Williams and Sons Erectors, Inc. v. South Carolina Steel Corp.
| Decision Date | 14 January 1993 |
| Docket Number | D,No. 1672,1672 |
| Parties | WILLIAMS AND SONS ERECTORS, INC., Plaintiff, v. SOUTH CAROLINA STEEL CORPORATION, Defendant. SOUTH CAROLINA STEEL CORPORATION, Third-Party-Plaintiff, v. MARS ASSOCIATES, INC.; Normel Construction Corporation; and Federal Insurance Company, Third-Party-Defendants. MARS ASSOCIATES, INC.; Normel Construction Corporation; and Federal Insurance Company, Fourth-Party-Plaintiffs-Appellants, v. The DORMITORY AUTHORITY OF the STATE OF NEW YORK, Fourth-Party-Defendant-Appellee. The DORMITORY AUTHORITY OF the STATE OF NEW YORK, Fifth-Party-Plaintiff-Appellee, v. The GRUZEN PARTNERSHIP, ARCHITECTS, PLANNERS; and Gruzen Samton Steinglass, Fifth-Party-Defendants-Appellees. The GRUZEN PARTNERSHIP, ARCHITECTS, PLANNERS; and Gruzen Samton Steinglass, Sixth-Party-Plaintiff-Appellee, v. EWELL W. FINLEY, P.C., Sixth-Party-Defendant. ocket 92-7140. |
| Court | U.S. Court of Appeals — Second Circuit |
Eli S. Cohn, New York City (Eugene H. Goldberg, McDonough Marcus Cohn & Tretter, P.C., of counsel), for appellants Mars Associates, Inc., Normel Const. Corp. and Federal Ins. Co.
Frederick R. Rohn, New York City (David E. Montgomery, Ronald E. Sharpe, Sacks Montgomery, P.C., of counsel), for appellees The Dormitory Authority of the State of New York and The Gruzen Partnership, Architects, Planners and Gruzen Samton Steinglass.
Before: CARDAMONE, WINTER and MAHONEY, Circuit Judges.
On this appeal we are called upon to apply New York's law of privity, familiar to lawyers from Chief Judge Cardozo's memorable phrase: "The assault upon the citadel of privity is proceeding in these days apace." Ultramares Corp. v. Touche, 255 N.Y. 170, 180, 174 N.E. 441 (1931). That case involved plaintiff's attempt to hold defendant liable for words negligently spoken. In this suit by contractors, working from plans prepared for the state dormitory authority, against the architects who prepared them, we also must construe the contract documents. The record before us reveals a bungling bureaucracy that approved bid plans that had obviously been prepared in a slipshod manner. The bureaucracy's--in this case the state dormitory authority--contrary opinion that the plans would do became its dogmatic ruling to that effect, which set the stage for the litigation presently before us.
We set forth those facts relevant to the resolution of the issues on appeal. The Dormitory Authority of the State of New York is a public benefit corporation that provides financing for construction of new facilities for the City University of New York (CUNY). In November 1985 it engaged The Gruzen Partnership, Architects, Planners and later its successor firm, Gruzen Samton Steinglass, (Gruzen or the architects) to design a Marine Academic Center at the Kingsborough Community College in Brooklyn, New York. Gruzen was asked to provide architectural services during the design and construction phases of the project, and also to prepare contract documents for construction of the project that the authority could distribute to prospective bidders. The architects were required to respond to questions posed by bidders regarding these project documents.
The architects retained several consulting firms to aid them in designing certain elements of the project. One was Ewell W. Finley, P.C., who was to put together the structural engineering design. Gruzen together with its consultants spent almost two years in design work and prepared more than 150 drawings and a massive book of specifications. In June 1987 when construction documents were 60 percent complete, the dormitory authority's internal design review board as well as CUNY staff architects and engineers reviewed the submitted designs, in which they found major defects. For example, the architects' design showed the project's roof was to be sloped; the structural plan failed to correspond and did not include such slope. When these inconsistencies were pointed out to Gruzen and Finley, they said the errors would be corrected.
Two months later, in August 1987, with the plans complete, the authority told Gruzen that the structural drawings of the roof still showed no slope. Gruzen responded that the actual elevations of steel would be coordinated with its structural engineer. Meanwhile, the project documents were finalized. CUNY's staff architects and engineers reviewed them independently. During a September 17, 1987 meeting with Gruzen and Finley the CUNY architects expressed serious concern about the lack of care that characterized the preparation of the completed construction plans. As a CUNY's chief architect then advised the dormitory authority of the particulars of CUNY's review and requested that an independent structural engineer examine all the structural documents. The authority's project manager joined in this request, which the dormitory authority denied at a September 21 meeting. At the same meeting, Finley asked that the October 7 bidding date be delayed to permit better coordination of the plan designs, which the authority also turned down. On September 23 CUNY's architect wrote a letter to the dormitory authority reiterating, "we have reviewed the 100% Structural Bid Documents of the above project and found them unacceptable for bidding."
result of a review of representative drawings, these CUNY professionals doubted whether the structural plans would be satisfactorily finished in time for the October 7 bid date. A list of comments enumerating the problems with the plans included: lack of coordination in the plan documents, structurally incorrect details, and drafting errors of such proportion as to distort the drawings. Based on these deficiencies, the CUNY professionals stated that they did not believe the structure shown on the plans could actually be built
On October 15, 1987--after further work on the project documents and a one-week delay of the scheduled bidding date--the dormitory authority put out Gruzen's plans and specifications to prospective bidders. As part of the bidding process, 44 contractors attended an informational meeting with authority and Gruzen representatives. There the architects answered questions about the plans and specifications and later issued written clarifications of the documents. As required by its retainer, Gruzen also submitted to all prospective bidders written minutes of the meeting that included its clarifications.
On December 17, 1987 appellants, a joint venture of Mars Associates, Inc. and Normel Construction Corp. (Mars-Normel) submitted what was subsequently determined to be the lowest bid. The state dormitory authority awarded appellants the contract to construct the project in January 1988. Appellant Federal Insurance Company was Mars-Normel's guarantor. Joseph Brandes, an officer of Mars-Normel and an experienced licensed professional engineer, became the general superintendent of the project. After reviewing the plan documents, he and the steel subcontractor, South Carolina Steel Corporation, determined that the structural steel fabrication could not go forward because the structural plan improperly coordinated with the architectural plans. Among these errors was the previously noted discrepancy between the architectural and structural plans with respect to the shape and slope of the project's roof. During the course of construction, Brandes discovered other significant design defects.
In March 1988 after construction had begun, the dormitory authority submitted an entirely new set of plans that Gruzen had prepared, and when errors in these plans appeared, the authority issued yet a third set the following month. Despite the "new" plans, voluminous substantial corrections were still necessary, amounting to 400 sketches modifying the reissued plans. Further, during the construction phase of the project the dormitory authority had to make 267 change orders because of plan errors that caused appellants to perform additional work. The change orders were submitted on a dormitory authority form describing the additional work and adjusting the agreed upon price. Section 7.01D of the contract specified how the contract price would be adjusted:
Unless otherwise specifically provided for in a change order, the compensation specified therein for Extra Work includes full payment for both the Extra Work covered thereby and for any damage or expense caused the Contractor by any delays to other Work to be done under the Contract resulting from said Extra Work and the Contractor waives all rights to any other compensation for said Extra Work, damage or expense.
The contract also contained a general no-damages-for-delay clause, § 10.02, providing No claims for increased costs, charges, expenses or damages of any kind shall be made by the Contractor against the Owner for any delays or hindrances from any cause whatsoever; provided that the Owner, in the Owner's discretion, may compensate the Contractor for any said delays by extending the time for completion of the Work as specified in the Contract.
The authority exercised its § 10.02 discretion on eight separate change orders and paid Mars-Normel $75,402 for the costs of delay. In addition, on 121 of the approximately 267 change orders the parties agreed that the authority would pay appellant for the cost of performing extra work, and that Mars-Normel would reserve all other rights arising from the change orders. The following is an example of the reservations attached to those change orders:
the Contractor and the Dormitory Authority expressly agree [that] ... the Contractor reserves all rights, remedies or actions, if any, against the Dormitory Authority for damages or expenses caused the contractor and/or an extension of time arising out of or related to any delays to the performance of its contract work caused by this Extra Work.
In June 1989, while the project was under...
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