Negligence • Workplace Injury • Statutory Employer Immunity • Assumption of Risk

J.J. DeLuca Co., Inc. v. Toll Naval Assocs., PICS Case No. 12-1976 (Pa. Super. Oct. 12, 2012) Platt, Sr. J. (29 pages).

Appellant and cross-appellee J.J. DeLuca Company, Inc. appealed from the order entered in favor of appellees and cross-appellants Toll Naval Associates, Toll PA GP Corp, Inc. and Toll Bros. Inc. (collectively, Toll). DeLuca raised 16 claims of error and Toll raised nine counter-questions, primarily addressing punitive damages and gist of the action doctrine. The Superior Court affirmed in this action involving breach of contract and fraud in a construction contract and project.

This is the second appeal in this case. The underlying suit stemmed from the contractual relationship between Toll and DeLuca. DeLuca was engaged by Toll to be the general contractor for the $79 million Naval Square project for the construction of townhomes and condominiums on former Navy property in Philadelphia.

Disagreements developed over Toll’s delays in obtaining permits, shop drawings and work that Toll directed be performed out of sequence. Toll had complaints about DeLuca’s quality of workmanship and failure to meet the contract schedule. The trial court attributed most of the delays to Toll.

The parties discontinued their agreement and Toll became the general contractor. The parties executed a termination for convenience agreement (TCA), which, among other things, limited the types of claims that could be brought. Mediation failed and DeLuca sued Toll for amounts held back by Toll under a 10 percent retainage agreement, alleging breach of contract, unjust enrichment, quantum meruit and violation of the Contractor and Subcontractor Payment Act (CAPSA). DeLuca originally sought damages of over four million dollars. Toll counterclaimed for cost overruns, costs of completion, unanticipated personnel costs and liquidated damages.

During discovery, Toll uncovered a fraud scheme whereby DeLuca directed personnel to submit invoices to Toll for work not performed at Naval Square, to compensate subcontractors for other work for DeLuca at unrelated non-Toll worksites. The trial court permitted Toll to amend its cross-complaint to include a counterclaim for fraud.

Initially, the trial court awarded DeLuca $1.2 million but revised the amount to $2.1 million. The trial court denied all motions for attorney fees and interest, finding that any claim not preserved in the TCA was waived. Despite finding significant fraud, the trial court denied Toll’s punitive damages claim as waived. Both parties appealed.

The Superior Court remanded, finding the punitive damages claim was not waived. On remand, the trial court entered a $4.5 million verdict in favor of Toll on the punitive damages claim, resulting in a net award to Toll of $2.37 million. Both parties cross-appealed.

DeLuca raised 16 issues and Toll raised nine issues, styled as a counterstatement. The court found that DeLuca violated Pa.R.App.P. 2119 since many of its arguments overlapped or were duplicative.

The court found several of DeLuca’s issues were waived, including claims that Toll paid for fraudulent billings and that Toll was not entitled to $4.5 million in punitive damages.

DeLuca also challenged the underlying fraud claim as insufficient to support punitive damages. The court disagreed. First, several of DeLuca’s claims in support of its argument were waived for lack of development or support. The trial court expressly found fraud. The court also concluded that the failure to include fraud in the TCA did not preclude Toll from bringing the claim.

In addition, the court determined that the fraud claim was not barred by the statute of limitations. Discovery of fraud is the trigger for the operation of the statute of limitations. DeLuca did not show the trial court abused its discretion in finding that Toll’s fraud claim was not tolled by a lack of due diligence and, further, that DeLuca’s no-active-concealment defense did not merit relief.

The court also found that Toll’s fraud claim was not barred by the gist of the action doctrine. The fraud claim was not merely collateral to its contract claims. Here, the fraud did not arise from the performance of the contract. Toll claimed DeLuca submitted invoices for work that had nothing to do with the performance of the contract. The duty breached was not created by the contract and liability did not stem from a contract. “The trial court properly concluded that invoice billing under the contract was merely the vehicle for the fraud.” Thus, DeLuca’s gist of the action argument failed.

DeLuca also argued that the punitive damages award was excessive. The court disagreed and found the ratio to compensatory damages was constitutionally permissible.

DeLuca also challenged the trial court’s denial of interest, attorney fees and costs under CAPSA. Because DeLuca was not a substantially prevailing party, it was not entitled to recover those items.

The court’s disposition of DeLuca’s claims resolved Toll’s counter-questions.