Consigli & Associates, LLC v. Maplewood Senior Living, LLC

Background

Consigli & Associates, LLC was the construction manager, and Maplewood Senior Living, LLC was the owner’s agent for a construction project. Consigli sued for breach of contract and wrongful termination. Maplewood asserted counterclaims for breach of contract, alleged violations of sections 39 and 39-A of the New York Lien Law, breach of the implied duty of good faith and fair dealing, and fraud.

The parties’ contract included detailed procedures for changes to the work, claims for extra compensation, delay claims, and termination. The project’s completion deadline was extended at least to December 4, 2019. The project was not completed by that date, and the project was further affected by the COVID-19 pandemic. Maplewood purported to terminate the contract for cause on March 23, 2021.

The parties filed cross-motions for partial summary judgment. Summary judgment is judgment without a trial when the evidence shows there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law.

Maplewood’s motion on Consigli’s payment claims

Maplewood’s motion addressed Counts Two and Four of Consigli’s second amended and supplemental complaint. Count Two sought payment for extra work, delay-related costs, and COVID-19-related subcontractor costs. Count Four sought payment for work involving damage to adjacent structures.

The court granted Maplewood’s motion as to Consigli’s claims based on CR-534 and CR-633, finding that Consigli had not shown timely notice under the contract. The court also granted the motion as to the non-design-related delay portions of CR-351 and the portions of Count Four based on CR-47, CR-52, and CR-136.

The court otherwise denied Maplewood’s motion on these claims. Triable factual issues remained concerning whether Consigli gave sufficient notice and received authorization for CR-450, CR-471, and CR-553 Revision 1. The court also allowed Consigli’s claims involving COVID-19-related delays, including CR-617, CR-687, and an unlabeled subcontractor-cost claim, to proceed because a factfinder could treat the pandemic as a continuing delay and find that the claims were timely.

The court likewise allowed claims involving delays allegedly caused by design changes, including CR-144, CR-544, CR-553 Revision 1, CR-689, CR-714, and the design-related portion of CR-351. The court denied the motion as to CR-45 because a written change order could be read to permit Consigli to submit that claim later if Maplewood made a claim under the project’s insurance program.

For adjacent-structure work, the court denied Maplewood’s motion as to CR-12, CR-42, and CR-170. A factfinder could determine that CR-12 involved an emergency affecting life or property, that CR-42 provided timely notice of Consigli’s disagreement with payment terms, and that Consigli had advance authorization for the work underlying CR-170. The court granted Maplewood’s motion as to CR-47 and CR-52 because the record did not establish timely notice, and as to CR-136 because the claim was settled through another change order.

The court also rejected Maplewood’s argument that Consigli waived all disputed claims through its final payment application. The court reasoned that the disputed claims had not become agreed change orders or other agreed changes to the contract.

Wrongful termination

Both parties moved for summary judgment on Count Seven, Consigli’s wrongful-termination claim. The court denied both motions.

Maplewood argued that Consigli could not prove damages. The court found that argument premature because the contract’s termination-for-convenience damages provision could potentially provide a basis for recovery up to the adjusted contract sum, even if some other payment claims failed.

Consigli argued that termination after substantial completion was wrongful as a matter of law. The court rejected that argument because the relevant legal rule concerns substantial performance of the contract, not merely substantial completion of the structure. A factfinder could determine that Consigli had not substantially performed, including because of disputed allegations involving damage to adjacent buildings, unpaid subcontractors, and mechanics’ liens. The court also rejected Consigli’s argument that Maplewood waived its termination rights by waiting to terminate.

Consigli’s motion on Maplewood’s counterclaims

Consigli moved for summary judgment on Maplewood’s breach-of-contract counterclaim. The court granted the motion in part and denied it in part.

The court limited the damages Maplewood could pursue. The contract’s waiver of consequential damages barred some damages for harm to adjacent property, including claimed lost profits from a hypothetical sale and related carrying costs. The contract’s liquidated-damages provision also limited general and consequential damages for delay in completing the project, including certain lease payments, storage fees, and other costs tied to delayed occupancy.

The court allowed Maplewood to pursue damages that could qualify as direct damages for actually remedying harm to adjacent property and resulting losses, if Consigli were found responsible. It also held that Maplewood could pursue damages it incurred itself or indemnification for liabilities imposed on it by third parties, but Maplewood could not pursue claims belonging to third parties without establishing a basis for third-party standing. The court found insufficient evidence to determine the precise categories and amounts of improper third-party damages.

The court denied summary judgment based on the anti-subrogation rule because the record did not show whether the claimed losses were covered by the relevant insurance policy. The court also denied Consigli’s motion to the extent it relied on Maplewood’s allegedly wrongful termination, because a factfinder could determine that Consigli was terminated for cause for violating a material contract provision.

Fraud and lien counterclaims

The court granted Consigli summary judgment on Maplewood’s fraud counterclaim. Maplewood had not produced clear and convincing evidence that Consigli made a knowingly false material statement or breached a duty to disclose information about insurance charges. The emails cited by Maplewood were, at most, loose or ambiguous references to insurance costs and did not establish an actionable misrepresentation.

The court also granted Consigli summary judgment on Maplewood’s claim for damages based on willful exaggeration of a mechanic’s lien. Consigli had not sought to enforce a mechanic’s lien, and the court held that Maplewood could not use sections 39 and 39-A of the New York Lien Law to assert the damages claim in this action. Allegations that liens were exaggerated in support of other counterclaims did not make lien validity an issue requiring a ruling under those provisions.

Disposition

The court held that Maplewood’s motion for summary judgment was granted in part and denied in part. Consigli’s motion for summary judgment was also granted in part and denied in part. Consigli’s remaining claims included Count One, specified portions of Count Two, specified portions of Count Four, and Count Seven. Maplewood’s remaining counterclaims included Count One, subject to the damages limitations described by the court, and Count Three, which was not at issue on the motion.