Integrated Constr. Enters., Inc. v. GN Erectors, Inc.
| Decision Date | 10 February 2020 |
| Docket Number | 16 Civ. 5561 (PAE) |
| Parties | INTEGRATED CONSTRUCTION ENTERPRISES, INC., Plaintiff, v. GN ERECTORS, INC., et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
This case is a multi-defendant contractor-subcontractor dispute related to the construction of a new entrance and security pavilion at the Daniel Patrick Moynihan U.S. Courthouse in New York City from 2014 to 2016 (the "Project"). With discovery complete, Michael Sergi, the sole individual defendant, has moved for summary judgment on the one cause of action in which he is named: the claim by plaintiff Integrated Construction Enterprises, Inc. ("Integrated") that he committed fraud. For the following reasons, the Court grants the motion in part and denies it in part.
Integrated is a general contractor that was awarded the contract for the Project by the U.S. Government Services Agency ("GSA"). Defendant GN Erectors, Inc. ("GN"), was awarded a subcontract by Integrated to manufacture and install certain components of the Project. Defendant Greenfield Metals, Inc. ("Greenfield"), was a vendor used by GN to fabricate some of those components. Sergi is GN's President. Patriot Armored Systems, LLC ("Patriot Armor"), formerly known as U.S. Armor, LLC, is a terminated defendant in this action, see Dkt. 52, and was GN's supplier of ballistic, or blast-proof, glass for the Project.
In December 2013, the GSA awarded Integrated the contract for the Project. JSF ¶¶ 7, 8. The contract specified a project duration of 540 days, with work to be commenced by February 14, 2014, substantially completed by August 15, 2015, and closed out by October 2015. Id. ¶ 9. Integrated initially accepted a bid from Safe Zone Ballistics ("Safe Zone") to serve as the subcontractor that would supply the blast resistant windows, doors, skylight, and other features of the building envelope2 for the project. Id. ¶ 13. Safe Zone, however, was unable to deliveracceptable shop drawings for the elements it had been hired to design, manufacture, and install, and ultimately withdrew from the project on September 3, 2014. Id. ¶¶ 15-17. As a result, eight months into the project, "no shop drawings . . . related to the entrance pavilion had been approved, no materials had been ordered with respect to this portion of the project and [Integrated] had not hired any entity to install the store front." Id. ¶ 18.
Integrated turned to Old Castle Building Envelope ("Old Castle"), a Rhode Island company that "marketed itself as a company that provided similar products to that which [Safe Zone] was to provide" under its now terminated subcontract. Id. ¶¶ 22-23. Old Castle referred Integrated to Greenfield, its New York distributor. Id. ¶ 24. Greenfield, in turn, referred Integrated to GN, an authorized installer of Old Castle products. Id. ¶¶ 25-26. Ultimately, GN entered into a subcontract with Integrated to provide mock-ups3 for, and then produce and install, "the [b]last [r]esistant [s]torefront, [s]kylight, interior security partitions, window[s,] and doors associated with the storefront and interior security partitions . . . all stainless steel cladding for columns, beams, etc., [and] [five] exterior glass air-vent[s]." Id. ¶ 32. Under this arrangement, Old Castle would supply materials to Greenfield, which would fabricate them according to specifications provided by GN, which would then install them at the Project site. Id. ¶¶ 30-31.
After signing the subcontract in October 2014, GN's first major task was to obtain shop drawings for the various components from Old Castle, id. ¶ 51, based on the architectural drawings, schematics, and diagrams it had been provided, id. ¶ 68. The shop drawings, in turn, would provide the basis from which Greenfield would fabricate the mock-ups and, ultimately, the components to be installed for the Project. Delivery of the shop drawings, however, wasdelayed, as were other stages of the construction process, including completion of the mock-ups and delivery of various components to the job site. The causes of, and responsibility for, this delay are factual disputes at the heart of this lawsuit. As a result, completion of the Project was delayed, id. ¶ 131; the GSA imposed financial penalties on Integrated, id. ¶ 132; and Integrated eventually terminated its subcontract with GN, id. ¶¶ 133-34.
In its Eighth Cause of Action, Integrated alleges that Sergi, GN's President, personally committed fraud. Dkt. 3 ("FAC") ¶¶ 183-204. Integrated's First Amended Complaint advances two theories of fraud.
First, Integrated alleges that Sergi fraudulently induced it to enter into the subcontract by falsely representing that his company was financially sound, had sufficient manpower to complete the job in a timely manner, and had excellent relationships with its suppliers. Id. ¶ 191.
Second, Integrated alleges that Sergi made false material statements or omissions during the course of GN's performance of the subcontract. Id. ¶ 203. The falsehoods at issue related to GN's ability to meet intermediate project deadlines; the steps Sergi had taken to ensure those deadlines would be met; the progress that had been made on ordering various component parts for the Project, especially the blast-proof glass; and his timely payment to vendors in order to obtain those parts on schedule.4 Id.
On July 13, 2016, Integrated filed its complaint. Dkt. 1. On July 15, 2016, at the direction of Judge Torres, to whom the matter was then assigned, Integrated filed an amended complaint. FAC. On November 22, 2016, the case was reassigned to Judge Forrest. On December 8, 2016, Judge Forrest granted a partial motion to dismiss, terminating Patriot Armor as a defendant. Dkt. 52. On September 20, 2018, the case was reassigned to this Court. On January 31, 2019, fact discovery concluded. See Dkt. 71.
On April 3, 2019, Integrated and Sergi filed their joint statement of undisputed material facts. JSF. On April 15, 2019, Sergi filed the instant motion for partial summary judgment on Integrated's fraud claim, FAC ¶¶ 183-204. Dkt. 84. Sergi also filed his Rule 56.1 statement, Dkt. 84-1, the Sergi declaration, Dkt. 84-2, and an accompanying memorandum of law, Dkt. 84-3 ("Def. Mem."). On May 6, 2019, Integrated filed its response to Sergi's Rule 56.1 statement, Dkt. 87, its Rule 56.1 counter-statement, Dkt. 87-1, the Cherbaka declaration, Dkt. 87-2, the Ramcharan declaration, Dkt. 87-3, and an accompanying memorandum of law, Dkt. 87-5 ("Pl. Mem."). On May 13, 2019, Sergi filed a reply brief, Dkt. 90 ("Def. Reply"), a reply to Integrated's Rule 56.1 counter-statement, Dkt. 90-1, and the Sergi reply declaration, Dkt. 90-2.
To prevail on a motion for summary judgment, the movant must "show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." Fed. R. Civ. P. 56(a). The movant bears the burden of demonstrating the absence of a question of material fact. In making this determination, the Court must view all facts "in the light most favorable" to the non-moving party. Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir. 2008); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the movant meets its burden, "the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment." Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008). "A party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment." Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (internal quotation marks, brackets, and citation omitted). Rather, the opposing party must establish a genuine issue of fact by "citing to particular parts of materials in the record." Fed. R. Civ. P. 56(c)(1)(A); see also Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009).
"Only disputes over facts that might affect the outcome of the suit under the governing law" will preclude a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether there are genuine issues of 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." Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012) (quoting Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)).
A threshold question, although not identified by the parties, is which state's law applies to Integrated's fraud claim. Both parties treat New Jersey law as governing. The subcontract at the center of this dispute contains a choice of law provision stating that "[t]his agreement shall begoverned by the laws of New Jersey," but it does not identify the law applicable to a tort claim between the parties. Dkt. 84-8 ¶ 15.2.
The Court, sitting in diversity, "appl[ies] New York law to determine the scope of the contractual choice-of-law clause." Fin. One Pub. Co. v. Lehman Bros. Special Fin., 414 F.3d 325, 333 (2d Cir. 2005) (). And "under New York law, a choice-of-law provision indicating that the contract will be governed by a certain body of law does not dispositively determine that law which will govern a claim of fraud arising incident to the contract." Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir. 1996); Knieriemen v. Bache Halsey Stuart Shields Inc., 427 N.Y.S.2d 10, 12-13 (1st Dep't 1980), overruled on other grounds, Rescildo v. R.H. Macy's, 594 N.Y.S.2d 139 (1st Dep't 1993); see also Fin. One Pub. Co., 414 F.3d at 335. To the contrary, under New York law "tort claims...
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