United States v. Skidmore, Owings & Merrill

• Decision Date: 29 January 1981
• Docket Number: No. 80 Civil 3060.,80 Civil 3060.
• Citation: 505 F. Supp. 1101
• Parties: UNITED STATES of America, Plaintiff, v. SKIDMORE, OWINGS & MERRILL, Defendant.
• Court: U.S. District Court — Southern District of New York

505 F. Supp. 1101

UNITED STATES of America, Plaintiff, v. SKIDMORE, OWINGS & MERRILL, Defendant.

No. 80 Civil 3060.

United States District Court, S. D. New York.

January 29, 1981.

John S. Martin, Jr., U. S. Atty., S. D. New York, New York City, for plaintiff; Jonathan A. Lindsey, Asst. U. S. Atty., New York City, of counsel.

Christy & Viener, New York City, for defendant; Arthur H. Christy, Leonard J. Colamarino, New York City, of counsel.

OPINION

EDWARD WEINFELD, District Judge.

In this suit brought by the United States against the architectural firm Skidmore, Owings & Merrill ("Skidmore") on claims based on indemnification, breach of contract and breach of warranty arising out of a contract for the design and construction of the Joseph H. Hirshhorn Museum and Sculpture Garden in Washington, D. C., defendant Skidmore moves pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint on the grounds that all claims are barred by the applicable statute of limitations and that defendant as an architectural firm cannot be held liable for breach of warranty. The Government, in resisting the motion, has submitted an affidavit and certain evidentiary material; the Court thus treats the motion as one for summary judgment under Rule 56. For the reasons set forth below, defendant's motion is granted in part and denied in part.

The facts alleged in the complaint and contained in the Government's supporting material, which for purposes of this motion are accepted as true, are rather simple. The United States, acting through the General Services Administration ("GSA"), entered into a contract for architectural and engineering services with Skidmore in August 1967 in connection with the construction of the museum. Among other things, the contract required Skidmore to prepare specifications to be included in the contract for the construction of the museum, and also to review and approve architectural and structural shop drawings. In February 1970, the United States entered into a contract for the construction of the museum with Piracci Construction Company ("Piracci").

Pursuant to the construction contract, Piracci was required to prepare a scale model of the museum's "Core No. 1 support from Plaza Level to and including Second Floor framing, complete with ring girders, and one typical axial rib each side; to extent shown on drawings." Piracci submitted this model to GSA in August 1970, and Skidmore reviewed it. The complaint alleges that GSA rejected the model as not acceptable upon Skidmore's representation that it was inaccurate and out of scale. Piracci submitted a second model, which was accepted, in April 1971.

The complaint further alleges that Skidmore, contrary to its contractual obligation, refused to approve shop drawings for the column supports until the second model was approved, despite its knowledge that such drawings were not required by the subcontractor which was fabricating the columns; and that it persisted in such refusal although it knew the subcontractor would not proceed without such approval and its refusal would delay the fabrication of the form and delay construction of the museum as a whole. As a result, according to the Government, the formwork was not delivered until June 1971, six months behind schedule, causing both the Government and Piracci to incur substantial additional costs.

In addition to the above allegations in the complaint, other facts are set forth in the affidavit of Walter Huber, the Contracting Officer in charge of the GSA-Piracci construction contract.

On November 29, 1970, Piracci notified the GSA that its performance of work under the construction contract had been unreasonably delayed "because of the failure of the government and its architect to furnish it with the design information and related calculations required to produce the shop drawings for steel form fabrication for the main support columns and to fabricate a scale model as specified," and that it intended to submit a claim for the increased cost resulting from the delay. Thereafter Piracci submitted the second model which, based upon the architect's approval, was accepted by GSA in April 1971.

On May 12, 1971, Piracci filed a detailed statement for its additional costs claimed to have been incurred as a result of changes ordered and of delays occasioned by the rejection of the first model. On August 25, 1971 the Contracting Officer rejected Piracci's claim, upon the ground that any delays were the result of Piracci's failure to execute the work as required. Piracci appealed this decision to the General Services Board of Contract Appeals ("Board") and also filed an additional claim with the Contracting Officer on February 18, 1972. The Board reversed the decision of the Contracting Officer on May 30, 1974 and found that GSA wrongfully rejected the model and delayed approval of the shop drawings, and that Piracci had thus sustained compensable additional costs as a result thereof. The Board's opinion contained language critical of Skidmore's basis for recommending to GSA rejection of the first model, but made no finding that Skidmore was negligent since it was not a party to the administrative appeal. In sum, the Board rejected GSA's contention that the first model failed to meet specification requirements.

GSA and Piracci effected a settlement in the amount of $1,043,393 on September 30, 1977, three-and-a-half years after the Board's decision; a stipulation of settlement was filed in the Court of Claims on May 12, 1978,¹ and payment was made by August 3, 1978 to Piracci which executed a general release in favor of the Government. The GSA notified Skidmore on August 12, 1977 that it would assess damages against it based on Skidmore's professional negligence regarding the scale-model issue; on December 19, 1977, GSA informed Skidmore that the damages amounted to $1,043,393, the amount paid to Piracci. Skidmore denied responsibility and notified GSA of its refusal to make any payment. The Government commenced this action on May 29, 1980.

The rather inartistically and repetitively worded complaint states four causes of action. The first alleges that Skidmore's rejection of the first model, its insistence on a submission of a second model, and its refusal to consider the drawings until the model was approved were both unjustified and constituted breach of contract. The second alleges that these actions constituted negligence by Skidmore in the performance of its professional services in breach of Article XVI(B) of the contract, which provides in pertinent part:

the Professional Services Contractor Skidmore shall be and remain liable to the Government for all costs of any kind which were incurred by the Government as a result of Skidmore's negligent performance of any of the services furnished under this contract.

The third alleges that Skidmore breached its agreement to indemnify the Government as provided by Article XVI(B) of the contract. Finally, the fourth alleges that Skidmore failed to provide all necessary information for the model maker to fabricate a scale model to the degree of accuracy insisted upon by Skidmore and that such failure constituted a breach of its warranties and undertakings under the contract and delayed the construction of the museum. The Government seeks the same damages— $1,043,393 paid to Piracci pursuant to the settlement—on each cause of action.

However variously stated and fragmentized under allegations of negligence, breach of contract and breach of warranty, the Government, under its four separately pleaded causes of action, essentially seeks indemnification of the $1,043,393 paid to Piracci. Upon argument of this motion, it conceded as much. Thus, it urges, because a cause of action for indemnification does not accrue until the indemnitee's liability is determined, this action was timely filed pursuant to the six-year statute of limitations of 28 U.S.C. § 2415(a) for actions by the Government for money damages.

However, the first, second, and fourth causes of action are clearly based not on indemnity but on alleged breaches of Skidmore's duties. Thus, they are time-barred because each accrued no later than April 1971, the latest date on which the Government alleges conduct by Skidmore in violation of a contractual duty. It approved the second model on April 2, 1971.

A cause of action accrues "when the claim first could have been sued upon."² Here, under the Government's allegations, Skidmore allegedly breached the contract no later than April 1971; its cause of action for the alleged breach accrued as of that date. The Government, however, contends that the earliest accrual date is May 30, 1974, when the Board held the Government liable to Piracci. Before that, it argues, it had suffered no damages.³ However, the fact that until the time of the decision GSA believed that Skidmore and it were justified in rejecting the first model, does not alter the date of accrual of the causes of action based upon alleged breach of the contract.

The Government's position not only overlooks when Skidmore performed the acts that the Government alleges constitute a breach of the contract, it further ignores the framework of 28 U.S.C. § 2415(a), the statute of limitations which governs actions by the Government based on contracts, express or implied. That section provides that a suit is time-barred "unless the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings required by contract or by law, whichever is later." The one-year saving clause has the effect of tolling the statute of limitations during administrative proceedings and is necessary because "an administrative proceeding ordinarily consumes a considerable period of time and ... the section would permit the Government a year after the final administrative decision in which...