Worth Construction Co., Inc. v. State of Connecticut Department of Public Works (2011)

MEMORANDUM OF DECISION

The plaintiff, Worth Construction Co., Inc. (“Worth”), commenced this action by filing a Five–Count Complaint.   At the time of trial, the only counts still under consideration were Count One, Count Two and Count Five.¹ Count One alleges that on May 29, 2001, Worth entered into a written contract with the defendant, State of Connecticut, Department of Public Works (“DPW”), to construct additions and renovations to Engelman Hall on the Campus of Southern Connecticut State University in New Haven, Connecticut (the “Contract”).   It further alleges that the original Contract price was $33,497,050.   Worth substantially completed the work on or about November 10, 2005, received periodic payments and submitted requests for equitable adjustment.   It further alleges that DPW has breached the Contract and has refused to pay a remaining balance which amounts to $1,434,068.87.

Count Two alleges, in part:

12.  Worth also submitted requests for adjustment with regard to Claywell Electric Company, Inc. (“Claywell”), the electrical subcontractor for the Project.   Further delays, extra costs and losses on the Project were caused by defendant DPW through interference with subcontractor performance;  favoritism to Claywell;  and, by allowing and insisting that Claywell receive special treatment and favors which included, but was not limited to, authorizing and allowing Claywell to bill for materials not delivered and to bill and be paid for work not actually performed.

18. DPW caused the additional costs and damages to Worth by its breach of Contract through interference and favoritism to Claywell and as a result Worth expended $553,389.83 in extra costs to complete the electrical work for the Project ․

After trial the court finds the following facts.   On May 29, 2001 the DPW entered into the Contract with Worth for construction of improvements to Engleman Hall on the campus of Southern Connecticut University (the “Project”).   Worth served as the general contractor and by the terms of the Contract had to follow a sequence and phasing of the work, which required Worth to work on Engelman Hall in a four-stage operation, working first on Building D, then on Building A, then Building B and finally on final phase Building C.

FIP Construction (“FIP”) was retained by DPW to act as the Construction Administrator for the Project and acted as an agent for DPW on the Project.   Worth subcontracted with Claywell to be the electrical subcontractor on the Project.   The DPW did not participate in Worth's hiring of Claywell and there was no evidence that anyone at the DPW or anyone who worked for the State of Connecticut had any part in directing or influencing Worth to hire Claywell as a subcontractor.

The parties have stipulated to many of the foregoing facts in a Joint Stipulation of Fact dated September 28, 2010.   That stipulation further provides, in part:

9.  Worth subcontracted with New England Drywall & Acoustical, LLC, for the drywall portion of the Project.

10. In June 2001, DPW gave Worth notice to proceed.

11. On or about June 1, 2001, Worth timely commenced work on the Project and proceeded with construction.

12. The original Prime Contract [contract between DPW and Worth] price for the Work amounted to $33,497,050.00, to which DPW added approved change orders (CO# 1–CO# 220) in the amount of $3,821,692.15 and another approved change order (CO# 221) in the amount of $800,000 which increased the Prime Contract price to $38,118,742.15.

13. Worth substantially completed the Project on or about November 10, 2005.

14. The DPW issued its certificate of acceptance of the work on the Project on December 2, 2005.

15. In late 2004, Worth terminated Claywell's contract as Claywell had experienced a financial failure and failed to provide the necessary manpower to continue to perform and complete the electrical subcontract.

16. At the time of Claywell's contract termination, Claywell had a contract value including previous change orders of $3,475,653.71 of which DPW had paid $3,129,926.02 leaving only $345,727.69 to complete the electrical portion of the Project.

17. In December 2004, Worth solicited bids for the remainder of the electrical work on the project and Semac Electric Co. (“Semac”) submitted the lowest bid of $460,000.

18. On January 6, 2005, Worth sub-contracted with Semac to complete the remainder of the electrical work on the Project for a price of $460,000.

19. Worth ultimately paid $799,083.35 to complete the electrical portion of the Project, of which only $345,727.69 (the amount left unpaid on Claywell's subcontract) was reimbursed to Worth by the DPW.

20.  Of this amount of $799,083.35, $694,576.40 was paid to Semac for labor and materials, $54,506.95 was paid to electrical material vendors in order to obtain lien waivers, and an additional $50,000 was paid in settlement to Semac for change orders which had been misplaced during the course of the project.

21. On or about April 20, 2007, Worth filed a timely notice of claim pursuant to Connecticut General Statutes § 4–61.

Under the Contract with DPW, Worth represented that it had obtained a performance bond and a labor and material bond from Claywell.   That representation was incorrect.   Worth never obtained those bonds.

The gravamen of Worth's claim on Counts One and Two is that DPW put pressure on it to approve payments to Claywell for materials which were not delivered to the Project site and, consequently, there were insufficient lighting fixtures and other materials for which Claywell had been paid.   This shortage required Worth to obtain the materials at additional cost from other subcontractors like Semac after it terminated Claywell's contract.   The court finds that Worth has failed to prove this claim.   Worth's “evidence” of improper pressure allegedly exerted by DPW on it with respect to Claywell is unsupported by any documentary evidence.   It is, instead, dependent upon the court's willingness to infer that Richard Piotrowki, former deputy commissioner of DPW and John Rowland, former governor of the State of Connecticut, both friends of Curt Claywell, Claywell's president, must have acted improperly with respect to Worth vis a vis Claywell because they are convicted felons.

Only one witness, Joseph Hemingway, former project manager for Worth, testified that Richard Piotrowski, deputy commissioner of DPW, called him several times in 2002 to “suggest” that he approve full payment of Claywell's requisitions.   Mr. Hemingway further testified that he had difficulty verifying whether light fixtures and other equipment for which Claywell was submitting requisitions had actually been delivered to the Project site and, therefore, that Worth did not want to pay Claywell its full requisition amount for those items.

Richard Piotrowski testified that he was a friend of Curt Claywell and spoke to him once a week during the period in question.   He also testified that he never called Worth concerning a dispute over a requisition of Claywell.   He admitted that he may have made calls to Worth to see why Worth had not paid Claywell, or another subcontractor after Worth itself had been paid by the State.²  Piotrowski's testimony was consistent with that of W. Sam Dizenzo, president of Worth, who testified that he had received phone calls from Piotrowski to discuss Worth's failure to pay Claywell within the 30–day time period required under § 49–41a, but not to discuss requisition amounts.

The court does not find credible the testimony of Mr. Hemingway that Piotrowski pressured Worth into paying Claywell more than it was due for requisitions.   The monthly requisitions, or payment applications, for the Project completely contradict the claim that DPW forced Worth to pay Claywell more than Worth believed Claywell was due.   They show the exact opposite.

The monthly requisition process consisted of two parts.   First Worth would submit a so-called “pencil requisition” on which it assigned a monthly and cumulative percentage of overall completion of specific line items of labor and materials.   A Worth executive like W. Sam Dizenzo executed a certified and notarized statement on each requisition which provided:

The under signed Contractor certifies that to the best of the Contractor's knowledge, information and belief the Work covered by this Application for Payment has been completed in accordance with the Contract Documents, that all amounts have been paid by the Contractor for Work which previous Certificates for Payment were issued and payments received from the Owner, and that current payment shown herein is now due.

FIP field superintendent, David Strid, reviewed each requisition for accuracy and made adjustments to the percentage of progress claimed in pencil next to a particular line item if he disagreed with the proposed amount.   Hemingway and FIP project manager, Richard L'Heureux, would then negotiate with Worth and ultimately agree on a payment amount for all disputed line items before L'Heureux forwarded the final requisition to Randy Daigle, DPW project manager, for approval and payment.   L'Heureux and Daigle signed the final requisition form, but were not required to certify the accuracy of the completed amounts.

If Mr. Piotrowski, or anyone else, had been pressuring Worth to pay Claywell more than Worth believed Claywell was due in any requisition period, then the pencil requisition would contain a lower amount due to Claywell than the final requisition.   There was no evidence of any pencil requisition which contained a lower amount for Claywell than was contained in the final requisition.   To the contrary, the pencil and final requisition forms for June, July and August 2002 (Exhibits D1, D2, E1, E2, F1 and F2) show that Worth sought payment in the pencil requisition for amounts greater than those approved by DPW in the final requisition.

In June 2002, Worth sought payment for $55,000 in light fixtures for Claywell.   FIP reduced this amount to 0 and DPW approved the final requisition for June 2002 with 0 payment due to Claywell for light fixtures.   In July 2002, Worth sought payment for $108,000 in light fixtures for Claywell.   FIP reduced this amount by $38,000 to $70,000 and DPW approved the final requisition for July 2002 with a $70,000 payment due to Claywell for light fixtures, rather than the $108,000 payment Worth had requested.   In August 2002, Worth sought payment for $108,000 in light fixtures for Claywell.   FIP reduced this amount by $26,000 to $82,000 and DPW approved the final requisition for August 2002 with a $82,000 payment due to Claywell for light fixtures, rather than the $108,000 payment Worth had requested.

The monthly requisitions contradicted Mr. Hemingway's testimony that Mr. Piotrowski (or anyone else) had improperly attempted to obtain greater payment requisition amounts for Claywell.   Moreover, Mr. Hemingway admitted that he put nothing in writing to document such alleged conduct at any time prior to Worth's termination of Claywell as a subcontractor.

Worth also pointed to meetings between FIP and Claywell as evidence that DPW personnel had pressured Worth to favor Claywell.   The court finds that FIP did meet separately with Claywell on occasion to negotiate the requisition amount for Claywell.   However, such meetings were initiated by FIP personnel like Mr. Strid and Mr. L'Heureux in an effort to keep the job moving forward.   There was no evidence that anyone pressured FIP to hold such meetings.   Mr. L'Heuruex credibly testified that Worth was not excluded from these meetings and that he had held similar meetings with other subcontractors.

The FIP witnesses were skeptical of Worth's claim that separate meetings with Claywell were evidence of favoritism.   Ultimately, they stated, it was Worth, and not Claywell, who had to swear to the amounts contained in each requisition.   Moreover, if a meeting between Claywell and FIP resulted in an overinflated requisition amount for Claywell, then there would have been pencil requisitions with lower amounts for Claywell and final requisitions in which the DPW had increased those amounts.   As stated above, there was no written evidence that Worth ever requisitioned less for Claywell than the DPW ultimately approved.   Contrary to Worth's position at trial, in 2002 and 2003 Worth was always seeking more money for payment to Claywell than DPW was willing to authorize.

Claywell requisitioned for the light fixtures needed for all of the four phases of the job within the first two years after performance under the Contract commenced.   This type of “frontloading” was common because it enabled the subcontractor to ensure that the lighting fixtures would be the same in all phases of the Project, and to save money via large quantity purchase.   The light fixtures and other materials of Claywell were stored in trailers on the Project site.   Worth was charged with the responsibility of certifying to DPW that the fixtures for which it requisitioned payment were actually on site.   Therefore, when Worth submitted requisitions between March 2002 and January 2003 seeking payment for light fixtures, it was effectively notifying DPW that it believed that the hundreds of light fixtures identified in a monthly requisition were in fact on site.   Mr. Hemingway never told Mr. L'Heureux that he thought that the State was paying too much for the Claywell portion of any of its monthly requisitions or that the light fixtures included in a requisition were not actually on the job site.

FIP was responsible to check on the accuracy of Worth's representations with respect to materials.   The court finds that FIP did a diligent job in attempting to verify that the materials had been delivered to the job site.

In 2004 Worth terminated Claywell's subcontract because Claywell had insufficient manpower to perform.   DPW did not direct Worth to terminate Claywell.   After Claywell was terminated Worth discovered that the lighting fixtures were not in the Claywell trailers.   Moreover, the number of Claywell trailers on the site had decreased from five to two or three.   When the absence of the fixtures was discovered, Mr. Hemingway told Randy Daigle, the DPW project manager, that he believed that the light fixtures had been stolen.   Mr. Daigle suggested to Worth that it contact the police.   However, Worth failed to do so.

At trial Worth took the position that the fixtures had never been on site because DPW had pressured it to pay Claywell for fixtures that were never delivered.   As stated above, this position is not supported by Worth's own monthly certifications that the lighting fixtures had been delivered to the Project site.   Moreover, Claywell had access to the trailers during the entire time it was working on the project.   Therefore, the absence of lighting fixtures which Worth seeks to attribute to DPW's improper pressure on it to pay Claywell is much more readily attributable to the removal of those fixtures between the time they were delivered and the time Claywell's subcontract was terminated.

Worth accepted the risk of increased costs for missing materials and lack of performance by Claywell when it elected not to purchase a labor and material bond or a performance bond with respect to Claywell, contrary to its representations in the Contract.

For the foregoing reasons, Worth has failed to prove any breach of contract by the State.   Worth's claim that the breach of contract occurred because DPW pressured it to overpay Claywell simply was not supported by any credible evidence.   The DPW paid Worth for the Claywell electrical fixtures which Worth certified to have been on site.   Worth determined to terminate Claywell and hire another electrical contractor.   Nothing in the Contract required DPW to pay Worth the cost of its contractor substitution.   DPW paid Worth $345,727.69, the amount left unpaid on Claywell's subcontract and, therefore, there was no breach of the Contract.   Judgment may enter in favor of the defendant with respect to Count Two of the Complaint.

Count One seeks to recover under the principle of equitable adjustment.  “The term ‘equitable adjustment’ is a legal term of art;  it signifies a principle designed to keep a contractor whole when the Government modifies a contract.”   General Ry. Signal Co. v. Washington Metropolitan Area Transit Authority, 875 F.2d 320, 324–25 (1989);  M.J. Paquet, Inc. v. New Jersey Dept of Transportation, 171 N.J. 378, 392, 794 A.2d 141 (2002).   Since the plaintiff has not proved that the defendant breached the Contract, or acted unfairly or in bad faith with respect to Worth, it is not entitled to equitable adjustment.   Judgment may enter for the defendant on Count One of the complaint.

After trial the plaintiff's attorney advised the court by letter with a copy to the defendant's attorney that the parties had entered an Accord and Satisfaction which provided:

Worth Construction Co., Inc. (“Worth”) hereby agrees to accept from the State of Connecticut (“State”), and the State hereby agrees to make to Worth, a payment of Ninety Five Thousand Dollars ($95,000) in complete and final accord and satisfaction of any debt or obligation that the State may now have or ever may have to Worth in connection with the matters, or related in any way to matters, described in Count Five of Worth's pending lawsuit against the State ․

Based on the foregoing Accord and Satisfaction, the court will consider that the plaintiff has withdrawn Count Five of the complaint and will enter no judgment on that count.

In its Counterclaim, DPW is seeking to recover $222,000 for 74 days of liquidated damages due to Worth's failure to reach substantial completion on the Project in accordance with the provisions of the Contract.   The Contract allowed DPW to assess liquidated damages of $3,000 per calendar day for every day Worth failed to complete the Project “within the Contract Time.” “Contract Time” is defined as “[t]he period of time allotted in the Contract Documents for Substantial Completion of the work, including authorized adjustments thereto.”

Worth has admitted in its complaint that it was allowed 1,068 calendar days to reach substantial completion.   The DPW granted Worth an additional 394 days of contract extension due to change orders during the Project, for a total of 1,462 contract days allowed to reach substantial completion.   Worth was required to reach substantial completion on June 12, 2005 but did not do so until August 25, 2005, or 74 days later.

In its Memorandum, Worth argues, “At trial, five years after these events, DPW has decided to make a claim for Liquidated Damages.”   Worth, Memorandum, date, p.31. Worth further argues that DPW has waived its claim for liquidated damages.

DPW did not decide to make a claim for liquidated damages at trial.   It first filed its counterclaim seeking liquidated damages on February 5, 2008.   This counterclaim was, obviously, made in response to Worth complaint, which was not filed until July of 2007.

The issue of liquidated damages first arose in a letter from Scott Jellison, P.E., the DPW's director of project management, to Mr. Dizenzo of Worth.   In that letter Mr. Jellison notified Worth that the “State may assess liquidated damages at the rate of $3,000 for each day beyond June 12, 2005 through August 26, 2005.”   In a Liquidated Damages Assessment Field Report signed on November 22, 2005, Randy Daigle recommended that liquidated damages not be assessed.   This recommendation was approved by Kenneth Quimby, supervising project manager, on May 4, 2006.   However, the Liquidated Damages Assessment Field Report contained an error.   Mr. Daigle had mistakenly listed that the Contract allowed 1,158 days for substantial completion.   Worth itself has admitted that the Contract only allowed 1,068 days for substantial completion.

“Waiver is the intentional relinquishment or abandonment of a known right or privilege ․ As a general rule, both statutory and constitutional rights and privileges may be waived ․ Waiver is based upon a species of the principle of estoppel and where applicable it will be enforced as the estoppel would be enforced ․ Estoppel has its roots in equity and stems from the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed ․ Waiver does not have to be express, but may consist of acts or conduct from which waiver may be implied ․ In other words, waiver may be inferred from the circumstances if it is reasonable to do so.”  (Internal quotation marks omitted.)  Wiele v. Board of Assessment Appeals, 119 Conn.App. 544, 549, 988 A.2d 889 (2010).

The Contract provides:

8.2 The Liquidated Damages, or any portion thereof, may be waived at the sole discretion of the Commissioner.

The court finds that the Commissioner of the DPW has not waived liquidated damages.   Moreover, it was not reasonable for Worth to believe that DPW had knowingly waived such damages based on Mr. Daigle's recommendation.   That recommendation contained a mathematical error which should have been obvious to Worth on its face.   But for that error, Mr. Daigle's calculation would have agreed with that of Mr. Jellison, who had advised Worth that the State might seek liquidated damages.

Based on the foregoing, judgment enters in favor of DPW against Worth on the counterclaim in the amount of $222,222.

By the Court,

Aurigemma, J.

FOOTNOTES

FN1. This court, Prescott, J., granted the defendant's motion to dismiss Count Four on August 10, 2010.   The plaintiff abandoned its claim of delay damages under Count Three and presented no evidence on construction delay at trial..  FN1. This court, Prescott, J., granted the defendant's motion to dismiss Count Four on August 10, 2010.   The plaintiff abandoned its claim of delay damages under Count Three and presented no evidence on construction delay at trial.

FN2. Pursuant to Connecticut General Statutes § 49–41a, a general contractor like Worth is required to make payment to its subcontractors within thirty days of payment from the State for the subcontractor's labor and materials..  FN2. Pursuant to Connecticut General Statutes § 49–41a, a general contractor like Worth is required to make payment to its subcontractors within thirty days of payment from the State for the subcontractor's labor and materials.

Aurigemma, Julia L., J.