| Science Applications Intl. Corp. v Environmental RiskSolutions, LLC |
| 2015 NY Slip Op 07870 [132 AD3d 1161] |
| October 29, 2015 |
| Appellate Division, Third Department |
[*1]
| Science Applications International Corporation,Respondent-Appellant, v Environmental Risk Solutions, LLC, et al.,Defendants, and 1694 Niagara Falls Blvd Tonawanda, LLC, et al.,Appellants-Respondents. (Action No. 1.) Blount Energy, Inc., et al.,Appellants-Respondents, v Environmental Risk Solutions, LLC, et al., Defendants, andScience Applications International Corporation, Respondent-Appellant. (Action No.2.) |
Harriton & Furrer, LLP, Armonk (Urs Broderick Furrer of counsel), forappellants-respondents.
Tabner, Ryan & Keniry, LLP, Albany (Thomas R. Fallati of counsel), forrespondent-appellant.
Rose, J. Cross appeals (1) from an order of the Supreme Court (Teresi, J.), enteredOctober 5, 2012 in Albany County, which, in action No. 1, among other things, deniedplaintiff's cross motion seeking to amend its pleading to add certain affirmative defenses,(2) from an order of said court, entered October 15, 2012 in Albany County, which, inaction No. 1, denied certain defendants' motion to reargue, (3) from an order of said court(McDonough, J.), entered January 24, 2014 in Albany County, upon a decision of thecourt in favor of Science Applications International Corporation, and (4) upon thejudgment entered thereon.
ExxonMobil Corporation sold and/or assigned lease rights to 47 gas station sites inupstate New York to various entities affiliated with Lehigh Gas Corporation (hereinaftercollectively referred to as Lehigh). Both ExxonMobil and Lehigh were aware that thesites were affected by varying degrees of petroleum contamination, and the purchase andsale agreements required Lehigh to assume, in perpetuity, all liability resulting from anysuch contamination. They also executed three remediation escrow agreements wherebyExxonMobil agreed to, among other things, establish and fund escrow accounts for thepurpose of covering the estimated costs for Lehigh to achieve regulatory closure of thespill numbers established by the Department of Environmental Conservation (hereinafterDEC) for each of the 47 sites.
Thereafter, Lehigh hired defendant Environmental Risk Solutions, LLC (hereinafterERS) as its environmental remediation contractor. ERS, in turn, retained ScienceApplications International Corporation (hereinafter SAIC), with whom it had apreexisting professional services master agreement (hereinafter PSMA), as itssubcontractor to perform the actual onsite remediation work. To that end, ERS and SAICentered into three separate subcontracts designated as project specific scopes of work(hereinafter PSSW) that were, as relevant here, identical in language. The PSSWsrequired SAIC to perform remediation at each site for a fixed price, regardless of theactual site-specific cleanup costs incurred in achieving the appropriate remediationstandard, with the fixed price for each site to be paid from the escrowed funds.
After SAIC obtained closure of DEC spill numbers at 18 of the 47 sites,ERS—at Lehigh's request—notified SAIC that it was being "terminated forconvenience" pursuant to section 14.2 of the PSMA. SAIC then wound down itsoperations and submitted final invoices to ERS for payment. When no further paymentswere forthcoming, SAIC filed notices of mechanic's liens on seven of the sites basedupon remediation work that it had allegedly performed and for which it was not fullycompensated. Thereafter, SAIC commenced action No. 1 alleging, among other things,breach of contract against ERS and seeking the foreclosure of the mechanic's liensagainst Lehigh. Lehigh responded with action No. 2, which alleged, among other things,breach of contract against ERS and SAIC. Action Nos. 1 and 2 were joined and,following discovery and extended motion practice, Supreme Court (Teresi, J.), issued anorder entered October 5, 2012, which, among other things, denied SAIC's request toamend its [*2]pleadings. SAIC and Lehigh cross-appealfrom this order.[FN1]
On the eve of trial, Lehigh settled all of its outstanding claims against ERS. SAICthen agreed to sever all of its claims and cross claims against ERS, thereby removingERS as a party to these actions. Following a five-week nonjury trial, Supreme Court(McDonough, J.) issued a decision and order entered January 24, 2014 that, among otherthings, permitted foreclosure of six of SAIC's mechanic's liens and dismissed Lehigh'scounterclaims in action No. 1. As for action No. 2, Supreme Court determined thatLehigh had failed to prove its causes of action for breach of contract and fraud, denied itsremaining claims and dismissed SAIC's counterclaims. Supreme Court also denied eachparty's request for counsel fees. The court then entered judgment in accord with its order,and SAIC and Lehigh now cross-appeal from both the order and the judgment.
Upon our review of a nonjury trial, we will independently review the record andgrant any judgment that we find to be warranted (see Mazza v Fleet Bank, 16 AD3d 761, 762 [2005];Amodeo v Town of Marlborough, 307 AD2d 507, 508 [2003]). While our overallreview of Supreme Court's order and judgment is rooted in New York law, we willaccept the parties' agreement that Lehigh's claim in action No. 2—that SAICbreached the PSSWs by failing to fully perform its remediation obligations—isgoverned by Pennsylvania law. Under Pennsylvania law, "[t]he necessary material factsthat must be alleged for such an action are simple: there was a contract, the defendantbreached it, and plaintiffs suffered damages from the breach" (McShea v City ofPhiladelphia, 606 Pa 88, 97, 995 A2d 334, 340 [2010]; see Stein v Magarity,102 A3d 1010, 1013-1014 [Pa Super 2014]). Here, neither Lehigh nor SAIC questionsthe validity of the PSSWs. Rather, the central issue in this dispute is one of contractinterpretation, as the parties present starkly contrasting views of how the PSSWs definethe scope of SAIC's remediation obligations.
When a court must resolve questions of contract interpretation, "[t]he fundamentalrule . . . is to ascertain and give effect to the intent of the contractingparties" (Murphy v Duquesne Univ. of The Holy Ghost, 565 Pa 571, 590-591,777 A2d 418, 429 [2001]; see Robert F. Felte, Inc. v White, 451 Pa 137, 143,302 A2d 347, 351 [1973]). If the terms of the contract are unambiguous, "the intent ofthe parties is to be ascertained from the document itself" (Insurance Adj. Bur., Inc. vAllstate Ins. Co., 588 Pa 470, 481, 905 A2d 462, 468 [2006]; see Lesko vFrankford Hosp.-Bucks County, 609 Pa 115, 123, 15 A3d 337, 342 [2011]). [*3]However, when a contract is "reasonably susceptible ofdifferent constructions and capable of being understood in more than one sense"(Trizechahn Gateway LLC v Titus, 601 Pa 637, 653, 976 A2d 474, 483 [2009][internal quotation marks and citation omitted]; accord Ferrer v Trustees of Univ. ofPa., 573 Pa 310, 339, 825 A2d 591, 608 [2002]), "parol evidence is admissible toexplain or clarify or resolve the ambiguity, irrespective of whether the ambiguity ispatent, created by the language of the instrument, or latent, created by extrinsic orcollateral circumstances" (Insurance Adj. Bur., Inc. v Allstate Ins. Co., 588 Pa at481, 905 A2d at 468).
Here, we agree with Supreme Court that most of the disputed terms regarding SAIC'sremediation obligations under the PSSWs are "a compromised hodgepodge of conflictingproposals" susceptible to several reasonable interpretations. As an example, Lehigh'sargument that section 5 (a) (1) of the PSSWs unambiguously required SAIC to, amongother things, meet a stringent, contractually defined "Cleanup Standard" is belied bysection 5 (a) (3) of the PSSWs, which—also unambiguously—permitsSAIC to remediate the sites by, among other things, achieving regulatory closure of thespill numbers from DEC, as indicated by receipt of "no further action" (hereinafter NFA)letters from DEC.
As an additional example, SAIC argues that Lehigh's consent to seek spill numberclosures pursuant to section 5 (a) (3) of the PSSWs could be obtained passively via thereview and comment procedure set forth in section 5 (p) of the PSSWs. Nowhere in thePSSWs, however, does it indicate that SAIC could rely on this subsection to obtainLehigh's consent—passively or otherwise—to proceed with regulatoryclosure pursuant to section 5 (a) (3). Likewise, the PSSWs fail to provide any alternativemechanism or procedure for Lehigh to review and comment on SAIC's submissions toDEC. This failure on the part of Lehigh and SAIC to articulate an adequately definedprocedure for how SAIC was to obtain Lehigh's consent to proceed with an alternatecleanup standard left the ultimate formation of such a procedure susceptible to the variedand subjective constructions of the parties, thus creating additional ambiguity.
Further ambiguity arose with regard to section 5 (g) of the PSSWs, an inherentlycontradictory provision governing when SAIC's remediation work at a given site couldbe considered complete. In its first clause, section 5 (g) references SAIC's obligationspursuant to section 5 (a) (1) of the PSSWs, stating that "SAIC's remediation andmonitoring obligations under this [PSSW] shall cease upon attainment of the CleanupStandard and receipt of [NFA] Status from DEC for each [s]ite as defined in[section 5 (a)]" (emphasis added). However, the very next clause contradicts the priorone, stating that, "[u]pon receipt of [NFA] Status confirmation from DEC, SAIC'sremediation and monitoring obligations shall cease, except for re-openers to the extentfound to be due to SAIC's negligence[.]" In light of these ambiguities, we find thatSupreme Court appropriately considered parol evidence to determine both the intent ofthe parties and whether SAIC breached the PSSWs (see Insurance Adj. Bur., Inc. vAllstate Ins. Co., 588 Pa at 481, 905 A2d at 468; Murphy v Duquesne Univ. ofThe Holy Ghost, 565 Pa at 591, 777 A2d at 429-430).
Generally speaking, under Pennsylvania law, when considering parol evidence toresolve contractual ambiguities, the course of performance between the contractingparties is "perhaps the strongest indication of what the writing means" (AtlanticRichfield Co. v Razumic, 480 Pa 366, 376, 390 A2d 736, 741 [1978]; accordMatt Lamb & Sons, Inc. v Christian Schmidt Brewing Co., 336 Pa Super 341,351, 485 A2d 836, 841 [1984]). Indeed, "[w]herever reasonable, the manifestations ofintention of the parties to a promise or agreement are interpreted as consistent with eachother and with any relevant course of performance" (Sunbeam Corp. v Liberty Mut.Ins. Co., 566 Pa 494, 501, 781 A2d 1189, 1193 [2001] [internal quotation marks andcitation omitted]; accord Solomon v United States Healthcare Sys. of Pa., Inc.,797 A2d [*4]346, 350 [Pa Super 2002], appealdenied 570 Pa 688, 808 A2d 573 [2002]).
Here, SAIC concedes that, during the performance of its remediation obligations, itnever met the more stringent cleanup standards required by section 5 (a) (1) of thePSSWs. Nonetheless, SAIC maintains that it fully complied with its remedial obligationsby obtaining Lehigh's passive consent to utilize the alternative cleanup standards requiredto obtain spill number closures in accordance with section 5 (a) (3) of the PSSWs. Weagree. The evidence reveals that, prior to requesting closure of an open spill number fromDEC, it was SAIC's regular practice to post relevant documentation, including, amongother things, remedial action plans,[FN2] to a file transfer protocol (hereinafterFTP) site to allow for review and comment by ERS and Lehigh pursuant to the terms ofsection 5 (p) of the PSSWs. Each time it posted such information to the FTP site, if SAICdid not receive any objections within the 10-day review period provided by section 5 (p),SAIC assumed—as section 5 (p) entitled it to do—that ERS and Lehigh hadapproved its proposed submissions and, by extension, consented to its remedial actionplan as required by section 5 (a) (3). This, in turn, prompted SAIC to contact DEC andseek closure of the spill number pursuant to DEC's spill guidance manual.
Between late 2006, when remediation work began, and late 2008, SAIC relied solelyupon the above-described procedure to seek and obtain consent from Lehigh to pursuespill number closures according to its remedial action plans. These extensive, highlydetailed plans were proposals to utilize the cleanup standards authorized by section 5 (a)(3) of the PSSWs, and should have been considered as such by Lehigh, a sophisticatedparty undoubtedly familiar with the subject matter. At no point during this two-yearperiod did ERS or Lehigh ever object to the remedial action plans or otherdocumentation that SAIC posted on the FTP site, and there is no evidence tending toshow that Lehigh was unable to do so. In our view, given that SAIC obtained spillnumber closure in accordance with the spill guidance manual at 18 sites, and inasmuch asthe parties' course of performance leading up to the closures is consistent with SAIC'sinterpretation of subsections (a) (3) and (p) of section 5, we find that the parties intendedto permit SAIC to obtain Lehigh's passive consent to seek spill number closure pursuantto section 5 (a) (3), and that Lehigh manifested its consent by not objecting to SAIC'sremedial action plans, or any other relevant documentation, within the section 5 (p)review period (see Sunbeam Corp. v Liberty Mut. Ins. Co., 566 Pa at 501, 781A2d at 1193; Solomon v United States Healthcare Sys. of Pa., Inc., 797 A2d at350).
We likewise reject Lehigh's contention that the PSSWs required DEC to makeexpress findings of infeasibility in order for SAIC to utilize section 5 (a) (3) of thePSSWs, as the claim is contradicted by the plain language of that subsection. Lehigh alsoclaims that SAIC should not have attempted to obtain its consent through the PSSWsand, instead, should have sought it in accordance with the PSMA. Lehigh, however, wasneither a party nor a third-party beneficiary to the PSMA and, thus, Lehigh cannot arguethat the consent procedures between it and SAIC are governed by anything other than thePSSWs, to which Lehigh was expressly made a third-party beneficiary.
The parties' course of performance between late 2008 and mid 2009 leads us to the[*5]further conclusion that, despite the conflictinglanguage in section 5 (g) of the PSSWs, the parties intended to relieve SAIC of anyfurther remediation obligations at a given site upon achieving NFA status, regardless ofwhether the more stringent cleanup standard set forth in section 5 (a) (1) of the PSSWshad been met. Despite Lehigh's desire, after two years of acquiescence, to alter theconsent procedure for future spill number requests, and despite the fact that residualpetroleum contamination might remain at the 18 sites at which SAIC had already attainedNFA status, Lehigh failed to charge SAIC with any breach of contract and did notspecifically reserve any rights with respect thereto. Nor did Lehigh mandate that SAICreturn to any of those sites to perform additional remediation in order to satisfy the morestringent standards set forth in section 5 (a) (1). Instead, Lehigh agreed to move forwardwith remediation at the remaining 29 sites and approved payment of approximately$800,000 in SAIC invoices that were then in arrears. Accordingly, we concur withSupreme Court's determination to dismiss Lehigh's breach of contract claim in action No.2, inasmuch as the parol evidence makes clear that SAIC performed its remedialobligations in accordance with the PSSWs.
We likewise concur that, in action No. 2, Supreme Court appropriately dismissedLehigh's fraud cause of action. In order to prevail upon its cause of action for fraud,Lehigh was required to establish that SAIC, "with the intent to deceive, misrepresentedor omitted a material fact that [it] knew to be false and [Lehigh], in turn, justifiably reliedupon such misrepresentation or omission, thereby incurring damages" (Revell v Guido, 124 AD3d1006, 1010 [2015]; seeMandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 178 [2011]; McColgan v Brewer, 112AD3d 1191, 1193 [2013], lv denied 24 NY3d 911 [2014]). Here, Lehighoffered no evidence indicating that SAIC had any intention to not perform its contractualobligations pursuant to the PSSWs. We agree with Supreme Court's view that certainemail messages between SAIC's managers could be characterized—atworst—as flippant, but they did not support a fraud cause of action. Nor couldLehigh have justifiably relied on any misrepresentations purportedly set forth by SAIC,as Lehigh had a full and fair opportunity to review and comment on SAIC's remedialaction plans as well as the reprogramming of certain site-specific funds from one task toanother pursuant to the procedure set forth in section 5 (p) of the PSSWs. To the extentthat Lehigh avers that SAIC misrepresented the degree of the contamination at variousgas station sites, Supreme Court appropriately determined that its claims are premised onits dissatisfaction with SAIC's performance of its contractual obligations and duplicativeof its breach of contract cause of action (see New York Univ. v Continental Ins.Co., 87 NY2d 308, 318-320 [1995]; Carpenter v Plattsburgh Wholesale Homes, Inc., 83 AD3d1175, 1176 [2011]; see alsoDemetre v HMS Holdings Corp., 127 AD3d 493, 494 [2015]).
Next, we address a number of the arguments raised by the parties with regard toSupreme Court's award of damages. First, Lehigh argues that Supreme Court erred bygranting SAIC's requests in action No. 1 to foreclose on six of SAIC's mechanic's liens.We disagree. To the extent that Lehigh argues, for the first time on appeal, that SAIC hadno right to file the liens because the PSMA was not a "construction contract" and, thus,SAIC was not a "contractor" or "subcontractor" under General Business Law§ 756, the argument is unpreserved for our review (see Anthony DeMarco & SonsNursery, LLC v Maxim Constr. Serv. Corp., 130 AD3d 1409, 1411 [2015]). Inany event, it is patently without merit, as the aforementioned definitions are particular tothe General Business Law and are contradicted by separate definitions of the same termsin the Lien Law, which clearly allow SAIC to maintain the liens (see Lien Law§ 2 [9], [10]).
Nor did Lehigh sufficiently prove that SAIC failed to perform the work for which itfiled the subject liens or that it willfully exaggerated the amount of its lien claims. For theliens upon which it was allowed to foreclose, SAIC established the basis of each lien andthe [*6]underlying unpaid work alleged to have beenperformed through the introduction of itemized statements of the lien claims, which wereprovided to Lehigh upon its demand (see Lien Law § 38; Associated Bldg. Servs., Inc. vPentecostal Faith Church, 112 AD3d 1130, 1131-1132 [2013]). Lehigh's largelyconclusory and unsupported allegations to the contrary are, in any event, refuted byextensive course of performance evidence indicating that Lehigh was fully aware ofSAIC's invoicing practices and had consented to them for years, both through section 5(p) of the PSSWs and by actually paying SAIC's invoices (compare Creech v Rufa, 101AD3d 1224, 1225-1226 [2012]; Tri-North Bldrs. v Di Donna, 217 AD2d886, 887 [1995]). Furthermore, we find no credible evidence in the record tending toindicate that SAIC willfully exaggerated the amounts of its lien claims (see LienLaw §§ 39, 39-a; Saratoga Assoc. Landscape Architects, Architects, Engrs. &Planners, P.C. v Lauter Dev. Group, 77 AD3d 1219, 1223 [2010]; PyramidChamplain Co. v Brosseau & Co., 267 AD2d 539, 542-543 [1999], lvdenied 94 NY2d 760 [2000]).
Finally, both Lehigh and SAIC argue that, pursuant to section 20.8 of the PSMA,they are entitled to recover costs and counsel fees from the other party. However,inasmuch as Lehigh is not a party to the PSMA, the only way that either Lehigh or SAICwould be entitled to enforce this provision against the other party is if Lehigh can beconsidered a third-party beneficiary to the PSMA (see Scarpitti v Weborg, 530 Pa366, 372-373, 609 A2d 147, 150 [1992]). Here, ERS and SAIC unambiguously limitedLehigh's third-party beneficiary rights to the provisions of the PSSWs only. Thus, wefind that neither SAIC nor Lehigh has the right to enforce any provision of the PSMAagainst the other, including section 20.8, which is the only provision in any of thecontracts relevant to this appeal that allows for the recovery of costs and counsel fees(cf. Ribarchak v Municipal Auth. of City of Monongahela, 44 A3d 706, 709-710[Pa Commw 2012], appeal denied 618 Pa 692, 57 A3d 73 [2012]; VictoriaGardens Condominium Assn. v Kennett Twp. of Chester County, 23 A3d 1098,1104-1106 [Pa Commw 2011], appeal denied 611 Pa 644, 24 A3d 365[2011]).
To the extent that Lehigh's remaining arguments have not been rendered academic byour decision, they have been considered and found to be without merit. We have alsoconsidered SAIC's arguments regarding its purported entitlement to additional damagesbeyond what was awarded by Supreme Court's judgment, and find that SAIC has failedto make a sufficient showing as to any of those claims.
Peters, P.J., McCarthy and Garry, JJ., concur. Ordered that the appeals from theorders entered October 5, 2012 and October 15, 2012 are dismissed, without costs.Ordered that order entered January 24, 2014 and the judgment are affirmed, withoutcosts. [Prior Case History: 37 Misc 3d 1202(A), 2012 NY Slip Op51855(U).]
Footnote 1:These cross appealsmust be dismissed, inasmuch as SAIC concedes in its brief that its cross appeal is moot,and Lehigh has effectively abandoned its cross appeal by failing to raise in its brief anyargument regarding this order's propriety (see Mayr v Alvarez, 130 AD3d 1199, 1200 n 1 [2015]; Miller v Genoa AG Ctr., Inc.,124 AD3d 1113, 1114 n [2015]). To the extent that Lehigh also appeals from thecourt's October 15, 2012 order denying its subsequent motion to reargue, no appeal liestherefrom (see Schillaci vSarris, 122 AD3d 1085, 1087 [2014]; Matter of Yager v Massena Cent. Sch. Dist., 119 AD3d1066, 1068-1069 [2014]).
Footnote 2:Remedial action plansprovided detailed designs of the intended cleanup strategy for a given site and, as such,were an instrumental component of each application to DEC seeking spill numberclosure.