New York State Court of Claims

New York State Court of Claims

ARBEN CORPORATION v. NEW YORK STATE THRUWAY AUTHORITY, #2008-036-406, Claim No. 114873


Synopsis



Case Information

UID:
2008-036-406
Claimant(s):
ARBEN CORPORATION and ARBEN GROUP, LLC
Claimant short name:
ARBEN CORPORATION
Footnote (claimant name) :

Defendant(s):
NEW YORK STATE THRUWAY AUTHORITY
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
114873
Motion number(s):

Cross-motion number(s):

Judge:
MELVIN L. SCHWEITZER
Claimant’s attorney:
ARTHUR J. SEMETIS, P.C.By: Arthur J. Semetis, Esq.
Defendant’s attorney:
ANDREW M. CUOMO, ATTORNEY GENERAL
By: Eiden Beirne, Esq. Assistant Attorney General
Third-party defendant’s attorney:

Signature date:
September 10, 2008
City:
New York
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

This is the court’s decision after a five-day trial conducted on February 26-29, 2008 and March 4, 2008. Claimants Arben Corporation and Arben Group, LLC,[1] allege that defendant New York State Thruway Authority (defendant or “NYSTA”) breached a settlement agreement between the parties. The alleged agreement is comprised of two letters: a November 27, 2002 letter (Ex. 46)[2] from defendant’s Executive Director to claimant’s then counsel, who acted on behalf of claimant, setting forth the terms of a settlement, to which claimant’s counsel responded in a letter to the Executive Director dated December 6, 2002 (Ex. 47) stating that his letter was “acceptable.” Claimant contends these letters are an offer and acceptance which formed a binding agreement to fully resolve claims for compensation for extra work under three underlying construction contracts claimant had with defendant, and that defendant breached the agreement by paying only part of the amount it had promised to pay. Defendant counters that it never made such an agreement and the parties always understood that in order for claimant to be paid it would be required to furnish certain documentary substantiation called for by the underlying construction contracts, requirements which defendant asserts never were fulfilled by claimant.


Claimant is a road and heavy construction contracting firm based in Pleasantville, New York. Founded in 1986, claimant contracts virtually exclusively with public entities such as the New York State Department of Transportation (“DOT”) and, until this dispute, NYSTA. (30-33). Claimant is jointly owned by two brothers, Robert Benza (“R. Benza”) who is the President, and Philip Benza (“P. Benza”) who is the Executive Vice-President. Both have been intimately involved in operating and managing the company and both testified at the trial.

On November 23, 1999 NYSTA and Arben entered into a contract for the construction of a noise barrier along the New England Thruway (TANE 99-88/D212785) (the “Noise Barrier contract”). Ex.14. After it began work under the contract, claimant notified defendant of changed conditions and NYSTA subsequently terminated the contract for convenience. Claimant asserted it was entitled to be reimbursed for additional costs it had incurred. Defendant refused to reimburse claimant, contending claimant had failed to support its claims with documentation required under the contract. On December 8, 1999, NYSTA and Arben entered into another contract for the cleaning and repair of culverts at five highway locations in the Bronx and in Westchester and Rockland counties (TANY 99-74/D212764) (the “Culvert contract”). Ex. 15. After completion of the contract, claimant asserted it was entitled to be reimbursed for additional work due to changes, and defendant refused to pay claimant contending that claimant had not furnished defendant with the required documentation to support its claims. On February 23, 2000, NYSTA and Arben entered into a contract for the rehabilitation of bridges on the New York State Thruway in Westchester County (TANY 99-12B/D212640) (the “Bridge contract”). Ex. 16. Claimant began work under the contract, but then asserted it was being required to do more work than it had agreed to do under the original project specifications. Defendant redesigned the project but the parties could not agree on a price for the redesigned work and defendant terminated the Bridge contract for convenience. Claimant claimed that defendant failed to compensate it for the work it performed under the Bridge contract. A dispute arose over what documentation claimant needed to provide in order for it to be paid.[3]

In each of these three disputes, claimant filed a claim with the Court of Claims on March 7, 2002 (respectively, nos. 105702, 105703 and 105704; Exs. 1, 2 and 3). After claimant filed the claims, the parties decided to attempt to resolve their differences through nonbinding mediation. Ex. 18; (43, 294-96). On May 6, 2002, pursuant to stipulations filed with the court, claimant withdrew its court claims, without prejudice to renewal, in order to facilitate mediation and to proceed without the involvement of the State’s Attorney General, who otherwise represents NYSTA once claims are filed with the court. Exs. 21 and 22.

The parties engaged in mediation between May and July 17, 2002. On the recommendation of John Brizzell, the then Deputy Director and Chief Engineer of defendant (854-55), the parties selected Darrell Harp as mediator, agreeing to split the cost of Mr. Harp’s fee. Ex. 20. Mr. Harp, a lawyer now in private practice, worked for over thirty-two years for DOT (233-34), including as its general counsel.[4] The mediation proved unsuccessful but, as a result, the parties continued to negotiate.[5] On July 22, 2002, Mr. P. Benza spoke to Mr. Brizzell concerning a proposed settlement. (305-08; 864). Mr. Brizzell sent Mr. P. Benza a fax offering to pay $201,787 on the Bridge contract and $272,194 on the Noise Barrier contract, contingent upon verification of documentation and execution of a waiver of claimant’s claims under those contracts. Ex. 72. (58-59; 499). Mr. P. Benza testified that by July 23, 2002, Mr. Brizzell had offered to settle the dispute for $750,000, and he had countered that claimant wanted $1.5 million to settle all three claims. Ex. 33. (316-17). The negotiations centered around the adequacy of claimant’s documentation to support its claims, particularly on the Bridge and Noise Barrier contracts, which was where the bulk of the money was being sought.

The parties appeared to be at an impasse, so Mr. P. Benza called John Platt, NYSTA’s Executive Director, directly.[6] Mr. Plunkett, as counsel for claimant, had been in contact with Mr. Platt to explore whether the matter could be resolved in the range of $1.1 million. (330). As a result of Mr. P. Benza’s conversation with Mr. Platt, on September 4, 2002, claimant agreed to retain Mr. Harp,[7] the former mediator, at its own expense to assist on the matter of documentation to facilitate negotiations. This was done with defendant’s concurrence. (246). Exs. 36 and 37. (64-65; 328-30). The parties agreed Mr. Harp would work with Martin White, Civil Engineer III of defendant’s Office of Construction Management, to identify documentation that would justify a settlement of $1.1 million and with which NYSTA could be comfortable when submitting the “order on contract” to the State Comptroller for ultimate approval. Exs. 36, 37, 38 and 40. Mr. Harp identified documentation which he believed was sufficient for this purpose and forwarded it to Mr. White in anticipation of a meeting they were scheduled to have on September 19, 2002. In Mr.  Harp’s September 16, 2002 cover letter, he reported to Mr. White, “I found, consistent with the terms of the contracts and the law of the New York State, that the additional sums of $598,000 for TANY 99-12B/D212640 and $617,516 for TANE 99-88/D212785 are justified and fully supported by these records and documents.” Ex. 41. Mr. Harp testified that, in his view, a total of $1,215,516 was the minimum amount which could be justified by the documentation he provided, and that he had eliminated two to three hundred thousand dollars claimant previously had claimed, which included his disregarding certain items of equipment defendant had questioned. (253, 283-86).

Mr. Harp testified that at their September 19, 2002 meeting Mr. White said he still needed field people to verify certain documentation claimant had submitted, although he did not think Mr. White actually was requesting any additional documentation from claimant. (258-259; 274, 276). Mr. Harp said that, in his experience, the recordkeeping requirements in contract specifications, such as mandated nightly sign-offs by field supervisors, are not met in 99 percent of the cases, and in his view, the records furnished by claimant “were sufficient.” (276, 283). Mr. P. Benza, who also was at the meeting with Mr. White, testified that claimant had provided Mr. White with “all of the remaining documentation,” and Mr. White had not asked for more from claimant at their meeting. (333). Nevertheless, no agreement had been reached.[8] Claimant again looked to Executive Director Platt to help settle the matter. Mr. P. Benza testified he had four or five conversations with Mr. Platt who, according to Mr. P. Benza, was “committed to resolving this matter.” (343). He explained that after the September 19, 2002 meeting, he and Mr.  Plunkett “were on a mission of basically bringing [the dispute] to final resolution and calling Mr. Platt to set up a meeting that we could, you know, get this resolved.” (354). He said he went into the meeting seeking $1.25 million based on the documentation he previously submitted. (355).

On October 25, 2002, the meeting was held in Mr. Platt’s office in Suffern, New York. According to a handwritten note prepared by Mr. P. Benza, present at the meeting were Messrs. Platt, Brizzell, Randall and White on behalf of defendant, and Messrs. P. Benza, Harp and Plunkett on behalf of claimant. Ex. 43. According to Mr. P. Benza, he went into the meeting to compromise. He wanted to come out with $1 million because that would translate into $15-20 million of bonding authority for his company (1011). Mr. P. Benza estimated the meeting lasted about 1½ hours; Mr. Plunkett testified it was closer to two. Mr. P. Benza testified Mr. Platt began the meeting by saying he wanted to “resolve this completely and get it done and we were there to do that” and they then discussed each of the individual contracts “and the amounts that . . . would work for them and for us.” (357). Mr. Harp participated in a presentation of the various projects. According to Messrs. P. Benza and Harp, following the discussion Mr. Platt said defendant would pay claimant an amount of between $997,000 and $1.1 million based on the documentation claimant already had provided; that this apparently was the range NYSTA felt comfortable with. (1012).

Mr. P. Benza testified as follows:
Q. Did you believe that you reached an agreement at that time?


A. Oh, there’s no question in my mind. I walked out of there with an agreement. When we finished the meeting, I stood up and I shook John Platt’s hand.


Q. And what is your understanding of what the terms of that agreement were?


A. The terms of the agreement were simply that they [NYSTA] were going to pay us the remaining money and they were going to try to do it as quickly as possible.


Q. Was there any discussion about providing additional documentation?


A. None whatsoever.
(359).

Mr. Harp testified similarly regarding the October 25, 2002 meeting:

Q. And do you recall what was discussed at that meeting?


A. We discussed 12-B extensively. That was the bridge contract.


Q. Okay.


A. And at some point, it came out somewhere around a million to a million one should be the range of a settlement

* * *

Q. Was that someone from the Thruway Authority?


A. Back and forth?


Q. Yeah.


A. Yes. I believe it was John Platt.


Q. And again, what did he indicate? There was a range?


A. A range around - - just a little under a million. I can’t remember exactly where, to about a million one.


Q. As settlement?


A. As a settlement, yes, and that was - - and that was the terms that were used. That we’ll [sic] would process this thing, get this thing done.

* * *

Q. And were you - - at the end of that meeting and thereafter, were you asked to provide or produce any more documentation by anybody?


A. I don’t believe I was.


Q. Okay. Now - -


A. I don’t recall any other meetings or anything.

* * *

Q. Did you formulate an opinion as to whether or not Mr. Platt wanted that matter settled at that time?


[After defense objection and colloquy with the court]


THE WITNESS: I believe that there was an agreement of a range of a number from just slightly under a million to a million one.

(261-66).

Mr. Plunkett testified similarly that there was an agreement at the meeting to resolve the claims in the range of “under a million to a million two.” (578). Mr. P. Benza’s handwritten note from the meeting identifies the three contracts by number and states: “final settlement reached approx[imately] $997,000-$1,100 Hooray!” Ex. 43 (emphasis in original).

In contrast to claimant’s accounts of what transpired, each of the three individuals from NYSTA who testified at trial as having attended the meeting, said he had little or no specific recollection of what occurred there. (634, 661, 828, 873, 893, 983-84). Mr. Randall remembered the purpose of the meeting as providing Mr. Plunkett and claimant with an additional opportunity to make a presentation as to their position on the ongoing disputes, but he could not recall whether he spoke at the meeting. “[I]t was just listen and hear what they say and that’s what they did,” he said. (649). On cross-examination, he added, “I don’t remember very much about that meeting. . . . [661] I don’t recall it [the meeting] as something that really moved the ball forward very much.” (827). When asked on cross-examination whether he could say that anything Mr. Harp testified to about the meeting was not accurate, he answered, “No.” (661).[9]

Over the next month following the October 25, 2002 meeting, Mr. Plunkett had conversations with Mr. Platt who, according to Mr. Plunkett, “was taking charge of this matter to try to resolve it . . . [W]e were settling the case.” (579). It was Mr. R. Benza’s objective to “nail this down” by December 31, 2002. (1014). During the settlement conversations, Mr. Platt communicated a specific settlement offer to Mr. Plunkett which he recalled as being just below $1 million and which NYSTA was proposing to allocate among the three construction contracts in a certain way. (580). Mr. Plunkett informed his client of the offer. Thereafter, Mr. P. Benza furnished Mr. Plunkett with a letter dated November 21, 2002 detailing his “request” of how he preferred the $997,486.55 to be allocated among the contracts. Ex. 44. At trial, he explained that he had asked for this as an accommodation for accounting purposes, to assist him with surety bonding. (1016-1017). This letter also stated that claimant would provide “all the necessary documentation to the NYS Thruway Authority.” Mr. P. Benza testified that by this he meant he would provide all closeout documentation needed, such as final affidavits from contractors and suppliers, certified payrolls to demonstrate compliance with prevailing wage laws, and documents representing that all bills had been paid and that no liens or claims were outstanding. According to him, it did not mean the agreement was contingent on the production of additional documentation of the extra work. (1020-21). Mr. Plunkett, in turn, forwarded his client’s letter with its proposed allocation to Mr. Platt.

Thereafter, Mr. Platt responded by faxing Mr. Plunkett a draft unsigned letter dated November 27, 2002 which incorporated Mr. P. Benza’s proposed allocation with a cover note stating: “Let me know if this letter serves the purposes of settling the mentioned contracts.” Ex. 45. Mr. Plunkett then reviewed the numbers with his client and they agreed. Mr. Plunkett called Mr. Platt to confirm the parties were in agreement and asked Mr. Platt to send out the final settlement letter, which he did on December 5, 2002 by faxing to Mr. Plunkett a copy of the final signed version of his November 27, 2002 letter. Ex. 46. Mr. Platt’s letter acknowledges that he received Mr. P. Benza’s letter of November 21, 2002 containing Mr. P. Benza’s requested allocation of the $997,486.55, and then states:
Please be advised that the amounts set forth for each contract in the letter are acceptable to the New York State Thruway Authority. The amounts are as follows:

TANE 99-88 (Noise Walls) $  323,305.01
TANY 99-12B (I-87 Bridges)     632,979.12
TANY 99-74 (Cleaning Culverts)       41,202.42

Total $  997,486.55


While it is our sincere intent to make these payments to Arben Corporation as quickly as possible, it cannot be guaranteed by 12/31/02 as they have requested. However, we certainly intend to make our best efforts to expeditiously process each of the contracts in the amounts set forth in this letter.

The next day, on December 6, 2002, Mr. Plunkett sent a response stating: “The letter is acceptable to Arben.” Ex. 47. Mr. Plunkett’s letter further stated: “I will have Phil Benza call your office to coordinate the payment process. If there is a need for attorneys to finalize documents, please have Chuck Randell [sic], Esq. call me as needed.” Id.

That same day, as Mr. Plunkett had referenced in his letter to Mr. Platt, Mr. P. Benza followed up by calling Mr. Platt who then directed him to speak to Mr. White to coordinate payment of the settlement. According to Mr. P. Benza, however, when he called Mr. White, the latter claimed he was unaware of the settlement and “wasn’t really sure what [he] was supposed to do.” (377-78). So, on December 12, 2002, Mr. P. Benza wrote a letter to Mr. Platt first thanking him “for your leadership and hard work that enabled us to reach resolution on the issues” and then asking him to “provide the necessary direction that would enable Mr. White to expeditiously bring closure to these projects.” Ex. 48.

Nothing further happened, however, until January 14 and 15, 2003. It was then that claimant received letters from both defendant and an engineering consulting firm acting on NYSTA’s behalf, again seeking more documentation from claimant. Exs. 49 and 50. On January 21, 2003, Mr. P. Benza wrote Mr. Platt stating he would provide what he had in his office but added that “[s]ome of this information at this point is unattainable” and asked: “Again when does this all end?” A week later, on January 27, 2003, Mr. P. Benza once again wrote Mr. Platt, this time imploring him, “I need you to immediately expedite payment to us in a matter of days.” Mr. P. Benza added: “I am sure that some funds can be paid from a legal settlement account immediately while the balance of the transaction is processed through the controller’s office.” Ex. 52.

On January 31, 2003, Mr. Platt responded to Mr. P. Benza by letter which, at trial, Mr. Randall testified had been drafted by him for Mr. Platt’s signature. Ex. 53. The letter stated defendant was prepared to provide claimant with a payment of $600,462.52 “based on all documentation currently available that supports further payment” under the three construction contracts. It explained the “vehicle for this payment is a New York State Thruway Authority check, and a duplicate check in the same amount . . . will be forthcoming in the future from the Office of the State Comptroller (‘OCS’) after they have completed processing and review.” Ex. 53. Claimant was required to agree to reimburse defendant the amount of the second check in order to receive the $600,462.52 payment by signing a provision at the end of the letter to that effect.

The letter added, however, “this check represents final payment” on the contracts and “you must file a claim to receive additional amounts that have been discussed as a settlement.” (Id.). Mr. Randall testified he had had a conversation directly with Mr. P. Benza, either before or after the letter was sent, in which Mr. Randall explained to him that in paying the $600,462.52 “we were paying everything that we could under the contract, and as he knew, there was a problem with documentation, and if he wanted anything further [he would have to] go back and refile that claim [with the court] as we had talked about several months ago.” (751). Mr. Randall said the intent of this letter “was to give them a basis to refile their claim. . . . [W]e told them this is all you can get, and if you want [any more] money you’re going to have to sue us.” (755).

Mr. P. Benza testified he did not know what to make of it, so his counsel, Mr. Plunkett, advised him to call Mr. Platt for an explanation. Mr. P. Benza did, and testified that he asked Mr. Platt if they still had an agreement to pay the full amount. Mr. Platt answered, “yes, but you’ll need to have Kevin [Plunkett] refile your Notice of Claim and we’ll get the rest of it done.” (l025). So on February 4, 2003, Mr. P. Benza sent Mr. Platt a letter (Ex. 54) stating he had signed the provision at the end of the January 31, 2002 letter (in which he agreed to reimburse NYSTA), and defendant thereafter delivered to claimant’s messenger a check for $600,462.52. Ex. 55.

Thereafter, in early April, NYSTA engaged an outside certified public accountant, at its expense, to conduct a “total cost audit” of the projects which were the subject of claimant’s construction claims in anticipation of claimant refiling its claims with the court. As Mr. Randall explained, “In some cases, [the Attorney General] will use an audit to establish cost that cannot be otherwise understood or because . . . the process permitted by the contract does not result in a meaningful or practicable means of establishing what the contractor was entitled to. . . . [T]here would be a further settlement process that could happen in the context of a lawsuit. . . . You would still have to have some kind of basis to establish that the settlement was appropriate, that there was a justification for it. . . . There has to be something to back it up, and that’s what we were looking for.” (655-657).

Also in early April, however, to the surprise of Mr. P. Benza, claimant received a State Comptroller’s check dated April 3, 2003, bearing a reference to the Bridge contract, in the amount of $416,108.56. Exs. 55 and 71-3. Both Messrs. Mr. R. Benza and Mr. P. Benza testified they believed this check represented the balance of the monies due under the settlement agreement. (100; 106-07). Mr. R. Benza explained that the fact the check identified the Bridge project as the source of payment did not mean to him that the payment was for work on that project – only that it was the source of money for the State to pay the balance of the settlement owed to claimant. (1031-1033). Mr. P. Benza said that, as a result, he was “completely taken by surprise and off guard” when thereafter, sometime in May or early June, Messrs. White and Randall made it clear to him in separate telephone conversations they wanted the $416,108.56 back (424-425) because it was not the balance of the payment under the settlement agreement. (439-440). Mr. P. Benza did not return the money, professing to be waiting for the results of the audit he hoped would finally permit claimant to receive the balance he thought he had settled for.

When defendant saw that claimant was not returning the money, it began deducting amounts from other contract payments due to claimant, and also due to its sister corporation, Arben Group, LLC. Claimant introduced Ex. 71-1 containing a chart of deductions from money owed to Arben Corporation and its sister corporation Arben Group, LLC. Mr. R. Benza testified that when he saw funds were being withheld, he called Mr. Randall, who told him the money had been withheld as an offset because the $416,108.56 was due back to defendant. (136-38; 147). The withheld funds total $438,011.76. Ex. 71-1.

In July 2003, the audit which had been arranged for by Mr. Randall ultimately was conducted at claimant’s offices. (447). But the auditor was instructed not to provide a copy of his report to claimant (Ex. 64) and it was not seen by claimant until it obtained a copy in 2007 pursuant to a Freedom of Information Law request. Ex. 63. (447-48).
*               *               *
The court finds claimant has proved by a fair preponderance of the credible evidence that the parties entered into a valid, binding and enforceable agreement which completely settled claimant’s claims under the three construction contracts when claimant’s counsel, Mr. Plunkett, sent the December 6, 2002 letter to defendant accepting what the court finds was defendant’s valid offer, made by Mr. Platt in his November 27, 2002 letter, to pay to claimant $997,486.55 without requiring additional documentation; and that defendant then breached the agreement by paying only $600,462.52 and refusing to pay any more, thus requiring claimant to sue for the balance.

Central to this determination is the court’s finding that Mr. Platt’s November 27, 2002 letter to Mr. Plunkett (Ex. 46) was a valid offer, sufficient to form a binding agreement when it was properly accepted by claimant, and not just another event in a prolonged series of otherwise fruitless negotiations between the parties, as defendant urges here. See Restatement (Second) of Contracts § 24 (“An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it.”). Mr. Platt’s letter did not actually state defendant was making an offer (he referred to Mr. P. Benza’s letter of November 21, 2002 [Ex. 44] and stated “the amounts set forth for each contract in the letter are acceptable to the New York State Thruway Authority”) and so the parties ascribe radically divergent meanings and draw diametrically opposed inferences from what he wrote. Because Mr. Platt is deceased, the court did not have the benefit of his testimony as to what he intended. In these circumstances, consideration of extrinsic evidence is appropriate:
Words and conduct used in the process of making a contract – offers, acceptances, modifications, preliminary communications not themselves operative in any way – all these need interpretation, before we can say that the parties have reached agreement, before we can determine whether or not agreement has resulted in contract, and before we can determine the operative effect that should be given to the contract.

5-24 Corbin on Contracts § 24.1
[2008].

The October 25, 2002 meeting and the events leading up to it provide the context for construing the writings which followed. By the time of that meeting, claimant had prevailed on Mr. Platt, NYSTA’s Executive Director, to lend his good offices to an effort to finally resolve what had become a seemingly irreconcilable dispute. NYSTA’s staff obviously had become invested with its view that the documentation claimant was relying on was inadequate to support the amount claimant was seeking. The dispute already had been the subject of claims filed with the court, followed by unsuccessful mediation; then by negotiations in which Mr. Harp, the former mediator, was retained by claimant with defendant’s approval to help bring about a resolution and who thereafter argued that the documentation could support a payment in excess of $1.2 million; but then yet another impasse because the staff continued to adhere to its position after the September 19, 2002 meeting. There even appeared to be staff resentment that claimant now was relying on Mr. Harp’s credibility as a former government colleague to persuade NYSTA to increase its settlement offer instead of using him to help claimant put together what NYSTA said it needed. The parties appeared destined to resume litigation.

It is with this background that the court heard six witnesses offer testimony about the October 25 meeting (three from each side). For claimant, Messrs. P. Benza, Harp and Plunkett testified that by the end of the meeting each believed an “agreement” actually had been reached for defendant to pay claimant in a range between $997,000 and $1.1 million which was not contingent on claimant providing defendant with any further documentation. In contrast, none of defendant’s three witnesses, Messrs. Randall, White and Brizzell, remembered very much of anything that occurred at the meeting – let alone that it had resulted in an agreement to settle the dispute. Defendant suggests this absence of recollection by its attendees at the meeting demonstrates that whatever occurred there really was of no moment. None of its three witnesses was able to recount what transpired at the meeting to have moved Mr. P. Benza to write a contemporaneous note on the written agenda he had prepared for the session, “final settlement reached approx[imately] $997,000-$1,100 Hooray!” Ex. 43 (emphasis in original). The court views this singular inability of defendant’s witnesses to provide more specifics about a meeting presided over by their executive director, which had pertained to a dispute each had been directly involved with, as straining credulity. The court credits instead the testimony of Messrs. P. Benza, Plunkett and Harp that the result of the meeting was an understanding that Mr. Platt, NYSTA’s Executive Director, decided to settle the dispute within a $100,000 range, between $997,000 and $1.1 million, based on the documentation claimant already had provided.1[0] Mr. Platt had this executive authority under NYSTA’s contract settlement procedure to “determine the Authority’s final position.” (Ex. E, § 105-14 [F]).

Defendant argues that the applicable DOT standard specifications incorporated into the three construction contracts preclude a settlement which dispenses with specific documentation requirements absent an express written waiver to this effect: “For reasons that can be only based in speculation at this point, at the meeting between the parties in October 2002 and in subsequent correspondence, Mr. Platt did not expressly remind Claimant of the contract requirements for payment, e.g. its obligations to furnish cost documentation.” Defendant’s Post-Trial Brief, p. 11. The court has found, however, that Mr. Platt’s November 27, 2002 letter was an offer which, in turn, was accepted by claimant in Mr. Plunkett’s December 6, 2002 letter, and that a binding agreement thus was made to settle the entire dispute – a contract separate and distinct from the construction contracts which preceded it. As such, the documentation requirements of those contracts are not to be read into the agreement here. (See e.g. Japan Cotton Trading Co., Ltd. v Farber, 233 App Div 354, 355 [1st Dept 1931], where a dispute under four contracts containing arbitration clauses were alleged to have been settled in a settlement agreement, the court noted that, if so, “no arbitration may be had, for the agreements calling for such were superseded by the terms of the settlement”; see also Putnam v Otsego Mut. Fire Ins. Co., 45 AD2d 556, 558 [3d Dept 1974] [“A settlement by compromise should be sustained without reference to the validity of the original claim of the parties. The effect of a compromise and settlement is to disclaim the obligation and the new promise substituted as the binding agreement between the parties.”]; 15A CJS, Compromise and Settlement § 32 [2008] [“The effect of a compromise and settlement is to disclaim the obligation and to substitute the new promise; therefore, the effect of a compromise is to substitute a new contract.”]) Defendant intentionally relinquished “a known right with both knowledge of its existence and an intention to relinquish it.” (Airco Alloys Div. v Niagara Mohawk Power Corp., 76 AD2d 68, 81 [4th Dept 1980].)

Defendant makes several additional contract law arguments in support of its argument that the correspondence at issue does not constitute an enforceable contract. It argues the alleged agreement lacks consideration from claimant because none of its claims under the construction contracts was extant and it did not make an agreement to forbear from bringing another suit on the claims. The court disagrees. The settlement agreement was a compromise by both parties, the classic definition of a settlement. Defendant agreed to pay just under $1 million in return for claimant’s agreement to give up its right to pursue claims for the larger reimbursement amounts it had been seeking. Whether litigation actually was pending at the time of the settlement is not determinative. Mr. Brizzell acknowledged that Mr. Platt told him, “[t]he dollar figure agreed to . . . saved a lot of money from what Mr. Harp had come up with in his thing.” (897). On September 16, 2002, Mr. Harp sent Mr. White documentation which, he asserted, supported claims amounting to $1,215,516. Ex. 41. Mr. P. Benza testified that prior to attending the October 25, 2002 meeting, he believed he was entitled to payment of $1.25 million. (354-55; 421-22). The very real possibility that claimant would refile its claims which it previously had withdrawn without prejudice thus loomed over the October 25, 2002 meeting and the back-and- forth which then ensued. Even if defendant ultimately had prevailed in refiled litigation, “a settlement of a disputed claim [made] in good faith by a promisee against a promisor, is a legal consideration for a promise; and the fact that the promisor had a legal defense to the claim settled is no defense to an action on the new promise.” (Wahl v Barnum, 116 NY 87, 95 [1889]; Russell v Cook, 3 Hill 504 [Sup Ct of Judicature, 1842]).

Next, defendant argues the alleged agreement lacks a material term, that is, when the payment would be made. “There can be no legally enforceable contract unless the written agreement is reasonably certain or specific in its material terms.” (22 NY Jur 2d, Material Terms § 19, at 41 [2008]). Mr. P. Benza’s letter of November 21, 2002 had stipulated the $997,486.55 needed to be paid by December 31, 2002. Yet Mr. Platt’s November 27, 2002 letter stated payment by the end of the year cannot be guaranteed, but added “we certainly intend to make our best efforts to expeditiously process each of the contracts in the amounts set forth in this letter.” Ex. 46. Claimant accepted this on December 6. Ex. 47. Although not precise, the court concludes this exchange of correspondence is certain enough to obligate defendant to make the full payment within a reasonable period of time. (Eppens, Smith & Weimann Co. v Littlejohn, 164 NY 187, 195 [1900]) (where no time was fixed in the contract, a reasonable time would be inferred and it was up to the jury to make a determination as to what is reasonable). Under all the circumstances here, the court, as trier of fact, determines that defendant was obligated to pay the entire settlement amount by the end of January 2003. See discussion of defendant’s partial payment, infra.

Finally, defendant suggests that because the State Comptroller was required to approve the agreement, it cannot be held liable for the breach of a contract which never was so approved. This begs the question. It is clear from the events which ensued in January 2003 that defendant did not take those steps to process payment from the Comptroller of the $997,486.55 amount. “It is a ‘well-settled and salutary rule that a party cannot insist upon a condition precedent, when its non-performance has been caused by himself.’. . . Put another way, a party to a contract ‘cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition.’ ” (A.H.A. Gen. Constr. v New York City Hous. Auth., 92 NY2d 20, 31 [1998] [citations omitted]). When a party to an agreement fails to perform an act necessary to consummate the agreement, and that act is within the exclusive control of such party resulting in the failure of performance, such failure will not serve to excuse that party from performance. (Menna v State of New York, 10 AD2d 753 [3d Dept 1960], affd 12 NY2d 956 [1963]).

The events of mid-January-early February 2003 may be seen either as supporting defendant’s view that a meeting of the minds never was reached in November-December 2002, or as the time when defendant breached the settlement agreement it had made. The court is persuaded of the latter. By mid-January, claimant had received two letters written on behalf of NYSTA on successive days, January 14 and 15, 2003 (Exs. 49 and 50), the latter from NYTA’s consulting engineer seeking “Required Documentation” before an order-on-contract could be processed “based on the Administrative Settlement reached between your Firm and the Thruway.” Although one or the other of the letters had been copied to various members of NYTA’s staff (including Messrs. Randall, White and Brizzell), absent from the copy list was Mr. Platt, who had forged the settlement. Once again, Mr. P. Benza was compelled to reach out to Mr. Platt with another plea for his intervention, this time for immediate help. (Exs. 51 and 52).

Without Mr. Platt’s testimony about what transpired within NYSTA, all that is known with certainty is that Mr. Randall authored a January 31, 2003 letter which Mr. Platt then saw fit to sign. Ex. 53. While offering claimant an immediate “advance payment” of $600,462.52, Mr. Platt now stated this would be a “final payment” under the contracts and the “maximum amount of payment that is payable based on the documentation you have provided to us. . . . You must file a claim to receive additional amounts that have been discussed as a settlement.” (Id.). Although defendant argues this shows Mr. Platt never had agreed to pay $997,486.55 without requiring claimant to furnish additional documentation, claimant counters that Mr. P. Benza, after receiving the letter, had a follow-up telephone conversation with Mr. Platt who assured him they still had an agreement to pay the full amount, but NYSTA would have to use the vehicle of a judicial settlement rather than the administrative one. In fact, Mr. Randall explained that a lawsuit in a construction contract dispute actually can afford a defendant like NYSTA with somewhat more flexibility to justify a settlement. If a total cost audit were to show claimant sustained large losses encompassing the extra costs sought, this may suffice even where claimant has not met all of the literal contract specifications otherwise required to demonstrate its added costs. According to Mr. Randall, this was why, in early April, defendant retained an accountant at its own expense to conduct just such an audit of claimant’s accounts.

The court thus does not view the totality of these January-February 2003 events as persuasive evidence that the parties never entered into a binding agreement in November-December 2002. Rather, the court concludes that the persistent resistance of NYSTA’s ‘permanent government’ to an administrative settlement based on what it continued to see as inadequate documentation may have ultimately persuaded Mr. Platt to accede to these pressures from within and require claimant to sue for the balance – albeit two months after he already had made a binding agreement on behalf of the Authority to pay $997,486.55 based on that documentation. The court also does not view Mr. P. Benza’s decision, on advice of counsel, to cooperate with this approach and allow the audit to proceed as being inconsistent with claimant’s having a binding agreement with defendant. Both Messrs. R. Benza and P. Benza testified they did not agree with defendant’s unilateral attempt to change the agreement (89-90; 401) and Mr. Randall acknowledged claimant did not agree to a modification. (755). Claimant simply was forced to engage in what became a real politic effort in the hope defendant ultimately would honor its agreement after completion of the audit, even if it meant claimant had to make a pro forma refiling of its claims as the vehicle to be paid. It is clear, however, that Mr. Platt’s decision to require claimant to go back to court was a breach of the binding agreement between the parties.1[1]

What happened next is a somewhat shabby tale of resort to ‘self help’ by both sides. When claimant unexpectedly received a check in early April from the State Comptroller in the amount of $416,108.56 attributable to the Bridge project it should have known something was awry. Although the check was not in the same amount as the $600,462.52 advance paid by NYSTA from its own account, considering what was remaining to be paid to claimant on the Bridge project (both as a result of the settlement and independent of it, i.e. retainage), it was reasonable to conclude that some or all of this money duplicated what NYSTA had advanced on February 4. Because the check was not in the same amount, however, claimant decided to cash it and keep the funds notwithstanding what defendant said and had written to claimant on January 31 about having to refile its claims in order for it to receive additional amounts. Claimant appears to have leapt at the chance to make itself whole.

Even if the court were to accept claimant’s explanation that it did not realize the check it received in April was a mistake, it had to have done so by May or early June 2003 when NYSTA discovered what had happened and both Messrs. White and Randall asked for the money back. The court finds claimant’s failure and refusal at that point to return funds it previously had agreed to return or which came into its possession by mistake was a wrongful conversion of those funds.1[2]

Claimant’s resort to self help also appears to have permanently poisoned the already severely strained relationship of the parties. Any chance that defendant would view the results of the total cost audit as a basis to justify its performance of the settlement agreement–however belated this would have been–appears to have been lost as a result. Then, in clear retaliation, defendant also was moved to take matters into its own hands. It decided to deduct and divert $359,131.25 which was due and owing to Arben Group, LLC, on an entirely different construction contract having nothing to do with the dispute here. Defendant asserts it was within its rights to offset monies due to claimant’s sister corporation because it considered that company to be one and the same with Arben Corporation and, as noted supra, the latter had agreed in the January 31, 2003 letter (Ex. 53) to such deductions from future contract payments. Defendant pointed to the thin capitalization of Arben Group, LLC, and asserted the company never would have received a contract award form NYSTA were it not related to Arben Corporation. Even if this is so, no proof was offered at trial that Arben Group, LLC, was anything other than a separate and distinct corporate entity with which defendant voluntarily contracted and that absolutely no basis to pierce its corporate veil was presented by defendant. The court thus finds defendant’s failure and refusal to pay Arben Group, LLC, monies to which it was entitled on contracts and jobs unrelated to those here was a wrongful conversion of those funds.

Turning to the matter of damages, the court finds as follows:

Claimant is entitled to damages for defendant’s breach of the settlement agreement in the amount of $397,024.03, plus interest at the statutory rate of 9% per annum from January 31, 2003, the date the court has found to be the date of the breach.

The damages for claimant’s wrongful conversion of the funds it received from the State Comptroller amount to $416,108.56. However, that amount must be offset by $78,880.51, the total of amounts withheld by defendant on Contract Nos. TANY 99-12B/D212640 and TANY 99-74/D212764, for a principal sum due defendant of $337,228.05 ($416,108.56 - $78,880.51). Defendant is further entitled to interest at the statutory rate of 9% from June 6, 2003, the date which can be fixed with certainty when defendant put claimant on notice that these funds duplicated a portion of those NYSTA previously advanced pursuant to claimant’s agreement to refund duplicate funds and demanded their return, to the date of judgment. Thus, defendant is entitled to interest on $416,108.56 from June 6, 2003 to July 16, 2003, the date defendant withheld payment in the amount of $70,967.57 on Contract No. TANY 99-12B/D212640; interest on $345,140.99 ($416,108.56 reduced by $70,967.57) from July 17, 2003 to March 16, 2006, the date defendant withheld $7,912.94 on Contract No. TANY 99-74/D212764; and interest on the remainder of $337,228.05 ($345,140.99 reduced by $7,912.94) from March 16, 2006 to the date of judgment.

Claimant Arben Group, LLC, is entitled to damages aggregating $359,131.25 as set forth in Ex. 71-1 for defendant’s wrongful conversion of funds which defendant deducted and diverted from payments otherwise due and owing on Contract No. TANY 02-63B/D213287 ($57,517.75, $293,700.56 and $7,912.94), plus interest at the statutory rate of 9% per annum, from June 19, 2003, August 18, 2003 and March 16, 2006, respectively, the dates of each of these wrongful conversions.

To the extent claimants have paid the filing fees, they may be recovered in accordance with Court of Claims Act § 11-a.

The Clerk is directed to enter judgments accordingly.


September 10, 2008
New York, New York

HON. MELVIN L. SCHWEITZER
Judge of the Court of Claims




[1]. “Claimant” refers to Arben Corporation herein unless otherwise indicated.
[2]. “Ex.__” refers to the exhibits introduced at the trial and “( )” to pages from the transcript of the trial.

[3].After Arben Corporation entered into the three construction contracts, its sister company, Arben Group, LLC, entered into a contract with defendant for work on the Tappan Zee Bridge (Contract No. 02-63B/D213287, Ex. 17). Although there is no issue of unsatisfactory performance by Arben Group, LLC, defendant withheld funds owed to that company under that contract. On January 12, 2004, Arben Group, LLC, filed and served a claim to retrieve these funds.

The procedural history of all four claims as pertains to the trial here is as follows. Defendant moved for summary judgment to dismiss claim nos. 105702, 105703 and 105704, which the court granted in part and denied in part. Claimant cross-moved for summary judgment on these same claims, alleging defendant’s breach of a settlement agreement which the court denied. Claimant, Arben Group, LLC, moved for summary judgment on claim no. 108755 which the court denied. As a result of the court’s decision on these motions and cross-motions, filed May 7, 2007, both sides were facing a lengthy trial of their respective contract claims and related damage matters involving complex issues of fact. At a pre-trial telephone conference between the parties and chambers on August 23, 2007, both sides agreed to try first the issue of whether an agreement existed settling the underlying claims which are the subject of claim nos. 105702, 105703 and 105704. If claimant were to prevail on this issue, the related questions of whether there was a breach of such an agreement, whether claimant was within its right to retain a certain payment made by defendant on April 3, 2003, and whether defendant was within its right thereafter to make deductions from sums otherwise due to Arben Corporation and Arben Group, LLC (the latter being the subject of claim no. 107855), also would be implicated in calculating damages. On the eve of trial, however, defense counsel pressed an issue defendant had raised on claimant’s cross-motions for summary judgment, that is, whether the court actually had jurisdiction to try the issue of the settlement agreement because none of the claims theretofore filed expressly had referred to it. Inasmuch as the court already had considered the issue of the alleged settlement agreement in deciding claimant’s summary judgment cross-motions, and the parties then had agreed at the pre-trial telephone conference to try this issue, the court entertained claimant’s motion to file a late claim to formally put the matter before it. The court granted claimant’s motion on February 20, 2008 and claimant filed claim no. 114873 on February 21, 2008. Ex. 12. Defendant’s answer to this claim, dated February 25, 2008 filed March 3, 2008 (Ex. 13), contains counterclaims for monies had and received and wrongful conversion stemming from its advance to claimant of $600,462.52. Claimant’s reply to these counterclaims, filed Mar. 3, 2008 (Ex. 13A), alleges they are barred by defendant’s breach of the settlement agreement to pay $997,486.55. The court’s Pre-Trial Order, negotiated by counsel for both sides, encompassed these as the issues to be tried, as well as whether defendant improperly withheld payments due to Arben Group, LLC, and Arben Corporation (Pre-Trial Order, “Causes of Action or Defenses to be tried at this Trial”; “Undisputed Facts” ¶¶ 25-29, 34, 36).
[4]. Mr. Harp testified that at the time of his retirement he oversaw a staff of eleven attorneys, eight engineers and additional support staff, and was responsible for a budget in excess of $1 billion. (235-36). He testified he authored DOT’s contract specifications. (237). At the time Mr. Harp was retained as a mediator, he was not familiar with claimant, but he had had extensive dealings with defendant, including Mr. Brizzell and Charles Randall, defendant’s Chief Assistant Counsel, both of whom testified on behalf of defendant.
[5]. Defendant moved to exclude the admissibility of any evidence pertaining to the mediation itself because the parties had agreed to keep confidential anything said or written in the mediation, and the court granted defendant’s motion in a decision filed on February 26, 2008.
[6]. Mr. Platt is deceased, having passed away prior to the re-initiation of the claims before the court.
[7]. Mr. R. Benza testified that he believed Mr. Harp was retained on defendant’s “recommendation to help assemble the paperwork in a proper manner which the Thruway Authority deemed necessary.” (179).
[8]. NYSTA apparently viewed Mr. Harp’s consulting role as helping claimant to “put together” the documentation NYSTA needed to support a settlement, while claimant viewed Mr. Harp’s role as helping NYSTA to write up a justification for a settlement based on the documentation already available and which Mr. Harp believed would pass muster with the State Comptroller. (821-823).
[9]. Messrs. Randall, Brizzell and White rode on the train together from Albany to New York City for the trial and discussed their expected testimony among themselves. (877-80).
1[0]. Both the November 27, 2002 and December 6, 2002 letters make reference to a “process” in the context of payment. The November 27, 2002 letter promises “to expeditiously process each of the contracts in the amounts set forth in this letter;” and the December 6, 2002 letter states that Mr. Plunkett will have Mr. P. Benza “call your office to coordinate the payment process.” (Exs. 46 and 47). Based on the testimony at trial, the court concludes the word “process”, as used in this context, referred to the ministerial steps that had to be performed to obtain a check from the New York State Comptroller’s Office, not that additional documentation needed to be furnished in order for claimant to be paid. As such, it is consistent with Mr. P. Benza’s explanation at trial that when he wrote in his November 21, 2002 letter (Ex. 44) that claimant was “committed to successfully closing out this project and providing all the necessary documentation,” he was referencing customary close-out documentation such as prevailing wage affidavits, certificates of no outstanding liens or claims, etc.
[1]1. Defendant argues the court’s summary judgment decision of March 14, 2007 which held that documentation furnished by claimant with respect to the Noise Barrier and Bridge contracts was insufficient to support the full amounts sought by claimant (the court did not find those claims were entirely without merit) collaterally estops the instant claim for breach of the settlement agreement. The reasoning appears to be that since claimant’s underlying claims under those two construction contracts were reduced (albeit not entirely rejected), claimant is precluded from asserting a claim under the settlement agreement which encompasses disputed claims under those contracts plus the Culvert contract. The logic of defendant’s argument is flawed. Claimant’s claim under the settlement agreement seeks damages for breach of a separate and distinct agreement based on the November-December 2002 letters. See Putnam v Ostego Mutual Fire Ins. Co., supra, 15A CJS, Compromise and Settlement § 32, supra. The court here is called on to determine whether the letters constituted an enforceable binding agreement. The court does not need to decide, nor does it address, whether the underlying claims that were alleged to have been compromised by the settlement agreement had merit. The court’s decision here is the first and only consideration on the merits of whether an enforceable settlement agreement was formed (after having denied summary judgment on this issue because material issues of fact existed). Neither res judicata nor collateral estoppel principles are anywhere implicated here.
1[2]. As a result, defendant then was justified in deducting certain payments aggregating $78,880.51 which otherwise were due and owing to claimant on the Bridge and Culvert projects pursuant to claimant’s agreement in the January 31, 2003 letter (the last paragraph was agreed to by claimant on February 3) to refund duplicate amounts “or to have the Authority deduct same from future contract payments, whichever is most expeditious”.