HOWELL CO LLC v. Westchester Fire Insurance Company, Defendant. (2025)

Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered on or about November 9, 2023, which granted defendant Hill's motion for summary judgment dismissing the complaint's sole remaining cause of action for breach of the implied covenant of good faith and fair dealing, unanimously reversed, on the law, with costs, the motion denied, and that cause of action reinstated.

This case concerns payment on a public works construction project for a new performing arts center at Brooklyn College, which is part of the City University of New York (CUNY).  The contract for the project was awarded to defendant Hill International, Inc., which then entered into a general construction contract with plaintiff E.W. Howell Co., LLC in which Howell would serve as general contractor.  Article 10 of the agreement contained a “no-damages-for-delay” clause, and article 29 required that all disputes regarding the general construction contract be resolved “exclusively” by the alternative dispute resolution procedures described in that article.  Over the course of the project, Howell experienced numerous delays, and it made delay-related claims for compensation arising from those delays.  In a May 4, 2023 letter on City University Construction Fund (CUCF) letterhead, CUNY purported to resolve Howell's claims, rejecting Howell's request to be compensated for the delays.  CUNY's determination identified three independent bases for denying Howell's claims for damages.  First, it found that Howell and its subcontractors were responsible for most of the delays Howell identified.  Second, it found that the no-damages-for-delay provision barred Howell's claims.  Third, it found that Howell failed to submit proper documentation supporting its delay damage claims.

CUNY's determination, reached by way of the parties’ contractually mandated ADR process, does not negate Howell's claim that Hill breached the covenant of good faith by frustrating the ADR process itself, and Howell is not collaterally estopped from pursuing its claim based on CUNY's determination (see Schwartz v. Public Admr. of County of Bronx, 24 N.Y.2d 65, 71, 298 N.Y.S.2d 955, 246 N.E.2d 725 [1969];  see also City of New York v. Welsbach Elec. Corp., 9 N.Y.3d 124, 128, 848 N.Y.S.2d 551, 878 N.E.2d 966 [2007]).  Although “[t]he rule in New York ․ is that the mere pendency of an appeal does not prevent the use of the challenged judgment as the basis of collaterally estopping a party to that judgment in a second proceeding” (Matter of Amica Mut. Ins. Co., 85 A.D.2d 727, 728, 445 N.Y.S.2d 820 [2d Dept. 1981]), Howell's central contention is that Hill frustrated the ADR process itself, and that Hill's breaches of the covenant of good faith may have influenced CUNY's determination with respect to each of these bases.  CUNY did not rule on this contention.  It would defy reason to hold that Howell is collaterally estopped from contesting the very decision by CUNY that plaintiff contends was tainted by Hill's breach of good faith (see Whitestone Constr. Corp. v. F.J. Sciame Constr. Co. Inc., 194 A.D.3d 532, 533, 149 N.Y.S.3d 21 [1st Dept. 2021]).

Notwithstanding CUNY's denial of damages, Howell raised triable issues of fact as to whether Hill breached the implied covenant of good faith and fair dealing by subverting the ADR process and whether its conduct caused damages.  Among other things, Howell sufficiently raised issues of fact as to whether at least one of the four exceptions to the general rule that a no-damages-for-delay contract provision barred any claims for delay damages (see Corinno Civetta Const. Corp. v. City of New York, 67 N.Y.2d 297, 309, 502 N.Y.S.2d 681, 493 N.E.2d 905 [1986]).  Howell contends that defendant may have been responsible for CUNY's denial of claims on the ground that there was no proper documentation supporting Howell's delay damage claims;  CUNY may have found such an exception had Hill properly forwarded all of Howell's materials to CUNY and had Hill otherwise properly administered the ADR process.