A New York State judge has ruled that Laquila Construction Group, the excavation and foundation subcontractor for the Barclays Center arena in Brooklyn, can sue prime contractor Hunt Construction Group for additional payment even though Laquila signed releases when it accepted progress payments during the project.
The arena open on time in September 2012.
New York City-based Laquila filed a complaint against Hunt in state court in Brooklyn in May, 2013. Although Hunt paid Laquila all the money due under the original $27.5 million contract, plus payments covering change orders, Laquila says in its lawsuit that it is owed $10.8 million more. Laquila sent Hunt a letter in January 2013 asking for the additional pay.
Changes to the scope of work, delays related to permits and hazardous material found at the site all added to the costs and time needed to finish its work, claims Laquila.
Among other failings, Laquila claims, Hunt failed to provide access to the site in the promised sequence, to obtain permits needed to do the work and to disclose the presence of arsenic.
Judge Carolyn Demarest ruled June 25th that although Hunt had compensated Laquila for many of the changes made to the contract, Hunt failed to provide conclusive evidence against Laquila's claim that the changes in scope constituted a "cardinal" change to the contract.
Nor did Hunt provide enough documentary evidence to overturn Laquila's claim that Hunt orally modified the subcontract terms to meet the project schedule and method of payment, Demarest wrote.
The heart of Hunt's pleading to disqualify the claim was that it had paid all amounts due in progress payments and that acceptance of the payments included signed releases from claims.
"This action is an improper attempt by Laquila to obtain a windfall by asserting claims in a litigation that were previously paid, resolved and released," Hunt argued.
As a result, Hunt claimed in its pleading, Laquila seeks to convince the court that increases in its contract price are justified and that Hunt breached its contract.
"In truth, virtually all of the issues identified by Laquila were contemplated by the Subcontract and were addressed through a series of Change Orders," for which Laquila received additional pay, Hunt claims.
Partial Waiver of Claims
With each progress payment, Laquila submitted releases and a "Partial Waiver of Claims, " including a waiver of liens, that confirmed that it had been properly paid for its work. "Had Laquila wished to reserve its rights, it could have done so," Hunt claimed. In fact, Laquila did that in January and February 2011 over disputed retainage and cost to replace a footing, and these were resolved by change order, said Hunt.
Courts around the country routinely enforce waivers similar to those signed by Laquila, Hunt claims.
Laquila said it accepted the progress payments because it feared for the financial health and ability to continue in business.