New York State Court of Claims

New York State Court of Claims

SCIENCE APPLICATIONS v. THE STATE OF NEW YORK, #2008-015-043, Claim No. 114716, Motion Nos. M-74696, CM-74724


Synopsis


In a breach of contract action, claimant's motion and defendant's cross-motion for summary judgment were denied. Ambiguities in contract precluded summary resolution of issues.

Case Information

UID:
2008-015-043
Claimant(s):
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Claimant short name:
SCIENCE APPLICATIONS
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
114716
Motion number(s):
M-74696
Cross-motion number(s):
CM-74724
Judge:
FRANCIS T. COLLINS
Claimant’s attorney:
Fried, Frank, Harris, Shriver & Jacobson LLP
By: Jack B. Gordon, Esquire and
Tabner, Ryan and Keniry, LLPBy: William J. Keniry, Esquire
Defendant’s attorney:
Honorable Andrew M. Cuomo, Attorney General
By: Frederick H. McGown, III, EsquireAssistant Attorney General
Third-party defendant’s attorney:

Signature date:
June 5, 2008
City:
Saratoga Springs
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

Claimant, Science Applications International Corporation (SAIC), moves for summary judgment pursuant to CPLR 3212 on its causes of action for breach of contract and for a declaration interpreting certain language of the contract. The defendant opposes the motion and cross-moves for summary judgment dismissing the claim. SAIC entered into a contract with the New York State Office of Temporary and Disability Assistance (OTDA) for the provision of imaging and document repository services. The purpose of the project was "to develop and provide an enterprise document repository system and provide image capture services for the Medicaid (MA), Home Energy Assistance (HEAP), Public Assistance (PA) and Food Stamp (FS) programs supported by the Local Social Service Departments (LSSD) and administered by the OTDA . . . " (see claimant’s Exhibit A-4, § 1.2). Toward this end OTDA solicited bids through a Request For Proposals (RFP). Article 9 of the contract incorporated by reference the RFP, all appendices, attachments and exhibits, the contractor’s proposal and communications in response to the RFP (see claimant’s Exhibit A-3, Art. 9). Article 9 of the contract also specifically set forth the following order of precedence should an inconsistency arise between the various documents composing the contract:
“In the event of any inconsistency in or conflict among the document elements of this Agreement identified in this Article, such inconsistency or conflict shall be resolved by giving precedence to the document elements in the following order:

1. First, Appendix A;

2. Second, body of this Agreement, and the Appendices other than Appendix A;

3. Third, all published Questions and Answers , Modifications and Clarifications (Attachment 1- Part 2);

4. Fourth, the RFP. (Attachment 3);

5. All other attachments.”
Pricing for the services encompassed by the contract is set forth in Appendix C. Two price charts are provided - one for “Core Imaging - Day Forward Price per Page (one or two sided)” and one for “Core Imaging- Historical and Backfile Price per Page (one sided or two sided).” The price is based on volume and each chart sets forth a “tier” level of volume with the corresponding price column (redacted) for five years.

The RFP also contained price schedules which bidders were required to use in compiling the financial section of their proposal (see claimant’s Exhibit A-4, RFP § 3.6.1). Unlike the price charts in Appendix C, however, the RFP price charts were entitled “Day Forward Cost Per Page Schedule (Phase 1 and Phase 2)” and “Backfile and Historical Cost Per Page Schedule” and did not include the parenthetical references to “one or two sided” or “one sided or two sided” found in Appendix C. The instructions provided relative to the Day Forward cost per page stated in pertinent part the following:
“Instructions: . . . All images scanned per month in all Local Districts will be added together to determine the applicable volume tier. Example: If county A has 75,000 images and county B has 50,000 images in a given month, the applicable price for all images will be the price submitted for the 100,001-500,000 volume tier” (emphasis added).
Although revisions to the price charts contained in the RFP were made expanding the volume tiers, the instructions remained the same (see Revisions to RFP, claimant’s Exhibit A-5, § 8.4.2.1). James B. Herrick, who is employed by OTDA as the Assistant Director of the Bureau of Contract Management, stated the following in an affidavit submitted in opposition to the motion:
“Although, . . . my original intention had been to incorporate the pricing sheet from the SAIC Cost Proposal exactly as it appeared in that Proposal, my intention was frustrated due to the fact SAIC had made certain modifications to the sheet provided in the RFP. Specifically, rather than merely filling in the blank provided for the ‘cost per page’ of duplicating documents, SAIC had inserted language in the form indicating it was billing us at a ‘cost per document’. Such a change would have been highly prejudicial to SAIC since a document could consist of an infinite number of pages yet compensation was pegged at the cost of a single document . . . Accordingly, among other editorial changes, I deleted the word ‘document’ and substituted the word ‘page’. . . [J]ust to make sure that OTDA’s intentions were adequately expressed, I added the parenthetical modifiers ‘(one or two sided)’ and ‘(one sided or two sided)’ ” (Herrick Affidavit ¶ 7).
Mr. Herrick indicates that the negotiation package, including a draft contract containing the amended price appendix, was sent to SAIC on March 2, 2006. He states in his affidavit that he “specifically iterated” all changes in the RFP at the parties' first formal negotiation meeting held on March 8, 2006 (Herrick Affidavit ¶8). With respect to the price appendix Mr. Herrick stated:
“The language at issue in Appendix 3 was projected onto the screen at this meeting and I specifically advised the SAIC staff in attendance that I had modified their ‘document’ language and why. I did not comment on my parenthetical additions because, as indicated above, I did not think them significant, however, such additions were clearly presented for all in attendance to see, and all attendees knew, or should have known, that these were my changes to SAIC’s language and were intended to mean exactly what they seemed to mean” (Herrick Affidavit, ¶ 9).
Pamela Paulik, the lead negotiator for the OTDA team, states the following with respect to SAIC’s reaction to the changes which had been brought to the attention of those in attendance at the March 8, 2006 meeting:
“SAIC was pleased with removal of ‘document’. SAIC representatives stated that the one-side or two-sided reference made no difference because the scanning machines to be utilized by their subcontractor (Sourcecorp) always scanned both sides of a piece of paper. No questions were raised regarding this item by any of the several SAIC personnel in attendance at this session, or in any subsequent communications with SAIC prior to contract signing” (see affidavit of Pamela Paulik, ¶ 6).
Although the execution pages of the contract were not provided in support of its motion, SAIC indicates that its representative signed the contract on March 28, 2006, nearly three weeks after the changes to the price schedule were allegedly provided.

SAIC supports its motion for summary judgment by reference to the several instances throughout the RFP and the other contract documents in which “page” and “image” appear to be used interchangeably. For example, § 8.3 of the RFP states that “[m]onthly billings for the State must be based on the quoted pricing tier that corresponds to the total actual number of images captured across all participating counties/State agencies” (emphasis added) (see also claimant’s Exhibit A-3, Art. 6; Exhibit A-4, § 3.7.4; § 8.3; § 8.4.2.1). SAIC argues that insofar as a double-sided page has two images, the only reasonable interpretation of the contract is that “page” and “image” are synonymous entitling it to payment of the stated price for each “image” reproduced and stored.

In a letter dated November 3, 2006 (see claimant’s Exhibit A-1) SAIC addressed the inclusion of the terms "one or two sided" in Appendix C of the contract, stating:
"SAIC is now aware that OTDA’s inclusion of the term 'one or two sided' as set forth in the finalized contract, Appendix C, Sections 4 and 5, OTDA intended this addition to mean that the same amount would be charged for one (1) page with images on two (2) sides. SAIC interpreted the addition of the term “one or two sided” to mean that the system would have the capability to scan pages that have images on two (2) sides of the page. The system will have this capability.”
Three invoices for payment (totaling $40,490.67) based on the per image pricing methodology were rejected by OTDA on July 18, 2007 (see claimant’s Exhibit A-1). The matter was submitted to the Commissioner’s designee Leonard R. Belanger, Director, Bureau of Contract Management, for resolution pursuant to Article 10 of the contract (see claimant’s Exhibit A-3, Art. 10).

Mr. Belanger rejected SAIC’s contention that because it did not draft the contract any ambiguity must be interpreted in its favor as “self-serving and unsupported by the record” (see claimant’s Exhibit A-2, Belanger decision p. 8). Mr. Belanger stated that "SAIC was a fully participating partner in the process that resulted in the language in question being added to the contract" explaining:
“having made the clarification [to the price appendix] necessitated by SAIC’s error, OTDA timely transmitted a document to SAIC in which the corrected language was clearly set forth, brought SAIC’s attention to the change by orally pointing out the changes as the final OTDA language was being presented on a screen during contract negotiations, and then gave SAIC almost a month to consider the effect of the clarification after the negotiating session, prior to SAIC’s execution of the contract” (see claimant’s Exhibit A-2, p. 8)
Mr. Belanger rejected the contention that SAIC’s interpretation of “per page” was consistent with industry custom and usage. He was similarly unpersuaded by SAIC’s contention that OTDA should have been alerted to the deficiencies in the RFP by virtue of the fact that no bidder inquired regarding the volume of one-sided versus two-sided pages and that no responsible bidder could have bid without that information. In this regard Mr. Belanger noted that another contractor who submitted a bid for this work, ACS State and Local Solutions, was performing the same type of work pursuant to a contract with the City of New York and was charging per page whether it was one- sided or two-sided (see claimant’s Exhibit A-2, pp. 4, 10).

SAIC now seeks reformation of the contract and damages for breach of contract in the total sum of $40,490.67.

It is well established that " 'summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue' " (Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223, 231 [1978] quoting Moskowitz v Garlock, 23 AD2d 943-944 (1965])http://web2.westlaw.com/find/default.wl?rs=WLW6.11&serialnum=1979103056&fn=_top&sv=Split&tc=-1&findtype=Y&tf=-1&db=605&vr=2.0&rp. "The 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 eliminate any material issues of fact from the case" (Winegrad v New York Univ. Med. Center, 64 NY2d 851, 853 [1985]). Once the movant has made this showing, the burden shifts to the party opposing the motion "to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986] citing Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

It is a well-accepted tenet of contract interpretation that “[w]here possible, a contract should be interpreted to avoid inconsistencies and to give meaning to all of its provisions, giving a practical and reasonable interpretation to the language employed and the parties’ reasonable expectations with respect thereto” Malleolo v Malleolo, 287 AD2d 603, 603-604 [2001], citing W.W.W. Assocs. v Giancontieri, 77 NY2d 157, 162 [1990]). "Such agreements should be read as a whole to ensure that undue emphasis is not placed upon particular words and phrases" (Bailey v Fish & Neave, 8 NY3d 523, 528 [2007]; see also Matter of Westmoreland Coal Co. v Entech, Inc., 100 NY2d 352 [2003]). Interpretation of the contract should not render any portion of the contract meaningless and, to the extent possible, should give effect to its general purpose (Beal Sav. Bank v Sommer, 8 NY3d 318, 324-325 [2007]; Queens Best, LLC v Brazal S. Holdings, LLC, 35 AD3d 695 [2006]; First Fed. Sav. & Loan Assn. of Rochester v Minkoff, 176 AD2d 1049 [1991]). Thus, “a court should not adopt an interpretation which would leave any provision without force and effect” (Gonzalez v Norrito, 256 AD2d 440, 440 [1998], lv dismissed 93 NY2d 888 [1999]).

Here, there is an inconsistency between the plain language of the price schedules comprising Appendix C of the contract and those which are a part of the RFP. Whereas the price schedules included in the contract as Appendix C clearly indicate a price per page whether it was “one or two sided” or “one sided or two sided”, the price schedules and other material included in the RFP make multiple references to price as determined by reference to the volume of images scanned per month. Upon consideration of the proof submitted on the motion the Court concludes that questions of fact exist precluding summary judgment in SAIC’s favor. To hold otherwise would render the seemingly unequivocal parenthetical references to one-sided or two-sided in the price chart without meaningful effect. Where a written contract “read as a whole to determine its purpose and intent . . . is reasonably susceptible to differing interpretations” an ambiguity is created which raises questions of fact requiring a trial (Comprehensive Health Solutions v Trustco Bank, N.A., 277 AD2d 861, 863 [2000] [internal citations and quotations omitted]; see also First Fed. Sav. & Loan Assn. of Rochester v Minkoff, 176 AD2d 1049,1051 [1991]; Barrow v Lawrence United Corp., 146 AD2d 15 [1989], lv denied 89 NY2d 810 [1997]).

SAIC’s contrary argument notwithstanding, the Court is unpersuaded that the ambiguities in this contract should be interpreted against the defendant. SAIC is a sophisticated business entity who participated in drafting the price schedule at issue in this case. In such circumstances, interpreting ambiguities against the defendant would be inappropriate (see e.g. Citibank, N.A. v 666 Fifth Ave. Ltd. Partnership, 2 AD3d 331 [2003]). Accordingly, SAIC’s motion for summary judgment is denied.

Defendant’s cross-motion for summary judgment is based on the contention that this Court does not possess subject matter jurisdiction to entertain the claim because any award of damages “is necessarily dependant upon the . . . determination that the contract as written and executed does not conform with the agreement claimant wishes was in place” (see affirmation of Frederick H. McGown, III, dated March 26, 2008, ¶ 19).

This Court has jurisdiction to award money damages against the State for causes of action sounding in appropriation, contract or tort (Court of Claims Act § 9 [2]). Whether an action is primarily one for money damages or equitable relief is not determined by how the claimant characterizes it in the claim (see Sidoti v State of New York, 115 AD2d 202, 203, citing Schaffer v Evans, 86 AD2d 708, 709 [1982], affd 57 NY2d 992 [1982]). Rather, the inquiry may be resolved by reference to "[w]hether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim" (Matter of Gross v Perales, 72 NY2d 231, 236 [1988]; see also Guy v State of New York, 18 AD3d 936 [2005]). Here, there is no question but that the essential nature of SAIC’s claim is for money damages for breach of contract.

Based on the foregoing, claimant’s motion for summary judgment and the defendant’s cross-motion for summary judgment are both denied.


June 5, 2008
Saratoga Springs, New York

HON. FRANCIS T. COLLINS
Judge of the Court of Claims


The Court considered the following papers:
  1. Notice of motion dated March 14, 2008;
  2. Affidavit of Jane C. Philips sworn to March 14, 2008 with exhibits;
  3. Affirmation of Jack B. Gordon dated March 14, 2008 with exhibits;
  4. Memorandum of law of Jack B. Gordon dated March 14, 2008;
  5. Notice of cross-motion dated March 26, 2008;
  6. Affirmation of Frederick H. McGown, III dated March 26, 2008 with exhibits;
  7. Reply memorandum of Jack B. Gordon dated April 1, 2008.