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LLC v. Massachusetts Technology Park Corp.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

January 30, 2017

G4S Technology, LLC
v.
Massachusetts Technology Park Corporation No. 136536

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

          Janet L. Sanders, Justice of the Superior Court.

         This is a contract-based 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, instituted the lawsuit claiming that the defendant Massachusetts Technology Park Corporation (MTPC) wrongfully denied a $10.1 Million " Request for Adjustment" claim and improperly withheld an additional $4.1 Million based on unfounded claims of late delivery and poor quality of work. MTPC counterclaimed, alleging fraud and violation of Chapter 93A.[1] In an earlier decision, this Court allowed MTPC's motion for summary judgment as to G4S's claims, relying on appellate case law which held that an intentional breach by one of the parties to a contract prevented it from recovering on its own contract-based claims so long as that breach was not de minimis . See Memorandum of Decision and Order dated March 29, 2016 (the March 2016 Decision).

         Now before the Court are two motions. The first is G4S's Motion for Partial Summary Judgment on so much of MTPC's counterclaim That asserts a 93A violation.[2] Among other arguments, G4S contends that MTPC is not engaged in " trade or commerce" and thus may not proceed under G.L.c. 93A, § 11. The second motion is brought by MTPC and seeks judgment in its favor on both the Chapter 93A claim and the common-law claim of fraud. In opposing that motion, G4S argues that it is entitled to judgment its favor because MTPC cannot demonstrate that it has suffered any damages, particularly in light of the fact that it has already been successful in obtaining this Court's ruling that G4S cannot assert its own claims. This Court concludes that G4S's Motion must be Allowed, MTPC's motion must be Denied and that both the 93A and the fraud counts must be dismissed.

         BACKGROUND

          MTPC is a state development agency established and organized under Chapter 401. As stated in the enabling legislation, its purpose is to " foster the expansion of industrial and commercial activity and employment opportunities in the commonwealth." G.L.c. 40J, § 1A. One of MTPC's divisions, Massachusetts Broadband Institute (MBI), is charged with expanding the broadband infrastructure in Massachusetts. G.L.c. 40J, § 6B(b). In 2010, consistent with these purposes, MTPC received $45.4 million in federal funding together with additional money from the state to build MassBroadband 123 (the Project). The federal funds were stimulus money allocated through the American Recovery and Reinvestment Act of 2009.

         The Project involved the creation of a 1, 200-mile fiber optic network. As described on MBI's website, the Project, once completed, would allow public safety entities, schools, libraries, medical facilities and town halls in western Massachusetts to get high speed internet access. This would in turn " provide the necessary broadband infrastructure to foster economic growth, improve health care and education, and strengthen public safety." MTPC put the Project out to public bid and ultimately selected G4S as the design builder of the Project. A design build contract between the two was executed on June 30, 2011 (the Contract).

         A Request for Proposal, incorporated into the Contract, indicated that, once complete, the broadband network would be turned over in segments to MTPC's chosen " Network Operator." The Network Operator would make the expanded network available to targeted communities for a fee which would then be turned over to MTPC. MTPC uses the monies generated from that fee to offset certain expenses incurred in connection with the network and to create a reserve fund for the network's eventual upgrade, consistent with its legislative mandate.

         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, excluding only the value of any Pending Changes and Disputed Claims submitted in accordance with the General Conditions of the Contract.

Exhibit B-1 to Contract, ¶ E. The Contract provided that if G4S failed to pay a subcontractor in a timely fashion without cause, then MTPC could withhold payment to G4S. See 10.2.1, 10.2.3 of Contract. 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.

         As explained in this Court's March 2016 ruling, it is undisputed that this was not true. Moreover, the summary judgment record shows that: a) G4S understood at the time that this conduct was in violation of the Contract; and b) 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.[3]

         On January 20, 2015, a Certification of Final Completion was issued pursuant to the Contract. MTPC withheld over $4 million of the original contract price. Of That amount, $3.2 million was for liquidated damages under Article 4 of the Contract as ...


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