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Connelly Construction Corporation v. Travelers Casualty And Surety Company

United States District Court, E.D. Pennsylvania

January 2, 2018





         Over the course of a Commonwealth prison facility construction project, a subcontractor executed a series of contracts, styled as releases and change orders, that purported to waive claims against the general contractor. Subsequently, the subcontractor sued the general contractor, claiming that it lost money on the project due to the general contractor's mismanagement.

         The bench trial focused on two issues:

1. Whether the subcontractor waived any potential claims against the general contractor by signing the periodic releases and change orders; and
2. Even if so, whether statements made by the general contractor's employees waived the general contractor's claim to rely on the releases and change orders.

         The Court concludes that the general contractor never waived its right to rely on the releases and change orders, which themselves bar the subcontractor from asserting certain claims against the general contractor.

         Findings of Fact

         After introducing the parties, the project, and the subcontract at issue, the Court summarizes the series of releases and change orders signed by the subcontractor. Last, the Court explains the courses of conduct of both the general contractor and the subcontractor as they relate to the question of waiver.

         I. Background

         A. Parties

         Walsh Heery Joint Venture (“WHJV”) is a joint venture comprised of Walsh Construction Company and Heery International. Compl. ¶ 2; Ans. ¶ 2.

         Travelers Casualty and Surety Company of America, Travelers Casualty and Surety Company, Fidelity and Deposit Company of Maryland, and Liberty Mutual Insurance Company are WHJV's sureties. Compl. ¶ 30; Ans. ¶ 30.

         Connelly Construction Corporation (“CCC”) is a masonry contractor that has been in the business of public masonry construction work since 1982. Tr. Day 1 (Connelly) at 20:19-21:3. CCC is a woman-owned business enterprise[1] in Pennsylvania and has held that certification since 2008/2009. Id. at 62:1-6. CCC had previously completed jobs on which it was required to submit monthly waivers. Stip. of Uncontested Facts ¶ 7.

         Rita Connelly is the President and 75% owner of CCC. Tr. Day 1 (Connelly) at 20:16- 18. She handles contracts, bonding, insurance, accounts payable, and payroll for CCC. Id. at 61:21-25. She is the senior person within CCC responsible for knowing what was in CCC's subcontract for this project. Id. at 147:4-10.

         John Pico is a 25% owner of CCC. Tr. Day 2 (Pico) at 2:23-3:5.

         B. The Project

         This case arises out of the construction of a prison facility known as “SCI Phoenix” for the Commonwealth of Pennsylvania at the site of the Graterford prison in Montgomery County (the “Project”). Stip. of Uncontested Facts ¶ 1.

         On February 6, 2012, WHJV entered into a written contract with the Department of General Services (“DGS”), an executive agency of the Commonwealth, to provide construction services in connection with the Project. Id. ¶ 2. Construction has been underway since 2013 at a contracted cost of approximately $350 million. Id. ¶ 3. The original construction completion date was extended by DGS to November 2, 2015. Tr. Day 3 (Swain) at 33:25-34:5.

         CCC was WHJV's masonry subcontractor on the Project. Stip. of Uncontested Facts ¶ 4. CCC had previously completed contracts of equivalent size and dollar value as compared to the Project. Id. ¶ 6. CCC began working on the Project in August 2013. Tr. Day 1 (Connelly) at 21:22-24. CCC completed its work in May 2015. Id. at 21:25-22:2.

         C. The Subcontract Between WHJV and CCC

         CCC received a written subcontract agreement from WHJV for the Project in February or March 2012. Tr. Day 1 (Connelly) at 70:9-10. Upon receipt, Ms. Connelly made a number of handwritten modifications to the subcontract form and sent the revised, or “marked up, ” copy back to WHJV. Id. at 71:4-74:11; DX-9.[2]

         WHJV did not agree to CCC's proposed changes. Compare DX-9, with DX-8; Tr. Day 1 (Connelly) at 27:24-28:1. Ms. Connelly read the final execution copy of the subcontract and was aware that her requested modifications were not incorporated into the final version of the subcontract before she signed it. Id. at 146:19-147:3.

         According to Ms. Connelly, WHJV Project Manager Patrick Delaney assured her that her exclusions and revisions were still a part of the final subcontract and that they did not appear on the subcontract simply because WHJV was not allowed to mark up the watermarked document. Id. at 27:15-22; 75:14-18; 76:7-9. According to Ms. Connelly, Mr. Delaney further stated that Ms. Connelly should trust him and sign the subcontract as-is because WHJV was “not out to hurt” CCC. Id. at 76:9-10. In contrast, Mr. Delaney testified that he had no recollection of any meeting in which Ms. Connelly questioned why her revisions to the subcontract were not made. Tr. Day 1 (Delaney) at 164:24-165:3.

         Ms. Connelly signed the written subcontract between WHJV and CCC on behalf of CCC. Stip. of Uncontested Facts ¶ 5; DX-8. CCC had an opportunity to consult with legal counsel prior to executing the subcontract. DX-8.

         Among other provisions, the subcontract required CCC to provide monthly lien waivers and releases (the “releases”) to WHJV as a condition for receiving payment. Stip. of Uncontested Facts ¶ 10. The specific monthly waiver and release forms required by WHJV, titled “Partial Waiver and Release of Claims for Payment - Conditional - Joint Venture” and “Partial Waiver and Release of Claims for Payment - Unconditional - Joint Venture, ” were attached as Exhibit 1 to the subcontract. Id. ¶ 11.

         The subcontract itself provides that

[t]he failure of either party hereto to insist, in any one or more instances, upon the performance of any of the terms, covenants or conditions of this Agreement, or to exercise any right herein, shall not be construed as a waiver or relinquishment of such term, covenant, condition or right as respects further performance.

DX-8 at Section 13.2.

         The subcontract also provides specific requirements by which CCC must provide notice to WHJV of any claim. DX-8 at Section 4.3. It states:

4.3 Claims. A “Claim” is a Subcontractor's demand or assertion seeking, as a matter of right, an increase in Subcontract Amount, an extension in the time for performance of Subcontractor's Work, coverage under an insurance policy related to the Project, or relief with respect to the terms of the Contract Documents. All Claims must be made by written notice to the Contractor at least one (1) week prior to the beginning of the Subcontractor's affected or additional work, or the date by which Contractor is obligated to give notice to the Owner with respect to such claim, or within one (1) week of the Subcontractor's first knowledge of the event, whichever shall first occur, otherwise, such claims shall be deemed waived. With respect to written notice required for a Claim, Subcontractor's written notice must be via letter, email or fax is not sufficient notice. Subcontractor expressly acknowledges and agrees that the preceding notice requirements are a material term of this Subcontract, and are necessary for the Contractor to mitigate adverse consequences arising out of or related to the Subcontractor's Claim, and that the Contractor would be prejudiced if the notice requirements are not followed by the Subcontractor. . . . (Emphasis added)

         CCC did not request any modifications to the provisions of the subcontract addressing the monthly release requirement or the notice of claim provision. Tr. Day 1 (Connelly) at 28:2-16.

         II. The Releases

         CCC previously worked on projects for which it was required to submit monthly waiver forms. Stip. of Uncontested Facts ¶ 7. It is not unusual for monthly waiver forms to be required on construction projects. Id. ¶ 8.

         Ms. Connelly did not consult with anyone at CCC, neither did she consult with any attorney, about the legal meaning of the releases before signing the subcontract, nor on the multiple occasions that CCC executed the releases. Tr. Day 1 (Connelly) at 46:16-18.

         Shortly after signing the subcontract, Ms. Connelly received an email from WHJV's office manager containing copies of the same release forms included with the subcontract, and advising CCC what steps needed to be taken on a monthly basis, including executing the release forms, to receive payment. PX-13; Tr. Day 1 (Connelly) at 126:22-127:23. Ms. Connelly did not raise any contemporaneous concerns about the releases. Id. at 127:13-18.

         Ms. Connelly had several conversations, by email and phone, with WHJV Project Engineers Pierre Bick and Sean Taylor, concerning the proper way to fill out the waivers. Id. at 36:19-37:20; PX-23; PX-24; PX-25. Ms. Connelly did not discuss the releases with anyone else at WHJV, including Patrick Delaney. Tr. Day 1 (Connelly) at 41:1-6; 41:21-25.

         Starting on July 16, 2013 and regularly thereafter, Ms. Connelly, signed the releases, secured a notary's acknowledgment, and delivered them to WHJV. DX-10; Tr. Day 1 (Connelly) at 28:21-25. Each release expressly stated that CCC was “waiving and releasing” WHJV, its sureties, and others:

from any and all suits, debts, demands, torts, charges, causes of action, and claims for payment including claims under the laws of the municipality, state or federal government relating to payment bonds . . . on account of, arising out of or relating in any way to the labor, services, material, fixtures, equipment, apparatus or machinery furnished by [CCC] on the above described Project from the beginning of time until the date [on which the document was signed] including extras.

DX-13-19; DX-21; DX-23-24; DX-26; DX-28; DX-30-31 (emphasis added). At the time of the July 16 release, CCC's start date had been delayed by almost nine months. Tr. Day 1 (Connelly) at 23:3-6; id. at 23:19-23. This nine-month delay is a significant component of CCC's claim in this case. Id. at 135:9-23.

         CCC submitted no fewer than eighteen written releases. They were submitted on the following dates:

July 16, 2013 (DX-10)
February 4, 2014 (DX-13)
February 18, 2014 (DX-14)
April 14, 2014 (DX-15)
May 5, 2014 (DX-16)
June 11, 2014 ...

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