Dart Mech. Corp. v. Johnson Controls, Inc.

• Decision Date: 15 December 2015
• Docket Number: 13-CV-2941(JS)(AYS)
• Parties: DART MECHANICAL CORPORATION, Plaintiff, v. JOHNSON CONTROLS, INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

DART MECHANICAL CORPORATION, Plaintiff, v. JOHNSON CONTROLS, INC., Defendant.

13-CV-2941(JS)(AYS)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

December 15, 2015

MEMORANDUM & ORDER

APPEARANCES

For Plaintiff:

Marvin Schechter, Esq.

Michael D. Ganz, Esq.

Turnstead & Schecter

500 North Broadway, Suite 101

Jericho, NY 11753

For Defendant:

James Barriere, Esq.

Nathan Sabourin, Esq.

Hinckley Allen & Snyder LLP

30 South Pearl Street

Albany, NY 12207

SEYBERT, District Judge:

This case arises out of a subcontract between Plaintiff Dart Mechanical Corporation ("Dart") and Defendant Johnson Controls, Inc. ("Johnson"), in which Johnson agreed to furnish and install an automatic temperature control system ("ATCS") as part of a larger construction project (the "Subcontract").¹ Dart commenced this action arguing that Johnson failed to complete theATCS work. The parties have both moved for summary judgment. (Docket Entries 25, 26.) As discussed below, Johnson's motion for summary judgment is DENIED, and Dart's motion for partial summary judgment is GRANTED IN PART and DENIED IN PART.

BACKGROUND²

I. Factual Background³

A. The Project

On April 23, 2003, Dart contracted with the City of New York (the "City"), acting by and through the City's Department of Sanitation ("DSNY" or the "Owner"), to install a bus garage in New York City (the "Prime Contract" or the "Project"). (Def.'s 56.1Stmt., Docket Entry 26-2, ¶ 4.) Nearly two years later, Dart and York International Corporation ("York") entered into the Subcontract, in which York would install an ATCS in exchange for $1,425,000. (Def.'s 56.1 Stmt. ¶ 5.) After York began work, Johnson acquired York, assuming the ATCS work under the Subcontract. (Def.'s 56.1 Stmt. ¶¶ 6-7.) The ATCS work included, among other items, the installation of thermostats, air handling units ("AHU"), heat and ventilation ("H&V") units, and smoke control systems. (See Settlement Agreement.) According to Dart, Johnson was also required to install a carbon monoxide, nitrous oxide gas monitoring ("CO/NO2") system. (See, e.g., Compl., Docket Entry 1-1. ¶ 12.)

To date, the Project has not been finished. (Def.'s 56.1 Stmt. ¶ 8.) Dart alleges that DSNY is completing the ATCS work and backcharging Dart for all costs. (Pl.'s 56.1 Stmt.,⁴ ¶¶ 6, 9.) Dart further alleges that the City owes Dart an additional $4,005,622.44 for approved extra and additional work. (See Karol Aff. in Opp. Ex. 5,⁵ ¶ 35, at 24.)

On October 16, 2012, Dart, along with other prime contractors, filed suit against the City seeking unpaidcompensation for the Project. (See Karol Aff. in Opp. Ex. 5.) The City answered and counterclaimed against Dart and the other prime contractors. (See Karol Aff. in Opp. Ex. 6.⁶) The City argues, among other things, that Dart "delay[ed] completion of its work and the work of other contractors on the Project." (Karol Aff. in Opp. Ex. 6, ¶ 174.) As a result, the City is seeking both liquidated and compensatory damages in an unspecified amount. (Karol Aff. in Opp. Ex. 6, ¶ 177.) The City notes that the Prime Contract provides an assessment of liquidated damages. (Karol Aff. in Opp. Ex. 6, ¶ 175.)

B. The Subcontract

The Subcontract contains two articles relevant to this Order. Article 17 of the Subcontract sets out the procedure to make a claim for extra or additional work. As discussed below, the parties agreed that Dart must approve any claims for extra or additional work in a written change order:

17.1 The SUBCONTRACTOR shall make no claim for extra or additional work unless performed pursuant to a written change order executed by an officer of DART and by SUBCONTRACTOR.

17.2 To avoid disputes about whether or not changes were directed to be made, it is agreed that all such directions, to be valid, must be supported by a written work order form with a specific number, signed by an officer of DART prior to SUBCONTRACTOR'S performance of such extra work. It is specifically understoodthat the fact that a written work directive has been issued does not, in and of itself, establish that the work covered thereby is in fact a change to the Subcontract but that, nevertheless, the existence of such a directive is a strict condition precedent to the subsequent issuance of a formal change order in an otherwise proper case. A Change Order to the Subcontract must be in writing and signed only by an officer of DART. All changes in the WORK that may be made by the SUBCONTRACTOR without such written direction from DART shall have been made solely at the SUBCONTRACTOR'S risk, and where such changes involve additional cost, the SUBCONTRACTOR hereby waives all claims for additional compensation therefore.

(Subcontract at 7) (emphasis added).

Article 18 details the Subcontract's notice of claim requirements. As set forth below, Johnson was required to issue a notice of claim to Dart within seven days after the claim arises:

18.3 If the SUBCONTRACTOR claims any WORK or disputed work required by DART involves extra or additional work not required by this subcontract, the SUBCONTRACTOR within seven (7) days of receipt of a written order from DART directing the performance of such WORK or disputed work shall make a claim in writing to DART stating that the WORK is being performed under protest, the basis of the claim and a detailed breakdown of the cost of labor, material, equipment and other changes. The SUBCONTRACTOR'S failure to submit written notice of claim and protest for extra or disputed work within the time and manner specified shall constitute a waiver of same and no recovery can be had by the SUBCONTRACTOR for any cost or damages for such extra or disputed work.

(Subcontract 8) (emphasis added).

II. Procedural History

Dart commenced this action against Johnson in Nassau County Supreme Court on April 23, 2013.⁷ According to the Complaint, Dart is seeking $14.7 million in damages based on four claims: (1) breach of contract in an amount no less than $1 million (Compl. ¶¶ 6-20); (2) delays and impacts to Dart's Prime Contract in an amount no less than $2 million (Compl. ¶¶ 21-23); (3) Dart's exposure to liquidated damages in an amount no less than $2.5 million (Compl. ¶¶ 24-28); and (4) Dart's exposure to additional damages in an amount no less than $9.2 million (Compl. ¶¶ 29-31). In sum, Dart argues that Johnson failed to complete certain change order work and failed to properly supervise and coordinate its work on the Project. (See Compl. ¶¶ 6-31.) Johnson has denied Dart's allegations and asserted three counterclaims: (1) breach of contract, (2) unjust enrichment, and (3) trust fund diversion under Article 3-A of the New York Lien Law. (See Am. Answer & Countercls., Docket Entry 4.)

During discovery, Johnson requested that Dart itemize and explain its alleged $14.7 million damages claim. (See Def.'s 56.1 Stmt. ¶ 13.) In response, Dart submitted the following:

1. Dart "will be backcharged by the Owner [i.e., the City and DSNY] . . . . ;"2. Dart's damages "will be fully ascertain[able] at the end of the Project;"

3. Dart's "exposure to Liquidated Damage[s] will be fully ascertain[able] at the end of the Project;" and

4. Dart "and its other subcontractors have exposure to additional costs and damages which will be fully ascertainable at the end of the Project."

(Def.'s 56.1 Stmt. ¶ 14.) Unsatisfied, Johnson challenged the sufficiency of these responses, so Dart issued a supplemental discovery response:

"The cost to remedy and complete Johnson's work cannot be ascertained because the Owner is to correct and complete Johnson's work. Dart will supplement its response when the Owner determines this cost for which it will backcharge Dart. The cost to Dart due to Johnson's delay cannot be ascertained because the [P]roject is not closed. However, the Prime Contract provides for liquidated damages at $2,000.00 per calendar day."

(Def.'s 56.1 Stmt. ¶¶ 16-18 (emphasis in original).) Discovery has now ended.

Pending before the Court are the parties' cross-motions for summary judgment. (Docket Entries 25, 26.) Dart moves for partial summary judgment on four grounds: (1) breach of contract for extra work, (2) unjust enrichment, (3) trust fund diversion, and (4) a claim for backcharges. (See Pl.'s Br., Docket Entry 25-2, at 2, 7, 10, 11.)

Johnson moves for summary judgment arguing that Dart has failed to prove that it suffered any damages, much less $14.7 million. (Def.'s Br., Docket Entry 26-1, at 10.) Essentially,Johnson is seeking to dismiss the Complaint or, alternatively, to limit Dart's award to nominal damages. In addition to its summary judgment motion, Johnson previously suggested that it would seek sanctions under Federal Rule of Civil Procedure 11. See FED. R. CIV. P. 11. In its reply papers, however, Johnson states that it withdraws any requests for sanctions.⁸ (Def.'s Reply Br., Docket Entry 32, at 7.)

DISCUSSION

The Court will first address the applicable legal standard on a motion for summary judgment before turning to the parties' arguments.

I. Legal Standard

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,247-48, 106 S. Ct. 2505, 2509-10, 91 L. Ed. 2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). "In assessing the record to determine whether there is a genuine issue to be tried as to any material fact, the court is required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." McLee v. Chrysler Corp., 109 F.3d 130, 134 (2d Cir. 1997).

"The burden of showing the absence of any genuine dispute as to a material fact rests on the party seeking summary judgment." Id.; see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 1608, 26 L. Ed. 2d 142 (1970). A genuine factual issue exists if "the...