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Tutor Perini Corp. v. Montgomery Kone, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

May 16, 2016

Tutor Perini Corporation et al., Joint Venture
v.
Montgomery Kone, Inc. et al No. 133751

          MEMORANDUM OF DECISION AND ORDER ON THE DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          Mitchell H. Kaplan, Justice

         The plaintiff, Tutor Perini Corporation, Kiewit Construction Co., Inc., Jay Cashman, Inc. d/b/a Perini-Kiewit-Cashman, Joint Venture (PKC), was the general contractor on the Central Artery/Tunnel Project often colloquially referred to as the " Big Dig" (the Project). PKC entered into the prime contract with the Massachusetts Highway Department (MHD) for construction of the Project in 1995 (the Contract). (For ease of reference the court will refer to the counterparty to the Contract as the parties to this case have: either " CA/T, " which is an acronym for Central Artery/Tunnel, or, when appropriate, the " Owner"). The defendant, Montgomery Kone, Inc. (Kone), entered into a subcontract with PKC covering that part of the Project that required the installation of elevators and escalators associated with the construction and renovation of MBTA stations for the Silver Line and Red Lines in the area of South Station (the Subcontract). The defendant Federal Insurance Company (Federal) furnished a performance bond in favor of PKC covering Kone's work under the Subcontract (the Bond). In this action, PKC alleges that Kone breached the Subcontract and seeks to recover resulting damages from Kone (Count I) and to hold Federal liable to it under the Bond (Count II). The case is before the court on the defendants' motions for summary judgment.

         Kone's motion relies principally on the defensive use of principles of collateral estoppel, more particularly issue preclusion. It argues that facts found in an arbitral proceeding to which PKC was a party establish a defense precluding recovery in this case. Federal's motion is based on its contention that the two-year statute of limitations set out in the Bond for filing a claim against the Bond expired before this action was filed. For the reasons that follow, Kone's motion is DENIED and Federal's motion is ALLOWED.

         FACTS

         The following relevant facts are taken from the summary judgment record and are either undisputed or viewed in the light most favorable to PKC, the non-moving party. The original Contract price was $377, 933, 000 and the Subcontract price was $3, 400, 000.

         The Contract required completion of certain milestones by specific dates. Two of these milestones are relevant to this case: Milestone 7 called for the Owner to have access to the work associated with the South Station renovations by a date certain and Milestone 2 provided the date by which the Owner was to have access to the entire Project. The Contract also established liquidated damages of differing amounts to be awarded for each day PKC was late in meeting a particular milestone. The scheduled completion dates were revised by CA/T and PKC from time to time during the course of the project. The final " approved" schedule was adopted in May 1999; it was referred to as Schedule 76Bs. It called for Kone's work to be completed by September 2002. Kone's final elevator installation was not accepted by the CA/T until January 2004.

         Beginning in October 2001 and continuing through 2003, PKC sent Kone a number of letters in which it advised Kone that it was missing scheduled dates for completion of its work under the Subcontract. The following sentence taken from an April 22, 2002 letter from PKC to Kone is typical of the concerns and admonitions expressed in the letters: " PKC wishes to inform you that should the completion of these units [elevators] run beyond the discussed time periods and result in schedule delays, PKC will begin to assess daily damage charges to KONE, totaling $14, 000/day, equivalent to the amount assessed PKC by the Central Artery Project."

         As everyone then living or working in downtown Boston during this period is aware, the Project was not completed within the time originally planned. It was also not completed by the dates set out in 76Bs. The extent to which any of the Project delays may be attributable to Kone's failure to perform according to the Subcontract is in substantial dispute and the subject of this litigation.

         An additional, confounding issue is also relevant to this dispute. CA/T directed that Atlantic Avenue be opened to traffic in June 2002. This was later than the date required by 76Bs, but changed the sequence of planned events along the " Critical Path" to completion of the Project. Under the Contract, Atlantic Avenue was not to be fully reopened until substantial completion of all the work on the Project; this sequencing would provide easier access to contractors engaged in Project work along the Atlantic Avenue area. Following the opening of Atlantic Avenue, it appears that no formal changes to the 76Bs were agreed upon, but rather PKC and CA/T engaged in " partnering sessions" in which the work to be accomplished over the next few weeks was periodically discussed.

         As might be expected, a number of disputes arose between PKC and CA/T concerning who was responsible for the costs associated with project delays. The contract had a dispute resolution procedure that was amended from time-to-time. In 2006, PKC submitted a dispute to a third panel of a " Dispute Resolution Board, " referred to by the parties as " DRB3, " which PKC called " The Omnibus Time Impact Claim." In this claim, PKC requested payment for project delays for two periods: a period that PKC called the 76Bs period which PKC maintained ended on December 31, 2001; and the Partnering Period that ran from January 1, 2002 to the project end. The DRB3 issued a decision on that claim on March 23, 2009.

         It appears that at one time there was some lack of agreement among the parties and the DRB3 concerning whether the DRB3's decision was in itself an " arbitral award" or only a recommendation to the Chief Engineer of the Massachusetts Turnpike Authority (the Chief Engineer), who the CA/T maintained was the person authorized by the Contract and G.L.c. 30 and c. 149 to render decisions on disputes between CA/T and PKC, subject to further review by appeal to either the MHD Board of Contract Appeals or the Superior Court. In any event, in this case the parties have agreed that the Chief Engineer's Decision (CE Decision), dated April 9, 2009, on the matters submitted to the DRB3, constituted the final arbitrator's judgment resolving this dispute, as it was not appealed. The CE Decision concluded that: (1) PKC was not entitled to a time extension for the Project to January 23, 2004; (2) PKC's claim for damages for delay during that period was denied; and (3) " [a]s a result of this decision, PKC shall be assessed Liquidated Damages for its delay in accordance with the Contract requirements." Some three and a half years later, on December 12, 2010, the MHD issued a contract modification which had the effect of assessing liquidated damages against PKC in the amount of $13, 046, 000; it included $6, 190, 000 for delays in meeting Milestone 2 and $3, 764, 000 in meeting Milestone 7. In this action PKC seeks to recover from Kone a portion of these liquidated damages, as well as certain additional overhead costs that it alleges it incurred because Kone's breach of the Subcontract caused delay in the completion of the Project and, in consequence, PKC incurred additional costs that would have been avoided if it had been able to remove its team and equipment from the Project at an earlier date.

         Certain statements set out in the relatively brief CE Decision (which is substantially shorter than the DRB3 Decision) are central to Kone's arguments in this motion.

[The DRB3's] view of the abandonment of 76Bs Schedule, namely that 76Bs was " mutually abandoned" is in direct conflict with the contemporaneous project record and the parties' presentations . . . In fact, a major focus of the partnering schedule discussions involved PKC's efforts to provide appropriate manpower to support or recover the 76Bs planned schedule.
The DRB poses the following question: " what happens if there is no current accepted progress schedule . . ." The DRB misses the point. There was an accepted progress schedule in 76Bs. PKC abandoned it. Accordingly, PKC cannot benefit from its own breach of contract. The partnering sessions did not change the contractual schedule . . . PKC did not provide a schedule analysis contemporaneously or after-the-fact to support any of its allegations. In fact, the DRB has noted that PKC's so-called Revision C " Partnering Schedule" showed that the directives would not have caused any delays to the project completion date.
I concur with the DRB's conclusion that delays of PKC's elevator subcontractor Kone substantially impacted PKC's operations in the MBTA Station. I also concur with DRB's finding that these delays are not the responsibility of the CA/T, nor are they compensable or excusable under the Contract . . . The facts are that in addition to Kone's problems, PKC did many things wrong.
On January 11, 2002, the CA/T and PKC agreed in a partnering session to recover the date of the re-opening of Atlantic Avenue to the northbound arterial traffic. For months prior to this date PKC was not meeting the progress required by the 76Bs Schedule.

         A further dispute concerning PKC's entitlement to additional compensation for Contract changes was decided by a DRB4 in a decision dated January 15, 2011. This again addressed issues relating to the opening of Atlantic Avenue before the Project was substantially completed. Here, DRB4 held that, although PKC breached the Contract because of its delay in achieving substantial completion, CA/T directed PKC to continue to work toward completion and " there was a mutual agreement in a spirit of partnering by which PKC would resequence its work in such a manner as to expedite the opening of Atlantic Avenue, an event which was neither on the critical path nor a milestone." The DRB4 held that PKC was " entitled to compensation for the mutually agreed resequencing of ...


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