ADDITIONAL CASES Murnane Building Contractors, Inc., Third-Party Plaintiff v. Classic Environmental, Inc., Third-Party Defendant The Oak Group, Inc., Plaintiff v. SCE Environmental Group, Inc., Murnane Building Contractors, Inc. and Travelers Casualty and Surety Company of America, Defendants Classic Environmental, Inc., Plaintiff v. Murnane Building Contractors, Inc., Patrick T. Murnane, James R. Hogel, and Travelers Casualty and Surety Company Of America, Defendants Papers Considered: Action No. 1: NYSCEF Doc Nos. 372-565; Action No. 2: NYSCEF Doc Nos. 111-146; Action No. 3: NYSCEF Doc Nos. 175-317. The three above-captioned actions arise from a public construction project commenced by the New York State Office of General Services (“OGS”) in 2016. The cases were consolidated for pretrial discovery, which is complete, and the parties in each action now move for summary judgment. I. BACKGROUND A. The Parties and the Project In 2016, OGS began a project to renovate Building No. 4 (“Building”) on the Harriman State Office Campus in Albany, New York (“Project”). As required by the Wicks Law (see General Municipal Law §101), OGS engaged multiple prime contractors. Murnane Building Contractors, Inc. (“MBC”) was retained on November 30, 2016 as the prime contractor for general construction work, including demolition and the abatement of hazardous materials (see Action No. 1, NYSCEF Doc No. 375, Ex. A ["Prime Contract"]).1 Travelers Casualty and Surety Company of America (“Travelers”) posted a payment and performance bond for MBC covering the Prime Contract (see NYSCEF Doc No. 7 ["Bond"]). In February 2017, MBC subcontracted with SCE Environmental Group, Inc. (“SCE”) to perform asbestos abatement and related work (see NYSCEF Doc No. 2 ["Subcontract"]). SCE subcontracted a portion of its scope of work to Oak Group, Inc. (“Oak”) (see Action No. 2, NYSCEF Doc No. 117 ["Oak Subcontract"]). Oak, in turn, claims to have subcontracted with Sunn Enterprises Group, LLC (“Sunn”) for the necessary labor, though Oak was unable to produce a written agreement in discovery. In mid-July 2017, OGS held a responsibility hearing concerning SCE, citing: (i) health and safety violations, including a June 9, 2017 flood incident (“Flood Incident”) involving the discharge of asbestos-contaminated water; (ii) unsafe working conditions; and (iii) missed scheduling deadlines (see Albany County Index No. 900380-18 ["OGS Proceeding"], NYSCEF Doc No. 6 at 2-3, 8). SCE accepted responsibility for the deficiencies identified by OGS, including the Flood Incident, and its focus was on corrective and preventive measures (see OGS Proceeding, NYSCEF Doc No. 42). On August 2, 2017, MBC issued a written notice of default to SCE (see NYSCEF Doc No. 4). MBC then terminated SCE’s Subcontract for cause on August 9, 2017, citing persistent delays and SCE’s failure to propose a viable recovery schedule (see NYSCEF Doc No. 5). MBC subcontracted with Classic Environmental, Inc. (“Classic”) on September 13, 2017 to complete SCE’s scope of work (see Action No. 3, NYSCEF Doc No. 54 ["Classic Subcontract"]). However, OGS barred Classic’s workers from the Project site just six weeks later, following an incident in which Classic inappropriately pressure-washed metal beams containing lead-based paint, which stripped the paint, and then allowed lead-contaminated runoff to spread throughout the Building and discharge into storm sewers (“Lead Incident”) (see NYSCEF Doc No. 421). OGS terminated the Prime Contract on November 13, 2017, citing MBC’s delays and its failure to properly manage its subcontractors (see NYSCEF Doc No. 425). OGS also made a demand on the Bond posted by Travelers and retained a completion contractor to complete MBC’s scope of work under the Prime Contract. B. The Lawsuits SCE commenced Action No. 1 on August 29, 2017, principally seeking damages for MBC’s alleged wrongful termination of its Subcontract (see Action No. 1, NYCEF Doc No. 434 ["SCE Complaint"]).2 MBC and Travelers counterclaim primarily for the damages caused by SCE’s alleged breaches of the Subcontract and for indemnification from OGS’s claims and their own first-party losses (see NYSCEF Doc No. 435 ["SCE Answer"]). Oak commenced Action No. 2 on May 23, 2018, seeking to recover (i) the unpaid balance under the Oak Subcontract from the Bond, and (ii) damages from MBC for the use of its construction equipment (see Action No. 2, NYSCEF Doc No. 114 ["Oak Complaint"]).3 MBC and Travelers counterclaim against Oak for negligence and indemnity (see NYSCEF Doc No. 115 ["Oak Answer"]). Classic commenced Action No. 3 in Oneida County on May 14, 2018 against MBC, Travelers and two individuals associated with MBC, principally seeking recovery of the unpaid balance under the Classic Subcontract. Upon MBC and Travelers’ motion, the case was transferred to Albany County and joined with Action Nos. 1 and 2 for discovery (see Action No. 3, NYSCEF Doc No. 29). MBC and Travelers countersue Classic for breaches of the Classic Subcontract and for indemnity. In addition to the three lawsuits between MBC and its lower-tier contractors, this Court presided over a 2018 CPLR article 78 proceeding brought by SCE challenging OGS’s determination of non-responsibility. By Decision, Order & Judgment dated July 5, 2018, the undersigned annulled the non-responsibility determination purely on procedural grounds and remitted the matter to OGS for redetermination (see OGS Proceeding, NYSCEF Doc No. 57 at 11-14). Finally, MBC and Travelers sue the State in the Court of Claims, alleging that OGS wrongfully terminated MBC’s Prime Contract (see Claim No. 133935 ["Court of Claims Case"], NYSCEF Doc No. 24). Dispositive motions are pending before the Court of Claims. II. MOTIONS DIRECTED AT SCE’S COMPLAINT A. Wrongful Termination of Subcontract (1st Cause of Action) SCE alleges that MBC wrongfully terminated the Subcontract (see SCE Complaint,
44-55), and it moves for summary judgment on its claim. MBC cross-moves for dismissal. 1. Relevant Portions of the Subcontract Under article 9, entitled “Default and Termination,” SCE “shall be in default if [it] fails to progress its Work according to the Schedule, as revised from time to time by [MBC]” (Subcontract, art 9, §1 [a], [g]). “If [SCE] fails within two working days after receipt of a written notice to commence and continue satisfactory correction of such default with diligence and promptness, then [MBC], without further notice, and without prejudice to any other rights or remedies, may…[t]erminate [SCE's] right to proceed with the work…and use any materials, implements, equipment, appliances or tools furnished by or belonging to [SCE] to complete [SCE's] work” (id., §2 [c]). 2. MBC’s Grounds for Termination At the outset, the Court rejects SCE’s contention that MBC terminated the Subcontract for reasons other than those stated in its August 2, 2017 notice of default (see Action No. 1, NYSCEF Doc No. 403 ["Notice of Default"]).4 The Notice of Default recited, in relevant part: The rate of asbestos removal and waste-out on this project remains insufficient, SCE continues to fall further behind schedule, and SCE has not presented a viable work plan and schedule. SCE is hereby on notice that it has 48 hours to provide an acceptable work plan and project schedule, and add sufficient manpower, supervision, and equipment to maintain the project schedule…. If SCE fails to meet this demand, on Monday, August 7, 2017, [MBC], without any further notice, will hold SCE in default…and will pursue any or all of the options described under Article 9 of the Subcontract Agreement. In suggesting that the Subcontract was terminated for other reasons, SCE relies on language in MBC’s August 9, 2017 termination letter (see NYSCEF Doc No. 431 at 6) referring to SCE’s “poor project management, lack of qualified workers, a flood, and numerous OGS and NYS Department of Labor health and safety violations in asbestos abatement” (NYSCEF Doc No. 5 ["Termination Letter"]). It is clear from the context, however, that MBC was summarizing the deficiencies raised by OGS at SCE’s July 14, 2017 responsibility hearing to make the point that SCE had “fallen even further behind schedule” in the weeks following the hearing (id.). But MBC’s stated basis for termination of the Subcontract was SCE’s failure to comply with the Notice of Default by providing a “work plan and updated project schedule within two business days…on how [SCE] proposed to complete its work by the…contract deadline” (id.).5 3. Lack of Baseline Schedule SCE argues that MBC’s termination of the Subcontract for delay was wrongful because OGS failed to provide MBC with a baseline schedule for the entire Project (“Baseline Schedule”), and MBC therefore had no basis to deem SCE’s work untimely. SCE’s argument is based on the following language within Article 3 of the Subcontract, entitled “Schedule of Subcontractor’s Work”: 1. [SCE] knows that [MBC] must complete the work of the Prime Contract on or before September 15, 2018, and it is therefore understood and agreed that that the Subcontract Work shall be entirely completed on or before September 15, 2018 (Subcontract Completion Date) and to that end [SCE] will perform the amount of Work that is necessary to permit [MBC] and other subcontractors to complete their work in the time allowed under the Prime Contract. 2. [SCE] agrees to perform its Work in the sequence and within the time specified in the construction schedule for this Project as prepared and as revised from time to time by [MBC]. [MBC] shall have the right to determine the time, order and priority in which the various parts of the Subcontract Work shall be performed. According to SCE, the term “Project” is defined in the Subcontract as pertaining to the entire renovation Project (see Subcontract at 1),6 and OGS failed to supply a Baseline Schedule reflecting the work of all three prime contractors until December 2018, more than 16 months following SCE’s termination. SCE argues that the absence of a Baseline Schedule hampered its ability to create a recovery schedule and left MBC unable “to establish that SCE was delaying the Project” (NYSCEF Doc No. 431 at 13). In interpreting the Subcontract, the Court must be “guided by basic principles of contract interpretation which instruct that a contract should be construed to give effect to the parties’ intent as gleaned from the four corners of the document itself, provided that its terms are clear and unambiguous” (Elmira Teachers’ Assn. v. Elmira City School Dist., 53 AD3d 757, 759 [3d Dept 2008], lv denied 11 NY3d 709 [2008]). “[A] contract should be interpreted according to its plain and ordinary meaning and in such a manner as to give effect to all of its provisions” (id. [citations omitted]). “[E]xcessive emphasis is not placed upon particular words or phrases” (South Rd. Assoc., LLC v. International Bus. Machs. Corp., 4 NY3d 272, 277 [2005]), and “[p]articular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby” (Atwater & Co. v. Panama R.R. Co., 246 NY 519, 524 [1927]). As MBC correctly observes, the Subcontract does not even refer to a Baseline Schedule, much less make OGS’s preparation and delivery of a Baseline Schedule a condition precedent to MBC’s right to insist that SCE timely perform its work (see NYSCEF Doc No. 494 at 8-9). Rather, the plain language of Article 3 obliged SCE to perform its work in accordance with a schedule “as prepared and as revised from time to time by [MBC]” (Subcontract, art 3, §2). The Subcontract gave MBC “the right to determine the time, order and priority” in which SCE’s work was to be performed (id.), and SCE was obliged to perform its work at a rate sufficient to allow MBC to complete the entire Prime Contract within the time allotted by OGS (see id., §1).7 And if SCE failed “to supply materials or workers so as to progress its Work in accordance with [MBC's] schedule,” MBC could take over SCE’s work (id., art 7, §9). Moreover, contrary to the arguments now being advanced by its counsel, SCE’s corporate representative, Nate Butler, fully acknowledged in his deposition that “the schedule that [MBC] was to be completing as per their [Prime C]ontract with OGS and the schedule [SCE] had [with MBC], were two different schedules” (NYSCEF Doc No. 497 at 58-59, 141; cf. Bast Hatfield, Inc. v. Joseph R. Wunderlich, Inc., 78 AD3d 1270, 1274 [3d Dept 2010]). The Court therefore rejects SCE’s contention that the “only schedule [it] was contractually bound to follow was the [Baseline Schedule]” (NYSCEF Doc No. 565 at 4). The Subcontract obliged SCE to perform under a schedule established by MBC, and the Notice of Default was issued based on SCE’s failure to adhere to that contractual obligation.8 4. Yellow Glue Next, SCE argues that the discovery of “Yellow Glue” was an unforeseen field condition that entitled it to an equitable extension of time (NYSCEF Doc No. 431 at 13), thereby rendering it improper for MBC to have relied “upon the delay caused by the Yellow Glue removal in its decision to terminate SCE” (id. at 15). A primary component of SCE’s abatement work was the removal and disposal of asbestos fireproofing material (see NYSCEF Doc No. 495, 6). SCE claims that it discovered a Yellow Glue substance underneath the fireproofing material in or about March 2017 (see id., 15). MBC vigorously disputes the timing of the discovery, asserting that the parties “discovered a yellow glue material…underneath the asbestos fireproofing material on the structural steel and metal decking in the building, in or around July of 2017″ (id.). MBC does not dispute SCE’s characterization of the Yellow Glue as an unforeseen condition,9 but it maintains that SCE’s Subcontract was not terminated due to the Yellow Glue. The Notice of Default was issued based on SCE “continu[ing] to fall further behind schedule” without “present[ing] a viable work plan and project schedule,” and MBC ultimately terminated the Subcontract based on SCE’s failure to timely and properly respond to the Notice of Default. Even if the Yellow Glue represented an unforeseen field condition that caused or contributed to SCE’s delays, and regardless of exactly when the Yellow Glue first was discovered, it remained incumbent upon SCE to respond to the persistent delays cited in MBC’s Notice of Default by timely presenting a viable recovery plan addressing the challenges posed by the discovery of the Yellow Glue. 5. Opportunity to Cure SCE contends that termination of the Subcontract was wrongful because MBC ignored the “immediate steps” it took “to correct the default alleged in the Notice of Default” (NYSCEF Doc No. 431 at 10). It was MBC that “obstructed and ignored [SCE's cure] efforts and terminated SCE without cause” (id.). Under Article 9, SCE had “two working days after receipt of” the Notice of Default “to commence and continue satisfactory correction of such default with diligence and promptness” (Subcontract, art 9, §2 ["Section 9.2"]). The Termination Letter recited that SCE did not provide “any type of work plan and updated project schedule within two business days…on how [SCE] proposed to complete its work.” In arguing that it took immediate and appropriate steps to cure, SCE relies on the affidavit of its general counsel, Gene Talerico (see NYSCEF Doc No. 105 ["Talerico Aff."]). “Immediately upon receiving the Notice of Default, SCE verbally contacted [MBC] and agreed to conference with its subcontractors and [MBC] as soon as possible to develop an acceleration plan and a revised schedule” (id., 11 & Ex. B [NYSCEF Doc No. 543]).10 “[MBC]‘s Vice President, James Hogel, represented to SCE that SCE would have the opportunity to correct the issues identified in the Notice of Default” (Talerico Aff., 12). On the following day, August 3, 2017, Talerico “provided written notice to [MBC], reiterating SCE’s willingness to accelerate and take other corrective action” (id., 13). “Despite SCE’s willingness to meet as early as possible, [MBC] delayed the coordination meeting with SCE and its subcontractors from August 7, 2017 to August 8, 2017″ (id., 14). MBC then “inexplicably canceled the meeting the night before the conference” (id., 15). SCE nonetheless “proceeded with the meeting, and developed an acceleration plan and revised schedule” (id., 16). MBC responds that SCE has not presented any evidence that it commenced efforts at correcting its default within two business days, as required by Section 9.2 (see NYSCEF Doc. No. 494 at 7). MBC asserts that SCE’s scheduling of the August 7, 2017 meeting “did not comply with instructions provided in the [Notice of Default] for what measures SCE needed to take to commence and continue satisfactory correction of the default. The fact that [MBC] canceled a meeting with SCE on August 7, 2017 is irrelevant, as any such meeting was not contractually required, would not have satisfied the Subcontract’s two-day deadline, and [MBC]‘s right to terminate SCE had already been triggered by August 7, 2017″ (id. at 8). The Court concludes that neither side has demonstrated its entitlement to summary judgment on this point. SCE has submitted proof that it commenced efforts to cure the alleged default within two business days of the Notice of Default through oral and written communications with Hogel directed at scheduling a meeting with MBC and other affected parties to develop a recovery plan satisfactory to MBC. Whether those efforts were commenced and continued “with [the] diligence and promptness” required by Section 9.2 depends on the substance of the communications between Talerico and Hogel, which is not addressed in Hogel’s affidavit in opposition to SCE’s motion (see NYSCEF Doc No. 505,
