Iacobelli Const., Inc. v. County of Monroe

• Citation: 32 F.3d 19
• Decision Date: 21 July 1994
• Docket Number: D,No. 1460,1460
• Court: U.S. Court of Appeals — Second Circuit
• Parties: 40 Fed. R. Evid. Serv. 1193 IACOBELLI CONSTRUCTION, INC., Plaintiff-Appellant, v. COUNTY OF MONROE, Rochester Pure Waters District, and Calocerinos & Spina Consulting Engineers, P.C., Defendants-Appellees. ocket 93-9193.

Page 19

32 F.3d 19

40 Fed. R. Evid. Serv. 1193

IACOBELLI CONSTRUCTION, INC., Plaintiff-Appellant, v. COUNTY OF MONROE, Rochester Pure Waters District, and Calocerinos & Spina Consulting Engineers, P.C. Defendants-Appellees.

No. 1460, Docket 93-9193.

United States Court of Appeals Second Circuit.

Argued April 15, 1994.

Decided July 21, 1994.

Abba I. Friedman, Birmingham, MI (Eric J. Flessland, Butzel Long, of counsel), for plaintiff-appellant.

Mark J. Moretti, Rochester, NY (Kenneth W. Gordon, Phillips, Lytle, Hitchcock, Blaine & Huber, of counsel), for defendants-appellees County of Monroe and Rochester Pure Waters Dist.

Paul J. Yesawich, III, Rochester, NY (Daniel J. Moore, Harris Beach & Wilcox, of counsel), for defendant-appellee Calocerinos & Spina Consulting Engineers.

Before: FEINBERG, PRATT, and MINER, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

This appeal arises out of a contract to construct a sewage tunnel in Rochester, New York. When the plaintiff, Iacobelli Construction, Inc., encountered more subsurface water inflows during construction of the tunnel than it had anticipated, it requested additional compensation under the contract's differing site conditions clause. The County of Monroe denied Iacobelli's request, which led Iacobelli to institute this suit in the United States District Court for the Western District of New York, Michael A. Telesca, Chief Judge. The district court held that Iacobelli failed to establish a viable claim for differing site conditions and granted summary judgment for the county.

FACTS AND BACKGROUND

The Rochester Pure Waters District ("RPWD"), an agent for the County of Monroe in New York, was responsible for the overall administration of the Combined Sewer Overflow Abatement Project for Rochester, New York. Funded primarily by the Environmental Protection Agency ("EPA"), the project involved establishing a network of tunnels for storing sewage overflow during storm periods and for transporting it to a treatment facility. For the purpose of soliciting bids, RPWD combined construction of In 1981 RPWD retained Calocerinos & Spina Consulting Engineers ("C & S") to prepare the bid documents and to help administer and supervise the construction. C & S in turn engaged two other firms to perform a geotechnical investigation and to prepare the final tunnel design. RPWD then distributed to prospective bidders the materials prepared by C & S, which contained information about the site conditions, technical specifications for the tunnels, construction plans, and geotechnical information. The geotechnical information included borehole data and descriptions of the subsurface rock conditions. Construction would require excavating the tunnels, removing debris, lining the tunnels with concrete, grouting the connections between tunnel segments, and a final cleanup.

two large waste-water tunnels, the Jay-Arnett and Saxton-Colvin tunnels, into one project. The Jay-Arnett tunnel was to be 8792 feet long; the Saxton-Colvin tunnel, 6155 feet. Both tunnels were to have an excavated diameter of twelve feet and were to be constructed in hard rock more than 120 feet underground.

Because the project was funded largely by the EPA, federal regulations required a differing site conditions clause to be part of the contract. It provided:

a. The CONTRACTOR shall promptly, and before such conditions are disturbed, notify the ENGINEER in writing of:

(1) Subsurface or latent physical conditions at the site differing materially from those indicated in this Contract, or

(2) unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in the work of the character provided for in this Contract.

The ENGINEER shall promptly investigate the conditions and, if he finds that such conditions do materially so differ and cause an increase or decrease in the CONTRACTOR's cost of, or the time required for, performance of any part of the work under this Contract, whether or not changed as a result of such conditions, an equitable adjustment shall be made and the Contract modified in writing accordingly.

Iacobelli, the low bidder, was ultimately awarded the contract. To prepare its estimate, Iacobelli's tunneling engineer, Jim Peters, reviewed the documents furnished by RPWD, conducted an inspection of the project site, and consulted someone who had previously managed two of Rochester's deep-tunnel projects. Peters concluded that the Jay-Arnett and Saxton-Colvin tunnel sites would be relatively dry, and advised Iacobelli that ground-water inflows should not be sufficiently large to affect operations. Iacobelli structured its bid accordingly.

Construction on the Saxton-Colvin tunnel went smoothly, and it was completed first. However, when Iacobelli began working on the Jay-Arnett tunnel, it encountered three conditions that differed from those it had anticipated from the bid documents: a geological fault, water inflows, and hydrogen sulfide gas. Although Iacobelli had originally planned on constructing both tunnels in essentially the same manner, these three factors forced it to modify its plans in order to complete the Jay-Arnett tunnel in accordance with the contract specifications.

The water inflows created the most difficulty for Iacobelli, because the level of infiltration was much greater than what it had expected. To stave off the additional water, Iacobelli had to perform excavation, concrete-lining, and grouting operations for which it had not originally planned. Consequently, on January 26, 1984, Iacobelli informed C & S that it had encountered

an unknown physical condition at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in this contract.

As required by the differing site conditions clause, C & S began investigating Iacobelli's claim. It also requested further information from Iacobelli.

Iacobelli submitted an itemized "Claim for Extra Compensation Resulting from Excessive Water" on May 18, 1984. Stating that water entered the tunnel at a rate of four-hundred gallons per minute more than normal Iacobelli filed this action in December 1988, claiming breach of contract and breach of warranty against the county and RPWD, and claiming negligence against C & S. On October 27, 1992, the district court dismissed Iacobelli's claim against C & S, holding that it was barred by New York's three-year statute of limitations for negligence. The county then impled C & S as a third-party defendant.

causing premature failure in the tunnel boring machine and the muck-conveyor system, Iacobelli requested additional compensation of $757,947. After conducting its own investigation, C & S recommended that the county reject Iacobelli's claim, because it found that the water inflow in the tunnel was not excessive and that it was Iacobelli's own inability to handle the infiltration of hydrogen sulfide gas and failure to dewater which led to the delays in construction of the tunnel. The county finally rejected Iacobelli's claim in mid-1986.

On October 13, 1993, the district court granted summary judgment for the county on the remaining claims, holding that there was no evidence to support Iacobelli's claim that "the contract documents failed to give it notice of troublesome water."

DISCUSSION

On appeal, Iacobelli claims that the district court: (1) erred in granting summary judgment for the county, because a genuine issue of material fact exists regarding whether the encountered conditions materially differed from those indicated in the contract; (2) should not have dismissed its claims of unreasonable interference and breach of warranty; and (3) erred in ruling that its negligence action against C & S was time-barred, because it incorrectly determined the time at which the action accrued. We address each contention in turn.

A. The Differing Site Conditions Claim

We review grants of summary judgment de novo. Taggart v. Time Inc., 924 F.2d 43, 45-46 (2d Cir.1991). Summary judgment is proper when there exists no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). A material fact is one that would "affect the outcome of the suit under the governing law", and a dispute about a genuine issue of material facts occurs if the evidence is such that "a reasonable jury could return a verdict for the nonmoving party". Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). For purposes of this decision, we must draw all reasonable inferences and resolve all ambiguities in the light most favorable to Iacobelli, see Lendino v. Trans Union Credit Information Co., 970 F.2d 1110, 1112 (2d Cir.1992) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d 142 (1970)), and Iacobelli's allegations must be taken as true. See Taggart, 924 F.2d at 46.

Once construction begins on a project under a contract that is silent about the risk of unforeseen conditions, a contractor bears the risk of running into conditions that were unforeseen at the time he submitted his bid even though they significantly increase the cost of performance. To prevent contractors from bidding on a worst-case-scenario basis, government construction contracts contain a differing site conditions clause. See North Slope Technical Ltd. v. United States, 14 Cl.Ct. 242, 257 (1988) (North Slope ). This clause imposes upon the government the risks for conditions that the contract documents fail to disclose, but leaves upon the contractor the costs of encountering those conditions described in the contract. See Erickson-Shaver Contracting Corp. v. United States, 9 Cl.Ct. 302, 304 (1985) (Erickson-Shaver ). Because the differing site conditions clause alleviates the need for contractors to insert speculative...