New York State Court of Claims

New York State Court of Claims

WOOLARD v. THE STATE OF NEW YORK, #2009-009-204, Claim No. 95931


Synopsis


The Court awarded claimant the sum of $349,026.00 in this breach of contract claim.

Case Information

UID:
2009-009-204
Claimant(s):
THE WOOLARD GROUP, INC.
Claimant short name:
WOOLARD
Footnote (claimant name) :

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

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
95931
Motion number(s):

Cross-motion number(s):

Judge:
NICHOLAS V. MIDEY JR.
Claimant’s attorney:
HARRIS BEACH PLLC
BY: Paul R. Braunsdorf, Esq.,Of Counsel.
Defendant’s attorney:
HON. ANDREW M. CUOMO
Attorney General
BY: Cornelia Mogor, Esq.,
Assistant Attorney GeneralOf Counsel.
Third-party defendant’s attorney:

Signature date:
September 28, 2009
City:
Syracuse
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)


Decision

The Woolard Group, Inc. (hereinafter “claimant”) alleges that the State of New York (hereinafter “State”) breached a contract causing damages to claimant in the amount of $1,511,344.00 as set forth in their claim which was previously filed with the Clerk of the Court of Claims.

BACKGROUND
On April 7, 1994, the State’s Office of General Services (“OGS”) entered into a contract (Exhibit 1, Project No. M1130-C, and Exhibit 2, Project Specifications) with claimant by which claimant was to provide the general construction work in connection with the construction of a new Health Care Unit at Sullivan Correctional Facility in Fallsburg, New York. Claimant was one of four prime contractors for the project, pursuant to the Wicks Law, set forth in State Finance Law § 135. The other three contractors were General Mechanical Systems, Inc. (HVAC), Perreca Electric Co., Inc. (hereinafter “Perreca”) (electrical work), and Peter Annis, Inc. (hereinafter “Annis”) (plumbing). The original contract amount was $3,554,899.00, although this amount was subsequently adjusted through change orders. The contract provided that work was to be completed by April 7, 1995.

The Health Care Unit was designed to be constructed as a concrete block building and, since it was within a maximum security facility, was also designed to have interior concrete block walls. Claimant, as the general contractor, was responsible for the construction of both the interior and exterior walls. The contract provided that claimant had to provide openings in the walls to allow the other contractors to install their work, and then required the claimant to close those openings after such work was completed.

As noted above, the contract was dated April 7, 1994, and provided that the work would be completed within one year. In late August 1994, however, the plumbing contractor (Annis) filed for bankruptcy and abandoned the project, bringing work to a stand-still. It took approximately three months for OGS, through its performance bond, to find a replacement contractor for the plumbing work.

During this time, James Mayers, the engineer-in-charge (“EIC”) for the State on this project, informed claimant that work would continue on this job even without a plumbing contractor. In essence, claimant was instructed to construct the masonry walls and to leave openings in the walls


where plumbing work would be required. After a plumbing contractor was hired and had completed its work, Woolard would then be required to finish off those walls.

Due to delays incurred, including that of the extensive delay caused by the abandonment of the project by Annis, the construction project was not completed within the one year period called for in the contract. In fact, claimant did not complete its work on this project, and was terminated by OGS in November, 1995.

In this claim, claimant contends that the delay in completing the project was attributable to the State and as a result seeks damages for the “inefficiency costs” incurred which required claimant to perform its work in an out-of-sequence and less efficient manner, as well as additional “stretch-out costs” incurred by claimant based upon the fact that claimant was required to work on this project for approximately nine months after the original anticipated completion date.
TESTIMONY
Phillip Woolard, the former president of claimant, testified on its behalf. He confirmed that claimant had been awarded the contract for the general construction work in connection with the Health Care Unit to be constructed at Sullivan Correctional Facility. Mr. Woolard explained that since this project involved the construction of a health care unit, or hospital, it required, in essence, double the plumbing work that would be required in other projects of similar scope. Additionally, since this unit was to be constructed to serve a correctional facility, the interior walls had to be of masonry construction, and rebars were also required.

Mr. Woolard testified that after the plumbing contractor defaulted on this project, and once claimant was required to continue with its masonry work, there was no way to avoid substantial increased costs for this work.

Mr. Woolard testified that first of all, it had been claimant’s intention to simultaneously construct both the interior and exterior concrete block walls, and that they intended to work from the center of the building out and therefore bring the outside walls up once a floor was finished. By this process, claimant would be able to move the scaffolding up as the work proceeded, and each floor was completed.

Secondly, Mr. Woolard testified that it was intended that claimant would coordinate its masonry work with the plumbing contractor so that the walls, including any openings for pipes or other plumbing work, would be completed in a single stage.

Mr. Woolard testified that after claimant was instructed to proceed without a plumbing contractor on site, claimant then had to re-sequence its work and had to leave openings for all of the plumbing stubs and penetrations. As a result, the interior walls could not be completed in a single stage, and claimant then had to return and “tooth-in”[1] the remaining masonry after the plumbing work had been completed. Such work also required that the scaffolding had to be torn down after the initial stage and then reassembled once the plumbing contractor had completed its work. Mr. Woolard testified that in essence, claimant had to continually build up its scaffolding, tear it down, and then reassemble that scaffolding once the plumbing work was completed, and that this process was continually repeated throughout the construction process.

Additionally, Mr. Woolard testified that the completion of the project required that materials for the masonry work, which were required to complete the interior walls once the plumbing was done, could not be trucked in and mechanically loaded as originally planned, but had to be hand-carried in by construction workers, since at that time there was only one access point to the unit.

Mr. Woolard also testified that due to the delay in obtaining a replacement plumbing contractor, claimant was required to erect the interior block masonry walls during winter months, which created complications in both the mixing and protection of the mortar used in the masonry construction, due to cold weather. The cold weather also resulted in increased costs to the claimant, since it was required to provide temporary heat for the enclosed building during the construction process.

John W. Hillman, the project manager for claimant on this project, also testified. He testified that as a result of the default by the plumbing contractor, the entire construction schedule had been thrown off and was “no use to anybody”. He testified that as originally expected, claimant did not plan on any costs for winterization of the project, which was now required due to the delay caused by the plumbing contractor’s default.

He also testified that during his extensive and repeated discussions with Mr. Mayers, the EIC on this project, he was assured that claimant would be able to make a request for additional compensation, once the project was completed, as a result of the re-sequencing of the work and the additional costs involved.

Mr. Hillman also acknowledged that although there were certain delays in this project which were the responsibility of claimant, these delays did not affect the completion date of the contract, and that such delays are “expected”, and that adjustments can be made by the contractor during the course of the project so that the completion date is not affected.

Francis DeMayo, the owner of The Ferndale Group, also testified on behalf of the claimant. He testified that his company was the subcontractor of claimant which performed the masonry work on this project, the primary issue in this claim. Mr. DeMayo testified that although claimant and Ferndale were two separate corporate entities, his salary was paid by Woolard and that even though there was no formal written agreement between claimant and Ferndale, Ferndale’s workers provided the labor for the masonry work on this project.

Paul J. Kaiser, claimant’s economic expert, testified as to his evaluation of the damages suffered by claimant resulting from the delay in completing the project. Mr. Kaiser assumed the entire delay was due to the default by the plumbing contractor, and attributed responsibility for this delay to the State.

Mr. Kaiser’s calculations consisted of two separate elements. The first element involved the use of the “earned value method” to calculate the additional labor costs incurred by claimant, attributable to inefficiencies in the work caused by the absence of the plumbing contractor. The second element was characterized by Mr. Kaiser as “stretch-out costs”, representing the additional costs incurred by claimant as it was required to be on the job for nine months longer than originally contemplated. Mr. Kaiser further testified that the “strecth-out” costs were comprised of two components, consisting of “site overhead” and “home-office overhead”.

With regard to the inefficiency claim, and as set forth in his expert report (Exhibit 3), Mr. Kaiser utilized a “composite labor rate” of $42.04 per hour, which he arrived at by combining labor expenses with percentages for small tools allowance, overhead, and profit. He relied upon the certified payroll records of The Ferndale Group (Exhibit 71), the subcontractor for the masonry work on this project, in determining these labor expenses. Based on his analysis, Mr. Kaiser concluded, in his report, that $502,057.50 was due to the claimant resulting from the inefficiencies in the masonry work caused by the abandonment of the project by the plumbing contractor.

At trial, however, Mr. Kaiser testified that an adjustment to this figure was required, since he learned shortly before trial that the masonry workers from The Ferndale Group had also performed some non-masonry work. He therefore adjusted his “earned value” method and arrived at a new amount for inefficiency costs of $422,836.50 (Exhibit 72).

With regard to “stretch-out costs”, Mr. Kaiser calculated an amount per month to be allocated to site overhead. He then multiplied this amount by the additional nine months, for a total of $138,420.00 which he allocated to additional site overhead costs (Exhibit 3, Tab 3, pages 4-5).

With regard to additional home-office overhead, Mr. Kaiser relied upon the testimony of Phillip Woolard, Yvonne Clark, and Francis DeMayo. Mr. Woolard testified that he spent approximately two of the additional nine months on this project. Ms. Clark, a secretary with claimant, testified that she was spending approximately two-thirds to three-quarters of her time on this project, and Mr. DeMayo testified that he was spending approximately 40% to 50% of his time on this project. Based on this testimony, it was necessary for Mr. Kaiser to recalculate the amount due for “Home Office Overhead”, which he had originally determined to be $213,622.00 (Exhibit 3, Tab 3, p. 5). Since the testimony established that Mr. Woolard, Ms. Clark, and Mr. DeMayo had not devoted full-time work to this project, and since it is apparent that the salary for Mr. Hillman, the Project Manager, had already been accounted for in the computations of “Site Overhead”, Mr. Kaiser determined that the proper amount due had to be adjusted (downward) to $114,762.00.

Accordingly, based upon the testimony and the calculations provided by Mr. Kaiser, claimant seeks damages for additional labor costs calculated under the “earned value” analysis ($422,836.50) and “stretch-out costs” (site overhead [$138,420.00], home office overhead [$114,762.00], and 5% profit [$12,659.00]) for a total of $688,677.50, as calculated by the Court.

James E. Mayers, the State’s EIC on this project, testified on behalf of the State. In addition to his testimony, transcripts of his deposition testimony were also received into evidence at trial (Exhibits 62-A, 62-B and 62-C)[2]. Mr. Mayers testified that he was the EIC of this project from July, 1994 through the spring of 1996, and as such was present and actively involved during the time of the plumbing contractor’s default.

Mr. Mayers testified that he was present on the job on a daily basis, and that he met daily with representatives of the prime contractors to discuss progress, problems, and the like. Claimant introduced into evidence numerous internal memos from Mr. Mayers (Exhibits 12 - 16) in which he acknowledged the dire situation on the job site created by the abandonment of the job by Annis, the plumbing contractor.

During one of his daily meetings, on November 15, 1994, Mr. Mayers advised the contractors that they would be “invited to Albany” to discuss time and financial adjustments to the various contracts resulting from the adverse impact caused by the plumber’s default (Exhibit 16).

William E. Held, a Regional Supervisor for the State, also testified at trial. Mr. Held testified that he was Mr. Mayers’ supervisor and that he made weekly visits to the job site to monitor progress. He testified as to the reasons justifying the decision to proceed with construction work on the project without a plumber after the Annis default. Mr. Held explained that the State did not have any idea when a plumber would eventually come onto the job, and that in order to protect the work that had already been done from the elements (such as the foundation and interior work), the decision was made to proceed with the exterior work to ensure that the building would be enclosed before winter, which would then allow workers to proceed with the interior work during winter months. In addition to his testimony, a transcript of his deposition testimony was also received into evidence (Exhibit 63).

Additionally, although he did not testify at trial, a transcript of the deposition testimony of David Seiffert, head of the OGS Construction Division, was also received into evidence (Exhibit 64). Through the deposition testimony of the various State witnesses, as well as documentary evidence received into evidence (Exhibits E-N), it was established that claimant, during the course of the project, also had problems of its own, unrelated to the default of the plumbing contractor, which the State contends contributed to the delay in completing the project on a timely basis. Specifically, there were problems and delays related to the construction of an access road, problems and delays in the delivery of steel, and specifically a problem with the installation of certain anchor bolts that had to be corrected (Exhibit 9).

As previously mentioned, Mr. Mayers had advised the contractors that they would be provided the opportunity to request time and financial adjustments to the contract due to the delay in retaining a plumbing contractor for this project. It was brought out during trial by claimant that one of the prime contractors, Perreca Electric, Co., received such an adjustment, in which the State acknowledged responsibility for a significant portion of the delay in completing the project (Exhibit 55). Mr. David Seiffert testified in his deposition (Exhibit 64), that any request for an adjustment by a contractor had to be evaluated on its own merits, and that responsibility for the delay and possible financial adjustment could potentially be different, or even nonexistent, for each contractor. In other words, there could be different reasons behind the delay, some of which would not necessarily be the responsibility of the State, and that a delay might affect one contractor while not impacting the others.

Richard D. Weller, a certified public accountant, performed an audit of this project and testified as the State’s economic expert. His “Independent Auditor’s Report” was received into evidence as Exhibit A, and his payroll registers in support of the report were received into evidence as Exhibit B.

Mr. Weller testified that he audited the daily reports of job activity and attempted to reconcile the hours worked by the laborers to the type of work performed. Mr. Weller testified that not all of the work performed by the laborers related to masonry, but that these workers also had other duties, such as erecting and disassembling scaffolding and clean up work.

Mr. Weller also made adjustments to the “composite labor rate” arrived at by claimant’s expert, Mr. Kaiser. The most significant adjustment to this rate was the fact that Mr. Weller did not include the “small tools allowance” (8%) which had been utilized by Mr. Kaiser, as Mr. Weller determined that this item was properly included in the 10% “general allowance” rather than as a separate itemized category.

Based on the adjustments made by Mr. Weller in his Auditor’s Report, he concluded that the cost of labor inefficiencies claimed by claimant came to $292,196.12.

In his report, Mr. Weller also substantially reduced the claim for additional site overhead expenses submitted by claimant, as he deducted the amount claimed for extended supervision (the salaries of the project manager and superintendent). Additionally, Mr. Weller disallowed any claim for home-office overhead, since there was no documentation to establish the salaries of Mr. Woolard, Mr. DeMayo, and Ms. Clark, as well as the amounts claimed for additional accounting, clerk, and estimator. In sum, Mr. Weller made no allowance for these supervisory expenses due to the lack of accounting or supporting documentation.

As a result, Mr. Weller, in his Auditor’s Report, allowed the sum of $6,732.00 for additional site overhead expenses, and made no allowance for home-office overhead.

Finally, based on testimony elicited during the trial, Mr. Weller made some mathematical calculations and prepared an alternative “actual total cost” estimate for the total costs of the masonry work, including overhead and profit. These calculations were based upon testimony which set forth the total number of hours, attributable to masonry labor, expended on the project by claimant, during both “unimpacted” and “impacted” periods. These computations are set forth in his handwritten notes (Exhibit V), in which he determined that the increased costs for masonry can be viewed as $258,211.00.
FINDINGS
The contract which is the subject of this claim contained a “NO DAMAGE FOR DELAY” clause, set forth as § 17.9 of the contract (Exhibit 1). This exculpatory language states that the defendant is not liable for damages resulting from any delays or disruptions in the performance of the contract.

It is well settled, however, that such “NO DAMAGE FOR DELAY” clauses have four judicially recognized exceptions which, if established, will nevertheless permit damages to be awarded. As was stated by the Court of Appeals in Corinno Civetta Constr. Corp. v City of New York, 67 NY2d 297, 309:

Generally, even with such a clause, damages may be recovered for: (1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract.


In this particular matter, claimant relies upon the “uncontemplated delay” exception, referring to the delay and disruption of work caused by the abandonment of the project by Annis, the plumbing contractor.

Based upon the testimony and documentary evidence (Exhibits 12 - 16), it is readily apparent to this Court that the delay caused by the default of the plumbing contractor was not only significant, but was not contemplated by the parties. Furthermore, as testified to by Mr. Hillman, as a result of the default the construction was thrown completely off schedule and out of sequence.

While the Court does not fault the State for its decision to proceed with construction in the absence of a plumbing contractor, the State nevertheless must be held accountable for the additional costs and inefficiencies incurred by the other prime contractors in proceeding in this fashion. Claimant, in particular, was most adversely affected by this decision to proceed, as it was required to construct the walls, leave openings for plumbing, pipes and fixtures, and then was required to revisit each section once the plumbing work was eventually completed to “tooth-in” and finish off the construction. It is readily apparent and obvious to this Court that requiring claimant to “hopscotch” and perform what can best be described as repetitive work (i.e., finishing newly constructed walls once the plumbing work was completed, which required the reassembly and disassembly of scaffolding), was much more inefficient and time consuming than if all such work had been completed in a single stage. The Court therefore agrees with the contention of claimant that this was a highly inefficient process which resulted in significant additional labor costs, and required substantially more time to complete the project than originally contemplated.

Additionally, although it is not necessarily controlling in this matter, the Court finds highly persuasive the fact that the State did make a financial adjustment with one of the other prime contractors for additional costs caused by the delay in completing this project. In making this adjustment, the State acknowledged that it was responsible for approximately 11 months of the total delay in the performance of Perreca’s electrical work.

Notwithstanding this finding, however, the Court finds that claimant was also responsible for a portion of the delay in completing this project. Specifically, there was an admitted delay caused by problems with the delivery of steel, as well as problems with the installation of defective anchor bolts which then had to be replaced. Although claimant’s representatives contend that these delays were typical and could be made up during the course of the project, this Court finds that such delays were significant and substantially contributed to the additional costs incurred and requested by claimant herein.

As a result, this Court finds and determines that claimant must bear 35% of the burden of the total delay (and the additional costs claimed) and that the State is therefore responsible for 65% of the additional costs attributed to the delay.


DAMAGES
Although a claimant is not required to prove its claim with mathematical certainty, it does have the burden of proving the extent of damages suffered (Berley Indus. v City of New York, 45 NY2d 683). Even if they are uncertain or difficult to ascertain, a claimant is still entitled to recover damages (J.R. Loftus, Inc. v White, 85 NY2d 874). Nevertheless, a claimant may not rely upon a theory of damages involving estimates where more precise records of damages are available (Clark-Fitzpatrick, Inc. v State of New York, 258 AD2d 431).

I. Labor Inefficiencies

As set forth previously, claimant’s economic expert, Mr. Kaiser, relied upon the “earned value” concept of determining the additional labor costs incurred by claimant as a result of the inefficiencies in completing the contract. In doing so, however, he relied primarily upon testimony from principals of the claimant due to a lack of documentation and supporting records. The Court finds that the recordkeeping of claimant was woefully inadequate in this matter, requiring Mr. Kaiser to base his calculations on many assumptions rather than facts. The fact that Mr. Kaiser had to revise many of his calculations, at trial, to account for facts of which he was unaware when he prepared his report, casts serious doubt as to the credibility of his findings.

The Court further finds that Mr. Weller’s auditor’s report (Exhibit A), although based upon certified payroll records, is also based upon numerous assumptions and estimates, due to the lack of supporting documentation.

Accordingly, even though it is set forth in a very simplistic manner, the Court finds that the most accurate determination of costs due to labor inefficiencies is found in the calculations prepared by Mr. Weller at trial (Exhibit V). These calculations can best be considered as a “total cost approach”, which has been accepted as a method of calculating damages (Fehlhaber Corp. & Horn Constr. Co. v State of New York, 69 AD2d 362; Port Chester Elec. Co. v State of New York, 101 AD2d 825). The Court therefore finds, based upon these calculations, that claimant incurred increased costs resulting from labor inefficiencies in the amount of $258,211.00. These damages must be adjusted based upon the percentage of the delay attributable to the State, as previously determined herein.

II. Stretch-out Costs

Additionally, and as discussed herein, claimant also seeks damages for site overhead and home office overhead caused by the fact that the delay in completing the project required claimant to be “on the job” longer than contemplated under the contract. Although Mr. Weller, defendant’s expert, only found minimal additional costs (based upon a lack of documentation), the Court finds that the testimony from claimant’s representatives adequately established that site overhead expenses, for the additional nine months for which claimant was on the job, totaled $138,420.00. Although payroll records were not available, the Court also finds that claimant, through the testimony of its representatives, has established additional office overhead expenses of $114,762.00. The total for these “stretch-out costs”, therefore, is $253,182.00, which amount must also be adjusted based upon the percentage of fault attributable to the State.

Since these amounts represent the additional costs to claimant attributable to the delay in completing the contract, claimant is further entitled to a 5% profit on the entire amount, determined to be $25,570.00.


In sum, the Court finds the following damages:
I. Additional Labor Costs $258,211.00
II. Stretch-Out Costs $253,182.00
III. Profit @ 5% $ 25,570.00
Total $536,963.00

Based upon the Court’s finding that the State is responsible for 65% of the total damages found herein, the Court hereby awards claimant the sum of $349,026.00, together with interest from April 3, 1997 (the date of filing of this claim) to the date of decision herein and thereafter to the date of entry of judgment.

LET JUDGMENT BE ENTERED ACCORDINGLY.


September 28, 2009
Syracuse, New York

HON. NICHOLAS V. MIDEY JR.
Judge of the Court of Claims




[1]. Unless otherwise indicated, all references and quotations are taken from the Court’s trial notes.
[2]. In its post-trial submission, claimant requested that the Court draw an unfavorable inference based on the State’s failure to question Mr. Mayers, the EIC, as to his view on the difference in the work performed between the unimpacted and impacted periods (i.e., before the plumber’s default and after the default). The Court notes that Mr. Mayers was called as a witness at trial, and that transcripts of his three days of deposition testimony were also received into evidence (Exhibits 62-A, 62-B and 62-C). Since Mr. Mayers was freely available for questioning, both at trial and previously at his deposition, the Court declines to find any negative inference.