US District Court in New York Holds That CPM Expert Not Required to Prove Delay and That Liquidating Agreement is Required in Order to Bring Pass-Through Claims

Helena Assocs., LLC v. EFCO Corp.
U.S. Dist. LEXIS 39977 (S.D.N.Y. May 14, 2008)

Owner, The Helena Associates, LLC contracted with EFCO Corporation for the work, materials and installation of aluminum windows in the construction of The Helena, a high-rise residential building in New York City. Helena brought a breach of contract action against EFCO alleging that EFCO had failed to comply with project schedules, caused delay to the project, and failed to provide sufficient manpower and supervision. Helena claimed damages in excess of $6.7 million. EFCO denied Helena’s claims arguing that the delays were caused by factors outside of its control and within the control of parties for whom Helena was responsible, and asserted a counterclaim for additional work of approximately $875 thousand. EFCO moved for partial summary judgment.

EFCO sought summary judgment on Helena’s delay claim arguing that Helena had not proved entitlement to delay damages because Helena did not provide a critical path method analysis (“CPM”), but rather relied solely upon the testimony of the project manager regarding delays. In assessing this contention, the Court held that under New York law, Helena was required to show that EFCO was responsible for the delay, that EFCO’s delay caused a delay in project completion without concurrent delay, and that as a result Helena suffered damages that could be rationally estimated. While a CPM analysis is sometimes used for this purpose, the Court held that use of a CPM analysis is not required to meet this burden and there was no support for EFCO’s assertion that testimony regarding delay and a project’s critical path must be presented by an expert rather than a lay witness. The Court did however require that the testimony of Helena’s fact witnesses, who had not been designated as experts, be limited to their first-hand knowledge and experience rather than custom or practice in the industry.

EFCO’s main argument was that Helena had not presented sufficient evidence to demonstrate that EFCO caused the delay and that there had been no concurrent delay by Helena or a party within Helena’s control. The Court disagreed, finding that Helena had offered evidence on these topics which created genuine issues of material fact preventing entry of summary judgment.

EFCO next challenged certain line items of Helena’s claim for damages incurred by KBF, Helena’s construction manager, and Rose Associates, Helena’s representative on the project. EFCO contended that as Helena had not paid these claims by KBF and Rose Associates, under New York law, the only mechanism by which Helena could recover for these amounts was through a liquidating agreement. In evaluating this argument, the Court reviewed the three elements of a liquidating agreement: (1) the imposition of liability upon a party for a third party’s increased costs, providing the first party with a basis for legal action against the party at fault, (2) a liquidation of liability in amount of the first party’s recovery against the party at fault, and (3) a provision for the pass-through of that recovery to the third party. In order for such an agreement to be valid, it must be an actual contractual commitment. Helena countered that it did have such a liquidating agreement, pointing to a clause in its agreement with EFCO entitling Helena to recover damages caused to KBF and Rose Associates. The Court found however that because the clause in the contract between Helena and EFCO addressed only the accountability of EFCO, and did not include any agreement between Helena and KBF or Rose Associates, that it did not satisfy the requirements of a liquidating agreement. Accordingly, the Court held that Helena could not assert damages on behalf of KBF and Rose Associates and granted summary judgment on those portions of Helena’s claim.

This entry was posted in Breach of Contract and tagged , , . Bookmark the permalink.