Turner Construction Co. v. MJ Flaherty Co.

34 Mass. L. Rptr. 171
CourtMassachusetts Superior Court, Suffolk County
DecidedMarch 8, 2017
DocketNo. SUCV201302308
StatusPublished

This text of 34 Mass. L. Rptr. 171 (Turner Construction Co. v. MJ Flaherty Co.) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court, Suffolk County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Turner Construction Co. v. MJ Flaherty Co., 34 Mass. L. Rptr. 171 (Mass. Super. Ct. 2017).

Opinion

Kaplan, Mitchell H., J.

INTRODUCTION

This case arises out of a subcontract between the plaintiff, Turner Construction Company (Turner), and the defendant MJ Flaherty Company (Flaherty). Turner was the general contractor on the construction of a 23-story commercial building at 157 Berkeley Street and certain related remodeling of an adjacent building for Liberty Mutual Insurance Company (the Project). Flaherty entered into a subcontract with Turner to perform the HVAC work on the Project (the Subcontract). The initial value of the Subcontract was $12,462,252. Turner brought this action against Flaherty to recover damages that it alleges that it suffered when Flaherty failed to complete its work on the Project and Turner had to hire another subcontractor to complete the HVAC work.1

Flaherty has asserted counterclaims against Turner. Some of these claims are based on Turner’s failure to pay Flaherty for all of the work that it performed. Here, the amount in dispute is complicated by the fact that in early 2013 several sub-subcontractors and material suppliers to Flaherty were not being paid and began to file notices of contract in anticipation of asserting mechanics’ liens on the Project. In response, Turner entered into a series of agreements with Flaherty pursuant to which it issued checks to Flaherty for subcontracted work that were made jointly payable to Flaherty and the vendors to insure that they were being paid out of the sums Turner was disbursing to Flaherty.

Flaherty, however, also has alleged that as a result of the manner in which Turner ran the Project, Flaherty was so adversely affected that the value of Flaherty as a going concern was adversely impacted and this resulted in a $6.4 million reduction in Flaherty’s “new worth.” This is, of course, a paradigm claim for consequential damages. This claim is the subject of the motion now before the court.

It would be an extraordinary understatement to say that this case has a tortured procedural history. Turner has filed two previous motions for summary [172]*172judgment that the court was unable to decide on their merits because they were premature or otherwise not properly before the court. It is treating this motion as a motion for partial summary judgment seeking dismissal of so much of the counterclaims as assert claims for consequential damages, and, to that extent, Turner’s motion for summary judgment is ALLOWED.

ADDITIONAL FACTS

There are only a few additional facts that need be recited in connection with Flaherty’s claim for consequential damages.

As is typical of subcontracts for large, commercial building projects, the Subcontract contained a clause eliminating Flaherty’s right to recover consequential damages.

Notwithstanding any term or provision herein to the contrary, Subcontractor expressly waives and releases all claims or rights to recover lost profit (except for profit on work actually performed), recovery of overhead (including home office overhead), and any other indirect damages, costs or expenses in any way arising out of or related to the Agreement, including the breach thereof by Contractor, delays, charges, acceleration, loss of efficiency or productivity disruptions and interference with the performance of the work.

A number of change orders were issued for the HVAC work which increased the project price by something in excess of 20%. Flaherty asserts, and for purposes of this motion it is accepted as true, that Turner’s project schedule was very aggressive. Additionally, changes to the schedule and project sequencing “negatively impacted . . . Flaherty’s manner and method of performance and this increased Flaherty’s costs” and made the project much more difficult for Flaherty to perform.

DISCUSSION Summary Judgment

Flaherty contends that the project changes were cumulatively of such a scope and consequence that they caused “a Cardinal Change or Abandonment of the [Subcontract].” As will be seen, whether a question of fact exists concerning whether Turner caused a cardinal change in the Subcontract, or the Subcontract was abandoned, need not be decided to conclude that the limitation on consequential damages set out in the Subcontract continues to be binding on Flaherty.

At oral argument, the court noted that, before this case, it had never encountered the concept of cardinal change in a contract, and the few cases that Flaherty cited in support of this doctrine were federal government contracting cases. The court questioned whether the doctrine would be applied by Massachusetts courts to private contracts. In a post-hearing supplemental brief Flaherty directed the court to Superior Court Judge Lloyd MacDonald’s (now retired) excellent and comprehensive decision: Certified Power Systems, Inc. v. Dominion Energy Brayton Point, LLC, 2012 WL 384600 (Jan. 3, 2012). In that case, J. MacDonald described this doctrine as follows:

The Court was unable to find a Massachusetts case that referred directly to the cardinal change doctrine. However, it is referred to by commentators on Massachusetts law and the concept embodies familiar contract principals.
A cardinal change is a change outside the general scope of the contract which constitutes such a substantial deviation that it alters the nature of the bargain and constitutes a material breach . . . (cardinal change is drastic and fundamental modification in the work which requires contractor to perform duties materially different from those originally bargained for).
Although a cardinal change generally represents a large increase in one parly’s contract burdens, there is no precise formula for determining whether a change is within the scope of the contract or a cardinal change . .. Each case must be analyzed on its own facts and circumstances giving fair consideration to the magnitude and qualify of the changes ordered and their cumulative effect on the project as a whole . . . Numerous changes, none of which individually may be deemed cardinal, may create a cardinal change when considered as a whole.

(Internal citations and quotations omitted for simplicity.) This court finds this reasoning persuasive and concludes that, under Massachusetts law, the cardinal change doctrine may be applied to a private construction contract when the facts warrant it. It is, however, worth noting that, in Certified Power Systems, Inc., Judge MacDonald concluded that change orders that increased the subcontract price by more than 50% did not constitute a cardinal change: “the enlarged work crew, the insistence on substantial overtime as a means to recover schedule and the winter conditions together presented a markedly different contract environment from what CPS reasonably anticipated. However, the essence of the work required by the Subcontract remained the same. Further, the change order procedure of the Subcontract provided a structure for the orderly accommodation of the altered conditions without undue disruption.”

It seems likely that Judge MacDonald’s conclusions will apply to the present case as well, but the court’s decision on consequential damages does not rest on that factual conclusion. As Judge MacDonald notes, if a cardinal change were established that might constitute a material breach of the Subcontract.

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Cite This Page — Counsel Stack

Bluebook (online)
34 Mass. L. Rptr. 171, Counsel Stack Legal Research, https://law.counselstack.com/opinion/turner-construction-co-v-mj-flaherty-co-masssuperctsuff-2017.