G4S Tech. LLC v. Mass. Tech. Park Corp.

• Decision Date: 13 June 2018
• Docket Number: SJC–12397
• Parties: G4S TECHNOLOGY LLC v. MASSACHUSETTS TECHNOLOGY PARK CORPORATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

479 Mass. 721

99 N.E.3d 728

G4S TECHNOLOGY LLC

v.MASSACHUSETTS TECHNOLOGY PARK CORPORATION.

SJC–12397

Supreme Judicial Court of Massachusetts, Suffolk..

Argued March 5, 2018

Decided June 13, 2018

Christopher Weld, Jr., Boston (Megan C. Deluhery & Joel Lewin, Boston, also present) for the plaintiff.

Robert J. Kaler, Boston (Edwin L. Hall, Boston, also present) for the defendant.

Carol Chandler, Boston, Brendan Carter, David E. Wilson, Woburn, Shannon A. Reilly, Buzzards Bay, & Mark Keough Molloy, for Associated Builders and Contractors, Massachusetts Chapter, & others, amici curiae, submitted a brief.

Maura Healey, Attorney General, & James A. Sweeney & Cassandra H. Arriaza, Assistant Attorneys General, for the Attorney General, amicus curiae, submitted a brief.

Present: Gants, C.J., Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.

KAFKER, J.

At issue is a construction contract dispute between G4S Technology LLC (G4S) and Massachusetts Technology Park Corporation (MTPC) arising out of a State- and federally funded project to design and build a fiber optic network in western and north central Massachusetts. On summary judgment, a judge in the Superior Court concluded that G4S was barred from seeking recovery on the contract or under quantum meruit because it intentionally filed false certifications of timely payments to subcontractors. The judge also concluded that MTPC could not maintain a fraud action against G4S, in which it sought damages in addition to the $4 million payment MTPC already had withheld from G4S, because any recovery would be duplicative.

On appeal, G4S argues that MTPC was not damaged by the false certifications, and that the Commonwealth should replace the common-law rule that "in relation to building contracts, ... a contractor cannot recover on the contract itself without showing complete and strict performance of all its terms," Andre v. Maguire, 305 Mass. 515, 516, 26 N.E.2d 347 (1940), with a materiality rule as provided in the Restatement (Second) of Contracts §§ 237, 241 (1981). Alternatively, G4S contends that, even if recovery on the contract is disallowed, it should be able to pursue an equitable recovery under the doctrine of quantum meruit. G4S argues that MTPC, and not G4S, was responsible for the delays in construction and the $10 million in increased costs G4S assumed. MTPC cross-appealed from the dismissal of its claim of fraud against G4S.

We conclude that complete and strict performance is still required for all construction contract terms relating to the design and construction itself. We also conclude, however, that ordinary contract principles, including the traditional Massachusetts materiality rule, apply for breaches of other provisions, such as the one at issue governing payment certifications. We hold that G4S's numerous false certifications and intentional subcontractor payment delays constitute a material breach of the contract and, standing alone, preclude recovery for breach of contract.

Summary judgment was not, however, properly granted on G4S's quantum meruit theory of recovery. A party seeking to recover under quantum meruit must prove both substantial performance and good faith. Substantial performance is not at issue here, as the project was completed as specified, albeit delayed. The issue is whether a party that has intentionally committed a breach of a provision in the contract can still have acted in good faith for quantum meruit purposes and whether there has been a windfall for the other party. Overruling an older line of cases, we now hold that good faith applies to the contract as a whole, and that the intentional commission of breaches of individual contract provisions must be considered in the over-all context, including the value of the uncompensated work, the damage caused by the breach, the total performance of both parties, and the balancing of equities to accomplish a just result. Here, there are material disputed facts regarding which party caused the delays, whether G4S performed $10 million of uncompensated work, and whether there is any causal connection between the intentional misrepresentations regarding payments to subcontractors and the damages assessed against G4S. We thus reverse the award of summary judgment on the quantum meruit claim for further fact finding.

We further conclude that the dismissal of MTPC's fraud claim against G4S was error. The undisputed facts establish fraudulent certifications. The motion judge dismissed the count as duplicative, concluding that the fraudulent certifications provided the basis for damages under all the different claims presented and recovery under the fraud claim would be far less than the amount MTPC was allowed to retain for breach of contract. Where separate recoveries are based on the same act and injury, duplicative recovery is precluded. Here, however, further fact finding is required to discern whether there could be factually separable and distinguishable acts resulting in separable quantifiable injuries. We therefore reverse the allowance of summary judgment on the fraud claim.¹

1. Background. MTPC is a State development agency created and organized under G. L. c. 40J. In 2010, MTPC received funding from both the Commonwealth and the Federal government to build a 1,200–mile fiber optic network connecting 123 communities in western and north central Massachusetts to high-speed Internet (project). An approximately $89.7 million construction project, it connects "[o]ver 1,100+ public safety entities, schools, libraries, medical facilities, and town halls[,] ... serve[s] as a backbone for over 400,000 households and businesses over a geographic area covering over one-third of Massachusetts, with more than one million residents[,] ... [and] [p]rovides necessary broadband infrastructure to foster economic growth, improve health care and education, and strengthen public safety." Of the $89.7 million project, $45.4 million was funded by the American Recovery and Reinvestment Act of 2009, 111th Cong., Pub. L. No. 111–5, 123 Stat. 115 (2009) (Recovery Act). In the wake of the "Great Recession," the funds were to be used "in a manner that maximize[d] job creation and economic benefit" and was intended to "provide a one-time injection of funds for the purpose of stimulating the American economy."

Time was of the essence with respect to the dates for substantial completion and final completion of the project.² According to the initial procurement documents, the Recovery Act award placed "significant time constraints on the construction of the Project." The design-builder thus was contractually obligated to meet mandatory milestones: complete fifty-five per cent of the value of the work by June 30, 2012; achieve substantial completion by April 15, 2013; and achieve final completion by June 30, 2013.

MTPC put the project out to public bid, and a design-build contract with G4S was executed on June 30, 2011. After adjustments, the total contract value was $45.5 million. G4S agreed to the mandatory milestones and acknowledged that if "any Date for a Mandatory Milestone, after adjustment for any extensions of time ... is not attained as a result of any failure of [G4S] to perform, then [G4S] shall pay [MTPC], as part of compensatory delay damages ... for each Day ... that achievement of the Mandatory Milestone" is not met as damages are "difficult to determine and specify accurately."³

Damages for failure to attain substantial completion by April 15, 2013, was $7,500 per day and escalated to $9,500 per day after June 30, 2013. Failure to attain final completion by June 30, 2013, was $3,000 per day; daily rates additive for any periods of overlap. The contract, however, also contemplated a remedy should there be excused delays to the project. Articles 8.2.1 and 8.2.2 provided that, "[i]f [G4S] is delayed in the performance of the Work due to acts, omissions, conditions, events, or circumstances beyond its control and due to no fault of its own, ... the Contract Time(s) for performance shall be reasonably extended by Change Order ... [and G4S] shall also be entitled to an appropriate adjustment of the Contract Price."

MTPC's contract with G4S set forth additional provisions, at issue here. They included (1) procedures for obtaining a change order to adjust the contract price and time in the event of delay to the work; (2) MTPC's right to stop and suspend the work and terminate G4S for cause should G4S, among other reasons, fail to "timely pay, without cause ... subcontractors"; (3) MTPC's obligation to facilitate timely and efficient performance of the work, submit conduit and pole attachment applications for licenses and leases, and perform any "Make–Ready work" necessary to permit G4S to perform its construction and installation work; and (4) G4S's right to, within ten working days of awareness of excused work delay, request an equitable adjustment to the contract price or an equitable extension of time for the reasonable costs of excused delays or differing site conditions.

Following the June 30, 2011, execution of the design-build contract and the subsequent notice to proceed, G4S commenced the work. On September 21, 2012, MTPC notified G4S of nonconforming work and requested corrective action.⁴ On December 10, 2012, MTPC notified G4S a second time of nonconforming work and gave notice that G4S had failed to cure the prior nonconforming work.⁵ At various times, change orders were executed throughout the performance of the work. The dates to achieve substantial and final completion of the project were adjusted to July 31, 2013, and October 31, 2013, respectively. The parties reserved their respective rights, stating that "[n]othing in ... Change Order[s] shall be taken as a waiver of any rights or defense of [MTPC] and [G4S] with respect to any other request for change, equitable adjustment or other claim."

On March 7, 2014, over seven months past the contractual substantial completion date, substantial completion of...