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Framan Mech., Inc. V. Dormitory Auth. of The

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Framan Mech., Inc. V. Dormitory Auth. of The 4/21/2019 Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. (2019 NY Slip Op 50583(U)) [*1] Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. 2019 NY Slip Op 50583(U) Decided on March 7, 2019 Supreme Court, Albany County Platkin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports. Decided on March 7, 2019 Supreme Court, Albany County Framan Mechanical, Inc., Plaintiff, against Dormitory Authority Of the State of New York, Defendant/Third- Party Plaintiff. ARCH INSURANCE COMPANY, Third-Party Defendant. A1114-14 Berkowitz & Associates, P.C. Attorneys for Framan Mechanical, Inc. (Ira E. Dorfman, of counsel) nycourts.gov/reporter/3dseries/2019/2019_50583.htm 1/23 4/21/2019 Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. (2019 NY Slip Op 50583(U)) 10000 Lincoln Drive East, Suite 202 Marlton, New Jersey 08053 Schiff Hardin LLP Attorneys for DASNY (Gary L. Rubin, of counsel) 666 Fifth Avenue, 17th Floor New York, New York 10103 Greenberg Traurig LLP Attorneys for DASNY (Jacqueline Greenberg Vogt) 500 Campus Drive, Suite 400 Florham Park, New Jersey 07932-0677 Baron Samson LLP nycourts.gov/reporter/3dseries/2019/2019_50583.htm 2/23 4/21/2019 Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. (2019 NY Slip Op 50583(U)) Attorneys for Arch Ins. Co. (Scott D. Baron, of counsel) 27 Horseneck Road, Suite 210 Fairfield, New Jersey 07004 Richard M. Platkin, J. This construction dispute arises out of renovation and abatement work performed by plaintiff Framan Mechanical, Inc. ("Framan") for defendant/third-party plaintiff Dormitory Authority of the State of New York ("DASNY"). Discovery is complete, and a trial-term note of issue has been filed. DASNY now moves for summary judgment, seeking an order dismissing (1) the Amended Verified Complaint filed by Framan in its entirety, and (2) the first through fourth counterclaims alleged by third-party defendant Arch Insurance Company ("Arch"). Arch cross-moves for partial summary judgment, seeking: (1) dismissal of the second, third and fifth causes of action alleged in DASNY's Amended Third-Party Complaint; and (2) an order capping the liquidated damages recoverable by DASNY on its first cause of action at a maximum of $528,000. BACKGROUND On or about May 14, 2013, Framan and DASNY entered into a contract ("Contract") for Framan to perform a bathroom renovation project, with associated asbestos abatement, at the New York City College of Technology ("Project") for a total price of $4,255,000. Arch, as surety, issued a performance bond ("Bond") on behalf of Framan, as principal, and in favor of DASNY, as obligee, in connection with Framan's performance of the Contract. nycourts.gov/reporter/3dseries/2019/2019_50583.htm 3/23 4/21/2019 Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. (2019 NY Slip Op 50583(U)) The Project involved the renovation of 35 bathrooms and six janitor's closets at Namm Hall, an 11-story academic building. To minimize disruption, the Project was divided into six sequential phases. Under the Contract, Framan was to achieve substantial completion no later than December 31, 2014. In the event that the Project was not timely completed, Framan agreed to pay liquidated damages of $2,000 per day for loss of beneficial use of the facility, together with any other types of damages actually sustained by DASNY. By letter dated May 15, 2014, DASNY terminated the Contract for cause and made a demand under the Bond for Arch to complete the contracted work ("Work"). On or about July 31, 2014, Arch and DASNY entered into a Completion/Takeover Agreement ("Takeover Agreement"), whereby Arch agreed to complete the Work. The Project was substantially completed on October 3, 2016. By summons and complaint filed October 31, 2014, Framan commenced this action against DASNY, alleging causes of action for breach of contract, unjust enrichment, quantum meruit and declaratory judgment. All of these causes of action arise out of DASNY's alleged wrongful termination of the Contract. Framan subsequently filed an Amended Verified Complaint ("Complaint") that added claims for delay damages and for DASNY's alleged negligence in determining that Framan was not a responsible contractor and rejecting its bids on two other construction projects. DASNY answered the Complaint and interposed counterclaims for breach of contract. DASNY also commenced a third-party action against Arch, seeking recovery of the damages allegedly incurred as a result of Arch's breaches of the Bond and Takeover Agreement. For its part, Arch counterclaimed against DASNY for: (1) improper demand under the Bond, a claim premised on the allegation that Framan was wrongfully terminated; (2) breach of the Takeover Agreement; (3) unjust enrichment; and (4) quantum meruit. LEGAL STANDARD "[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact," and the "[f]ailure to make such . showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). If the movant meets this initial burden, the burden shifts to nycourts.gov/reporter/3dseries/2019/2019_50583.htm 4/23 4/21/2019 Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. (2019 NY Slip Op 50583(U)) the nonmoving party to demonstrate the existence of triable issues of fact (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). On such a motion, all evidence must be viewed in the light most favorable to the opponent of the motion (see Branham v Loews Orpheum Cinemas, Inc., 8 NY3d 931, 932 [2007]). DASNY'S MOTION AGAINST FRAMAN DASNY moves for dismissal of Framan's Complaint in its entirety "on the ground that Framan lacks standing to assert any of the causes of action alleged therein, having assigned to its surety, [Arch], all claims and causes of action arising out of Framan's contract with [DASNY]" (NY St Cts Electronic Filing [NYSCEF] Doc No. 83 ["DASNY Notice of Motion"]). A. DASNY's Contentions In support of the motion, DASNY submits proof that Framan was terminated for cause based upon its default under the Contract (see NYSCEF Doc No. 104). DASNY also submits the General Indemnity Agreement executed by Framan in favor of Arch, which provides that upon a default, "[Framan and its indemnitors] do hereby assign, transfer and set over to [Arch], all of their rights under [the Contract], including . all claims and causes of action against any parties to the [Contract] . , [and] any and all sums due, or to become due under the [Contract] at or after the time of such Default" (NYSCEF Doc No. 93 ["GIA"], § 7).[FN1] Thus, DASNY contends that, because Framan "'assign[ed] its rights under [the Contract] to [its surety Arch], [Framan] is no longer the real party in interest with respect to claims against [DASNY]'" (Xavier Constr. Co., Inc. v Bronxville Union Free School Dist., 143 AD3d 976, 977 [2d Dept 2016], quoting International Fid. Ins. Co. v Quenzer Elec. Sys., Inc., 132 AD3d 811, [*2]812 [2d Dept 2015]; see James McKinney & Son v Lake Placid 1980 Olympic Games, 61 NY2d 836, 838 [1984]; Nagan Constr., Inc. v Monsignor McClancy Mem. High Sch., 137 AD3d 986, 987 [2d Dept 2016]). B. Waiver nycourts.gov/reporter/3dseries/2019/2019_50583.htm 5/23 4/21/2019 Framan Mech., Inc. v Dormitory Auth. of the State of N.Y. (2019 NY Slip Op 50583(U)) As a threshold matter, Arch and Framan argue that DASNY waived the defense of lack of standing by failing to include it in a pre-answer motion to dismiss under CPLR 3211 or in its answer. As held by the Court of Appeals and all four Departments of the Appellate Division, " [a]n argument that a plaintiff lacks standing, if not asserted in the defendant's answer or in a pre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211 (e)" (US Bank N.A. v Nelson, 2019 NY Slip Op 00494, *3, ___ AD3d ___, ___, [2d Dept Jan. 23, 2019] [internal quotation marks and citation omitted] [collecting authorities]). DASNY concedes that it failed to preserve the defense of lack of standing, but it contends that Framan and Arch's argument "ignores settled case law establishing that the applicable defense in this case is 'failure to state a cause of action' (CPLR [3211] (a)(7)" (NYSCEF Doc. 152, p. 4). The Court does not find DASNY's argument to be persuasive. In fact, DASNY's own notice of motion frames the defense as one of lack of standing, not failure to state a cause of action (see DASNY Notice of Motion), and this characterization is echoed in DASNY's opening brief (see NYSCEF Doc. 110, p. 1). Moreover, several of the cases relied upon by DASNY, both in its moving papers and in reply, describe the applicable defense as lack of standing (see id., p. 7, citing Nagan, 137 AD3d at 987 ["plaintiffs lacked standing to commence this action"]; NYSCEF Doc. 152, p. 5, citing CRAFT EM CLO 2006-1, Ltd. v Deutsche Bank AG, 139 AD3d 638, 638 [1st Dept 2016] [plaintiff "lacked standing to sue"]). Moreover, even if DASNY were free to re-characterize the grounds for the relief that it is seeking in response to Framan and Arch's claim of waiver under CPLR 3211 (e), the overwhelming weight of authority supports the conclusion that DASNY's defense sounds in lack of standing (see e.g.
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