U.S. District Court in Massachusetts Declines Summary Judgment Based on Releases Submitted with Pay Requests – Holds Issue of Fact Exists as to Interpretation

Josef Gartner USA LP v. Consigli Construction Co., Inc.
2011 U.S. Dist. LEXIS 62492 (D. Mass. June 10, 2011)

Consigli Construction and J. F. White Contracting, as joint venturers and general contractors, contracted with Josef Gartner USA for the design, fabrication, and installation of a curtain wall at the Cambridge Public Library. This subcontract provided for periodic payments to Gartner, contingent upon Gartner’s submission of evidence to Consigli/JFW that all known indebtedness connected with Gartner’s work had been satisfied. The subcontract also provided that Gartner would be entitled to additional compensation due to delays and out-of-sequence work.

Upon submission of Gartner’s periodic payment applications, Consigli/JFW required Gartner to sign a “waiver and payment affidavit.” In addition to a certification that all indebtedness had been paid, the affidavits contained a release of “any and all claims, suits, bond claims, liens, and rights of lien for all work, labor, services, equipment or materials furnished or performed in connection with construction.” Gartner signed a waiver and payment affidavit each time that it was paid.

As the Library project progressed, the delayed work of other subcontractors caused Gartner to perform its work out of sequence and for an extended period. Gartner submitted a time/cost impact claim to Consigli/JFW for direct costs that Gartner incurred as a result of delays. When the time/cost impact claim, as well as several proposed Change Orders, remained unpaid, Gartner sued Consigli/JFW, alleging several contractual causes of action. Consigli/JFW moved for summary judgment, arguing that the waiver and payment affidavits were general releases that barred Gartner’s claims for any work done prior to Gartner’s final executed affidavit.

The court found that, as a pre-condition to periodic payments, the subcontract only required Gartner to submit evidence that indebtedness connected with its work had been satisfied. In practice, however, Consigli/JFW required more by demanding execution of the waiver and payment affidavits. Although Consigli/JFW had no right to require the affidavits, Gartner signed them nonetheless. The court therefore had to assess the validity, nature, and effect of the releases under Massachusetts law.

Refusing to find that the affidavits were part of the subcontract, the court reasoned that the affidavits exceeded the original agreement’s scope. They did so by conditioning payment on a release of claims when the original bargain called only for evidence that indebtedness had been paid. This relinquishment of Gartner’s legal right was neither part of, nor contemplated by, the subcontract. However, Gartner signed the affidavits, which purported to change the original bargain. Therefore, the court found that “the most sensible approach” was to treat the releases as possible modifications to the parties’ subcontract.

The court noted that modifications are enforceable under Massachusetts law “so long as there is mutual assent to, and consideration for, the modification.” Consideration existed because the affidavits were signed under seal, and so the court only had to examine whether Gartner assented to the modification. Because the affidavits did not expressly state that they were intended to modify the subcontract, the court examined the attendant circumstances to determine whether assent existed. On the one hand, the court found Gartner’s execution of a clear and unambiguous release to be persuasive evidence of assent.

However, the court also found compelling that Gartner had repeatedly expressed an intent to seek compensation for delays, which suggested that Gartner did not view the affidavits as modifications that would extinguish its right to seek delay costs. Further, the court found that the releases effectively deleted the right to delay cost language from the subcontract. Thus, to find that Gartner assented to such a modification would require one to believe that Gartner wished to waive its contractual right “unilaterally—only a month into the work, and in exchange for nothing.” Because evidence conflicted as to whether Gartner assented to the modification, the court found that a question of fact remained for trial and denied Consigli/JFW’s motion for summary judgment.

Click here for full text of decision courtesy of LexisNexis.

Stephen W. Kiefer

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