Opinion
No. 15097/06.
2010-09-21
SKANSKA USA BUILDING INC., Plaintiff, v. LONG ISLAND UNIVERSITY, Macro Consultants, Inc., Michael Fromm and Mathew Barnett, Defendants. Interstate Industrial Corp., Plaintiff, v. Long Island University; Skanska USA Building, Inc., New York Division; and Macro Consultants; and Conesco Doka, Ltd.; and Ferrara Bros. Building Materials Corp., Defendants.
Stephen Stallings, Esq., Peckar & Abramson, New York, for Skanska. John S. Wojak, Esq., Duane Morris LLP, New York, for Long Island University.
Stephen Stallings, Esq., Peckar & Abramson, New York, for Skanska. John S. Wojak, Esq., Duane Morris LLP, New York, for Long Island University.
Robert Rimberg, Esq., Goldberg & Rimberg, New York, for Fromm, Marco Consultants and Barnett.
Stephen Knudsen, Esq., Durkin & Durkin, LLP, New York, for Interstate.
CAROLYN E. DEMAREST, J.
Plaintiff Skanska USA Building Inc. (Skanska) moves, pursuant to CPLR 3212, for partial summary judgment as to liability on its second cause of action seeking recovery in quantum meruit against defendant Long Island University (LIU). Defendant LIU cross-moves, pursuant to CPLR 3212, for partial summary judgment dismissing plaintiff's second cause of action. Although the instant action consists of two consolidated actions arising out of the same circumstances, the motions both address only the second cause of action of the complaint brought under index No. 15097/2006 (the Complaint). The issue facing the court is whether a valid and enforceable agreement was formed and existed between the parties or, whether in the absence of such an agreement, Skanska is entitled to recover in quantum meruit.
BACKGROUND
The claims in these consolidated actions arise out of the construction of a Wellness, Recreation and Athletic Center (WRAC) for LIU in Brooklyn, New York (Project). According to the Complaint, prior to February 2004, LIU solicited Skanska to perform certain construction management services in connection with the construction of the WRAC. Defendant Michael Fromm is the principal and president of defendant Macro Consultants, Inc. and was also retained by LIU to act as LIU's agent during the pre-construction and construction phases of the Project.
Preconstruction Phase
Fromm maintained a journal on his computer wherein he recorded his thoughts, opinions and observations concerning various events that occurred on the Project.
In his affidavit in support of LIU's motion, Fromm stated that on or about October or November of 2003, he assisted LIU in preparing a bid package, consisting of a “Request for Proposal,” dated October 22, 2003(RFP), which solicited bid proposals from various construction managers, and Addendum Number 1, dated November 3, 2003, which contained sample form agreements. The introduction to Section 1 of the RFP stated that the construction manager “will be expected to provide a guaranteed maximum price (“GMP”) for the project at the end of the Design Development Phase which will also include the release of select early bid-packages” (Exhibit A to the Cross Motion). The RFP described the procurement method for the contract as “Construction Manager at Risk with Guaranteed Maximum Price” and described the Project in terms of “construction budget, preconstruction phase services, and construction phase services” ( id.).
Fromm's journal was introduced into evidence by LIU during a spoliation hearing held by this court on June 8, 2009.
LIU proposed to contract with the successful bidder through a two-phase process, consisting of two separate contracts and two separate Notices to Proceed: a) a preconstruction phase in which a preconstruction services agreement would be executed and b) a construction phase in which a construction services agreement, to be governed by LIU's general conditions, would be executed. The RFP states that once LIU and the selected construction manager agree upon a guaranteed maximum price (GMP), LIU would award a construction agreement to the construction manager incorporating LIU's general conditions. Section 5.2.5 of the RFP provides for the construction manager to “[a]gree with LIU on a Guaranteed Maximum Price (GMP) for all construction work for no more than the project construction budget, and the construction budget ... is $25,000,000, and it includes all the direct trade construction costs and site work costs, and excludes all fees and general conditions for the [construction manager].” Section 5.2.5 further provides that if LIU and the construction manager are unable to agree upon a GMP, LIU will terminate the preconstruction phase and proceed with the construction phase through other means.
Sample forms of the “Pre-construction Services Agreement” (Preconstruction Agreement), the “Agreement Between Owner and Construction Manager at Risk (CMAR)—for Construction Services” (Construction Agreement), and “Exhibit A—General Conditions to Agreement Between Owner & CMAR” (General Conditions) were circulated as attachments to Addendum Number 1. The Preconstruction Agreement provided for a design phase, in which the construction manager would work closely with LIU and the Project's architect, obtain the necessary regulatory approvals, develop bid packages for soliciting trade contractors, and agree upon a GMP. The Preconstruction Agreement also provided for a bid phase, during which the construction manager was to develop a master project schedule and solicit trade contractors under the review and approval of LIU.
The sample form of the Construction Agreement unified all of the contract documents and recited the terms by which the Project would be completed. Article 2 thereof listed the contract documents
to be incorporated by reference into the Construction Agreement, including a) the Construction Agreement, the General Conditions, change orders and executed written modifications, a completed “Pre–Construction Services Scope of Work” form and the “GMP Setting Modification” form; b) LIU's general project requirements; c) LIU's project criteria; d) construction documents and any design submission documents; e) the RFP f) performance and payment bond; g) project manual; h) supplementary general conditions; (i) construction manager's qualifications, exclusions and allowances; and (j) the project schedule. Article 3 of the sample form of the Construction Agreement stated that the contract documents were “complementary and must be interpreted in harmony so as to avoid conflict,” that they “form the entire agreement between [LIU] and [the construction manager] and by incorporation herein are as fully binding on the parties,” and “they supersede all prior discussions and negotiations” (Exhibit B to the Cross Motion).
Forms of certain contract documents, if appropriate, were to be attached as exhibits, either to the executed Construction Agreement or the final General Conditions.
Section 6.2 of the sample form of the Construction Agreement stated that the “GMP will be the Guaranteed Maximum Price for the construction Work provided by [the construction manager] under this Agreement. Except for specific early [projects] to be approved and released by [LIU], none of the construction Work shall commence until [LIU] has approved in writing a GMP for the construction Work by [the construction manager] under this Agreement” ( id.).
The General Conditions, intended to be an addendum to the Construction Agreement, established the terms governing the construction of the Project. The sample form of the General Conditions provided in Addendum Number 1 set forth basic definitions, the responsibilities of all parties, environmental protection matters, insurance requirements, payment methods, indemnification terms, a dispute resolution framework and the procedure for submitting change orders, price adjustments and GMP modifications. Section 2.2.2.5 of the sample form of the General Conditions stated:
At a time determined by [LIU] and the [construction manager] and
no later than the conclusion of the Design Development sub-phase, the [construction manager] shall propose a Guaranteed Maximum Price. The proposed GMP shall not exceed the amount within [LIU's] Project Budget available for the construction Work. To do this the [construction manager] will submit a proposed completed form of the GMP Setting Modification in the format and setting forth the terms and attaching the documents called for. ( id.).
Section 2.2.2.6 and 2.2.2.7 described the specific method by which the GMP could be modified, and Exhibit B to the General Conditions provided the specific form for the construction manager to use entitled “Form of GMP Setting Modification.” Article 12 of the General Conditions allowed LIU to suspend work and terminate the Construction Agreement “without cause and for its convenience” ( id.). In the event that the construction manager was terminated, it was entitled to seek an adjustment of the GMP.
On November 18, 2003, Skanksa responded to the RFP by submitting a completed fee proposal to LIU on the form supplied in the RFP. The fee proposal listed the construction budget as $25,000,000, and structured Skanska's fees as percentages of the construction budget. Skanksa proposed a fee of $160,000 for the preconstruction phase (.64% of the construction budget) and $590,000 for the construction phase (2.36% of the construction budget). Costs associated with general conditions totaled $3,370,000, and Skanska's proposed GMP construction contingency budget totaled $1,250,000.
On December 9, 2003, Fromm sent an email to Paul Anderson, then the president of Skanska, informing him that LIU had short-listed Skanska as a finalist for the Project. The email, among other things, directed Skanska to confirm that it was prepared to enter into a “Gross Maximum Price (GMP) delivery based on Design Development documents and per the proposed schedule outlined in the RFP” (Exhibit D to the Cross Motion). On December 18, 2003, Paul Anderson, on behalf of Skanska, responded by letter confirming that Skanska was prepared to enter into a GMP delivery pursuant to the terms of Fromm's email. Anderson included with his letter five pages of comments to the sample forms of the Preconstruction Agreement, the Construction Agreement and the General Conditions.
On December 30, 2003, LIU and Skanska executed the Preconstruction Agreement, which confirmed the preconstruction phase fee of $160,000, included in Skanska's fee proposal, and conformed, for the most part, with the proposed form Preconstruction Agreement submitted by LIU as part of Addendum Number 1. Section 1(B)(1)(f) provided that if LIU and Skanska could agree to a GMP, LIU would “award a contract to [Skanska] to construct the project for the aggregate of the direct cost of the work, plus [Skanska's] fee for Construction Phase Services, contingency, General Conditions, overhead and profit” (Exhibit G to the Cross Motion). The construction budget was set at $25,000,000, which included direct construction costs, but excluded total management fees, contingency, overhead, and profit. The Preconstruction Agreement also provided:
After reaching agreement on a GMP, the [construction manager], by signing this agreement, agrees to execute a contract with [LIU] for the construction phase of the project, and that contract shall incorporate the “Contract Documents” as defined in Article 2 of the Contract General Conditions. Once [LIU] issue [ sic ] a Notice to Proceed for the construction phase of the project, the [construction manager] shall enter into trade contracts with the lowest responsible bidders in each trade. ( Id.).
In his deposition, Anderson testified that, “[t]he only thing I can tell you, it's clear to me if we didn't reach a GMP agreement, Barney Skanska wasn't going to build the project” (Anderson Dep., p. 38). Anderson also testified that he left the Project in May of 2004, at which time the parties had not reached an agreement as to a final GMP.
Construction Phase
On May 6, 2004, Skanska submitted a document entitled “100% Design Development GMP Estimate Summary.” The trade cost subtotal presented by Skanska was $30,905,166, but was reduced to $28,035,840, after value engineering alternatives were employed.
On May 23, 2004, Fromm sent an email to Arquitectonica, the architectural firm retained by LIU, as well as to a number of Skanska employees, including Anderson, “to advise that LIU has taken the decisions on the required value engineering and scope reduction items in the effort to reduce the project cost and agree to an anticipated GMP in accordance with the project proforma budget” (Exhibit I to the Cross Motion). Attached to the email was a document, dated May 21, 2004, entitled “VE ENGINEERING LOG,” which presented an anticipated GMP of $26,778,913, attained through the deduction of $4,071,253 using value engineering methods, from the $30,905,166 GMP estimate that Skanska had submitted on May 6, 2004. The email instructed the recipients to review the document carefully and instructed that “LIU IS DIRECTING THE PROJECT TEAM TO PROCEED with construction documents and GMP contract documents based on these selected [value engineering] and Scope Reduction items being exercised and initiated” ( id.). Fromm also instructed Skanska to “[p]roceed to finalize the GMP documents(s)” noting that “LIU expects the anticipated GMP to be $26,779,000+/-(or even lower)” ( id.). Fromm concluded his e-mail with the exclamation: “It's a GO—Let's all make it happen!!!” ( id.).
On June 18, 2004, Skanska, acting as construction manager for LIU, entered into a subcontract with Interstate Industrial Corp. (Interstate), by which Interstate was retained to perform the excavation and foundation work on the Project.
Prior to the execution of this contract, LIU had issued a Letter of Intent to Interstate.
The extent of Interstate's performance and the amount owed it is the subject of dispute in the second, related action before this court ( Interstate Indus. Corp. v. Long Is. Univ., Sup Ct, Kings County, index No. 817/2006). Interstate commenced this action against, inter alia, LIU and Skanska by summons and complaint, dated January 9, 2006. The complaint alleges that LIU and Skanska are jointly liable for services performed by Interstate in connection with the construction of the WRAC.
On October 26, 2004, Fromm noted in his journal that he had a phone conversation with Gregg Gambino, then a project executive at Skanska, expressing a desire to meet with Gambino to obtain an update on the GMP and some potential cost issues related to carpentry. According to Fromm's journal, he met with Gambino the following day to discuss the bidding status and to review the GMP estimate. Fromm noted an $800,000 line item error in Skanska's estimate, but wrote that “Skanska stated it was [its] error and [it intended] to honor the GMP value of $26.8—feel [Skanska] can procure the rest of the job (with some additional [value engineering] ).”
In November 2004, Skanska submitted a revised GMP estimate, which included a revised version of the document entitled “100% Design Development GMP Estimate Summary,” proposing a total construction cost of $32,323,338 and a trade cost subtotal of $27,069,838. The trade cost subtotal was achieved by the deduction of $2,259,308 through value engineering methods. The new GMP estimate contained eight pages of qualifications. In its estimate, Skanska noted that “[d]ue to the recent and current increases in commodity pricing, certain unit rates in the GMP will continue to be reviewed to ensure their continued validity. However, we reserve the right to update the unit costs in this GMP should commodity pricing continue to rise beyond reasonable expectation” (Exhibit E to Plaintiff's Reply). The November estimate was predicated upon implementation of suggested value engineered modifications to the drawings and itemized the allowances in the GMP made for specific elements.
Following receipt of Skanska's submission, on November 16, 2004, Fromm wrote in his journal that he had had a meeting with LIU and Skanska. Fromm noted his lack of confidence in Skanska's ability to complete the Project in a timely fashion, suggesting that LIU should retain legal counsel, and expressing concern that LIU may have no privity with Skanska because neither a letter of intent, nor the Construction Agreement, was ever executed. Fromm also wrote, “LIU only has a verbal/hand shake contract with [Skanska] based on the RFP and interview response/award process” (Exhibit C to the Motion).
On December 2, 2004, Fromm noted in his journal that he had reviewed the “Final GMP Estimate” and confirmed that the estimate submitted of $27,069,838 was within $19,000 of the amount LIU and Macro had accepted in May of 2004. Fromm wrote that he recommended that LIU accept the estimate as the project GMP. Fromm also noted that his approach would be “to incorporate this GMP document in the [Construction Agreement]” ( id.).
On December 12, 2004, Fromm wrote in his journal that he issued emails requesting a meeting between Skanska and LIU “to go over the GMP document” ( id.). On December 19, 2004, Fromm wrote that he “[r]eviewed Skanska 11.04 GMP documents and drafted [a] response to specific issues relating to the GMP Qualifications, Allowances and Exclusions,” “[p]repared [a] 5 page memo listing all the questions and comments,” and “[i]ssued [a] final draft of Macro/LIU comments/questions on the 11.04 GMP documents,” which were sent via e-mail to Skanska. On December 21, 2004, Fromm wrote about a meeting he had with LIU and Skanska “to review GMP Qualifications, Allowances and Exclusions” ( id.).
On January 9, 2005, Fromm sent an email to a number of Skanska employees, including Anthony Buonpastore, the senior vice president of Skanska. Attached to the email were drafts of the Construction Agreement and the General Conditions, consistent with the sample forms attached to the RFP and Addendum Number 1. Fromm stated in the email that the drafts addressed the contract modifications Skanska had requested on December 19, 2003,
and were redlined to reflect the changes that LIU accepted. Among the redlined changes, Article 6.1 of the draft Construction Agreement stipulated that the fee for construction phase services would be $590,000, consistent with the construction phase fee contained in the fee proposal submitted by Skanska on November 18, 2003. The draft General Conditions contained provisions for setting and modifying the GMP, but no actual GMP was included in, nor was a draft GMP Schedule attached to, any of the drafts.
The letter Skanska sent was actually dated December 18, 2003.
On January 27, 2005, Fromm wrote in his journal that “Skanska appears to be delaying finalizing [the] contract because of GMP issues/concerns” ( id.).
On February 4, 2005, Fromm mentioned in his journal a telephone conference in which Fromm advised Anderson that “LIU is considering [the] alternative of bringing in another [construction manager] and bifurcat[ing] the completion of the project—Skanska will complete the exterior/envelope and an alternative Builder would manage/complete the interior build out” ( id.).
On February 8, 2005, Fromm again noted that LIU “was/is seriously looking at [the] alternative/option/idea of bifurcating the project,” but wrote that he was against the bifurcation, and requested that Skanska “come back to us/LIU with a plan/program of finishing this project—with ... realistic dates and the cost projections to complete the project” ( id.). Skanska has recited a notation in Fromm's journal, dated February 9, 2005, indicating the advice of his legal counsel not to “push” for execution of a contract as evidencing an acknowledgment that no binding agreement had been reached.
Following a spoliation hearing regarding the journal, this court ruled that the privilege regarding this legal advice had been waived. The probative value of such advice, however, is inconsequential.
On March 3, 2005, Fromm reported in his journal that Skanska had submitted its first “Projected Final Costs” on Feburary 28, 2005 and had estimated that construction costs would total $29.2 million dollars due to unexpected drywall and carpentry costs. Fromm wrote that this presented a “major issue” as LIU's pro forma budget estimated that construction costs would total $27.1 million dollars ( id.). Fromm also noted that the Construction Agreement still had not been executed due to a fee disagreement.
On Thursday, June 23, 2005, Fromm wrote in his journal that the GMP was “[p]robably now at/in range of $29M to $29.5 M” ( id.). A week later, on June 30, 2005, Fromm reported on a meeting that took place between Skanska, LIU and Interstate to “try and see if this situation can be resolved.” He noted that the Construction Agreement was tied to the dispute with Interstate “because there has to be an acknowledgment that there is a material and significant dispute issue between the parties that is outside the [Construction Agreement], “and expressed concern, writing: “I don't know how this will be done!!” Fromm also wrote that, with respect to the Construction Agreement and the GMP, Skanska was “willing to sign [a] deal but based on today's numbers—$3.9M for [general conditions] vs. $3.2M in the 11.04 GMP presentation” and “$28.7 [million dollars in] trades cost (May 2005 Monthly Report) as the GMP [as opposed to] the $27.1 [million dollars] GMP for trades [cost] in 11.04” ( id.).
Notwithstanding the failure to execute the Construction Agreement, the project continued under Skanka's management, which continued to submit monthly construction bills and change order requests and to meet weekly with LIU. On July 26, 2005, Fromm wrote in his journal about an upcoming meeting with Skanska to review its monthly General Conditions application and construction bills. On July 28, 2005, Fromm noted in his journal that Skanska's General Conditions application was “totally unacceptable—the submission was incomplete, disorganized and missing information—a mess.” Fromm also wrote that Skanska was “lost” and that something was “seriously wrong with [its] Accounting Dept” ( id.).
On August 3, 2005, August 17, 2005 and August 29, 2005, various meetings were held in an attempt to resolve the Interstate dispute. In Fromm's journal, he wrote that during the August 29, 2005 meeting, Phil Centenio, Interstate's claim consultant, proposed that the dispute could be settled if Interstate were paid $1.4 million dollars, but another Interstate representative, Phil Pirro, walked out, stating that Interstate's claim would be pursued legally.
On September 8, 2005, Fromm wrote in his journal that he had informed Peter Tymus at LIU that Fromm did “not believe it [was] likely that Skanska [could] substantially complete the project by mid November 2005 ... [but advised] Peter not to push for [the] date—Skanska and the [trade contractors would] take advantage of the situation and it [would] be extremely cost excessive to LIU” ( id.).
On August 23, 2005, in addition to their regular weekly project meeting, Skanska and LIU held another meeting to discuss the projected final costs. Fromm wrote in his journal that Skanksa's position was that, in light of design revisions, it “could not complete the design to meet the GMP budget—i.e. the costs/numbers are where they are today.” Fromm suggested that “this is [Skanska's] apparent position to justify the cost overruns and busts above the GMP' “ ( id.).
On October 6, 2005, Fromm wrote in his journal that he had a telephone conversation with Lynn Shavelson, corporate counsel for Skanska, to discuss ways in which LIU and Skanska could jointly settle the dispute with Interstate. Fromm also sent an email to Peter Tymus on that date, attaching a projected cost analysis from Skanska based on hard costs only. In his email, Fromm noted that the cost projection included a negative variance of $4.5 million dollars, which Fromm attributed to “Skanska's direct GMP responsibilities (and lack thereof) and [its] mismanagement of the Project” ( id.).
On October 20, 2005, Fromm had a “seminal and important meeting” with Tymus about Skanksa's progress and new change order requests. Fromm wrote that Tymus “suggest[ed] that LIU should terminate Skanska now and complete the job” ( id.).
On October 19, 2005, Fromm wrote in his journal that he received a change order request from Skanska for $1,036,861 due to a General Conditions overrun. In response, Fromm sent an email dated October 31, 2005 denying the request. Fromm wrote:
The business deal and Agreement between LIU and Skanska USA on this Project from the RFP phase, through the Preconstruction and Construction Services phases provided for a Gross Maximum Price (GMP) project delivery, including fixed General Conditions as part of and included in the GMP amount. The Skanska General Conditions were confirmed and agreed upon at $3,193,600 ... [w]e need to confirm the revisions based on previously approved Change Orders between LIU and Skanska USA. Id.
Fromm also wrote that “LIU is prepared to immediately meet with Skanska USA so that [LIU would be] advised what Skanska [was] prepared to do and commit to [LIU] to complete this Project and by when” ( id.).
On November 10, 2005, in response to LIU's denial of Skanska's change order request, LIU had a meeting with Skanska. Fromm wrote in his journal that Skanska's position is that there was no signed contract and that it should be paid its fee and its General Conditions overrun. Fromm wrote that he stated that a contract did exist and that the General Conditions overrun was included in the GMP. Fromm wrote a “Post Meeting Assessment” in which he noted that “Skanska will likely not remain on the job if not paid for [the General Conditions overrun]” and that LIU would put the December General Conditions payment in escrow but would not pay or reimburse additional General Conditions after December 2005. ( Id.).
On November 17, 2005, Skanska and LIU met again to discuss future steps, the revised schedule for finishing the project, and potentially resolving their disputes through arbitration. ( id.). Skanska continued to complete work on the Project for the next few months.
On February 21, 2006, Fromm wrote in his journal that he was served with the Interstate complaint. On February 24, 2006, Fromm wrote that he had a conference call with LIU to discuss terminating Skanska and setting new goals for completing the Project.
On March 29, 2006, George Sutton, Esq., Vice President and University Counsel of LIU, sent a letter to Richard Kennedy, Esq., Senior Vice President and General Counsel of Skanska, stating that “[d]ue to ... [Skanska's] failure to perform during the Project to date, [LIU has] been left with no alternative but to terminate the relationship and all agreements between [them] effective immediately” (Exhibit C to Reply Aff.).
On April 8, 2006, Lynne Shavelson sent a letter to Fromm submitting payment requisitions for construction management services performed for the Project. Enclosed with the letter was one of Skanska's “Application and Certification for Payment.” In it, Skanska stated that the “ORIGINAL CONTRACT SUM” was $32,579,538, but that change orders had increased the contract sum by $6,536,431.78, making the total “CONTRACT SUM TO DATE,” also referred to as the “ “ADJUSTED GMP,” $39,115,969.78. Shavelson also enclosed with the letter a spreadsheet entitled “Requisition for Payment.” Column C of the first page of the spreadsheet listed the “Scheduled Value (GMP)” for the subtotal of hard costs as $28,069,838. This amount corresponds to the amount for the subtotal of hard costs presented by Skanska in November of 2004. Column D of the spreadsheet listed the “Owner Approved Change Order” for the subtotal of hard costs as $815,294, the” “Owner Pending Change Order” for the subtotal of hard costs as $2,243,997, and the “Owner Claims” for the subtotal of the hard costs as $1,099,243. Adding Column C and Column D together, Column E listed the “Revised Scheduled Value” for the subtotal of hard costs as $32,228,372. On the next page, Column C listed the “Scheduled Value (GMP) with General Conditions” as $32,579,538. Column D listed the “Owner Additional Change Order” as $839,540, the “Owner Pending Change Order” as $4,543,649, and the “Owner Claims” as $1,099,243. Adding Column C and Column D together, Column E listed the “Revised Scheduled Value” of the total GMP as $39,115,970.
Plaintiff commenced the instant action on May 17, 2006, seeking to recover damages from LIU for, inter alia, breach of an oral agreement, quantum meruit, tortious interference with Skanska's trade contracts and breach of the Preconstruction Agreement. Plaintiff now seeks summary judgment on its claim for quantum meruit asserting that no binding contract exists between the parties, and LIU has cross-moved to dismiss the claim for quantum meruit claiming that a binding agreement was reached in which a GMP of $27,069,838 was established.
ARGUMENTS
In support of its motion for summary judgment, plaintiff submits the affidavits of Stephen A. Stallings, counsel for Skanska, as well as Leslie A. Meyer, who states in her affidavit that she was directly involved with the Project from approximately August of 2004 to May of 2005 and from January 2006 until the end of Skanska's involvement in the Project. Plaintiff argues that it is entitled to partial summary judgment as to liability on its quantum meruit claim because neither plaintiff nor LIU ever signed the Construction Agreement, which plaintiff claims contained disputed essential and material terms governing the construction of the Project. Because the Construction Agreement was never executed, plaintiff argues that a valid and enforceable agreement between it and LIU does not exist, thus entitling plaintiff to recover in quantum meruit for its work on the Project. Plaintiff further argues that the documentary evidence, consisting primarily of Fromm's journal entries, sufficiently demonstrates that no final agreement was reached between it and LIU with respect to the contract sum, also known as the GMP, as well as with respect to other material terms.
In support of its cross motion to dismiss the quantum meruit cause of action, defendant LIU submits the affidavit of defendant Fromm, who argues that an enforceable agreement governing the basic terms of the parties' relationship, including the compensation to be paid Skanska, clearly existed between Skanska and LIU, thus requiring the dismissal of the equitable cause of action. Fromm further claims that the documentary evidence sufficiently demonstrates that (a) the parties agreed that Skanska would be bound by a GMP for its services as construction manager, (b) LIU and Skanska agreed to a specific GMP for hard costs of $27,069,838 when LIU accepted Skanska's November GMP estimate, and (iii) Skanska's conduct evidences its recognition of the agreed-upon GMP, thus binding Skanksa to such GMP and denying it recovery in quantum meruit.
ANALYSIS
The “drastic remedy of summary judgment should be granted only if there are no material issues of fact” (Dykeman v. Heht, 52 A.D.3d 767, 769, 861 N.Y.S.2d 732 [2d Dept 2008]; see also Andre v. Pomeroy, 35 N.Y.2d 361, 364 [1974] ). Here, both plaintiff and defendant LIU are moving for partial summary judgment and, in order to succeed upon their claims, must both bear the burden of proving that no triable issues of fact exist.
The crux of this dispute turns on whether a valid and enforceable agreement governing the construction of the Project and establishing a definite GMP existed between LIU and Skanska or whether Skanska is entitled to recover in quantum meruit. It is not disputed that the proposed written Construction Agreement was never executed. It is also clear from the documentary evidence, and not disputed by the parties, that an agreed GMP was to have been a condition precedent to the execution of a written agreement. It is also undisputed that plaintiff did at least partially perform the scope of work defined in the proposed agreement.
To prevail upon its motion, plaintiff must prove that no valid and enforceable contract exists and that it has established the necessary elements of a quantum meruit cause of action. To recover upon a theory of quantum meruit, plaintiff must prove “(1) the performance of services in good faith, (2) the acceptance of the services by the person to whom they were rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services” ( see Tesser v. Allboro Equip. Co., 73 A.D.3d 1023, 904 N.Y.S.2d 701 [2d Dept 2010] ). All of these elements have been satisfied subject to the proof of reasonable value. However, if defendant can establish that a sufficiently definite valid and enforceable contract existed governing the construction of the WRAC, then plaintiff will be barred from recovering damages in quantum meruit. Here, notwithstanding plaintiff's inclusion of both breach of contract and quantum meruit claims in the Complaint, Skanska may ultimately only recover on either the first cause of action seeking damages for breach of an oral contract or the second cause of action seeking recovery in quantum meruit. The existence of a valid and enforceable agreement “ordinarily precludes recovery in quasi contract for events arising out of the same subject matter” (Clark–Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 388 [1987] ). The agreement, so long as it is express, may be written or oral (Morales v. Grand Cru Assoc., 305 A.D.2d 647, 759 N.Y.S.2d 890 [2d Dept 2003] ).
Defendant has moved for dismissal of plaintiff's equitable claim for quantum meruit based upon its contention that a valid and enforceable agreement precludes such recovery. However, “where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute in issue, plaintiff may proceed upon a theory of quantum meruit and will not be required to elect his or her remedies” (Joseph Sternberg, Inc. v. Walber 36th St., Assocs., 187 A.D.2d 225, 228, 594 N.Y.S.2d 144 [1st Dept 1993]; see also Hochman v. LaRea, 14 A.D.3d 653, 655, 789 N.Y.S.2d 300 [2d Dept]; Zuccarini v. Ziff–Davis Media, Inc., 306 A.D.2d 404, 405, 762 N.Y.S.2d 621 [2d Dept 2003] ).
To prevail upon its cross motion, defendant LIU must prove that a sufficiently definite, valid and enforceable contract was formed between Skanska and LIU. “Few principles are better settled in the law of contracts than the requirement of definiteness. If an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract” (Cobble Hill Nursing Home, Inc. v. Henry and Warren Corp., 74 N.Y.2d 475, 482 [1989];see also Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88 [1991] ). Moreover, the existence of a valid and enforceable contract “is not dependent on the subjective intent of either [party]. In determining whether the parties entered into a contractual agreement and what were its terms, it is necessary to look, rather, to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds. In doing so, disproportionate emphasis is not to be put on any single act, phrase or other expression, but, instead, on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objective they were striving to attain” (Brown Bros. Elec. Contr., Inc. v. Beam Constr. Corp., 41 N.Y.2d 397, 399–400 [1977] (internal quotation marks and citation omitted)). The doctrine of definiteness, however, should not be applied rigidly; “where it is clear from the language of an agreement that the parties intended to be bound and there exists an objective method for supplying a missing term, the court should endeavor to hold the parties to their bargain” (Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88 at 91, 571 N.Y.S.2d 686, 575 N.E.2d 104).
Based upon well-settled principles of contract interpretation, a court will find that no valid and enforceable contract was formed if a written agreement was negotiated, but never executed. “Generally, where the parties contemplate that a signed writing is required there is no contract until one is delivered. This rule yields, however, when the parties have agreed on all contractual terms and have only to commit them to writing. When this occurs, the contract is effective at the time the oral agreement is made, although the contract is never reduced to writing and signed” (Matter of Mun. Consultants & Publ., Inc. v. Town of Ramapo, 47 N.Y.2d 144, 148 [1979] [internal citation omitted] ).
In the instant action, it is obvious from the RFP that the parties envisioned a two-phase process for the construction of the WRAC, consisting of a preconstruction and a construction phase, to be memorialized by the execution of the Preconstruction Agreement and the Construction Agreement. The Preconstruction Agreement was executed and the preconstruction phase completed. It is undisputed, however, that the construction phase began on or about May of 2004 and continued until on or about March 2006 without the execution of the Construction Agreement. It is equally clear, based upon evidence of negotiation and the exchange of draft agreements, that the parties intended the execution of a written Construction Agreement to be the definitive umbrella agreement that incorporated by reference and provided a context for all of the relevant contract documents and specified the GMP which would cap LIU's liability to Skanska. As late as July 7, 2005, Fromm, in his journal, expressed skepticism of the possibility of signing the Construction Agreement because material issues, such as the Interstate dispute, remained. The fact that the parties had not signed the agreement and had not agreed to a number of material terms, including indemnity rights and insurance coverage, suggests that a “meeting of the minds” never took place between Skanska and LIU over the terms governing the construction phase of the Project.
It is clear that the parties never agreed to a GMP before the construction phase started and did not follow the procedure set forth in the Preconstruction Agreement for awarding the construction contract. In accordance with the terms of the Preconstruction Agreement, both Skanska and LIU agreed to agree upon a GMP before the construction phase began and to memorialize it by executing the Construction Agreement. However, agreements to agree are not binding upon the parties ( see 410 BPR Corp. v. Chmelecki Asset Mgt. ., Inc., 51 A.D.3d 715, 716, 859 N.Y.S.2d 209 [2d Dept 2008] ). Moreover, although the Preconstruction Agreement and the RFP both called for the parties to agree upon a GMP for the Project before the construction phase began, it appears that LIU, by directing Skanska to begin and continue the construction phase while the GMP was still under negotiation, waived the condition precedent contained in the Preconstruction Agreement. Similarly, the RFP set the budget for construction costs of the Project at $25,000,000 and calculated the fee proposal based upon that amount. Although Skanska continued to use the $25,000,000 figure for the purpose of calculating the fee in later cost estimates, it did not use that figure as the May 2004 GMP estimate nor as the November 2004 GMP estimate. Thus, it is clear that, in spite of the RFP and the Preconstruction Agreement, the construction phase began before the GMP was established.
At the point that Fromm sent his email stating, “It's a GO—Let's all make it happen!!!”, the anticipated GMP was “to be $26,779,000+/-(or even lower)” (Exhibit I to the Cross Motion). A little more than a month later, on June 18, 2004, Skanska had already begun the construction phase by entering into a subcontract with Interstate, the corporation performing the demolition, excavation and foundation work for the Project, which was to be completed by August 31, 2004. Skanska submitted its November 2004 GMP estimate, which LIU claims represents the agreed upon and contractually binding GMP, with eight pages of qualifications and recited the understanding that Skanska would continue to review the numbers to ensure their continued validity. Thus, LIU's argument, that the GMP was initially proposed in May of 2004, and finalized in November of 2004, and is therefore contractually established, is unavailing in light of the fact that Fromm's journal reveals continued efforts to finalize the GMP in December of 2004 and January of 2005, while construction was well underway. As late as January 27, 2005, Fromm noted in his journal that Skanska appeared to be delaying the finalization of the Construction Agreement due to concerns about the GMP. In February of 2005, LIU informed Skanska that it may bifurcate the project and retain an additional construction manager. The fact that LIU was considering such an alternative suggests that negotiations were ongoing and the scope of Skanska's work was not clearly defined. If a binding GMP had been reached, it is unlikely that LIU would have informed Skanska that it was considering a bifurcation of the Project.
Affidavits from both parties were submitted which presented conflicting statements as to whether an agreed-upon GMP was reflected in Skanska's pay requisitions. Fromm, in his affidavit in support of LIU's cross motion, states that the payment requisitions submitted by Skanska acknowledge that a GMP of $27,069,838 existed. Meyer, in her affidavit in support of Skanska's motion, explains that although Skanska used the last-estimated GMP when preparing its pay requisitions, that amount was used for billing purposes only. Given this explanation, Skanksa's behavior does not establish that the parties had agreed upon an GMP, nor does it resolve the outstanding qualifications that Skanska had submitted as part of its November 2004 GMP estimate. Skanska's use of the November 2004 GMP estimate as the base contract sum for its change order requests does not reflect that it is the finalized GMP. As noted, Fromm's journal entry revealed that, as late as June 30, 2005, Skanska was only willing to sign the Construction Agreement based upon a revised and updated GMP, as opposed to the November 2004 GMP estimate, revealing the parties' understanding that a GMP had not been finalized. Thus, Skanska's potential damages cannot be capped by the November 2004 GMP amount because it does not appear that the GMP had been agreed at that time.
However, although a written contract was not formally executed and certain material terms were not agreed upon, such terms may be supplied based upon the established custom and practice of the industry and the actions of the parties. In Metro–Goldwyn–Mayer, Inc. v. Scheider, 40 N.Y.2d 1069, 1071 [1976], the Court of Appeals, affirmed its judgment, quoting the trial court (75 Misc.2d 418, 422, 347 N.Y.S.2d 755 [NY Sup Ct 1972]:
[W]here the parties have completed their negotiations of what they regard as essential elements, and performance has begun on the good faith understanding that agreement on unsettled matters will follow, the court will find and enforce a contract even though the parties have expressly left these other elements for future negotiation and agreement, if some objective method of determination is available, independent of either party's mere wish or desire. Such objective criteria may be found in the agreement itself, commercial practice or other usage and customs. If the contract can be rendered certain and complete, by reference to something certain, the court will fill in the gaps.
It has not be established by the parties that the GMP is such a material term that the failure to agree upon a finalized GMP would effectively render any potential oral agreement indefinite and unenforceable. It is also not clear to this court whether the parties agreed to a process, such as the monthly pay requisitions, which may establish that an agreement to pay Skanska for its services was reached. In Matter of 166 Mamaroneck Ave. Corp., 78 N.Y.2d 88 at 91, 571 N.Y.S.2d 686, 575 N.E.2d 104, the court found that a contract which lacked a specific rental amount was sufficiently definite because the contract contained an objective standard for determining the rental amount. Here, although no written contract exists, a triable issue of fact has been raised as to whether some form of valid and enforceable express agreement was reached by the parties. Fromm's journal contains numerous references to weekly project meetings, to change order requests, monthly payment requisitions, updated schedules and revised cost projections. It is clear that, in spite of the parties' failure to agree upon LIU's suggested GMP of $27,069,838 for hard costs and to execute the Construction Agreement, the construction phase continued until March 2006. It appears that a pattern of performance was established, a portion of the construction was completed by Skanska and certain payments were made to Skanska by LIU in compensation for services performed. Thus, a triable issue of fact has been raised as to whether and to what extent Skanska and LIU's pattern of conduct and performance would lead a reasonable and objective person to conclude that a binding agreement governing certain terms of the construction phase of the Project was reached between LIU and Skanska.
CONCLUSION
At the request of the parties at oral argument that this court determine the issue of liability upon the second cause of action based upon the papers submitted and, if that was not possible, to take evidence in supplementation thereof, a framed issue hearing is scheduled to take place on October, 2010 to determine whether and to what extent a binding and enforceable contract was established through the pattern of LIU's conduct and Skanska's performance from the beginning of the construction phase in May 2004 until Skanska's termination in March of 2006.
This constitutes the decision, order and judgement of the court.