Massachusetts Appellate Court Holds That No-Damages-for-Delay Clause Does Not Bar Claim for Schedule Compression and Affirms Award of Total Cost Damages

Central Ceilings, Inc. v. Suffolk Constr. Co., Inc., 2017 Mass App. Lexis 36 (March 29, 2017).

 The Massachusetts State College Building Authority contracted with Suffolk Construction Company (“Suffolk”) to serve as the general contractor for the construction of dormitories at Westfield State University (“the Project”). Suffolk subcontracted with Central Ceilings, Inc. (“Central”) to install interior and exterior framing, drywall, and door frames for the Project.

Central’s work was impeded by Suffolk’s failure to: coordinate the work of other trades; establish proper elevation, column, and control lines; timely and properly coordinate delivery of the door frames; and ensure that the buildings were weather-tight and properly heated. Its workers were forced to repeatedly demobilize from one area and remobilize in another, and to work in the same space and at the same time as other subcontractors, i.e. stacking of trades.  Central’s project manager and other supervisors were forced to coordinate and administrate the remobilizations.  Both the remobilizations and the stacking of trades significantly increased Central’s labor costs.

In addition, Central’s start dates were consistently pushed back, while its completion dates remained the same, such that the time within which it had to perform was constantly compressed. Suffolk, whose contract provided for a bonus for completing the Project on time and liquidated damages for failing to complete the Project on time, advised Central that no time extensions would be granted.  Suffolk essentially directed Central to accelerate by adding manpower to keep the Project on schedule, which also increased Central’s labor costs.

The Project was ultimately completed on time. Central subsequently brought a breach of contract suit against Suffolk, claiming that Suffolk’s failures to adequately coordinate the Project had resulted in increased labor costs.  During a bench trial, Central’s damages expert testified that the pervasive nature of Suffolk’s breaches made it impossible to identify an adequate baseline for assessing increased costs on an event-by-event basis.  Instead, Central’s increased labor costs were best measured by subtracting Central’s original estimate for labor costs from the actual labor costs it incurred on the project, i.e. the total cost method, to arrive at a total of $321,315.  The court found Central’s damages expert to be credible, held in favor of Central, and awarded it $321,315.

Suffolk appealed, arguing that the award contravened the contract’s no-damages-for-delay clause, which provided that Central’s sole remedy for any delay it encountered was a time extension. The appeals court disagreed, holding that the no-damages-for delay clause was inapplicable for two reasons.  First, the court found that Central was not seeking damages because it had been delayed, but rather because it had been forced to increase its workforce due to the compression of the schedule occasioned by Suffolk’s breaches.  As the court explained, Suffolk’s breaches didn’t affect Central’s ability to complete its work on time, but rather its ability to complete its work on budget.  The no-damages-for-delay clause, which the court was required to strictly construe, didn’t apply to this situation.

Even if Central had been seeking damages for delay, the no-damages-for-delay clause would have been inapplicable for the independent reason that Suffolk’s refusal to grant time extensions operated to deprive Central of its sole remedy under the clause. Suffolk’s action to deprive Central of its remedy for delay was a material breach of the no-damages-for-delay clause that precluded Suffolk’s ability to enforce it against Central.

Suffolk also argued that the court should not have measured Central’s damages using the total cost method. Suffolk pointed to case law in which courts had characterized the total cost method as a “method of last resort,” and contended that Central had failed to establish that its use of the total cost method was appropriate.  The appeals court acknowledged that the total cost method is generally disfavored, but found no basis on which to disturb the trial court’s finding that Central’s damages expert was credible.  The appeals court upheld the trial court’s award to Central.

To view the full text of the court’s decision, courtesy of Lexis®click here.

Jane Fox Lehman

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