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Connelly Construction Corp. v. Travelers Casualty and Surety Co. of America

United States District Court, E.D. Pennsylvania

July 23, 2018

CONNELLY CONSTRUCTION CORPORATION, Plaintiff,
v.
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA ET AL., Defendants.

          MEMORANDUM

          Gene E.K. Pratter United States District Judge.

         Walsh Heery Joint Venture (WHJV) was a general contractor retained by Pennsylvania's Department of General Services for construction work on new prison facility in Montgomery County. WHJV hired subcontractor Connelly Construction Corporation to perform masonry work on the facility. After its work on the project concluded, Connelly sued WHJV, claiming that it suffered excess costs on labor and material due to WHJV's mismanagement. WHJV has brought two counterclaims.

         Until now, the litigation has focused on whether Connelly waived its claims during the project by periodically executing releases and change orders. After a mini-bench trial, the Court concluded that Connelly had waived most of its claims against WHJV. See Doc. Nos. 77 & 84.

         Now, the parties have turned their attention to the remaining claims in the case with a bouquet of four motions. The remaining claims are:

         1. Connelly's Claim for Retainage:

         Because the Commonwealth has withheld a portion of its final payment to WHJV, WHJV has withheld a portion of its payment to Connelly. Connelly brought a claim to recover these “retainage” funds from WHJV, and WHJV has moved for summary judgment.

         2. WHJV's Counterclaim for Liquidated Damages:

         Because the Commonwealth may seek to assess liquidated damages against WHJV for any delay to the overall project, WHJV brought a counterclaim for Connelly's partial responsibility for the delay. There are cross-motions on this claim: Connelly has moved for summary judgment, while WHJV has moved to dismiss the (unripe) claim without prejudice.

         The Court denies WHJV's motion for summary judgment on Connelly's claim for retainage. As to the counterclaim for liquidated damages, the Court grants WHJV's motion for leave to dismiss without prejudice and moots Connelly's motion for summary judgment.[1]

         Standard of Review

         A court shall grant a motion for summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). An issue is “genuine” if there is a sufficient evidentiary basis on which a reasonable jury could return a verdict for the non-moving party. Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A factual dispute is “material” if it might affect the outcome of the case under governing law. Id. (citing Anderson, 477 U.S. at 248). Under Rule 56, the Court must view the evidence presented on the motion in the light most favorable to the non-moving party. See Anderson, 477 U.S. at 255. However, “[u]nsupported assertions, conclusory allegations, or mere suspicions are insufficient to overcome a motion for summary judgment.” Betts v. New Castle Youth Dev. Ctr., 621 F.3d 249, 252 (3d Cir. 2010).

         The movant bears the initial responsibility for informing the Court of the basis for the motion for summary judgment and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the non-moving party bears the burden of proof on a particular issue, the moving party's initial burden can be met simply by “pointing out to the district court that there is an absence of evidence to support the nonmoving party's case.” Id. at 325. After the moving party has met the initial burden, the non-moving party must set forth specific facts showing that there is a genuinely disputed factual issue for trial by “citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials” or by “showing that the materials cited do not establish the absence or presence of a genuine dispute.” Fed.R.Civ.P. 56(c).

         Summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing “sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

         Discussion

         First, the Court denies WHJV's motion for summary judgment on Connelly's claim for retainage. Second, the Court dismisses WHJV's counterclaim for liquidated damages without prejudice.

         I. Connelly's Claim for Retainage

         The Commonwealth has withheld a portion of its final payments to WHJV allegedly because of delays to the project. WHJV, in turn, has withheld over $200, 000 in payments to Connelly. Connelly has asserted a claim for this “retainage, ” and WHJV has moved for summary judgment on the claim. The crux of the dispute is whether WHJV is currently obligated to release this (or any) money to Connelly.

         WHJV argues that the “pay-if-paid” clause in its subcontract with Connelly provides that the retainage is to be released only after WHJV has been paid by the Commonwealth. Because the Commonwealth has not paid WHJV, the argument goes, WHJV is not obligated to pay the retainage to Connelly. In response, Connelly argues that the “prevention doctrine” bars WHJV from relying on the pay-if-paid clause. The Court agrees: because WHJV's own conduct has delayed the project and WHJV has taken no documented steps to secure payment - meaning that the Commonwealth's non-payment is WHJV's own fault - WHJV is barred from using the pay-if-paid clause as a shield against Connelly's claim for retainage.

         A. Facts

         Completion of the construction project has been delayed for over two years. By this point, a reasonable jury could conclude that WHJV bears some responsibility for the delay. In particular, two letters from the Commonwealth's Department of General Services to WHJV executives in August 2015 highlight several potentially problematic issues with WHJV's work on the project.[2] As a result, the Commonwealth had “serious concerns regarding both late completion and unacceptable performance of the project work.” Viewing the evidence in the light most favorable to Connelly, then, WHJV appears to be at least partly responsible for the project delay.

         The project delay has triggered a retainage provision in the contract between WHJV and the Commonwealth. The contract provides that the Commonwealth's Department of General Services may withhold a portion of its payments to WHJV until the close of the project: “All money retained by DGS may be withheld from [WHJV] until Final Inspection and Closeout Inspection issues have been resolved.” Contract of Dep't of Gen. Servs. & WHJV, General Conditions, ¶ 13.7(B).

         Because WHJV, as the general contractor, has not been paid in full by the Commonwealth, WHJV has not paid its subcontractor, Connelly, in full. Pursuant to the subcontract between WHJV and Connelly, WHJV may withhold payments from Connelly in proportion to Connelly's responsibility for payments to WHJV withheld by the Commonwealth: “[WHJV] may retain from each progress payment sums otherwise due [to Connelly] until final payment. The amount of retention shall be the amount retained from [WHJV's] payment from [the Commonwealth] for [Connelly's] work.” Subcontract ¶ 3.3. The subcontract also includes a pay-if-paid clause: “if, and only if, [the Commonwealth] pays [WHJV], which is an express condition precedent to [WHJV's] duty to pay [Connelly], ...


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