Five Star Elec. Corp. v. A.J. Pegno Constr. Co.

• Docket Number: 15501-, 15502,Index No. 400897/11,Case Nos. 2021–02404, 2021–02405, 2021–02740
• Decision Date: 11 October 2022
• Citation: Five Star Elec. Corp. v. A.J. Pegno Constr. Co., 209 A.D.3d 464, 175 N.Y.S.3d 63 (N.Y. App. Div. 2022)
• Parties: FIVE STAR ELECTRIC CORP., Plaintiff–Respondent, v. A.J. PEGNO CONSTRUCTION CO., INC./TULLY CONSTRUCTION CO., INC., etc., et al., Defendants–Appellants.
• Court: New York Supreme Court — Appellate Division

209 A.D.3d 464

175 N.Y.S.3d 63

FIVE STAR ELECTRIC CORP., Plaintiff–Respondent,

v.A.J. PEGNO CONSTRUCTION CO., INC./TULLY CONSTRUCTION CO., INC., etc., et al., Defendants–Appellants.

15501-, 15502

Index No. 400897/11

Case Nos. 2021–02404, 2021–02405, 2021–02740

Supreme Court, Appellate Division, First Department, New York.

Entered October 11, 2022

Hogan Lovells US LLP, New York (Matthew J. Higgins and Jessica L. Ellsworth of the bar of the District of Columbia, admitted pro hac vice, of counsel), for appellants.

Duane Morris LLP, New York (Mark A. Canizio of counsel), for respondent.

Webber, J.P., Moulton, Kennedy, Mendez, Pitt, JJ.

Judgment, Supreme Court, New York County (Andrew Borrok, J.), entered July 16, 2021, in plaintiff's favor, and appeal therefrom bringing up for review an order, same court and Justice, entered June 15, 2021, as amended by an order, same court and Justice, entered June 17, 2021, which, after a nonjury trial, awarded plaintiff the amount of $40,336,302.93, unanimously modified, on the law, to vacate the award of $9.8 million in additional labor cost damages, to dismiss the claim for those damages, and to vacate the damages pertaining to additional and extended general conditions, labor escalation, equipment and material damages escalation, and extended home office overhead and to remand the claims for a new assessment on those damages, and otherwise affirmed, without costs. Appeals from amended order unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

The trial court should not have awarded damages for additional labor costs due to defendants' delays in the construction project. In general, it is impermissible to calculate delay damages for additional labor costs based on a comparison of the contractor's precontract estimate of what its labor cost would be and what it claimed its labor cost actually turned out to be (see Manshul Constr. Corp. v. Dormitory Auth. of State of N.Y., 79 A.D.2d 383, 388, 436 N.Y.S.2d 724 [1st Dept. 1981] ; Peter Scalamandre & Sons v. Village Dock, Inc., 187 A.D.2d 496, 589 N.Y.S.2d 191 [2d Dept. 1992], lv denied 81 N.Y.2d 710, 600 N.Y.S.2d 197, 616 N.E.2d 854 [1993] ). Nevertheless, in calculating the additional labor costs that plaintiff incurred from defendants' delays, plaintiff's expert improperly used plaintiff's pre-bid estimate of the project's expected labor costs, and Supreme Court erred in basing the award on this improper method of calculation.

Moreover, there is no support for plaintiff's claim that the lump sum contract payment included a contract price for labor that incorporated an assessment of the reasonableness of plaintiff's internal labor cost estimates. The contract was not a "time...