UNITED STATES OF AMERICA v. WESTCHESTER FIRE INSURANCE COMPANY

Background

Kirlin Builders, LLC entered into a prime contract with the United States for work at the Johnson Veterinary Clinic at West Point, New York, and subcontracted with Profex, Inc. for $6,212,787. The subcontract required written submissions and approval for change orders, required written notice of disputes within a reasonable time, and stated that an untimely claim would be treated as waived or abandoned. It also allowed Kirlin to terminate Profex after notice of default and an opportunity to cure, recover losses and damages caused by default, and seek reasonable attorneys’ fees.

The parties disputed responsibility for substantial project delays and the handling of proposed change orders. Kirlin attributed about 600 days of delay to Profex and terminated Profex for cause on November 10, 2021. Kirlin claimed $330,754.49 in completion costs. Profex disputed the alleged defaults, challenged the termination, and argued that Kirlin had waived or abandoned the subcontract’s written-notice requirements through its conduct.

Profex brought claims for breach of contract, quantum meruit—a claim seeking the reasonable value of services outside an enforceable contract—and claims against Kirlin’s sureties. Kirlin filed a counterclaim against Profex and a third-party contract claim against Western Surety Company. The parties filed competing summary-judgment motions under Federal Rule of Civil Procedure 56, which permits judgment without a trial when no genuine dispute over a material fact exists and the moving party is entitled to judgment as a matter of law.

Profex’s Claims

The court held that Section 19 of the subcontract was a strict condition precedent to Profex’s claims. In other words, Profex had to comply with the written-dispute-notice requirement before pursuing its disputed payment claims. Applying New York law, the court concluded that Profex did not strictly comply with that requirement and that the evidence did not establish an indisputable mutual waiver by Kirlin and Profex.

The court found that Profex’s affidavits and other materials did not create a genuine factual dispute about waiver. It also relied on testimony from Profex personnel acknowledging that formal written dispute notices had not been submitted. The court therefore held that Profex’s breach-of-contract claim was barred by the subcontract’s notice provision and did not reach Defendants’ additional arguments concerning that claim.

The court separately held that Profex’s quantum meruit claim failed as a matter of law because a valid, enforceable subcontract governed the same subject matter, including the work, payment, and proposed change-order procedures. The court rejected Profex’s argument that the subcontract had been effectively abandoned, finding that the record showed the agreement remained operative during the project.

The court also held that Profex’s unjust-enrichment theory was not included in the complaint and could not be added for the first time in opposition papers. In addition, the court stated that the theory would be barred even if properly pleaded because the enforceable subcontract governed the same subject matter.

Kirlin’s Partial Summary-Judgment Motion

The court denied Kirlin’s motion for partial summary judgment on its counterclaim against Profex and its third-party complaint against Western Surety Company. Although Kirlin presented a ledger summarizing alleged completion payments, it did not provide invoices or other evidence establishing that the payments were made to complete Profex’s work or directly resulted from Profex’s alleged breach. The court found a genuine dispute about whether some or all of the claimed costs resulted from Profex’s default, Kirlin employees’ errors, or work beyond Profex’s scope.

Attorneys’ Fees and Disposition

The court held that Defendants were entitled to reasonable attorneys’ fees for the motion on which they prevailed because the subcontract contained an express fee-shifting provision. It denied fees for Kirlin’s unsuccessful partial-summary-judgment motion. The parties were referred to Magistrate Judge Judith C. McCarthy for a hearing to determine the reasonable amount of fees.

Judge Nelson S. Roman granted Defendants Kirlin Builders, LLC, Liberty Mutual Insurance Company, and Westchester Fire Insurance Company’s motion for summary judgment in its entirety. He denied Kirlin’s motion for partial summary judgment concerning Kirlin’s counterclaim and third-party complaint. The court directed the Clerk to enter judgment for those Defendants and for Western Surety Company, and to terminate the main action, counterclaim, third-party action, and motion at ECF No. 105. The conclusion identifies the proposed change-order numbers for which Defendants were entitled to summary judgment: 1–65, 75–86, 88–89, 92, 98, 100–107, 117, 123–125, 131, 134, 136, 138–144, 148–149, 151–152, 157, 161–168, 172–174, 176, 178–183, 186, and 189.