Over $1M Awarded to Subcontractor for Wrongful Termination in Construction Dispute
December 16, 2021 | Case Results \ Construction Law
Rodriguez-McCloskey PLLC recently obtained an arbitration award of over $1 million for its client in a high-stakes, complex construction dispute.
Founding partner Yenisey Rodriguez-McCloskey successfully defended its client, Concrete Structures, Inc. (“CSI”), against unsubstantiated claims for damages totaling more than $5 million.
In more than nine days of hearings over a contested construction project, Rodriguez-McCloskey convinced the arbitration panel that CSI was wrongfully terminated as a subcontractor of Armory Builders III, LLC (“Armory”).
As a result, CSI rightfully obtained the money for work it had performed, but that Armory had withheld based on unsupportable breach of contract claims.
What Is Arbitration and Why Use It?
Arbitration is a form of alternative dispute resolution (ADR), which allows parties to attempt to resolve disputes without going to court. ADR is facilitated by a neutral third party.
ADR can include arbitration, mediation, or other processes involving neutral evaluation of issues. ADR can be a way for parties to reach a more amicable resolution to disputes, which can help preserve business relationships.
Often, binding arbitration is included in a contract between parties. But, parties can opt to arbitrate even when there is no requirement to do so.
Arbitration can be a way for parties to resolve a contract dispute by saving the time, expense, and uncertainty of litigation. It can be a helpful tool in the construction industry, when a timely resolution to disputes can allow a project to proceed more efficiently.
The Armory Construction Contracts
This case arose from a construction contract in November 2018 between Armory and Bedford Courts III LLC (“Bedford”). Armory contracted with general contractor Bedford to build affordable housing and facilities (the “Project”) at the Bedford Union Armory in Brooklyn, New York (the “Site”).
Specifically, the Project consisted of:
- Rehabilitating and developing the armory facilities into a community center, sports complex, pool, and offices for non-profit organizations
- Construction of a 60-unit, 15-story residential building
- Construction of a 335-unit, 15-story residential building
The Project was a Brownfield site and required special procedures for handling contaminated soil on the Site.
In July 2019, after terminating a contract with a different concrete subcontractor, Armory entered into three subcontracts with CSI for excavation and concrete work.
From the start, Armory put CSI behind schedule by failing to update the master schedule, even though the previous contractor hadn’t completed any significant work on the Project before CSI got started.
Armory ultimately terminated CSI’s contracts based on a number of alleged defaults and delays.
Excavation
Armory blamed CSI for failing to maintain the proper slope in excavation for one of the buildings. However, the arbitration panel found that Armory’s original design was flawed and that CSI was not at fault for any delays caused by its excavation method.
Water Buildup on the Site
Armory claimed that CSI delayed the project because it failed to properly remove water from the Site. In turn, this prevented CSI from pouring concrete on time.
The arbitration panel disagreed. It determined that Armory caused the water buildup in the first place because Armory failed to properly manage rainwater runoff. CSI was not responsible for this problem that Armory caused.
Understaffing Allegations
Armory vaguely alleged that CSI delayed the Project because CSI didn’t have enough workers onsite. But Armory presented no testimony regarding any specific work that was not being done by CSI. The panel found that any delays were either caused by Armory itself or were otherwise out of CSI’s control.
The Decision
Siding with CSI, the panel found that Armory failed to meet its burden of proof that CSI had breached the subcontracts. Therefore, Armory had no grounds to terminate CSI from the Project.
The arbitration panel awarded CSI $1,092,747.82, plus interest of 9%, accrued from April 6, 2020.
The panel wholly denied Armory’s claims seeking $5,352,865.55 in costs and lost rent due to the alleged delays caused by CSI. Armory’s award was $0.