Plato General Const. Corp/EMCO Tech Constr. v. DASNY, et al

2011 WL 5429516 (2d Dept, Nov 9, 2011)

Plato had a contract with DASNY for general construction at the Brooklyn College Library for $19.9 million.  For a number of reasons completion was delayed 526 days. Plato sued DASNY for $15.8 million for delay damages, and DASNY counterclaimed to recover liquidated damages for 411 days of delay at $1,000 per day.

After a non-jury trial, the Supreme Court held that DASNY could not rely on the no-damages-for-delay clause in the contract because DASNY had waived that clause. The court also found that DASNY had breached the contract on several grounds, and that the delays encountered by Plato had not been contemplated and were therefore excluded from the no-damage-for-delay clause. As a result the court awarded Plato damages of $10.1 million.

On appeal by DASNY the award to Plato was reversed. As this was a non-jury trial the Appellate Division (“App Div”) “may render the  judgment it finds warranted by the facts.” The decision by the App Div contains a thorough discussion of the no-damage-for-delay clause which is recommended reading for those interested in the subject.

Initially the App Div held that DASNY did not breach the contract by not abandoning use of the CPM schedule in favor using the common practice of two-week “lookaheads.”On this issue the App Div stated:

“Such conduct did not constitute a fundamental breach of contract by DASNY. At worst, DASNY could be charged with poor planning and administration, which would not render inapplicable the no-damage-for-delay clause.” (Apparently poor planning and administration by an owner should be contemplated by the contractor.)

The App Div also held other delays on the project should had been contemplated by the parties, and did not void the no-damages-for-delay clause:

“The contract specifically provided that Plato could not sue the owner for damages resulting from the acts or omissions of other contractors [which had been one of the grounds for Plato’s claim]. Further, since the contract provided for change orders, extra work and acts or omissions by other contractors, such delays were, on their face, contemplated by the parties at the time they entered into the contract.

“Further, the other prime contractors’ inaction, faulty performance and defaults under their contracts are delays precisely within the contemplation of exculpatory clauses.”

One wrinkle in this case was a not-so-usual provision 20.15 in the contract, which provided that Plato (1) could not cancel the contract based on DASNY’s breach of contract, and (2) waived “any and all rights and remedies to which Plato might otherwise be or become entitled to because of any wrongful act or omission of DASNY, except Plato’s right to damages.

The trial court held that this provision was not consistent with the no-damages-for-delay clause. The App Div however disagreed saying:

“Under New York law, Plato only had a right to cancel the contract if DASNY committed a fundamental breach of contract which would also constitute an exception to the no-damage-for-delay clause. However, since there was no fundamental breach of contract by DASNY and, therefore no grounds for Plato to cancel the contract, paragraph 20.15 was not applicable to this dispute.”

Key to the decision was the affect of change orders in which Plato was given compensation for 115 days of delay. As expected, the change orders set forth the specific reasons set forth in the change orders. They   also explicitly stated that there would be additional adjustments ‘upon conclusion of negotiations of the time impacts and verification of actual costs,’ The change orders did not, however, contain a reservation of rights with respect to the no-damages-for delay clause.

Plato argued that the change orders constituted a waiver of the no-damages-for-delay clause by DASNY.  The App Div rejected this argument holding that “a waiver of the no-damages-for-delay clause for delays for other reasons not mentioned in those change orders may not be inferred.”

The App Div then had to consider both the causes for delay that had been waived by DASNY and the delays attributable to Plato.

On the critical issue of concurrent delay it is worth setting forth the App Div’s statement of NY law:

“When claims are made for damages for delay, plaintiff must show that defendant was [solely] responsible for the delay; that these delays caused delay in completion of the contract (eliminating overlapping or duplication of delays); that the plaintiff suffered damages as a result of these delays; and plaintiff must furnish some rational basis for the court to estimate those damages, although obviously a precise measure is neither possible nor required.

“Requiring proof that “these delays caused delay in completion of the contract (eliminating overlapping or duplication of delays)” eliminates damages for “concurrent” delays. Concurrent delays occur where both parties are responsible for the same period of delay. Under such circumstances, recovery of delay damages is precluded, since defendant is not the sole proximate cause of the delay.

Here, Plato failed to establish that the delays specified in the two change orders which waived the no-damages-for-delay clause [solely] delayed completion of the project.  The project was plagued by delays from a number of sources.

As a result of the App Div concluded that “In view of the limited waiver of the no-damage-for delay clause, and the extensive evidence of concurrent delay, the award of delay damages to Plato was not warranted by the facts, and must be set aside.