Connecticut Supreme Court Construes “Active Interference” Exception to “No-Damage-for-Delay” Clause

C&H Electric, Inc. v. Town of Bethel, 312 Conn. 843, 2014 Conn. LEXIS 263 (Aug. 5, 2014)

This dispute arose out of a project to renovate and build an addition at a high school in the Town of Bethel, Connecticut.  The plaintiff, C&H Electric, entered into a contract with the defendant, the Town of Bethel, to perform the electrical work on the project.  The parties’ contract included a “no damages for delay” clause, limiting the defendant’s liability for delays it caused on the project.  The no damages for delay clause specified that an extension of time would be plaintiff’s “sole remedy” for “(1) delays in the commencement, prosecution or completion of the work, (2) hindrance or obstruction in the performance of the work, (3) loss of productivity, or (4) other similar claims whether or not such delays are foreseeable, contemplated, or uncontemplated . . .”  The contract included a single exception to the no damages for delay clause, which allowed the plaintiff to recover for delays caused by acts of the defendant “constituting active interference with [the plaintiff’s] performance of the work.”  While the contract did not define “active interference,” it did specify that the defendant’s exercise of its contractual rights, including its right to suspend, reschedule or change the work, would not constitute “active interference.”

Prior to entering into the contract with plaintiff, the defendant began a project to remove asbestos from the high school.  The defendant originally planned that the asbestos abatement work would be complete prior to the plaintiff beginning work.  However, the abatement work was only approximately 70% complete before the plaintiff began work.  While the defendant discussed the delays in the abatement work during public meetings, it did not revise the project specifications to reflect the remaining abatement work, nor did it discuss the remaining abatement work with the plaintiff.

The plaintiff began work in February 2007 and progressed as planned until the summer of 2007 when the abatement work resumed.  Because of the abatement work, plaintiff could not access certain areas of the project.  This forced the plaintiff to move its crews and equipment to and from the same areas of the project numerous times to complete its work.  Despite the logistical challenges, plaintiff completed its work on time.  However, it submitted a claim to the defendant for the added costs of lost productivity resulting from the inefficient work process.

At trial, the plaintiff argued that to overcome the no damages for delay clause, it only need to prove that the defendant committed some affirmative, willful act that unreasonably interfered with its work on the project.  The plaintiff claimed that the defendant’s failure to inform plaintiff of the anticipated abatement work and its failure to provide unrestricted access to the worksite fell within the exceptions to no damage for delay clauses articulated in White Oak Corp. v. Dept. of Transportation, 217 Conn. 281, 585 A.2d 1199 (1991).  The defendant argued that the active interference exception required plaintiff to show that the defendant actions constituted bad faith, wilful, malicious, or grossly negligent conduct.  The trial court agreed with the defendant and concluded that the plaintiff did not show the defendant’s actions met this standard for active interference.

On appeal, the Supreme Court of Connecticut addressed the standard for the “active interference” exception to the contract’s no damage for delay clause.  The Court first explained that in White Oak, it adopted four common law exceptions to no damage for delay clauses: (1) delays caused by the owner’s bad faith or its willful or grossly negligent conduct, (2) uncontemplated delays, (3) delays constituting intentional abandonment of the contract, and (4) delays from the owner’s breach of a fundamental contract obligation.

After reviewing White Oak and cases from other jurisdictions, the Court determined that “active interference” does not require bad faith or malicious intent, but does require a willful act.  It explained that “active interference” does requires “something greater than ordinary negligence or passive omission, that is, conduct more affirmative and willful than a ‘simple mistake, error in judgment, lack of total effort, or lack of complete diligence.’”  The Court also interpreted the parties contractual exception to the no damage for delay clause to require something more than an ordinary construction delay and that the “conduct giving rise to the delay and the delay itself must be truly unreasonable to expose the [defendant] to liability.”    The Court concluded that “to establish active interference, the plaintiff must prove that the [defendant] committed an affirmative, willful act that unreasonably interfered with the plaintiff’s work and that this act must be more than a mistake, error in judgment, lack of total effort, or lack of diligence.”

The Court then analyzed plaintiff’s two claims for active interference: (1) that the defendant concealed the abatement work from the plaintiff while knowing that it would cause plaintiff delays and lost productivity and (2) the defendant’s coordination and failure to update the specifications interfered with plaintiff’s ability to complete the work.

On the first claim, the Court concluded that evidence reflected that the town did not conceal the abatement work from plaintiff and that it did not know the abatement work would interfere with plaintiff.  The Court identified evidence suggesting that the defendant repeatedly discussed at public meetings the ongoing abatement work and that the defendant believed that the abatement work was sufficiently advanced for the plaintiff to commence its work.  The Court explained that the defendant’s decision to start plaintiff’s work, “supported by an environmental consultant, later proved to be erroneous does not transform the [defendant’s] mistake or error in judgment into active interference.”  Id.  Likewise, the court explained that the defendant’s failure to affirmatively disclose to plaintiff the remaining abatement work was a result of a “mistake or oversight [which] is not enough to satisfy the active interference exception in the contract.”

For plaintiff’s second claim, the Court explained that the parties contract “categorically excluded from the meaning of ‘active interference’ any rescheduling or suspension of the work by [defendant], irrespective of the extent and frequency that the [defendant] exercised these rights.”  The Court concluded that the defendant’s “less than fastidious” coordination of the work and project did not actively interfere with the plaintiff’s work.

Finally, the Court addressed plaintiff’s argument that it can recover damages based on two of the common law exceptions to the no damage delay claims set forth in White Oak.  The plaintiff claimed that the White Oak bad faith exception and breach of fundament obligation exception applied and it was entitled to damages.  With respect to the bad faith exception, the Court concluded that “[h]aving failed to establish that the [defendant] actively interfered, the plaintiff necessarily has not demonstrated that the [defendant] acted in bad faith or with gross negligence.”  With respect to the breach of fundamental obligation claim, the Court explained that the breach must be more than an ordinary breach and usually involves the owner failing to obtain title to the worksite or making it available to a contractor.  Although the plaintiff did not have access to portions of the site at certain times, the Court explained that it had sufficient access to the site to complete the project on time.  Thus, the Court concluded that the plaintiff failed to establish the defendant breached a fundamental obligation of the contract.

To view the full text of this decision, courtesy of Lexis ®, click here.

Jason C. Spang

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