Jeffrey M. Brown Associates, Inc. v. Stone Cast, Inc.

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re:
Stone Cast, Inc., 	Chapter 11
Case No. 11-1045-1 (REL)
Debtor.
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Jeffrey M. Brown Associates, Inc.,
Plaintiff,
v. 	Adv. Pro. No. 11-08337 (RDD)
Stone Cast, Inc.,
Defendant.
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APPEARANCES:
Howard Blum, P.C., by Howard Blum, Esq. and Platzer, Swergold, Karlin, Levine, Goldberg &
Jaslow, LLP, by Clifford A. Katz,. Esq. and Mitchell L. Kaplan, Esq., for Jeffrey M. Brown
Associates, Inc.
Couch Dale Marshall P.C., by Mark W. Couch, Esq., for Stone Cast, Inc.
MEMORANDUM OF DECISION AFTER TRIAL
Hon. Robert D. Drain, United States Bankruptcy Judge
This adversary proceeding, commenced in the Supreme Court of the State of New
York, County of New York, Index No. 602603/06, was removed to the Bankruptcy Court for the
Northern District of New York pursuant to 28 U.S.C. § 1452(a) and then, by Stipulation and
Order on Consent, dated August 3, 2011, to this Court. 1 The parties originally asserted claims
against each other arising out of the construction of a parking garage for Fordham University.
However, before removal, the state court (Stallman, J.) granted Stone Cast Inc.’s (“Stone Cast”)
motion for summary judgment on the claims of Jeffrey M. Brown Associates, Inc. (“JMB”), the
1 The chapter 11 case of Stone Cast, Inc., the debtor herein, is pending in the Northern District of New York.
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prime contractor,2 and JMB has not pursued any remaining claims against Stone Cast that might
have been left open by Justice Stallman’s ruling. Left to be decided after pretrial rulings by this
Court, therefore, is the contract claim against JMB of Stone Cast, the subcontractor responsible
for providing the exterior stone “envelope” for the garage. This memorandum of decision is
based on the evidence admitted during the one-day bench trial of that claim, including the
testimony of the parties’ four witnesses, as well as the parties’ post-trial submissions.
Jurisdiction
The Court has jurisdiction over this adversary proceeding, which is related to
Stone Cast’s chapter 11 case, pursuant to 28 U.S.C. §§ 157(a)-(b) and 1334(b). This is not a core
proceeding under 28 U.S.C. § 157(b), but the parties have consented to this Court’s
determination of Stone Cast’s claim under 28 U.S.C. § 157(c)(2); see also Dynegy
Danskammer, LLC v. Peabody COALTRADE Int’l Ltd., 905 F. Supp. 2d 526, 530 (S.D.N.Y.
2012); Executive Sounding Bd. Assocs. v. Advanced Mach. & Eng’g Co. (In re Oldco M Corp.),
484 B.R. 598, 606-08, 614 (Bankr. S.D.N.Y. 2012) (Congress has not precluded Article III,
district courts’ determination of any class of cases, proceedings and matters referred by the
district courts to the Article I, bankruptcy courts; therefore, the bankruptcy courts’ exercise of
jurisdiction on consent does not implicate non-waivable, structural constitutional rights.).
Findings of Fact and Conclusions of Law
JMB and Stone Cast entered into a Purchase Order – Materials agreement (the
“Contract”)3 on March 17, 2005, pursuant to which Stone Cast agreed to provide pre-fabricated
stone base walls, column covers, piers, pedestrian bridge and horizontal panels and related
drawings for a Fordham University parking garage and JMB agreed to pay Stone Cast $2.2
2 See Decision and Order in Jeffrey M. Brown, Assocs., Inc. v. Stone Cast, Inc., Index No. 602603/2006, dated April
22, 2008 (“Summary Judgment Ruling”).
3 Stone Cast Ex. 1, p. 1.
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million for its work. Id. The panels and other pieces were to be delivered to JMB F.O.B. at
Stone Cast’s Fort Edward, New York yard. Id. ¶ 1.1
The Contract scheduled eleven payments to be made to Stone Cast by JMB
between March 5, 2005 and January 5, 2006 in specific amounts based on milestones to be met
by Stone Cast before each payment. Id., p. 1.
The raw materials were to be delivered to Stone Cast’s yard on or about August 1,
2005, and fabricated panels were to be ready for pickup by JMB’s agent starting on November 1,
2005 and completed for final pickup by January 3, 2006. Id., p. 2. Under ¶ 7.1 of the Contract,
“Time is of the essence. [Stone Cast] shall furnish all submittals and materials associated with
this [Contract] by the date or dates set forth herein.”
The Contract also specified that Stone Cast “warrants materials supplied
hereunder to conform to all plans, drawings, and/or specifications, to be fit for purposes
intended, merchantable, and of the highest quality and workmanship.” Id. ¶ 6.1. After a seven-
day notice and cure period, it permits JMB to correct defects or lack of performance and relieves
JMB of its payment obligation pending satisfactory correction or if any work is rejected as non-
conforming. Id.
Consistent with the foregoing paragraph, as well as the Contract’s time-of-the-
essence provision, the parties agreed that JMB “shall promptly advise [Stone Cast] in writing if
the Owner or [JMB] disapproves of or is withholding all or any of a Request for Payment,” id. ¶
3.3, and states, “Both parties agree to endeavor to promptly resolve such disputes on an ongoing
basis.” Id.
Contract ¶ 10.1 provides,
In the event [Stone Cast] fails to comply, or becomes unable to comply, or with
reasonable probability (as determined solely by [JMB]) will become unable to
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comply, with any of the provisions of this [Contract], or in the event [Stone Cast]
fails in any respect to prosecute the work with promptness and diligence, or
causes by any action or omission a stoppage or delay of the work of [JMB] or any
other Supplier of [JMB] and such failure, inability or deficiency (as determined
solely by [JMB]) is not corrected within five days after written demand by [JMB]
to [Stone Cast], [JMB] may, in addition to and without prejudice to any other
right or remedy, take over and complete the performance of the [Contract], at the
expense of [Stone Cast]. [Stone Cast] shall receive no further payment on this
[Contract] until the work has been completed and accepted by the Owner and
payment has been received by [JMB] from the Owner.
In addition to this rather onerous (for Stone Cast) default provision, Contract ¶ 12.1 permits JMB
to terminate for convenience, without cause:
[JMB] may, at any time, terminate this [Contract] in whole or in part via written
notice for [JMB’s] convenience and without cause. [Stone Cast] shall recover as
its sole remedy payment for work properly performed in connection with the
terminated portion of the work prior to the effective date of the termination and
for items properly and timely fabricated off the Project site, delivered and stored
in accordance with [JMB’s] instructions. [Stone Cast] hereby waives and forfeits
all other claims for payment and damage, including, without limitation,
anticipated profits and restocking fees.
The Contract has a New York choice of law provision, id. ¶ 13.1, 4 as well as an
integration clause that requires, except as otherwise provided in the Contract, any amendments or
modifications to be in a written change order signed by the parties. Id. ¶ 2.1. The Contract also
provides, “No payment shall constitute acceptance by [JMB] of the materials for which the
payment is made; nor shall any payment constitute a waiver of any right to require fulfillment of
all the terms of this [Contract].”
Neither the Fordham project nor Stone Cast’s part of it went smoothly. Indeed,
JMB sent Stone Cast two default notices, dated October 24, 20055 and January 17, 2006,6 which
were based on Stone Cast’s asserted failure to comply with the Contract’s original schedule and
4 The parties have correctly assumed that New York law governs this dispute involving a contract made and to be
performed in New York.
5 JMB Ex. 6.
6 JMB Ex. 9.
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a modified timetable agreed by the parties. The parties never entered into a change order altering
the Contract’s schedule or a formal written waiver of the foregoing defaults, although, as
discussed below, consistent with Contract ¶ 3.3, they subsequently agreed on a new method for
payment upon verification of ongoing work.
Ultimately, JMB did not exercise its default rights, including under Contract ¶
10.1. Instead, by letter dated April 24, 2006,7 JMB terminated for convenience under Contract ¶
12.1. As determined by Justice Stallman, that choice precluded JMB from asserting a claim
against Stone Cast for breach of the Contract and failure to cure under ¶ 10.1. Summary
Judgment Ruling at 2, citing Tishman Constr. Corp. v. City of New York, 228 A.D.2d 292 (1 st
Dept. 1996), and Paragon Restoration Grp.. v. Cambridge Sq. Condominiums, 42 A.D.3d 905
(4th Dept. 2007), for the proposition that JMB’s termination for convenience deprived Stone Cast
of its right to cure its alleged failures to perform and therefore precluded JMB’s breach claim.
JMB’s April 24, 2006 termination letter stated that JMB “has arranged for the
immediate removal and transportation of the stockpiled materials that have been previously
requisitioned and paid for by Fordham University which includes but is not necessarily limited to
the Champlain granite, steel molds/forms and epoxy coated rebar,” Joint Ex. 16, which, in a
letter dated May 3, 2014,8 JMB again demanded be readied for pickup. Although JMB’s
complaint did not assert a claim for the return of contract-related materials in Stone Cast’s
possession, the Summary Judgment Ruling left open JMB’s right to amend the complaint to seek
such relief, which is within the contemplation of Contract ¶ 12.1, but JMB has not done so. Nor
did JMB thereafter seek recovery of any materials from Stone Cast.
7 Stone Cast Ex. 16.
8 JMB Ex. 19.
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Thus, the remaining claim in this case (this Court having previously granted
JMB’s motion to dismiss Stone Cast’s quantum meruit and unjust enrichment claims in light of
Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y..2d 382, 386 (1987), and MCK Bldg.
Assocs., Inc. v. St. Lawrence Univ., 301 A.D.2d, 726, 728 (3d Dept. 2003) (existence of
enforceable contract precludes quantum meruit and unjust enrichment claims unless contract was
wrongfully terminated prior to completion, thus thwarting performance)),9 is Stone Cast’s claim
that JMB breached Contract ¶ 12.1 by failing to pay Stone Cast the amount required after
termination for convenience. The parties’ other Contract rights and remedies do not apply
except as they might inform the operation of Contract ¶ 12.1.
Stone Cast’s claim comprises the following four elements: (1) $176,050 of
retainage withheld by JMB in respect of Stone Cast’s first seven bills, which were otherwise paid
by JMB, exclusive of completed panels or units; (2) $207,000 for 46 panels not paid for in Stone
Cast’s eighth bill,10 at a rate, however, of $4,500 per panel instead of the billed amount of
$121,411.20; (3) $124,750 demanded by Stone Cast in a letter dated May 2, 200611 for work that
Stone Cast allegedly performed before the April 24, 2006 termination letter and after the
submission of Stone Cast’s eighth bill; and (4) storage costs, at a rate of $5,000 per month, and
aggregating $465,000 as of February 14, 2014, for panels and other materials demanded by JMB
in its April 26, 2006 and May 3, 2006 letters to be readied for pickup by JMB.12
JMB opposes this relief on three grounds. First, JMB has contended, albeit only
at oral argument and in its post-trial submission, that Stone Cast has not carried its burden to
9 December 10, 2013 Trial Transcript (“Tr.”) at 5‐6. See also Lockhead Martin Transp. Sec. Solutions v. MTA Capital
Constr. Co., 2014 U.S. Dist. LEXIS 131395, *100 (S.D.N.Y. Sept. 15, 2014)
10 Stone Cast Ex. 15.
11 Stone Cast Ex. 17.
12 Post‐Trial Submission of Stone Cast, Inc., Debtor/Defendant, dated February 14, 2014 (“Stone Cast’s Post‐Trial
Submission), p. 17‐18.
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establish its claimed damages in any respect. Second, it asserts that Stone Cast’s work product
was defective and therefore not compensable under Contract ¶ 12.1, which requires payment
only for work “properly performed.” Last, JMB asserts that to the extent Stone Cast is claiming
payment for specific items, such items were not “timely fabricated” for purposes of Contract ¶
12.1.
As noted, Stone Cast’s claim is premised on JMB’s alleged breach of Contract ¶
12.1, that is, on JMB’s alleged failure to pay “for work properly performed in connection with
the terminated portion of the work prior to the effective date of termination and for items
properly and timely fabricated off the Project site, delivered and stored in accordance with
[JMB’s] instructions.”13 This is Stone Cast’s “sole remedy for payment,” under ¶ 12.1, as Stone
Cast “waives and forfeits all other claims for payment and damage, including, without limitation,
anticipated profits and restocking fees.” Id.
Contract ¶ 12.1 is clear on its face and thus must be enforced according to its terms
as expressing the parties’ intentions. J. D’Addario & Co. v. Embassy Indus., Inc., 20 N.Y.3d
113, 118 (2012); Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002). This
requirement is especially apt here because the Contract was terminated as of right under a
termination-for-convenience clause, and, therefore, such termination did not constitute a breach,
the only amount owing being that specified by the parties in ¶ 12.1 in the event of such a
bargained-for termination. See A.J. Temple Marble & Tile v. Long Island R.R., 256 A.D.2d 526,
527 (2d Dep’t 1998) (where contract was terminated under termination-for-convenience
provision, damages are limited to those unpaid amounts owing under such provision, as
termination as of right is not a breach giving rise to other claims); see also Paragon Restoration
Grp., Inc. v. Cambridge Sq. Condominiums, 42 A.D.3d at 906 (plaintiff’s damages limited to
13 Contract ¶ 12.1.
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unpaid amounts provided for in termination-for-convenience clause); Crow & Sutton Assoc., Inc.
v. Welliver Mcguire, Inc., 32 A.D.3d 651, 651-52 (3d Dept. 2006) (court enforces plain meaning
of termination-for-convenience payment provision).
Of the elements of a contract claim under New York law (the existence of a
contract, the plaintiff’s performance under the contract, the defendant’s breach of that contract,
and resulting damages, Resetarits Constr. Corp. v. Olmsted, 118 A.D.3d 1454 (4 th Dept. 2014)),
only the amount owed and unpaid under Contract ¶ 12.1 and the proper performance and
timeliness of Stone Cast’s work are at issue. On these issues, Stone Cast has the burden of proof
by a preponderance of the evidence. Metropolitan Switch Bd. Mfg. Co., Inc. v. B & G Elec.
Contrs., Div. of B & G Indus., Inc., 96 A.D.3d 725, 726 (2d Dept. 2012); Paragon Restoration
Grp. v. Cambridge Sq. Condominiums, 42 A.D.3d at 906. That burden can shift, however, as
“[u]nder New York law, evidence of a signed written agreement between the parties, along with
invoices reflecting the defendant’s unpaid balance, is sufficient to establish a prima facie case for
breach of contract. The burden then shifts to the defendant to provide competent evidence
raising a question of material fact.” AT&T Corp. v. Publ’g Concepts L.P., 2010 U.S. Dist.
LEXIS 32871, *8 (S.D.N.Y. Mar. 29, 2010) (internal citations omitted); see also Paragon
Restoration Grp. v. Cambridge Sq. Condominiums, 42 A.D.3d at 906.
Applying the foregoing principles to the facts, it is clear that Stone Cast has not
sustained certain elements of its claim but has proven others.
First, Stone Cast has no right under Contract ¶ 12.1 -- which, as discussed above,
contains Stone Cast’s “sole remedy for payment” and under which Stone Cast “forfeits all other
claims for payment and damage” if the Contract is terminated for convenience -- to any storage
costs. Storage costs are not mentioned in ¶ 12.1, nor, under the clear language of that paragraph,
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does JMB have any duty to remove materials from Stone Cast’s yard upon termination for
convenience; it simply has the right to do so, which it has declined to enforce.
Nonetheless, citing RSG Caulkng & Waterproofing. V. J.P. Morgan Chase & Co.,
13 Misc. 3d 1218(A) (Sup. Ct. 2006), or based on an estoppel theory, for which no support is
cited, Stone Cast argues that JMB must pay such costs based on JMB’s alleged “bad faith or
other transgression” in not following through on its April 24, 2006 and May 3, 2006 letter
demands that Stone Cast stand ready for JMB’s pickup and removal of stockpiled materials.
Stone Cast’s Pre-Trial Submission, p. 16-17.14
RSG Caulking is readily distinguishable, however. Not only was that decision
issued in the context of a challenge to an arbitration ruling, where judicial review is highly
deferential, id., *12-17, but also, in contrast to Contract ¶ 12.1, the termination-for-convenience
provision in RSG Caulking did not limit claims, the provision could be read to permit the
asserted claims, and/or the arbitrators could have concluded that the contract was not properly
terminated for convenience. Id., *19-23.
Moreover, Stone Cast has failed to establish that JMB caused it unconscionable
injury by failing to pick up material after having written twice in the spring of 2006 that it
intended to do so, or that Stone Cast reasonably relied on those letters, each necessary elements
of an estoppel claim. Ferreyr v. Soros, 116 A.D.3d 407, 407-08 (1st Dept. 2014). Indeed, Stone
Cast has failed to establish that it was damaged in any way by keeping the material on its lot, let
alone that it was damaged in the amount of $5,000 a month (no provision in the Contract
14 Stone Cast also contends that JMB is “judicially estopped” from denying responsibility for storage charges “by
the commencement of the state court action to recover the materials.” However, JMB’s complaint in this
proceeding did not seek such relief, and, in addition, there has been no court ruling in reliance upon any such claim
by JMB, a condition of a viable judicial estoppel claim. “The offense is not taking inconsistent positions so much as
it is winning twice on the basis of incompatible positions.” Loral Fairchild Corp. v. Matsushita Elec. Indus. Co., 840
F. Supp. 211, 219 (E.D.N.Y. 1994). See generally Bates v. Long Island R. Co., 997 F.2d 1028, 1038 (2d Cir. 1992),
cert. denied, 510 U.S. 992 (1993).
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provides for or quantifies storage costs). In addition, with the exception of JMB’s April 24, 2006
and May 3, 2006 letters, there is no evidence that JMB pressed its request for Stone Cast to stand
ready to permit the materials to be removed. Nor has Stone Cast introduced any evidence to
show that it reasonably relied after May 2006 on the notion that JMB wanted it to incur
substantial storage costs pending JMB’s retrieval of the materials, with the exception of JMB’s
failure to object to the $5,000 monthly storage cost charges that appeared (apparently for the first
time, as no earlier bills with such charges were introduced) in Stone Cast’s September 30, 2009
and March 31, 2010 bills,15 sent to JMB years after the Contract was terminated. The record
thus does not establish that JMB reasonably led Stone Cast to believe that it should incur any
material storage costs, let alone such costs in excess of $465,000 over several years after the
autumn, 2006 completion of the Fordham garage.16
Stone Cast’s claim to be paid $4,500 per completed panel for 46 panels not
previously paid for in its eighth bill also fails, because the parties never agreed to this payment
measure under the Contract. Although the evidence shows that on March 8, 2006 JMB proposed
an interim payment modification of this nature to Fordham17 and representatives of JMB and
Fordham testified that they agreed to it between themselves,18 there is no evidence that the
modification was ever implemented with Stone Cast, or that Stone Cast was even aware of it, let
alone that it was agreed in a signed writing under Contract ¶ 2.1. Stone Cast’s seventh bill does
not employ the $4,500 per panel methodology. 19 Nor does the March 20, 2006 recommendation
15 Stone Cast Exs. 19 and 20, respectively.
16 Tr. at 249 (testimony of Dr. Brian Byrne of Fordham University). After JMB hired a replacement subcontractor for
Stone Cast, the parking garage was completed in time for the 2006 Fall Term. Id.
17 See JMB Ex. 16, consisting of a letter by JMB’s project manager, Michael McAleer to Fordham’s Dr. Brian Byrne
proposing a possible, fall back accelerated payment mechanism on a $4,500 per panel basis.
18 Tr. at 205‐06 (testimony of JMB’s Michael McAleer); Tr. at 240‐41 and 250 (testimony of Fordham’s Dr. Brian
Byrne).
19 Stone Cast Ex. 13.
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for payment to Stone Cast made by Douglas Hyde to Fordham and JMB’s representatives after
they sent him to Stone Cast’s yard to check on the status of the work.20 Instead, Mr. Hyde
recommended payment of previously withheld amounts from prior bills that employ the
Contract’s payment methodology21 (which appears to be what JBM did in its March 31, 2014
check).22 Stone Cast’s last, unpaid bill also does not employ the $4,500 “per panel” formula,
although that would have been more lucrative for Stone Cast, but, rather, uses the Contract
payment formula.23
Moreover, even if JMB had agreed with Stone Cast to modify payment terms
along the lines of a $4,500 per panel formula, the only description of that methodology, set forth
in JMB’s March 8, 2006 proposal to Fordham, contemplated just an interim acceleration, not a
permanent change to the overall Contract price.24 Stone Cast’s “$4,500 per panel” contention,
therefore, is an unwarranted attempt to inflate Stone Cast’s claim under Contract ¶ 12.1 above
the price for Stone Cast’s work set forth on page 1 of the Contract. If Stone Cast is to be paid
anything for the work covered by its unpaid eighth bill, in should be at the Contract rate reflected
by that bill’s $121,411.20 demand plus the $30,000 retainage included in the bill.
JMB’s remaining challenge to the amount of Stone Cast’s claim, however, is
unavailing. JMG argues that, having paid the first seven of Stone Cast’s bills, exclusive of
retainage, JMB also advanced $124,000 by check dated March 30, 2006 for work that was not
actually billed by Stone Cast until its eighth bill.25 JMB supports this contention by noting that
20 Stone Cast Ex. 14,
21 Id.
22 Stone Cast Ex. 13.
23 Stone Cast Ex. 15, consisting of Stone Cast’s eighth bill, for March 2006. See also Stone Cast Ex. 17, which is
Stone Cast’s post‐termination May 2, 2006 demand letter, which also does not use the $4,500 per panel measure
and is, instead, consistent with the pricing provisions on page 1 of the Contract and the pricing measure used in
Stone Cast’s prior bills.
24 JMB Ex. 16.
25 Post‐Trial Brief of Jeffrey M. Brown Associates, Inc., dated February 13, 2014, p. 2, 4‐5.
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Douglas Hyde’s March 20, 2014 email to Fordham and JMB’s representatives26 recommended
releasing $20,000 for molds and steel and $104,000 for the completion of 39 panels whose
completion he had verified, which coincides with the amount of JMB’s March 30, 2014 check.
JMB contends, therefore, that it has already paid $124,000 of the amount claimed by Stone Cast.
Upon review of the first seven bills, however, JMB’s math does not add up. Having
examined these bills27 and the evidence of payments therefor,28 it is clear that the $124,000 was
applied by Stone Cast to satisfy bills prior to the unpaid, eighth bill, which was in the amount of
$121,411.20 plus $30,000 of retainage and references “materials presently stored not included in
work previously completed” of $151,764.29 Therefore, Stone Cast was not double counting in its
eighth bill or in its final demand on May 2, 2014 for work not covered by the eighth bill but
completed before the termination date of April 24, 2006. The seventh bill does not list any
completed panels, and the three checks paid on it therefore are not for completed panels but,
rather, for the items listed on that bill. 30 The March 30, 2006 check clearly is not an
overpayment of the seventh bill. Douglas Hyde’s March 20, 2006 email31 is more properly read
as verifying that Stone Cast was successfully continuing its work, thereby warranting that JMB
should feel comfortable paying its prior bills, rather than advocating advance payments for bills
yet to be issued. This would be consistent with Douglas Hyde’s testimony regarding his
instructions to confirm the ongoing progress of Stone Cast’s work before JMB would pay its
bills. See Tr. at 101-02, 123-24.
26 Stone Cast Ex. 14.
27 Stone Cast Exs. 2, 5, 7, 9, 11, 12, 13.
28 Stone Cast Exs. 4, 5, 7. 9, 11, 12, 13.
29 Stone Cast Ex. 15.
30 Stone Cast Ex. 13.
31 Stone Cast Ex. 14.
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Although JMB has not pointed to any other evidence that Stone Cast’s bills were
inaccurate, it asserts that Stone Cast has not proven by a preponderance of the evidence that they
are accurate, for example questioning why Stone Cast has not introduced any photographs of the
completed work covered by its eighth bill or by its May 2, 2006 demand letter. However, under
AT&T Corp. v. Publ’g Concepts L.P., 2010 U.S. Dist. LEXIS, *8, and the cases cited therein,
Stone Cast’s bills shifted the burden to JMB to provide evidence to challenge the bills, which it
has not done.32
Moreover, Stone Cast did provide additional evidence, in the form of testimony by
its representative, Terry Karanikas, as well as by Mr. Hyde, that the work covered by the eighth
bill and the May 2, 2006 demand letter was actually performed and billed as provided in the
Contract.33 The Court found both Mr. Karanikas and Mr. Hyde credible witnesses, Mr. Hyde
being a truly a neutral third party with no real stake in this dispute. Moreover, although the
Court did not grant Stone Cast’s motion to sanction JMB for its failure to comply with discovery
requests, it is clear that it was the practice of Michael McAleer, JMB’s primary representative on
the project, to take notes, subsequently recorded in digital form, on his site visits, which he
testified would have reflected whether Stone Cast had in fact done the work that it billed for,34
and JMB has not produced any such notes.35 Mr. McAleer further testified that he believed it
was especially important to prepare site visit notes if a problem with the subcontractor had been
32 Justice Stallman’s denial of Stone Cast’s summary judgment motion is not to the contrary.
33 See Affidavit of Terry Karanikas, dated December 3, 2013, comprising Mr. Karanikas’ direct testimony as
provided for in the Court’s pretrial procedures, at ¶¶ 11, 24‐5, 29‐30; Tr. at 101‐02, 111, 123‐25 (testimony of
Douglas Hyde). Fordham project meeting minutes, admitted as JMB Exs. 14 (meeting of January 21, 2006) and 17
(meeting of April 19, 2006), do not change the Court’s finding. The minutes reflect meetings that were not
attended by any representative of Stone Cast and reflect only JMB’s representative’s assessment of Stone Cast’s
performance. The January 2006 meeting minutes’ observation, at page 7, regarding the number of panels
completed is superseded by Mr. Hyde’s later reports, and the April 2006 meeting minutes’ observation, at page 4,
on the delivery status of the panels does not note any specific number of incomplete or unprepared panels.
34 Tr. at 148‐49, 155, 161
35 Tr. at 161.
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identified,36 and that he actually counted Stone Cast’s finished panels on his site visits.37 The
Court infers, therefore, that JMB would have provided evidence of Stone Cast’s failure to
complete the work for which it billed JMB if such work had, in fact, not been completed. JMB
could offer no credible reason for not producing its representatives’ contemporaneous notes of
site visits, including one in the third week of April 2006 that concededly occurred when the
completion of work covered by Stone Cast’s eighth bill and most of Stone Cast’s May 6, 2006
letter could have been verified, except that there were no such notes detailing problems with the
number of panels produced.
Accordingly, Stone Cast has carried its burden that the amount of its bills,
comprising (a) $176,050 of retainage under its first seven bills, (b) $121,411.20 demanded by its
eighth bill as well as $30,000 of unpaid retainage in that bill, and (c) $124,750 listed in its May
2, 2006 demand letter for work done between the work covered by the eighth bill and the April
24, 2014 termination letter, totaling $452,211.20, is correct.
JMB’s remaining objections to Stone Cast’s claims are more substantial, but they
also fail upon review of the evidence, including the Court’s assessment of the witnesses’
credibility. As noted above, under Contract ¶ 12.1 after termination for convenience Stone Cast
is entitled to be paid only for “work properly performed in connection with the terminated
portion of the work prior to the effective date of termination and for items properly and timely
fabricated off the Project site, delivered and stored in accordance with the Contractors
instructions.” (Emphasis added.) JMB contends that the work for which Stone Cast has billed it
was not properly performed and the items covered by its bills were not properly and timely
fabricated.
36 Id.
37 Tr. at 163.
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On the issue of whether Stone Cast properly fabricated the items for which it billed
JMB, JMB relies almost exclusively on the testimony of Mr. McAleer. However, Mr. McAleer,
who generally was not credible, was especially not credible on this issue. Mr. McAleer’s
affidavit, dated December 2, 2013 (“McAleer Aff.”), which under the Court’s pre-trial
procedures constituted his direct testimony, makes the following serious and sweeping
allegations:
I personally observed that the performance of Stone Cast was very poor, both
from a quality and time perspective. I had repeated discussions with Fordham’s
construction representatives, Dr. Brian Byrne (Vice President for Construction)
and Mr. Tony Aloi (Director of Construction), about Stone Cast’s improper
performance. . . . [I]t was very disturbing to both Fordham and JMB that there
were significant issues of safety. Stone Cast was putting the Fordham community
and the public at serious safety risk by its improper and faulty performance. The
manufactured panels that I observed had loose granite stones which could fall and
injure individuals. I personally observed this fact during my site visits to Stone
Cast’s manufacturing facility. I discussed this a number of times with Stone
Cast’s president, Terry Karanikas.
McAleer Aff. ¶ 10. Mr. McAleer further testified,
I personally visited the Stone Cast Facility on at least two (2) occasions. I
observed the lack of production. I also observed the poor quality of manufacture,
resulting in life safety issues. Specifically, at the first visit, when looking at the
panels, I did not feel comfortable with how the granite stones were affixed to the
panels. I performed a ‘hammer’ test, which simply involved using a 2 or 3 pound
hammer to hit the granite. Unfortunately, the stones came loose. I did this a
number of times, with the same result. At the second visit, I did not perform any
tests because Stone Cast had not made any improvements or alterations to the
granite.
I also observed Stone Cast’s employees using an acid wash-down on the stones.
This was having a negative impact on the stones adhering to the panels.
Id. ¶¶ 26-27.
The problem with this testimony, however, is that the rest of the record, including Mr.
McAleer’s testimony on cross and re-direct, almost entirely belies it. First, there is no
corroborating testimony or document from any Fordham representative -- or any JMB
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representative, for that matter -- that the parties were disturbed that “Stone Cast was putting the
Fordham community and the public at serious safety risk.” The monthly project minutes of
meetings between JMB and Fordham do not reflect any such discussion. There is only an April
19, 2006 minute -- only five days before JMB terminated the Contract for convenience but
months after the first site visit to Stone Cast’s facility at which Mr. McAleer testified in his
Affidavit that he “observed poor quality of manufacture, resulting in life safety issues” – in
which JMB reported that “JMB’s site visit has revealed that many panels need repairs the, [sic]
work that has been performed is of poor workmanship.”38 (As noted above, Stone Cast never
attended these project meetings.) Mr. McAleer testified that he was the author if this minute. Tr.
at 215.
Nor is there any evidence of any written communication between JMB or
Fordham, on the one hand, and Stone Cast, on the other, regarding alleged safety issues or the
quality of Stone Cast’s work, although Mr. McAleer testified that if a site visit had identified
such issues, letters probably would have been sent to Stone Cast, Tr. at 160, which stands to
reason and is consistent with Contract ¶ 3.03.39
Moreover, as noted above, JMB has not produced any reports of Mr. McAleer’s site
visits to Stone Cast’s facility, although Mr. McAleer testified that such reports were
contemporaneously prepared and thereafter recorded in digital form and that he would have
noted in them that he had performed a “hammer test.” Tr. at 148-49, 151-55, 160-63, 229.
Indeed, although Mr. McAleer previously testified that he performed this test during his first site
38 JMB Ex. 17, p.4.
39 Tr. at 201‐02, 205, 207, and 212 in which Mr. McAleer testified that he could not recall any notices to Stone Cast
regarding the quality of its work or the its failure to comply with specifications for its work from the time of his first
site visit through the date of the termination letter, which followed his second, April site visit.
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visit, on January 6, 2006, id. at 162, 229-31; McAleer Aff. ¶ 26, on cross examination he stated
that he instead did so during his second site visit, in April 2006. Tr. at 216-17.
It is of course possible that memory may mislead as to when an event occurred,
but Mr. McAleer had no reasonable explanation why at trial he could remember an April site
visit and hammer test in great detail when he had twice previously testified that the event
occurred in January during a very different stage in the Contract’s performance (for example,
after the January 6, 2006 site visit, JMB and Fordham delegated Mr. Hyde to report to them after
visiting Stone Cast’s jobsite, at which time no quality problems were noted, and after which JMB
and Fordham paid Stone Cast hundreds of thousands of dollars, something they would not likely
have done if they had serious safety concerns about Stone Cast’s work). It is also highly unlikely
that such a dramatic event as Mr. McAleer banging away with a hammer on various panels
during a visit to Stone Cast’s site would go unremarked by the other parties present. Yet this is
the case. Neither Mr. Karanikas nor Mr. Hyde recalled such an event, nor did Mr. Hyde recall
that Mr. Basile, Fordham’s structural engineer who also was on the second site visit, expressed
any material reservations regarding Stone Cast’s product.40 Although Mr. Hyde testified that he
may not have been with Mr. McAleer or Mr. Basile during the entire April 2006 visit, id. at 127,
130-31, it simply is not credible that the results of Mr. McAleer’s “hammer test” were not aired
before the visit ended. Instead, Mr. Hyde recalled only Mr. McAleer’s observing “that there
were some pockmarks or bubble marks in the back of the concrete,” id. at 127, and that any
quality issues raised were a matter of “fine tuning.” Id. at 128.
It is worth noting in this regard that the record is clear that Mr. McAleer could be
outspoken, even insulting when dealing with Stone Cast; about other matters he did not hesitate
40 Tr. at 63‐4,66‐7, and 71‐2 (testimony of Terry Karanikas regarding the January 6, 2006 site visit, the lack of
complaints regarding quality of the product thereafter, and the April, 2006 site visit and lack of complaints,
respectively); 127‐28 (testimony of Douglas Hyde regarding April 2006 site visit).
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to castigate Stone Cast directly and to Fordham’s representatives behind Stone Cast’s back. See,
e.g., JMB Exs. 5 (October 5, 2005 email from Mr. McAleer to Fordham’s Messrs. Aloi and
Basile), and 13 (January 18, 2006 email from Mr. McAleer to Stone Cast, copied to Messrs. Aloi
and Basile, as well as Scott Adams, an engineer on the project). The lack of corroboration of Mr.
McAleer’s allegations about the quality of Stone Cast’s product, therefore, cannot be attributed
to his being a shrinking violet.
Finally, Mr. McAleer was particularly far-fetched when he testified,
notwithstanding JMB’s April 24, 2006 and May 3, 2006 demand letters,41 that JMB did not want
Stone Cast’s product to be made ready for pick-up because “[w]e felt they were unsafe.” Tr. at
227-28.
Thus, credible evidence is lacking that Stone Cast failed Contract ¶ 12.1’s
condition that its work be properly performed and the items which it completed before
termination and for which it seeks payment have been properly fabricated.
Whether such items were timely fabricated for purposes of Contract ¶ 12.1 is a
closer question. It is not a question, however, of whether all of Stone Cast’s unpaid bills can be
disregarded because Stone Cast missed milestones under the Contract: 	as Justice Stallman’s
Summary Judgment Ruling precluded, that would instead be a basis for a breach claim by JMB if
JMB had not terminated the Contract for convenience. 	Instead, for purposes of ¶ 12.1, which
puts no specific parameters around the condition that the billed-for items be “timely . . .
performed,” the Court may consider the parties’ actual performance and expectations as adjusted
by mutual consent during the course of performance. 	Crow & Sutton Assoc., Inc. v. Welliver
41 JMB Exs. 18 and 19, in which Mr. McAleer and JMB’s outside counsel, respectively, informed Stone Cast that JMB
“had made arrangements for the immediate removal and transportation of the paid for materials which were
stored at your facility.”
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Mcguire, Inc., 32 A.D.3d at 652 (court applies termination-for-convenience remedy by its plain
terms); A.J. Temple Marble & Tile v. Long Island R.R., 256 A.D.2d at 527 (same).
In any event, a “time of the essence” provision (which appeared in the Contract
outside of ¶ 12.1) may be waived “where the parties, by their conduct, evince an intent that time
not be of the essence.” 	Parker Hannifin Corp. v. North Sound Props., 2013 U.S. Dist. LEXIS
67026, *20-21 (S.D.N.Y. May 8, 2013) (internal quotations omitted), which may include
accepting performance after expiration of the time limit, as Contract ¶ 3.3 contemplated. Allen
v. Kowaleksi, 239 A.D.2d 879 (4th Dept. 1997), app. denied, 909 N.Y.2d 806 (1997); Franklin
Pavkov Constr. Co. v. Ultra Roof, Inc., 51 F. Supp. 2d 204, 207 (N.D.N.Y. 1999); see also
Lockhead Martin Transp. Sec. Solutions v. MTA Capital Constr. Co., 2014 U.S. Dist. LEXIS
131395, *71 (S.D.N.Y. Sept. 16, 2014); GDJS Corp. v. 917 Props., Inc., 99 A.D.2d 998 (1st
Dept. 1984), app. dismissed, 62 N.Y.2d 942 (1984). Such a “waiver may be express or implied,
the intent to waive must be clearly established and cannot be inferred from doubtful or equivocal
acts or language, and the burden of proof is on the person claiming the waiver of the right.” 200
E. 87th St. Assoc. v. MTS, Inc., 793 F. Supp. 1237, 1251 (S.D.N.Y. 1992), aff’d 978 F.2d 706
(2d Cir. 1992) (internal quotations and citation omitted). “Once such a waiver has occurred, the
time-is-of-the-essence provision of the contract may not be unilaterally reinstated: it is improper
for a party who has waived its right to timely performance to attempt suddenly to cancel the
contract without first notifying its counterparty that time is of the essence and re-setting the time
for performance within a reasonable time by clear, distinct, and unequivocal notice.” Lockhead
Martin Transp. Sec. Solutions v. MTA Capital Constr. Co., 2014 U.S.Dist LEXIS 131395, *71-
72.
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Based on the trial record, I find and conclude that, for purposes of Contract ¶ 12.1,
JMB repeatedly extended JMB’s performance deadlines and when JMB terminated the Contract
for convenience, while the projected completion of Stone Cast’s work left little room for further
delay, it was still on time for completing its work by JMB’s “real” deadline for completion, the
commencement of Fordham’s Fall Term. Tr. at 249 (testimony of Dr. Brian Byrne regarding
completion of the project).
As noted above, there clearly were delays in Stone Cast’s work. The parties
disagree about their cause, but I accept Mr. Karanikas’ testimony, which was in part
corroborated by Mr. Hyde, that much of the delay was attributable to third party failures,
including the late delivery of others’ drawings upon which Stone Cast’s work depended,
payment delays based on misinformation about the delivery of granite, and delay to the whole
garage project caused by unanticipated remediation work at the garage site. Tr. at 28-30, 40-41,
74-76 (testimony of Terry Karanikas); 103-04, 116, 119-21 (testimony of Douglas Hyde).
JMB extended Stone Cast’s performance deadlines at least two times, on
November 21, 200542 and after a visit to Stone Cast’s site in the third week of January 200643
(which followed JMB’s last formal default notice, dated January 9, 2006).44 The witnesses
testified that starting in January and continuing through March, 2006, JMB and Stone Cast
agreed to a procedure whereby JMB would pay Stone Cast only after Mr. Hyde would
periodically visit Stone Cast’s worksite to verify its ongoing completion of panels. Mr.
Karanikas and Mr. Hyde each testified, again credibly, that during this period JMB’s payments
42 JMB Ex. 7.
43 JMB Ex. 14, p. 7 (minutes of JMB/Fordham January 25, 2006 project update meeting referencing a revised Stone
Cast schedul.
44 JMB Ex. 9.
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to Stone Cast resumed based on Mr. Hyde’s confirmation of Stone Cast’s continuing and
apparently timely work. 45 The payment history supports their testimony.46
Mr. McAleer disputed that Stone Cast’s performance was timely after the
January, 2006 extension, but, again, his testimony is not supported by the record. He made no
count of completed panels on his site visits and, as noted, neither he nor JMB produced any site
visit notes or reports that would show a production delay. Instead, as with the quality issue, he
points only to his own statements memorialized in the April 19, 2014 JMB/Fordham project
meeting minutes of a meeting that Stone Cast did not attend and that apparently were not shared
with Stone Cast before the April 24, 2006 termination for convenience.47
JMB has also introduced a March 3, 2006 email from Mr. McAleer to, Scott
Adams, the engineer on the Fordham project, as well as to Stone Cast, in which he sates,
referring to the need to complete four specific panels, “Stone Cast has already screwed up the
schedule as it is. If this issue is not settled and these panels are not made in the next 2 weeks the
schedule is going to be screwed up even more. . . . LET’S GET IT TOGETHER PEOPLE.” 48
Four points are worth noting about this email, however. First, the “issue” referred to in the email
appears to be a delay in preparing engineer’s drawings for the panels, not Stone Cast’s work;
second, JBM has not introduced any evidence that Stone Cast failed to complete these four
panels; third, as discussed above, JMB sent another payment to Stone Cast after Mr. Hyde’s site
visit later in March; and, fourth, the email itself states, albeit hyperbolically, “There is no more
fluff to take out of the schedule to save Stone Cast’s ass.” Id. Thus, as of the date of the email,
45 Tr. at 76‐85 (testimony of Terry Karanikas), 122‐25 (testimony of Douglas Hyde).
46 Stone Cast Exs. 12‐14; see also Ex. B to Affidavit of Douglas Hyde, dated November 12, 2013 (consisting of March
20, 2014 email to Fordham representatives regarding Stone Cast’s ongoing performance and recommending
release of additional payments to Stone Cast, which were, in fact, made).
47 JMB Ex. 17, p. 4.
48 JMB Ex. 15.
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Stone Cast appears to have been on a schedule that, although tight, by the email’s own terms
would serve JMB’s purposes, and there is no evidence, with the exception of Mr. McAleer’s own
statements (notwithstanding that representatives of Fordham also participated in the April, 2006
site visit), to contradict Mr. Hyde’s and Mr. Karanikas’ testimony that Stone Cast was on
schedule in March and April, 2006.
Accordingly, weighing all the evidence, including the credibility of the witnesses,
I find and conclude that, to the extent Stone Cast has charged JMB for items completed before
termination of the Contract, those items were “timely fabricated” as required by Contract ¶ 12.1.
Conclusion
For the foregoing reasons, Stone Cast shall have judgment against JMB in the
aggregate amount of $452,211.20, plus post-judgment interest at the federal rate now in effect.
Counsel for Stone Cast should email chambers a proposed judgment consistent with this
Memorandum of Decision.
Dated: White Plains, New York
November 17, 2014
/s/ Robert D. Drain
United States Bankruptcy Judge
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