Court Opinion

ID: 3150509
Source: CourtListenerOpinion
Date Created: 2015-10-29 14:06:20.044153+00
Date Added: 2024-06-11T11:55:30.355743
License: Public Domain

State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered:   October 29, 2015                 515406
                                                        518498
________________________________

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.)
________________________________            MEMORANDUM AND ORDER

BLOUNT ENERGY, INC., et al.,
                    Appellants-
                    Respondents,
      v

ENVIRONMENTAL RISK SOLUTIONS,
   LLC, et al.,
                    Defendants,
      and

SCIENCE APPLICATIONS
   INTERNATIONAL CORPORATION,
                    Respondent-
                    Appellant.

(Action No. 2.)
________________________________

Calendar Date:   September 17, 2105
                                -2-                515406
                                                   518498

Before:    Peters, P.J., McCarthy, Garry and Rose, JJ.

                             __________

      Harriton & Furrer, LLP, Armonk (Urs Broderick Furrer of
counsel), for appellants-respondents.

      Tabner, Ryan & Keniry, LLP, Albany (Thomas R. Fallati of
counsel), for respondent-appellant.

                             __________

Rose, J.

      Cross appeals (1) from an order of the Supreme Court
(Teresi, J.), entered October 5, 2012 in Albany County, which, in
action No. 1, among other things, denied plaintiff'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, in action 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 the court in favor of Science Applications
International Corporation, and (4) upon the judgment entered
thereon.

      ExxonMobil Corporation sold and/or assigned lease rights to
47 gas station sites in upstate New York to various entities
affiliated with Lehigh Gas Corporation (hereinafter collectively
referred to as Lehigh). Both ExxonMobil and Lehigh were aware
that the sites were affected by varying degrees of petroleum
contamination, and the purchase and sale agreements required
Lehigh to assume, in perpetuity, all liability resulting from any
such contamination. They also executed three Remediation Escrow
Agreements whereby ExxonMobil agreed to, among other things,
establish and fund escrow accounts for the purpose of covering
the estimated costs for Lehigh to achieve regulatory closure of
the spill numbers established by the Department of Environmental
                              -3-                515406
                                                 518498

Conservation (hereinafter DEC) for each of the 47 sites.

      Thereafter, Lehigh hired defendant Environmental Risk
Solutions, LLC (hereinafter ERS) as its environmental remediation
contractor. ERS, in turn, retained Science Applications
International Corporation (hereinafter SAIC), with whom it had a
preexisting Professional Services Master Agreement (hereinafter
PSMA), as its subcontractor to perform the actual onsite
remediation work. To that end, ERS and SAIC entered into three
separate subcontracts designated as Project Specific Scopes of
Work (hereinafter PSSW) that were, as relevant here, identical in
language. The PSSWs required SAIC to perform remediation at each
site for a fixed price, regardless of the actual site-specific
cleanup costs incurred in achieving the appropriate remediation
standard, 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 for convenience" pursuant to section 14.2
of the PSMA. SAIC then wound down its operations and submitted
final invoices to ERS for payment. When no further payments were
forthcoming, SAIC filed notices of mechanic's liens on seven of
the sites based upon remediation work that it had allegedly
performed and for which it was not fully compensated.
Thereafter, SAIC commenced action No. 1 alleging, among other
things, breach of contract against ERS and seeking the
foreclosure of the mechanic's liens against 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 an order entered
October 5, 2012, which, among other things, denied SAIC's request
to amend its pleadings. SAIC and Lehigh cross-appeal from this
order.1

    1
        These cross appeals must 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
                              -4-                515406
                                                 518498

      On the eve of trial, Lehigh settled all of its outstanding
claims against ERS. SAIC then agreed to sever all of its claims
and cross claims against ERS, thereby removing ERS 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 other things, permitted foreclosure of six
of SAIC's mechanic's liens and dismissed Lehigh's counterclaims
in action No. 1. As for action No. 2, Supreme Court determined
that Lehigh had failed to prove its causes of action for breach
of contract and fraud, denied its remaining claims and dismissed
SAIC's counterclaims. Supreme Court also denied each party'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 and grant 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 overall review of Supreme Court's order and judgment is
rooted in New York law, we will accept the parties' agreement
that Lehigh's claim in action No. 2 – that SAIC breached the
PSSWs by failing to fully perform its remediation obligations –
is governed by Pennsylvania law. Under Pennsylvania law, "[t]he
necessary material facts that must be alleged for such an action
are simple: there was a contract, the defendant breached it, and
plaintiffs suffered damages from the breach" (McShea v City of
Philadelphia, 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 questions the validity of the PSSWs.

its brief any argument 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 the court's October 15, 2012 order
denying its subsequent motion to reargue, no appeal lies
therefrom (see Schillaci v Sarris, 122 AD3d 1085, 1087 [2014];
Matter of Yager v Massena Cent. Sch. Dist., 119 AD3d 1066, 1068-
1069 [2014]).
                              -5-                515406
                                                 518498

Rather, the central issue in this dispute is one of contract
interpretation, as the parties present starkly contrasting views
of how the PSSWs define the scope of SAIC's remediation
obligations.

      When a court must resolve questions of contract
interpretation, "[t]he fundamental rule . . . is to ascertain and
give effect to the intent of the contracting parties" (Murphy v
Duquense 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 of the parties is to be ascertained from
the document itself" (Insurance Adjustment Bureau, Inc. v
Allstate Ins. Co., 588 Pa 470, 481, 905 A2d 462, 468 [2006]; see
Lesko v Frankford Hospital-Bucks County, 609 Pa 115, 123, 15 A3d
337, 342 [2011]). However, when a contract is "reasonably
susceptible of different 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. of Pa., 573 Pa 310, 339, 825 A2d 591, 608 [2002]),
"parol evidence is admissible to explain or clarify or resolve
the ambiguity, irrespective of whether the ambiguity is patent,
created by the language of the instrument, or latent, created by
extrinsic or collateral circumstances" (Insurance Adjustment
Bureau, Inc. v Allstate Ins. Co., 588 Pa at 481).

      Here, we agree with Supreme Court that most of the disputed
terms regarding SAIC's remediation obligations under the PSSWs
are "a compromised hodgepodge of conflicting proposals"
susceptible to several reasonable interpretations. As an
example, Lehigh's argument that section 5 (a) (1) of the PSSWs
unambiguously required SAIC to, among other things, meet a
stringent, contractually defined "Cleanup Standard" is belied by
section 5 (a) (3) of the PSSWs, which – also unambiguously –
permits SAIC to remediate the sites by, among other things,
achieving regulatory closure of the spill numbers from DEC, as
indicated by receipt of "no further action" (hereinafter NFA)
letters from DEC.
                              -6-                515406
                                                 518498

      As an additional example, SAIC argues that Lehigh's consent
to seek spill number closures pursuant to section 5 (a) (3) of
the PSSWs could be obtained passively via the review and comment
procedure set forth in section 5 (p) of the PSSWs. Nowhere in
the PSSWs, however, does it indicate that SAIC could rely on this
subsection to obtain Lehigh's consent – passively or otherwise –
to proceed with regulatory closure pursuant to section 5 (a) (3).
Likewise, the PSSWs fail to provide any alternative mechanism or
procedure for Lehigh to review and comment on SAIC's submissions
to DEC. This failure on the part of Lehigh and SAIC to
articulate an adequately defined procedure for how SAIC was to
obtain Lehigh's consent to proceed with an alternate cleanup
standard left the ultimate formation of such a procedure
susceptible to the varied and subjective constructions of the
parties, thus creating additional ambiguity.

      Further ambiguity arose with regard to section 5 (g) of the
PSSWs, an inherently contradictory provision governing when
SAIC's remediation work at a given site could be considered
complete. In its first clause, section 5 (g) references SAIC's
obligations pursuant to section 5 (a) (1) of the PSSWs, stating
that "SAIC's remediation and monitoring obligations under this
[PSSW] shall cease upon attainment of the Cleanup Standard 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 prior one, stating that, "[u]pon receipt of [NFA]
Status confirmation from DEC, SAIC's remediation and monitoring
obligations shall cease, except for re-openers to the extent
found to be due to SAIC's negligence[.]" In light of these
ambiguities, we find that Supreme Court appropriately considered
parol evidence to determine both the intent of the parties and
whether SAIC breached the PSSWs (see Insurance Adjustment Bureau,
Inc. v Allstate Ins. Co., 588 Pa at 481; Murphy v Duquense Univ.
of The Holy Ghost, 565 Pa at 591).

      Generally speaking, under Pennsylvania law, when
considering parol evidence to resolve contractual ambiguities,
the course of performance between the contracting parties is
"perhaps the strongest indication of what the writing means"
(Atlantic Richfield Co. v Razumic, 480 Pa 366, 376, 390 A2d 736,
                                -7-                515406
                                                   518498

741 [1978]; accord Matt Lamb & Sons, Inc. v Christian Schmidt
Brewing Co., 336 Pa Super 341, 351, 485 A2d 836, 841 [1984]).
Indeed, "[w]herever reasonable, the manifestations of intention
of the parties to a promise or agreement are interpreted as
consistent with each other 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 and
citation omitted]; accord Solomon v U.S. Healthcare Systems of
Pa., Inc., 797 A2d 346, 350 [PA Super 2002], lv denied 570 Pa 688
[2002]).

      Here, SAIC concedes that, during the performance of its
remediation obligations, it never met the more stringent cleanup
standards required by section 5 (a) (1) of the PSSWs.
Nonetheless, SAIC maintains that it fully complied with its
remedial obligations by obtaining Lehigh's passive consent to
utilize the alternative cleanup standards required to obtain
spill number closures in accordance with section 5 (a) (3) of the
PSSWs. We agree. The evidence reveals that, prior to requesting
closure of an open spill number from DEC, it was SAIC's regular
practice to post relevant documentation, including, among other
things, remedial action plans,2 to a File Transfer Protocol
(hereinafter FTP) site to allow for review and comment by ERS and
Lehigh pursuant to the terms of section 5 (p) of the PSSWs. Each
time it posted such information to the FTP site, if SAIC did 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 had approved its proposed submissions
and, by extension, consented to its remedial action plan as
required by section 5 (a) (3). This, in turn, prompted SAIC to
contact DEC and seek closure of the spill number pursuant to
DEC's Spill Guidance Manual.

        Between late 2006, when remediation work began, and late

    2
        Remedial action plans provided 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
number closure.
                              -8-                515406
                                                 518498

2008, SAIC relied solely upon the above-described procedure to
seek and obtain consent from Lehigh to pursue spill number
closures according to its remedial action plans. These
extensive, highly detailed 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
sophisticated party undoubtedly familiar with the subject matter.
At no point during this two-year period did ERS or Lehigh ever
object to the remedial action plans or other documentation that
SAIC posted on the FTP site, and there is no evidence tending to
show that Lehigh was unable to do so. In our view, given that
SAIC obtained spill number closure in accordance with the Spill
Guidance Manual at 18 sites, and inasmuch as the parties' course
of performance leading up to the closures is consistent with
SAIC's interpretation of subsections (a) (3) and (p) of section
5, we find that the parties intended to permit SAIC to obtain
Lehigh's passive consent to seek spill number closure pursuant to
section 5 (a) (3), and that Lehigh manifested its consent by not
objecting to SAIC's remedial 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; Solomon v
U.S. Healthcare Systems of Pa., Inc., 797 A2d at 350).

      We likewise reject Lehigh's contention that the PSSWs
required DEC to make express findings of infeasibility in order
for SAIC to utilize section 5 (a) (3) of the PSSWs, as the claim
is contradicted by the plain language of that subsection. Lehigh
also claims that SAIC should not have attempted to obtain its
consent through the PSSWs and, instead, should have sought it in
accordance with the PSMA. Lehigh, however, was neither a party
nor a third-party beneficiary to the PSMA and, thus, Lehigh
cannot argue that the consent procedures between it and SAIC are
governed by anything other than the PSSWs, 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 further conclusion that, despite the
conflicting language in section 5 (g) of the PSSWs, the parties
intended to relieve SAIC of any further remediation obligations
at a given site upon achieving NFA status, regardless of whether
                              -9-                515406
                                                 518498

the more stringent cleanup standard set forth in section 5 (a)
(1) of the PSSWs had been met. Despite Lehigh's desire, after
two years of acquiescence, to alter the consent procedure for
future spill number requests, and despite the fact that residual
petroleum contamination might remain at the 18 sites at which
SAIC had already attained NFA status, Lehigh failed to charge
SAIC with any breach of contract and did not specifically reserve
any rights with respect thereto. Nor did Lehigh mandate that
SAIC return to any of those sites to perform additional
remediation in order to satisfy the more stringent standards set
forth in section 5 (a) (1). Instead, Lehigh agreed to move
forward with remediation at the remaining 29 sites and approved
payment of approximately $800,000 in SAIC invoices that were then
in arrears. Accordingly, we concur with Supreme 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 remedial obligations in accordance with the
PSSWs.

      We likewise concur that, in action No. 2, Supreme Court
appropriately dismissed Lehigh'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,
misrepresented or omitted a material fact that [it] knew to be
false and [Lehigh], in turn, justifiably relied upon such
misrepresentation or omission, thereby incurring damages" (Revell
v Guido, 124 AD3d 1006, 1010 [2015]; see Mandarin Trading Ltd. v
Wildenstein, 16 NY3d 173, 178 [2011]; McColgan v Brewer, 112 AD3d
1191, 1193 [2013], lv denied 24 NY3d 911 [2014]). Here, Lehigh
offered no evidence indicating that SAIC had any intention to not
perform its contractual obligations pursuant to the PSSWs. We
agree with Supreme Court's view that certain email messages
between SAIC's managers could be characterized – at worst – as
flippant, but they did not support a fraud cause of action. Nor
could Lehigh 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 remedial action plans
as well as the reprogramming of certain site-specific funds from
one task to another pursuant to the procedure set forth in
section 5 (p) of the PSSWs. To the extent that Lehigh avers that
                              -10-               515406
                                                 518498

SAIC misrepresented the degree of the contamination at various
gas station sites, Supreme Court appropriately determined that
its claims are premised on its dissatisfaction with SAIC's
performance of its contractual obligations and duplicative of 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 AD3d 1175, 1176 [2011]; see
also Demetre v HMS Holdings Corp., 127 AD3d 493, 494 [2015]).

      Next, we address a number of the arguments raised by the
parties with regard to Supreme Court's award of damages. First,
Lehigh argues that Supreme Court erred by granting 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 had no 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 & Sons Nursery, LLC v Maxim Constr. Serv.
Corp., 130 AD3d 1409, 1411 [2015]). In any event, it is patently
without merit, as the aforementioned definitions are particular
to the General Business Law and are contradicted by separate
definitions of the same terms in 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 it filed the subject liens or that it
willfully exaggerated the amount of its lien claims. For the
liens upon which it was allowed to foreclose, SAIC established
the basis of each lien and the underlying unpaid work alleged to
have been performed through the introduction of itemized
statements of the lien claims, which were provided to Lehigh upon
its demand (see Lien Law § 38; Associated Bldg. Servs., Inc. v
Pentecostal Faith Church, 112 AD3d 1130, 1131-1132 [2013]).
Lehigh's largely conclusory and unsupported allegations to the
contrary are, in any event, refuted by extensive course of
performance evidence indicating that Lehigh was fully aware of
SAIC'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, 101 AD3d 1224, 1225-1226
                              -11-               515406
                                                 518498

[2012]; Tri-North Bldrs. v Di Donna, 217 AD2d 886, 887 [1995]).
Furthermore, we find no credible evidence in the record tending
to indicate that SAIC willfully exaggerated the amounts of its
lien claims (see Lien Law §§ 39, 39-a; Saratoga Assoc. Landscape
Architects, Architects, Engrs. & Planners, P.C. v Lauter Dev.
Group, 77 AD3d 1219, 1223 [2010]; Pyramid Champlain Co. v
Brosseau & Co., 267 AD2d 539, 542-543 [1999], lv denied 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
SAIC would be entitled to enforce this provision against the
other party is if Lehigh can be considered a third-party
beneficiary to the PSMA (see Scarpitti v Weborg, 530 Pa 366, 372-
373, 609 A2d 147, 150 [1992]). Here, ERS and SAIC unambiguously
limited Lehigh's third-party beneficiary rights to the provisions
of the PSSWs only. Thus, we find that neither SAIC nor Lehigh
has the right to enforce any provision of the PSMA against the
other, including section 20.8, which is the only provision in any
of the contracts 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 Cmwlth
2012], lv denied 618 Pa 692 [2012]; Victoria Gardens Condominium
Assn. v Kennett Twp. of Chester County, 23 A3d 1098, 1104-1106
[Pa Cmwlth 2011], lv denied 611 Pa 644 [2011]).

      To the extent that Lehigh's remaining arguments have not
been rendered academic by our decision, they have been considered
and found to be without merit. We have also considered SAIC's
arguments regarding its purported entitlement to additional
damages beyond what was awarded by Supreme Court's judgment, and
find that SAIC has failed to make a sufficient showing as to any
of those claims.

     Peters, P.J., McCarthy and Garry, JJ., concur.
                              -12-                 515406
                                                   518498

      ORDERED that the appeals from the orders entered October 5,
2012 and October 15, 2012 are dismissed, without costs.

      ORDERED that order entered January 24, 2014 and the
judgment are affirmed, without costs.

                             ENTER:

                             Robert D. Mayberger
                             Clerk of the Court