RKI Construction, LLC v. WDF Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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RKI CONSTRUCTION, LLC,

Plaintiff, MEMORANDUM AND ORDER

14-cv-1803 (KAM)(VMS)

-against-

WDF INC.; LIBERTY MUTUAL INSURANCE

CO.; ANDRON CONSTRUCTION CORP.; and

TRAVELERS CASUALTY AND SURETY CO. OF

AMERICA,

Defendants,

-against-

CITIZENS INSURANCE CO. OF AMERICA;

LEROY KAY; and ALICE KAY

Additional Defendants

on the Third-Party

Claims.

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KIYO A. MATSUMOTO, United States District Judge:

Plaintiff RKI Construction, LLC (“RKI”) commenced this

diversity breach of contract action against WDF Inc. (“WDF”),1

which filed a counterclaim against RKI, a third-party breach of

contract claim against Citizens Insurance Company of America

(“Citizens”), which issued a subcontractor performance bond (the

“Bond”) to secure RKI’s performance under a subcontract with

1 Andron Construction Corp. (“Andron”) and Liberty Mutual Insurance

Company (“Liberty”) were originally named as defendants in this action. On

April 18, 2016, Andron and Liberty settled with RKI and were dismissed by

RKI, without prejudice. (See ECF No. 98, Stipulation of Partial Settlement

and Partial Dismissal without Prejudice.) Travelers Casualty and Surety

Company of America (“Travelers”) is also listed as a named defendant but has

not asserted any counterclaims.

WDF, and a third-party claim against Leroy Kay and Alice Kay for

fraud.2 (See ECF Nos. 32, 38, Amended Complaint (“Am. Compl.”)

and Answer.)

On February 25, 26, 27, and 28, March 1, and April 3,

2019, the court conducted a six-day bench trial, where it

considered the parties’ claims arising out of a sub-subcontract

between RKI and WDF to install piping for WDF’s HVAC work, for

construction of a five-story elementary school in Ridgewood,

Queens (the “Project”).3 Having considered the evidence

presented at trial, assessed the credibility of the witnesses,

and reviewed the parties’ post-trial submissions,4 the court

makes the following findings of fact and conclusions of law

pursuant to Federal Rule of Civil Procedure 52 (“Rule 52”).5

2 By Memorandum and Order issued April 3, 2017, the court: (i) denied

RKI's motion for summary judgment on its claim against WDF and WDF’s

counterclaim, and (ii) granted Citizens' motion for summary judgment and

dismissed WDF’s third-party claim against Citizens. (ECF No. 113)(RKI

Construction, LLC v. WDF, Inc., No. 14-cv-1803 (KAM) (VMS), 2017 WL 1232441

(E.D.N.Y. Apr. 3, 2017).)

3 The trial addressed the parties’ liability and damages. The court

reserved judgment on any issues regarding the award of fees until after its

ruling on liability. Specifically, the court held the following claims in

abeyance: (i) WDF's claim for legal fees; (ii) the Kay’s counterclaim for

fees; (iii) RKI's fifth claim for interest based on WDF's violation of New

York General Business Law § 756-a; (iv) and RKI's, Leroy Kay's and Alice

Kay's claim against WDF for making a wrongful claim against the Bond. (See

ECF Minute Entry dated Feb. 22, 2019.)

4 The post-trial submissions of the parties consist of the following: ECF

No. 198, Plaintiff’s Proposed Findings of Fact and Conclusions of Law (“Pl.

Mem.”); ECF No. 200 Defendant’s Proposed Findings of Fact and Conclusions of

Law (“Def. Mem.”); ECF No. 201, Plaintiff’s Response to Defendant’s Proposed

Findings of Fact and Conclusions of Law (“Pl. Resp.”); ECF No. 203,

Defendant’s Response to Plaintiff’s Proposed Findings of Fact and Conclusions

of Law (“Def. Resp.”).

5 “In an action tried on the facts without a jury . . ., the court must

find the facts specially and state its conclusions of law separately. The

Based on the trial record, for the reasons set forth below, the

court concludes that RKI proved its claim for breach of contract

by a preponderance of the evidence, and WDF failed to prove its

counterclaims for breach of contract by a preponderance of

evidence and fraud by clear and convincing evidence.6

PROCEDURAL HISTORY

RKI commenced this action on March 20, 2014, and filed

the operative amended complaint on March 11, 2015. (See Am.

Compl.) WDF filed its answer to the Amended Complaint,

counterclaim against RKI, and third-party claim against Citizens

on March 25, 2015. (See Answer.) The court issued its summary

judgment Memorandum and Order on April 3, 2017, granting summary

judgment to Citizens and denying summary judgment to RKI. (See

ECF No. 113, Mem. and Opinion.) In its summary judgment

decision, this court left open the “triable issues of fact as to

whether or not RKI performed under the contract, and whether WDF

properly deemed RKI to be in default.” (Id. at *5.) Trial

findings and conclusions may . . . appear in an opinion or a memorandum of

decision filed by the court.” Fed. R. Civ. P. 52(a)(1). Under Rule 52(a),

findings of fact may be determined “based on oral or documentary evidence,”

and “findings of fact in a bench trial based on written submissions are

accorded the same deference as factual findings that are otherwise

determined.” Connors v. Conn. Gen. Life Ins. Co., 272 F.3d 127, 135 (2d Cir.

2001) (citing Fed. R. Civ. P. 52(a)).

6 To establish a fact by a preponderance of evidence means “simply to

prove that the fact is more likely true than not true.” United States v.

Rosa, 17 F.3d 1531, 1542 (2d Cir. 1994); see also Velasquez v. United States

Postal Serv., 155 F. Supp. 3d 218, 227 (E.D.N.Y. 2016). As the finder of

fact, the court is entitled to make credibility findings as to the witnesses

and their testimony. See Krist v. Kolombos Rest. Inc., 688 F.3d 89, 95 (2d

Cir. 2012).

began on February 25 and continued through February 28, March 1,

and April 3, 2019.

FINDINGS OF FACT

At trial, plaintiffs presented testimony from David

Kay, Alice Kay, two managing members from RKI, RKI counsel

Michael Zicherman, Esq., and WDF counsel Becky Tung, Esq. as

witnesses. Defendants called Antonio Gentile, SCA’s project

officer, Robert Bailey, Andron project manager, Liam McLaughlin,

WDF Senior Vice President, and John Cutrone, WDF project

manager, as witnesses. The court was also provided with a

Declaration of Mark Wilson, formerly employed by Andron as an

operations manager on the Project, which was admitted into

evidence without objection.7 (Trial Transcript ("Tr.") 1031:7-

1035:5, 1166:14-16.) Pursuant to Federal Rule of Civil

Procedure 52, the court considers the evidence offered at trial

and makes the following findings of fact below.

The Parties

The New York City School Construction Authority

(“SCA”) is “a public benefit corporation established pursuant to

New York Public Authority Law §§ 1727 et seq., whose primary

purpose is to design, construct, and maintain educational

facilities in New York City.” A.F.C. Enterprises v. New York

7 At trial, the parties stipulated that all exhibits in the joint exhibit

binders would be admitted into evidence. (Tr. 17:13-16; see ECF Nos. 208-210

(joint trial exhibits cited herein).)

City Sch. Const. Auth., No. 98-cv-4534 (CPS), 1999 WL 1417210,

at *1 (E.D.N.Y. June 29, 1999).

Andron is a corporation organized under the laws of

New York with its principal place of business in Goldens Bridge,

New York. (ECF No. 38, Answer to Amended Complaint with

Counterclaims (“Answer”), ¶ 4.) Andron is a general contractor

and construction manager providing services in the New York

region.

WDF is a corporation organized under the laws of New

York with its principal place of business in Mount Vernon, New

York. (Answer ¶ 26.) WDF is in the business of providing

plumbing, mechanical, and heating, ventilation, and air

conditioning (“HVAC”) services.

RKI is a limited liability company founded in 2008.

(Tr. 9:17-23.) RKI is organized under the laws of New Jersey

with its principal place of business in Colts Neck, New Jersey.

(Am. Compl. ¶ 1.) Members of RKI included David Kay, Leroy Kay,

and Alice Kay. (Tr. 9:24-10:5.) RKI provides services related

to HVAC piping and is recognized as a Women’s Business

Enterprise. (Id. 9:1-2, 10:13-14.)

Citizens is a corporation existing under the laws of

Michigan with its principal place of business in Howell,

Michigan. (Answer ¶ 27.) Citizens is in the business of

issuing surety bonds. (Id.)

The Construction Contracts and Subcontracts

In or about December 2011, Andron, as general

contractor, entered into a written agreement with the SCA in

connection with a project for the construction of a five-story

public school, P.S. 290, located in Queens, New York (the “P.S.

290 project,” the “Project,” or the “school project”). (ECF No.

154, Proposed Pretrial Order, Ex. 1, Joint Stipulation of Facts

(“Joint Stip.”), ¶ 1.) As the general contractor, Andron was

responsible for coordinating the work of all of the contractors

on the job site, which included developing the project schedule

and workflow. (Joint Stip. ¶ 1.)

In or about October 2012, WDF entered into a written

subcontract with Andron to perform certain HVAC work for the

school project. (Id. ¶ 2.)

On or about October 22, 2012, RKI, as a sub-

subcontractor, entered into a written sub-subcontract, with WDF

to perform the piping portion of the HVAC work for the school

project (“WDF-RKI agreement” or the “sub-subcontract”). (Id. ¶

3.) The agreed upon price and reasonable value of the work,

labor, services and materials to be provided by RKI to WDF in

connection with the sub-subcontract was $1,252,000.00. (Id. ¶

4.)

Pursuant to the WDF-RKI agreement, RKI retained

Citizens, as surety, and entered into a subcontractor

performance bond.8 (ECF No. 103-1, Statement of Material Facts

in Support of Motion for Summary Judgment, ¶ 6.) RKI, Citizens,

and WDF entered into the Bond on January 4, 2013. (ECF No. 101-

5, Declaration of Bogda Clarke, attorney for Hannover Insurance

Group, an affiliate of Citizens, in Support of Motion for

Summary Judgment Ex. A, A312 Subcontractor Performance Bond.)

A. The WDF-RKI Agreement

The WDF-RKI agreement governed the sub-contractor and

sub-subcontractor relationship, respectively, between WDF and

RKI and provided the contractual rights and duties of each party

as relevant to the P.S. 290 project.

The parties’ payment obligations were described in the

sub-subcontract. Pursuant to Article 4 of the sub-subcontract,

WDF was to make progress payments to RKI within five days after

receiving a progress payment from Andron. (ECF Nos. 208, 209,

210, Joint Trial Exhibits (“Joint Ex.”) 3; Def. Mem. ¶ 4.)9

Article 6 permitted WDF to withhold payments from RKI to protect

itself from potential breaches of contract, so long as WDF

8 “When a surety issues a performance bond, the surety guarantees ...

that the project will be completed a certain price irrespective of whether

the contractor [or subcontractor] is able to complete the project.” Acranom

Masonry, Inc. v. Wenger Constr. Co., No. 14-cv-1839 (PKC)(RML), 2019 WL

3798047, at *8 n.9 (E.D.N.Y. Aug. 13, 2019) (quoting In re ADL Contracting

Corp., 184 B.R. 436, 440-41 (S.D.N.Y. 1995)).

9 The sub-subcontract refers to WDF as the “Contractor” and RKI as

“Subcontractor.”

provided RKI “prior written notice” that was accepted by RKI.

(Joint Ex. 3 at 6.)

The sub-subcontract also required RKI to “furnish and

maintain at all times sufficient, qualified and competent forces

and supervision, and adequate, conforming and usable materials,

equipment, plants, tools and other necessary things, to achieve

timely progress” according to the current progress schedule or

any modified schedule. (Joint Ex. 3 at 7 (Article Seven).)

Upon receiving a modified project schedule, RKI was obligated to

perform according to the modified schedule, unless it provided

written objections with 48 hours of receipt. (Id.) Under

Article 7, WDF was permitted to “direct acceleration” of RKI’s

performance at the Project. (Id.)

The sub-subcontract further described the

circumstances and remedies for any purported default or

termination of the sub-subcontract. Article 26 specified

several events that would constitute default by RKI, (Joint Ex.

3 at 23-25), and prescribed the following procedures for

invoking default and terminating the sub-subcontract:

[I]n every such event, if any, each of which

shall constitute a default hereunder by

Subcontractor [RKI], Contractor [WDF] shall .

. . after giving Subcontractor written notice

of default and forty-eight (48) hours within

which to cure said default, have the right to

exercise any one or more of the following

remedies: . . .

(iii) after giving Subcontractor an additional

forty-eight (48) hours written notice (at any

time following the expiration of an initial

forty-eight (48) hours notice and curative

period), terminate this Subcontract in whole

or part . . . .

(Id. at 24 (emphasis added).) Thus, under the terms of the sub-

subcontract, WDF was required to provide two written notices of

default to RKI with two separate 48 hours periods before WDF was

authorized to terminate the sub-subcontract. (Id.)

Article 10 of the sub-subcontract described the

legally sufficient notice each party was required to provide in

the event of a default. (Id. at 11.) It provides that “written

notice provided for in this [sub-subcontract] shall be deemed

given if delivered personally to an officer or partner or

similar principal position, as the case may be, of a party or

sent by certified mail, return receipt requested, in the custody

of the United States Postal Service to the authorized executive

or representatives of a party at its address.” (Id.)

In the event there was a change in the scope of work

at the school construction project, Article 9 of the sub-

subcontract provided that RKI would not proceed with “change

order work” without a “Change Order” issued by WDF. (Id. at 9-

11 (Article 9).) Further, under Article 20, RKI was not

permitted to commence any work “requiring a shop drawing or

sample submission . . . until the submission has been approved

by the Architect.” (Id. at 19.)

Exhibit B to the sub-subcontract provided the scope of

work for WDF and RKI. (Id. at 36 (Exhibit B).) Among other

things, RKI was obligated to:

Furnish all labor, pipe, valves, fittings,

materials and equipment necessary to install

Piping & HVAC Equipment . . .

Install all piping and equipment specialties

provided by WDF, Inc. . . .

Provide a two-week look-ahead listing planned

areas and scope of work

[C]losely follow the flow of the job according

to the project schedule

(Id. at 36.) Moreover, Exhibit B also provided that “WDF Inc.

will incur costs of Payment & Performance Bond for RKI

Construction LLC.” (Id. at 38.) Finally, Article 21 provided

RKI the authority to control the “construction means, methods,

[and] techniques” for performing its work associated with the

construction project. (Id. at 20 (Article 21).)

The P.S. 290 Project

RKI began field work at the P.S. 290 project in

February 2013. (Tr. 24:20-25:16.) RKI was tasked with

installing the “heating and cooling piping” for the HVAC system,

which included supplying the “pipes itself, the hangers, [and]

the miscellaneous valves” on all five stories and the cellar at

P.S. 290. (Id. 12:18, 14:3-4.)

A. The Requisition and Payment Process

The P.S. 290 project used a requisition process to pay

contractors, sub-contractors, and sub-subcontractors for work

performed. Pursuant to the sub-subcontract, WDF was obligated

to pay RKI for services performed at the Project after it

received payment from Andron or SCA. (Joint Ex. 3 at 3-5

(Article 4).) After RKI finished a portion of its piping work,

RKI would submit a requisition to WDF for payment for that work.

(Tr. 569:10-18.) WDF, in turn, negotiated the line items on its

requisition request with Andron. (Id.) Andron, the general

contractor, negotiated the payment requests with SCA, the state

construction authority. (Id.) After review, SCA would pay

Andron, who in turn would pay WDF. (Id.) Once WDF received

payment from Andron, any previously requested payments became

due to RKI pursuant to sub-subcontract. (See Joint Ex. 3 at 3-4

(Article 4).) The entire requisition and payment schedule could

take several weeks to process. (Tr. 569:10-18.)

David Kay, a member of RKI, managed the RKI field

operations, including ordering materials, tracking the schedule,

going to job sites, and preparing all RKI requisitions sent to

WDF for payment. (Id. 10:22-11:15, 34:6-35:9.) Alice Kay,

another member of RKI and Mr. Kay’s wife, was responsible for

managing RKI’s office, payroll, and accounting, which included

processing RKI’s requisition paperwork. (Id. 34:9-16, 886:13-

17, 887:1-12.) In total, RKI submitted seven requisitions to

WDF for work performed at the P.S. 290 project. (Joint Stip. ¶

34.)

B. The Work Schedule and Change Orders

Andron, as general contractor, scheduled the flow of

work at the P.S. 290 project on whiteboards in its field site

office. (Joint Stip ¶ 38.) Andron’s Whiteboard (the

“Whiteboard”) would describe the project schedule and list

deadlines for the ongoing construction projects by various

subcontracting trades. (Tr. 101:23-102:6.) The Whiteboard was

updated every two weeks by Andron and was maintained in the

Andron’s site office. (Id. 124:1-18.) Andron’s operations

manager Mark Wilson managed the Whiteboard. (Id. 713:9-17.)

The Whiteboard described the P.S. 290 workflow based on a

baseline schedule and served as “a break down of certain phases”

of construction work, including the “times [and] durations for

certain areas, certain floors for different trades to perform

their work,” as determined by Mr. Wilson. (Id. 713:9-17,

1195:21-1196:15.) The Whiteboard was developed from the

Critical Path Method (“CPM”)10 schedule and listed specific dates

10 “A CPM [critical path method] schedule is a standard construction

device used to plan activities of a construction project in a logical,

orderly sequencing manner citing durations for different activities from the

for specific work, with a review of how those dates would impact

the rest of the project. (Id. 713:18-714:16.) As the

subcontractor, WDF was responsible for communicating any revised

deadlines as set forth on the Whiteboard to its sub-

subcontractors. (Id. 734:17-735:18.)

Andron held weekly foreman’s meetings and project

management meetings. John Cutrone, a WDF project manager at the

P.S. 290 project, would attend most meetings. Mr. Cutrone saw

and was aware of the Whiteboard. (Tr. 698:19-21; 1177:4-12.)

Andron’s Mark Wilson wrote dates on the Whiteboard. (Tr.

1219:15-24, 1220:2-19.) RKI’s foreman and David Kay would

occasionally attend the weekly meetings. (Tr. 1177:16-1178:7.)

Mr. Kay testified that Andron held meetings every two weeks to

go over the progress of the project with the various

subcontractors. (Tr. 106:22-107:5.) Mr. Kay further testified

that he never received the official CPM schedule, (Tr. 101:21-

102:6), and WDF agreed that the Whiteboard and not the CPM

schedule guided the P.S. 290 project. (Tr. 1195:21-1196:5.) As

of August 15, 2013, several months after RKI began fieldwork at

the Project, a photograph of the Whiteboard, stated “Needs

beginning of the job to the end.” In re GII Indus., Inc., 464 B.R. 557, 561

n.1 (Bankr. E.D.N.Y. 2011) (internal quotation marks omitted); see Tr.

268:17-25 (David Kay testifying that a CPM schedule “showed exactly where the

job was” in terms of project delays and anticipated deadlines).

dates,” under “Hydronic Piping,” the work that RKI was to

perform. (See ECF No. 218, RKI Trial Exhibits (“RKI Ex.”) 47.)

C. Changes to the Scope of Work

Like many large-scale construction projects, the P.S.

290 project experienced several delays and design changes

leading to extensions of time in finishing the Project and

changes in work plans. On April 28, 2013 the SCA issued

Bulletin No. 7, making certain changes to the Project. (ECF No.

103-3, Zicherman Decl. Ex. F, Schedule update at SCA-01456.)

Bulletin No. 7 impacted the HVAC work, including RKI’s piping

work because it required that the pipes be rerouted. (Tr.

191:15-192:20.) WDF did not issue a written change order to RKI

with respect to Bulletin No. 7. (Id. 188:11-13.)

In October 2013, Andron submitted a request for

extension of time to the SCA due to SCA’s design changes and

other changes to the Project. (Joint Stip. ¶ 39.) Andron

attributed 188 days of delay to SCA’s design changes and sought

an extension of the completion date. (Id. ¶ 40.) On or about

February 12, 2014, the SCA approved a change order in favor of

Andron in the sum of $900,000.00 for acceleration costs. (Id. ¶

41.) On or about February 13, 2014, the SCA admitted that 92

calendar days of delay were caused by the SCA and approved

Andron’s change order for a 61-day time extension. (Id. ¶ 42.)

D. Delays in Payment

It is undisputed that RKI was paid in full by WDF for

work performed and material delivered through May 31, 2013.

(Joint Stip. ¶ 8.) Mr. Cutrone, the WDF project manager,

testified at trial that he “didn’t have a problem with where

[RKI was] in terms of work in place” for the period of February

2013 to May 2013. (Tr. 1185:5-15.)

After May 31, 2013, however, RKI received delayed or

insufficient payments from WDF for work performed at the P.S.

290 project. In July and August 2013, RKI submitted several

additional requisitions to WDF for work performed by RKI in June

through September 2013. (Joint Stip. ¶¶ 31-34.) WDF did not

pay RKI for work performed at the P.S. 290 project during June

through August 2013. (Id. ¶ 36.) WDF received additional

payments from Andron totaling $134,274.07 for work and material

provided by RKI during the period ending June 30, 2013 through

August 31, 2013. (Id. ¶ 8.)

Both parties argue that several delays and factors

contributed to WDF’s decision to not pay RKI for the work

performed from June to August 2013. RKI argues that WDF

breached the sub-subcontract by failing to remit payments within

five days after receiving payments from Andron. (Pl. Mem. at

26.) WDF argues that RKI breached the sub-subcontract by

falling behind the work schedule, failing to provide piping, and

failing to adequately staff the construction site pursuant to

WDF’s directives. (Def. Mem. at 2.)

As set forth below, the court finds that WDF breached

the terms of the sub-subcontract by failing to pay RKI for work

performed at the Project from June to August 2013. The court

further finds that WDF failed to follow proper procedures for

terminating the contract, as set forth in Article 26 of the sub-

subcontract. In reaching this conclusion, the court finds that

the correspondence WDF sent to RKI in August and September 2013

were insufficient to serve as a Notice of Default and 48-hour

period to cure under the sub-subcontract.

E. Termination of the Sub-subcontract

RKI’s purported failure in performance of specific

work items led WDF to terminate the sub-subcontract. On August

28, 2013, WDF’s Senior Vice President, Liam McLaughlin delivered

to RKI a letter titled “48-HOUR NOTICE,” (1) advising RKI and

counterclaim-defendant Citizens that “WDF may declare RKI in

default” and (2) requesting a meeting with Citizens and RKI “to

discuss how this matter may be immediately resolved.” (Joint

Stip. ¶ 5; Joint Ex. 56 (the “August 28, 2013 Letter”).) WDF

identified seven work items which it required RKI to perform to

various levels of completion within 48 hours: (1) the completion

of cellar piping; (2) delivering piping to the first floor; (3)

roughing the piping on the first floor; (4) delivering piping to

the second floor; (5) delivering piping to the third floor; (6)

installing condenser curbs on the roof; and (7) providing a

manpower loaded two-week schedule. (Id.; Joint Ex. 56.) WDF

asserts that the August 28, 2013 Letter qualified as a 48-hour

notice of default delivered to RKI. (Def. Mem. at 27.) For

reasons further explained below, the court finds that the August

28, 2013 Letter was not a notice of default under the sub-

subcontract because it did not notify RKI of a default but

instead stated that WDF “may declare” a default and requested a

meeting with RKI to “resolve” the matter. (Joint Ex. 56.)

On August 29, 2013, RKI responded to WDF’s August 28,

2013 letter, and asserted that WDF’s letter was based on

inaccurate information concerning the schedule and that RKI was

providing proper manpower and set forth the status of its work

in response to the seven work items previously identified.

(Joint Stip. ¶ 6; Tr. 213:15-214:5.)

On September 5, 2013, WDF notified RKI by email that

it had failed to comply with the directives described in the

August 28, 2013 Letter. (Joint Ex. 134.) Between September 5

and September 13, WDF and RKI exchanged several correspondences

relating to RKI’s delivery of piping, the number of RKI

employees staffed at the worksite, and the percentage of work

completed at the project. (See Joint Exs. 101, 104, 137.)

On Friday, September 13, 2013, WDF notified Citizens

that it was planning to issue a notice of default to RKI on

September 16, 2013 and that WDF would perform RKI’s remaining

work on the P.S. 290 project. (Joint Ex. 104.) On that same

day, Friday, September 13, WDF’s general counsel sent an email

to RKI, notifying RKI that WDF “will default RKI on Monday per

the performance bond terms.” (Joint Ex. 105.) WDF asserts that

the September 13 email constitutes a second 48-hour notice of

default, notifying RKI of its breach of the sub-subcontract and

state of default. (Def. Mem. ¶ 53.)

On September 16, 2013, WDF sent a letter to RKI and

Citizens informing RKI that it was in default of the sub-

subcontract and terminating the sub-subcontract. (Joint Stip. ¶

7; Joint Ex. 57 (the “September 16, 2013 Letter”).) In the

letter, WDF claimed that RKI was in breach of the sub-

subcontract after it failed to satisfactorily perform the seven

activities previously identified in the August 28, 2013 Letter.

(Joint Ex. 57.) At trial, WDF’s general counsel, Becky Tung

confirmed that no other written notice was delivered to RKI

between August 28, 2013 and September 16, 2013. (Tr. 526:22-

528:4.)

On September 17, 2013, RKI hand delivered to Mr.

Cutrone RKI’s requisition for payment No. 7 in the amount of

$299,310.84 for work performed by RKI between June and September

2013 at the P.S. 290 project. (Joint Ex. 46.; Joint Stip ¶ 34.)

On September 24, 2013, Citizens sent WDF a letter

advising that Citizens was investigating WDF’s demand that

Citizens perform in accordance with the terms of the performance

bond. (ECF No. 102-3, Tung Citizens Declaration, Ex. F, Letter

from Jonathan Bondy dated September 24, 2013.)

On October 21, 2013, Citizens sent WDF a letter

denying WDF’s claim under the Bond based on contractor default

because: (1) WDF failed to pay RKI properly under the terms of

the sub-subcontract and (2) Citizens did not find RKI to be

materially in breach of their obligations under the sub-

subcontract agreement. (Id. Ex. G, letter from Jonathan Bondy

dated October 21, 2013.)

RKI’s Compliance with WDF’s August & September 2013

Letters

Having considered the evidence presented at trial and

assessed the credibility of the witnesses, the court finds that

RKI either satisfied, or was not required under the sub-

subcontract to comply with the seven work items identified in

WDF’s August 28 and September 16, 2013 Letters.11

11 To the extent that any of the following Findings of Fact may be

deemed Conclusions of Law, or vice versa, they shall also be considered as

both findings and conclusions. See Miller v. Fenton, 474 U.S. 104, 113–14,

(1985) (noting the occasional difficulty of differentiating findings of fact

from conclusions of law); see also Int'l Union of Painters and Allied Trades,

As a preliminary matter, the court respectfully

rejects WDF’s assertions in its proposed findings of fact that

attempt to expand the court’s review of the relevant factual

issues. (See Def. Mem. at 1-2 (referring generally to RKI’s

performance in June and August 2013).) At trial, the court

specifically asked WDF’s counsel whether the bases for WDF’s

termination of the sub-subcontract was limited to the seven

activities identified in WDF’s August 28, 2013 and September 16,

2013 Letters. (See Tr. 1237-38.) In response, WDF’s counsel

represented that WDF’s termination of the sub-subcontract was

“limited” to those letters and RKI’s performance in “September,

not in July and August.” (Id. 1237:23-1238:1.) WDF’s counsel

further advised the court that he had given the issue “a lot of

thought” and concluded that the sub-subcontract termination was

“based on the [seven] items” in the August 28, 2013 and

September 16, 2013 Letters. (Id. 1209:20-23.) When the court

invited WDF counsel to clarify his representations and advised

him that he was “binding” his “client to the reasons set forth

in the termination letter,” WDF’s counsel conceded that WDF

“binded themselves.”12 (Id. 1239:19-21.) Given these clear and

AFL–CIO v. Local 8A–28A, No. 09–CV–4358 (RRM)(RLM), 2010 WL 3780366, at *1

n.1 (E.D.N.Y. Sept. 21, 2010).

12 The court concludes that WDF’s counsel’s repeated representations at

trial limiting the reasons for termination to the August 28 and September 16,

2013 Letters constitute judicial admissions binding on WDF. The Second

Circuit has explained that “[j]udicial admissions are not evidence at

all. Rather, they are formal concessions in the pleadings in the case or

unequivocal statements and admissions by WDF’s counsel at trial,

the court limits its findings of fact relating to RKI’s

performance under the sub-subcontract (and subsequently its

purported breach) to the seven activities identified in WDF’s

August 28, 2013 and September 16, 2013 Letters.

Based on the foregoing, RKI’s performance in June

through August 2013 is immaterial to the breach of the sub-

subcontract claim because WDF clearly and unambiguously

represented that the sub-subcontract was terminated for the

seven alleged deficiencies in performance identified in WDF’s

August 28 and September 16, 2013 Letters to RKI. (Joint Exs.

56-57.) After reviewing the evidence submitted at trial and

weighing the credibility of the witnesses, the court concludes

that RKI either satisfied the conditions outlined in the August

28 and September 16, 2013 Letters or was not required to satisfy

those activities under the sub-subcontract. As a result, the

court concludes that RKI was not in default of the sub-

subcontract for the reasons stated in WDF’s August 28 and

September 16, 2013 Letters.

stipulations by a party or counsel that have the effect of withdrawing a fact

from issue and dispensing wholly with the need for proof of the fact.”

Hoodho v. Holder, 558 F.3d 184, 191 (2d Cir. 2009) (quoting 2 McCormick on

Evid. § 254 (6th ed. 2006)). To be considered a judicial admission, a

statement must be a “clear and unambiguous admission of fact.” United States

v. McKeon, 738 F.2d 26, 30 (2d Cir. 1984). Here, as noted above, WDF’s

counsel made a “clear and unambiguous admission” as to the limited reasons

for WDF’s termination of the sub-subcontract. Id.

A. WDF’s August 28 and September 16, 2013 Letters

In its August 28, 2013 Letter, which WDF’s General

Counsel, Becky Tung, reviewed before it was sent by WDF Senior

Vice President Liam McLaughlin, WDF identified seven activities

that RKI was allegedly underperforming which led to RKI’s

purported breach of asserted default under, the sub-

subcontract:13

1. “Cellar piping to be 100% rough”

WDF demanded that RKI complete the “Cellar piping to

be 100% rough.” (Joint Ex. 56.) Several weeks later, in the

September 16, 2013 Letter, WDF changed its demand to “Cellar

piping to be 100% complete.” (Joint Ex. 57.) Although the

practical significance of WDF’s shifting demand from “100%

rough” to “100% complete” is unclear from the evidence, WDF

admitted at trial that RKI had performed as much work as

possible in the cellar by September 10, 2013 -- six days before

WDF delivered its notice of default. (See Tr. 1347:25-1348:9

(Cutrone stating that RKI “roughed as far as they can go down

there [the cellar] at this time. They have a little bit more

work down here, but we will wait until the brickeys

[bricklayers] get out of here.”).) WDF represented that the

13 The court notes that Mr. McLaughlin admitted at trial that he never

reviewed a CPM schedule for P.S. 290 (Tr. 1005:12-17) and that the

percentages for the work activities in the August 28, 2013 Letter were “an

arbitrary determination by John [Cutrone] and I.” (Tr. 1069:20-1070:3.)

only work remaining at the cellar level had to await the

bricklayers completing work and leaving the area. (See Tr.

1348:11-17.) Accordingly, RKI’s piping activity in the cellar,

measured under either the “rough” or “complete” standard, was

satisfied by RKI as of September 10, 2013 because RKI could not

proceed with any work in the cellar.

2. “1st floor piping material to be 50% on site”

WDF also demanded that RKI deliver 50% of piping

material to the first floor at P.S. 290. In the August 28, 2013

Letter, WDF confirmed that this activity had been completed.

(Joint Ex. 57 (“1st floor piping material to be 50% on site-

Complete”).)

3. “1st floor piping installed to be 35% rough”

The August 28, 2013 Letter demanded that 1st floor

piping was to be “35% rough.” (Joint Ex. 56.) The September

16, 2013 Letter increased the percentage of work to “45% rough.”

(See Joint Exs. 56-57.) Thus, like the demand for cellar

piping, WDF’s demand for 1st floor piping similarly expanded in

scope between August 28 and September 16, 2013. In the

September 16, 2013 Letter, WDF claimed that the 1st floor piping

was “not done” and was only “20% complete.” (Joint Ex. 57.)

Notwithstanding the ten percent increase in WDF’s

demand for “rough” piping work, RKI submitted credible evidence

and testimony showing that it satisfied the “roughing”

percentages for the 1st floor piping in excess of the 45%

benchmark set by WDF. For example, Mr. Cutrone, WDF’s project

manager, explained at trial what activities qualified as

“roughing” for purposes of the August 28 and September 16, 2013

Letters.14 (See Tr. 1293-94.) Relying on Mr. Cutrone’s metrics

for “roughing,” RKI credibly demonstrated that it exceeded the

higher 45% benchmark set in the September 16, 2013 Letter.

Indeed, RKI credibly explained that based on Mr. Cutrone’s

metrics, RKI completed approximately 60% of roughing on the

first floor according to the RKI’s August 2013 requisition for

payment, (see Joint Ex. 43 (line items 91 through 97; comparing

“Total Completed and Stored to Date” work with “Contract

Value”)), and approximately 56% of roughing according to WDF’s

approved August 2013 requisition for payment. (See Joint Ex. 45

(same).) Hence, RKI presented credible documentary evidence

showing that it satisfied the 45% “roughing” threshold set by

WDF in the September 16, 2013 Letter.15

14 Mr. Cutrone identified the following work items as included in

“roughing” work: (i) delivery of pipe, (ii) delivery of valves and pipe

specialties, (iii) installation of hot water system mains, (iv) installation

of hot water system branches, (v) installation of secondary system mains,

(vi) installation of secondary system branches, (vii) installation of

condensate drainage piping, (viii) installation of secondary system risers,

(ix) and installation of hot water system risers. (See Tr. 1293-94

(referring to line items 43, 44, 45, 46, 47, 48, 49, 57 and 58 of the August

2013 requisition approved by WDF).)

15 Moreover, the court also finds that Mr. Cutrone provided inconsistent

testimony with respect to the 1st floor completion percentages. Although the

September 16, 2013 Letter concluded that RKI only completed 20% of the 1st

floor piping, Mr. Cutrone, in an email submitted into evidence, represented

that RKI completed 30% of the rough in work as of September 5, 2013. Thus,

4. 2nd & 3rd floor “piping material to be 50% on

site”

Another issue identified by WDF in its August 28 and

September 16 Letters was RKI’s alleged delay in delivering

piping material to the construction site. Although RKI had a

contractual obligation to provide piping materials under the

sub-subcontract, (see Joint Ex. 3 at 36 (Exhibit B)), RKI also

retained the contractual right and responsibility to control the

means and methods for performing work at the P.S. 290 project

consistent with the current project schedule. (See id. at 20

(Article 21).) Here, it is undisputed that Andron scheduled the

flow of work through the Whiteboard in Andron’s site office, and

that under the sub-subcontract, RKI “shall be bound by the

interpretations and decisions of Architect, GC [Andron], and

Owner to the same extent as” WDF. (Id.; Joint Stip. ¶ 38.) At

trial, RKI presented credible evidence showing that that the

Whiteboard displayed no deadlines for second and third floor

piping work until September 6, 2013. (See RKI Ex. 46 at RKI 203

(Revised Whiteboard reflecting September 30 deadline set for

second floor; October 14 deadline set for third floor); see also

Tr. 165, 322:8-324:5) Consistent with RKI’s contractual right

to control the means and methods of its performance, Mr. Kay

WDF’s 30% completion rate is inconsistent with the 20% completion rate as

noted in WDF’s September 16, 2013 Letter. The Court accords no weight or

credibility to WDF’s shifting statements and instead credits RKI’s evidence,

including, but not limited to, Joint Exs. 43 and 45.

testified that RKI’s practice in 2013 was to deliver the piping

materials two days before the work was to be performed by RKI to

avoid theft of materials from the work site. (Tr. 112:17-113:1,

219:3-220:15.) The court finds that RKI’s practice of

delivering piping two days before the works was to be performed

was reasonable in light of RKI’s right to control the means and

methods of its performance and that under the revised Whiteboard

deadline, Andron, the general contractor, had not required dates

for RKI’s work, and RKI was not required under the sub-

subcontract to deliver 50% of the piping material by September

16, 2013. Accordingly, WDF’s assertion that RKI failed to

deliver the piping according to its September 16, 2013 Letter is

immaterial to RKI’s performance of the sub-subcontract.

5. “Condenser curbs installed on roof”

WDF’s August 28, 2013 Letter also demanded RKI to

install condenser curbs on the roof of P.S. 290. (Joint Ex.

57.) A curb is an object that holds equipment such as a

condenser or fan, and was to be installed on top of the P.S. 290

roof. (Tr. 1331:13-15, 1335:9-25.) Due to the size of the

condenser curbs, Mr. Kay determined that a crane was needed to

hoist the curbs to the roof. When WDF’s truck had arrived at

the Project with the condenser curbs, however, WDF’s crane was

no longer at the site. (Tr. 183:4-186:21, 199:4-200:3, 259:25-

261:11, 1371:15-1373:11, 1376:1-1377:15; RKI’s Exs. 73, 74.)

Though Mr. Cutrone testified that RKI could have physically

carried or used some unspecified “rigging mechanism” to bring

the condenser curbs to the roof, (Tr. 1331:10-1338:23), WDF

failed to show that RKI could carry the curbs to the P.S. 290

roof because the size and weight of the condenser curbs are not

revealed in the trial evidence. Further, there is no evidence

that WDF coordinated delivery of the condenser curbs with RKI as

required under the sub-subcontract. (See Joint Ex. 3 at 36

(Exhibit B); Tr. 183:22-185:22.)

In any event, even if RKI could conceivably have

carried the curbs to the P.S. 290 roof, Andron’s roofing

subcontractor’s delay in construction prevented RKI from

installing the condenser curbs on the roof. Based on the

relevant testimony and evidence, the court credits RKI’s

explanation that the condenser curbs could not have been

installed in September 2013 because the roofing subcontractor

had not completed installing the roof’s first layer of roofing

material. (See Pl. Mem. ¶ 23; Tr. 790:4-15; RKI’s Ex. 21 at SCA

1455.) Mr. Kay from RKI testified that the roof was not ready

for installation of the curbs because the roofer first wanted to

install a layer on the roof. (Tr. 185:10-186:21.) Consistent

with Mr. Kay’s recollection of delays by the roofer, Mr. Cutrone

from WDF confirmed that as of September 5, 2013, the roofer was

at least one week behind schedule and did not want installation

of curbs before he was finished. (Tr. 1339-40). Contemporaneous

documentary evidence circulated by Mr. Cutrone also confirms the

installation delay of the roofing material by the roofer. (See

Joint Ex. 134 (“Per today’s Andron meeting, the roofer is 1 week

behind schedule.”).) Consequently, RKI presented consistent and

credible evidence that RKI had to wait to install the condenser

curbs on the roof until the roof was finished and further

confirmed through documentary evidence that the roof

construction did not commence until October 1, 2013. (See RKI

Ex. 21 at SCA 1455 (roofing started on October 1, 2013); Tr.

790:4-15 (testimony from Andron’s project manager agreeing that

the roof was not installed until October 1, 2013).) Thus, the

court finds that RKI presented credible evidence that it was

unable to install the condenser curbs as of September 16, 2013

due to the delay in the roof construction, and concludes that

RKI did not fail to perform installation of condenser curbs on

the roof.

6. Delivery of a “Manpower loaded 2 week schedule”

In the August 28, 2013 Letter, WDF demanded that RKI

provide a “Man-loaded Two (2) Week Look-Head Schedule.” (Joint

Ex. 56.) In the September 16, 2013 Letter, WDF demanded that

RKI provide a “Manpower loaded 2 week schedule.” (Joint Ex.

57.) The September 16, 2013 Letter noted that RKI failed to

comply with WDF’s August 28, 2013 demand because “no manpower

[was] provided in [the] schedule.” (Id.) A “man loaded

schedule” was described at trial as a type of schedule providing

“how many men are going to do each activity” at the construction

site. (Tr. 221:13-15.)

Under the terms of the sub-subcontract, RKI was

obligated to “[p]rovide a two-week look-ahead listing planned

areas and scope of work.” (Joint Ex. 3 at 36.) Thus, the sub-

subcontract, unlike WDF’s Letters, did not require “Manpower” or

“Man-loaded” to be provided in RKI’s two-week look ahead

schedule. Accordingly, RKI’s purported failure to provide

“manpower” in the schedule is immaterial as RKI was not required

to do so under the sub-subcontract.

To be sure, RKI presented evidence showing that it

complied with its contractual obligation to provide WDF a two-

week look ahead schedule when requested on September 16, 2013.

Specifically, WDF’s September 16, 2013 letter confirms that WDF

received a schedule from RKI and only objected to the lack of

“manpower provided in the schedule.” (Joint Ex. 57.)

Furthermore, Mr. Kay testified that he provided WDF “a schedule

that showed dates and activities and durations” as required

under the sub-subcontract. (Tr. 440:3-6.)

In sum, for the reasons stated above, the court finds

that RKI presented credible evidence establishing that it either

satisfied the conditions outlined in the August 28 and September

16, 2013 Letters or was not required to satisfy those activities

under the terms of the sub-subcontract.16 Accordingly, based on

WDF’s confirmation of the seven work activities as the grounds

for WDF’s termination of the sub-subcontract, identified in the

August 28 and September 16, 2013 Letters, the court concludes

that RKI has proven by a preponderance of the evidence that

WDF’s termination of the sub-subcontract was without a factual

basis and, in any event, in breach of the sub-subcontract as

described below in the conclusions of law.

RKI’s Performance of the Sub-subcontract

In the alternative, even if the court ignored WDF’s

counsel’s representation regarding WDF’s bases for terminating

the sub-subcontract, and considered issues beyond the scope of

the August 28, 2013 and September 16, 2013 letters, i.e., RKI’s

performance between June and August 2013, the court finds that

RKI presented a preponderance of credible evidence describing

several factors that prevented RKI from completing the HVAC

piping work at the P.S. 290 project. Specifically, the court

finds that RKI’s credible evidence established that: (1) RKI was

16 The court also notes that WDF’s Senior Vice President Liam McLaughlin

testified that the percentages assigned to each activity identified in WDF’s

September 16, 2013 and August 28, 2013 Letters were “arbitrary

determination[s]” based on “current activities” at the worksite. (Tr.

1070:1-6.) Although the court does not place dispositive weight on this

admission, it reinforces the court’s conclusion that the credible evidence

RKI presented at trial, viewed in the totality of the circumstances, is

consistent with RKI’s position that WDF wrongfully terminated the sub-

subcontract.

not behind its project schedule as determined by the Whiteboard,

(2) delays in work were substantially caused by factors outside

of RKI’s control, such as delays in receiving design drawings

from SCA’s architect, SCA’s change orders, and work site

problems not of RKI’s making, and (3) WDF contributed to any

potential breach of contract by delaying requisition payments to

RKI without justification and in contravention of the sub-

subcontract.

A. Andron’s Whiteboard Schedule

As admitted by both parties, the court finds that

Andron’s Whiteboard schedule was the relevant schedule for RKI’s

timeline of work and that the February 20, 2013 baseline

schedule was not the basis for evaluating the timeliness of

RKI’s performance in August 2013.17 Robert Bailey, Andron’s

project manager for the P.S. 290 project, explained that a

baseline (or CPM) schedule was created at the beginning of the

project to establish the timeline for the project. (Tr. 712:5-

11; 743:11-22.) During the course of a project, if delays or

other events occurred impacting the baseline dates, the

17 The court finds that the handwriting on the Whiteboard describing RKI’s

project deadlines belongs to Andron’s operation manager Mark Wilson and was

written on behalf of Andron. In his declaration, which was admitted into

evidence without objection by either party, Mr. Wilson stated that the

handwriting on the Whiteboard was his and that dates referring to each

project at the P.S. 290 project were updated every Tuesday. (ECF No. 194,

Decl. of Mark Wilson, at 2.) As operations manager for Andron, Mr. Wilson

ran weekly schedule meetings with trade subcontractors using the Whiteboard

for the P.S. 290 project. (Id.)

Whiteboard would be updated to reflect an updated schedule.

(Id. 726:5-12.) It was WDF’s responsibility as a subcontractor

to convey the changing deadlines on the Whiteboard to its

respective sub-subcontractors, including RKI. (Id. 735:1-18.)

Mr. Kay from RKI testified that on August 15, 2013,

WDF provided him two sets of Whiteboard schedules. (Id. 159-

60.) In the morning of August 15, 2013, Mr. Kay received a

Whiteboard schedule dated August 15, 2013, containing no

deadlines for RKI’s hydronic piping work and instead, including

a note: “Needs dates.” (RKI Ex. 47; Tr. 156-57.) Later in the

afternoon of the same day, WDF sent Mr. Kay another Whiteboard

schedule. (Tr. 159-60.) The schedule sent in the afternoon of

August 15, 2013, however, depicted a Whiteboard with deadlines

originating from the February 20, 2013 CPM schedule. (See RKI

Ex. 48 (“From Project CPM 2/20/13”); Tr. 160:18-161:23.)

On September 6, 2013, Mr. Kay took photos of another

revised Whiteboard schedule submitted into evidence setting

deadlines for RKI’s piping work at the P.S. 290 project. (See

RKI Ex. 46 at RKI 203 (Revised Whiteboard reflecting September

30 deadline set for second floor; October 14 deadline set for

third floor); see also Tr. 165, 322:8-323:14). Based on Mr.

Kay’s credible testimony and the corroborating documentary

evidence, the court concludes that RKI’s deadlines were guided

by the revised Whiteboard and not the February 20, 2013 CPM

schedule. After reviewing the revised Whiteboard schedules, the

court finds that RKI’s progress as of June through August 2013

was within the expected timeframe.18 Accordingly,

notwithstanding the evidence showing WDF’s disagreement with

RKI’s progress at the P.S. 290 project,19 the court credits RKI’s

reasonable position that based on the revised Whiteboard

schedules, RKI’s performance was not behind.

B. Delays in Architect Drawings, Change Orders, and

Worksite Issues

In addition, RKI presented credible evidence showing

that delays in work were substantially caused by factors outside

of RKI’s control, such as delays in receiving approved design

18 Although defendants note that Mr. Kay’s testimony that he had met with

Mr. Bailey to draft the Whiteboard timeline was contradicted at trial,

defendants do not dispute that the writing on the Whiteboard belonged to Mr.

Wilson, an Andron representative. Therefore, with respect to the controlling

schedule guiding RKI’s performance, it is of no moment whether Mr. Kay met

with Mr. Bailey or another individual because the documentary evidence shows

what deadlines were binding under the revised Whiteboards.

19 The court notes that it affords little weight to WDF’s documentary

evidence describing its disagreement with RKI’s progress and staffing at the

P.S. 290 project in June through August 2013. (See Joint Exs. 102, 107, 108;

Def. Mem. ¶¶ 16, 25-27.) Although the joint exhibits containing emails from

Mr. Cutrone and others were submitted into evidence by the parties’

stipulation at trial, the court highlighted hearsay issues apparent in each

exhibit. (See Tr. 1223:14-1224:13 (striking portion of testimony concerning

Joint Exhibit 102); Tr. 1254:11-1255:17 (discussing double hearsay issue with

Joint Exhibit 108 and reserving decision as to how much weight to afford the

emails); Tr. 1256:13-1257:13 (striking out-of-court statements from declarant

as hearsay in Joint Exhibit 107).) Thus, even though WDF’s documentary

evidence was admitted into evidence through the parties’ stipulation, this

court is obligated to consider evidence pursuant to the Federal Rules of

Evidence, and also retains discretion as the trier of fact to determine the

weight to be given to the evidence. See Krist, 688 F.3d at 95 (“[A]s trier

of fact, the judge is entitled, just as a jury would be to believe some parts

and disbelieve other parts of the testimony of any given witness.” (internal

citations and quotation marks omitted)).

drawings from SCA’s architect, SCA’s change orders, and other

work site issues.

First, there was substantial evidence presented at

trial showing significant delays in the time it took for RKI to

receive approvals on project drawings from the SCA architect.

(See Tr. 102:16-104:1.) Indeed, WDF admitted that RKI waited

nearly three months, from April 29 to July 19, 2013, to receive

approval from SCA on a particular drawing necessary to begin

work on the first floor HVAC piping. (Id. 1206-07, 1212:19-22.)

Under the sub-subcontract, RKI was prohibited from beginning

construction work without an approved drawing from the SCA

architect. (See Joint Ex. 3 (Article 20).) RKI was aware that

it was not permitted to begin work without an approved drawing

and WDF admitted at trial that if RKI began construction without

approval, RKI would “technically” be in violation of the sub-

subcontract.20 (See Tr. 1235:8-16.) Accordingly, RKI plausibly

proved that WDF’s request for additional manpower was

unreasonable given the lack of work available due to the

outstanding project drawings awaiting Architect approval. (Tr.

101:1-20.)

20 WDF’s contention that RKI performed some work at P.S. 290 without

approved drawings is irrelevant to WDF’s improper termination of the sub-

subcontract. Accordingly, even if RKI could and did begin some work without

SCA’s approved drawings, that would not invalidate RKI’s reasonable

explanation for its delays and its staffing decisions at the P.S. 290 project

site or provide a justification for WDF to terminate the sub-subcontract.

Second, SCA issued Bulletin 7 in April 2013, which

required a number of changes to the P.S. 290 project. Mr. Kay

testified that Bulletin 7 significantly impacted RKI’s piping

work because it required that the pipes be rerouted. (Tr.

191:15-192:20.) Under the sub-subcontract, any change order in

the construction plan was required to be in writing and

delivered to RKI. (See Joint Ex. 3 (Article 9); see also Tr.

534:16-20 (WDF’s general counsel describing what a change order

is).) Mr. Kay testified that RKI never received a written

change order from WDF incorporating Bulletin 7. (Tr. 187:7-13,

188:11-13.) WDF offered no contrary evidence. Despite not

issuing a proper change notice, Mr. Cutrone from WDF directed

RKI to incorporate all changes from Bulletin 7. (See Joint Ex.

78 at WDF 2183.) For these reasons noted above, however, RKI

could not move forward without a proper written change order

from WDF, thereby leading to additional delays at the

construction site.

Finally, many of WDF’s demands and disagreements with

RKI’s performance and supply of manpower were explained by

numerous problems at the P.S. 290 worksite. For instance, the

court credits RKI’s testimony and documentary evidence showing

that rain and water pooling on certain floors in P.S. 290

prevented RKI from safely using electrical tools for certain

periods.21 (See Tr. 309-310; RKI Ex. 46 at RKI 212, 213, 219

(photos taken September 6, 2013 showing water pooling on floors

at P.S. 290).) Moreover, the court also credits RKI’s position

that there was insufficient space and work for both RKI

employees and the additional trades to work in the same areas on

site. (Tr. 259:9-15, 291:3-12.) Although WDF asserts that RKI

failed to staff the P.S. 290 worksite with sufficient employees,

for the reasons stated above, the court concludes that RKI

presented credible evidence establishing that RKI was not behind

schedule, there was insufficient work or space for the number of

employees WDF demanded, delayed approval of project drawings

delayed RKI from starting work, unsafe water conditions existed,

other trades were working in the same areas in which RKI needed

to perform work, and WDF failed to provide written change

orders.

C. WDF’s Delay in Processing RKI’s Requisitions

Finally, and perhaps most importantly, RKI’s

performance at the P.S. 290 project was hindered by WDF’s

21 At trial, Robert Bailey from Andron noted that the risk of electrical

shock was eliminated through the use of “Ground Fault Interrupted Circuits”

that cut electricity automatically if voltage runs into the ground. (Tr.

823:15-824:6.) On the other hand, Antonio Gentile, a project officer for

SCA, recalled at trial that “water was an issue” at P.S. 290 and that the

Ground Fault Interrupted Circuits could sometimes be faulty or broken,

resulting in potential electrical shock dangers. (Tr. 867:7-868:10.) In

light of this conflicting testimony, the court credits RKI’s position that

the presence of water at P.S. 290 was an outside factor impacting RKI’s

ability to safely perform piping work.

failure to promptly process requisition payments to RKI as

required by the sub-subcontract. RKI presented credible

testimony and evidence showing multiple delays in receiving

payment from WDF after RKI submitted its requisitions and WDF

received payment from Andron for RKI’s work. (See Tr. 51:8-19,

52:21-53:12, 55:11-57:23; see also Joint Exs. 12, 24, 26, 28.)

For example, RKI submitted its second requisition to WDF on

February 28, 2013 for work performed in the amount of

$53,273.68. (Joint Ex. 12; Tr. 41:23-42:10.) Three months

later, at the end of May 2013, RKI was informed that WDF would

only pay $5,000 of the requested $53,273.68 to RKI for the HVAC

piping inserts and sleeves installed by RKI.22 (Tr. 42:17-43:22;

see also Joint Ex. 82 (email from RKI to WDF dated June 13, 2013

discussing payments for sleeves and inserts).) WDF asserted

that the piping inserts and sleeves were not paid because they

were not listed as line items on the requisitions. (Tr.

1319:23-1320:2.) Nonetheless, WDF also admitted that SCA would

“generally approve[]” payment for sleeves, despite WDF’s

position that these requests were not appropriate. (Tr.

1320:24-1321:20.) Thus, the court accords little weight to

22 In fact, during the three months that WDF was in possession of RKI’s

February requisition, WDF did not forward RKI’s requisition to Andron for

payment until the end of May 2013. (Tr. 1315:20-1316:14.) WDF’s

representative admitted that this three-month delay was not “timely”

processing of RKI’s requisition. (Id.)

WDF’s inconsistent testimony and shifting explanations for its

delays in processing RKI’s requisitions.

As late as August 27, 2013, WDF still refused to

approve payments for the sleeves and inserts installed by RKI.

(Joint Ex. 138 at 409-412.) Indeed, WDF’s widespread delays

persisted throughout the P.S. 290 project, with WDF confirming

that payment to RKI was forthcoming even as late as September 5,

2013, when Mr. Cutrone told Mr. Kay that the “check [was] being

processed.” (Tr. 528:15-530:6; see Joint Ex. 95.) At trial,

WDF acknowledged that it was important for RKI to receive

payment, (Tr. 1311:1-10), and further acknowledged that it would

be impossible for RKI to continue its work without payment.

(Tr. 1311:14-24.) Accordingly, given RKI’s credible testimony

and contemporaneous documentary evidence, the court credits

RKI’s assertion that delays in requisition payments during the

Project hindered RKI’s ability to complete its piping work.

RKI’s Payment of Union Fringe Benefits

RKI’s employees at the P.S. 290 project were

steamfitters and union members from Local 638 of the Enterprise

Association of Steamfitters (“Local 638”). (Tr. 1326-27.)

Pursuant to a collective bargaining agreement with Local 368,

RKI was obligated to pay certain fringe benefits to the union

for steamfitters employed at the P.S. 290 project. (See RKI Ex.

54; Tr. 347:19-348:3.) RKI would deliver a release form to WDF

indicating that RKI had paid the union fringe benefits and

seeking payments from WDF. (Joint Ex. 77 at WDF 335.)

Three releases signed by RKI formed the basis of WDF’s

fraud counterclaims. Alice Kay signed a release for the payment

to RKI for $5,156.95 for work performed by RKI through February

28, 2013. (Joint Ex. 77 at WDF 324; Tr. 899:21-900:17.) Ms.

Kay signed a second release for a payment from WDF for $9,448.46

for work performed through April 30, 2013. (Joint Ex. 77 at WDF

331; Tr. 902:4-10.) Leroy Kay -- another member of RKI and Ms.

Kay’s father-in law and David Kay’s father -- also signed a

release for payment from WDF for $26,531.35 for work performed

through February 28, 2013. (Joint Ex. 77 at WDF 336; Tr. 901:4-

22.)

At trial, WDF’s general counsel explained that it was

important for WDF to receive release papers from RKI confirming

that RKI paid union benefits to prevent creditors from later

seeking contribution from WDF under New York state laws. (Tr.

566:18-567:14.) During the duration of the P.S. 290 project,

WDF was notified that RKI owed money in union benefits to Local

368. (Tr. 566:15-568:6.) WDF also represented that it

regularly checked with Local 638’s union representative “to

ensure that contractors were up-to-date in their benefit fund

payments.” (ECF No. 164, WDF Mem. of Law in Opposition to RKI’s

Mot. in Limine at 15; Tr. 917-18.) WDF was thus aware that

Local 638 had claimed that RKI had not paid union benefits, and

was aware that WDF delayed paying RKI.

RKI’s Damages under the Sub-subcontract

The parties stipulated to the project payment process

and the sums paid and unpaid. It is undisputed that RKI was

paid in full by WDF for all work and material through the period

ending in May 31, 2013. (Joint Stip. ¶ 8.) Further, WDF

received additional payments from Andron in the total sum of

$134,274.07 for work and material provided by RKI for the period

between June 30, 2013 through August 31, 2013. (Joint Stip. ¶

8.) On or about, September 17, 2018, Alice Kay personally

delivered RKI’s final requisition for the sum of $299,310.84 for

work performed by RKI from June through September 2013 at the

P.S. 290 project. (Joint Stip. ¶ 34.) WDF paid RKI a sum of

$5,156.95 on June 15, 2013; a sum of $9,448.46 on July 3, 2013;

and a sum of $26,531.30 on July 26, 2013. (Joint Stip. ¶ 35.)

Furthermore, both parties stipulated before trial that

the damages amount claimed by RKI for its work is “$286,790.84

plus interest which is the difference between the amount due for

work RKI claims to have performed ($371,747.60) and WDF’s

payments ($85,956.76).” (ECF No. 190, Supplemental Stipulation

of Facts and Law for Amended Joint Pretrial Order, ¶ 1.)

Included in the $371,747.60 amount is the bond premium of

$31,300 related to the performance bond provided by Citizens on

RKI’s behalf and the bond monitoring cost of $12,520. (Id.)

CONCLUSIONS OF LAW

Having reached the above factual findings based on a

preponderance of the credible evidence, the court will now

consider whether these facts establish liability for the parties

as a matter of law.

Jurisdiction and Venue

This court has jurisdiction pursuant to 28 U.S.C. §

1332(a)(1) because the parties are of diverse citizenship and

the amount in controversy exceeds $75,000. Venue is proper

pursuant to 28 U.S.C. § 1391(b)(2) because the events giving

rise to this action occurred in the Eastern District of New

York.

Applicable Law

Article 27 of the sub-subcontract provides that the

sub-subcontract shall be governed and construed under the laws

of the State of New York. (Joint Ex. 3 at 26 (Article 27).)

A. Breach of Contract under New York Law

Under New York law, a breach of contract claim

requires proof of (1) an agreement, (2) adequate performance by

the plaintiff, (3) breach by the defendant, and (4) damages.

Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d

Cir. 2011) (collecting cases).

Under New York law, a party is relieved of the duty to

perform under a contract only when the other party has committed

a material breach. In re Lavigne, 114 F.3d 379, 387 (2d Cir.

1997). For a breach to be considered material, “it must go to

the root of the agreement between the parties.” Frank Felix

Assocs. v. Austin Drugs, Inc., 111 F.3d 284, 289 (2d Cir. 1997)

(citations and internal quotations omitted). Failure to tender

payment pursuant to the terms of a contract is generally

considered a material breach. See ARP Films, Inc. v. Marvel

Entertainment Group, Inc., 952 F.2d 643, 649 (2d Cir. 1991).

A party injured by a breach of contract is entitled to

recover damages that are the “natural and probable consequence

of the breach.” Bi-Econ. Mkt., Inc. v. Harleysville Ins. Co. of

N.Y., 886 N.E.2d 127, 130 (N.Y. 2008) (internal citation

omitted). “The injured party, however, bears an obligation to

make reasonable efforts to mitigate its damages and failure to

do so may cause a court to lessen the recovery.” APL Co. PTE

Ltd. v. Blue Water Shipping U.S. Inc., 592 F.3d 108, 111 (2d

Cir. 2010) (citing Losei Realty Corp. v. City of N.Y., 171 N.E.

899, 902 (N.Y. 1930)).

B. Notice of Default and Cure Provisions

Requirements for written notice informing the parties

that they are in breach and providing an opportunity to cure the

breach are “fully enforceable” contract terms. Art of War Music

Pub., Inc. v. Mark Andrews, No. 98-cv-6034 (JSR), 2000 WL

245908, at *2 (S.D.N.Y. Mar. 3, 2000). “[W]ritten notice

provisions serve the valuable function of allowing the

purportedly breaching party to distinguish between minor

complaints or posturing by its contractual partner and an actual

threat of termination.” Id. If a defendant has failed to

comply properly with the written notice requirement as

stipulated in the contract, its counterclaims for breach of

contract must be dismissed under New York law. See Env’t Safety

& Control Cop. V. Bd. of Educ. Of Camden Cent. Sch. Dist., 179

A.D.2d 1012, 1013 (4th Dep’t 1992) (“Defendant’s remaining

counterclaims based upon alleged breach of contract should also

have been dismissed based upon defendant’s failure to comply

with the condition precedent of written notice as required by

[the contract].”).

The Second Circuit has explained, however, that “New

York common law will not require strict compliance with a

contractual notice-and-cure provision if providing an

opportunity to cure would be useless, or if the breach

undermines the entire contractual relationship such that it

cannot be cured.” Giuffre Hyundai, Ltd. v. Hyundai Motor

America, 756 F.3d 204, 209-10 (2d Cir. 2014) (collecting cases);

see also Sea Tow Servs. Intern., Inc. v. Pontin, 607 F. Supp. 2d

378, 389 (E.D.N.Y. 2009) (“[A]dherence to the cure provision of

a contract is not required where it would be a futile act.”).

WDF is not excused from complying with the notice and cure

provisions of the sub-subcontract based on the foregoing Giuffre

Hyundai factors.

C. WDF’s Counterclaim for Fraud under New York Law

For a party to prevail on a claim of fraud under New

York law, “the five elements of a fraud claim must be shown by

clear and convincing evidence: (1) a material misrepresentation

or omission of fact (2) made by defendant with knowledge of its

falsity, (3) and intent to defraud;(4) reasonable reliance on

the part of the plaintiff; and (5) resulting damage to the

plaintiff.” Crigger v. Fahnestock and Co., Inc., 443 F.3d 230,

234 (2d Cir. 2006) (citing Schlaifer Nance & Co. v. Estate of

Warhol, 119 F.3d 91, 98 (2d Cir. 1997)).

With respect to the fourth element of reasonable

reliance, if the plaintiff “has the means available to it of

knowing, by the exercise of ordinary intelligence, the truth, or

the real quality of the subject of the representation, the

plaintiff must make use of those means, or it will not be heard

to complain that it was induced to enter into the transaction by

misrepresentations.” ACA Fin. Guar. Corp. v. Goldman, Sachs &

Co., 32 N.E.3d 921, 922 (N.Y. 2015) (citations, brackets, and

internal quotation marks omitted).

Application of Law

Having conducted a six-day bench trial, considered the

evidence presented at trial, assessed the credibility of the

witnesses, and reviewed the parties’ post-trial submissions, the

court concludes that RKI proved its claim for breach of contract

by a preponderance of the evidence, and that WDF failed to prove

its counterclaims for breach of contract by a preponderance of

the evidence and fraud by clear and convincing evidence.

Specifically, RKI proved its breach of contract claim because

WDF breached the sub-subcontract by: (1) failing to pay RKI for

work performed, and (2) failing to comply with the notice and

cure provision.

A. Breach of Contract - WDF’s Failure to Pay for Work

Performed by RKI

RKI asserts that WDF breached the sub-subcontract by

failing to tender payment to RKI after WDF received payment from

Andron in accordance to the terms of the sub-subcontract. (Pl.

Mem. at 27.) Article 4 of the sub-subcontract provides:

Within five (5) days after receiving a

progress payment from Owner and/or GC under

the Contract Documents, Contractor shall make

a progress payment to Subcontractor equal to

a ratable share of the progress payment based

upon the value of the Completed Work and

Stored Work as of the corresponding Monthly

Billing Date, to the extent approved by

Contractor and allowed and paid by Owner on

account of the Work . . .

(Joint Ex. 3 at 4.) Thus, the sub-subcontract required WDF to

pay RKI within five days of WDF’s receipt of payment from Andron

on August 27, 2013, which would have required payment to RKI no

later than Tuesday, September 3, 2013. (Pl. Mem. at 27

(excluding Labor Day and the weekend under N.Y. Gen. Constr. Law

§ 25).) The following facts are undisputed: WDF received

$464,481.45 from Andron on August 27, 2013 for work performed on

the Project from June 1, 2013 through June 30, 2013 (Joint Stip.

¶¶ 15-16); WDF received $134,274.07 from Andron for work and

material provided by RKI during June 30, 2013 through August 31,

2013 (Joint Stip. ¶ 8; Def. Mem. at 15.); “WDF did not pay to

RKI any monies for work performed in connection with the Sub-

Subcontract during the months of June, July and August 2013.”

(Joint Stip. ¶ 36.) Accordingly, based on the undisputed facts

above, WDF did not remit payments to RKI for work performed at

the Project despite receiving the funds from Andron.

Turning to the elements of RKI’s breach of contract

claim, here, the parties do not dispute that a valid contract

was formed between the parties. WDF argues that RKI failed to

adequately perform its obligations under the sub-subcontract,

leading to WDF’s August 28, 2013 Letter, which purportedly

relieved WDF of its duty to tender payment to RKI for June

through September 2013 work. (Def. Mem. at 23-24.) In other

words, WDF argues that RKI was in default due to its delays and

understaffing, thereby relieving WDF of its obligation to tender

payment after WDF delivered its purported notice letter to RKI

on August 28, 2013. (Id.) For the reasons stated in the

court’s findings of fact, however, this court concludes that

RKI’s performance was timely as shown by the Whiteboard entries

and according to the credible testimony, and that RKI either

satisfied or was not required under the sub-subcontract to

satisfy the seven work items identified in WDF’s August 28, 2013

and September 16, 2013 Letters. Accordingly, because RKI was

not in default of the sub-subcontract, the court concludes that

WDF was obligated to tender payment to RKI in accordance with

Article 4 of the sub-subcontract, but failed to do so.

In turn, because a “[f]ailure to tender payment is

generally deemed a material breach of a contract,” ARP Films,

Inc., 952 F.2d at 649, the court concludes that WDF’s failure to

pay RKI for work completed in June through September 2013

constituted a material breach of the sub-subcontract. WDF’s

material breach of the sub-subcontract thereby relieved RKI of

its obligation to perform and precludes WDF’s recovery on its

counterclaim for breach of contract as discussed below. See

Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d

171, 186 (2d Cir. 2007) (“Under New York law, a party's

performance under a contract is excused where the other party

has substantially failed to perform its side of the bargain or,

synonymously, where that party has committed a material

breach.”) (citing Hadden v. Consol. Edison Co. of N.Y., 312

N.E.2d 445 (N.Y. 1974))).

Moreover, WDF baselessly argues that it was permitted

to withhold sums that became due to RKI after it delivered the

August 28, 2013 Letter to RKI under Article 26 of the sub-

subcontract. (Def. Mem. at 25-26.) For reasons explained

below, the court first finds that the August 28, 2013 Letter did

not constitute a notice of default, and second, also finds that

WDF was not entitled to withhold payment to RKI under the sub-

subcontract. Article 26 only permits a termination of the sub-

subcontract after two written notices of default and the

expiration of two 48-hour periods. (See Joint Ex. 3 at 24

(Article 26).) Accordingly, contrary to WDF’s assertions, WDF

was not permitted to withhold sums owed to RKI as of August 28,

2013, because WDF failed to comply with the default procedures

under Article 26. Thus, when WDF received $134,274.07 from

Andron on August 27, 2013 for work performed by RKI during June

30, 2013 through August 31, 2013, it was obligated under the

sub-subcontract to remit payments to RKI within five days of

receipt by WDF, as required under Article 4 of the sub-

subcontract.23 For these reasons, the court concludes that RKI

23 As late as September 5, 2013, Mr. Cutrone was still representing to RKI

that RKI’s June 2013 “check [was] being processed.” (Tr. 528:15-530:6; see

Joint Ex. 95.) Accordingly, as late as September 2013, after WDF delivered

proved, by a preponderance of the evidence, that WDF failed to

comply with its contractual obligation to tender payment to RKI

for completed work in June through September 2013.24

B. Breach of Contract - WDF’s Failure to Comply with

the Notice and Cure Provision

In addition, RKI also asserts that WDF breached the

sub-subcontract by failing to comply with the Notice and Cure

provision in the sub-subcontract under Article 26. (Pl. Mem. at

28-33.) Article 26 specifies events that constitute default by

RKI and provides WDF the following remedy in the event of

default:

[In the event of] a default hereunder by

Subcontractor [RKI], Contractor [WDF] shall .

. . after giving Subcontractor [RKI] written

notice of default and forty-eight (48) hours

within which to cure said default, have the

right to exercise any one or more of the

following remedies: . . .

(iii) after giving Subcontractor an additional

forty-eight (48) hours written notice (at any

time following the expiration of an initial

forty-eight (48) hours notice and curative

period), terminate this Subcontract in whole

or part . . . .

to RKI its August 28, 2013 Letter, WDF was still representing to RKI that it

would comply with its payment obligations under the sub-subcontract. This

contemporaneous evidence confirming WDF’s understanding of its payment

obligations under the sub-subcontract contradicts WDF’s argument now that it

was entitled to withhold payment due to RKI’s alleged default.

24 WDF also failed to present evidence that it complied with its

obligation under Article 6 of the sub-subcontract to deliver a written notice

to RKI when WDF decided to withhold payment for RKI’s completed work, and

failed to present evidence that RKI accepted it. (See Joint Ex. 3 at 5-6

(Article 6, granting WDF “the right to withhold [payment] from time to time,

only with prior written notice and acceptance” by RKI); Def. Resp. at 17.)

(Joint Ex. 3 at 24 (emphasis added).) Thus, under the terms of

the sub-subcontract, WDF was required to provide two written

notices of default to RKI with two sets of 48-hour periods

before it could terminate the sub-subcontract. (Id.)

“Generally, ‘a party asserting nonperformance must

afford a defaulting party any contractually-secured opportunity

to cure prior to terminating a contract.’” Point Productions

A.G. v. Sony Music Entertainment, Inc., No. 93-cv-4001(NRB),

2000 WL 1006236, at *3 (S.D.N.Y. July 20, 2000) (quoting Karabu

v. Pension Benefit Guaranty Corp., No. 96-cv-4960(BSJ), 1997 WL

759462, at *8 (S.D.N.Y. Dec. 10, 1997)). Parties must adhere to

contractually-secured cure provisions regarding contract

termination when the cause for the termination is “the very

situation to which the cure provision was intended to

apply.” Needham v. Candie's, Inc., No. 01-cv-7184 (LTS)(FM),

2002 WL 1896892, at *3 (S.D.N.Y. Aug. 16, 2002) (quoting Rebh v.

Lake George Ventures, Inc., 233, A.D.2d 986, 987 (3d Dep't

1996)); see also Bausch & Lomb Inc. v. Bressler, 977 F.2d 720,

727 (2d Cir. 1992) (terminating party breached contract by

providing two-day written notice of termination instead of

contractually-required thirty day written notice); Filmline

(Cross-Country) Prods., Inc. v. United Artists Corp., 865 F.2d

513, 519 (2d Cir. 1989) (recognizing a “clear New York rule

requiring termination of a contract in accordance with its

terms”). “The word ‘shall’ is ‘used to express a command or

exhortation,’ and is ‘used in laws, regulations, or directives

to express what is mandatory.’” See United States v. Maria, 186

F.3d 65, 70 (2d Cir. 1999) (citing Webster's Third New Int'l

Dictionary 2104 (1st ed. 1993) at 2085).

Applying these principles, the court concludes that

under the Article 26 notice-and-cure provision, RKI cannot be in

breach of the sub-subcontract unless WDF first provided RKI

with two written notices of default and two 48-hour periods.

Moreover, the use of the term “shall” indicates that WDF was

mandated to provide these notices and opportunities to cure

before it could terminate the sub-subcontract. (Joint Ex. 3 at

24.)

Here, WDF’s August 28, 2013 Letter titled “48-HOUR

NOTICE” did not constitute a “written notice of default” under

Article 26 of the sub-subcontract. (Pl. Mem. at 33; Joint Ex.

56.) After identifying seven work activities that RKI allegedly

failed to perform, the August 28, 2013 Letter stated that “WDF

may declare RKI in default,” and not that RKI was declared in

default, if RKI did not take specific actions in 48 hours.

(Joint Ex. 56.) Thus, by its very terms, the August 28, 2013

Letter is not a “written notice of default,” as required by

Article 26 of the sub-subcontract, but rather an advisory notice

of what action WDF may decide to take if RKI did not act as

demanded. Simply put, the August 28, 2013 Letter is no more

than a warning to RKI that WDF is contemplating whether to

declare RKI in default. Because Article 26 requires an actual

“written notice of default” and not merely a warning that

default “may” be declared, WDF’s August 28, 2013 Letter cannot

serve as a first notice of default delivered to RKI.25

Even assuming the August 28, 2013 Letter served as an

adequate first notice of default under Article 26, WDF was still

required under the sub-subcontract to deliver to RKI a second

notice of default with a second 48-hour period before WDF could

terminate the sub-subcontract. At trial, WDF’s general counsel

testified that a WDF email sent to RKI on September 13, 2013 at

5:23 pm served as the second notice of default. (Tr. 511:1-

512:9; Joint Ex. 105 (the “September 13 email”).) In its

September 13 email, WDF states that it “will default RKI on

Monday.” (Joint Ex. 105.) Thus, the September 13 email is also

insufficient to serve as a notice of default under Article 26,

because, like the August 28, 2013, it warns of a future default

instead of actually declaring RKI in default.

25 WDF has presented inconsistent statements as to which correspondence

served as the first notice of default to RKI. In its Proposed Findings of

Fact and Conclusions of Law, WDF asserts that the August 28, 2013 Letter

served as the first notice “to achieve certain levels of completion.” (Def.

Mem. at 27.) At trial, however, WDF’s general counsel represented that an

email sent by Mr. Cutrone to RKI and others on August 22, 2013 served as the

first notice to RKI. (Tr. 499:17-500:4; Joint Ex. 107.) Like the August 28,

2013 Letter, however, the August 22 email is similarly a deficient notice

under Article 26 because it does not notify RKI that RKI is in default. (See

Joint Ex. 107.)

Finally, the last correspondence sent by WDF to RKI

before terminating the sub-subcontract was WDF’s September 16,

2013 Letter. (Joint Ex. 57.) This Letter, titled “NOTICE OF

DEFAULT,” provides that RKI “is in default of the Subcontract

with WDF because RKI has breached one or more material terms of

its Subcontract.” (Joint Ex. 57.) Specifically, the September

16, 2013 Letter identifies the seven activities with

modifications noted in the August 28, 2013 Letter and asserts

that RKI failed to satisfy those activities. (Joint Ex. 57.)

Unlike the August 28, 2013 Letter and the September 13 email,

the September 16, 2013 Letter expressly deemed RKI in default,

but still failed to comply with the directive under Article 26

of the sub-subcontract because it automatically terminated the

sub-subcontract without providing RKI 48 hours to cure the

default. Accordingly, for the reasons stated above, the court

concludes that WDF failed to comply with the notice and cure

terms prescribed in Article 26 and thus improperly breached the

sub-subcontract.

C. WDF’s Counterclaim for Breach of Contract

Furthermore, even if the court had not concluded that

WDF breached the sub-subcontract, the court concludes that WDF

failed to prove its counterclaim against RKI for breach of

contract by a preponderance of the evidence. As discussed above

in the findings of fact, WDF’s counsel clearly and unequivocally

represented at trial that WDF’s termination of the sub-

subcontract was solely based on RKI’s failure to satisfy the

seven work items identified in WDF’s August 28 and September 16,

2013 Letters. RKI proved at trial, by a preponderance of the

evidence, that it either satisfied or was not required to

perform each of the seven activities identified in the August 28

and September 16 Letters. Hence, based on WDF’s counsel’s

circumscribed grounds for termination as set forth in WDF’s

August 28 and September 16, 2013 Letters, WDF’s breach of

contract counterclaim fails.

Even considering RKI’s performance outside of the

August 28 and September 16, 2013 Letters, however, the court

also concludes that WDF failed to prove that RKI breached the

sub-subcontract. WDF asserts that RKI breached the sub-

subcontract by failing to adequately provide manpower and piping

material. (Def. Mem. at 26.) Based on the findings of fact

above, RKI neither failed to supply adequate manpower nor piping

material.

WDF further argues that it had the contractual

authority to demand accelerated performance from RKI and that

RKI failed to comply with its August 15, 2013 “Field Directive”

demanding such performance. (Def. Mem. at 24-25; Joint Ex. 54.)

Article 7 of the sub-subcontract provides:

Contractor [WDF] may direct acceleration of

the Work in order that it may be performed in

advance of the schedules, time requirements,

and Project requirements described in this

Article 7. If so directed, Subcontractor [RKI]

shall increase its staff or work overtime, or

both.

(Joint Ex. 3 at 8.)

“Under New York law, each party to a construction

contract impliedly agrees ‘not to hinder or obstruct [the

other's] performance.’” Wolff & Munier, Inc. v. Whiting-Turner

Contracting Co., 946 F.2d 1003, 1007 (2d Cir. 1991) (quoting

Quaker-Empire Const. Co. v. D.A. Collins Const. Co., Inc., 88

A.D.2d 1043, 1044 (3d Dep’t 1982)); see also Young v. Whitney,

111 A.D.2d 1013, 1014 (3d Dep't 1985) (citations omitted)

(“[T]he law implies in every contract that one party will not

prevent the other party's performance.”). Indeed, each party

has an affirmative obligation to facilitate the other's

performance. See Savin Bros., Inc. v. State, 62 A.D.2d 511, 516

(4th Dept. 1978), aff'd, 393 N.E.2d 1041 (1979).

This implied obligation, commonly referred to as the

“covenant of good faith and fair dealing,” includes “a pledge

that neither party shall do anything which will have the effect

of destroying or injuring the right of the other party to

receive the fruits of the contract.” 511 West 232nd Owners

Corp. v. Jennifer Realty Co., 773 N.E.2d 496, 500 (N.Y. 2002)

(internal quotation marks omitted); see also Storm v. Aquatic

Builders, Ltd., No. 02-cv-707(FJS)(DRH), 2007 WL 1395457, at *2

(N.D.N.Y. May 10, 2007) (discussing implied covenant of good

faith and fair dealing in construction context). “Where the

contract contemplates the exercise of discretion, this pledge

includes a promise not to act arbitrarily or irrationally in

exercising that discretion.” Dalton v. Educ. Testing Serv., 663

N.E.2d 289, 291 (N.Y. 1995) (internal citation omitted).26

Under these contract principles, the court finds, as

explained above, that WDF’s factual basis for accelerating RKI’s

performance pursuant to Article 7 was based on WDF’s unsupported

position that RKI was “severely behind” schedule at the P.S. 290

project. (Joint Ex. 54.) Article 7 provided WDF the discretion

to accelerate work performed by RKI at the Project. (See Joint

Ex. 3 at 8.) In exercising this discretion, New York law

requires that WDF not exert its authority in an “arbitrar[y] or

irattional[]” manner. Dalton, 663 N.E.2d at 291. The August

15, 2013 Field Directive exercising WDF’s discretion to

26 In an analogous context, New York courts recognize various defenses to

enforcement of an acceleration clause in a mortgage agreement. See Fed. Home

Loan Mortg. Corp. v. Bronx New Dawn Renaissance VII, L.P., No. 93-cv-7970

(CSH), 1995 WL 412399, at *1 (S.D.N.Y. July 11, 1995) (collecting New York

cases where courts decline to enforce acceleration clauses where the

enforcing party commits “unconscionable overreach[],” fails to provide “an

opportunity to cure,” retains knowledge that any “default was inadvertent and

inconsequential, or was prompted by [the enforcing party’s] own unjustifiable

conduct.”). While factually distinguishable from the context of a

construction sub-subcontract, these cases reinforce the court’s conclusion

that WDF’s conduct in delaying RKI’s requisition payments and WDF’s erroneous

determination that RKI was in default were inconsistent bases to justify the

acceleration of RKI’s performance at the Project.

accelerate RKI’s performance states that “[p]er the contract

requirements and attached Andron field schedule, [i]t is

determined that RKI Construction is severely behind the schedule

and progress of the PS-290 project.” (Joint Ex. 54.) Thus,

WDF’s justification for accelerating RKI’s performance was based

on the “attached Andron field schedule” and WDF’s erroneous

belief that RKI was “severely behind” schedule. (Joint Ex. 54.)

As discussed above in the court’s findings of fact, however, RKI

was bound by the Whiteboard schedule and under that revised

schedule, RKI was not “severely behind” in its work.

Accordingly, consistent with the findings of fact above, the

court concludes that WDF’s demand for accelerated work by RKI

through its exercise of discretion under Article 7 was

arbitrary, lacking in a rational factual basis, and unreasonable

under the circumstances. See Toledo Fund, LLC v. HSBC Bank USA,

Nat'l Assn., No. 11-cv-7686, 2012 WL 2850997, at *6 (S.D.N.Y.

July 9, 2012) (quoting Doe v. Nat’l Bd. Of Podiatric Med.

Exam’rs, No. 03-cv-4034, 2005 WL 352137, at *10 (S.D.N.Y. Feb.

15, 2005) (“For an act to be ‘arbitrary’ it must be ‘without

sound basis in reason and generally taken without regard to the

facts.’”); Peacock v. Herald Square Loft Corp., 67 A.D.3d 442,

443 (1st Dep’t 2009) (the question of “whether defendants acted

arbitrarily or unreasonably” in violation of the implied

covenant of good faith and faith dealing presents questions of

fact); Sec. Plans, Inc. v. CUNA Mut. Ins. Soc., 769 F.3d 807,

810 (2d Cir. 2014) (noting that “[a] trier of fact could

conclude that the decision was arbitrary” in violation of the

implied covenant of good faith and faith dealing).

Moreover, the court finds that a number of factors,

including WDF’s own conduct, contributed to any purported delay

in RKI’s performance. Most importantly, as stated above, the

court found by a preponderance of credible evidence that WDF’s

failure to tender payment to RKI likely “hinder[ed] or

obstruct[ed] [RKI’s] performance.” Wolff & Munier, Inc., 946

F.2d at 1007. For these reasons, the court concludes that WDF

failed to prove its breach of contract counterclaims and

dismisses WDF’s counterclaim for breach of contract.

D. WDF’s Counterclaims for Fraud

Finally, the court concludes that WDF failed to prove

its counterclaim for fraud against Alice and Leroy Kay by clear

and convincing evidence. “Clear and convincing evidence is

evidence that makes the fact to be proved ‘highly probable.’”

Abernathy–Thomas Eng'g Co. v. Pall Corp., 103 F. Supp. 2d 582,

595–96 (E.D.N.Y.2000) (quoting 1A New York Pattern Jury

Instructions—Civil § 1:64 (3d ed. 1999)); see also Currie v.

McTague, 83 A.D.3d 1184, 1185 (3d Dep’t 2011) (“The clear and

convincing evidence standard requires the party bearing the

burden of proof to adduce evidence that makes it highly probable

that what he or she claims is what actually happened.” (internal

quotation marks and citations omitted)).

WDF asserts a counterclaim for fraud against Alice and

Leroy Kay, in their personal capacities, for allegedly

committing fraud by signing three releases representing that RKI

had paid all union fringe benefits owed under labor agreements,

despite allegedly knowing that RKI still owed monies under these

agreements. (Def. Mem. at 30-31.) RKI argues that WDF’s

counterclaims must be dismissed because WDF failed to show,

inter alia: (1) reasonable reliance by WDF on any of the three

releases signed and (2) fraud damages that are distinct from its

claim for breach of contract damages. (Pl. Mem. at 37-40.)

After reviewing the relevant testimony and documents

presented at trial and assessing the credibility and weight of

the evidence, the court concludes that WDF failed to show, by

clear and convincing evidence, that it reasonably relied on the

releases signed by Alice and Leroy Kay. To the contrary, during

the duration of the P.S. 290 project, WDF knew it had delayed

payment to RKI, and WDF was notified that RKI owned money in

union benefits to Local 638. (Tr. 528:15-530:6, 566:15-567:14;

see Joint Ex. 95.) Moreover, WDF also represented that it

regularly checked with Local 638’s union representative “to

ensure that contractors were up-to-date in their benefit fund

payments.” (ECF No. 164, WDF Mem. of Law in Opposition to RKI’s

Mot. in Limine at 15; Tr. 917.) Because WDF admitted that it

was notified by the union that RKI had purportedly not paid all

benefits, and because WDF had an independent means to verify the

representations made by Alice and Leroy Kay (and indeed asserted

that it regularly checked with the union regarding fund

payments), WDF cannot now argue that it reasonably relied on the

Kays’ alleged misstatements.

Under New York law, although reasonable reliance is

often a “fact-intensive” question, DDJ Mgmt., LLC v. Rhone Grp.

L.L.C., 931 N.E.2d 87, 91–92 (N.Y. 2010), it “is a condition

which cannot be met where . . . a party has the means to

discover the true nature of the transaction by the exercise of

ordinary intelligence, and fails to make use of those

means.” Arfa v. Zamir, 76 A.D.3d 56, 59-60 (1st Dep’t

2010) (affirming grant of motion to dismiss a fraud claim for

failing to show reasonable reliance), aff'd, 952 N.E.2d 1003

(2011); see also Crigger, 443 F.3d at 234 (A plaintiff “cannot

demonstrate reasonable reliance without making inquiry and

investigation if he has the ability, through ordinary

intelligence, to ferret out the reliability or truth” of the

statement.”). In light of WDF’s admissions and other credible

testimony presented at trial, the court concludes that WDF

failed to satisfy its burden of showing reasonable reliance on

the Kay’s statements by clear and convincing evidence because

WDF was aware that WDF had not paid RKI, that RKI had

purportedly not paid the union benefits and WDF had an

independent means to verify the representations made by the

Kays. See MacDraw, Inc. v. CIT Grp. Equip. Fin., Inc., 157 F.3d

956, 961–62 (2d Cir. 1998) (affirming dismissal of fraud claim

after bench trial where the documentary evidence contradicted

and the defendant denied making an alleged false

representation).27 The court concludes that WDF failed to prove

its fraud claims against the Kays by clear and convincing

evidence and, consequently, dismisses the fraud claims.

Damages

Having concluded that RKI proved its breach of

contract claim by a preponderance of the evidence, the court

also finds that RKI is entitled to damages in the sum of

$286,790.84 with interest.

27 Even assuming WDF showed reasonable reliance on the releases, the court

also finds that WDF failed to show special damages unrecoverable as contract

damages. See Merrill Lynch & Co. Inc., 500 F.3d at 183 (“Under New York law,

parallel fraud and contract claims may be brought if the plaintiff . . .

seeks special damages that are unrecoverable as contract damages.”).

Specifically, WDF failed to show that its requested fraud damages of

$41,136.76 are not already accounted for in its counterclaim for breach of

contract. In its statement of damages in the Amended Joint Pretrial Order,

WDF represented that its breach of contract damages consisted of several

categories of completion costs, including “Labor wages and burden (i.e.,

union fringe benefits).” (ECF No. 154, Amended Joint Pretrial Order, at 7.)

Accordingly, because WDF failed to present clear and convincing evidence

showing fraud damages distinct from its breach of contract damages, the

counterclaim damages are duplicative and must be denied. See Guilbert v.

Gardner, 480 F.3d 140, 148 (2d Cir. 2007) (affirming dismissal of fraud claim

New York law as duplicative of plaintiff’s breach of contract claim). In any

event, because WDF failed to prove fraud by clear and convincing evidence, it

may not recover fraud damages.

In construction contract cases where the contract is

terminated before completion, damages are calculated by

considering the “actual job costs plus an allowance for overhead

and profit minus amounts paid.” Najjar Indus., Inc. v. City of

New York, 87 A.D.2d 329, 332 (1st Dep't 1982), aff'd, 502 N.E.2d

997 (N.Y. 1986). RKI’s theory of damages generally follows the

method above: RKI states that its final requisition delivered

to WDF on September 16, 2013 requested an amount of $299,310.84

for work performed at P.S. 290. (Joint Ex. 46.) RKI explained

that this amount was then reduced by $12,520, which represented

the bond cost that WDF paid to Citizens, the surety. (Tr. 464-

65.) After subtracting the bond cost from the final requisition

amount, both parties stipulated before trial that the damages

amount claimed by RKI for its work is $286,790.84 plus interest.

The damages amount of $286,790.84 represented “the difference

between the amount for work RKI claims to have performed

($371,747.60) and WDF’s payments ($85,956.76).” (ECF No. 190,

Supplemental Stipulation of Facts and Law for Amended Joint

Pretrial Order, ¶ 1.)

Based on the testimony presented at trial by Mr. Kay

and his unopposed analysis comparing the amounts invoiced by RKI

for work completed through August 2013, and the amounts invoiced

by WDF to Andron for work completed through August 2013, the

court credits and awards RKI $286,790.84 plus interest.

A. Pre- and Post-Judgment Interest

In a diversity action, state law governs the award of

pre-judgment interest. Schipani v. McLeod, 541 F.3d 158, 164–65

(2d Cir. 2008). The parties’ sub-subcontract agreed to the

application of New York law, which provides that a prevailing

claimant may recover pre-judgment interest “upon a sum awarded

because of breach of performance of a contract.” N.Y. C.P.L.R.

§ 50001(a); see also HTV Indus., Inc. v. Agarwal, 317 F. Supp.

3d 707, 717 (S.D.N.Y. 2018), as amended (June 18, 2018). If

pre-judgment interest is awarded, it must be calculated at the

statutory rate of nine percent (9%). See N.Y. C.P.L.R. § 5004.

Pre-judgment interest is calculated from the “earliest

ascertainable date the cause of action existed.” N.Y. C.P.L.R.

§ 5001(b). New York law grants courts “wide discretion in

determining a reasonable date from which to award pre[-]judgment

interest.” Conway v. Icahn & Co., Inc., 16 F.3d 504, 512 (2d

Cir. 1994).

In its post-trial briefing, RKI asserts that the Court

should calculate pre-judgment interest from October 29, 2013, an

intermediate date between the two dates between which WDF was

required to pay RKI under the sub-subcontract. (Pl Mem. at 36-

37.) The court finds that the earliest ascertainable date the

cause of action existed occurred five days after WDF received

Andron’s payment on August 27, 2013 for RKI’s June 2013

performance. Accordingly, pre-judgment interest at a rate of 9%

shall be calculated from September 3, 2013. In addition, post-

judgment interest is awarded pursuant to 28 U.S.C. § 1967 in the

manner prescribed thereunder.

CONCLUSION

Based upon the foregoing findings of fact and

conclusions of law, the court grants judgment in favor of RKI as

to its breach of contract claim and awards damages to RKI in the

amount of $286,790.84 with pre- and post-judgment interest. The

court dismisses with prejudice WDF’s counterclaim for breach of

contract against RKI and fraud against Leroy Kay and Alice Kay.

The Clerk of the Court is respectfully directed to enter

judgment for the plaintiff. The parties shall advise the court

no later than November 20, 2020, how they intend to proceed with

regard to the outstanding issues reserved. Plaintiff shall

submit a Bill of Costs pursuant to Fed. R. Civ. P. 54(d).

SO ORDERED.

Dated: November 6, 2020

Brooklyn, New York

/s/

KIYO A. MATSUMOTO

United States District Judge

Eastern District of New York