Charter Contracting Company, LLC v. Orange & Rockland Utilities, Inc.

Background

Charter Contracting Company, LLC sued Orange & Rockland Utilities, Inc. and Consolidated Edison Company of New York, Inc. Charter alleged breach of contract and breach of the implied covenant of good faith and fair dealing under New York law. The dispute arose from a contract under which Charter agreed to perform environmental remediation at a defunct manufactured-gas plant in Haverstraw, New York.

Charter alleged that it encountered unexpected subsurface obstructions and other difficulties while excavating and disposing of contaminated soil. It claimed the defendants breached the contract by providing defective or inaccurate information about site conditions, refusing additional contract modifications, refusing to allow disposal at other facilities, refusing to pay for additional work, and failing to make timely payments for undisputed contract work. Charter also alleged that the defendants acted unfairly by withholding payments, blaming Charter for unexpected conditions and costs, asserting unjustified offsets, and refusing to pay amounts it said were undisputed.

The defendants moved to dismiss the first amended complaint under Rule 12(b)(6), which tests whether a complaint alleges enough plausible facts to support legal relief. Charter separately moved to strike a declaration submitted in support of the dismissal motion.

Breach of Contract

The court held that Charter did not plausibly allege that the defendants breached the contract by providing defective project designs or inaccurate site information. The contract did not require the defendants to provide designs or specifications of a particular quality. The contract also stated that Charter had examined the contract documents and was responsible for failing to examine the site or available information. Another provision stated that the defendants were not required to show subsurface conditions on drawings, plans, or specifications.

The court also held that Charter did not plausibly allege a breach based on the defendants’ refusal to approve additional contract modifications or pay for additional work. Article 13 addressed changes directed by the defendants and did not require changes in response to unexpected conditions. Article 16 established procedures for certain claims but did not require the defendants to accept proposed modifications. Article 22 required the defendants to investigate reported differing subsurface conditions, but it did not require them to approve every requested modification. The court noted that Charter alleged the defendants had approved one modification based on differing site conditions. The court concluded that the cited contract provisions did not require the defendants to approve further modifications or compensate Charter for the additional work described in the complaint.

As to late payments, the court found that Charter plausibly alleged that the defendants failed to pay approximately $946,823.09 for undisputed contract work within the time required by Articles 4 and 54. But Charter did not allege facts connecting the late payments to its claimed damages. Because causation is required to recover damages for breach of contract, the court dismissed this part of the contract claim as well.

Implied Covenant of Good Faith and Fair Dealing

The court dismissed Charter’s claim for breach of the implied covenant of good faith and fair dealing. Under New York law, that covenant is an implied duty in an express contract, but it does not create a separate claim when it is based on the same facts as a breach-of-contract claim. The court found that Charter’s good-faith allegations relied on the same alleged conduct as its contract claim and added only vague and conclusory assertions that the defendants acted in bad faith and with intentional ill-will.

Disposition

Judge Vincent L. Briccetti granted the defendants’ motion to dismiss. The court denied Charter’s motion to strike as moot because it relied only on the first amended complaint and the attached contract in deciding the dismissal motion. The Clerk was directed to terminate the motions and close the case. The opinion does not state that the dismissal was with or without prejudice.