . . . This rule has since become known as the ` Severin doctrine.'
"The exculpatory clause in Severin provided: `The Contractor or Subcontractor shall not in any event be held responsible for any loss, damate [sic], detention, or delay caused by the Owner or any other Subcontractor upon the building . . .' The court concluded that this language constituted a complete release of the contractor's liability to the subcontractor . . . However, the court noted that `[i]f plaintiffs had proved that they, in the performance of their contract with the Government became liable to their subcontractor for the damages which the latter suffered, that liability, though not yet satisfied by payment, might well constitute actual damages to plaintiffs, and sustain their suit `. . .
"Federal courts have modified the Severin doctrine to mitigate the perceived unfairness in its strict application . . . In accordance with the jurisprudence that emerged after Severin, most pass-through arrangements still provide for the subcontractor to release the contractor from liability. However, that release is generally made contingent on the contractor bringing the subcontractor's claims to the owner and remitting to the subcontractor any amounts recovered . . . More recently, federal courts have expressly limited the Severin doctrine . . . Thus, federal courts allow the contractor and subcontractor to liquidate the contractor's liability to the amount actually recovered from the owner." (Citations omitted; emphasis in original.) Interstate Contracting Corp. v. Dallas, supra, 135 S.W.3d 610-13.
After its exhaustive summary of federal precedent on pass-through claims, the Texas Supreme Court briefly surveys state law on pass-through claims. Interstate Contracting Corp. v. Dallas, supra, 35 S.W.3d 613-14. The court notes that, as of 2004, nineteen states had addressed the concept in published opinions, and the court concludes that "eighteen treat pass-through claims favorably, and only Connecticut explicitly rejects them." Id. In concluding that Connecticut explicitly rejects pass-through claims, the Texas Supreme Court cites three Connecticut cases: Peabody, discussed above; Wexler Construction Co. v. Housing Authority, 149 Conn. 602, 183 A.2d 262 (1962); and Walter Kidde Constructors, Inc. v. State, 37 Conn.Sup. 50, 434 A.2d 962 (1981). Id., 614 n. 6. This court disagrees with the Texas Supreme Court's conclusion that Connecticut law completely rejects pass-through claims.
Connecticut courts have not previously defined the term "pass-through claim," adopted the Severin doctrine, or otherwise explicitly recognized or permitted pass-through claims as defined above. Nor have they plainly rejected or prohibited such claims. Using the Texas Supreme Court's definition of a "pass-through claim," the court next turns to Connecticut cases involving instances in which courts have encountered claims that are factually similar to pass-through claims.
The first Connecticut case, Peabody, as discussed above, did not involve a "pass-through claim" in the strict sense, but rather, a general contractor's attempt, via a third-party complaint, to allege a claim for indemnification against the state by impleading the state into a subcontractor's action against the general contractor. Further, the court in Peabody did not strictly bar the general contractor from recovering against the state after impleading it under all circumstances, but, as the Texas Supreme Court notes; see Interstate Contracting Corp. v. Dallas, supra, 135 S.W.3d 614 n. 6; required the general contractor to admit liability to the subcontractor in order to recover against the state.
In another case, Wexler Construction Co. v. Housing Authority, 149 Conn. 602, 602, 183 A.2d 262 (1962), the plaintiff, a general contractor, sought recovery on behalf of a subcontractor against a municipality for the performance of extra work. After a jury verdict and judgment in favor of the plaintiff, the municipality appealed, claiming that the trial court should have charged the jury that proof of the plaintiff's liability to its subcontractor was a prerequisite to recovery. Id., 607.
Our Supreme Court agreed, noting: "It is a fundamental concept of judicial administration that no person is entitled to set the machinery of the courts into operation unless for the purpose of obtaining redress for an injury he has suffered or to prevent an injury he may suffer, either in an individual or representative capacity . . . A plaintiff can recover only by proving that he himself is entitled to prevail on the cause of action alleged. It is not enough that he prove that some other person, not a party to the case, would be entitled to recover on that cause of action. The only way in which the plaintiff here could be injured, under the allegations of the first count, is if it is liable to [its subcontractor] in connection with the extra work. A contractor is not necessarily, nor even generally, liable to its subcontractor for the extra work done by the subcontractor by reason of fault on the part of the owner or his agents." (Citations omitted; internal quotation marks omitted.) Id., 605. Implicitly then, the Supreme Court in Wexler Construction Co. held that a prerequisite to recovery by a general contractor against a municipality, on behalf of its subcontractor, is that the general contractor prove it is in fact liable to its subcontractor. See, id., 605-07. Therefore, Wexler Construction Co. appears to stand for the principle that a general contractor can allege a pass-through claim on behalf of one of its subcontractors against a non-state entity as long as the general contractor proves that it is in fact liable to that subcontractor. See id. Wexler Construction Co., however, is not directly applicable to the present matter because the defendant in that case was a municipality, not the state, and therefore, was not protected by the doctrine of sovereign immunity. Indeed, part of the court's reasoning was that certain policy considerations, raised by the plaintiff in defending against the municipality's appeal, were inapplicable because "no reason appeared why [the subcontractor] itself would have any difficulty in recovering for extra work performed by it" against the municipality. Id., 606.
In comparison, the very impetus of the presently contested claims is that the plaintiff's subcontractors themselves are unable to recover against the state. Nevertheless, Wexler Construction Co. implicitly permits pass-through claims, at least as to non-state entities, in a manner consistent with Severin's federal precedent.
Finally, the court turns to a superior court decision, Walter Kidde Constructors, Inc. v. State, 37 Conn.Sup. 50, 51, 434 A.2d 962 (1981). In Walter Kidde Constructors, Inc., two construction contractors that had formed a joint venture to act as general contractor for a $35 million state construction project filed a complex, twenty-one count complaint against the state. Eight of the counts in the complaint alleged what amounted to pass-through claims on behalf of eight different subcontractors. Id., 53. As to those eight counts, the court concluded that the plaintiffs failed to prove the liability of the state. Id., 74.
A state referee, House, J., issued the decision after a jury trial that required 113 trial days over a 13-month period. Walter Kidde Constructors, Inc. v. State, supra, 37 Conn.Sup. 55.
For a number of reasons, it is this court's opinion that Walter Kidde Constructors, Inc. represents dubious authority to rely on in deciding whether to permit pass-through claims against the state under § 4-61, and does not consider it. First, the court's analysis used to reach its decision is confusing and difficult to apply. The court began its analysis by noting that circumstances exist "under which a prime contractor may sue for and recover damages sustained by a subcontractor"; Walter Kidde Constructors, Inc. v. State, supra, 37 Conn.Sup. 68; and that the "conditions precedent to the prosecution of such a suit have been the subject of much discussion and judicial consideration." Id. (citing as support federal and Connecticut law including Severin and Wexler Construction Co.) The court then goes on to cite Wexler Construction Co. and another Connecticut case, Knapp v. New Haven Road Construction Co., 150 Conn. 321, 324, 189 A.2d 386 (1963), in an apparent effort to identify the conditions precedent for the prosecution of a pass-through claim, but never specifically delineates what those conditions precedent are, nor how many exist. Walter Kidde Constructors, Inc. v. State, supra, 68-69. This pattern continues when the court, while examining the facts of the case, concludes that the plaintiffs "satisfied the first condition precedent to successfully suing on behalf of its subcontractors"; id., 72; but later states that the satisfaction of that first condition precedent is insufficient without supporting proof. Id., 73. Implicitly then, it seems that the court concluded that the plaintiff failed to satisfy the other condition or conditions precedent, but the decision never clearly explains what that or those other condition or conditions precedent are.
Although the court's initial analysis above is ambiguous in its own right, it is further complicated later in the decision when the court appears to contradict itself. Following the preceding analysis, the court states that, under § 4-61, because "none of the subcontractors had `entered into a contract with the state'"; id., 74; the subcontractors were "barred from a suit against the state whether that suit is brought by them directly in their own names or through the `conduit' of a contractor who had entered into a contract with the state." (Emphasis added.) Id. The implicit result of that statement, then, is that subcontractor pass-through claims can never be alleged against the state, including when brought by the subcontractors themselves or through a general contractor. This latter conclusion is at odds with the court's preceding statement that subcontractor pass-through claims can be alleged against the state as long as certain conditions precedent are met.
Moreover, Walter Kidde Constructors, Inc. is a Superior Court decision, and thus, is not binding on this court. Additionally, Walter Kidde Constructors, Inc. relies primarily on Wexler Construction Co. for controlling Connecticut precedent; see id., 68, 72-73; a case which did not involve the issue of sovereign immunity, which is at the heart of the dispute in the present matter. Further, Walter Kidde Constructors, Inc. was decided fifteen years prior to Peabody.
Finally, the language of Walter Kidde Constructors, Inc. raises some doubt as to whether that court properly applied the doctrine of sovereign immunity. The court in Walter Kidde Constructors, Inc. noted that the state pleaded sovereign immunity as a defense to the eight pass-through claims; id., 53; and held that the state had waived sovereign immunity under § 4-61 as to certain counts alleging claims based on liability of the state to the general contractors only. Id., 67. But in discussing the applicability of § 4-61 to the eight pass-through claims, the court said "there is also merit to the defendant's special defense of governmental immunity from suit . . ." (Emphasis added.) Id., 73.
Sovereign immunity and governmental immunity, however, are separate and different concepts, and the terms cannot be used interchangeably. See Vejseli v. Pasha, 282 Conn. 561, 573, 923 A.2d 688 (2007) (recognizing the "inherent differences in the nature of the governmental immunity enjoyed by municipalities as contrasted with the sovereign immunity enjoyed by the state" [internal quotation marks omitted]). At the very least, the words used by the court in Walter Kidde Constructors, Inc. create ambiguity, making that decision difficult for this court to apply to the present matter. For all these reasons, this court does not rely on Walter Kidde Constructors, Inc. to resolve this motion.
Left only with Peabody and Wexler Construction Co. as guiding precedent, this court also considers, as previously considered by our Supreme Court, the legislative intent behind § 4-61. "Prior to the enactment of § 4-61, suits against the state by contractors were not countenanced because of sovereign immunity. Individualized legislative authorization to sue was required to be sought by petition before an action could be brought against the state . . . In 1957, the legislature enacted § 4-61 to reduce the number of petitions for permission to sue the state that it received involving suits over state construction contracts . . . Another reason for allowing parties who had contracted with the state to sue the state directly without seeking legislative authorization was the hope that affording contractors the right to sue would reduce the costs of construction projects to the state by eliminating the cost of the lengthy legislative authorization process that was often built into state construction contracts . . . Accordingly, § 4-61 was intended to foster competitive bidding for state construction contracts, which, in turn, would make it more likely that the cost to the state of such projects will be reduced . . . In 1986, the legislature amended § 4-61 by adding subsection (b), which provides that a party may file a demand for arbitration with the American Arbitration Association in lieu of filing a complaint in the Superior Court . . . The purpose of this amendment was to provide an alternative forum in which disputed claims arising under public works contracts could be resolved in a simpler, speedier and more efficient manner . . . As we repeatedly have observed, § 4-61 was intended to carve out a narrow and limited exception to sovereign immunity . . . [T]he legislative policies that the statute was designed to implement [are], namely, increasing the quality of construction in the state while, at the same time, reducing its cost by permitting contractors to sue the state directly to resolve disputed claims arising under public works contracts quickly and efficiently." (Citations omitted; internal quotation marks omitted.) Dept. of Transportation v. White Oak Corp., supra, 287 Conn. 11-14.
This court reads Peabody and Wexler Construction Co. together, in light of the legislative intent behind § 4-61, to establish the following principles regarding pass-through claims under Connecticut law. Pass-through claims are permissible under § 4-61(a) as "disputed claims under such contract" as long as the general contractor admits unconditional liability to the subcontractor, liquidates its liability to a sum certain, and incorporates the subcontractor's claim into its own. That the general contractor's admission of liability must be unconditional bears particular emphasis not only because it is required by Peabody and Wexler Construction Co., but because it gives effect to the legislature's intent behind § 4-61.
In setting forth the principles above, this court recognizes that they are only partially consistent with the non-binding federal precedent regarding pass-through claims against the United States government (known as the Severin doctrine). The principles established by this court are consistent with the Severin doctrine to the extent that it allows and requires the general contractor to admit liability to the subcontractor and incorporate the subcontractor's claim into its own, but the federal precedent does not mandate that the general contractor's admission of liability be unconditional and liquidated to a sum certain. A requirement that the admission of liability be unconditional and liquidated is more restrictive than federal law regarding pass-through claims.
The court finds this requirement is necessary under Connecticut law, however, because to hold otherwise and allow a general contractor to, on one hand, admit liability to its subcontractor, but on the other hand, permit the general contractor to limit its liability to its subcontractor only to an amount recovered against the state in the future, would eviscerate the core principles underlying § 4-61 and Peabody. In other words, without such a requirement, the claim does not truly belong to the general contractor but instead still belongs to the subcontractor who is simply litigating it against the state through its proxy, the general contractor. Such a result would not be consistent with the intent of § 4-61 because it would increase litigation expenses and burdens on the state thereby increasing the costs of construction to the state. Certainly, such a result would contravene the Connecticut Supreme Court repeated observation that "§ 4-61 was intended to carve out a narrow and limited exception to sovereign immunity." Dept. of Transportation v. White Oak Corp., supra, 287 Conn. 13.
This court must now apply the principles stated above, based on Peabody, Wexler Construction Co. and § 4-61, to the present complaint and the liquidation agreements between the plaintiff and its subcontractors submitted by the state in support of its motion. The liquidation agreements, however, do not contain identical language, so each count, and thus, each liquidation agreement, is considered individually.
When interpreting a contract or agreement, "[o]rdinarily the parties' intent is a question of fact . . . Where a party's intent is expressed clearly and unambiguously in writing, however, the determination of what the parties intended . . . is a question of law . . . The intent of the parties as expressed in [writing] is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the [writing]." (Citation omitted; internal quotation marks omitted.) 19 Perry Street, LLC v. Unionville Water Co., 294 Conn. 611, 622-23, 987 A.2d 1009 (2010).
COUNT FOUR AND THE DALY AGREEMENT
Count four alleges that the plaintiff has received and accepted claims for increased costs for Daly in the amount of $319,151.00, has liquidated the amount, and is liable to Daly. The "Claim Acknowledgment and Liquidation Agreement" between the plaintiff and Daly (Daly agreement) contains the following pertinent provisions. First, the Daly agreement contains several predicate statements including: "Contractor hereby admits liability to the subcontractor for the increased costs;" and "Contractor has agreed to accept and incorporate the subcontractor's claim with its own claims against owner under the prime contract."
The Daly agreement continues with sixteen numbered paragraphs. Paragraph 1 states in part: "Contractor has acknowledged liability to the subcontractor for the subcontractor claim for equitable adjustment . . . and contractor shall and hereby does liquidate such liability for the total amount of . . . $319,151.00 . . . dollars (the "Liquidated Amount") and incorporates the subcontractor claim with its own claims against the owner for equitable adjustment under the prime contract."
Paragraph 2 states in relevant part: "Contractor, as the party in privity with the state, agrees to include subcontractor's claim, contractor's claim, and the claims of any other eligible subcontractors, as a joint claim to the department of public works and the state of Connecticut, as the owner, under [ § 4-61]."
Paragraph 3 provides: "The decision to litigate or arbitrate is left to the sole discretion of contractor. The liability and obligation of contractor to the subcontractor to pay the subcontractor claim is not conditioned upon, and payable only from and out of, an amount recovered for or on account of subcontractor claim by contractor from the owner through negotiation, mediation, settlement or after trial of the consolidated claim; however, subcontractor does agree to allow the contractor a reasonable time, no less than eighteen . . . months, first to pursue, prosecute and resolve the consolidated claim with the owner before subcontractor demands payment of the liquidated amount directly from contractor or its surety.
"Regardless, upon any such collection or recovery being obtained by contractor for the subcontractor claim, the sum so collected or recovered for the subcontractor claim from the owner shall be paid promptly by contractor to the subcontractor and accepted by the subcontractor as complete payment, settlement and discharge of the subcontractor claim and contractor shall then be fully released and discharged of any and all liability to the subcontractor for the subcontractor claim; or, if not collection or recovery shall be obtained by contractor from the owner with respect to the subcontractor claim . . . and after expiration of the reasonable time to prosecute the consolidated claim . . . then, contractor shall pay such liquidated amount to subcontractor on written demand regardless of collection or recovery from the owner." (Emphasis added.)
Finally, paragraph 9 states: "It is the intention of the parties hereto that contractor is, and contractor expressly acknowledges, as herein provided, that it is liable to the subcontractor for the subcontractor claim and is responsible for the proper and timely assertion in accordance with the time frames set forth in this agreement of the subcontractor claim against the owner for and on behalf of the subcontractor."
Given the provisions above, the Daly agreement does not satisfy the controlling legal principles of Peabody and Wexler Construction Co. that would permit the pass-through claim in count four to proceed against the state under § 4-61. Although the language in the Daly agreement's initial predicate statements, paragraph 1, paragraph 9 and the third sentence of paragraph 3, appear to support the plaintiff's argument that it has admitted unconditional liability to Daly for Daly's claims against the state, certain additional provisions contained in the fourth sentence of paragraph 3 make the plaintiff's admission of liability merely for an unliquidated rather than liquidated amount. After the third sentence of paragraph 3 initially sets forth the plaintiff's admission of liability, the fourth sentence goes on to provide how the plaintiff may extinguish virtually all of its obligation to Daly. As previously set forth above, the language states that "upon any such collection or recovery" being obtained by the plaintiff for Daly's claim, "the sum so collected or recovered" for Daly's claim from the state "shall be paid promptly" by the plaintiff to Daly and accepted by Daly "as complete payment, settlement and discharge" of Daly's claim and the plaintiff "shall then be fully released and discharged of any and all liability" to Daly for its claim.
The parties agreed at the June 7, 2010 hearing that the plaintiff's liquidation agreement with Daly, as well as its liquidation agreement with New England, are each clear and unambiguous, and do not raise any questions of fact.
A reasonable interpretation of the fourth sentence allows that if the plaintiff recovers the full $319,151 purportedly owed to Daly by the state, and sought by the plaintiff in count four, and the plaintiff then pays that amount to Daly, the plaintiff's liability to Daly will then be extinguished. But the fourth sentence also allows that if the plaintiff recovers an amount less than the $319,151 sought, and then pays that amount to Daly, the plaintiff's liability to Daly will also be extinguished. Importantly, the language of paragraph 3 even allows the plaintiff to extinguish virtually all of its liability to Daly by recovering an amount well below the $319,151. Indeed, if the plaintiff recovers only $1 from the state, it will only owe Daly $1.
Under Peabody and Wexler Construction Co., a general contractor alleging a claim based on liquidated liability to a subcontractor for a purported debt owed by the state to that subcontractor must be obligated to pay that subcontractor the entire liquidated amount of the general contractor's liability to that subcontractor in order to be relieved of the admitted liability. In the present case, the plaintiff has admitted liability to Daly for its claim against the state, but it has not done so for a liquidated sum, as the terms of its liquidation agreement with Daly do not require the plaintiff to recover or pay Daly the entire amount of its liability in order to extinguish that liability. Instead, the plaintiff only may be obligated to pay the entire liquidated amount of its liability in order to extinguish that liability. This court concludes that it is inconsistent with Peabody and Wexler Construction Co. to allow the plaintiff to maintain its claim under § 4-61 given the terms of its liquidation agreement with Daly. Therefore, the state's motion to dismiss count four is granted.
The only other way the plaintiff could avoid dismissal of count four is by having obtained authorization from the office of the claims commissioner to bring that claim, thereby waiving the state's sovereign immunity. The plaintiff has not obtained permission from the claims commissioner to bring the claim.
COUNT FIVE AND THE NEW ENGLAND AGREEMENT
Count five alleges that the plaintiff has received and accepted claims for increased costs for New England in the amount of $163,225.32, has liquidated the amount, and is liable to New England. Like the Daly agreement, the "Claim Acknowledgment and Liquidation Agreement" between the plaintiff and New England (New England agreement) contains several different substantive statements and provisions, of which, only the pertinent parts are noted. Like the Daly agreement, the New England agreement begins with several predicate statements, two of which are the same as those mentioned above in the Daly agreement.
The New England agreement then continues with fourteen numbered paragraphs. Paragraph 1 is nearly identical to the same paragraph in the Daly agreement, the only difference being the stated liquidated amount, which is $154,734.94. Paragraph 2 is identical to the same paragraph in the Daly agreement.
Paragraph 3a begins the same as paragraph 3 in the Daly agreement, stating: "The decision to litigate or arbitrate is left to the sole discretion of contractor. The liability and obligation of contractor to the subcontractor to pay the subcontractor claim is not conditioned upon, and payable only from and out of, an amount recovered for or on account of subcontractor claim by contractor from the owner through negotiation, mediation, settlement or after trial of the consolidated claim." But the provision varies thereafter by creating a different "reasonable time" before the subcontractor can demand payment of the liquidated amount, "no less than eighteen . . . months, but not more than twenty-four . . . months."
Paragraph 3b states, in part: "Subcontractor hereby acknowledges receipt of [$55,000] from the contractor towards payment of the liquidated amount and agrees that the contractor has already paid subcontractor that portion of the liquidated amount of the subcontractor claim; and, contractor shall be entitled to retain the equivalent amount from the proceeds recovered from the owner." Paragraph 10 is identical to paragraph 9 of the Daly agreement.
Although the New England agreement contains much of the same language as the Daly agreement, unlike the Daly agreement, however, the New England agreement has no provision that permits the plaintiff to extinguish virtually all of its liability to New England. Thus, it is fair to conclude that, unlike the nature of the plaintiff's obligations to Daly, no matter the outcome of the plaintiff's present suit against the state, the plaintiff is obligated to pay New England the entire liquidated amount of its liability. Therefore, because the plaintiff's admission of liability to its subcontractor in the New England agreement is in fact unconditional, the court has subject matter jurisdiction to adjudicate count five against the state as a "disputed claim under such contract" pursuant to § 4-61(a).
The state's arguments in favor of granting the motion to dismiss as to count five are unconvincing. First, the state argues that because the New England agreement "refers to the claim for the liquidated sum as the subcontractor's claim, again and again," the plaintiff has not adequately admitted liability for the claim so as to make it the plaintiff's claim under its contract with the state. The court is not persuaded. The simple fact is that prior to execution of the agreement, the claim was still "New England's" under its subcontract with the plaintiff, thereby making it proper to refer to the claim as "the subcontractor's claim." Only after executing the agreement did the claim "become" the plaintiff's claim under its contract with the state. This language, therefore, does not create any real ambiguity regarding the other provisions of the agreement and the actual intent of the parties remains clear.
Second, the state argues that the inclusion of paragraph 2 in the New England agreement, as well as paragraph 2's use of the phrase "on behalf of . . . the subcontractor" and the term "joint claim," indicate that New England still "owns" a part of the claim, and therefore, the plaintiff hasn't unconditionally admitted liability to New England. Although perhaps not a model of drafting clarity, these passing references do not undermine the court's conclusion that the intent of the parties was to have the plaintiff unconditionally admit liability to the subcontractor for a liquidated amount that would not change even if the plaintiff's action against the state is not fully successful.
The state also argues that certain language in paragraph 3a, allowing the plaintiff a "reasonable time" to pay New England the liquidated amount before it is due, in paragraph 3b, permitting the plaintiff to retain any proceeds recovered in excess of the liquidated amount, and in paragraph 4(a), obligating the plaintiff to bear the complete cost and expense of litigating the pass-through claim, makes the plaintiff's admission of liability to New England conditional. These provisions do not alter the plaintiff's liability to New England in any substantive way.
Finally, the state cites to paragraph 3b of the New England agreement as evidence that the plaintiff has already paid to New England $55,000 of the total amount it is liable for, and seeks in count five. The state then explicitly argues that it "does not challenge Worth's right to prosecute a claim for that $55,000 under § 4-61." This argument fails for two reasons.
First, nowhere in the language of the agreement is there any indication that the payment of $55,000 satisfies the remaining amounts due to New England. Second, by admitting that the plaintiff has unconditionally liquidated this much of the claim constitutes an implicit concession that, pursuant to § 4-61, the court has jurisdiction over count five even if the state's liability is capped at $55,000.
In other Words, because the state implicitly admits that the allegations of the plaintiff's complaint in count five at least partially satisfy § 4-61, the state concedes that it has at least partially waived its sovereign immunity, and thus, the court has subject matter jurisdiction to consider the plaintiff's claim in count five. Therefore, the amount the plaintiff can recover on count five is an issue of the state's liability, not its immunity from suit.
THE PLAINTIFF'S REMAINING ARGUMENT
In addition to its § 4-61 arguments discussed above, the plaintiff also argues that the state waived its sovereign immunity when it "lodged counterclaims for affirmative relief," and therefore, its motion to dismiss must fail. Because it has already been concluded that the state has waived its sovereign immunity as to count five under § 4-61, the court examines this argument only as to count four.
"The rule undoubtedly is that the State cannot be made a party defendant to an action without its consent; but if the State itself invokes the jurisdiction of the court to secure affirmative relief, it subjects itself to any proper cross demand involved in the subject-matter of the action . . . A fortiori, by bringing an action, the State subjects itself to the procedure established for its final and complete disposition in the courts, by way of appeal or otherwise." (Citations omitted.) Reilly v. State, 119 Conn. 217, 219-20, 175 A. 582 (1934), overruled on other grounds by Cannavo Enterprises, Inc. v. Burns, 194 Conn. 43, 478 A.2d 601 (1984); accord Lacasse v. Burns, 214 Conn. 464, 470-71, 572 A.2d 357 (1990).
The plaintiff relies primarily on two authorities: Reilly v. State, supra, 119 Conn. 217, and University of Connecticut v. Wolf, Superior Court, judicial district of New Haven, Docket No. CV 03 0482479 (October 26, 2004, Zoarski, J.T.R.) ( 38 Conn.L.Rptr. 148). In Reilly, our Supreme Court held that the state had waived its sovereign immunity regarding the defendant's writ of error only "[w]hen the State brought the original action." Reilly v. State, supra, 119 Conn. 221. In Wolf, the Superior Court held that the plaintiff, a state entity, "by instituting this action against the defendant has waived its sovereign immunity with regards to the defendant's counterclaim." University of Connecticut v. Wolf, supra, 150.
The plaintiff argues for the inverse result of Wolf. By alleging counterclaims against the plaintiff, the state has waived its sovereign immunity with regards to the plaintiff's complaint. The authorities relied upon by the plaintiff do not support this argument. Instead, those authorities only held the state to have waived its sovereign immunity where it brought the initial action. Just as Wolf states that "[t]here is a clear distinction between state action as an initiating litigant and one as an intervening party"; id.; here, there is a clear distinction between the state's action as an initiating litigant, and one as a counterclaiming party. Because the state did not initiate the present action, but only alleged counterclaims against the plaintiff after the plaintiff had initially invoked the court's jurisdiction, the state has not waived its sovereign immunity as to count four.
CONCLUSION
For the foregoing reasons, the court grants the state's motion to dismiss as to count four and denies the motion as to count five.