HONORABLE Justice LEONARD B. AUSTINdecisions.courts.state.ny.us/10jd/nassau/decisions/index/index_new/... · 100 Quentin Roosevelt Boulevard Garden City, New York 11530 - against

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INDEX

NO. 15809-SUPREME COURT - STATE OF NEW YORK

IAS TERM PART 16 NASSAU COUNTY

PRESENT:HONORABLE LEONARD B. AUSTINJustice Motion RID: 2-10-

Submission Date: 2-10-Motion Sequence No. : 001,002/MOT D

BLUE WATER ENVIRONMENTAL, INC.

Plaintiff,

COUNSEL FOR PLAINTIFFWesterman, Hamilton, Sheehy,Aydelott & Keenam , LLPGarden City Center - Suite 502100 Quentin Roosevelt BoulevardGarden City, New York 11530

- against -

INCORPORATED VILLAGE OFBAYVILLE, NEW YORK,

Defendant.

COUNSEL FOR DEFENDANTFeinstein & Nisnewitz, P .42-40 Bell BoulevardBayside, New York 11361

ORDER

The following papers were read on Defendant's motion for summary judgmentand Plaintiff's cross-motion to strike Defendant's fifth affirmative defense:

Notice of Motion dated January 27, 2006;Affidavit of Donald Sioss sworn to on January 26, 2006;Affirmation of Sheldon Feinstein , Esq. dated January 26, 2006;Defendant's Memorandum of Law;Notice of Motion dated January 30 2006;Affrmation of Robert J. Fryman , Esq. dated January 30 , 2006;Affidavit of Michael Posillico sworn to on January 30 , 2006;Plaintiff' s Memorandum of Law;Affidavit of Donald Sioss sworn to on February 8, 2006;Affirmation of Sheldon Feinstein , Esq. dated February 8, 2006;Affidavit of Michael J. Posillico sworn to February 10 , 2006;Affirmation of Robert J. Fryman, Esq. dated February 10, 2006.

BLUE WATER ENVIRONMENTAL , INC. v. INCORPORATED VILLAGE OFBA YVILLE , NEW YORKIndex No. 15809-

Defendant moves pursuant to CPLR 3212 for summary judgment dismissing the

complaint. Plaintiff cross-moves pursuant to CPLR 3211 (b) to dismiss Defendant's fifth

affirmative defense.

BACKGROUND

This is an action for breach of a public works contract. Plaintiff Blue Water

Environmental , Inc. ("Blue Water ) entered into a contract with Defendant Incorporated

Village of Bayville ("Vilage ) to perform certain maintenance and construction work at

the Mill Neck Creek marina located in Bayvile, New York. The contract called for Blue

Water to dredge and dispose of approximately 6,000 cubic yards of waste material,

replace the boat ramp and pavement and restore the site to its prior condition.

The Village initially solicited bids for the project in October 2003. Two bids were

submitted, one by Blue Water in the amount of $1 235,300 and one by Newborn

Construction in the amount of $1 076,000. Donald Sioss is the chief civil engineer of

H2M Group ("H2M"), the engineering consulting firm which designed the project for the

Village and inspected the work as it was being performed.

After the bids were received, Sioss spoke with Michael Posillico , the President of

Blue Water, concerning Blue Water s calculation of the cost to dispose of the "dredge

spoil" or waste material. Posilico stated that Blue Water s estimate was based upon a

price of $70 per cubic yard quoted by the Town of Brookhaven s municipal waste

facility. Posillico and Sioss also discussed the possibility of using Transmi e, a private

disposal facility, whose cost to accept the dredge material was understood to be $30


per cubic yard; significantly less than that of the Town of Brookhaven. Because of the

contemplated cost savings to be realized by switching to Transmine, the Village

ultimately decided to reject both bids and to call for a new round of bidding on the

project.

In the new invitation for proposals , the Vilage permitted contractors to bid on the

boat ramp and the dredging work separately. Bidders were also encouraged to offer a

credit" , or package discount, as an incentive for the Village to award both jobs to the

same contractor. New bids were to be submitted by December 2 , 2003. Although two

other contractors submitted bids for the boat ramp, Blue Water and Newborn were the

only companies to bid on both projects. Newborn submitted a total bid for both

projects of $1 196 000 " and Blue Water submitted a combined bid of $945,000. The

Village awarded the contract to Blue Water. The parties formally executed a written

agreement on January 5 , 2004.

The contract provided that all work was to be performed in "strict accordance

with all regulatory agencies , including specifically the New York State Department of

Environmental Conservation ("DEC"). On January 18 , 2002 , the DEC had issued a

permit to replace the boat ramp. A second permit to dredge 10,000 cubic yards of spoil

and dispose of it at an upland landfill was granted by the DEC on March 14 , 2003. The

dredging permit authorized the removal of material to a depth of six feet below the

apparent low water level. The dredging permit contained a special condition prohibiting

BLUE WATER ENVIRONMENTAL , INC. v. INCORPORATED VILLAGE OFBAYVILLE , NEW YORKIndex No. 15809-

dredging from June 1 to September 30 in order to protect spawning shellfish and finned

species. In both permits , the DEC reserved the right to modify, suspend or revoke the

permit based on a material change in environmental conditions or other newly

discovered information.

The contract contained a "no damages for delay" clause which provided as

follows:

The contractor and all subcontractors agree tohold harmless from any and all claims for lossor damages of any nature against the owner orengineer for delays in commencementperformance or completion of the contractregardless of whether said delays are , ormaybe, caused by the owner, engineer, or anygovernmental agency." (Agreement 11 3.

The contract further provided that Blue Water was to commence work on or before the

date specified in the owner s written notice to proceed and to complete the project

within 60 consecutive calendar days. Blue Water also agreed to pay, as liquidated

damages , the sum of $500 for each consecutive calendar day that the work was not

completed.

H2M , on behalf of the Village, initially directed Blue Water to begin construction

operations on January 8 and to have the work fully completed by March 8 , 2004.

However, because ice on the creek interfered with dredging, Blue Water requested that

the starting date be changed to February 14 and the completion date to April 16 , 2004.

Although H2M refused to alter the starting date , it did extend the completion date to

BLUE WATER ENVIRONMENTAL, INC. v. INCORPORATED VILLAGE OFBA YVILLE , NEW YORKIndex No. 15809-

March 31. Nonetheless , because of weather conditions, Blue Water was not able to

assemble its equipment and make the site ready until late in February.

On March 16 , 2004 , David Relyea , the owner of a shellfish hatchery located in

Bayville, wrote to the Department of Environmental Conservation , noting that dredging

had not yet begun. Relyea voiced concern that, if dredging were to be performed in

April and May, it would damage the larval and juvenile oysters in his hatchery and have

a negative impact upon his business. Relyea requested the DEC to postpone the

dredging until October.

On March 24 , 2004 , Sioss, on behalf of H2M , wrote to Blue Water directing it to

cease operations on the project. Citing regulations of the Army Corps of Engineers,

Sioss instructed Blue Water to remove all materials and equipment located at the site

and to await notification from H2M as to when work could recommence. On March 26

2004 , the DEC sent the Village a notice of intent to modify the dredging permit. The

amendment authorized the Vilage to modify the area of the site used for staging

materials and removing water from the dredge spoil. The amendment also changed the

prohibited dredging period to April 13 to September 30 , 2004. Absent an objection or

request for a hearing, the modification was to become effective on April 13, 2004.

On March 29 , 2004 , Julia Schneider, an environmental scientist at H2M , wrote to

the Army Corps of Engineers requesting a permit for the marina dredging and boat

ramp rehabilitation project. In her letter, Ms. Schneider stated her belief that the project

BLUE WATER ENVIRONMENTAL, INC. v. INCORPORATED VILLAGE OFBAYVILLE , NEW YORKIndex No. 15809-

was covered under a pre-existing nationwide permit. On June 3 , 2004 , the Corps of

Engineers advised that an individual permit was not required because the work was

covered by two nationwide permits which had been issued by the Corps of Engineers.

The opinion letter from the Corps of Engineers contained a special condition that

dredging not be performed between April 13 and September 30 , 2004 , the same period

during which dredging had been prohibited by the DEC.

Meanwhile, on March 29, 2004 , Blue Water had advised the Village that it would

comply under protest with the Village s directive to cease operations on the project.

Blue Water also notified the Village that it intended to assert a claim for additional costs

which were occasioned by the delay. On July 28 , 2004 , Blue Water submitted an

itemized claim to the Vilage for additional costs in the amount of $436 970.77. The

delay damages claim was allocated as to equipment and materials , labor and

miscellaneous charges.

On August 31 2004 , H2M notified Blue Water to recommence operations on the

project on September 20 , 2004. On September 3 , 2004 , Blue Water filed a notice of

claim with the Village for delay damages in the adjusted amount of $436, 128. , plus

interest. On September 7 2004 , Blue Water wrote to H2M agreeing to "mobilze

immediately but asserting that they could not begin dredging until October 11.

According to Sioss , Blue Water did not actually start dredging until October 20 and

completed dredging nine weeks later on December 22. The project was substantially


completed on January 26 and fully completed on April 7 , 2005.

During the course of performing the contract, Blue Water determined that it

would be necessary to remove certain floating dock piles and then reinstall the piles

after the completion of dredging. Because removal of the piles was not listed as a

separate item of work in the contract, Blue Water requested extra payment for removal

and reinstallation of the piles. Sioss , the chief engineer for H2M, found that the piles

were an existing condition of which the contractor should have been aware prior to

bidding on the project. Thus , Sioss ruled that the cost of removal and reinstallation of

the piles was included in the contract and denied the request for extra payment.

second notice of claim , seeking damages of $13 767.88 for extra work in connection

with the dock piles was submitted on December 27 2004.

On May 18 , 2005, Blue Water submitted its third notice of claim , seeking

$159 034.50 for work performed under the contract and an amount in excess of

000,000 for diminished ability to "bid , bond , and perform other projects" based upon

the Vilage s delay of Blue Water s performance of the contract.

In this action , Plaintiff seeks to recover damages either in breach of contract (first

cause of action) or quantum meruit (second cause of action). Defendant now moves

for summary judgment dismissing the complaint except for $159,034. , the unpaid

1 Paragraph 28 of the contract provides

, "

The engineer shall determine theamount, quality, acceptability and fitness of all parts of the work; shall interpret theplans , specifications , contract documents, and any extra work orders; and shall decideall other questions in connection with the work.

BLUE WATER ENVIRONMENTAL , INC. v. INCORPORATED VILLAGE OFBA YVILLE, NEW YORKIndex No. 15809-

balance on the contract. Plaintiff cross-moves to dismiss the fifth affirmative defense

sounding in fraud.

DISCUSSION

Defendant's Motion for Summary Judgment

Delay Damages

The Vilage asserts that the "hold harmless" provision in the Agreement insulates

the Village from the contractor s delay damages claim. A clause which exculpates the

owner from liability to a contractor for damages resulting from delays in the

performance of the latter s work is valid and enforceable and is not contrary to public

policy, if the clause and the contract of which it is a part satisfy the requirements for the

validity of contracts generally. Corinno Civetta Construction COrD. v. City of New York

67 N.Y.2d 297 , 309 (1986). See also, Kalisch - Jarcho. Inc. V. City of New York

Y. 2d 377 , 384 (1983).

Exculpatory clauses purporting to preclude damages for all delays resulting from

any cause whatsoever are not read literally. Corinno Civetta Construction Corp. V. City

of New York supra. See also Norman Corp. v. County of Nassau , 27 A.D. 2d 936 (2

Dept. 1967). Generally, even with such an exculpatory clause, the contractor may

recover damages for (1) delays caused by the owner s bad faith or its wilful , malicious

or grossly negligent conduct; (2) uncontemplated delays; (3) delays so unreasonable

that they constitute an intentional abandonment of the contract by the owner; and (4)


delays resulting from the owner s breach of a fundamental obligation of the contract.

Corinno Civetta Construction Corp. v. City of New York supra at 309.

The delay in this case was caused by the directives from the DEC and the Army

Corps of Engineers prohibiting dredging between June and September, during which

time Blue Water was otherwise ready and able to perform the work. The Court

concludes that the Vilage was clearly in good faith in complying with these

administrative requirements. Moreover, the Village did not abandon the contract or

breach a fundamental obligation arising from the agreement.

Nonetheless , the Court concludes that there is a triable issue of fact as to

whether the DEC's modification of the prohibited dredging period in order to protect

local fish and shellfish breeding interests was within the contemplation of the parties.

As a contractor engaged in environmental clean-up, Blue Water was certainly on

notice of the general requirement to obtain permits from environmental agencies.

However, Blue Water was not necessarily aware of when the spawning season would

take place or the effect of the dredging operations upon the young shellfish. The

Village , particularly because of its proximity to Oyster Bay, in all likelihood had some

familiarity with the local shellfish industry. However, it has not been established that

the Village understood the effect that dredging would have upon the shellfish. Nor has

it been shown whether the Village had previously undertaken dredging in the Mill Creek

area. If the effect of dredging upon the shellfish was not within the contemplation of


the parties, Blue Water may be able to recover delay damages as an unanticipated

cost, despite the provision purporting to relieve the Vilage from liability.

Accordingly, Defendant's motion for summary judgment must be denied with

respect to Plaintiff's delay damages claim.

Extra work

The Vilage asserts that Blue Water s claim for extra work is precluded by its

engineer s determination which was issued pursuant to the dispute resolution provision

in the Agreement (1J 28). Alternate dispute resolution mechanisms are frequently

contained in agreements between private contractors and public or governmental

entities. Yonkers Contracting Co. v. Port Authority Trans-Hudson Corp. , 87 N.Y. 2d 927

(1996). An alternate dispute resolution agreement, like an arbitration agreement, must

be clear, explicit, and unequivocal (Thomas Crimmins Contracting Co. Inc. v. City of

New York , 74 NY2d 166, 171 (1989)), since the parties are surrendering "many of (their)

normal rights under procedural and substantive law of the State, and it would be unfair

to infer such significant waiver on the basis of anything less than a clear indication of

intent." Matter of Marlene Industries Cor Carmac Texties Inc. , 45 N.Y. 2d 327 , 334

(1978). This is true even where the parties did not provide for review of the arbitrator

determination. Yonkers Contracting Co. V. Port Authority Trans-Hudson Corp. supra

930.

It is not grounds for disqualification that the arbitrator is subject to a conflict of


interest or partiality. Id. The arbitrator may have a relationship with one of the parties,

as long as it is fully disclosed. Matter of Sie el Lewis 40 N. 2d 687, 690 (1976).

See also, Matter of Astoria Medical Grp. v. Health Ins. Plan of Greater N. , 11 N.Y. 2d

128, 133 (1962). Indeed, the arbitrator may even be an employee of one of the parties.

Yonkers Contracting Co. v. Port Authority Trans-Hudson Corp. supra at 929. Thus

the parties are almost completely free to agree upon the identity of the arbitrator (Id.

especially if the arbitrator has a particular expertise.

689-90.

The dispute resolution provision in the Agreement between Blue Water and the

Vilage appears to be binding on both of the parties to the contract. Although Sioss,

the chief engineer, had a close relationship to the Vilage, he was not a Vilage

employee. Sioss was clearly qualified to resolve the issue of whether removal of the

piles was extra work , even if he was somewhat partial. Paragraph 28 specifically refers

to arbitrating questions concerning "extra work orders." Because there is no evidence

that Sioss ' determination was "infected by fraud , bad faith , or palpable error " his ruling

is binding upon Blue Water. Tufano Contracting Corp. v. Port of New York Auth. , 18

A.D. 2d 100 (2 Dept.), 13 N. Y. 2d 848 (1963). See also, Ardsley Construction Co. Inc.

v. Port Authority of New York and New Jersey, 54 N.Y. 2d 876, 877 (1981).

Accordingly, Defendant's motion for summary judgment with regard to Plaintiff'

claim for extra compensation for removing and reinstallng the piles should be granted.

BLUE WATER ENVIRONMENTAL , INC. v. INCORPORATED VILLAGE OFBAYVILLE, NEW YORKIndex No. 15809-

Lost profits

The Village asserts that Blue Water may not maintain a claim for lost profits

because such an item of damages was not foreseeable or within the contemplation of

the parties. Ashland Mgt. Inc. v. Janien , 87 N. Y. 2d 395, 403 (1995); and Atkins

Nutritionals. Inc. v. Ernst & Young LLP , 301 A.D. 2d 547 , 549 (2 Dept. 2003).

The rules governing the recovery of lost profits as damages for breach of

contract are precise and long established. Kenford Co. Inc v. County of Erie , 67 N.

2d 257 , 261 ( 1986). To recover lost profits , it must be demonstrated with certainty that

such damages have been caused by the breach , and the alleged loss must be capable

of proof with reasonable certainty. See, Kasem v. Philip Morris. USA, 244 A.D. 2d 532

Dept. 1997). The lost profits may not be merely speculative, possible or imaginary

but must be directly traceable to the breach. See Kenford Co. Inc. v. County of Erie

supra at 261. See also Joseph v. Rubinstein Jewelry Mfg. Co.. Inc. , 18 A.D. 3d 615

Dept. 2005). The damages may not be remote or the result of other intervening

causes. See, Cambridge Assocs. v. Town of North Salem , 282 A.D. 2d 702 (2 Dept.

2001 ).

Blue Water s third notice of claim alleges, in substance , that it was prevented

from bidding on and performing other projects because its performance of the Mil

Creek contract was delayed by the Vilage. A loss of business by Blue Water may have

been within the contemplation of the parties, if performing the dredging in the Fall, as


opposed to the Spring, caused equipment, personnel , or working capital that was

needed for other jobs to be unavailable. However, Blue Water has not submitted any

proof, by affidavit or otherwise , as to the manner in which delay in performance caused

the contractor to be unable to bid on or perform other projects. Thus, with the Village

having met its burden , it became incumbent on Blue Water to come forward with

evidentiary proof to avoid summary judgment. Zuckerman v. City of New York , 49 N.

2d 557 (1980). Blue Water has failed to meet this burden.

Accordingly, Blue Water has not shown that its claim for lost profits is capable of

proof with reasonable certainty. Because Blue Water s damages appear to be merely

speculative, Defendant's motion for summary judgment must be granted as to Plaintiff'

lost profits claim.

Plaintiff' s Cross-Motion to Dismiss the Fifth Affirmative Defense

In its fifth affirmative defense, the Village alleges the contract is unenforceable

because of fraud in the inducement.

After the bids had been received , Blue Water advised the Village that based

upon savings to be realized by using Transmarine to dispose of the dredge spoil , Blue

Water was prepared to submit a bid of $665,000.

In purported reliance upon this representation , the Vilage rejected the initial bids

and called for a second round of bidding.

In the second round of bidding, Blue Water submitted a bid for $945 000 which

BLUE WATER ENVIRONMENTAL , INC. v. INCORPORATED VILLAGE OFBA YVILLE, NEW YORKIndex No. 15809-

was $280,000 dollars higher than the bid it had represented it would be submitting.

Blue Water s bid on the second round was over $130 000 less than the lowest bid on

the first round of bidding and $251 000 less that the bid submitted by the next lowest

bidder on the re-bid.

The Village asserts that it put the project up for a second round of bidding based

upon Blue Water s representation. The second round of bidding delayed the

commencement of the project. Had the Village not put the project up for a second

round of bidding, the work would have commenced in November 2003 and would have

been completed by January 2003.

The Village asserts that the contract is void or voidable because of Blue Water

misrepresentations thus barring Blue Water from maintaining an action on the contract.

A party seeking fraud based recision must establish "

...

a knowing

misrepresentation, which is intended to deceive another party and to induced them to

act upon it, causing injury (citations omitted). Sokolow. Dunaud. Mercadier & Carreras

LLP v. Lacher, 299 A.D.2d 64, 70 Dept. 2002). "(F)raud in the inducement renders

the obligation voidable based upon facts occurring prior of subsequent to its execution

(citation omitted). Dalessio v. Kressler, 6 A. 3d 57 , 61 (2 Dept. 2004).

A contract that is voidable for fraud may be ratified by the party to whom the

false representation was made. Strauss v. Title Guarantee and Trust Co. , 284 N.Y. 41

(1940). The party to whom the false representation was made may ratify the contract

after that party has knowledge of the material facts relating to the transaction. New


York State Medical Transporters Assoc. Inc. v. Perales , 77 N. 2d 126 (1990); and

Strauss v. Title Guarantee and Trust Co. supra.

Furthermore , a contract is not fraudulently induced if the misrepresentation could

have been discovered through the exercise of due diligence. See, Danann Realty Corp.

v. Harris , 5 N. 2d 317 (1959); and Cohen v. Cerier, 243 A. 2d 670 (2 Dept., 1997).

The representation made by Blue Water as to the significant savings to be

achieved by using Transmarine was relevant but did not effect the essential terms of the

dredging and boat ramp rehabiliation contract. While the Village relied upon these

representations in rejecting the first round of bids , the Vilage was well aware of the

actual cost savings when it received and accepted Blue Water s bid on the second

round. Thus, any misrepresentation by Blue Water as to the extent of the costs savings

could not have induced the Village s assent to the agreement.

Therefore , Blue Water s cross-motion to dismiss the fifth affirmative defense

must be granted.

Partial Summary Judgment

Breach of Contract

In moving for summary judgment, the Village did not request dismissal of

Plaintiff' s claim for $159 034. , the unpaid balance of the contract price. The Vilage

concedes that the project was fully completed and has not raised any objection to the

quality of the work.


CPLR 3212(b) provides, " If it shall appear that any party other than the moving

party is entitled to a summary judgment, the court may grant such judgment without the

necessity of a cross-motion." Furthermore , CPLR 3212(e) authorizes the court to grant

partial summary judgment as to one or more causes of action or part thereof. See,

Dunham v. Hillco Construction Co.. Inc. , 89 N.Y. 2d 425 (1996).

Upon searching the record , it appears, as a matter of law, that Blue Water is

entitled to judgment on its claim for the unpaid portion of the contract price which is

subject to this motion. See, Costello v. Hapco Realty. Inc. , 305 AD. 2d 445 (2 Dept.

2003); and Tow v. Moore , 24 AD. 2d 648 (2 Dept. 1965). Accordingly, Plaintiff'

claim for the unpaid portion of the contract price is severed and the Court, pursuant to

CPLR 3212(b) and (e) and on its own motion , grants partial summary judgment on that

claim.

Quantum Meruit

The complaint alleges a cause of action in quantum meruit. Recovery cannot be

had in quantum meruit unless the written contract between the parties has been

rescinded, is unenforceable or is abrogated. Conlon v. Teicher, 8 AD.3d 606 (2 Dept.

2004); and Waldman v. Englishtown Sportswear. Ltd. , 92 AD.2d 833 Dept. 1983).

Blue Water has not sought to have the contract rescinded or abrogated. In fact

Blue Water seeks recovery on the contract. Thus, it cannot, as a matter of law,

successfully prosecute its quantum meruit claim.

BLUE WATER ENVIRONMENTAL , INC. v. INCORPORATED VILLAGE OFBAYVILLE , NEW YORKIndex No. 15809-

Therefore, the second cause of action must be dismissed.

Accordingly, it is,

ORDERED, that Defendant's motion for summary judgment is granted with

regard to Plaintiff's claim for extra work and lost profits and is denied with regard to

Plaintiff' s claim for delay damages; and it is further,

ORDERED , that Plaintiff's cross-motion to dismiss the fifth affirmative defense is

granted; and it is further

ORDERED, that , on the Court's own motion , Plaintiff is granted partial summary

judgment on its breach of contract claims in the sum of $159,034.50 together with

interest from April 7 , 2005. Entry of judgment is hereby stayed pending the trial of this

matter; and it is further

ORDERED , that on the Court's own motion , Defendant is granted partial

summary judgment dismissing the second cause of action; and it is further,

ORDERED, that counsel for the parties shall appear for a conference to

schedule the trial of this matter on July 11 , 2006 at 9:30 a.

This constitutes the decision and Order of the Court.

Dated: Mineola, NYJune 14, 2006

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Documents

HONORABLE Justice LEONARD B. AUSTINdecisions.courts.state.ny.us/10jd/nassau/decisions/index/index_new/... · 100 Quentin Roosevelt Boulevard Garden City, New York 11530 - against