Summary
In Excel, the plaintiff entered into a construction contract with the New York City Transit Authority. The Transit Authority notified the plaintiff in writing that it was in default of the contract and gave it seven days to cure, but later notified the plaintiff that the cure plan was unacceptable and terminated the contract for cause. The plaintiff filed a state court action for breach of contract, and the Transit Authority maintained in its affirmative defenses that the plaintiff was required to pursue the resolution procedure set forth in the contract.
Summary of this case from In re Vision Technology CorporationOpinion
2004-05517.
April 25, 2006.
Motion by the respondent on an appeal from an order of the Supreme Court, Kings County, dated April 19, 2004, which was determined by decision and order of this Court dated October 31, 2005 [ 22 AD3d 794], to amend the decision and order of this Court, and cross motion by the appellant to amend the same decision and order, and for reargument of the appeal.
Goetz Fitzpatrick, LLP, New York, N.Y. (Peter Goetz, Jane Goetz, and Ellen August of counsel), for appellant.
Martin B. Schnabel, Brooklyn, N.Y. (Bettina Quintas of counsel), for respondent.
Before: Goldstein, J.P., Skelos, Fisher and Lunn, JJ., concur.
Upon the papers filed in support of the motion and the cross motion, and the papers filed in opposition to the cross motion, it is
Ordered that the motion and cross motion are granted to the extent that the decision and order of this Court dated October 31, 2005, is recalled and vacated, and the following decision and order is substituted therefor, and the motion and cross motion are otherwise denied.
In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Knipel, J.), dated April 19, 2004, as granted the defendant's cross motion for summary judgment dismissing the complaint.
Ordered that the order is affirmed insofar as appealed from, with costs.
After competitive bidding, on or about December 31, 1998, the plaintiff entered into a contract with the defendant to perform rehabilitation of three subway stations at a contract price of $37,930,725. The terms of the contract were set forth in a form contract entitled, inter alia, "INFORMATION FOR BIDDERS, CONTRACT TERMS AND CONDITIONS."
By letter dated September 26, 2001, the defendant notified the plaintiff that it was in default of the contract and had seven days to cure. After the plaintiff submitted a "cure plan," by letter dated October 23, 2001, the defendant notified the plaintiff that the cure plan was unacceptable and terminated the contract for cause.
On or about October 31, 2001 the plaintiff commenced the instant action, inter alia, to recover damages for breach of contract and moved for a preliminary injunction restraining the defendant from enforcing a 10-day time limitation for submitting the dispute to the "DISPUTES RESOLUTION PROCEDURE" set forth in article 8.03 of the contract (hereinafter the resolution procedure). In its answer, the defendant asserted in its second, third, and fourth affirmative defenses that the plaintiff was required to pursue the resolution procedure and "could not request de novo review" by the court.
Article 8.03 of the contract, entitled "DISPUTES RESOLUTION PROCEDURE," states in pertinent part: "The provisions of this Article shall constitute the Contractor's sole means for . . . asserting against the Contracting Party or Authority [the defendant] any claim of whatever nature arising under, or in any way relating to, this Contract (any such challenge or assertion by the Contractor shall be herein referred to as a `Dispute'). Exhaustion of these dispute resolution procedures including the judicial review set forth in Article 8.06 shall be the parties' sole remedy in connection with any Dispute."
Pursuant to article 8.03, technical disputes were to be referred to the defendant's "Chief Engineer" and "any" other dispute was to be referred to the defendant's Contractual Disputes Review Board, by written submission made "within the time specified in the Contract or, if no time is specified, within ten (10) days of the determination which is the subject of the Dispute" ( see Phoenix Mar. Co., Inc. v. New York City Tr. Auth., 4 Misc 3d 1014[A], 2004 NY Slip Op 50881 [U], *1 [2004] [internal quotation marks omitted]). A determination by the Chief Engineer or the Contractual Disputes Review Board "shall be final and binding on both parties" but was subject to judicial review pursuant to article 8.06 of the contract which permitted a challenge pursuant to CPLR article 78 limited to the question of whether the determination "is arbitrary, capricious or lacks a rational basis" ( see NAB Constr. Corp. v. Metropolitan Transp. Auth., 180 AD2d 436).
By order dated July 1, 2002, the plaintiff's motion for a preliminary injunction was denied on the ground that it failed to establish a likelihood of success on the merits. The plaintiff took no appeal from the order and did not submit the dispute to the resolution procedure pursuant to article 8.03 of the contract.
Thereafter, the plaintiff moved to dismiss the defendant's second, third, and fourth affirmative defenses and the defendant cross-moved for summary judgment dismissing the complaint on the ground that the plaintiff failed to submit the dispute to the resolution procedure. In support of its motion, the plaintiff asserted that it could proceed directly to a plenary action pursuant to article 8.05 (a) of the contract. That provision, which is entitled "STATUTE OF LIMITATIONS ON RIGHT TO SUE AUTHORITY OR CONTRACTING PARTY," states in pertinent part: "No action shall lie or be maintained by the Contractor against the Contracting Party or the Authority upon any claim arising out of or based upon this Contract . . . unless such action shall be commenced within six (6) months after the date of issuance of the Final Payment Certificate . . . or upon any claim relating to monies required to be retained for any period after the issuance of said certificate, unless such action is commenced within six months after such monies become due and payable . . . or, if this Contract is terminated or declared abandoned . . . unless such action is commenced within six (6) months after the date of such termination or declaration of abandonment by the Authority." Article 8.05 (b) further provided that any proceeding for judicial review pursuant to article 8.06 "must be commenced within four (4) months of the issuance of the final determination" under review.
In the order appealed from, the Supreme Court granted the defendant's motion for summary judgment dismissing the complaint on the ground that the plaintiff "must, under the terms of the contract, resort to an alternative dispute resolution process and may not bring a plenary action for money damages."
"[T]he prevailing general rule of both New York and Federal common law of contracts is that, absent a clear manifestation of contrary intent, it is presumed that the parties intended that the arbitration forum for dispute resolution provided in an agreement will survive termination of the agreement as to subsequent disputes arising thereunder, whether its cessation was the result of the expiration of its term, exercise of a unilateral termination option, or breach" ( Matter of Primex Intl. Corp. v. Wal-Mart Stores, 89 NY2d 594, 601-602). Accordingly, the plaintiff was required to pursue the resolution procedure ( see Westinghouse Elec. Corp. v. New York City Tr. Auth., 82 NY2d 47, 54; Laquila Constr. v. New York City Tr. Auth., 282 AD2d 331). Since its 10-day time period to pursue the resolution procedure expired, the plaintiff is foreclosed from pursuing that or any other remedy ( see Lovisa Constr. Co. v. Metropolitan Transp. Auth., 225 AD2d 740).
Article 8.05 of the contract did not create an exception to the requirement in article 8.03 that the dispute be submitted to the resolution procedure in cases where the contract has been terminated. Rather, article 8.05 sets forth a statute of limitations for statutory actions of six months after the date of the termination of the contract as well as a four-month statute of limitations for judicial review of a determination reached under the resolution procedure.
In the event of an adverse determination after the exercise of the resolution procedure, the terms of article 8.06 of the contract would have limited the plaintiff's relief to judicial review of that determination pursuant to CPLR article 78 ( see Abiele Contr. v. New York City School Constr. Auth., 91 NY2d 1, 6; Secco Elec. Corp. v. Kalikow, 13 AD3d 252, lv denied 5 NY3d 702). However, by waiving all its rights to the resolution procedure pursuant to article 8.03 the plaintiff abandoned its claim against the defendant arising from the dispute ( see Lovisa Constr. Co. v. Metropolitan Transp. Auth., supra at 741).
The parties' remaining contentions are without merit or need not be addressed in light of our determination.