Construction workers take a lunchtime break from work at the Barclays Center arena in Brooklyn in April 2012. (AP/Bebeto Matthews)
A subcontractor that worked on the Barclays Center in Brooklyn can sue the general contractor even though it signed claims releases, a Brooklyn judge has ruled, finding that extensive changes to the contract during construction may have voided those releases.
Justice Carolyn Demarest (See Profile), of Brooklyn’s Commercial Division, ruled June 25 in The Laquila Group v. Hunt Construction, 502732/13, that subcontractor The Laquila Group, Inc. had pleaded a case against general contractor Hunt Construction Group, Inc.
The original subcontract stated that Laquila would perform certain work for $27.5 million, and that time was of the essence because the arena needed to be finished in time for scheduled events. The contract required both parties to sign a change order to alter the scheduled work.
They ended up agreeing to numerous change orders due to complications such as flooding and contaminated soil, according to Demarest’s order. Each change order included a clause stating that Laquila waived the right to collect extra money for the work.
In January 2013, after the project was mostly completed, Laquila submitted a letter asking for an additional $10.8 million, saying that it had incurred hardship because the project had been delayed over seven months by matters outside of its control. Hunt refused to pay.
Laquila then sued Hunt for fraudulent inducement, cardinal change of contract, quantum meruit, unjust enrichment and, in the alternative, breach of contract. It claimed that Hunt knowingly misrepresented the likely costs of the work and the challenges involved in the project. It claimed these misrepresentations had changed the contract in principal, effectively making it void, and that it was owed an additional $11.2 million.
Laquila further claimed that during construction, it often started doing the altered work by verbal agreement before a changed work order was signed. These verbal agreements superseded the written ones, Laquila argued.
Hunt countered that the claim releases remained in effect, and that all of Laquila’s non-contract claims were barred by the existence of a valid contract. It moved to dismiss the case.
Demarest, however, found that most of the non-contract claims could go forward, ruling that Laquila’s suit “raises questions as to whether the parties’ conduct indicated that the waivers it executed were not intended to bar the claims it asserted herein.”
She further ruled that the non-contract claims could proceed because Laquila had pleaded facts to support an allegation that the various modifications to the contract had created a “cardinal change” that rendered the original contract unenforceable.
“Defendant’s reliance on a clause in the subcontract specifically barring quantum meruit claims is misplaced, since the finding of an absence of a valid, enforceable contract, a prerequisite to quantum meruit recovery, would inherently render that clause unenforceable, along with the remainder of the subcontract,” she wrote.
Demarest also rejected Hunt’s argument that any claim based on alleged oral agreements were barred by a provision of the contract that prohibited oral modifications. That defense would be estopped if Laquila had “detrimentally relied” on the oral modifications, she said.
“Hence, plaintiff has adequately pleaded a breach-of-contract cause of action based upon an alleged oral modification of the subcontract,” the judge wrote. “Defendant has failed to demonstrate the absence of a valid claim with any documentary evidence and has not challenged the accuracy of plaintiff’s allegations regarding purported oral modifications, instead relying on the effect of the no-oral-modification clause.”
Demarest dismissed Laquila’s fraudulent inducement claim, finding that Laquila had not pleaded facts sufficient to support it.
Thomas Finegan, an attorney at Goetz Fitzpatrick, represents Laquila.
“The importance of the decision is its holding that our client Laquila stated a cause of action for cardinal change by asserting that the multiple millions of dollars in changes and the uncontemplated events which forced those changes, when viewed as an aggregate, were sufficient to permit a fact finder to conclude that the base contract had been abandoned,” Finegan said in a statement.
Brian Keatts, an associate principal at Zetlin & De Chiara, represents Hunt.
In an email, Keatts said he believed his client’s position to be “meritorious in all respects” and that he and his client were reviewing the decision and considering an appeal.