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CANATAL STEEL USA v. TLT CONSTRUCTION CORPORATION (2021)

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Appeals Court of Massachusetts.

CANATAL STEEL USA v. TLT CONSTRUCTION CORPORATION & another;1 Montachusett Regional Transit Authority, third-party defendant (and a companion case 2).

20-P-319, 20-P-320

Decided: February 19, 2021

By the Court (Lemire, Ditkoff & Grant, JJ.3)

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

Montachusett Regional Transit Authority (MRTA) appeals from a final judgment entered following the denial of its motion to assert cross claims against Western Surety Company (Western). Contrary to arguments raised by Western, we conclude that the Superior Court had jurisdiction to decide the motion and that the motion should not have been denied on the bases of futility and undue delay. Accordingly, we vacate the final judgment and remand for further proceedings consistent with this memorandum and order.

1. Background. In February 2012, MRTA entered into a contract with TLT Construction Corporation (TLT) for the construction of the North Leominster commuter rail parking facility, and TLT obtained suretyship from Western. Under the surety agreement, TLT and Western jointly and severally “[bound] themselves” to MRTA for the performance of the construction contract. The surety agreement provided that Western would become obligated in the event of TLT's default and that Western's obligations would include, in certain circumstances, paying for “additional legal, design professional and delay costs resulting from [TLT's] [d]efault.” In or around August 2013, while construction was underway, TLT stopped paying its subcontractors and defaulted on its obligations under the construction contract.

Litigation commenced in October 2013 when two of TLT's subcontractors, Canatal Steel USA and Barker Steel, LLC (collectively, the subcontractors), each filed suit against TLT and Western. In each action, TLT brought third-party claims against MRTA for breach of the construction contract and quantum meruit. Until 2016, there was little activity on the dockets. In 2016, the Superior Court's tracking deadlines were extended, at the request of the parties, while they engaged in efforts to mediate and settle the cases. Ultimately, the subcontractors’ claims against TLT and Western were resolved, while TLT's third-party claims against MRTA remained unresolved. In October 2016, the two cases were consolidated.

In November 2016, TLT submitted a motion to compel arbitration and stay the consolidated Superior Court cases, which was granted in March 2017. In the arbitration that followed, TLT and MRTA asserted claims against each other for, among other things, breach of the construction contract.4 While Western sought to be included as a party to the arbitration, that request was denied.5 In November 2018, the arbitrator issued an award finding that TLT breached the construction contract and that MRTA was entitled to $214,829.63 for additional professional fees, plus interest, incurred as a result of TLT's default.6

In January 2019, MRTA submitted a motion in the consolidated Superior Court cases to confirm the arbitration award, which was allowed. Shortly thereafter, in March 2019, MRTA submitted a motion to assert cross claims against Western. In relevant part, MRTA sought to assert a claim for breach of the surety agreement based on Western's failure to pay MRTA for additional professional fees incurred as a result of TLT's default.7 A judge of the Superior Court denied MRTA's motion to assert cross claims against Western, a final judgment entered, and this appeal followed.

2. Discussion. As a preliminary matter, Western argues for the first time on appeal that G. L. c. 251, § 14, required a final judgment to be entered contemporaneously with the allowance of MRTA's motion to confirm the arbitration award and that, consequently, the Superior Court lacked jurisdiction thereafter to decide MRTA's motion to assert cross claims against Western. Western's argument reads words into the statute that are not there. General Laws c. 251, § 14, provides that “[u]pon the granting of an order confirming, modifying or correcting an award, judgment or decree shall be entered in conformity therewith.” Contrary to Western's arguments, the statute does not include any words requiring the two events to occur contemporaneously -- such as that the judgment or decree be entered “immediately” -- and we will not read any such words into the statute. See, e.g., Anderson St. Assocs. v. Boston, 442 Mass. 812, 817 (2004). In short, nothing in G. L. c. 251, § 14, automatically divests the Superior Court of jurisdiction simply because a motion to confirm an arbitration award has been allowed. Here, where a final judgment had not yet entered, and the matter was still pending before the Superior Court, the Superior Court had jurisdiction to decide MRTA's motion to assert cross claims against Western.8

Alternatively, Western argues that the motion was properly denied on the merits. While leave to amend to assert new claims “should be ‘freely given when justice so requires,’ Mass. R. Civ. P. 15 (a), 365 Mass. 761 (1974), such leave may be denied where there is undue delay, undue prejudice to the opposing party, or futility in the amendment.” Dzung Duy Nguyen v. Massachusetts Inst. of Tech., 479 Mass. 436, 461 (2018). We review the denial of MRTA's motion to assert cross claims against Western for abuse of discretion. See id.

In arguing that the motion was properly denied on the merits, Western relies on futility and undue delay.9 As to futility, Western argues that that MRTA's claim for breach of the surety agreement is time barred because the surety agreement required actions to be brought within two years of TLT's default.10 Western notes that TLT defaulted in or around August 2013, significantly more than two years before March 2019 when MRTA moved to assert cross claims against Western. MRTA, however, argues that its claim for breach of the surety agreement is timely under the relation back doctrine. We agree with MRTA.

“When a new claim asserted in an amended pleading arises ‘out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment ․ relates back to the original pleading.’ ” Atchue v. Benchmark Senior Living LLC, 98 Mass. App. Ct. 572, 576 (2020), quoting Mass. R. Civ. P. 15 (c), 365 Mass. 761 (1974). Here, the subcontractors filed their lawsuits because TLT stopped paying them, thereby defaulting on its obligations under the construction contract. In the subsequent arbitration between TLT and MRTA, the arbitrator found that TLT's default caused MRTA to incur additional professional fees. The issue now is whether MRTA may assert a claim against Western to recover the additional professional fees incurred as a result of TLT's default. All of these claims arise out of the same occurrence -- TLT's default. We conclude that MRTA's claim for breach of the surety agreement is timely as it relates back to the original pleadings, which were filed within months of TLT's default.11

As to undue delay, Western argues that six years elapsed between when the original pleadings were filed in 2013 and when MRTA moved to assert cross claims against Western in 2019. Western's argument, however, takes that delay out of context. As noted above, from 2013 to 2016, there was little activity on the dockets. In 2016, the parties agreed to extend the Superior Court tracking deadlines while they engaged in efforts to mediate and settle the cases. Then, from 2017 until late 2018, the consolidated Superior Court cases were stayed during the arbitration between TLT and MRTA. Within months of obtaining an arbitration award in November 2018 and an order confirming that award in January 2019, MRTA moved to assert cross claims against Western in March 2019. In these circumstances, and where no other factors support the denial of MRTA's motion to assert cross claims against Western, we conclude that denying the motion was an abuse of discretion. See Merrimack College v. KPMG LLP, 480 Mass. 614, 632 (2018) (denials of motions to amend based in part on undue delay are generally coupled with consideration of other factors); L.L. v. Commonwealth, 470 Mass. 169, 185 n.27 (2014) (abuse of discretion standard requires us to ask whether judge made “clear error of judgment” in weighing factors relevant to decision [citation omitted]).

The final judgment is vacated, and the matter is remanded for further proceedings consistent with this memorandum and order.

So ordered.

Vacated and remanded

FOOTNOTES

4.   MRTA's counterclaims against TLT were raised for the first time in arbitration.

5.   As a result, MRTA could not have asserted its cross claims against Western in the arbitration. In addition, we note the following: (1) while Western was not a party to the arbitration, Western's counsel appeared on behalf of TLT and was thus kept apprised of any developments, and (2) MRTA notified both Western and the Superior Court of MRTA's plan to assert cross claims against Western once the matter returned to the Superior Court.

6.   While not pertinent to the issues on appeal, we note that the arbitrator also found that TLT was entitled to $61,446.98 for certain change order requests, plus interest.

7.   MRTA sought to recover the following from Western: (1) the $214,829.63 that MRTA was awarded in arbitration but was, apparently, unable to collect from TLT, and (2) legal fees incurred as a result of TLT's default. MRTA also sought to assert additional claims for breach of the implied covenant of good faith and fair dealing and for violation of G. L. c. 93A, but counsel for MRTA clarified during oral argument that these additional claims are not at issue on appeal.

8.   This was a complex matter in which the subcontractors commenced litigation in the Superior Court and, thereafter, TLT and MRTA proceeded to arbitration. When the matter returned to the Superior Court, other issues unsurprisingly still required resolution on the docket. Especially in this context, it would make no sense for us to conclude that the Superior Court no longer had jurisdiction simply because the judge allowed MRTA's motion to confirm the arbitration award.

9.   While Western argued prejudice below, Western does not ague prejudice on appeal. Regardless, we note that where Western was involved in the litigation from the outset and was fully aware of MRTA's plan to assert a claim for breach of the surety agreement, see note 4, supra, we discern no prejudice.

10.   The surety agreement provided as follows: “Any proceeding, legal or equitable, under this [b]ond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located and shall be instituted within two years after a declaration of [c]ontractor [d]efault or within two years after the [c]ontractor ceased working or within two years after the [s]urety refuses or fails to perform its obligations under this [b]ond, whichever occurs first.”

11.   We thus need not address the parties’ additional arguments regarding whether the limitation period in the surety agreement is an unenforceable private statute of repose.

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