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Cumberland Farms, Inc. v. Tenacity Construction, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

November 16, 2016

Cumberland Farms, Inc.
Tenacity Construction, Inc. No. 135610


          Janet L. Sanders, Justice

         This case arises from a project for the construction of facilities located in Rhode Island and Massachusetts. The plaintiff Cumberland Farms, Inc. (CFI) is the owner of the properties on which the facilities were built. The defendant Tenacity Construction, Inc. (Tenacity) was the general contractor. CFI instituted this action to recover the difference between what it believes that it was obligated to pay Tenacity for its work and what it ended up paying, taking into account those amounts that CFI paid to Tenacity's subcontractors on Tenacity's behalf.. Tenacity counterclaimed, maintaining that CFI wrongfully failed to pay Tenacity for costs attributable to winter conditions and that, to the extent it could not pay its subcontractors, this was due to CFI's breach of contract. CFI now moves for judgment as to Tenacity's counterclaims against it. Tenacity has cross moved as to the same claims, asking this Court to enter judgment in its favor. This Court concludes that CFI's Motion must be Allowed and that Tenacity's Motion must be Denied .


         The following facts in the summary judgment record are undisputed.[1] CFI owns properties located at 15 Main Street in Northborough, Massachusetts (the Northborough Property) and at 2643 Hartford Avenue in Johnston, Rhode Island (the Johnston Property). CFI retained Tenacity as general contractor for the construction of a gas station/convenience store on the Northborough Property (the Northborough Project) and construction of a similar facility together with office space on the Johnston Property (the Johnston Project). On September 23, 2013, the parties entered into two construction contracts (the Master Contract) that governed Tenacity's work. Ex. 8 of Joint Appendix. Under the Master Contract, Tenacity was responsible for paying the subcontractors on both Projects.

         The Master Contract expressly incorporated two Work Orders, one for each Project The Northborough Project Work Order provided that work was to start at the Northborough Property on October 7, 2013 and be completed within 112 days (January 27, 2014). The Johnston Project Work Order stated that work was to begin November 4, 2013, and was to be completed within 140 days (March 24, 2013). Both projects were substantially delayed: the Johnston Project was completed May 6, 2014 and the Northborough Project completed on April 28, 2014.

         Tenacity's counterclaim concerns the additional costs it alleges that it was forced to incur as a result of harsh winter conditions and is based on its assertion that CFI is responsible for those additional expenses. According to the summary judgment record, the parties met in January 30, 2014 to discuss the impact that these winter conditions were having on completion of the projects. CFI agreed at that meeting that Tenacity would be paid for additional work due to winter conditions on a " time and materials" basis, as provided by the Master Contract. In the winter and spring of 2014, Tenacity submitted change order requests for time and materials due to winter conditions and CFI approved and paid all of them. Those requests included a markup for Tenacity's overhead and profit. Every request was paid in full.

         In a May 30, 2014 letter to CFI, Tenacity stated that it was entitled to an " equitable adjustment" to the Master Contract price for certain indirect costs attributable to winter conditions-- namely, those associated with diminished productivity and decreased efficiency in performing the work. Tenacity had expressed concern at the earlier meeting on January 30 that these indirect costs would not be covered by compensating it on strictly a time and materials basis. Other than CFI's indicating that it would " wait and see how it goes, " there is nothing in the summary judgment record to show that CFI at any time agreed to compensate Tenacity for these indirect costs.

         On June 6, 2014, Tenacity submitted a breakdown of costs that it sought in connection with this request to adjust the contract price. CFI asked for backup information on June 17, 2014 and on June 25, 2014. On July 8, 2014, CFI sent an email to Tenacity denying any responsibility for lost productivity costs but offered some amount in an effort to settle the dispute. Shortly thereafter, however, Tenacity informed CFI that it had been unable to make final payments to subcontractors and suppliers due to cash flow issues.

         At CFI's request, Tenacity provided CFI with a list of those subcontractors and suppliers who had not been paid, together with an amount believed to be due to each. Pursuant to 8(i) of the Master Contract, CFI had the right to pay off these obligations directly, upon notice to Tenacity. This notice was given by an August 1, 2014, letter to Tenacity. On August 8, 2014, CFI sent an email to Tenacity's subcontractors and suppliers directing them to submit claims for outstanding payments to CFI. Over the next six months, CFI personnel reviewed and processed requests for payment from dozens of subcontractors and suppliers, confirming that there was backup documentation for them and that Tenacity had approved the work performed before any payment was made.

         CFI made payments directly to subcontractors and suppliers in the total amount of $790, 650.64. CFI made payments to Tenacity pursuant to the Master Contract (together with change orders) in the total amount of $2, 983, 261.92.[2] Because the sum of these two figures exceeded that amount CFI believed that it was obligated to pay Tenacity, it refused to release retainage funds. It also brought this lawsuit seeking to recover the difference between that amount it alleges that it was obligated to pay pursuant to the Master Contract and that amount it actually paid, taking into account the subcontractor payments. In counterclaiming, Tenacity asserts that CFI's wrongful refusal to adjust the contract price for winter conditions and its retention of retainage amounts has caused Tenacity to suffer damages.


         Tenacity's counterclaim alleges the following: breach of contract (Count I), unjust enrichment/quantum meruit (Count II), detrimental reliance/promissory estoppel (Count III), declaratory judgment (Count IV) and a violation of G.L.c. 93A (Count V). Each of these counts depends upon Tenacity's theory that it is entitled to an equitable adjustment to the Master Contract price for the loss of productivity due to winter conditions. In moving for summary judgment in its favor on all counts, CFI contends that the damages that Tenacity seeks to recover are expressly precluded by the Master Contract, and that the undisputed facts show that there was no modification of this provision. This Court is convinced that CFI's position is the correct one.

         Tenacity acknowledges that a claim for an equitable adjustment does not lie where the contract itself limits the remedies or prevents the recovery sought. That is precisely the case here. The Master Contract contains a broad " no damages for delay" clause that applies not only where the work force is idle and cannot perform any work but also where there is interference with or obstructions to the work so as to delay its completion. Specifically, Section 6(e) of the Master Contract states:

Except as otherwise provided by law, should contractor's performance in whole or in part be interfered with, delayed, resequenced or disrupted, or be suspended in the commencement, prosecution or completion for reasons beyond Contractor's control . . . Contractor's sole remedy ...

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