Opinion
INDEX 157183/2021
04-01-2022
AABCO SHEET METAL SYSTEMS, INC. D/B/A ASM MECHANICAL SYSTEMS, Plaintiff, v. CITY UNIVERSITY CONSTRUCTION FUND, CITY UNIVERSITY OF NEW YORK, F.J. SCIAME CONSTRUCTION CO., INC. Defendant. MOTION SEQ. No. 001
DATE CAROL EDMEAD, J.S.C.
Unpublished Opinion
MOTION DATE 08/03/2021
DECISION + ORDER ON MOTION
DATE CAROL EDMEAD, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 8, 10, 11, 22, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36 were read on this motion to/for ARTICLE 78 (BODY OR OFFICER)__.
Upon the foregoing documents, it is
ORDERED AND ADJUDGED that the petition, pursuant to CPLR 7801, of petitioner AABCO Sheet Metal Systems, Inc., d/b/a ASM Mechanical Systems (motion sequence number 001), is denied and this proceeding is dismissed; and it is further
ORDERED that the Clerk of the Court shall enter judgment accordingly; and it is further
ORDERED that counsel for respondents shall serve a copy of this order, along with notice of entry, on all parties within ten (10) days.
In this proceeding pursuant to CPLR Article 78, petitioner AABCO Sheet Metal Systems, Inc., d/b/a ASM Mechanical Systems (ASM) seeks an order to (motion sequence number 001). For the following reasons, the petition is denied.
FACTS
The co-respondent City University Of New York (CUNY) is New York City's public university system of 25 colleges, and is organized under Article 25 of the New York State Education Law. See verified petition, ¶ 8. The co-respondent City University Construction Fund (CUCF) is a public benefit corporation organized under the City University Construction Fund Act whose function is to manage building design and construction projects on behalf of CUNY. Id., ¶ 7.
On March 30, 2010, CUCF retained co-respondent F.J. Sciame Construction Co., Inc. (Sciame) as the general contractor to oversee the construction of a new academic building for CUNY's New York City College of Technology (NYCCT) in Kings County via a "Construction Management/Build Services Agreement" (the CUCF contract). See verified petition, ¶ 10; exhibit 1. On October 10, 2013, Sciame engaged ASM as a subcontractor to provide labor, materials and equipment for the academic building's mechanical and building management systems via a "Subcontract Agreement" (the ASM subcontract). Id., ¶ 10; exhibit 2. The portion of the CUCF contract that is relevant to this proceeding is Article 29 ("Resolution of Disputes"), which sets forth the procedures that the parties are required to observe when attempting to resolve a subcontractor's work or billing dispute. In full, Article 29 provides as follows:
"29.1 Generally
"29.1.1 In relation to only this Agreement, all claims, controversies or disputes the Construction Manager [i.e., Sciame] may have against CUCF, including, without limitation, all claims, controversies or disputes a Subcontractor or a supplier may have in relation to this Agreement, (each a 'Dispute') to the extent permitted by law, shall be resolved exclusively by the procedure set forth in this Article. Without limitation, this
procedure covers Disputes concerning: (1) the scope of the Work related to this Agreement, (2) any direction given by CUCF or any governmental agency, (3) the performance by CUCF of its obligations under this Agreement, (4) the interpretation of this Agreement or of the Contract Documents, (5) if an amount, and what amount, if any, is to be paid for Work or Extra Work or disputed Work performed in connection with this Agreement, (6) every payment to and by the Construction Manager, (7) the conformity of the Work with this Agreement or the acceptability and quality of any portion or all of the Work, and (8) any combination of these. Independent of any other provision, time is of the essence to this procedure. The Construction Manager and its Subcontractors and suppliers grant CUCF the right to resolve any claim, controversy, or dispute between or amongst them arising under or related to the Agreement, their subcontract, or the Project, including, without limitation, the right of CUCF to resolve any of these by direct payment on behalf of the Construction Manager to a Subcontractor or supplier with a corresponding charge against the Construction Manager's balance under this Agreement.
"29.1.2 The terms of this Agreement shall remain in full force and effect during the period this dispute resolution procedure is being followed with respect to any Dispute. The Construction Manager agrees to continue to perform its obligations hereunder during this period in accordance with this Agreement and as directed by CUCF, including, without limitation, any and all matters covered by the Dispute. Failure of the Construction Manager to continue without delay to discharge its obligations hereunder, including, without limitation, to perform any Work, disputed Work and Extra Work as directed, shall constitute a material breach of this Agreement and a waiver by the Construction Manager of each Dispute then under review in this procedure.
"29.1.3 During the investigations integral to this procedure, each party shall provide to the other party copies of all information that each provides in response to any requests for information made by the Executive Director of the Department of Design, Construction and Management of CUNY (the 'Executive Director') and by the Vice Chancellor for Facilities Planning, Construction and Management of CUNY (the 'Vice Chancellor').
"29.1.4 In any event the Construction Manager, either on its own behalf or on behalf of a subcontractor or supplier, fails (a) to submit timely any Notice of Dispute, Dispute Report, Notice of Appeal, or any other information or document required or requested to be provided or (b) to attend without good cause any meeting it is required or requested to attend, pursuant to this procedure, its Dispute shall be deemed waived, and CUCF shall be deemed released of all liability for it.
"29 .1.5 As either may deem appropriate from time to time, the Executive Director and Vice Chancellor each may obtain technical and other expertise for assistance in evaluating the information related to a Dispute. Each may use mediation and select as a neutral mediator a CUNY employee, who is from a department or office not under the supervision of the Executive Director or Vice Chancellor, or hire a neutral mediator, who is not employed by CUCF or CUNY; the Construction Manager agrees to pay CUCF one-half of any fee for the services of a mediator not employed by CUCF or CUNY. All mediation sessions shall be confidential, and the parties agree that no mediation session may be the sole source of any information used in any other forum, such as litigation of the Dispute.
"29.2 Commencement
"Within fifteen (15) business days of any act or omission that gives rise to a Dispute, the Construction Manager, both on its own behalf and on behalf of its subcontractors and suppliers, must submit to the Executive Director written notice of its Dispute. In each such notice, the Construction Manager must identify (a) the date on which the Dispute arose, and (b) a brief description of it (with the elements specified in (a) and (b) hereof comprising a 'Notice of Dispute'). The Construction Manager may add other information it deems relevant. This notice requirement shall not replace any other notice requirement set forth in this Agreement. For cause, the Executive Director may extend in writing by no more than ten (10) business days the period within which the Construction Manager may file the Notice of Dispute.
"29.3 Filing the Dispute
"Within twenty (20) business days after submission of a Notice of Dispute, the Construction Manager must submit to the Executive Director an original and one copy (a) of a full written description of its Dispute, (b) of the resolution it requests CUCF to adopt, (c) of all documentation related to the Dispute, such as written orders from CUCF, and, as to any resolution that includes a payment of any sum, all supporting documentation that specifies the sum at issue and all computations required to arrive at the sum, and (d) of any other findings or decisions the Construction Manager asks CUCF to reach (with all of these elements comprising a 'Dispute Report'). The Construction Manager may add other information it deems relevant. For cause, the Executive Director and the Vice Chancellor may extend in writing by no more than ten (10) business days the period within which the Construction Manager may file the Dispute Report.
"29.4 Investigation, Meetings, and Notice of Appeal
"29.4.1 After receipt of the Dispute Report, the Executive Director shall investigate it, may require additional information from CUCF staff and from the Construction Manager, and may convene meetings with the Construction Manager, including the relevant sub-professional, and CUCF staff to resolve the Dispute. The Executive Director may resolve the Dispute by negotiating terms acceptable to both the Construction Manager and CUCF (a 'Negotiated Resolution'). The Executive Director shall put in writing any Negotiated Resolution to be executed by the Construction Manager and CUCF. Alternatively, after completing this investigation of the Dispute, the Executive Director may issue written findings and resolve the Dispute unilaterally, without negotiation, in a written decision (a 'Unilateral Resolution') that CUCF shall send to the Construction Manager by certified mail, return receipt requested, and to the CUCF staff for implementation. Any Unilateral Resolution rendered by the Executive Director, and not timely appealed by the Construction Manager pursuant to the procedure described below, shall be final and binding upon the parties upon expiration of the tenth day after the Construction Manager receives any such Unilateral Resolution.
"29.4.2 The Construction Manager, on its own behalf and on behalf of a sub-professional, may request an appeal (a) if the Executive Director is unable to reach a Negotiated Resolution or (b) the Construction Manager receives a Unilateral Resolution with which the Construction Manager disagrees. The Construction Manager must commence any such appeal by submitting a written notice to the Vice Chancellor requesting the Vice Chancellor to resolve the Dispute or to revise the Unilateral Resolution, as the case may be ('Notice of Appeal'). The Construction Manager must file the Notice of Appeal within thirty (30) consecutive calendar days after the Executive
Director receives the Dispute Report in the case of a failure to reach a Negotiated Resolution or within ten (10) consecutive calendar days after the Construction Manager receives any Unilateral Resolution with which the Construction Manager disagrees. In addition, the Construction Manager must submit to the Executive Director a copy of the Notice of Appeal.
"29.5 Appeal
"After receipt of the Construction Manager's Notice of Appeal, the Vice Chancellor shall investigate the Dispute, may require additional information from CUCF staff and from the Construction Manager, and may meet with the Construction Manager, including any relevant sub-professional, and CUCF staff to resolve the Dispute. The Vice Chancellor may resolve the Construction Manager's Dispute by negotiating terms acceptable to both the Construction Manager and CUCF. The Vice Chancellor shall put in writing any such resolution to be executed by the Construction Manager and the CUCF. Alternatively, after completing this investigation of the Dispute, the Vice Chancellor may issue written findings and resolve the Dispute unilaterally, without negotiation, in a written final decision that CUCF shall provide to the Construction Manager and to the Executive Director for implementation. If the Vice Chancellor is unable to resolve the Dispute within thirty (30) consecutive calendar days of receiving the Notice of Appeal or if within ten (10) consecutive calendar days after the Construction Manager receives from the Vice Chancellor a written final decision with which the Construction Manager disagrees, the Construction Manager, on its own behalf and on behalf of a sub-professional, agrees that its only remedy shall be an appeal pursuant to Article 78 of the Civil Practice Laws and Rules of the State of New York."Id., exhibit 1. The portion of the ASM subcontract that is most relevant to this proceeding is a clause contained in Article 10 of Rider B ("Project Schedule") which provide as follows:
"10.7 No Damages for Delay; Extensions of Time: Subcontractor [i.e., ASM] agrees to make no claim for damages for delay in the performance of this Agreement occasions by any act or omission by CUCF, Contractor or any of their respective representatives, and agrees that any such claim shall be fully compensated by an extension of time to complete performance of the Work, as provided herein. If the performance of the Work, either by Subcontractor, or by any sub-subcontractor of whatever tier hereunder, is delayed for a reason referred to by subparagraph 10.7.1 herein, the Subcontractor may be allowed a reasonable extension of time. An extension of time for further subcontracted work may be granted only by the Director, upon written application by the Construction Manager. The parties agree that, with respect to this Agreement, the Subcontractor may encounter delays attributable to CUCF and/or Contractor from time to time, including, without limitation, those which are unexpected and unforeseeable, in the progress of the Work, for which delays the Subcontractor agrees that it shall be fully and wholly compensated for each such delay solely and exclusively by an extension of time to complete performance of the Work, and agrees to make no other claim for damages for such delay. The Subcontractor hereby expressly waives and relinquishes all other damages for delay."Id., exhibit 2. Also relevant is Article 16 ("Disputes and Claims") which sets forth dispute resolution rules and procedures that largely mirror those contained in Article 29 of the CUCF contract. Id., exhibit 2.
On December 4, 2018, ASM commenced the "dispute" process by sending Sciame a 26-page "Request for a Time Extension and Equitable Contract Adjustment" which sought compensation for expenditures by itself, a sub-sub-contractor (non-party Siemens Industry, Inc. [Siemens]) and that entity's subcontractor (non-party T.R. Ricotta Electric [Ricotta]) on several items that it termed "project delay damages." See verified petition, ¶ 28; exhibit 3; verified answer, ¶ 28; exhibit C. ASM based its request on the allegation that CUCF had "abandoned" the baseline project work schedule set forth in the CUCF contract by "failing to properly coordinate necessary predecessor work" by other subcontractors with the result that ASM and its subcontractors incurred a total of $6,153,617.00 in subsequent cost overruns composed of, inter alia, "extended supervision" costs, "extended home office overhead" costs, "wage escalation" costs, "lost productivity" and "disputed change order charges," along with subcontractor "extended warranty costs," "labor cost escalations" and "subcontract percentage contract markups." Id., verified petition, ¶ 34; exhibit 3; verified answer, ¶¶ 140-143. Respondents note that ASM increased its request by an additional $3,276,242.00 in "delay damages" in a letter which it sent to Sciame on February 1, 2019. Id., verified answer, ¶ 144; exhibit D. On December 4, 2019, CUNY's Executive Director, Robert P Lemieux, issued a "unilateral resolution" that denied ASM's request (the unilateral resolution). See verified petition, ¶¶ 35-36; exhibit 4. The relevant portion of the unilateral resolution found as follows:
The petition alleges that ASM began the dispute process on November 15, 2018, which appears to be the date that was stamped on the commencement document when it was prepared. See verified petition, ¶ 28; exhibit 3. However, ASM erroneously, and perhaps disingenuously, omitted from its submissions the December 4, 2018 cover letter that it sent to Sciame with the commencement document. See verified answer, exhibit C.
Pursuant to Section 29.2 of the CUCF contract and Section 16.2 of the ASM subcontract. See verified petition, exhibits 1, 2.
Pursuant to Section 29.4.1 of the CUCF contract and Section 16.4.1 of the ASM subcontract. See verified petition, exhibits 1, 2.
"II ASM's Claim
"In summary, ASM's claim for an equitable adjustment and compensable time extension is set forth in its letter to Joseph Mizzi from George Quattlander dated December 4, 2018 (the 'ASM Letter') and attachments. ASM seeks certain alleged direct costs and expenses and labor rate increases for a total cost of $6,153,617.00 allegedly incurred primarily as a result of Project delays and inefficiencies. ASM also submits a claim on behalf of its subcontractor, Siemens, which totals $3,352,532.00. Siemens' claim will be addressed separately below.
"ASM's claim consists of five elements: (i) extended supervision costs; (ii) extended home office overhead; (iii) wage escalation; (iv) lost productivity; and (v) disputed change orders. In reviewing ASM's claim, CUCF conducted a thorough analysis of the documentation submitted by ASM to Sciame and that Sciame provided to CUCF, the Prime Contract, the Subcontract, various other Project documents, and reviewed the issues with relevant Project personnel.
"Sciame's Subcontract with ASM, which incorporates the terms and conditions of the Prime Contract, contains several provisions that are applicable to the claims raised in ASM's submission. These provisions, among others, address delay claims, requests for time extensions and requirements for notice of claims.
"A. No Damages for Delay
"No Damages for Delay clauses contained in construction contracts are routinely upheld by courts as a valid and enforceable way for a public owner to limit its exposure to monetary damages on public works projects in order to control costs and accurately predict expenditures involving public funds. ASM's Subcontract with Sciame contains a No Damages for Delay Clause. Specifically, Rider B, Article 10.7 of the Subcontract provides that ASM is contractually barred from making a claim for delay damages incurred by any act or omission of the Owner or Sciame:
'10.7 No Damages for Delay; Extensions of Time: Subcontractor agrees to make no claim for damages for delay in the performance of this Agreement occasion[sic]ed by any act or omission by CUCF, Contractor or any of their respective representatives, and agrees that any such claim shall be fully compensated by an extension of time to complete performance of the Work, as provided herein... []. The parties agree that, with respect to this Agreement, the Subcontractor may encounter delays attributable to CUCF and/or Contractor from time to time, including, without limitation, those which are unexpected and unforeseeable, in the progress of the Work, for which delays the Subcontractor agrees that it shall be fully and wholly compensated for each such delay solely and exclusively by an extension of time to complete performance of the Work, and agrees to make no other claim for damages for
such delay. The Subcontractor hereby expressly waives and relinquishes all other damages for delay.'
"(emphasis added) (All references to the Subcontract are set forth in Rider B, unless otherwise stated.)
"In summary, the Subcontract expressly prohibits the submission of claims for costs associated with delays on the Project, even if the delays were unexpected or unforeseeable. The sole remedy for such delays is a time extension, which may be requested by the Subcontractor in accordance with the terms and conditions of its Subcontract.
1. ASM's Alleged Costs Related to Delays Are Barred by the Express Terms of the Subcontract
"All of the costs ASM seeks with respect to extended supervision, home office overhead, wage escalation, and loss of productivity are expressly precluded by the terms of ASM's subcontract. The costs associated with these alleged delays are as follows: (i) $245,747.00 associated with the costs of ASM's supervisor during alleged delays from March 23, 2017 through July 25, 2018; (ii) $521,479.00 associated with home office overhead during the delay period (Note that ASM applies a formula to arrive at this number but does not provide any substantiation to show that it actually incurred greater home office costs during the alleged period of delay. The formula also assumes that ASM bears no responsibility for any delays on the Project.); (iii) $17,561.31 incurred from wage escalation of increased union rates for steamfitters for allegedly performing work later than anticipated in the planned performance period; and (iv) $1,834,282.00 associated with loss of productivity.
"Here, the alleged sources of delay are properly considered 'acts or omissions' of the Contractor, Owner or their representatives for which no compensation is due the Subcontractor. In this regard, according to ASM, it incurred the above costs as a result of Project delays arising from resequencing of work or other changes to the planned means and method of the contractor made by the Owner or Contractor, site access issues as a result of other trades, and changes to specifications or designs.
"Courts have addressed these types of project administration issues and have determined that such conduct, and any resulting delays, are well within the contemplation of the parties at contracting and therefore fall squarely within the parameters of the contractual no damages for delay clause. Courts have further routinely held that design changes are expressly contemplated by the parties through the contract's changes clause. See Subcontract 6.1 (Changes by Owner); 2.3.3 (CM/Owner relies on Subcontractor for coordination of traders); 4.1.8 (contemplates potential conflicts between contractors and requires coordination and cooperation); and Subcontract, Rider A 9.3 (Project schedule is subject to change). Therefore, ASM's only remedy for delay is a properly requested, non-compensable time extension, as discussed herein.
"Because the costs set forth above are barred by the no damages for delay clause, CUCF denies in its entirety this part of ASM's claim.
"2. Certain of ASM's Disputed Change Orders Constitute Claims for Delay that Are Barred by the Terms of its Subcontract and the Remaining Change Orders are Denied
"ASM's claim also includes several disputed change orders for which it seeks payment. PCOs 33 and 35 are barred by the No Damages for Delay clause in that they
arise from alleged delays to the Project schedule: (i) PCO 33 ($165,476) (seeks costs associated with storage of mechanical equipment due to unavailability of the site); and (ii) PCO 35 ($5,571) (additional labor costs to relocate onsite stored equipment due to project delays). As such, CUCF denies these proposed change orders.
"The remaining two PCOs - numbers PCO 51 ($4,197) (additional costs to relocate four (4) previously installed fire/smoke ductwork dampers and PCO 77 ($7,769.00) (additional emergency repairs) were originally denied by CUCF and Sciame and remain denied.
"Accordingly, CUCF denies proposed change orders 33, 350, 51, and 77 in their entirety.
"3. ASM Claims Are Waived by Contractual Waiver and Release
"ASM also waived its claim by executing partial lien waivers with its applications for payment. The Subcontract required that ASM submit partial lien waivers with its applications for payment. Specifically, the Subcontractor's Waiver and Release of Lien provides, among other things, that the subcontractor certifies that in exchange for partial payment, 'Subcontractor waives and releases any and all claims, demands, or causes of action that it has had or currently has arising from or in any way relating to the Agreement, the Project, the Project property or the Work against Construction Manager, its surety; the Owner, and its surety, if any...[] (emphasis added).' ASM executed these lien waivers in connection with progress payments on the Project and therefore waived any claims it may have had related to the Project prior to receipt of the payment. New York courts have held that such waivers act to bar any and all claims that a contractor may have in connection with such payments.
"Accordingly, for these reasons, and those set forth above, CUCF denies the entirety of ASM's claim."Id., exhibit 4.
ASM thereafter filed a notice to appeal the unilateral resolution on December 6, 2019. Id., ¶ 39; exhibit 5. CUNY's Vice Chancellor Allen Y. Lew convened a meeting to consider the administrative appeal on February 19, 2020 which officers of CUCF, Sciame, ASM and Siemens attended. Id., ¶ 42. On April 5, 2021, CUNY's Executive Director of Facilities and interim Vice Chancellor Scott Burrell issued a written "final decision" that upheld the unilateral resolution denying ASM's "delay damages" request (the final decision). Id., ¶ 45; exhibit 6. The relevant portion of the final decision found as follows:
Pursuant to Section 29.4.2 of the CUCF contract and Section 16.4.2 of the ASM subcontract. See verified petition, exhibits 1, 2.
Respondents note that CUNY Vice Chancellor Allen Y. Lew passed away on June 23, 2020 due to COVID-19, and aver that it was some time before Executive Facilities Director Burrell assumed the duties of interim Vice Chancellor. See respondents' mem of law at 8.
Pursuant to Section 29.5 of the CUCF contract and Section 16.5 of the ASM subcontract. See verified petition, exhibits 1, 2.
"Entitlement. In addition to the reasons stated in the Executive Director's Unilateral Decision dated December 4, 2020 under the terms of its Subcontract ASM is not entitled to payment of its delay related costs for the following additional reasons:
"1. ASM Contributed to Project Delay
"As set forth in the Executive Director's Unilateral Resolution, ASM is precluded from recovering damages for delay due to, among other things, the 'no damages for delay' clause in its Subcontract. Under the Subcontract, ASM could have requested a time extension as its remedy for alleged Project delay. ASM, however, is precluded from receiving a time extension for delays where it is responsible, or partially responsible, for the delays. See Subcontract 10.7.2. Here, ASM, through its subcontractor Siemens, contributed to the delays in the completion of the interior construction. In its February 27, 2020 correspondence to CUNY/CUCF (Claim, Attachment 2), for example, Sciame noted the following:
'Very early on, Sciame identified that Siemens was not properly manning the Project and because of this was not keeping up with the Project schedule. Despite Sciame's and Cuny's [sic] efforts, Siemens was behind schedule throughout the Project and in fact substantially completed their work 6 months after TCO. This was not due to any initial Project delays or the "interference walls" there is a long-documented history of Siemens inability to properly man the Project. Furthermore, it should be known that to mitigate the Siemens delays, Sciame sequenced virtually all the finishes to be complete before the ceilings were installed. This included painting, flooring and lab cabinets. Once ASM/Siemens completed their work, the carpenter had to complete the ceiling working over installed cabinets in many locations.'
"And:
'Additionally, we believe that any delay in the installation of the acoustical tile ceilings was directly attributable to ASM's subcontractor Siemens.'
"Claim, Attachment 2.
"Therefore, because ASM and/or its subcontractors contributed to the alleged Project delays, ASM cannot recover delay damages or obtain a time extension and this part of ASM's claim is denied.
"2. The Subcontract Required ASM to Coordinate its Work with the Work of Other Contractors
"In its claim, ASM states that its work was delayed due to the need to coordinate its work with the work of other contractors. However, coordination of work among trades is required by the express terms of the Subcontract. Specifically, Article 4 of the Subcontract (Subcontractor) Section 4.1 (Execution and Progress of the Work) 4.1.8 states the following:
'The Subcontractor shall cooperate with the Contractor other subcontractors the Owner and separate contractors whose work might interfere with the Subcontractor's Work. The Subcontractor shall participate in the preparation of coordinated drawings in areas of congestion if required by the Prime Contract
specifically noting and advising the Contractor of potential conflicts between the Work of the Subcontractor and that of the Contractor other subcontractors, the Owner, or separate contractors, (emphasis added).'
"Additionally, the Trade Specific Checklist, part of Rider A to Subcontract, sets forth the following requirements:
'18. Coordinate all work of your trade with the work of other trades. It is understood that you will be required to collaborate with the other trades on the job in order to permit simultaneous installation of the work, as well as to coordinate the setting of other trades' work that passes through this contractor's.' '19. Coordinate all work of your trade with the work of Subcontractors hired directly by the Owner.'
'21. Attend meetings with all concerned parties as required to review and resolve coordination issues and conflicts related to the work of your trade.'
"The Subcontract Trade Scope Checklist also includes the following requirements:
'32. Coordinate the work of this trade with all other trades and consultants. If work is installed before coordinating with other trades, make necessary changes to work to correct the condition without additional costs to the CM and owner.'
'60. Provide any overtime, supervision, manpower, material, tools or equipment to allow for other trades to have adequate time to complete by the Project completion date. Contractor agrees to an increase in manpower if requested by the CM if the schedule is at risk due to reasons caused by this Contractor (emphasis added).'
'62. Pricing includes comebacks due to the coordination and sequencing of other work, such as: infill of the hoist run, entry doors, ground floor glass, etc. (emphasis added).' "Rider B to the Subcontract further details ASM's obligation to coordinate its work with other trades and specifically requires ASM to 'cooperate, coordinate, facilitate and work in conjunction with' any work being performed for the benefit of Sciame or CUNY:
'The Subcontractor acknowledges that the Owner, directly and through the Design Professional, the Contractor and the Separate Contractors, is and shall be actively involved in the development of the Project (specifically including without limitation the completion of tenant installation work), and in interaction with the Contractor and the Subcontractors, and that the Owner and the Contractor will be relying upon the Subcontractor to coordinate the entirety of the work being performed on the Project Site and to contemplate and incorporate the logistical requirements of Separate Contractors. The Subcontractor understands and agrees that no such involvement or interaction shall be construed to relieve the Subcontractor from the performance of, or to waive or modify in any respect, any of the Services. For the avoidance of doubt, the Subcontractor shall cooperate, coordinate, facilitate and work in conjunction with any work being performed by or for the benefit of the Contractor, any of Owner's tenants and/or invitees at the Project (emphasis added).'
"Article 2 (General Provisions) (Section 2.3.3).
"Rider B also provides that ASM must coordinate its work with the work of other trades, including with respect to delivery and distribution of equipment and materials at the site to ensure that other contractors have the opportunity to complete their work in a timely manner:
'The Subcontractor shall coordinate the Work with the work of Separate Contractors, including but not limited to delivery, offloading, storage, protection, hoisting and distribution of equipment and materials on the Project Site, in order to facilitate the timely, efficient and safe completion of the Work and the work of the Separate Contractors, which coordination shall afford such Separate Contractors reasonable opportunity for the installation, execution and storage of their respective work and materials, and shall otherwise be performed in such manner as the Owner and/or the Contractor may direct. The Subcontractor shall cooperate in good faith with the Separate Contractors in order for all contractors working on the Project to have the opportunity to complete their work on a timely, cost effective and safe basis. In addition, the Subcontractor shall cooperate with any prospective Separate Contractors in affording access to and information about the Project (emphasis added).'
"Article 4 (Subcontractor Services) Section 4.11 (Separate Contracts) 4.11.2. "Accordingly, because the terms of the Subcontract clearly required ASM to coordinate its work with the work of other contractors at no additional cost to the Owner, ASM is not entitled to recover additional costs associated with this work and CUCF denies this part of ASM's claim.
"3. ASM Failed to Support its Alleged Damages
"ASM's claim seeks payment for costs associated with delays, wage escalation, lost productivity, certain disputed change orders and claims of its subcontractors. Specifically, ASM breaks down the costs it is seeking as follows:
Description
Total
Extended Supervision
$245,747.00
Extended Home Office Overhead
$521,479.00
Wage Escalation
$17,561.00
Lost Productivity
$ 1, 834, 282.00
Disputed Change Orders
$182,014.00
Subcontractor Claims (with ASM Markup)
$3,352,532.00
Total
$6,153,615.00
"Notably, ASM did not assert costs associated with extended general conditions such as trailers and portable toilets, material escalation or costs associated with support staff. In reviewing the documentation submitted with ASM's claim, there are certain deficiencies as described in detail below that, in addition to the reasons set forth in the Executive Director's Unilateral Resolution, warrant denial of ASM's claim.
"a. Extended Supervision
"ASM's claim for extended supervision consists of 40 weeks of salary for its project manager in 2017 and 30 weeks of salary in 2018. No supporting W-2 forms or payroll reports were provided to document these costs. CUCF denies this part of ASM's claim.
"b. Extended Home Office Overhead
"ASM calculates its demand for additional home office overhead associated with its alleged delays using a methodology known as the Manshul formula. This formula calculates additional home office overhead based on work remaining at
the point of original planned completion, exclusive of overhead and profit and the original overhead rate bid for the work. However, given the 'no damage for delay' provisions of the Subcontract, there is no basis for payment of these costs. The only provision of the Subcontract relating to payment of additional overhead costs is set forth in Article 6 (Changes in the Work) and Section 6.2 (Extra Work) of the Subcontract, which provide for a 20% markup for overhead and profit for change order work performed directly by ASM. For change order work performed by a sub subcontractor, the sub subcontractor is entitled to a 20% markup for overhead and profit and ASM is entitled to 5% markup on the sub subcontractors' cost.
"The costs asserted by ASM for additional home office overhead associated with alleged Project delays do not constitute changes to the work or extra work for which costs for additional overhead are payable under the Subcontract. Therefore, this claim is denied.
"c. Lost Productivity
"ASM asserts that it planned to expend 43, 748 manhours to perform its base contract work but actually expended 70, 503 manhours (26, 755 more manhours than planned). ASM claims that the additional labor (lost productivity) was the direct result of the unplanned and inefficient conditions affecting the performance of its work.
"ASM calculates its costs for its alleged lost productivity using productivity factors published by the Mechanical Contractors' Association of America (the 'MCAA factors'). The MCAA factors are percentages applied to planned labor hours to calculate additional labor associated with various impacts to a project (Claim, Attachment 4). In its lost productivity calculation (Claim, Attachment 5) ASM applies the MCAA factors for 'trade stacking,' 'reassignment of manpower,' 'learning curve,' and 'overtime,' as well as 'season and weather change' to support a loss of productivity ranging to 55% of planned hours and a total cost of $1,834,282.00.
"As an initial matter, the MCAA factors are generic and highly subjective. In this regard, use of the MCAA factors to calculate lost productivity requires the claimant to rank impacted work according to relative severity of delays. Additionally, many of the factors overlap resulting in duplication of costs. ASM provides little documentation to support its argument that the cited impacts were consistently, if ever, experienced during the Project.
"Additionally, the basis for, and the method by which the MCAA factors are calculated is unknown and unsupported by any data or records. Specifically, per MCAA Bulletin No. PD2 'Factors Affecting Labor Productivity,' the source of the MCAA productivity factors (Claim, Attachment 4, p. 25) provides as follows:
'To the best of MCAAs current knowledge, the information contained in the MCAA Factors was gathered anecdotally from a number of highly experienced members of the MCAA's Management Methods Committee. MCAA does not have in its possession any records indicating that a statistical or other type of empirical study was undertaken in order to determine the specific factors or the percentages of loss associated with individual factors (emphasis added).'
"As there is no evidence supporting the manner in which the MCAA factors were originally quantified, the subjective manner of their application, and ASM's failure to include supporting documentation, the costs here are too speculative and unsupported to warrant payment of additional monies to ASM. Therefore, this part of ASM's claim is denied.
"d. Disputed Change Orders
"The disputed change orders for which ASM seeks payment have been addressed previously by CUNY/CUCF and therefore, this aspect of the Claim is moot and denied.
"4. Subcontractor Claims
"As part of its claim, ASM included a claim asserted on behalf of its subcontractor, Siemens (with ASM's markup). Siemens, in turn, included a claim from its sub-subcontractor T.R. Ricotta Electric ('Ricotta') (with Siemens markup) as indicated below. Subsequently, in February of 2019, Siemens submitted an updated claim directly to Sciame. Siemens' 2019 claim is also summarized below. Consistent with ASM's Claim, the Siemens' claim and the claim from its subcontractor Ricotta, are barred by the terms of the Subcontract.
* * *
"Siemens' Claim
"ASM's Subcontract requires the 'no damages for delay' clause to be incorporated in any agreements with its Subcontractors. Therefore, as an initial matter and as set forth in the Executive Director's Unilateral Resolution, Siemens' claim is denied on this basis. Additionally, as previously noted per Sciame, the records indicate that Siemens caused significant delay on the Project, thus also precluding recovery of costs by Siemens.
"a. Extended Project Management
"Siemens' extended project management costs are presented as a summary of labor hours claimed to have been expended during the period of delay, times an hourly rate for its project manager. The project manager is not identified, nor any relevant project documentation provided to support the hours expended. Siemens' claim indicates that the labor rate for its project manager is calculated per a labor rate structure of the applicable year, including a 40% burden. Neither a copy of the referenced labor rate structure or W-2 form supporting the Siemens' Project manager's salary were provided to support this claim. For these reasons, this aspect of Siemens' claim is denied.
"b. Labor Cost Escalation
"The costs presented to support this claim are not relevant and are inconsistent with a claim for labor escalation. Typically, labor escalation is calculated on the basis of labor hours performed later in time than originally scheduled, where additional costs result from increased labor rates for the applicable period. Siemens did not calculate the alleged Tabor cost escalation' in this manner but rather, included costs for labor that allegedly exceeded the original planned cost for engineers, specialists and mechanics. Siemens provides no documentation to substantiate its claim that the hours originally planned correlate to Siemens' bid or that the planned hours were reasonable for the work in question. Further, Siemens provided no documentation to demonstrate that Siemens actually expended hours beyond those it planned to expend. In addition, Siemens provides
no support to show that the additional hours were not a result of Siemens' own delays and inefficiencies. Siemens also fails to document costs and show entitlement to payment for an extended warranty. Siemens' revised claim dated February 1, 2019 also fails for the reasons set forth above and is based on the same calculations but includes a slightly longer period of delay. Therefore, for the reasons set forth in the Executive Director's Unilateral Resolution, and those set forth above, CUCF denies Siemens' claim in its entirety.
"Ricotta Claim
"As with Siemens' claim, Ricotta has submitted costs labeled 'Labor Cost Escalation' that exceed the planned number of hours for its foremen, journeymen and apprentice electricians. As explained above, this is not a labor cost escalation claim. Additionally, Ricotta provides no documentation to substantiate that the hours shown correlate to Ricotta's contract, that the planned hours were reasonable for the work or that the hours worked by Ricotta exceeded planned hours allocated for the Project. In addition, Ricotta has not established that the additional hours were not a result of Ricotta's own delays and inefficiencies. Therefore, for the reasons set forth in the Executive Director's Unilateral Resolution, and those set forth above, I deny Ricotta's claim in its entirety.
Conclusion
"In summary CUNY/CUCF finds no basis for entitlement to payment for the costs set forth in ASM's claim. However, in the interest of settlement, as a business accommodation, CUNY/CUCF may be willing to consider ASM's costs for extended supervision, labor escalation and other applicable general conditions costs if such costs can be properly documented.
"In conjunction with the findings set forth in the Executive Director's Unilateral Resolution, it is the Unilateral Resolution and Final Decision of the Vice Chancellor that the Appeal of Claim submitted by the Contractors is hereby denied as set forth in Article 29 of the Contract.
"Please be advised that in accordance with Article 29 of the Contract, if the Construction Manager on its own behalf, or on behalf of a sub-professional, disagrees with this decision, its only remedy shall be an appeal under Article 78 of the Civil Practice Laws and Rules of the State of New York."Id., exhibit 6.
ASM commenced this Article 78 proceeding to challenge the final decision on August 3, 2021. See verified petition. After seeking and receiving an extension, respondents filed an answer on October 22, 2021. See verified answer. With the filing of ASM's reply papers, this matter is now fully submitted (motion sequence number 001).
Also pursuant to Section 29.5 of the CUCF contract and Section 16.5 of the ASM subcontract. See verified petition, exhibits 1, 2.
DISCUSSION
A court's role in an Article 78 proceeding is to determine, upon the facts before an administrative agency, whether a challenged agency determination had a rational basis in the record or was arbitrary and capricious. See Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222 (1974); Matter of E.G. A. Assoc, v New York State Div. of Hous. & Community Renewal, 232 A.D.2d 302 (1st Dept 1996). An agency's determination will only be found arbitrary and capricious where it is "without sound basis in reason, and in disregard of. . . the facts." Matter of Century Operating Corp. v Popolizio, 60 N.Y.2d 483, 488 (1983), citing Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d at 231. However, if there is a rational basis in the administrative record that supports the agency's determination, there can be no judicial interference. Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d at 231-232. Here, ASM's petition sets forth one cause of action alleging that the final decision should be vacated and deemed "null and void" as an arbitrary and capricious ruling. See verified petition, ¶¶ 97-105. Respondents answer that the final decision was rationally based and should be upheld. See verified answer, ¶¶ 155-157. After careful consideration, the court finds for respondents.
The lengthy portion of the unilateral determination quoted supra, sets forth CUNY Executive Director Lemieux's finding that the "no damages for delay" clause in paragraph 10.7 of Rider B to the ASM subcontract barred ASM's claims against CUCF. See verified petition, exhibit 4. At the beginning of the (equally lengthy) portion of the final decision quoted supra, is CUNY Interim Vice Chancellor Burrell's brief statement upholding that finding. Id., exhibit 6. However, the ensuing bulk of his final decision discusses other contractual bases that he determined were also bars to ASM's claims. Id., exhibit 6. They included: 1) ASM's own contribution to work delays by failing to request a completion extension pursuant to paragraph 10.7.2 of Rider B; 2) ASM's failure to coordinate its work with the work of other subcontractors in violation of, inter alia, paragraph 4.1.8 of the ASM subcontract, paragraphs 18, 19, 21, 32, 60 and 62 of Rider A, and paragraphs 2.3.3, 4.11 and 4.11.2 of Rider B; 3) ASM's failure to support its own "delay damages" claims with adequate documentation; 4) ASM's failure to support Siemens's "delay damages" claims with adequate documentation; and 5) ASM's failure to support Ricotta's "delay damages" claims with adequate documentation. Id., exhibit 6. Further, in addition to the "no damages for delay" clause, Executive Director Lemieux had also found that ASM's claims against CUCF were barred by, inter alia: 1) the terms of certain lien waivers that it executed pursuant to the ASM subcontract; 2) ASM's failure to request a completion extension pursuant to paragraph 10.7.3 of Rider B; 3) ASM's concomitant failure to obtain relief from liquidated damages pursuant to paragraph 10.7.5 of Rider B; 4) ASM's failure to abide by the notice requirements set forth in Articles 22 and 29 of the ASM subcontract and Articles 10 and 16 of Rider B; and 5) ASM's failure to adequately document either Siemens's or Ricotta's claims. Id., exhibit 4. The majority of ASM's petition and reply papers raise arguments concerning the foregoing findings. See verified petition, ¶¶ 59-88 ("The Numerous Substantive and Procedural Errors in CUNY/CUCFs Final Decision"); petitioner's reply mem. However, those findings were all ancillary to the main determination that ASM's claims against CUCF are barred by the "no damages for delay" clause. As a result, most of ASM's arguments herein also concern ancillary matters. Although ASM's papers appear to downplay its significance, the primary issue in this Article 78 proceeding it ASM's allegation that it was arbitrary and capricious for CUNY to enforce the "no damages for delay" clause to bar ASM's claims against CUCF. See verified petition, ¶ 89-96. The court finds that the ruling was rationally based.
The Appellate Divisions have observed that:
'"A clause which exculpates a contractee from liability to a contractor for damages resulting from delays in the performance of the latter's work is valid and enforceable and is not contrary to public policy if the clause and the contract of which it is a part satisfy the requirements for the validity of contracts generally' (Corinno Civetta Constr. Corp. v City of New York, 67 N.Y.2d 297, 309 [1986]). However, such a clause may be disregarded under certain recognized exceptions, including one for delays that are 'uncontemplated' (see id). Delays are not considered uncontemplated when they 'are reasonably foreseeable, arise from the contractor's work during performance, or ... are mentioned in the contract (id. at 310). Further, a party seeking to invoke any of the exceptions to the general rule that no damages for delay clauses are enforceable bears a heavy burden (LoDuca Assoc, Inc. v PMS Constr. Mgt. Corp., 91 A.D.3d 485, 485 [1stDept2012]."Bovis Lend Lease (LMB), Inc. v Lower Manhattan Dev. Corp., 108 A.D.3d 135, 147 (1st Dept 2013); see also Arnell Constr. Corp. v New York City Sch. Constr. Autk, 177 A.D.3d 595, 596 (2d Dept 2019). They have recognized four exceptions to the general rule favoring enforcement of "no damages for delays" clauses where a plaintiff can establish the existence of: "(1) delays caused by the contractee's bad faith or willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee's breach of a fundamental obligation of the contract." See Five Star Elec. Corp. v Trustees of Columbia Univ., 189 A.D.3d 536, 537 (1st Dept 2020); RadandDAprile, Inc. v Arnell Construction Corp., __ A.D.3d __, 2022 NY Slip Op 01472, *1-2 (2d Dept 2022), citing Corinno Civetta Constr. Corp. v City of New York, 67 N.Y.2d at 309; Arnell Constr. Corp. v New York City Sch. Constr. Auth., Ill. A.D.3d 595 (2d Dept 2019). However, where it is apparent that the costs that a plaintiff allegedly incurred were all simply related to various delays in the project, a "no damages for delays" clause will bar all claims for those costs. See e.g., Matter of Tutor Perini Corp. v City of N.Y.Off. of Admin. Trials & Hearings Contract Dispute Resolution Bd., 193 A.D.3d 665 (1st Dept 2021).
Here, Executive Director Lemieux states that he "reviewed [ASM's] submissions in detail" and found as follows:
"All of the costs ASM seeks with respect to extended supervision, home office overhead, wage escalation, and loss of productivity are expressly precluded by the terms of ASM's subcontract. The costs associated with these alleged delays are as follows: (i) $245,747.00 associated with the costs of ASM's supervisor during alleged delays from March 23, 2017 through July 25, 2018; (ii) $521,479.00 associated with home office overhead during the delay period; (hi) $17,561.31 incurred from wage escalation of increased union rates for steamfitters for allegedly performing work later than anticipated in the planned performance period; and (iv) $1,834,282.00 associated with loss of productivity.
"Here, the alleged sources of delay are properly considered 'acts or omissions' of the Contractor, Owner or their representatives for which no compensation is due the Subcontractor. In this regard, according to ASM, it incurred the above costs as a result of Project delays arising from resequencing of work or other changes to the planned means and method of the contractor made by the Owner or Contractor, site access issues as a result of other trades, and changes to specifications or designs.
"Courts have addressed these types of project administration issues and have determined that such conduct, and any resulting delays, are well within the contemplation of the parties at contracting and therefore fall squarely within the parameters of the contractual no damages for delay clause. Courts have further routinely held that design changes are expressly contemplated by the parties through the contract's changes clause. See Subcontract 6.1 (Changes by Owner); 2.3.3 (CM/Owner relies on Subcontractor for coordination of traders); 4.1.8 (contemplates potential conflicts between contractors and requires coordination and cooperation); and Subcontract, Rider A 9.3 (Project schedule is subject to change). Therefore, ASM's only remedy for delay is a properly requested, non-compensable time extension, as discussed herein."See verified petition, exhibit 4. Interim Vice Chancellor Burrell reiterated that follows:
"As set forth in the Executive Director's Unilateral Resolution, ASM is precluded from recovering damages for delay due to, among other things, the 'no damages for delay' clause in its Subcontract. Under the Subcontract, ASM could have requested a time extension as its remedy for alleged Project delay."Id., exhibit 6. It is clear from the foregoing statements that the CUNY officers charged with overseeing the subcontract "dispute" process did review all of the material that ASM had chosen to submit in support of its "delay damages" claims, and also gave consideration to the nature of those claims, when thev determined that the "no damages for delays" clause barred them. Indeed, ASM's petition does not allege that the CUNY officers omitted or disregarded any of their proffered evidence, but rather asserts that they "misapplied" the "no damages for delays" clause to that evidence. See verified petition at 18, section G. From this, the court concludes that both of the CUNY orders were based on the evidence in the administrative record. The question is thus whether the determination that the CUNY officers drew from that evidence was "rational."
ASM asserts that CUNY's determination was not rational because "CUNY/CUCF did not even acknowledge" the four exceptions under which a "no damages for delay" clause may be disregarded, "much less apply the facts to determine if they would overcome enforcement of the 'no damage for delay' clause." See verified petition, ¶¶ 94-96. ASM's reply papers repeat the assertion that the CUNY officers "failed to consider exceptions to the 'no damages for delay' clause." See petitioner's reply mem at 13. However, this argument is untenable for two reasons. First, the unilateral determination plainly states that the delays which ASM complained of were "well within the contemplation of the parties at contracting." See verified petition, exhibit 4. As noted, the second exception discussed above applies to "uncontemplated delays." See Five Star Elec. Corp. v Trustees of Columbia Univ., 189 A.D.3d at 537; Corinno Civetta Constr. Corp. v City of New York, 67 N.Y.2d at 309-312. It is thus clear that the CUNY officers did consider at least one of the exceptions which justify non-enforcement of a "no damages for delays" clause. Second, and more importantly, however, ASM's argument disregards that it - and not the CUNY officers - bears the burden of proving that one any of the four exceptions applies. LoDuca Assoc, Inc. v PMS Constr. Mgt. Corp., 91 A.D.3d at 485 (a party seeking to invoke any of the exceptions to the general rule that no damages for delay clauses are enforceable bears "a heavy burden"). Alleging that the CUNY officers failed to discharge ASM's legal responsibility is a meritless argument, and the court rejects it. Finally, the court notes that ASM's papers do not explain how its claims against CUCF fell within any of the four subject exceptions. As a result, the court concludes that it has failed to support its allegation that CUNY "misapplied" the "no damages for delay" clause in its subcontract.
ASM's arguments objecting to CUNY's alternative bases for denying ASM's claims against CUCF are equally unavailing. The lengthy portions of the unilateral determination and final decision that are reproduced above make it clear that the CUNY officers thoroughly reviewed the ASM contract provisions governing "dispute resolution" procedures when they made their respective determinations that ASM failed to comply with those provisions. Thus, those determinations, too, were rationally based on material in the administrative record. It is "well settled that an agency's interpretation of the statutes and regulations it is responsible for administering is entitled to great deference, and must be upheld if reasonable." Matter of Partnership 92 LP & Bldg. Mgt. Co., Inc. v. State of N.Y.Div. of Hous. & Community Renewal, 46 A.D.3d 425, 429 (1st Dept 2007), affd 11 N.Y.3d 859 (2008), citing New York City Campaign Fin. Bd. v Ortiz, 38 A.D.3d 75, 80-81 (1st Dept 2006). The court must similarly defer to CUNY's interpretation of the provisions of the contracts that CUCF enters into in furtherance of CUNY projects. ASM has failed to demonstrate that the CUNY officers' interpretations of the ASM subcontract were either unreasonable or inconsistent. Without such a demonstration, the fact that ASM would have preferred that a different interpretation be used is of no moment. See e.g. Matter of Leonard St. Props. Group, Ltd. v New York State Div. of Hous. & Community Renewal, 178 A.D.3d 92, 102-103 (1st Dept 2019) ("Even if the court reasonably could have reached a different result, the administrative determination, if rational, must be upheld").
For the foregoing reasons, the court concludes that ASM has failed to demonstrate that either the unilateral determination or the final decision were arbitrary and capricious rulings. Therefore, the court finds that ASM's Article 78 petition fails, as a matter of law, and should be denied.
DECISION
ACCORDINGLY, for the foregoing reasons it is hereby
ORDERED AND ADJUDGED that the petition, pursuant to CPLR 7801, of petitioner AABCO Sheet Metal Systems, Inc., d/b/a ASM Mechanical Systems (motion sequence number 001), is denied and this proceeding is dismissed; and it is further
ORDERED that the Clerk of the Court shall enter judgment accordingly; and it is further
ORDERED that counsel for respondents shall serve a copy of this order, along with notice of entry, on all parties within ten (10) days.