CDRB determined that contractor waived its claim regarding its contractual responsibility for wiring installation. Appeal denied.

Transcription

1 Summit Construction Services Group, Inc. v. Dep t of Design & Construction OATH Index No. 456/15, mem. dec. (Jan. 26, 2015), aff d, Index No /2015 (Sup. Ct. N.Y. Co. Aug. 20, 2015), appended CDRB determined that contractor waived its claim regarding its contractual responsibility for wiring installation. Appeal denied. NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS CONTRACT DISPUTE RESOLUTION BOARD In the Matter of SUMMIT CONSTRUCTION SERVICES GROUP, INC. Petitioner - against - DEPARTMENT OF DESIGN AND CONSTRUCTION Respondent MEMORANDUM DECISION JOHN B. SPOONER, Administrative Law Judge/Chair LAURA B. RINGELHEIM, ESQ., Mayor s Office of Contract Services BRUCE FEFFER, ESQ., Prequalified Panel Member Pending before the Contract Dispute Resolution Board (CDRB or Board) is an appeal filed by petitioner, Summit Construction Services Group, Inc. (Summit), which arises out of a contract awarded to petitioner by the City of New York Department of Design and Construction (DDC) for general construction work at the Riverside Health Center. Summit seeks a determination that under the Contract it is not responsible for the installation of control wiring for motorized shades. DDC argues that Summit waived its claim and that the appeal should be dismissed as a procedural matter. For the reasons set forth below, the Board finds that petitioner s claim must be dismissed as waived.

2 2 BACKGROUND On June 26, 2009, DDC entered into the Contract with Summit in the amount of $14,927,000 for general construction work to gut and renovate the Riverside Health Center Building located at 160 West 100th Street, New York, New York. The building is a green building with a design including window shades programmed to work with lighting conditions. There were four separate prime contracts for the job. Summit was the Prime Contractor #1, responsible for the general construction work of the project. Under the Contract, Summit was responsible for providing the motorized shades in accordance with specification section 12520, sec. 1.3 (Pet. Ex. A: Notice of Dispute, Ex. 5). However, during construction, Summit took the position that it was not responsible for the interface of the control wiring system for the shades; instead, Summit contended, the electrical contractor, Ark Systems Electric Corp. ( Ark ) was responsible for the wiring. The dispute arose at a site meeting in December 2012, when DDC and its construction manager, TDX Construction Corporation (TDX), told Summit that it was responsible for installing the control wiring for the motorized shades and verbally directed Summit to immediately proceed with the work. See, Resp. Ex. 1: Letter from Giattino to Zetterland of Mar. 25, 2014 at 4. Because time was of the essence, and believing that the cost of the job would be approximately $20,000, Summit hired Ark to perform the work. On February 8, 2013, Ark submitted an invoice to Summit for $24,069.50, with only 25% of the wiring work complete. Id. In response, Summit notified Ark by that it would not accept the invoice because Summit was not responsible under the contract for the wiring of the shades and controls. See, Pet. Ex. A: Notice of Dispute, Ex. 4: from Giattino to Lodaya of Feb. 12, Summit then forwarded the to DDC and TMX. See, Pet. Ex. A: Notice of Dispute, Ex. 4: from Giattino to Jones and Azad of Feb. 12, On February 20, 2013, DDC s project manager, Ali Azad, reiterated that installation of the control wiring for the window shades was Summit s responsibility. Pet. Ex. A: Notice of Dispute, Ex. 1: letter from Azad to Giattino of Feb. 20, Mr. Azad directed Summit to proceed with the work immediately. Mr. Azad warned Summit that if it did not commence work by February 25 th, DDC would issue a change order to the electrical contractor to complete the work and that all costs associated with such completion would be deducted from Summit s contract.

3 3 DDC hired another contractor to install the wiring and Summit was backcharged $120,000. (City Response at 3). Following Summit s refusal to install the control wiring, Summit submitted four requests for partial time extensions: March 19, 2013, August 19, 2013, November 20, 2013, and January 24, 2014 (Pet. Ex. G). Time extensions were then granted on April 15, 2013, September 14, 2013, December 5, 2013 and February 3, 2014 (Pet. Ex. G: letter from Palmer to Giattino of Apr. 2, 2014 at 2 n.2). As part of the extension requests, Summit stated that it waived all claims except those expressly reserved in the requests. Summit reserved claims related to additional costs it incurred arising out of a previous delay, claims relating to proposed change orders and additional work due to changes contained in bulletins. The four extension requests did not mention a claim relating to the shade control wiring costs. Summit submitted its Notice of Dispute to DDC Commissioner David J. Burney on March 20, 2013 (Pet. Ex. A). DDC issued its final determination denying Summit s claim on August 21, 2013 (Pet. Ex. B). Summit submitted its Notice of Claim to the Comptroller on January 8, 2014 (Pet. Ex. C). By letter dated April 2, 2014, the Comptroller informed Summit that its claim appeared to be untimely, waived, or both. It gave Summit until May 2, 2014 to respond (Pet. Ex. G). Summit timely responded and denied that its claim was time-barred or waived (Pet. Ex. H). The Comptroller extended its time of investigation from June 17, 2014 to July 31, 2014 (Pet. Ex. I). The Comptroller denied Summit s claim on July 18, 2014 (City Response at 5). Summit filed its petition with the CDRB on August 15, Oral argument was held before the CDRB on November 18, Summit made a posthearing submission on December 9, 2014, and DDC made one on December 16, 2014, at which time the record closed. ANALYSIS The Board s authority to resolve contract disputes between the City of New York and a vendor is set forth in the Procurement Policy Board Rules ( PPB Rules ). The PPB Rules were incorporated into Article 27 of the Contract, and authorize the Board to resolve disputes about the scope of work delineated by the contract, the interpretation of contract documents, the amount to be paid for extra work or disputed work performed in connection with the contract, the

4 4 conformity of the vendor s work to the contract, and the acceptability and quality of the vendor s work... 9 RCNY 4-09(a)(2) (Lexis 2014). The Board reviews the decision of the agency head, and the Board s decision must be consistent with the terms of the contract. 9 RCNY 4-09(g)(4) (Lexis 2014). Summit seeks a determination from the Board that, as the general contractor, it is not responsible for the wiring and installation of the low voltage controls necessary to operate the window shades, referring to the Contract specifications and drawings (Tr. 8-9). DDC argues that the Contract supports its contention that Summit is responsible for the installation of the shade wiring, citing subsections 1.3 and the operations provisions contained within subsection 2.2. DDC argues, in any event, that Summit waived this claim because it failed to reserve the claim in its applications for partial extensions of time, as required by section (c) of the Contract. Because the CDRB agrees that, for reasons set forth below, Summit waived its claim, we decline to reach the merits of the claim. Article (c) of the Contract provides that in an application for an extension of time the contractor shall set forth in detail [a] statement that the Contractor waives all claims except for those delineated in the application, and the particulars of any claims which the Contractor does not agree to waive. New York courts have consistently enforced waiver of claims in connection with extensions of time. See Honeywell, Inc. v. J.P. Maguire Co., 1999 U.S. Dist. LEXIS 1872 at *27 (S.D.N.Y. Feb. 22, 1999) (similar waiver language held clear, valid, and enforceable: both federal and state courts in this Circuit have repeatedly found clauses conditioning extensions of time to complete performance of a construction contract on waivers of the contractor s claims to be valid and enforceable where the waiver is clear on its face ), modified in part, adhered to in relevant part, 2000 U.S. Dist. LEXIS 3699 (S.D.N.Y. Mar. 17, 2000); Mars Associates, Inc. v. City of New York, 53 N.Y.2d 627 (1981), aff g, 70 A.D.2d 839 (1st Dep t 1979); Herman H. Schwartz, Inc. v. City of New York, 100 A.D.2d 610 (2d Dep t 1984); Naclerio Contracting Co., Inc. v. Environmental Protection Admin., 86 A.D.2d 793 (1st Dep t 1982); E.M. Substructures, Inc. v. City of New York, 73 A.D.2d 608 (2d Dep t 1979); Teller Paving & Contracting Corp. v. City of New York, 73 A.D.2d 589 (1st Dep t 1979); see also Commodore Maintenance Corp. v. Dep t of Transportation, OATH Index No. 1118/14, mem. dec. at 7-9 (Apr. 3, 2014); Ferreira

5 5 Construction Co., Inc. v. Dep t of Transportation, OATH Index No. 1619/12, mem. dec. at (Nov. 16, 2012). In this case, Summit was told by DDC that it was responsible for the installation of the control wiring system for the window shades, first at a site meeting in December 2012 and later in writing by DDC s project manager on February 20, Therefore, Summit was aware of the dispute when it made its first extension request on March 19, In the March extension request and in the three subsequent extension requests, Summit agreed to waive and release all claims which it might have against the City of New York arising out of the contract, except three regarding delay, previously submitted PCO s, and additional work due to changes contained in bulletins to date. Assuming that the control wiring issue was a claim, Summit s failure to identify it as an exception means that it was waived. Summit argues that it did not have to reserve the window shade control wiring issue because this was a dispute and not a claim under Article Summit contends that claims relate solely to monetary disputes that will have a financial impact on the City. Summit argues that the present dispute is not a monetary dispute but a contract interpretation dispute. Therefore, Summit contends, it was not required to reserve this issue and has not waived it by its applications for extensions of time (Pet. Brief at 1). The argument made here by Summit is the same as the one made by the contractor in Pavarini McGovern, LLC v. Dep t of Parks & Recreation, OATH Index No. 1565/14, mem. dec. (June 4, 2014). There, the general contractor sought a determination that it was not responsible for the installation and wiring of the automatic temperature controls in an HVAC system. The City moved to dismiss, arguing that the contractor waived its claim when it failed to expressly reserve it in its time extension request. The contractor, like Summit, argued that the waiver provision in Article [c] does not apply because it was seeking a contract interpretation, which it characterized as a dispute and not a claim. The CDRB disagreed, finding that [f]or the purposes of section [c] of the Contract, Pavarini s assertion that a claim is different from a dispute draws a distinction without a difference.... Moreover, in its own submissions to the Board Pavarini makes it clear that it in fact seeks a determination as to whether it must incur the costs of wiring and installing the HVAC controls, which is, in essence, a monetary claim. Pavarini McGovern, LLC, OATH 1565/14 at 6-7.

6 6 Summit s request for relief here is more clearly a claim than that in Pavarini. Here, after Summit refused to perform the disputed work, Summit was backcharged $120,000. There is little question that, as contended by DDC, a ruling in Summit s favor would result in an immediate demand for the $120,000. Further, Summit s contention that the City could somehow force the electrical contractor to return the money it was paid is questionable, at best. As DDC notes, a lawsuit to claw back the money from the electrical contractor on the feeble claim that it violated its contract by not doing the wiring work for free would be highly unlikely to erase its $120,000 loss. Accordingly, the Board finds that Summit waived its claim regarding its contractual responsibility for wiring installation. It is therefore unnecessary for the Board to consider the merits of Summit s appeal. CONCLUSION For the foregoing reasons, petitioner s claim is denied. This constitutes the final decision of the Board. All panel members concur. January 26, 2015 John B. Spooner Administrative Law Judge/Chair APPEARANCES: GIANNASCA & SHOOK, PLLC Attorneys for Petitioner BY: NATHAN SHOOK, ESQ. ZACHARY W. CARTER, ESQ. NEW YORK CITY CORPORATION COUNSEL Attorney for Respondent BY: TARA MINER, ESQ.

7 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: Part X SUMMIT CONSTRUCJTON SERVICES GROUP, INC., -against- Petitioner, Index No /2015 DECISION/ORDER THE CITY OF NEW YORK, THE CONTRACT DISPUTE RESOLUTION BOARD and THE NEW YORK CITY DEPARTMENT OF DESIGN AND CONSTRUCTION, Respondents ~ X HON. CYNTHIA KERN, J.S.C. Petitioner Summit Construction Services Group, Inc. ("Summit") brings the instant petition pursuant to Article 78 challenging respondent The Contract Dispute Resolution Board's ("CDRB") determination made on or about August 21, 2013, denying a claim made by petitioner regarding work on a construction project. For the reasons set forth below, the petition is denied. The relevant facts are as follows. On June 26, 2009, petitioner entered into a contract with respondent The New York City Department of Design and Construction ("DDC") (the "Contract") for the general construction of a public improvement project known as the Riverside Health Center located at 160 West 100th Street, New York, NY (the "Project"). In addition to Summit, there were three other "prime contractors" who entered into contract with the DDC for the construction of the Project. One of these other "prime contractors" was Ark Systems Electric Corp. ("Ark") who entered into a contract with DDC to serve as the electrical contractor for the Project. On or about March 20, 2013, petitioner filed a Notice of Dispute with the DDC seeking a determination that under the Contract it is not responsible for the installation of the control wiring for motorized shades. By letter dated February 20, 2013, DDC informed Summit that it

8 had determined, after reviewing all contract documents, that control wiring for window shades was part of Summit's contract obligations and directed Summit to proceed with the work immediately. Following this determination, Summit filed a Notice of Claim with the Office of the Comptroller (the "OC") seeking to overturn DDC's determination. The OC denied Summit's claim on the ground that the dispute was waived as Summit failed to reserve its claim when filing its requests for extensions of time. Thereafter, Summit appealed the OC determination to the CDRB. By decision dated January 26, 2015, the CDRB denied Summit's appeal and dismissed its claim as waived. Specifically, the CDRB based its decision on the following facts. Following Summit's refusal to install the control wiring, Summit submitted four requests for partial time extensions. As part of the extension requests, Summit stated that it waived all claims except those expressly reserved in the requests. Although Summit reserved claims related to additional costs it incurred arising out of a previous delay, claims relating to proposed change orders and additional work due to changes, the extension requests did not mention a claim relating to the shade control wiring costs. Summit has now brought the instant Article 78 petition to vacate the CDRB determination on the ground that it was affected by an error of law, was arbitrary and capricious and an abuse of discretion. On review of an Article 78 petition, "[t]he law is well settled that the courts may not overturn the decision of an administrative agency which has a rational basis and was not arbitrary and capricious." Goldstein v. Lewis, 90 A.D.2d 748, 749 (1st Dept 1982). "In applying the 'arbitrary and capricious' standard, a court inquires whether the determination under review had a rational basis." Halperin v. City of New Rochelle, 24 A.D.3d 768, 770 (2d Dept 2005); see Pell v. Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale &

9 Mamaroneck, Westchester County, 34 N.Y.2d, 222, 231 (1974) ("[r]ationality is what is reviewed under both the substantial evidence rule and the arbitrary and capricious standard.") "The arbitrary or capricious test chiefly 'relates to whether a particular action should have been taken or is justified... and whether the administrative action is without foundation in fact.' Arbitrary action is without sound basis in reason and is generally taken without regard to facts." Pell, 34 N.Y.2d at 231 (internal citations omitted). Here, the petition is denied as the court finds that CDRB's determination was rational. Pursuant to Article 13 of the Contract, in any application for an extension of time Summit was required to either expressly reserve or waive any claims it had under the Contract. The evidence before the CDRB established that Summit had applied for four extensions, yet these extension requests did not mention a claim relating to the window shade control wiring costs. Thus, it was rational for the CDRB to determine that Summit's claim relating to the window shade control wiring costs had been waived. To the extent Summit contends that the CDRB determination was arbitrary and capricious as it did not have to reserve the window shade control wiring issue because that was a "dispute" and not a "claim," such contention is without merit. This exact argument was raised in the underlying proceedings and was rejected by the CDRB. Relying on a prior related decision, CDRB rationally found that the argument that a "claim" is different than a "dispute" is a distinction without a difference. Although Summit may disagree with this finding, its disagreement does not render the finding arbitrary and capricious. Accordingly, the petition is denied. This constitutes the decision and order of the court. Dated: Aug. 20, 2015 Cynthia S. Kern J.S.C.