Westinghouse Elec. Corp. v. New York City Transit Authority

Citation14 F.3d 818
Decision Date01 February 1994
Docket NumberD,No. 1248,1248
PartiesWESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Appellant, v. NEW YORK CITY TRANSIT AUTHORITY, Metropolitan Transportation Authority, Defendants-Appellees. ocket 92-7503. United States Court of Appeals, Second Circuit
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Peter M. D'Ambrosio, Smith, Pachter, McWhorter & D'Ambrosio, Vienna, Virginia (John V. Snyder, Smith, Pachter, McWhorter & D'Ambrosio, Vienna, Virginia, John A. Redmon, Ellen Wahl Parker, Davis, Markel & Edwards, P.C., New York, New York, on the brief), for plaintiff-appellant.

Ira J. Lipton, New York City Transit Authority, Brooklyn, New York (Albert C. Cosenza, New York City Transit Authority, Brooklyn, New York, on the brief), for defendants-appellees.

Before: LUMBARD and ALTIMARI, Circuit Judges, and JAMES B. LOKEN, Circuit Judge of the United States Court of Appeals for the Eighth Circuit, sitting by designation.

ALTIMARI, Circuit Judge:

This case concerns a contract dispute between plaintiff-appellant Westinghouse Electric Corporation ("Westinghouse"), and defendants-appellees the New York City Transit Authority ("NYCTA") and the Metropolitan Transportation Authority ("MTA") (collectively herein "NYCTA" or the "Authority"). Following a series of conflicts between the parties concerning their contractual obligations, Westinghouse submitted a claim pursuant to the contract's alternative dispute resolution ("ADR") provision for damages and additional compensation. The ADR provision provided for dispute resolution by the NYCTA's Superintendent, W.D. Westfall (the "Superintendent"). The Superintendent denied Westinghouse's claim.

Westinghouse subsequently brought suit challenging the validity of the Superintendent's decision and the contract's ADR provision. The United States District Court for the Southern District of New York (Haight, J.) upheld both the provision and the Superintendent's determination. See Westinghouse Elec. Corp. v. New York City Transit Auth., 794 F.Supp. 79, 83-85 (S.D.N.Y.1991). Westinghouse then appealed the decision to this Court. For reasons discussed below, we certified the question of the ADR provision's validity to the New York Court of Appeals, see Westinghouse Elec. Corp. v. New York City Transit Auth., 990 F.2d 76, 80 (2d Cir.1993) (the "Certification"), which subsequently upheld the provision's validity. See Westinghouse Elec. Corp. v. New York City Transit Auth., 82 N.Y.2d 47, 603 N.Y.S.2d 404, 623 N.E.2d 531 (1993). The case now returns for our final determination. For the reasons discussed below, we affirm the district court's judgment.

BACKGROUND

Although a brief factual background of the case was presented in our Certification to the New York Court of Appeals, see 990 F.2d at In 1983, NYCTA and Westinghouse entered into a contract for the sale, delivery, and installation of power rectifier equipment to five substations for the New York City subway system. Over the course of Westinghouse's performance under the contract, disputes arose as to whether NYCTA failed to give Westinghouse timely access to the various substations, whether NYCTA improperly deleted certain contract work, and whether Westinghouse was being restrained from performing under the contract.

77-79, the following more detailed description of the parties' interactions is necessary for our review of the Superintendent's determination.

On November 3, 1988, at a meeting held to resolve various disputes, Westinghouse notified the Superintendent that Westinghouse's performance was effectively suspended due to numerous longstanding issues relating to design, access, and other matters. Westinghouse further explained that the effective suspension of its work constituted a constructive "work stop order" pursuant to the contract, and that Westinghouse would consider the contract terminated "for convenience" if the work restraints were not removed within 90 days. Westinghouse cited Article 2.07 of the contract, which provides as follows:

Stop Work Order. (a) The Authority may, at any time, by written order to the Contractor, require the Contractor to stop all, or any part, of the Work for a period of ninety (90) days (or any lesser period) after the order is delivered to the Contractor, and for any further period to which the parties may agree. Any such order shall be specifically identified as a "Stop Work Order" issued pursuant to this Article. Within the period of ninety (90) days (or the lesser period specified) after a stop work order is delivered to Contractor, or within any extension of that period to which the parties shall have agreed, the Authority shall either:

(i) cancel the stop work order, or

(ii) terminate the work covered by such order as provided in Article 2.08--Termination for convenience by the Authority.

Also on November 3, 1988, Westinghouse submitted a letter reiterating the above points.

The Superintendent responded to Westinghouse in a letter dated November 14, 1988, explaining that there was no such thing as a "constructive work stop order," and that the contract did not ordinarily provide for damages for delay. The Superintendent further explained that the contract provided for a dispute procedure for evaluating claims for compensable damages, and that he would recommend Westinghouse be declared in default of the contract if it abandoned the work.

Subsequently, on February 3, 1989, Westinghouse suspended performance under the contract. In its notification to NYCTA, Westinghouse claimed that NYCTA's failure to remove certain impediments either physically prevented performance of the contract work, or so altered the work as to change the nature of the contractual obligations. The Superintendent responded by directing Westinghouse to discontinue all work pursuant to the contract. He explained that Westinghouse's suspension of performance constituted a breach of contract, and that he would recommend it be held in default of the contract.

NYCTA then notified Westinghouse that NYCTA was in the process of determining whether to declare Westinghouse in default of the contract, and directed Westinghouse to show cause as to why it should not be so found. In response, Westinghouse sought a meeting to discuss the issue of the default. NYCTA rejected the meeting proposal, and instead invited Westinghouse to submit a written statement. Westinghouse did not submit a statement, and informed NYCTA that it would be submitting a comprehensive claim on the contract.

On June 13, 1989, based on Westinghouse's abandonment of work, NYCTA declared Westinghouse in default under the contract pursuant to Article 7.01 of the contract. On June 21, 1989, Westinghouse submitted a "Request for Additional Compensation and Time Extension." Westinghouse sought payment for the cost of additional labor, materials and equipment, compensation for field office overhead and additional general and Disputes. (a) In the event the Contractor and Authority are unable to resolve their differences concerning a determination by the Superintendent, the Contractor may initiate a dispute in accordance with the procedure set forth in this Article. Exhaustion of these procedures shall be a precondition to any lawsuit permitted hereunder.

administrative expenses, and damages caused by NYCTA's deletion of contract work items. Westinghouse also requested that the default be rescinded, and asked for a Superintendent's decision pursuant to Article 8.03 of the contract. Article 8.03 of the contract, in relevant part, provides as follows:

(b) The parties to this contract authorize the Superintendent, acting personally, to decide all questions of any nature whatsoever arising out of, under, or in connection with, or in any way related to or on account of, this Contract (including claims in the nature of breach of contract or fraud or misrepresentation before or subsequent to acceptance of the Bidder's Proposal[ ) ] and his decision shall be conclusive, final and binding on the parties.

On July 26, 1989, the Superintendent notified Westinghouse of his rejection of its claim. Specifically, he found "that as a result of the willful abandonment of and failure to complete the contract by Westinghouse, the contractor has forfeited any claim for any compensation by the Authority, and that the Authority is entitled to recover from Westinghouse all expenses and damages as stated in Chapter 7 of the contract."

Westinghouse subsequently filed an action for breach of contract and recision on August 2, 1989. Westinghouse contended that Article 8.03 contravened New York State public policy and was therefore void and unenforceable, and alternatively that the Superintendent's decision was erroneous. NYCTA claimed that the ADR provision was enforceable and that the Superintendent's decision was justified because of Westinghouse's unilateral suspension of performance and failure to seek timely recourse under Article 8.03.

The district court granted summary judgment in favor of NYCTA. See Westinghouse Elec. Corp. v. New York City Transit Auth., 794 F.Supp. 79, 85 (S.D.N.Y.1991). The court first held that the provision was valid and enforceable. See id. at 82-83. The court then found that given Westinghouse's abandonment of work under the contract and its failure to invoke Article 8.03, the Superintendent's rejection of Westinghouse's claim was not arbitrary and capricious. See id. at 85. This appeal followed.

DISCUSSION

The first issue on this appeal concerns the validity of the contract's ADR provision. Given the conflicting case law on the force of contract provisions appointing one of the parties to a contract as arbiter of all disputes arising out of that contract, we certified the question of the ADR provision's validity to the New York Court of Appeals. See Westinghouse Elec. Corp. v. New York City Transit Auth., 990 F.2d 76, 80 (2d Cir.1993). In a well-reasoned opinion, the New York Court of Appeals found that the provision, which expressly...

To continue reading

Request your trial
13 cases
  • Stagl v. Delta Airlines, Inc.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 17 Abril 1995
    ...that touch upon all three elements, and we shall address each one in turn. judgment de novo. See Westinghouse Elec. Corp. v. New York City Transit Auth., 14 F.3d 818, 821 (2d Cir.1994). A. Delta's Duty of Reasonable The district court ruled that "Delta owed no duty to protect [Mrs. Stagl] f......
  • Kyocera Corp. v. Prudential-Bache
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 29 Agosto 2003
    ...but in its decision it did not directly address the propriety under federal law of doing so. See Westinghouse Elec. Corp. v. N.Y. City Transit Auth., 14 F.3d 818, 821-23 (2d Cir.1994). In addition, the Supreme Court has, in dicta and in the ERISA context, suggested that parties might be abl......
  • Giano v. Senkowski
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 16 Mayo 1995
    ...996 F.2d 568, 572 (2d Cir.1993). We review the district court's grant of summary judgment de novo. Westinghouse Elec. Corp. v. New York City Transit Auth., 14 F.3d 818, 821 (2d Cir.1994). I. Giano's First Amendment Giano argues that the prison's policy violates the First Amendment. We disag......
  • Hottle v. Seidman, 268 Conn. 694 (CT 5/4/2004)
    • United States
    • Connecticut Supreme Court
    • 4 Mayo 2004
    ...of the clause. Westinghouse Electric Corp. v. New York City Transit Authority, 794 F. Sup. 79, 83 (S.D.N.Y. 1991), aff'd, 14 F.3d 818 (2d Cir. 1994). The contractor then appealed to the United States Court of Appeals for the Second Circuit and, relying on In the Matter of Cross & Brown Co.,......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT