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99 WALL DEVELOPMENT, INC., Plaintiff, v. CONSIGLI & ASSOCIATES, LLC f/k/a T.G. Nickel & Associates, LLC, Domestic Plumbing Corp., and HIG Services, Inc., Defendants.
T.G. Nickel & Associates, LLC, Counter claimant, v. Schear Construction LLC, Counterclaim Defendant, and Aspen American Insurance Company, Cranes Express, Inc., Everest Scaffolding, Inc., New York Hoist, LLC, Chelsea Lighting NYC, LLC, Safety and Quality Plus, Inc., PAL Environmental Services, Inc., NYGlassmaster Corp., HIG Services, Inc., Schear Construction, LLC, Bruce Supply Corp., and All Star Ductwork., Inc., Additional Counterclaim Defendants.
T.G. Nickel & Associates, LLC, Third Party Plaintiff, v. Domestic Plumbing Corp. and Thyssenkrupp Elevator Corporation, Third Party Defendants.
Plaintiff 99 Wall Development, Inc., hired defendant Consigli & Associates, LLC, as the construction manager to renovate and convert the real property at 99 Wall Street, New York, New York, into luxury condominiums. Plaintiff alleges that Consigli & Associates failed to provide a hoist to move workers and materials around the site, coordinate and supervise the subcontractors’ work, use a safe method to provide temporary access to water, and remit payments to the subcontractors, causing delay in the renovation, poor quality construction, dangerous conditions, and damage to the premises. The current amended complaint claims breach of a contract and unjust enrichment against Consigli & Associates and negligence against co-defendants Domestic Plumbing Corp. and HIG Services, Inc. Aff. of Chris Georgoulis Ex. 9, NYSCEF Doc. No. 446.
II. PLAINTIFF'S MOTION TO AMEND ITS AMENDED COMPLAINT
Now, plaintiff moves to amend its complaint a second time. The proposed second amended complaint adds negligence and gross negligence claims against Consigli & Associates, based on its defective installation of an inadequate temporary water tank system in the building that caused flooding and more than $20,000,000 in damages, including the replacement of completed work and additional delays of the project.
Leave to amend a complaint is freely granted unless the amendment would surprise or otherwise prejudice the opposing parties, Davis v. South Nassau Communities Hosp., 26 NY3d 563, 580 (2015); Kimso Apts., LLC v. Gandhi, 24 NY3d 403, 411 (2014); Mashinsky v. Drescher, 188 AD3d 465, 466 (1st Dep't 2020); Global Liberty Ins. Co. v. Tyrell, 172 AD3d 499, 500 (1st Dep't 2019), or the amendment lacks merit. C.P.L.R. § 3025(b); Avail 1 LLC v. Acquafredda Enters. LLC, 184 AD3d 476, 477 (1st Dep't 2020); Brook v. Peconic Bay Med. Ctr., 172 AD3d 468, 469 (1st Dep't 2019); Jean-Baptiste v. 153 Manhattan Ave. Hous. Dev. Fund Corp., 124 AD3d 476, 477 (1st Dep't 2015); Onetti v. Gatsby Condominium, 111 AD3d 496, 497 (1st Dep't 2013). Consigli & Associates objects to the second set of amendments on the grounds that the applicable statute of limitations bars the new claims for negligence and gross negligence, and they impermissibly prejudice Consigli & Associates and lack merit.
A. STATUTE OF LIMITATIONS
Consigli & Associates acknowledges that, while claims for negligence and gross negligence are subject to a statute of limitations of three years, C.P.L.R. § 214, new claims may date back to the date of the original pleading if that pleading gives notice of the transactions and occurrences on which the new claims are based. C.P.L.R. § 203(f). Consigli & Associates contends that the original complaint did not provide notice of the new allegations, such as Consigli & Associates’ failure to consult with an engineer, comply with code requirements, and take action after the same water tank caused an earlier flood August 9, 2016.
Plaintiff contends that Consigli & Associates received notice of the relevant transactions and occurrences and knew Consigli & Associates’ negligence and gross negligence would be at issue, since co-defendants’ affirmative defenses and cross-claims against Consigli & Associates and third party defendant Thyssenkrupp Elevator Corp.’s counterclaims included negligence and gross negligence claims. Domestic Plumbing's V. Answer with Affirmative Defenses, Georgoulis Aff. Ex. 12, NYSCEF Doc. No. 449, at 8; HIG Services’ Answer to 1st Am. Compl., Georgoulis Aff. Ex. 13 NYSCEF Doc. No. 450, at 4-5; Thyssenkrupp Elevator's V. Answer to V. 3d Party Compl. with Countercls., Georgoulis Aff. Ex. 11, NYSCEF Doc. No. 448, at 7.
The original complaint alleged that Consigli & Associates “opted for an inexpensive and unsafe solution of gravity feeding water from the 25th floor down to the other floors” that caused a critical failure and water flooding down 27 floors October 7, 2016. Georgoulis Aff. Ex. 1, NYSCEF Doc. No. 438, ¶ 16. The proposed second amended complaint adds that the temporary water tank also failed two months before, on August 9, 2016, and leaked two floors down, but Consigli & Associates failed to take any action to prevent a subsequent tank failure and flood. Georgoulis Aff. Ex. 4, NYSCEF Doc. No. 441, ¶¶ 55, 68. If the original pleading gives notice of an occurrence, all claims arising from that occurrence may relate back to the time of the original complaint. C.P.L.R. § 203(f); Ramirez v. Elias-Tejada, 168 AD3d 401, 402 (1st Dep't 2019); O'Halloran v. Metro. Transp. Auth., 154 AD3d 83, 86 (1st Dep't 2017). While Consigli & Associates maintains that the original complaint provided no notice of the August 2016 leak, that event is not the occurrence that is the basis for the negligence and gross negligence claims. The allegations about the August 2016 leak are new, but the allegations that Consigli & Associates installed a water tank insufficient for the building's needs, causing a flood and damage to the property October 7, 2016, are not new. Therefore the negligence and gross negligence claims may relate back to the original complaint in this action and are timely.
Consigli & Associates contends that the proposed amendments will severely prejudice it because the motion to amend will not be submitted before the deadline for filing the Note of Issue. That date now has passed and the Note of Issue has been filed. Note of Issue, NYSCEF Doc. No. 460. Delay alone, without prejudice, is not dispositive of a motion to amend a pleading. Disla v. Biggs, 191 AD3d 501, 504 (1st Dep't 2021). Consigli & Associates admits it would need no further disclosure from the other parties and would only need time to supplement its own expert disclosure regarding the additional damages that would be at issue. While it might have been easier and more convenient for the experts to include analysis of these additional damages in the original expert disclosure, the court has not set a trial date and may ameliorate any prejudice from the lateness of the amendment by granting the parties additional time to supplement their expert disclosure.
The only other potential prejudice claimed by Consigli & Associates is the prospect of facing millions of dollars in additional liabilities pursuant to the new claims. This prejudice is not the prejudice C.P.L.R. § 3025(b) contemplates. “Prejudice does not occur simply because a defendant is exposed to greater liability.” O'Halloran v. Metro. Transp. Auth., 154 AD3d at 89 (quoting Jacobson v. McNeil Consumer & Specialty Pharms., 68 AD3d 652, 654 (1st Dep't 2009)). Rather, “there must be some indication that the [party] has been hindered in the preparation of [the party's] case or has been prevented from taking some measure in support of [its] position.” Kimso Apartments, LLC v. Gandhi, 24 NY3d at 411 (quoting Loomis v. Civetta Corinno Constr. Corp., 54 NY2d 18, 23 (1981)). Consigli & Associates has not shown any prejudice that the court's permission to exchange post-note of issue expert disclosure would not eliminate.
Consigli & Associates further contends that the proposed negligence and gross negligence claims lack merit. To plead negligence, plaintiff must allege that Consigli & Associates owed a duty to plaintiff and breached that duty, causing injury. Greenberg, Trager & Herbst, LLP v. HSBC Bank USA, 17 NY3d 565, 576 (2011). Gross negligence “differs in kind, not only degree, from claims of ordinary negligence. It is conduct that evinces a reckless disregard for the rights of others or ‘smacks’ of intentional wrongdoing,” Colnaghi, U.S.A., Ltd. v. Jewelers Prot. Servs., Ltd., 81 NY2d 821, 823—24 (1993), and “betokens a reckless indifference to the rights of others.” Kalisch-Jarcho, Inc. v. City of New York, 58 NY2d 377, 385 (1983). Accord Sommer v. Fed. Signal Corp., 79 NY2d 540, 554 (1992).
Consigli & Associates takes the position that the proposed negligence and gross negligence claims fail as a matter of law because they are based on Consigli & Associates’ alleged failure to fulfil its contractual responsibilities to perform the renovation in a workmanlike and safe manner. A “simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.” Clark-Fitzpatrick, Inc. v. Long Is. R. R. Co., 70 NY2d 382, 389 (1987). Plaintiff counters that Consigli & Associates breached a legal duty owed to plaintiff independent of the contract, allowing the negligence and gross negligence claims to stand.
The New York Court of Appeals has recognized “borderland situations ․ where the parties’ relationship initially is formed by contract, but there is a claim that the contract was performed negligently.” Sommer v. Fed. Signal Corp., 79 NY2d at 551. Consigli & Associates may have owed no duty to plaintiff until the parties contracted for Consigli & Associates to install a safe temporary water system. See id. Contracting parties nevertheless owe a duty to perform their contractual obligations using reasonable care in addition to the contractual obligations themselves, id. at 551-52, particularly where the public has a significant interest in the contractual services Consigli & Associates provided, because “failure to perform the service carefully and competently can have catastrophic consequences.” Id. at 553. To determine whether plaintiff's negligence and gross negligence claims meet this standard, the court considers “the nature of the injury, the manner in which the injury occurred and the resulting harm.” Id. at 552. See Dormitory Auth. v. Samson Constr. Co., 30 NY3d 704, 711 (2018); Bellevue S. Assocs. v. HRH Const. Corp., 78 NY2d 282, 293 (1991). To bring a separate tort claim, however, plaintiff must not merely be seeking enforcement of the bargain. Sommer v. Fed. Signal Corp., 79 NY2d at 552.
The proposed second amended complaint's breach of contract claim is substantially unchanged. Plaintiff alleges a failure to meet deadlines, monitor and coordinate subcontractors’ work, furnish temporary water, and “properly provide and install a water tank,” among other defects in performance. Georgoulis Aff. Ex. 4 ¶ 18. The proposed negligence claim against Consigli & Associates alleges that the failure of the overfill switch in the temporary tank system damaged finished portions of the project and delayed completion of the work. Id. ¶¶ 56, 69. As far as the proposed negligence and gross negligence claims seek a remedy for delayed work and completion of the project, the claims seek enforcement of the bargain and are duplicative of the breach of contract claim. As far as plaintiff seeks a remedy for damage to the building from the flood, plaintiff is not merely seeking enforcement of the contract. Therefore the court must consider the nature of the injury, the manner in which the injury occurred, and the resulting harm, “particularly whether it is ‘catastrophic,’ as one of the most significant elements in determining whether the nature of the type of services rendered gives rise to a duty of reasonable care independent of the contract itself.” Verizon New York, Inc. v. Optical Commc'ns Grp., Inc., 91 AD3d 176, 181 (1st Dep't 2011) (quoting Trustees of Columbia Univ. in City of NY v. Gwathmey Siegel & Assoc. Architects, 192 AD2d 151, 154 (1st Dep't 1993)). Shoddy construction work or failure of utility services to a building causing flooding or otherwise endangering occupants or bystanders states a negligence claim separate from breach of a construction contract. E.g., Duane Reade v. SL Green Operating P'ship, LP, 30 AD3d 189, 190-91 (1st Dep't 2006); Trustees of Columbia Univ. in City of New York v. Gwathmey Siegel & Assocs. Architects, 192 AD2d at 154.
Plaintiff does not specifically allege the damage caused by the leak, but claims $20,000,000 in damages, double the damages sought for the breach of contract claim. Even $500,000 in damages from a leak caused by a burst sprinkler pipe is “typical of tort claims,” particularly when defendant construction manager owes a duty to maintain safe premises and ensure the integrity of a building's temporary water system for the protection of occupants and bystanders. Duane Reade v. SL Green Operating P'ship, LP, 30 AD3d at 191.
Here, plaintiff alleges that the leak was a single event over one day, “caus[ing] substantial damage to various finished areas of the project.” Georgoulis Aff. Ex. 4 ¶ 56. A leak that is a single occurrence causing significant damage, like the partial collapse of building components, may be sudden and precipitous, as opposed to a slow leak of water over weeks or months. See Duane Reade v. SL Green Operating P'ship, LP, 30 AD3d at 190; Trustees of Columbia Univ. in City of New York v. Gwathmey Siegel & Assocs. Architects, 192 AD2d at 155. Plaintiff alleges that the damages were both abrupt and catastrophic, Georgoulis Aff. Ex. 4 ¶¶ 19-20, 56, 62, 69, precluding a determination that the amendments are so utterly without merit as to disallow them. Dormitory Auth. v. Samson Constr. Co., 30 NY3d at 713. See Mashinsky v. Drescher, 188 AD3d at 466.
Consigli & Associates nonetheless contends that a contractual waiver of liability bars the negligence claim. In the construction management agreement between plaintiff and Consigli & Associates, which the parties stipulated that the court may consider despite the lack of authentication, the owner and contractor
waive Claims against each other for consequential damages arising out of or relating to this Contract. This mutual waiver includes
1. damages incurred by the Owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons ․
Aff. of Dominic M. Donato Ex. A, NYSCEF Doc. No. 456, § 15.1.6. Since this waiver provision does not cover the owner's property damage that the contractor's negligence allegedly caused, neither does the agreement render the negligence claim palpably insufficient as a matter of law. See Mashinsky v. Drescher, 188 AD3d at 466. Moreover, plaintiff also claims gross negligence, which may pierce a contractual limitation of liability. Matter of Part 60 Put-Back Litig., 36 NY3d 342, 352 (2020); Sommer v. Fed. Signal Corp., 79 NY2d at 555.
The proposed second amended complaint supports the gross negligence claim by alleging that Consigli & Associates was aware of problems with the temporary water tank system's float switch, which caused a prior failure resulting in a smaller flood. Plaintiff further alleges that Consigli & Associates, as well as other defendants, recklessly ignored the risk of another flood and flouted the code requirements for the water tank, which mandated safeguards against thousands of gallons of water flooding out of the temporary tank and causing property damage. Georgoulis Aff. Ex. 4 ¶¶ 66-67. While questions remain whether this conduct constitutes gross negligence, the alleged failure to follow code requirements and to take action after the tank already failed once may be evidence of recklessness, so this claim is not palpably insufficient as a matter of law either. See Mashinsky v. Drescher, 188 AD3d at 466.
In sum, the court grants in part plaintiff's motion to amend its complaint. C.P.L.R. § 3025(b). The court denies the motion as to claims for damages based on project delays, as those claims are duplicative of the breach of contract claim, but otherwise grants the motion.
Within 10 days after entry of this order, plaintiff shall serve a copy of this order with notice of entry and a second amended complaint in conformity with this order on defendants. Defendants shall answer or otherwise respond to the second amended complaint within 30 days after service of the second amended complaint. After answering the second amended complaint, defendant Consigli & Associates, LLC, may request additional time to supplement expert disclosure. This decision constitutes the court's order.
Lucy Billings, J.
Response sent, thank you
Docket No: Index No. 656973/2017
Decided: August 27, 2021
Court: Supreme Court, New York County, New York.
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