Author: Gregory J. Spaun

As most of you undoubtedly know, “No Damages For Delay” clauses are commonplace in construction contracts. Prior to 1986, New York courts often did not enforce such clauses, holding “uncontemplated delays” as being compensable. With the decision of the New York Court of Appeals in the case of Corinno Civetta Construction Corp v the City of New York, courts began enforcing “No Damages For Delay” clauses with a vengeance.  Yet in the Civetta decision, the Court set forth four very limited circumstances under which a contractor may still recover delay damages notwithstanding the presence of such a clause. (This column usually discusses these exceptions in the context of whether a seemingly lengthy delay was within the contemplation of the parties at the time of contract.) Recently, in the case of Nagori Contracting Corp. v City of New York, a court reminds us that these same circumstances can also support recovery where the contract provides for the recovery of damages for some (but not all) causes of delay, and that the possibility of recovering often turns on the facts of the case.

Background

In late-2019, Nagori Contracting Corp. submitted a bid for a project to construct a composting facility for the New York City Department of Sanitation. In December of 2019, this bid was accepted and the contract was awarded. The project term was to have been 485 days (16 months) from the issuance of a Notice to Proceed. The pandemic struck shortly after, and three months after the award of the contract, Executive Order 202 was issued, shutting down all non-essential activities. (You may recall that public construction was considered an essential activity which was permitted to proceed.)

The Notice to Proceed was ultimately issued by the City in March of the following year, with a proceed date of April 19, 2021. The project was completed in 2023, and Nagori was paid the full adjusted contract sum of $17.2 million. However, Nagori incurred over $1.5 million in increased costs for labor, materials, and insurance attributable to the delay in issuing the Notice to Proceed, and it placed a claim with the City to recover those costs. The City denied the claim, arguing that the delay did not meet the criteria for compensation under Section 11.4 of the Standard Construction Contract. Nagori then commenced a lawsuit to recover those damages. The City ultimately moved for summary judgment dismissing the lawsuit accordingly.

Decision

The court denied the City’s motion. In doing so, the court addressed the City’s contention about the delay damages provision in the contract, finding that it was questionable as to whether it applied to delays incurred only after the issuance of the Notice to Proceed, as was argued by the City, or whether such damages could be awarded for any time after the contract was awarded. However, the court did not delve deeper on the contractual issue because it found an issue of fact as to whether two of the four common law exceptions to a No Damages For Delay clause (which, by way of reminder, are for: (1) delays caused by the contractee’s bad faith or its 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) could be applied. Specifically, the court held that the issuance of a Notice to Proceed was a fundamental obligation of the contract, and found that there were questions of fact as to whether the City’s delay in issuing the Notice constituted a breach of that fundamental obligation. The court also found that there were issues of fact as to whether a 15 month delay in issuing a Notice to Proceed on a 16 month project was contemplated by the parties at the time of the contract. Accordingly, the court directed the parties to proceed to trial.

Comment

The court here made it clear that although the contractual provisions would be applied, there are certain principles of common law which will be grafted into all contracts—here, the common law exceptions to a No Damages For Delay clause. While the issue of whether Nagori is entitled to compensation for the delay under its contract will be litigated, the court gave Nagori two other lifelines in the event that its contractual claim is ultimately unsuccessful at trial. Accordingly, even if the contract claim fails, Nagori may yet recover if it proves either that the City breached a fundamental obligation of the contract in delaying the issuance of the Notice to Proceed, or that the 15 month delay in issuing a Notice to Proceed on a 16 month project was not contemplated by the parties at the time of the contract.

As we mentioned in last month’s column, contract law and contract interpretations are not always simply plain reading and common sense. Further, there may be remedies available outside of the contract, including those granted by statute, regulation, or case law. Accordingly, if you face an event of delay that is seemingly outside of the compensation provisions of the contract (including a blanket No Damages For Delay clause), you should reach out to experienced construction counsel so that you can determine all of your options before proceeding.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

Back in February, we wrote about the case of Gibraltar Contracting, Inc. v. Tully Construction Co., Inc., where the parties attempted to shorten a statute of limitations period within their subcontract, but the appellate court declined to enforce that shortened period (although that period seemingly ran before the lawsuit was started) because the event which triggered the running of the limitations period was uncertain. After being sent back to the lower court, and after discovery, the court found that the shortened limitations period there was void because it was tied into a contingent payment provision.

Background

In September of 2014, Tully Construction entered into a contract with the Triborough Bridge & Tunnel Authority to rehabilitate the Hugh Carey Tunnel (formerly the Brooklyn-Battery Tunnel). Two months later, Tully entered into a subcontract with Gibraltar Contracting for the tiling scope of work. The contract included a shortened limitations period of six months from the owner’s issuance of a certificate of substantial completion or, if no such certificate was issued, then six months from the owner’s acceptance of the work.

Gibraltar performed its obligations under the contract, including extra work—including a $4.5 million change order resulting from Governor Cuomo’s last minute requirement to use “New York Blue” and “New York Gold” tiles, instead of the white tiles specified. Gibraltar was also impacted by delays, and it incurred costs accordingly. When payment for several open change orders and Gibraltar’s impact costs was not forthcoming, Gibraltar sued, seeking payment of over $5 million. Tully moved to dismiss the lawsuit as being too late, citing the shortened limitations period. It provided the court with a document on MTA letterhead, signed by its Chief Engineer, denominated as a “Certificate of Final Completion”, advising that Tully has fully performed its work, and recommending acceptance of the project. The motion court denied the motion, citing the provision of the contract that required either the issuance of a certificate of substantial completion or of final acceptance by the owner, noting that the document provided was only a recommendation that the owner accept the project, not the acceptance itself. Tully appealed, and the appellate court affirmed. In doing so, the appellate court agreed that the document provided was not the final acceptance of the project, but only a recommendation that it be accepted.

While the appeal was pending, discovery proceeded. After the decision on the appeal, Tully moved for summary judgment (which also permits the use of affidavit evidence), adding an affidavit from the Chief Engineer averring that by signing the “Certificate of Final Completion”, he was indicating the owner’s acceptance. Gibraltar opposed and cross-moved to dismiss the shortened limitations defense in its entirety, noting that the owner’s acceptance is not the only condition to triggering the period, but that there was also a continent payment provision which made Tully’s receipt of its final payment a condition precedent to its obligation to pay Gibraltar. In light of the combination of these two conditions, Gibraltar argued, the shortened limitations period was not reasonable because Gibraltar had no way to verify the running of the period. In reply, Tully argued that Gibraltar could have demanded its money at any time and started the period running for itself, and its failure to do so was fatal to its claims.

Decision

The court denied Tully’s motion and granted Gibraltar’s motion for summary judgment dismissing the defense. In doing so, the court cited appellate precedent holding that a contingent payment provision making the obligation to remit final payment downstream contingent on the general contractor’s receipt of money from the owner renders a shortened limitations period unreasonable because the subcontractor has no way to know when the shortened limitations period commences to run. Based on that established case law, the motion court was constrained to make a similar finding as to the unreasonableness of the shortened limitations period here.

Comment

The last time we addressed this issue, we noted the importance of making the event which triggers the shortened limitations period unequivocal. This time, we note that the event which commences the running of the limitations period also has to be ascertainable by the party which will be subject to the limitation. Stated simply, the triggering event cannot be something that the subcontractor would not ordinarily have knowledge of (such as when an owner remits payment to a general contractor). Stealth may be valuable if you’re flying a bomber against an enemy, but it cannot be something that a general contractor bakes into a contract in order to avoid an otherwise legitimate claim. Consulting with construction counsel in drafting and reviewing contracts so that you can be sure that any shortened limitations period passes the reasonableness test (and does not run before the claim accrues), how to best trigger the provision, and how to best timely assert any claims within that shortened period, could be very helpful. And, as always, please also study your contract at the beginning of the job—not at the end.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

To say that Sections 200, 240(1), and 241(6) of the Labor Law, New York’s “Scaffold Law”, is the bane of the construction industry would be a gross understatement. The Scaffold Law results in ever increasing insurance costs, and ultimately stunts the development it is ostensibly designed to make safer. One small ray of hope is that where an injured plaintiff is said to be the “sole proximate cause” of his or her injuries (that there could be nothing else that contributed to the injuries other than the plaintiff’s own actions), the Scaffold Law’s absolute liability will no longer apply. Unfortunately, courts are quite strict in interpreting what actions constitute sole proximate cause.

One perverse side effect of the Scaffold Law is the increasing frequency of staged accidents, where a plaintiff—who is not always a construction worker—will enter a job site and climb up on to a ladder or scaffold (or other elevation) and throw him or herself from it. There are currently some lawsuits working their way through the court system under the Racketeer Influenced Corrupt Organizations Act (the RICO act, which was the tool used to topple the Mafia) alleging that these claims are part of an orchestrated scheme between criminal alien smugglers, dishonest doctors, and dishonest lawyers to churn settlements and verdicts out of the insurance industry through their insureds—you! Without delving into these allegations, an appellate court, in the recent case of Anguisaca-Morales v St. Paul and St. Andrew Condominium Association, held that video evidence created an issue of fact as to whether the plaintiff intentionally fell from the ladder, thus making himself the sole proximate cause of his injuries.

Background

In July of 2020, the plaintiff fell three feet from a ladder. Video surveillance footage of the job site showed that at the time of his fall, the plaintiff was leaning to the side, apparently throwing himself from the ladder. Importantly, the ladder did not shift until after the plaintiff fell. The plaintiff brought suit and ultimately made the typical Scaffold Law motion for summary judgment on the issue of liability. In opposition, the defendants noted the video evidence showing that the plaintiff apparently threw himself from the ladder, and that the ladder did not move until after the plaintiff was already off of it. The court granted the plaintiff’s motion, finding that the plaintiff’s testimony that the ladder moved prior to the fall was sufficient to grant summary judgment to him. The defendants moved to both reargue, and to amend the complaint to assert a counterclaim for fraud based on the staged nature of the accident. The court denied both motions. The defendants appealed.

Decision

The appellate court held that under the circumstances of the video evidence, it was not sufficient to have granted the plaintiff’s motion. The appellate court reasoned that the video evidence created a question of fact as to whether the plaintiff intentionally fell; if such was indeed the case, then the plaintiff would be considered the sole proximate cause of his injuries and, thus, outside the ambit of the Scaffold Law. Accordingly, the appellate court directed that the matter be tried. However, the appellate court did not go so far as to permit the assertion of the fraud counterclaim, finding that it was not sufficient.

Comment

While the appellate court did not go so far as to grant the motion to assert a fraud counterclaim, it denied what would ordinarily be a slam-dunk motion for summary judgment, and it referred the issue of whether the plaintiff intentionally caused his own injuries to a jury. Crucial to the appellate court was the video evidence which “created a question of fact as to whether the plaintiff intentionally fell”. The lesson to be gleaned from this decision is the importance of video surveillance on the jobsite to catch such ne’er-do-wells in the act and establish that they, by intentionally causing their own injuries, were the sole proximate cause of their injuries. Even if the accident is not staged, a video record will establish exactly how the accident happened, and whether the plaintiff could nevertheless be considered the sole proximate cause of their injuries by, for instance, failing to tie off a ladder despite instructions to do so (as we reported in our November, 2023 column). Worst case, the video merely confirms the plaintiff’s version of events, which would be sufficient to establish Scaffold Law liability even in the absence of the video. Stated differently, there is no downside to video surveillance when it comes to a Scaffold Law claim; it will never make you any more liable than you would otherwise be, but it could save you otherwise unwarranted liability.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

We have written on numerous occasions about how a construction contract is meant to define the relationship between the parties, and that absent a provision which violates public policy (pay-if-paid, pre-emptive lien waivers, indemnification of a party for its own negligence, etc.), the contract will be strictly enforced as written. The provision of these contracts which seems to be invoked most frequently is the provision for delivering notice of claims to the owner for extra, additional, or even delay compensation. In the recent case of Trocom Construction Corp. v City of New York, an appellate court yet again showed us the importance of strict compliance with these contractual notice of claim provisions.  

Background

In October of 2008, Trocom Construction Corp. entered into a contract with the City of New York for Trocom to perform the reconstruction of a portion of Fulton Street in Lower Manhattan in connection with the Fulton Transit Center project. The contract contained a provision requiring Trocom to provide the City’s engineer with a notice of claim for any claimed delay impacts within 45 days of the date on which Trocom first incurred damages, and to provide an additional notice with updated details every 30 days thereafter. The contract allowed Trocom to seek an extension of these deadlines, but warned that “on failure of [Trocom] to fully comply with the foregoing provisions, such claims shall be deemed waived and no right to recover on such claims shall exist”. The contract contained similar provisions for other claims, such as unpaid change orders, etc.

During the project, Trocom encountered numerous delays, and was required to perform significant additional work above and beyond its original scope. When these claims went unpaid, Trocom commenced a lawsuit against the City, seeking to recover $829,998.82 in unpaid change orders and $1,275,400.00 in delay damages, amongst other damages. After discovery, the City moved for summary judgment dismissing Trocom’s lawsuit, alleging that Trocom failed to provide the City with the contractually required notice. While Trocom was constrained to admit that it did not strictly comply with these requirements, it argued that voluminous email correspondence, in person discussions at project meetings, and “thousands of pages of documents [provided] to the Comptroller” adequately advised the City of the details of Trocom’s claims. The City conceded that there were discussions, but argued that the complaints of “general delay”, without specifics, were woefully inadequate to apprise the City of the details of the claims, or substitute for contractual notice.

Decision

The motion court granted the City’s motion, finding that the complaints of general delay, without specifics, were not sufficient, and that it was incumbent on Trocom to “show that a particular delay actually delayed the completion of the project and did not run concurrently with independently caused delays”. The court held that Trocom made no such showing, and had failed to produce documents in response to the Comptroller’s request. The court further held that even if Trocom’s documents did provide specifics, the City was nevertheless entitled to strict compliance with the contractual notice provisions.

Trocom appealed, arguing that the City was unreasonable and unduly burdensome with its document demands. The appellate court affirmed, finding that Trocom had failed to comply with the contractual conditions, and had failed to raise any issue of fact as to whether it was hindered or prevented from complying with the contractual requirements by the City’s bad faith, negligence, or misconduct.

Comment

Trocom is one in a long series of reminders that in most circumstances, contractual conditions precedent will be strictly enforced. Here, a $3.5 million lawsuit  ended up dismissed for a simple failure to follow contractual formalities. (Contractors should know that requirements to give notice of a claim may also come from statutes, city charters, or elsewhere, in addition to those found in the contract.) While Trocom’s claims here ended up buried in the graveyard of inadequate notice, this did not need to happen.

It goes without saying that contractors would be well advised to follow such contractual conditions precedent to the letter so that you are not in the position of having to later argue, like Trocom, that cobbled together correspondence constitutes the notice required by the contract. Often, and unfortunately, by the time the contractor recognizes that it is up against a deadline to submit a notice of claim, that deadline may have already passed. Your project people must learn to recognize the actions and correspondence from the Owner that trigger the Notice stopwatch. Further, never be afraid of being accused of starting a “letter war”. …like Tessio in the Godfather, sophisticated contractors will realize that it’s only business, and there are diplomatic and businesslike ways to do so.  In that regard, contractors should examine their contracts with experienced construction counsel so that they can—at the outset of, or during the progress of the job—have a checklist of what to submit when a claim arises, and the deadline for doing so.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

A downstream contractor has no contractual relationship with a project owner; that relationship is between the general contractor (or, here, the construction manager, Hill) and the owner. Accordingly, parties downstream from the construction manager cannot sue the owner if they sustain money damages caused by the owner. In response to this lack of contractual privity, the downstream contractor and construction manager may enter into a liquidating agreement, or pass-through agreement, where the downstream contractor assigns its claim to the upstream contractor. Such a provision may also already be in place in the downstream contractor’s boilerplate contract. Under either provision, the party with the direct contractual relationship would, in turn, prosecute the downstream contractor’s pass-through claim against the owner, and then give that contractor any recovery (or part thereof). The purpose of such an arrangement is to limit, or liquidate, the upstream contractor’s liability to the downstream contractor to the amount the upstream contractor recovers from the owner (or further upstream contractor).

In the recent case of E.W. Howell Co., LLC v Hill International, Inc., an appellate court reminded us of a construction manager’s duty of good faith and fair dealing to adequately protect a downstream contractor’s claims.

Background

In April of 2010, the City University Construction Fund entered into a Construction Management Agreement with Hill International for the construction of a new performing arts center at Brooklyn College. Two years later, Hill entered into a contract with E.W. Howell to be the general contractor for the Project. This contract contained an exclusive dispute resolution process whereby the City University of New York’s (CUNY) Executive Director would make a determination as to the validity (and amount) of Howell’s claim. In order to effectuate this process, the general contract required Howell to submit a Notice of Dispute to Hill within 7 days of the claim arising, and 10 days later submit a “dispute report” with further information. Hill was then required to submit these documents to CUNY, along with its own dispute report setting forth the resolution Hill would like to see. An unfavorable decision from CUNY’s Executive Director could be appealed to its Vice Chancellor (and, after that, only via an Article 78 proceeding).

Of course, such a dispute arose, and Howell submitted both required notices to Hill. While Hill eventually passed along these documents, there was a significant delay in doing so, and Hill also failed to investigate Howell’s claims and prepare its own Dispute Reports, as required by the contract. Ultimately, CUNY denied Howell’s claims, citing, amongst other things, the failure to submit proper documentation. Howell then sued Hill, claiming that Hill frustrated Howell’s rights under the dispute resolution process, and thereby breached the covenant of good faith and fair dealing found in its contract.

Decision

After discovery, Hill moved for summary judgment dismissing Howell’s complaint, arguing that Hill’s failure to submit certain paperwork did not contribute to the substantive reasons for the denial of Howell’s claim and, therefore, Howell incurred no resulting damages. Howell opposed, claiming that there were issues of fact as to whether Hill’s failure to timely pass along Howell’s claims, and whether there was something contained in Hill’s submissions to CUNY (which were not shared with Howell) or said at Hill’s meeting with CUNY (at which Howell was not in attendance), that frustrated Howell’s claims. The trial court granted the motion, finding that there was no frustration of Howell’s claims.

Howell appealed, and the appellate court reversed. In doing so, the appellate court held that there were issues of fact as to whether Hill breached the covenant of good faith and fair dealing which, under well settled case law, “requires the [upstream] contractor to ‘take all reasonable steps so that the [downstream contractor’s] right to an eventual recovery, if any, from the [owner] w[ould] be protected”. Accordingly, the appellate court reinstated the complaint and directed the matter to further proceedings and trial.

Comment

Liquidating agreements are an effective way to address the problem of a downstream contractor’s lack of a contractual relationship with an owner by having the party in privity with the owner essentially admit the validity of the downstream contractor’s claims, and then prosecute those claims on behalf of that contractor with the promise that the recovery would be passed along. The benefit to a downstream contractor is that claims which would otherwise be barred because of the lack of contractual privity with the owner can be adjudicated. The benefit to the upstream contractor is that its liability is limited to the amount it ultimately recovers on the liquidated claims. However, as we can see from E.W. Howell Co. v Hill International, in order to enjoy that protection, the upstream contractor must be diligent in prosecuting the downstream contractor’s liquidated claims. As always, know what your contract requires for the preservation of your claims, and be vigilant. Further, upstream contractors would be well advised to take their responsibilities under a liquidating agreement seriously or else be prepared to be held responsible for the downstream contractor’s claims, and contractors on either side of this agreement would be advised to consult with experience construction counsel to make sure everyone’s rights are adequately protected.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

Section 103 of the General Municipal Law requires that with several narrow exceptions, any contract for public work in excess of $35,000 must be sent out for public bid. Because of the opportunity for fraud and collusion, the exceptions are narrow and relate to emergency work or a demonstrated need for standardization, amongst others. One of these narrow exceptions is contained in Paragraph 16 of the statute, which provides that notwithstanding the general provisions of the statute, a municipal entity may “make purchases of apparatus, materials, equipment or supplies, or to contract for services related to the installation, maintenance or repair of apparatus, materials, equipment, and supplies” by “piggybacking” onto a “contract let by the United States of America or any agency thereof, any state or any other political subdivision or district therein”, provided that such contract has, itself, been publicly bid consistent with the statute. A court, in the recent case of Daniel J. Lynch, Inc. v Maine-Endwell Central School District, held that the statutory language permitting piggybacking for services related to the installation of equipment, etc., could not be read so broadly as to effectively permit the letting of public works contracts without submitting them to a full public bidding process.

Background

In December of 2022, the District’s voters approved a bond to finance various improvements at the District’s schools. This Project was to be carried out in six phases over five years. In July of 2023, instead of using the bidding process set forth in the General Municipal Law, the District entered into a “piggyback” contract with The Interlocal Purchasing System (“TIPS”) to undertake Phase One of the Project (replacing a sewer line and installing a new parking lot at the high school) for $2.5 million. TIPS was created by the State of Texas, and has grown into a national clearing house to match municipalities around the US to contractors who have joined the program. Once subscribed to TIPS, a municipality submits its project specifications, and the TIPS system matches the municipality with a contractor who can handle the project. Once the match is made, the parties negotiate the agreement, which incorporates the pricing provided by the TIPS contractor. Here, TIPS matched the District with Smith Site Development LLC.
The District was pleased with Smith’s work on Phase One, and it inquired of its CM whether it believed that Smith could handle Phase Two of the Project (extensive HVAC renovations at one of the elementary schools for $8.9 million). The CM indicated its belief that Smith could handle the work, and the District began negotiating with Smith, through TIPS, to perform Phase Two. The District ultimately awarded the contract to Smith.
In response, several local contractors commenced an Article 78 proceeding to declare Smith’s contract void, arguing that the piggybacking arrangement violated state law in numerous respects, including the failure to solicit public bids, the failure to let sperate contracts for the Wicks Law trades, and the failure to mandate bonds. In response, the District argued that piggybacking was not only permitted, but encouraged by Section 103(16) of the General Municipal Law, and that both the District and the TIPS system complied with the requirements set forth in that statute.

Decision

The court granted the local contractors’ petition. In doing so, the court conceded that it was hampered by the statute’s failure to define “public work contracts” or “public works projects”, but was ultimately able to use definitions from other related statutes, and held that such meant “construction or repair projects undertaken by municipalities on their infrastructure that are subject to the competitive bidding process”. With that definition, the court held that the piggybacking exception applies to the “purchase of specific classes of things, namely apparatus, materials, equipment and supplies, as well as service contracts related to those specific things” (emphasis original), and not to public works, public works contracts, or public works projects. Accordingly, the court held that the legislature specifically excluded such projects when it drafted the piggybacking exception, and the contract here was improperly let.
As to the remedy, although the Petitioners had sought disgorgement of the funds paid on the contract, the court declined to grant that draconian relief, holding that such would not be in the public interest. In doing so, the court noted that there were no allegations that the project was being performed inefficiently, or in an manner injurious to the taxpayers, and the District was not malfeasant in letting the contract to Smith. Accordingly, the court permitted Smith to complete its work, but enjoined the District from using TIPS (or a similar system) to bypass the requirement of public bidding to award future public works contracts.

Comment

In a case of clear first impression, the court here limited the use of the piggybacking scheme to, essentially, “plug-and-play” things that only need minor work to install and get running. If it involves anything more, it is classified as a public works project that must be sent out to bid. While the public bidding process—particularly when combined with the Wicks Law requiring the letting of separate contracts for general construction, plumbing, electrical, and HVAC scopes of work—can be cumbersome, the countervailing considerations of bidding for maximum competition, the reduction of opportunity for collusion, and the maintenance of bonding requirements won the day here. However, as this decision is still “hot off the press” there remains time (as of the writing of this article) for the District or Smith, as the aggrieved contractor, to file an appeal. Needless to say, if there is such an appeal, we will keep you updated as to the outcome. Regardless, if a contractor believes that it has lost out on public work through the use of piggybacking, or some other alternative procurement scheme, the contractor would be advised to consult with experienced construction counsel to see if you have a remedy.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

There are many ways to manage the contractual risks associated with a construction project. One of these ways is to include a contractual provision shortening the limitations period within which a lawsuit can be started (which is usually six years). In discussing these shortened limitations periods, courts have routinely held that they cannot have run before the claim accrued, and they must be reasonable. In the recent case of Gibraltar Contracting, Inc. v. Tully Construction Co., Inc., an appellate court also reminds us that the triggering event must be unequivocal in order to start the running of the shortened period.

Background

In September of 2014, Tully Construction entered into a contract with the Triborough Bridge & Tunnel Authority to rehabilitate the Hugh Carey Tunnel (formerly the Brooklyn-Battery Tunnel). Two months later, Tully entered into a subcontract with Gibraltar Contracting for the tiling scope of work. The contract included a shortened limitations period of six months from the owner’s issuance of a certificate of substantial completion or, if no such certificate was issued, then six months from the owner’s acceptance of the work.
Gibraltar performed its obligations under the contract, including extra work—including a $4.5 million change order resulting from Governor Cuomo’s last minute requirement to use “New York Blue” and “New York Gold” tiles, instead of the white tiles specified. Gibraltar was also impacted by delays, and it incurred costs accordingly. When payment for several open change orders and Gibraltar’s impact costs was not forthcoming, Gibraltar sued, seeking payment of over $5 million. Tully moved to dismiss the lawsuit, citing the shortened limitations period and providing the court with a document on MTA letterhead, signed by its Chief Engineer, denominated as a “Certificate of Final Completion”, advising that Tully has fully performed its work, and recommending acceptance of the project.

Decision

The motion court denied the motion, citing the provision of the contract that required either the issuance of a certificate of substantial completion or of final acceptance by the owner, noting that the document provided was only a recommendation that the owner accept the project, not the acceptance itself. Tully appealed, and the appellate court affirmed. In doing so, after citing well settled case law that the six month limitations period, itself, was not unreasonably short, the appellate court agreed that the document provided was not the final acceptance of the project, but only a recommendation that it be accepted.

Comment

This column often notes that the construction contract is the single most important document defining the relationship between the parties. Here, the court reminds us that while parties are free to agree to shorten the time within which to start a lawsuit arising out of the contract, the happening of the triggering event must be unequivocal. The document used here, a document entitled “Certificate of Final Completion” drafted on MTA letterhead, signed by several layers of employees up through the agency’s chief engineer was still equivocal because it only contained a recommendation that the TBTA accept the project, and was not the acceptance itself required by the contract.
While there is a narrow exception to this freedom that the limitations period cannot be so short that it runs before the claim actually accrues (here, the appellate court was ok with a six month period), the consequence here of a document which did not strictly meet the contractual triggering event was to permit a claim to that would otherwise have been subject to dismissal under the shortened limitations period. While Gibraltar was saved by this fortunate circumstance, generally parties would be advised that where they have agreed to a shortened limitations period—and where the events triggering the running of the period are clear—they must exercise extra diligence to do everything they need to do to preserve and prosecute their claims within that shortened period. Similarly, if you are the beneficiary of such a provision, you must make sure that you actually trigger the running of the shortened period exactly as set forth in the contract. Subcontractors often overlook such clauses when initially reviewing the subcontract, or when putting their claims together at the end of the project. Consulting with construction counsel in drafting and reviewing contracts so that you can be sure that any shortened limitations period passes the reasonableness test (and does not run before the claim accrues), how to best trigger the provision, and how to best timely assert any claims within that shortened period, could be very helpful. Please also study your contract at the beginning of the job—not at the end.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

Last June, in discussing the case of Electrical Contracting Solutions Corp. v Trump Village Section 4 Inc., this column reminded contractors that where a license is required to perform work, it is also a requirement to recover in court for such unpaid work. In that case, an appellate court held that where the contractor that entered into the contract for licensed work was not licensed, it was not able to recover—even though it performed that work with a licensed subcontractor. This month, in the case of Mikoma Electric, LLC v Otek Builders, LLC, the same appellate court reinforces this holding, effectively advising that Trump Village was not a one-off decision, and that the contracting party must indeed hold a license where one is required (for example, a home improvement contractor’s license) if it wishes to be able to resort to the courts to recover unpaid monies.

Background

Otek Builders was the general contractor for a number of construction projects for WeWork Companies in New York City. Otek subcontracted with Mikoma Technology of Power and Lights to perform electrical work with respect to a number of these WeWork properties, and it subcontracted with Mikoma Electic LLC to perform similar work at the other properties. Mikoma Electric was licensed by the City as an electrical contractor, but Mikoma Tech was not. Notwithstanding, Mikoma Electric pulled the permits for all of the WeWork properties—including those in Mikoma Tech’s scope of work—and its employees performed all of the work on both the Mikoma Electric and the Mikoma Tech projects. Further, Mikoma Electric’s employees were supervised on both projects by Mikoma Electric’s treasurer, who is a New York City Licensed Master Electrician employed by Mikoma Electric.
After the work was complete, Mikoma Tech filed mechanic’s liens for unpaid work (as did Mikoma Electric), and both commenced a lawsuit to foreclose those liens. Upon being served with the complaint, Otek moved to dismiss Mikoma Tech’s claims and discharge its liens, arguing that Mikoma Tech’s failure to obtain the required license was fatal to both the mechanic’s liens and its claims. In opposition to the motion, Mikoma Tech noted that the permits were pulled by the licensed electrical contractor (Mikoma Electric), the work was performed by its employees, and at all times the work was supervised by Mikoma Electric’s New York City Licensed Master Electrician.

Decision

The court dismissed Mikoma Tech’s claims and discharged its mechanic’s liens, holding that Mikoma Tech’s failure to obtain a license was fatal to maintaining either the mechanic’s liens or a lawsuit to recover for the unlicensed work. The court reinforced that an informal relationship between the unlicensed and licensed entities whereby the unlicensed entity performs the work using a licensed entity’s employees, permits, and licensed electrician was insufficient to bring the unlicensed entity into the licensure scheme to permit it to either file a mechanic’s lien, or a lawsuit, to recover for unpaid, unlicensed work.

Comment

While the decision was clearly bad news for Mikoma Tech, the appellate court’s citation to, and reliance upon the case first reported in this column last June serves to clarify and limit that holding. Specifically, in Trump Village, there was an informal subcontracting arrangement between the licensed and unlicensed entity, and the decision seemed to stand for the proposition that a general contractor itself may require a license to subcontract licensed work, and that reliance upon the subcontractor’s license, alone, was not sufficient. Here, however, by upholding the claims of the licensed entity, Mikoma Electric, while dismissing those of the unlicensed entity, the appellate court clarified that not every contractor in the chain of privity requires a license—just the one performing the work. Accordingly, the general contractor here, Otek (which a web search reveals is also not a licensed electrical contractor) was able to subcontract the work to a licensed electrical contractor (Mikoma Electric). The problem here arose when Otek retained a similarly unlicensed subcontractor (Mikoma Tech) to perform the work, and Mikoma Tech tried to get around the fact that it was not licensed by later patching facts together (by having Mikoma Electric pull the permits, using Mikoma Electric’s employees, and having Mikoma Electric’s licensed master electrician supervise the work). The appellate court held that such patchwork was not sufficient. Left open for now, however, is the question as to whether Mikoma Tech could have gotten around the issue by formally subcontracting its entire scope of work to a licensed electrical contractor (either Mikoma Electric or another licensed entity).
As we cautioned in the wake of Trump Village, contractors would be well advised to make sure that any licensed work is directly undertaken by a licensed contractor (and the retention is formally documented with a subcontract, and not the type of informal arrangement that was present here). We will continue to keep you updated as to any further developments or clarifications that are issued by the appellate courts. In the meantime, if you have any questions about how to tailor your business to operate in the context of the licensing regulations, a consultation with experienced construction counsel could prove helpful.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

This column has often extolled the virtues of the mechanic’s lien as a powerful tool to assist unpaid contractors to get paid for their work. This tool, as a creation of statute, balances the power of the lien by offering protections for the party against whom the lien is filed. One of these protections is the ability of the party against whom the lien is filed to demand an itemized statement of the items comprising the lien, which is to be sworn to by the lienor. Section 38 of the Lien Law specifically provides that upon such a demand, the lienor “shall set forth the items of labor and/or material and the value thereof which make up the amount for which he claims a lien, and which shall also set forth the terms of the contract under which such items were furnished”. A court, in the recent case of CPARE LLC v Trinchese Iron Works & Construction, Inc., reminds us that where the owner or upstream contractor is not only disputing extra work, but also the performance of the base contract work, the response to a demand for an itemized statement of lien must provide details as to all of the work at issue.

Background

CPARE is the owner of a property on East 6th Street in Manhattan. In February of 2021, CPARE hired The J360 Construction Co. as its construction manager for a construction project at the property. J360, in turn, retained Trinchese Iron Works & Construction as a subcontractor to perform certain iron work at the project. Trinchese ceased its work at the project in June of 2021, with CPARE arguing that Trinchese abandoned the project. Trinchese filed a $40,000 mechanic’s lien against the property in November of 2021, which lien was extended in October of 2022. In April of 2023, CPARE served a demand, pursuant to Section 38 of the Lien Law, for an itemized statement of the lien. In response, Trinchese provided a copy of the contract and a copy of its invoice. Upon the receipt of the bare bones response, CPARE brought a special proceeding to compel a more definite statement or, if Trinchese refused, to cancel its lien.

Decision

The court granted the petition and ordered Trinchese to provide a more definite statement of its lien. In doing so, the court analyzed Trinchese’s response—which would have been sufficient had the lump sum contract been completed—but noted that as there was a dispute as to the nature and value of the work, it was necessary for Trinchese to apprise CPARE of the details of the entirety of its claim. The court, however, did not go so far as to cancel the lien as a response was provided, noting that such a harsh remedy would only be appropriate if Trinchese was unwilling or unable to provide the required statement.

Comment

As the CPARE Court noted, the purpose of an itemized statement of lien is to apprise the demanding party of all of the items of materials and labor which comprise the lien. As a practical matter, the response should look like a time and materials statement. Clearly, particularly on a larger project, this can be quite a time consuming endeavor—especially in light of the statute’s short five-day period for responding to the demand. Accordingly, where there is a lump sum contract involved, the temptation for the lienor is to provide, as Trinchese did here, a copy of the contract and a copy of its invoice. In such cases, the fight is often over whether or not the job was substantially complete such that a contract and invoice response would be sufficient. Because the target of the lien will argue that there are issues with the performance of the base contract work, it is not often that a lienor can get away with such a simple response. Accordingly, lienors would be well advised to keep sufficient records to enable them to fully respond to a demand for an itemized statement of the lien. Failing such, a court has the ability to cancel the lien and leave the lienor to its contract rights, if any.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

Last year, just in time for the Holiday Season, we reported that Sections 200, 240(1), and 241(6) of New York’s Labor Law, which are commonly referred to as New York’s “Scaffold Law”, do not always result in automatic liability simply because there was an injury on the jobsite. While many cases are amenable to summary judgment in favor of an injured plaintiff (which leaves the trial to determine only how much—and not whether—that plaintiff gets paid), there we wrote about situations where a trial would be held on the issue of liability (a relative rarity in the context of a Scaffold Law claim) because there were questions as to whether the plaintiff was the sole proximate cause of his injuries. Here, just in time for this Holiday Season, we write to advise that a court, in Injai v Circle F 2243 Jackson (DE), LLC, also reminds us that unwitnessed accidents can provide a reason to permit contractors to challenge liability, and not just damages, at a trial.

Background

In February of 2019, Ronny Injai, a carpenter, was on a job site for the construction of an 11 story building in Long Island City. He was assigned to carry materials for the construction of concrete forms from one floor to another and build the required forms. He requested the assistance of another person from his supervisor, but no assistance was ever provided. Despite the lack of any assistance, Injai started to move these forms from the 8th floor to the 9th. During this process, according to Injai, the ladder he was using, which he claims was unsecured, began to wobble, and he fell and allegedly sustained injuries.

Injai started a lawsuit to recover for his injuries, alleging that the various defendants failed in their statutory duty to protect him from height-related hazards and he was injured as a result. In discovery, it was made clear that the accident was not witnessed by anyone, and the only version of events was the one alleged by Injai. Injai moved for summary judgment on the issue of liability, arguing that the defendants failed to provide adequate safety devices, and that the only issue to be tried was one of damages. The defendants opposed, pointing to: 1) Injai’s testimony that he was carrying 100+ pound loads up the ladder, and had carried between 20 and 25 loads up the ladder; and 2) an expert’s affidavit opining that if the ladder had been unsecured Injai would not have been able to have used it at all, and that Injai must have fallen because he was overburdened and simply lost his balance. Accordingly, the defendants argued, there was a question of fact as to how this unwitnessed accident actually occurred, and whether there was a violation of a statute.

Decision

The court denied Injai’s motion and, on appeal, the appellate court affirmed. In doing so, the court, citing well settled law, held that the mere fact of a fall from a ladder does not, in and of itself, establish a violation of the Scaffold Law, and that it is a plaintiff’s burden to establish that the ladder was defective or unsecured. After doing so, the court held that where, as here, a plaintiff is the sole witness to an accident and his credibility has been placed at issue—which occurred here when he testified that the ladder was unsecured after having used it while being overburdened between 20 and 25 times, and when the defendants provided expert testimony placing that version of events in doubt—that summary judgment is not appropriate.

Comment

As we wrote last year, the Scaffold Law is viewed as the bane of New York’s construction industry. Because of its absolute liability, the Scaffold Law does not permit the consideration of whether the plaintiff also had any comparative fault for his or her injuries, or how much effort the contractor put into safety, or otherwise preventing the accident in the first place. However, as the Injai Court reminds us, this does not preclude an owner or a contractor from proving that there was no violation of the Labor Law at all—which is made easier when a plaintiff’s version of events is the subject of a credibility challenge. Given the volume of people on a construction site, these situations will not happen very often, but when they do it hinders a plaintiff from having the usual “slam dunk” case for recovery. Also helping here was the expert testimony directly countering the plaintiff’s (uncorroborated) statement that the ladder was unsecured, stating that if the ladder was unsecured Injai would not have been able to make the 20 to 25 trips up and down he testified occurred before the accident.

While the Scaffold Law strikes fear into the hearts of contractors and owners (which is reflected in New York’s considerably higher liability insurance rates), all is not lost where contractors document their safety plans and procedures, and communicate them to employees and job site contractors—and do so on an ongoing basis. Similarly, when an accident occurs, thorough photographing and documenting of the accident and any item related to the accident is crucial; in Injai, the photographs of the ladder immediately after the accident supported the expert’s affidavit testimony that the ladder was not unsecured, which created the credibility issue requiring a trial of all issues (and not just the usual damages question).

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100