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LLC v. Massachusetts Techology Park Corp.

Superior Court of Massachusetts, Suffolk

March 29, 2016

G4S Technology, LLC
v.
Massachusetts Techology Park Corporation No. 133433

          Filed Date March 30, 2016

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          Janet L. Sanders, Justice of the Superior Court.

         This is 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.[1] 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.[2]

         BACKGROUND

         MTPC is 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.

         MTPC 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 stated:

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.

         To make 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.

         Contract 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 2.18.1.4 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).

         As the 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.

         Evidence 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."

         These 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 for itself.

         At some 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 ...


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