# Opposition Brief — Perini Corp. v. City of New York

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1999
- **Citation:** 528 U.S. 1061

## Text

3 “PILED -2

No. 99-615

NOV 10 1909
IN THE OFFICE OF THE CI “RK
SUPREME COURT OF THE UNITHDUSTA EHS COURT. os.

OCTOBER TERM, 1999

PERINI CORPORATION,
Petitioner,

- against -

THE CITY OF NEW YORK,
Respondent.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION

MICHAEL D. HESS,
Corporation Counsel for the
City of New York,
Attorney for Respondent,

100 Church Street,
New York, N.Y. 10007
(212) 788-1233

LEONARD J. KOERNER,*
FRANCIS F. CAPUTO
DONA B. MORRIS
LEWIS S. FINKELMAN
JOHN de P. DOUW

of Counsel.

* Attorney of Record

November 9, 1999.

iis ee rene!

Oe

QUESTION PRESENTED

Whether the notice provision of the Changes Clause, a
federal regulation incorporated into the construction contract
between a contractor and the City of New York for the
performance of work on a municipal water treatment
| facility, a project partially funded by federal grant monies,
Should be strictly construed in accordance with New York
law, where the parties agreed to be bound by New York
law and resolution of the choice of law issue does not
implicate any uniquely federal interest nor does it entail any
significant conflict between an identifiable federal policy
and the operation of state law.

TABLE OF CONTENTS _ aes

ees : Page

QUESTION PRESENTED ee ea
_TABLE OF AUTHORITIES................. i
OPINIONS BELOW, ke cee cn,
STATEMENT OF FACTS.................. 2

ARGUMENT

THE DETERMINATION THAT THE NOTICE
PROVISION OF THE CHANGES CLAUSE MUST BE
STRICTLY ENFORCED AS PROVIDED BY THE
CONTRACT AND IN ACCORDANCE WITH NEW
YORK LAW FULLY COMPORTS WITH DECISIONS
ve on 5 i an ene 9

RI ee ge abet oii 25

TABLE OF AUTHORITIES

Cases Page

A.H.A. General Construction, Inc. v.
New York City Housing Auth.,
a Te. ee EOD. dg ee ae bw es 18, 21, 22

Aircraft Gear Corp. v. Kaman Aerospace Corp..,
875 F. Supp. 485 (N.D.TH. 1995) ........... 19

Atherton v. F.D.1.C.,
Sie Sa BUS EEO OED. 6 kas eh 8G eee 1]

Barnett Bank of Marion County v. Nelson,
25 F Che ee Meee) GS PA SS Pie 24

Boyle v. United Technologies Inc,,
S67 UB: SOAS) wie eel. 11, 12, and passim.

Brinderson Corp. v. Hampton Roads
Sanitation District,
Geo Fis 4s CO Ce, TGRT) 2. ck ee es 8. 14

City of New York v. Job-Lot Pushcart.
ee Wes Cee PD nck oe a ee ew 24

Clearfield Trust Co. v. U.S.,
po De ee Sr 15

Copco Steel Co. v. U.S.,
Dee Pe ee es Gs PE es sn ee 19

-11i-

Cases Page

Virgin Islands Housing Authority v. Coastal General

Construction Services Co be
27 F.3d 911 (3d Cir. RE errr cae 14,17

W.W.W. Giancontieri,
tT? N.Y.2¢ 187 So Ee er oe ere 23

Westinghouse Electric Corp. v. New York City

Transit Authority,
735 F. Supp. 1205 (S.D.N.Y. SOO te yied St 18

Woodling v. Garrett Corp.,
813 F.2d 543 (2d Cir TPT tid. 10

Woodward Governor Co. v. Curtiss-Wright

Flight Systems,
164 F.3d 123 (2d Cir. See as ee a es 12

Statutes and Regulatons

Clean Water Act, 33 U.S.C. sii gies, ..... a
ee. § Nae. 2 Oy Ph) ees Te ae

15
me WB ee ee ie ei eS 15
40 C.F.R. 33.001(g)(rev. ge re 3
40 C.F.R. § 33.210(a)(rev. met, Pee eer ces 3

-jV-

Cases Page

Marine Midland Bank v. United Missouri Bank,
223 A.D.2d 119 (Ist Dep’t 1996) .......... 10n.

Mastrobuono v. Shearson Lehman Hutton,
gtk ae, rane wreareneyere me 23

Miree v. DeKalb County,
ee Oa ee a as as 96d he wee Rais 11

Panama Refining Co. v. Ryan,
Dee Ge ee ss on es ee CO oe ee 16

Reliance Insurance Co. v. U.S.,
20 Cl. Ct. 715 (Cl. Ct. 1990),

aff'd, 931 F.2d 863 (Fed. Cir. 1991) ......... 21 |
Sanders v. Winship,
is Se B.D ey. +4 Rees few pce 16
Sante Fe Engineers v. U.S., |
BOt F268 379 Gee. Cor: 1968). in be ke wees 21
Sunrise Mall Association v. Import Ally, |
rit w Se Bek ee 3 3 ere 23
Turtur v. Rothschild Registry International, Inc.,
26 F.3d 304 (2d Cir. 1994) ............04. 10
]
United Contractors v. U.S..,
rr oe B 3 Fa | | rn er 20

Cases Page

Virgin Islands Housing Authority v. Coastal General
Construction Services Corp..
af Fige 9a) Ge Ge. 19) gw ie oe ee. s 14,17

W.W.W. Giancontieri.
FE We WOE CIO ok és ce vc ccd nvan. 23

Westinghouse Electric Corp. v. New York City
Transit Authority,
735 F. Supp. 1205 (S.D.N.Y. i. SEP oe 18

Woodling v. Garrett Corp..,
813 F.2d 543 (2d Cir SE ai ak ie a otek 10

Woodward Governor Co. v. C urtiss- Wright
Flight Systems,
164 F.3d 123 (2d Cir. sige Ha eae eerie ier 12

Statutes and Regulatons 9

Clean Water Act, 33 U.S.C. § 125] I on alk 2,3
PES EIS oi 6s ke ee ae 15,
OM ER OSE OTe 15
40 C.F.R. 33.001(g)(rev. July 1, 1993) ........... 3
40 C.F.R. § 33.210(a)(rev. July 1, 1993) .......... 3

-Vi-

wicca send

Statutes

40 C.F.R. Part 35 Appendix C-2 to
Seleeet © CIPSS) uaa bas exe eee a ee 5

Ee rer ere ee ee eee ee ee 17

-Vii-

No. 99-615

IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1999

PERINI CORPORATION,

Petitioner,
- against -
THE CITY OF NEW YORK,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION

OPINIONS BELOW

The opinion of the Court of Appeals for the Second
Circuit (Pet. Appendix A) is not reported in an official
reporter. The Court of Appeals’ summary order affirming
the decision of the District Court for the Southern District

Be nae aS re

of New York is reported at 182 F.3d 901 (2d Cir. 1999).

The opinion of the District Court (Pet. Appendix B) is
reported at 18 F.Supp.2d 287 (S.D.N.Y. 1998).

STATEMENT OF FACTS

Congress declared that the objective of the Clean
Water Act, 33 U.S.C. § 1251 et seqg., was to “restore and i
maintain the chemical, physical and biological integrity of
the Nation’s waters.” 33 U.S.C. § 1251(a). At the same
time, Congress made manifestly clear its intention not to
have federal law pre-empt the field of construction project
management of water pollution control projects. Thus, in |
33 U.S.C. § 1251 (b), Congress declared as a goal and
policy:

Congressional recognition, preservation, and
protection of primary responsibilities and rights of
States. . . . It is the policy of the Congress to
recognize, preserve, and _ protect the primary
responsibilities and rights of States to prevent,
reduce, and eliminate pollution, .... It is the
policy of Congress that the States manage the
construction grant program under this Act. . .

In parallel fashion the federal regulations applicable to such
construction projects provided

Ae A pl cit

In the construction of treatment works program[sic]
under the Clean Water Act (33 U.S.C. 1251 ef
seq.), it is E.P.A.’s' policy to delegate

' The federal Environmental Protection Agency.

x.

determinations on individual projects to State
agencies to the maximum extent possible. . . .

40 C.F.R. 33.001(g)(rev. July 1, 1993).

In the section of the E.P.A. regulations entitled
“Recipient Responsibility," responsibility is delegated to the
grant recipient for management of the project as follows:

(a) the recipient is responsible for the settlement and
satisfactory completion in accordance with sound
business judgment and good administrative practice
of all contractual and administrative issues arising
out of subagreements entered into under the
assistance program. This includes issuance of
invitations for bids or requests for proposals,
selection of contractors, award of subagreements,
settlement of protests, claims, disputes and other
related procurement matters.

40 CFR § 33.210(a)(rev. July 1, 1993).

Within the context of this statutory and regulatory
framework, in December of 1993, Perini and the City of
New York (the “City”) entered into a construction contract
(the “contract”) for the replacement and improvement of
certain facilities at the Coney Island Water Pollution Plant
(the “project”). Under the Clean Water Act, the E.P.A.
funded 55% of the contract, the price of which was some
$40,000,000. The City provided the remaining funding.

Both the original grant agreement between the City

and EPA and a subsequent amendment thereto increasing
funding for the project mandated inclusion in the contract of

2.

certain provisions set forth in the Code of Federal
Regulations. Of particular concern here are the
“Supersession Clause” and the “Changes Clause” to which
it refers:

The Supersession Clause

1. General
(a) the owner and the contractor agree that the
following supplemental general provisions apply to
the work to be performed under this contract and
that these provisions supersede any conflicting
provisions of this contract.

The Changes Clause

2. Changes

(a) The owner may, at any time . . . by written
order designated or indicated to be a change order,
make any change in the work within the general
scope of the contract... .

(b) Any other written order or an oral order. . .
from the owner, which causes any such change,
shall be treated as a change order under this clause,
if the contractor gives the owner written notice
Stating the date, circumstances, and source of the
order and if the contractor regards the order as a

change order.
* * *

(d) If any change under this clause causes an
increase or decrease in the contractor’s cost of, or
the time required for, the performance of any part

ee

Oo

ee

of the work under this contract, whether or not
changed by any order, an equitable adjustment shall
be made and the contract modified in writing
accordingly. However, except for claims based on
defective specifications, no claim for any change
under paragraph (b) of this section 2., shall be
allowed for any costs incurred more than 20 days
before the contractor gives written notice as there
required. Also, in the case of defective
specifications for which the owner is responsible,
the equitable adjustment shall include any increased
cost reasonably incurred by the contractor in
attempting to comply with such defective
specifications.

(e) If the contractor intends to assert a claim for an
equitable adjustment under this clause, he must,
within 30 days after receipt of a written change
order under (a) above or the furnishing of a written
notice under paragraph (b) of this section 2., submit
to the owner a written statement setting forth the
general nature and monetary extent of such claim,
unless the owner extends this period. The statement
of claim hereunder may be included in the notice
under paragraph (b) of this section 2.

40 C.F.R. Part 35 Appendix C-2 to Subpart E (1993).

In addition to the federally mandated clauses, the

contract includes standard provisions providing for the
making of changes to the contract and the issuance of
change orders, Article 25; prescribing the methods of
payment for contract changes: either by applicable contract
unit prices, reasonable costs plus an allowance for overhead

.*

and profit, or a negotiated payment, Article 26; and
defining notice and documentation requirements respecting
claims, Article 27

Also, Article 54 of the contract in pertinent part
provides:

No claims against the City for damages for breach
of Contract or compensation for extra work shall be
made or asserted in any action or proceeding at law
or in equity, unless the Contractor shall have strictly
complied with all requirements relating to the giving
of notice and of information with respect to such
claims as have been herein provided.

Finally, the contract contained a choice-of-law
provision, Article 62, in which the parties agreed that the
contract was to be governed by and construed in accordance
with the laws of the State of New York.

During the course of work on the project, Perini and
the City negotiated lump sum payments which, as the
contractor certified, covered the “accurate, complete, and
current” costs of the change orders involved in this
litigation. Perini, however, claimed entitlement to
compensation under the Changes Clause for alleged indirect
costs beyond those agreed to by both parties and, upon the
City’s refusal to pay, brought this lawsuit.’

> The kind of damages for which Perini is suing, increased
costs attributable to changed contract conditions but not part
of the changed work, are variously referred to as delay
damages, impact costs or ripple costs.

-6-

eee

AF NSPS ih awn i a —<

ai ma

Perini sought summary judgment establishing the
City’s liability on Perini’s third cause of action, which
sought an “equitable adjustment” of $16 million for the
claimed indirect costs. The City cross-moved for summary
judgment, arguing, inter alia, that the contractor’s failure
to comply with the notice provisions of the Changes Clause
barred its claims. In opposing the City’s cross-motion,
Perini argued that its claims were viable because federal law
governed interpretation of the Changes and Supersession
Clauses and that federal courts and agencies would construe
the notice requirements of the Changes Clause liberally.

The District Court found that 1) New York law
governed interpretation of the notice provision of the
Changes Clause; 2) New York courts construe such notice
requirements strictly; and 3) Perini’s evidence of notice did
not demonstrate compliance with the notice requirements of
the Changes Clause.?

The Court of Appeals affirmed. In its unreported
summary order,* the Second Circuit agreed that New York

* The District Court noted that Perini’s failure to comply
with the more lenient notice and documentation
requirements of the Changes Clause obviated any need to
consider the existence of a conflict between the Changes
Clause and the more demanding notice and documentation
provisions of Article 27 of the contract. 18 F.Supp.2d at
295 n. 8.

* Since the Second Circuit’s summary order specifically
provides that it “will not be published in the federal
reporter and may not be cited as precedential authority to

(continued...)

nA

law governed interpretation of the notice provision of the
Changes Clause. In so holding, the Court of Appeals cited
to Linan-Faye Constr. Co. v. Housing Auth. of Camden, 49
F.3d 915, 919-21 (3d Cir. 1995 (holding that state law
governed construction of the federally mandated termination
clause despite use of federal funds for the project and
adoption of forms authorized by the federal agency) and
Brinderson Corp. v. Hampton Roads Sanitation Dist., 825
F.2d 41, 44-45 (4th Cir. 1987) (stating that the court was
“not persuaded” by the contention that federal law
controlled construction of a federally mandated clause in
contract, but following federal law because state courts
would follow do so in the absence of controlling state
authority).

Furthermore, the Court of Appeals did not perceive
any conflict between, on the one hand, the notice provision
of the Changes Clause and, on the other hand, the contract
Clauses requiring strict construction of notice provisions and
the application of New York law. The Court of Appeals,
therefore, rejected Perini’s argument that the Supersession
Clause required nullification of the contractor’s agreement
that 1) it would comply strictly with the notice requirements
of the Changes Clause; and 2) New York law would govern
interpretation of the contract.

Finally, the Court of Appeals examined each of the
documents that the contractor claimed constituted the notice
required by the Changes Clause, finding that most were

* (...continued)

this or any other court,” it is difficult to comprehend
petitioner’s description of this decision as “the lead case of
decision on this issue in the United States.” Pet. 7.

-8-

untimely and that those that arguably were timely failed
adequately to inform the City of the monetary extent of the
damages claimed as the result of a particular change order,
as the Changes Clause required.

ARGUMENT

THE DETERMINATION THAT THE NOTICE
PROVISION OF THE CHANGES CLAUSE
MUST BE STRICTLY ENFORCED AS
PROVIDED BY THE CONTRACT AND IN
ACCORDANCE WITH NEW YORK LAW
FULLY COMPORTS WITH DECISIONS OF
THIS COURT.

(1)

The decision of the Court of Appeals, affirming the
decision of the District Court and holding that New York
law governs the interpretation of the notice provision of the
Changes Clause, is correct and does not conflict with any
decision of this Court or any other court of appeals. Also
correct is the finding of the Court of Appeals that there is
no conflict between the Changes Clause’s notice
requirements and those clauses of the parties’ contract
requiring strict compliance with such requirements and
construction of the contract under New York law.
Accordingly, contrary to the contractor’s arguments, the
Supersession Clause of the contract does not require
nullification of Perini’s contractual agreements that it would
strictly comply with the notice requirements of the Changes
Clause as a precondition to assertion of a claim for payment
under that provision and that New York law would govern
interpretation of the contract.

-9-

(2)

Perini, in executing the contract, agreed to be bound
by its choice of law provision, which required that it be
construed in accordance with New York state law. Both
federal and New York state courts recognize that where
parties to a contract include a choice-of-law clause
providing for construction of the agreement in accordance
with New York state law, that clause generally must be
honored, where, as here, New York has a reasonable
relationship to the agreement. See for example Turtur v.
Rothschild Registry Int’l, Inc., 26 F.3d 304, 310 (2d Cir.
1994); Woodling v. Garrett Corp., 813 F.2d 543 (2d Cir.

1986); Freedman _v. Chemical Construction Corp., 43
N.Y.2d 260, 264 (1977).

Nonetheless, Perini, realizing that its claim for an
equitable adjustment is barred when the notice provision of
the Changes Clause is strictly construed as the contract and
New York law require, seeks to nullify its agreement to be
bound by the interpretation of the contract under New York
law. Under New York law, as under federal law, however,
the presumption remains that the contract will be interpreted
according to New York law. ° See Erie Railroad Co. v.

* In Marine Midland Bank v. United Missouri Bank, 223
A.D.2d 119, 123 (1st Dep’t 1996), for example, the New
York Supreme Court, Appellate Division, First Department
recently noted that a contract’s choice of law provision
might be held invalid only where the issue is of such
overriding concern to the public policy of the other
jurisdiction as to override the intent of the parties and the
interest of the State of New York in enforcing its own

(continued. ..)

-10-

Set AS A RARE IGRI IC NN SS ik Ns. ad wlasid Aart it Shanta aes eid itis

Tompkins, 304 U.S. 64, 78 (1938) (“Except in matters
governed by the Federal Constitution or by Acts of
Congress, the law to be applied in any case is the law of the
State”).

While, in the years since Erie, this Court has at
times found federal law displaces state law, the exceptions
have been few and the tests rigorous. As this Court
explained in Boyle v. United Technologies, Inc., 487 U.S.
500 (1988), in most fields of activity, this Court “has
refused to find federal pre-emption of state law in the
absence of either a clear statutory prescription . . . or a
direct conflict between federal and state law.” 487 U.S. at
504 (citations omitted). Having cautioned against the broad
use of federal common law in, for example, Miree v.
DeKalb County, 433 U.S. 25, 31-32 ( 1977) (federal
common law found not to govern air crash survivors’ suit
against the county as third-party beneficiaries of a contract
between the county and the federal government), this Court,
in Boyle, stated the test applicable to the choice of law
question raised in this case. The Boyle Court found that
federal common law only applies where there is 1) a
“uniquely federal interest” and 2) a “significant conflict”
between an identifiable federal policy or interest and the
operation of state law. Boyle, 487 U.S. at 507. Compare
Atherton v. F.D.LC., 519 U.S. 213, 218 (1997) (normally
when courts decide to fashion rules of federal common law,
the guiding principle is that a significant conflict between
some federal policy or interest and the use of state law must
first be specifically shown).

> (...continued)
policies.

wae

As summarized recently by the Second Circuit,
under the rule stated in Boyle, federal common law applies
only in those limited situations where a uniform national
rule is necessary to further the interests of the federal
government. Marcus v. A.T.&T., 138 F.3d 46 (2d Cir.
1998). In Boyle this Court found uniquely federal interests
to arise only in a few areas, such as: the obligations to, and
rights of, the United States under its contracts; the liability
of federal officers for official acts; and civil liabilities
arising out of federal procurement contracts. 487 U.S. at
504-506. See also Woodward Governor Co. v. Curtiss-
Wright Flight Systems, 164 F.3d 123, 127 (2d Cir. 1999).
Thus, in Boyle, federal law was applied to determine the
tort liability of an independent contractor which, under the
federal procurement program, had provided helicopters to
the U.S. Marines.° The narrow reach of the requirement

° Perini makes the breathtaking leap from this Court’s
finding in Boyle that “state law which holds Government
contractors liable for design defects in military equipment
does in some circumstances present a ‘significant conflict’
with federal policy and must be displaced,” 487 U.S. at
512, to the totally unsupported observation that the Boyle
Court “concluded that state laws that hold the contractor
liable for Unforeseen Conditions, by exculpatory or other
Clauses present a ‘significant conflict’ with federal policy
and must be displaced.” Pet. 21. According to Perini,
therefore, the Second Circuit’s decision is in conflict with
Boyle.

This is just one of the most salient misstatements
contained in Perini’s petition, many of which grow out of
Perini’s attempt to odscure the fundamental point that the
contract at issue here is not a federal procurement contract.

(continued...)

42

reuters oe ee ee ae

for a uniform federal rule may be seen, for example, by the
result in Marcus, supra, 138 F.3d at 54, where the Second
Circuit applied the Boyle test to find no uniquely federal
interest in preventing a carrier from misrepresenting the
nature of its rates to customers, although the Federal
Communications Act evidenced a federal interest in
uniformity of charges in telecommunications.

(3)

The notice requirements of the Changes Clause
found in the contract simply does not invoke a “uniquely

© (...continued)

Thus, in its discussion of Boyle, Perini attempts to
disregard the fact that, unlike the defendant in Boyle, who
was a Government contractor which, under its contract,
provided equipment to the federal government as part of the
federal procurement program, Perini contracted with the
City under the City’s procurement program which, in part,
benefitted from federal funding. Similarly, Perini
repeatedly conflates federal and municipal procurement
programs, for example, referring to United States.
Government’s “uniquely federal interest in its national
procurement program.” Pet. "i" and passim.

Perini’s discussion of the split in authority as to whether
the government contractor defense is available only to
manufacturers of military products or extends also to
Government contractors providing nonmilitary products to
the federal government under the federal procurement
program, Pet. 22-23, obviously, is totally irrelevant to this
case, which does not involve either an assertion of the
_ government contractor defense or federal procurement.

2%.

federal interest,” and thus, under Boyle, federal common
law does not apply to its interpretation.

“[T]he fact that a contract is subject to federal
regulation does not, in itself, demonstrate that Congress
meant that all aspects of its performance or nonperformance
are to be governed by federal law rather than state law
applicable to similar contracts in businesses not under
federal regulation.’” Linan-Faye Construction Co., Inc., v.

Housing Authority of City of Camden, 49 F.3d 915, 919
(3d Cir. 1995), quoting Virgin Islands Housing Authority

v. Coastal General Construction Services Corp., 27 F.3d
911, 916 (3rd Cir. 1994). In Linan-Faye, supra, the parties

entered into a contract which was funded in substantial part
by a grant from the United States Department of Housing
and Urban Development. 49 F.2d at 917. As here, the
applicable federal regulations mandated the inclusion of
certain provisions in the contract, including a termination
for convenience clause. Id. at 921, 936. The Housing
Authority terminated the contract, and the contractor
commenced a federal action seeking specific performance
and damages. The District Court, exercising diversity
jurisdiction over the matter, applied federal, not New
Jersey, common law in interpreting the federally-required
termination for convenience clause. Id. at 919. However,
the Court of Appeals for the Third Circuit applied the test
articulated in Boyle and reversed with the direction that the
District Court resolve all remaining issues in accordance
with New Jersey law, holding that “it is the law of New
Jersey that governs the interpretation of this contract.” Id.
at 921.

Brinderson Corporation v. Hampton _ Roads
Sanitation District, 825 F.2d 41 (4th Cir. 1987), is a case

-14-

(a ee Oa a ee ee ee ee

decided before the Supreme Court had articulated the clear
test of Boyle. In Brinderson, the Fourth Circuit rejected the
argument that federal law should control the construction of
provisions drawn from federal regulations in a contract,
partially funded by an E.P.A. grant, between a contractor
and a regional subdivision of the Commonwealth of
Virginia for the construction of a waste water treatment
facility because such a result was required under Clearfield
Trust Co. v. U.S., 318 U.S. 363 (1943). Thus, the
Brinderson Court did not find that the facts of the case
mandated the use of federal common law in order to assure
the application of a uniform rule. 825 F.2d at 44. The
Fourth Circuit, however, did hold that federal common law
was relevant, but not because federally mandated provisions
in state or municipal contracts carry with them federal
common law. Rather, the Brinderson Court looked first to
State law and found that federal common law was, in the
absence of applicable Virginia case law on the subject, what
Virginia courts would have adopted. The absence of
Virginia precedents on the disputed issue contrasts sharply
with this case, where there is extensive New York case law
addressing the interpretation of the contractual notice
provisions and requiring the strict compliance with such
requirements.

J.A. Jones Constr. Co. v. City of New York, 753
F. Supp. 497, 505 (S.D.N.Y. 1990), is also instructive. In
J.A. Jones, the contractor argued that the incorporation of
federal regulations defining how to calculate payments for
change orders and delays in a contract with New York City
funded by an E.P.A. grant provided a basis for federal
question jurisdiction under 28 U.S.C. § 1331 as well as
jurisdiction pursuant to the federal declaratory judgment
statute, 28 U.S.C. § 2201. In J.A. Jones, the District

-15-

Court rejected the contractor’s arguments, finding that the
construction of federal regulations incorporated in a
federally funded construction contract does not present a
substantial issue of federal law. 753 F. Supp. at 504-505.

It is a well-settled principle of statutory construction
that a statute or a set of regulations must be construed as a
whole and that its various sections must be considered
together and with reference to each other. See Marine
Carriers Corp. v. Fowler, 429 F.2d 702, 706 (2d Cir.
1970), cert. denied, 400 U.S. 1020 (1971), quoting Panama
Refining Co. v. Ryan, 293 U.S. 388, 439 (1935)(“‘[T]he
meaning of a statute is to be looked for, not in any single
section, but in all parts together and in their relation to the
end in view.’”); Sanders v. Winship, 57 N.Y.2d 391, 395-
396 (1982) (“[A] statute is to be viewed as a whole. To
this end, all parts thereof, if possible, are to be harmonized
to achieve the legislative purpose.”).

Thus, both the Supersession Clause and the Changes
Clause must be understood in the context of the Clean
Water Act’s clear embodiment of a Congressional intent to
delegate responsibility for construction projects to the
recipients of federal grants as indicated in the provisions of
the applicable statute and regulations quoted above at pages
2-3.

Furthermore, Perini has not identified, because it
cannot, any statutory declaration that federal law must
govern in the interpretation of contracts for municipal
projects funded by the E.P.A. under the Clean Water Act.
Perhaps the strongest support the contractor can muster for
its argument that, in the interest of uniformity, federal
common law should be applied to interpret the notice

-16-

provision of the Changes Clause because a uniform policy
is required a directive issued by President Reagan in 1988.
Pet. 6-7, 19. As part of the Presidential “regulatory relief
program,” which aimed to reduce the burden of federal
regulation and paperwork, the directive called for the
publication of common regulations, thus aiming for
consistency and uniformity among all federal assistance
awarding agencies. 53 F.R. 8073. However, Perini cites
to no case law indicating that the Reagan house-cleaning
directive calls for, in the name of national uniformity, the
application of federal common law to all contracts entered
into by any recipient of federal funding. Indeed, the Court
of Appeals for the Third Circuit found that the interest in
uniformity in construction of federal contractual provisions
is not enough to pose federal question issues. Virgin

Islands Housing Authority v. Coastal General Construction
Services Corp. 27 F.3d 911, 916 (3d Cir. 1994).

Therefore, given the expressed Congressional intent
to delegate responsibility for management of construction
projects to the recipients of E.P.A. grants, the contract’s
Supersession Clause itself cannot and does not, as Perini
argues, operate to nullify or pre-empt other standard City
contract provisions included in the contract that touch
matters covered by the Changes Clause. Nor does it speak
to the choice of law issue, much less mandate the
application of federal common law to disputes over contract
administration between a recipient of an E.P.A. grant and
its chosen contractors. The Supersession Clause merely
provides that the Changes Clause, as a “supplemental
general provision” included in the contract, supersedes any
conflicting provisions.

ois

In sum, there is no uniquely federal interest entailed
by the interpretation of the notice provision of the Changes
Clause in a contract to which the federal government is not
a party under a statutory and regulatory scheme in which
responsibility for the construction of local facilities is
delegated to the grant recipient.

(4)

Under Boyle, the existence of a uniquely federal
interest is a necessary but not sufficient condition for the
displacement of state law. 487 U.S. at 507. While that
necessary condition plainly has not been met in this case,
assuming it to have been met for the sake of argument, the
existence of a conflict between the operation of New York
law and an identifiable federal policy is similarly absent.

The contract, in Article 54, specifically requires
strict enforcement of notice provisions. Furthermore, New
York law enforces provisions requiring strict compliance
with notice requirements in public contracts as conditions
precedent to claims for extra compensation. See for
example, A.H.A. Gen. Constr., Inc. v. New York City
Housing Auth., 92 N.Y.2d 20 (1998); Westinghouse
Electric Corp. v. New York City Transit Auth., 735 F.
Supp. 1205, 1224 (S.D.N.Y. 1990).

On the other hand, under federal common law, in
cases where contracts have not specified strict construction
of notice provisions, courts at times liberally construe
contractual notice provisions, excusing strict, formal
compliance with certain kinds of notice provisions when
actual or constructive notice of the underlying facts on the
part of the contractee is found. See for example, Hoel-

-18-

ry ee

eet Bete s /.

Steffen Constr.Co. v. U.S., 456 F.2d 760, 768 (Ct. Cl.

1972); Copco Steel Co. v. U.S., 341 F.2d 590, 598 (Ct.
Cl. 1965). It is worth noting, however, that, even where
federal common law has been applied, a contractual
provision requiring strict compliance with notice
requirements may be enforced. See Aircraft Gear Corp. v.

Kaman Aerospace Corp., 875 F. Supp. 485, 492-495
(N.D.Ill. 1995).

In attempting to confect an argument that the strict
interpretation of the notice provision of the Changes Clause
required by New York law conflicts with some significant
federal policy, Perini discerns a federal policy that the
government, not the contractor, should absorb the increased
costs of delays, which policy mandates equitable
adjustments that make contractors whole. The rationale for
this supposed policy is that, in anticipation of such equitable
adjustments, public contractors will not provide in their bids
for contingency costs to cover indirect costs of delays.
Thus, according to Perini, the equitable adjustment language
of the Changes Clause embodies a federal policy designed
to induce contractors to submit lower bid prices for public
contracts. Pet. 8-12.’ Perini understands this policy to
entail an interpretation of the notice provision of the
Changes Clause so liberal that no notice would be required

? While Perini argues that its interpretation of the Changes
Clause is necessary to prevent the submission by contractors
of inflated bids, it should be noted that if the City finds bid
prices to be inflated it can and does reject all bids and rebid
the contract. Furthermore, if the E.P.A. finds bids inflated,
it can refuse to fund the project.

-19-

as to “changes that the City itself had directed as the City
had actual knowledge of such changes.” Pet. 5.*

Perini relies primarily upon Foster Construction v.
U.S., 435 F.2d 873 (Ct. Cl. 1970) in support of its

argument that there is a federal policy that requires payment
of all of a contractor’s claimed indirect costs of delays
relating to change orders. However, this Court should note
that Foster deals only with the very narrow and specific
issue Of delays related to differing site conditions and
involves consideration of issues not relevant here, such as
the extent to which bidders should be able to rely upon the
Owner’s representations concerning subsurface conditions as
opposed to their own pre-bid investigations. 435 F.2d at
886-888. Kaiser Industries Corp. v. U.S., 340 F.2d 322
(Ct. Cl. 1965) and United Contractors v. U.S., 368 F.2d
585 (Ct. Cl. 1966), also cited by Perini, both similarly deal
with changed subsurface conditions, which have a particular
relation to bid prices. Pet. 8-10.

Indeed, contrary to Perini’s argument, the Federal
Circuit has held, on at least two occasions, that federal
agencies in fact are free to place cost limitations on change
orders issued pursuant to the Changes Clause. In Reliance

* Perini does not deal with the fact that the notice provision
requires notice of both the general nature and the monetary
extent of the claim being asserted. The owner’s knowledge
of the fact of a contract change does not automatically
supply it with knowledge of costs incurred by the contractor
indirectly resulting from such a change.

If, as Perini states, the district court observed that “if the
liberal federal law applied, Perini would prevail,” Pet. 4-5,
that statement does not occur in its reported decision.

-20-

Insurance Co. v. U.S., 20 Cl.Ct. 715 (Cl. Ct. 1990), aff'd
931 F.2d 863 (Fed. Cir. 1991), and Sante Fe Engineers v.
U.S., 801 F.2d 379 (Fed. Cir. 1986), the underlying
contracts included another federal regulation which limited
the amount recoverable by the contractor for both overhead
and profit with respect to changes to no more than 10% of
the contractor’s direct costs. Notwithstanding the
“equitable adjustment” language of the Changes Clause, the
Court in both cases upheld the costs limitations contained in
the other regulation. In fact, in Reliance, the Court
affirmed dismissal of the contractor’s claim seeking $1.3
million in delay damages and held that such limitations
apply “regardless of the size and scope of contract
changes.” 931 F.2d at 865.

Perini contrasts this supposed federal policy of
reimbursing contractors for all claimed costs of delays with
what it asserts is the City’s policy of exculpating itself from
liability for all increased costs due to delays. (Pet. 8-12).
Perini then leaps to the conclusion that these supposed
policy differences directly result in an inconsistency
between federal and New York law with respect to the
interpretation of the notice provision of the Changes Clause
such that, in order to effectuate the intent of the regulations,
federal common law must be applied.

The main point that must be made in response to
Perini’s policy argument is that this case only concerns the
interpretation of notice requirements and, as the New York
Court of Appeals has recently stated, in A.H.A General
Construction, Inc. v. New York City Housing Auth., 92
N.Y.2d 20 (1998), notice provisions in public contracts are
not exculpatory clauses, nor do they embody any
substantive rule of liability for construction costs. Rather,

-21-

notice provisions are conditions precedent to recovery which
serve salutary purposes with respect to protection of the
public treasury. 92 N.Y.2d at 30-34. Indeed, as the Court
of Appeals observed in A.H.A., notice provisions are
intended to prevent precisely the situation raised in this
litigation, the accumulation by a _ contractor of
undocumented damages amounting to a_ substantial
percentage of the actual price of the contract. See Id. at
34.” Since protection of the public fisc is the essential
policy that may be seen also to underlay the federal
regulations incorporated into contracts funded in part by
EPA grants, there is no fundamental inconsistency to be
found respecting the interpretation of contractual notice
provisions.

Given the nature and function of the notice
provisions at issue here, Perini’s depiction of the City’s
procurement policy, and its supposed conflicts with federal
procurement policy is simply not relevant. Furthermore,
given that the contract at issue here, like all standard City
contracts, provides for the issuance of change orders to
compensaie the contractor for the extra costs entailed by the
performance of extra work, Perini’s statements that it is the
City’s policy “to exculpate itself from all increased costs,”
Pet. 10, is patently absurd.

Perini’s argument that the notice requirements of the
Changes Clause as interpreted under the generally more
liberal approach to such provisions of federal common law
should displace the contract’s requirement of strict
compliance with notice provisions is supported by neither

* In this case, Perini is claiming $16,000,000 in delay
damages, approximately 40% over the contract price.

2.

onc BATRA

the holding of Boyle, the language of the Supersession
Clause, nor by well-established principles of contract
construction. There is, in sum, no significant conflict
involved here.

Under both federal and New York common law it is
a fundamental principle of contract construction that the
contract should be read so as to give meaning to all of its
provisions and to render them consistent with each other.
Thus, a contract should be interpreted to give meaning to
all of its parts. An interpretation that renders portions of
the contract ineffective or meaningless should be avoided.
See for example Mastrobuono v. Shearson Lehman Hutton,
514 U.S. 52 at 63 (1995); Fulton Cogeneration Associates
v. Niagara Mohawk Power Corp., 84 F.3d 91, 99 (2d Cir
1996); W.W.W. Giancontieri, 77 N.Y.2d 157 (1990);

Sunrise Mall Association v. Import Ally, 211 A.D.2d 711
(2d Dep’t 1995). |

Contract Article 54 and the notice requirements of
the Changes Clause, therefore, under fundamental principles
of contract interpretation, should not be read to conflict. In
fact, they can easily occupy the Contract together, without
the Supersession Clause nullifying any part of them. The
federal notice requirements provide that the contractor must
“within 30 days after receipt of a written change order. . .
submit to the owner a written statement setting forth the
general nature and monetary extent of such claim, unless
the owner extends this period.” This certainly does not
conflict with Article 54, which merely requires strict
compliance with the very notice obligations set forth in the
Changes Clause.

While Perini argues that the Changes Clause’s notice
provision, liberally construed, should completely replace
any other contractual notice provision, the language of the
Supersession Clause does not mandate such a result. The
Supersession Clause simply provides that the provisions of
the Changes Clause supersede any “conflicting” provisions
of the agreement. Were it intended that the provisions in
the federal Changes Clause exclusively governed the
contractor’s obligation for notice, thus overriding the
Standard contract article requiring strict compliance with
notice and reporting provisions, Article 54, the Supersession
Clause would have said so.

This Court, in Barnett Bank of Marion County v.
Nelson, 517 U.S. 25 (1996), in reviewing the tests for pre-
emption, observed that a federal law may be in
“irreconcilable conflict” with state law when compliance
with both statutes may be a “physical impossibility,” or the
State law may “stand as an obstacle to accomplishment and
execution of the full purposes and objectives of Congress.”
517 U.S. at 31. Accord City of New York v. Job-Lot
Pushcart, 88 N.Y.2d 163, 167 (1996).

Here, Perini does not contend, nor could it, that it
‘was impossible to comply with both the notice requirement
of the Changes Clause and Article 54’s requirement of strict
compliance with contractual notice provisions.
Accordingly, the notice provision of the federal Changes
Clause, does not, as Perini contends, supersede the
contract's requirement, in Article 54, of strict compliance
with contractual notice provisions as a precondition for the
assertion of any claims.

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In sum, there is no inconsistency between federal
policy respecting the notice provision of the Changes Clause
and the operation of New York law in interpreting that
provision. Thus, Perini cannot escape strict compliance
with the contract’s notice provisions as required by the
contract and its construction under New York law.
Furthermore, the Court below followed precedent
established by this Court and consistent with that of other
circuits in so finding.

CONCLUSION

THE PETITION FOR A WRIT OF
CERTIORARI SHOULD BE DENIED.

Dated: New York, New York
November 9, 1999

Respectfully submitted,

MICHAEL D. HESS

Corporation Counsel of the
City of New York

Attorney for Respondent

100 Church Street, Room 6-183

New York, New York 10007

(212) 788-1233

By: ema jp Mitty
DONA B. MORRIS
Assistant Corporation Counsel

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_0190%3A2. Public record. Not legal advice.