Opinion ID: 598973
Heading Depth: 2
Heading Rank: 2

Heading: New York Law Applied

Text: 28 The contractor appellants in the case at hand contend that their relationship with the defendant architects Gruzen was sufficient to impose a duty of care on defendant under New York law. Viewing the allegations in the complaint as true, and construing them in a light most favorable to appellants, the allegations are insufficient to raise an issue of fact with respect to whether the relationship between the parties is close enough so as to be the functional equivalent of privity. 29 In alleging a direct relationship with Gruzen, appellants place great reliance on the pre-bid meeting at which Gruzen answered prospective bidders' questions about the plan documents and Gruzen's preparation and forwarding the minutes of the meeting and written clarifications to prospective bidders. Gruzen of course took these actions at the direction of the dormitory authority, which had made it a requirement of the retainer agreement. Gruzen was therefore acting merely as a representative of the authority and not establishing a direct relationship of its own that would link it with appellants. Further, this action was directed to all prospective bidders, not simply to Mars-Normel. This isolated contact is insufficient to establish the relationship required for the imposition of liability under New York law. See Security Pacific Business Credit, Inc., 79 N.Y.2d at 706-07, 586 N.Y.S.2d 87, 597 N.E.2d 1080. Hence, appellant's cross-claim for negligent misrepresentation and indemnity against Gruzen was properly dismissed by the district court. II A. Appropriateness of Summary Judgment 30 We next analyze the October 28, 1991 order. In granting partial summary judgment in favor of the dormitory authority, the magistrate judge held that the no-damages-for-delay clause of § 10.02 of the construction contract barred Mars-Normel from seeking delay damages. Appellants first contend that the no-damages-for-delay clause does not exempt the authority from liability for prebid and other misrepresentations. Appellants also assert that, notwithstanding the general no-damages-for-delay clause, § 7.01D of the contract provides for payment of delay impact costs arising from change orders. In support of their contention that § 7.01D is an exception to the general no-damages-for-delay clause, appellants point out that the authority paid it $75,402 in impact damages as part of eight change orders during the course of the project. Additionally, the authority paid one subcontractor directly for its delay costs. Appellants declare further that they explicitly reserved their right to delay costs envisioned by § 7.01D by insisting that such language be included on nearly half--121 of the 267--of the change orders issued. 31 Summary judgment may be granted when the provisions of a contract convey a definite and precise meaning, absent any ambiguity. See Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.1992); Heyman v. Commerce and Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir.1975); Painton & Co. v. Bourns, Inc., 442 F.2d 216, 233 (2d Cir.1971). When the provisions of the contract are susceptible to conflicting constructions and when there is also relevant extrinsic evidence of the parties' actual intent, the meaning of the provisions becomes an issue of fact barring summary judgment. See Seiden, 959 F.2d at 428; Heyman, 524 F.2d at 1320; Painton, 442 F.2d at 233. Ambiguity without the existence of extrinsic evidence of intent presents not an issue of fact, but an issue of law for the court to rule on. Antilles Steamship Co. v. Members of the Am. Hull Ins. Syndicate, 733 F.2d 195, 207 (2d Cir.1984) (Newman, J., concurring). 32 A conflict exists between § 7.01D of the contract--which provides for delay impact costs arising from change orders--and the general no-damages-for-delay clause of § 10.02. The contract is ambiguous because the interrelationship of these two provisions is susceptible to different reasonable interpretations. See Seiden, 959 F.2d at 430. In light of this ambiguity, the contracting parties are entitled to an opportunity to present extrinsic evidence to establish their intent. Id. Appellants have proffered such extrinsic evidence by asserting that the authority paid delay impact costs with respect to a number of change orders, and that appellants explicitly reserved their right to make such claims in other change orders. These facts directly conflict with the state dormitory authority's interpretation of the contract. Thus partial summary judgment was inappropriately granted. B. Gross Negligence 33 Even if it is determined that the no-damages-for-delay clause applies to the extra work performed pursuant to the change orders, such a clause will not serve to prevent recovery of damages for delays caused by the authority's bad faith or its willful, malicious, or grossly negligent conduct. See Corinno Civetta Constr. Corp. v. City of New York, 67 N.Y.2d 297, 309, 502 N.Y.S.2d 681, 493 N.E.2d 905 (1986); Kalisch-Jarcho, Inc. v. City of New York, 58 N.Y.2d 377, 384-85, 461 N.Y.S.2d 746, 448 N.E.2d 413 (1983). Gross negligence encompasses conduct that betokens a reckless indifference to the rights of others. Kalisch-Jarcho, 58 N.Y.2d at 385, 461 N.Y.S.2d 746, 448 N.E.2d 413. Appellants contend the district court erred in ruling as a matter of law that the authority was not grossly negligent in submitting the defective plan documents. 34 After award of the construction contract, the state authority issued two completely revised sets of plan documents because of deficiencies in the original plans submitted to the contractors. More than 267 change orders were required because of errors found in the revised documents. While these extensive changes may not in themselves raise an issue of fact as to gross negligence, it is undisputed that the authority had notice from its own and other professionals of how substantial those errors were and how they pervaded the original documents as late as three weeks before they were submitted for bidding. Those professionals seriously questioned the viability of a structure built in accordance with the plans in hand at that time. The magistrate judge viewing this evidence concluded that any errors on the authority's part constituted simple negligence at worst. That court reasoned that any error so blatant as to be gross negligence would have had to be obvious to Mars-Normel. But in reaching this conclusion, the magistrate judge failed to apply the appropriate rule under New York law, requiring this aspect of the case also to be remanded. 35 On the remand already directed therefore the magistrate judge should first resolve the ambiguity in the contract. If that dispute is decided in appellant's favor, there will be no further need to consider appellant's gross negligence claim because whatever injury appellant suffered will be redressed by the damages obtained in its contract action. If, on the other hand, the contract ambiguity is resolved against appellant, the magistrate judge should then proceed with respect to the gross negligence claim to decide: whether the dormitory authority's delays and changes were contemplated by both parties when they entered into the contract, or whether the delays--even if contemplated by the parties--were so egregious that they constituted reckless indifference to Mars-Normel's rights. See Castagna & Son, Inc. v. Board of Educ. of New York, 173 A.D.2d 405, 406, 570 N.Y.S.2d 286 (1st Dep't 1991); J.R. Stevenson Corp. v. County of Westchester, 113 A.D.2d 918, 922, 493 N.Y.S.2d 819 (2d Dep't 1985).