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J. WM. Foley Inc. v. United Illuminating Co.

Appellate Court of Connecticut

June 23, 2015

J. WM. FOLEY INC.
v.
THE UNITED ILLUMINATING COMPANY

Argued November 19, 2014

Action to recover damages for, inter alia, breach of contract, and for other relief, brought to the Superior Court in the judicial district of Fairfield, where the matter was transferred to the judicial district of Stamford-Norwalk; thereafter, the defendant filed a counterclaim; subsequently, the matter was transferred to the judicial district of Hartford, Complex Litigation Docket; thereafter, the court, Bright, J., denied the plaintiff's request for leave to file a fifth amended complaint; subsequently, the matter was tried to the court; judgment in part for the plaintiff on the complaint and judgment for the plaintiff on the counterclaim, from which the plaintiff appealed to this court.

SYLLABUS

The plaintiff general contractor sought to recover damages from the defendant public utility company for, inter alia, the alleged breach of a contract to construct an underground transmission line. The defendant provided to the potential bidders on the project certain drawings, which were supplied by a third party consultant, showing various obstructions a contractor should expect to encounter when doing the work, including other utilities already in the work area. The plaintiff submitted the lowest bid and entered into a contract with the defendant to perform the work for a specific amount. The contract reflected the parties' understanding that the plaintiff would encounter conditions not identified on the drawings, and provided a mechanism for the plaintiff to receive additional compensation for the expenses that it incurred from any unexpected obstacles. In order to receive the additional compensation, the plaintiff was required to submit a change order request that included an equitable schedule or price adjustment to compensate the plaintiff for the actual, demonstrable delay in the " critical path," which was defined in the contract as a postponement to construction that affects the final completion date of the project. The contract required the plaintiff to submit change order requests within ten business days of the event or decision giving rise to the claim, otherwise the claim for additional compensation was irrevocably waived and released. The contract also provided that the plaintiff was entitled to a 10 percent markup on change order requests submitted by the plaintiff's subcontractors. The plaintiff began to request additional compensation almost immediately after construction began, but the parties disputed what level of detail needed to be included in the change order requests. Given the number of obstacles and issues the plaintiff was encountering that were not contained in the drawings, including unknown underground utilities and other conditions such as soil contamination, the plaintiff determined that it was impractical to identify the critical path impact associated with each change order request. The plaintiff proposed that the parties resolve the direct cost of addressing the obstacle giving rise to the change order request at the time the request was made while reserving the issue of the critical path impact. The defendant rejected that proposal, and the plaintiff informed its subcontractor accordingly. The subcontractor then informed the plaintiff that the change order process was impractical, and the plaintiff replied that the defendant was not waiving the change order request requirements detailed in the contract. The plaintiff forwarded the subcontractor's inquiry to the defendant with a second proposal to adjust the change order request process. By letter, the defendant rejected the plaintiff's second proposal but agreed to adjust the change order process. Specifically, the letter stated that the parties would negotiate the direct costs associated with an obstacle and the " crew day delay," which was defined in the letter as a day of delay to a particular crew. The letter stated that the defendant was not waiving any provision of the contract and clarified that a crew day delay should not be understood as being equal to a critical path delay. As construction progressed, the plaintiff continued to encounter unanticipated obstacles and submitted change order requests for direct costs and crew day delays, to which the defendant responded by issuing change orders and additional compensation. During the course of the project, however, the plaintiff never submitted a critical path delay analysis or claim with any of the change order requests. The plaintiff, however, sent a letter to its subcontractor insisting that it provide a critical path delay claim in accordance with the contract. During the final stages of the project, the plaintiff, for the first time, submitted a claim for a delay in the project, but that delay claim did not include a critical path delay analysis. The first critical path delay analysis was submitted three and one-half years after construction had been completed. The defendant refused to compensate the plaintiff for the delay claim, and the plaintiff commenced the present action seeking compensation for the delay claim due to the defendant's errors and omissions, and the unforeseen field conditions encountered. During the pendency of the trial, the defendant paid two of the plaintiff's subcontractors to settle actions brought by those subcontractors seeking unreimbursed construction expenses, but the plaintiff did not participate in those negotiations. After a bench trial, the court concluded that the plaintiff had irrevocably waived and released the delay claim because the contract required that the claim be submitted within ten days of the event or decision giving rise to the claim, and the defendant had not waived the requirement. The trial court also concluded that the plaintiff was not entitled to 10 percent of the settlement payments made to its subcontractors because no language to that effect was contained in the contract. The court denied the plaintiff's claims for prejudgment interest and interest for late payments under the contract because the defendant had a good faith basis for withholding payment. The court found that the plaintiff had not established the standard of care or a breach in the standard of care as part of its negligence claims, and that there was no merit to the plaintiff's claim that the defendant engaged in unfair or deceptive trade practices in violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The plaintiff appealed, challenging the court's conclusions and claiming that the trial court improperly had denied its request to amend its complaint to add counts sounding in negligent misrepresentation and common-law fraud. The court denied the request to amend as untimely because the additional counts concerned the defendant's alleged conduct before the parties entered into the contract, which was contrary to the allegations in the operative complaint, and, therefore, did not relate back to it.

Held:

1. The trial court correctly determined that the plaintiff had irrevocably waived and released its untimely delay claim, as that claim was subject to the contractual requirement that claims for additional compensation as a result of a delay in the critical path be submitted within ten days, and the defendant had not waived that requirement: the plain language of the contract specifically provided that the plaintiff had ten days to submit a claim for compensation arising from delays in the critical path and that the discovery of unknown or misidentified site conditions did not relieve the plaintiff of that obligation, and, therefore, the plaintiff's delay claim was untimely because it was submitted more than three and one-half years after the completion of the project; furthermore, the defendant's letter agreeing to adjust the change order process clarified that crew day delays were distinct from critical path delays and that the defendant had not forfeited any contractual rights, including the ten day requirement for submitting claims, which was reflected in the defendant's subsequent correspondence to the plaintiff and by the plaintiff's correspondence with its subcontractor directing it to provide a critical path delay claim in accordance with the contract's provisions.

2. The trial court properly concluded that the plaintiff was not entitled to a 10 percent markup on the settlement payments that the defendant made to the plaintiff's subcontractors, the contract having included no language indicating that settlement payments were subject to the 10 percent markup provision.

3. The trial court did not abuse its discretion when in rejecting the plaintiff's claim for statutory (§ 37-3a) prejudgment interest; the trial court relied on appropriate equitable considerations that were within its discretion, and the record supported the court's conclusion that the defendant had a good faith basis for disputing the amounts in question pursuant to the contract.

4. The plaintiff could not prevail on its claim that the trial court failed to rule on its claim for statutory (§ 42-158j) retainage interest due to the untimely payment by the defendant following the plaintiff's substantial completion of the project; in deciding the plaintiff's CUTPA claim, the trial court made findings that supported a determination that the defendant had not withheld an " amount due and owing," which is a requirement for awarding interest under § 42-158j, because the defendant had the contractual right to dispute the plaintiff's claims and did so in good faith.

5. There was no merit to the plaintiff's claim that the trial court improperly denied its negligence claims, which were based in part on the argument that the defendant owed a duty to the plaintiff arising out of the defendant's contract with the third party consultant who supplied the project drawings, and that the defendant had provided defective plans for the project and failed to inform the plaintiff of the true nature of the soil and subsurface conditions: the defendant did not owe a duty to the plaintiff by virtue of the defendant's contract with the third party consultant, and the plaintiff failed to present any expert testimony as to the standard of care required of the defendant with respect to disclosing underground utilities in the drawings and to performing soil testing and communicating the results; moreover, the record supported the court's finding that any duty the defendant owed was not breached by failing to identify every underground condition the plaintiff might encounter because there was testimony that it was impossible to identify every underground obstacle, the defendant told the plaintiff that it would encounter more obstacles than were shown on the drawings, the contract stated that underground conditions may exist that were not on the drawings, the accuracy and completeness of the drawings were unknown, and the contract provided a mechanism by which the plaintiff could request additional compensation after encountering unexpected underground obstacles.

6. The trial court properly concluded that the defendant did not engage in any conduct prohibited by CUTPA as alleged by the plaintiff pertaining to the failure to disclose the true extent of underground obstacles or environmental hazards and the failure to process and pay change order requests in a timely manner: the evidence in the record supporting the court's conclusion that the plaintiff was not entitled to prejudgment interest and that the plaintiff could not prevail on its negligence claims also provided the basis for the court's determination that the defendant did not engage in any conduct prohibited by CUTPA; furthermore, the court's conclusion that the defendant had not engaged in unfair or deceptive acts or practices was supported by evidence that when the defendant solicited bids from contractors, it disclosed potential obstacles in a way that was intended to ensure that bidders had the maximum amount of information.

7. The trial court did not abuse its discretion in denying as untimely the plaintiff's request for leave to file an amended complaint, as the proposed additional counts presented a new and different factual situation than the allegations in the operative complaint that would require the presentation of different evidence and, therefore, did not relate back to the operative complaint; the allegations in the operative complaint exclusively pertained to the parties' conduct after they entered into the contract, whereas the proposed additional counts of fraud and negligent misrepresentation in the amended complaint related solely to the defendant's alleged misconduct before the parties entered into the contract.

Ira S. Sacks, with whom were Gerard P. Brady, and, on the brief, Alan J. Sobol and Paul G. Ryan, for the appellant (plaintiff).

Jonathan M. Freiman, with whom were Timothy A. Diemand and Ivana D. Greco, for the appellee (defendant).

Gruendel, Mullins and Mihalakos, Js.

OPINION

MULLINS, J.

[158 Conn.App. 31]  The plaintiff, J. Wm. Foley, Inc. (Foley), appeals from the judgment of the trial court, after a bench trial, rendered in part in favor of the defendant, The United Illuminating Company (United). Foley claims that the court improperly: (1) denied its claim for compensation arising from delays in a construction project in which Foley served as a contractor; (2) concluded that it was not entitled to a 10 percent markup on United's settlement payments to Foley's subcontractors pursuant to a markup provision in the parties' contract; (3) denied its claims for interest; (4) rejected its tort [158 Conn.App. 32] claims; and (5) denied its request for leave to file a fifth amended complaint. We affirm the judgment of the trial court.

The relevant facts found by the court in its memorandum of decision are as follows. To meet the growing energy demands of southwest Connecticut, United undertook the construction of a sixty-nine mile power transmission line. As a part of that endeavor, United was required to install an underground power transmission line over a six mile stretch of land between Bridgeport and Stratford (project). " Doing so was not simply a matter of digging a single six mile trench through open land, laying a six mile transmission line in the trench, and then filling it in. [United's] route passed through congested residential and commercial areas, and included work on public roads. In addition, to protect the transmission line, concrete would be poured into the trench to encase the line in a `duct bank.' Finally, the transmission line would be laid in segments and connected to other segments along the length of the duct banks. These connection points are known as splice chambers. . . .

" To complete the work required on the project, [United] sought bids from qualified contractors who would be responsible for digging the trenches, laying the transmission line, installing the duct banks and splice chambers, laying the transmission line into the splice chambers and filling in the trenches. On or about January 25, 2006, Foley submitted a bid of $43,344,000 to do all of this work, except for supplying and installing the transmission line. . . .

" In submitting this bid, Foley considered the drawings [United] gave to potential bidders as part of the bid package. These drawings showed various obstructions a contractor should expect to encounter when doing the trenching and laying work called for by the bid [158 Conn.App. 33] request. Among these obstructions were other utilities already in the area where the work was to be performed. [United] notified Foley that it was the low bidder on the contract, and Foley and [United] then began negotiating the terms of a contract."

On or about September 29, 2006, United and Foley entered into a contract for Foley's work on the project (contract). The contract reflected an understanding by the parties that Foley could encounter site conditions not identified in the drawings. Specifically, the contract provided that " in the event that [Foley] encounters unknown or misidentified site conditions whose presence will cause a change in [Foley's] scope of work or delay in the critical path" Foley would be entitled to additional compensation. " Critical path" was defined in the contract as " the particular sequence of tasks, activities, and/or other [m]ilestones associated with performance of the [w]ork which must be accomplished as scheduled in order for the [w]ork and the [p]roject as a whole to be completed on time and in accordance with the [c]ontract [d]ocuments, including the [p]roject [s]chedule." [1] The contract included a lump sum contract price of $53,348,057.

Article 6 of the contract outlined a mechanism for compensating Foley for the expenses that it incurred from unexpected obstacles. When Foley sought additional compensation, § 6.4 (a) required that Foley submit to United a " [c]hange [o]rder" request. The change order request had to include " an equitable schedule and/or price adjustment to compensate [Foley] for the actual, demonstrable delay in the [c]ritical [p]ath and/or the cost of [Foley's] additional [w]ork." Section 6.1 (d) provided that claims for additional compensation would be " irrevocably waived and released" unless [158 Conn.App. 34] Foley submitted its change order request within ten business days of the event or decision giving rise to the claim (ten day rule). " Pursuant to § 6.1 (e), [United] then had ten business days to respond to Foley's proposal. . . . Pursuant to § 6.3, if [United] agreed with the proposal, a change order would issue. . . . Thus, based on the structure of the agreement, the parties . . . intended that any price adjustments related to delay were to be resolved as part of the above process and addressed on a change order by change order basis."

United hired Black & Veatch to serve as its consultant on, and coordinator of, the project.[2] Foley hired as subcontractors Manafort Brothers, Inc. (Manafort) and A.M. Rizzo Electrical Contractors, Inc. (Rizzo). Manafort dug the trenches and installed the duct banks and splice chambers. Rizzo installed the piping in the trenches that would include the transmission line. After Rizzo installed the piping, Manafort then refilled the trenches.

According to their anticipated schedule, the parties expected the project to take approximately one year to complete. Foley was to commence construction in October, 2006, and have construction substantially completed [3] by November, 2007. Foley did not notify United that the project was substantially complete, however, until November, 2008, approximately one year after the expected completion date.

There were many reasons for delays to the project. On the one hand, United was responsible for some of [158 Conn.App. 35] those reasons, which included: failing to secure necessary easements; postponing work on the project due to the construction of a separate transmission line; tardily remediating soil contamination; and failing to resolve a municipal zoning dispute in a timely manner. On the other hand, various performance and workmanship issues by Foley and its subcontractors also slowed the project. For example, Manafort's use of trench boxes that were ill suited for the densely populated urban conditions encountered during construction caused delays to the project.

" By far though, the biggest obstacles the parties encountered on the project were unknown underground utilities and other conditions [that] were not shown on the project drawings. Foley and Manafort started encountering these obstacles as early as January, 2007. They continued to encounter them throughout virtually the entire project. The unknown conditions encountered included everything from abandoned water pipes ranging in size up to 60 inches in diameter located in positions different than what was shown on the project drawings; gas lines and other underground utilities not shown on the drawings at all; unexpected amounts of rock; a culvert that was missing one side that everyone thought was there; and soil contaminated by PCBs.[4] Overall, while the number of expected underground interferences shown in the project drawings was 415, over the life of the project Foley and Manafort encountered 1209." (Footnote added.)

Almost immediately after construction began, Foley encountered undisclosed obstacles and, pursuant to § 6.4 (a) of the contract, requested additional compensation for the resulting costs by submitting to United [158 Conn.App. 36] change order requests. " By the summer of 2007 though, Foley and [United] were in dispute over what level of detail needed to be provided in the [change order requests]. Given the number of obstacles and issues it was encountering, Foley thought that it was impractical for it to identify the critical path impact associated with each submittal it made. Consequently, it proposed [to United] that the parties resolve the direct cost part of the [change order requests] when presented and reserve for later any resolution of critical path impact."

In particular, on July 23, 2007, Foley proposed altering the procedures set forth in § 6.4 (a), whereby Foley would be permitted to include in its change order requests only the direct costs associated with an obstacle, while reserving to the parties " all rights, remedies and defenses" concerning critical path delays. On August 3, 2007, however, United declined that proposal, and informed Foley that claims for additional compensation must comply with article 6 of the contract. Upon receipt of United's refusal, Foley reiterated to Manafort that change order requests must include " a cost and resource loaded schedule showing impact to the critical path," that " [a]ll claims must have all of the information shown in Article 6," and that " the time limitations outlined in Article 6 are in effect."

On August 15, 2007, Manafort informed Foley that it believed that United's requirements were impractical, and inquired whether, after submitting change order requests, it should continue work or halt construction until United issued a change order. On August 20, 2007, Foley replied: " [United] is not waiving the time limits for submitting a claim as contained in the [c]ontract, Article 6. . . . Please also be reminded that requests for adjustments to the critical path schedule affecting your subcontract work must be received in time for Foley to make any necessary adjustments to the overall critical path schedule and submit its proposal to [158 Conn.App. 37] [United] for such change in the work." (Emphasis in original.) That same day, Foley forwarded Manafort's inquiry to United, and submitted another proposal to adjust the change order process. Foley suggested that United issue change orders in two parts: the first part would pertain to increased direct costs; the second part would address adjustments for delays in the critical path.

In a letter dated August 28, 2007 (August, 2007 letter), United represented to Foley that it would modify the change order process, but in a manner different from what Foley had proposed. Under the adjusted procedure, United first would negotiate the direct costs associated with the obstacle, and then United and Foley would negotiate " the number of days delay to the crew . . . ." United clarified, however, that this modification pertained only to crew delays, and not critical path delays.[5]

Specifically, United explained: " When the negotiations are complete, a change order will be drafted in the agreed dollar amount (Direct Costs). The change order will also list the agreed amount of crew-day delay; not schedule delay. The idea is to keep the crew delays with the appropriate change order event. The listing of the crew-day delay will not signify that [ United ] has waived any provision of the contract. A day of delay to a particular crew shall not be understood as being equal to a day of delay of the project schedule [a critical path delay]. These change orders will not affect either party's rights or liabilities for delay and impact costs, except that the change order will have [158 Conn.App. 38] settled the issue of how many days delay was experienced by the impacted crew only." (Emphasis added.)

As construction progressed, Foley continued to encounter unanticipated obstacles and, in turn, submitted to United change order requests for direct costs and crew delays. United continued to issue change orders that provided additional compensation to Foley.[6] In spite of that, however, " Foley never, during the course of the project, submitted a critical path delay analysis or claim with any [change order request]. While it did regularly submit updates to critical path schedules . . . those schedules did not assign responsibility for any particular delay to any particular event or party."

On October 10, 2008, as work on the project was in its final stages, Foley, for the first time, submitted to United a claim for a delay of the project, a critical path delay. This claim, however, did not include a critical path delay analysis. In its submission, " Foley basically claimed that the project took thirteen months longer than expected, the entire delay was [United's] fault, and, as a result, Foley had additional overhead and related costs of $6,174,122.45 for which [United] was responsible. . . . While Foley attached documents in support of its claimed increased costs, it did not submit a critical path delay analysis with its claim."

United refused to compensate Foley for the delay claim. Thereafter, Foley filed the present action seeking, inter alia, compensation for " delays in the critical path caused by unknown or misidentified site conditions, and caused by the extra, additional, and impacted work ordered, directed, or otherwise required on the project." [7]

[158 Conn.App. 39] In 2011, Foley submitted to United two additional versions of its delay claim, neither of which included a critical path delay analysis. Again, " Foley had taken a `global cost approach' to the claim. . . . Essentially, Foley was claiming that all delays on the project were clearly [United's] responsibility and it had to prove nothing more than the amount of costs it incurred because the project took longer to complete than planned."

In June, 2012, Foley, for the first time, presented United with a time impact analysis pertaining to delays in the critical path. This analysis was prepared by Riverso Associates, Foley's scheduling consultant during the project. In connection with this report, " [o]n August 10, 2012, approximately one month before the start of trial, Foley submitted a fourth version of its [delay] claim to [United]. The amount of this claim was $4,854,206.93." During trial, however, Foley's primary witness on damages acknowledged errors in Foley's delay claim, and Foley reduced the amount that it was claiming to $4,691,882.44.

On September 3, 2013, after a bench trial, the court, Bright, J., issued a memorandum of decision. The court concluded that Foley had " irrevocably waived and released" its delay claim because it had failed to timely submit its claim to United. The court further concluded that, even if notice had been timely, Foley did not demonstrate that the delays for which United allegedly was responsible delayed the critical path of the project. Accordingly, the court rendered judgment in favor of United on the breach of contract count regarding the delay claim.

The court, additionally, rejected Foley's tort claims, the breach of the implied covenant of good faith and fair dealing claim, and its claim that United violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The court also denied [158 Conn.App. 40] Foley's claim to recoup 10 percent of the settlement payments made by United to Foley's subcontractors, and rejected Foley's claim for unanticipated legal costs. The court found in Foley's favor, however, on three change order requests for additional direct costs that Foley claimed United wrongfully had rejected, and ...


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