Date March 30, 2016
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT
L. Sanders, Justice of the Superior Court.
a contract dispute arising from a state-and federally-funded
project to design and construct a fiber optic network in
western Massachusetts. Plaintiff G4S Technology, LLC (G4S),
the design-builder on the project, claims that the defendant
Massachusetts Technology Park Corporation (MTPC) wrongfully
denied a $10.1 Million " Request for Adjustment"
claim, and that MTPC improperly withheld an additional $4.1
Million based on unfounded claims of late delivery and poor
quality of work. G4S asserts claims for breach of contract
and breach of warranty, and (by way of a motion to amend) for
quantum meruit. MTPC, in turn, brings counterclaims against
G4S alleging (among other things) fraud and violation of
G.L.c. 93A; it seeks several million dollars of additional
damages beyond the retained amount. MTPC now moves for
summary judgment as to G4S's claims against it, asserting
that G4S is precluded from recovery because it intentionally
breached its own contractual obligations. MTPC also moves for
summary judgment in its favor on some of its counterclaims.
For the reasons set forth below MTPC's Motion is
Allowed as to G4S's Complaint but
Denied as to MTPC's counterclaims.
a state development agency established and organized under
G.L.c. 40J. In July 2010, it received both state and federal
funding to build a 1, 200-mile fiber optic network known as
MassBroadband123 in western Massachusetts (the Project). Of
that amount, $45.4 million was awarded pursuant to the
American Recovery and Reinvestment Act of 2009 (ARRA), Pub.
L. No. 111-5. One of the stated goals of ARRA was (as its
title suggests) to create jobs in the wake of the 2008
recession and to provide a direct financial boost to those
impacted by the economic crisis. In the context of the
instant case, that meant that, if there were to be
subcontractors on the job providing labor and materials, they
needed to be paid on a timely basis in keeping with the
statutory purpose of stimulating the economy.
put the Project out for a public bid, and a design-build
contract with G4S was executed on June 30, 2011 (the
Contract). In line with federal requirements, the Contract
had specific provisions to ensure timely payment of
subcontractors. Specifically, Section 6.3.1 of the Contract
Design Builder [G4S] will pay Design Consultants and
Subcontractors, in accordance with its contractual
obligations to such parties and subject to any provisions of
such contracts regarding the withholding of sums from any
subcontractor or design consultants for their non-compliance
with or non-performance of their contracts, all the amounts
Design-Builder [G4S] has received from Owner [MTPC] on
account of their work.
sure that G4S honored this obligation, the Contract stated
that G4S had to include with its own applications for payment
a " progress payment release" (the Certification).
See Section 6.1.1 of Contract. The Certification (attached to
the Contract as Exhibit B-1) stated that G4S "
represents and warrants" that:
all subcontractors, suppliers and equipment providers of the
undersigned have been paid in full all amounts due to them up
to the date of this Certification, and that sums received in
payment for the Amount Requested shall be used to forthwith
pay in full all amounts due to such subcontractors,
suppliers, and equipment providers up to the date hereof.
at Exhibit B-1, ¶ E. The Contract made the submissions
of these Certifications part of the " Work" G4S
agreed to perform. See Section 1.2.13 of the General
Conditions of Contract (defining " Work"). Finally,
the Contract stated that G4S had to comply with all
applicable state and federal laws, including the False Claims
Act, 31 U.S.C. § § 3729-3733, and the Massachusetts
False Claims Act, G.L.c. 12, § § 5A-5O. See Section
188.8.131.52 of General Conditions of Contract. The False Claims
Act makes it unlawful to knowingly make a false statement in
order to get a claim for payment approved where the federal
government provides some portion of that reimbursement. 31
U.S.C. § 3729(a) and (c).
Project progressed, G4S submitted dozens of Applications for
Payment accompanied by the signed Certifications that were
necessary in order to obtain payments from MTPC. In each of
those submissions, G4S certified that all of its
subcontractors had been paid the amounts due them at the time
the Certification was executed. It is undisputed that this
was not true. The summary judgment record shows that G4S
understood at the time that this conduct was in violation of
the Contract. It also shows that the reason for the delay in
payment to at least some (if not all) subcontractors was to
improve G4S's own financial picture. This was not limited
to a handful of occasions but was repeated and continuous
conduct that spanned more than a year.
as to G4S's conduct, knowledge and motivation is found in
G4S's own business records and in internal correspondence
as well as the deposition testimony of key G4S employees. For
example, Judith Krantz, G4S's Contract Manager
responsible for paying subcontractors, acknowledged in
contemporaneous emails and in her later deposition that, even
as G4S was certifying to MTPC that all amounts due had been
paid to subcontractors, there were in fact past due invoices
for significant sums that were outstanding at the time the
Certifications were executed. Krantz knew this, yet submitted
the Certifications anyway. Among those who did not receive
timely payments were NextGen, Gannett-Fleming, Phoenix, Penta
Communications, Annese Electric, and Tower Resources
Management, Inc. There is undisputed evidence that G4S timed
its payments to these subcontractors so that they occurred
after G4S's own quarterly financial statements came out.
In one internal email dated September 25, 2012, G4S project
manager Scott Mailman pointedly criticized this practice,
writing: " How can we tell subs that they aren't
getting paid so our books look better? There's something
wrong with that."
delays did not go unnoticed by the subcontractors, who in
some instances strongly objected and threatened to shut down
work or pull crews if G4S continued to withhold payments even
as it was getting paid by MTPC. As one subcontractor stated
in an email to G4S's Treasurer: " I think it is
extremely unfair that you are not honoring our contract . . .
The issue that bothers me the most is that you are not making
payment to better your books but don't care about the
books of the companies that support you." In September
2012 emails to Krantz, subcontractor NextGen noted that it
had past due invoices to G4S in the amount of $358, 275; a
NextGen representative stated that " [t]his is a "
significant problem for us" and that "
nextGen's cash flow challenges will be exacerbated as we
ramp up our number of crews if we are not paid within
[contract] terms." In December 2012, another unpaid
subcontractor (Annese) actually threatened to stop work
because of unpaid invoices and then in June 2013, emailed G4S
again to complain, citing specific sections of the
subcontract that required payment within a certain time.
Annese made the same threat again in December 2013, when G4S
persisted in its practice of late payments. When
subcontractor Penta asked on December 2013 about its
outstanding invoices, Krantz informed it that " all
subcontract payments are on hold until after the first of the
year, " prompting a Penta representative to reply:
" That is not acceptable. This money is due and I need
to collect it before the end of the year. This is a direct
violation of the contract." It too threatened to pull
crews off the job on more than one occasion. Even as these
objections and complaints were being made, G4S continued to
submit to MTPC Certifications that these subcontractors had
been paid for all amounts due in order to obtain full payment
point, a dispute developed between the parties over which of
them was responsible for delays and disruptions connected to
the Project, and MTPC decided to withhold funds from G4S. In
response, G4S commenced this action in September 2014. In