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PIRACCI CONSTR. CO. v. SKIDMORE

May 22, 1980

PIRACCI CONSTRUCTION CO., INC., Plaintiff, against SKIDMORE, OWINGS & MERRILL, Defendant.


The opinion of the court was delivered by: TENNEY

Piracci Construction Co., Inc. ("Piracci") sued Skidmore, Owings & Merrill ("SOM") on three causes of action growing out of the construction of the Smithsonian Institution, Joseph H. Hirshhorn Museum and Sculpture Garden ("Museum") in Washington, D.C. SOM, an architectural and engineering firm, designed the museum, and Piracci built it, each under a separate contract with the General Services Administration of the United States ("GSA"). In its first cause of action, Piracci claimed that SOM injured it by negligently designing the Museum and thereby causing delays. In its second cause of action, it claimed that SOM injured it by willfully delaying the revision of the faulty design. In its third and final cause of action, Piracci claimed that "SOM, without reasonable justification knowingly and intentionally interfered with the contract between Piracci and the GSA by persuading the GSA to wrongfully reject the scale model of the (Museum) Project which Piracci built from SOM's designs," Complaint P 16, and that after considerable delay and at additional cost, Piracci was required to build another scale model. By Memorandum and Order dated July 28, 1977 ("1977 Memorandum and Order"), the Court granted SOM's motion pursuant to Federal Rule of Civil Procedure ("Rule") 12(b) to dismiss the first two causes of action on the ground that Piracci had failed to pursue its contractual remedies. The Court denied the motion to dismiss the third cause of action. In doing so, the Court concluded that Piracci had sufficiently stated a cause of action for tortious interference with contractual relations. "(A) factual inquiry is needed to determine if the actions of SOM were permissible or if they exceeded the scope of its authorized power and discretion, and if they were intended to and succeeded in impeding Piracci's performance, thereby causing it to lose some of the benefits of its contract." 1977 Memorandum and Order at 12.

Piracci subsequently moved for summary judgment against SOM as to liability on the third cause of action and for an order specifying the facts that appear without substantial controversy. SOM cross-moved for summary judgment against Piracci on the grounds that the third cause of action is barred by the three-year statute of limitations and that, as a matter of law, Piracci has failed to offer evidence sufficient to sustain a claim for tortious interference with the contract between Piracci and the GSA. For the reasons stated below, the Court concludes that the third cause of action is barred by the applicable statute of limitations and that, accordingly, the complaint must be dismissed.

BACKGROUND

 Pursuant to its contract with the GSA, Piracci was required to produce a model of a portion of the Museum. Affidavit of Louis H. Willenken, sworn to February 21, 1979 ("Willenken Feb. Aff."), P 5; Affidavit of Arthur H. Christy, sworn to April 4, 1979 ("Christy Apr. Aff."), P 4. In April 1970, Piracci engaged Architectural Presentation Associates ("APA") to make the model. APA completed the model on May 1, 1970. Willenken Feb. Aff. P 6; Christy Apr. Aff. P 5. Soon thereafter, Piracci alleges, the parties began using the model as a visual aid. Willenken Feb. Aff. PP 7-9. During the summer of 1970, Piracci further alleges, Universal Formclamp Co. ("Universal"), a formwork subcontractor, noted problems with SOM's contract drawings and so informed SOM. Id. P 11. Allegedly in response to Universal's inquiries about the drawings, SOM began asking the GSA about the whereabouts of the model. Id. P 12. SOM then asked the GSA to have the model sent to SOM for review. Id. P 15. After reviewing the model, SOM determined that it did not comply with the applicable specifications. Christy Apr. Aff. P 6. It so informed the GSA and requested that the model be resubmitted. Id.; Letter from Leon Moed of SOM to Joseph E. Smercak of the GSA, dated September 9, 1970, attached id. as Exh. A. The GSA then informed Piracci of various defects in the model and asked that it be resubmitted. Letter from Joseph E. Smercak to Piracci, dated September 15, 1970, attached as Exh. B to Christy Apr. Aff. The first model was resubmitted with corrections in November 1970; it was again rejected. Willenken Feb. Aff. PP 67-68; Christy Apr. Aff. P 8. Piracci then retained Alexander, Jones & Teepe to make a second model. Willenken Feb. Aff. P 69; Christy Apr. Aff. P 8. In April 1971 SOM approved the second model. Willenken Feb. Aff. P 100.

 On May 12, 1971, Piracci made a formal claim against the GSA for the costs of delays to the Museum Project allegedly caused by the rejection of the model. The Contracting Officer at the GSA denied Piracci's request for compensation. Piracci appealed the decision to the GSA Board of Contract Appeals ("GSABCA"). Administrative Law Judge David W. Pelkey granted an equitable adjustment because the rejection had constituted a "constructive change" within the meaning of the contract. See 1977 Memorandum and Order at 10. *fn1"

 Statute of Limitations

 In its motion for summary judgment, SOM contends that Piracci's claim for intentional interference with its contract with the GSA is barred by the applicable three-year statute of limitations in N.Y.C.P.L.R. ยง 214(4). It contends that the cause of action, if it arose at all, accrued on September 9, 1970, the date on which SOM suggested that a revised model be submitted. The latest conceivable date on which any alleged interference could have occurred, SOM further alleges, was either in April 1971, when the GSA accepted the second model, or May 31, 1971, because Piracci's president allegedly admitted that no interference took place after that date. *fn2" Piracci commenced the action on July 1, 1976, more than five years after any of the above dates and more than two years after the statute of limitations expired.

 Piracci agrees that section 214(4) (three years) governs this cause of action, but it argues that it commenced this action within three years after the cause of action accrued. It argues that the accrual date was not until the later of (1) the completion of the Museum in September 1974 or (2) the termination of administrative proceedings before the GSABCA on August 29, 1974. Asserting that the claim sounds in professional malpractice, it contends that the statute of limitations does not begin to run until the completion of construction. Piracci argues that a contrary rule would be unfair to the contractor who must work with and is dependent on the architect, would encourage multiple lawsuits, and would fail to recognize that the injury is a continuing one and that the full extent of damages remains unknown until the construction is completed.

 Piracci argues alternatively that its cause of action for tortious interference with its GSA contract did not accrue until Piracci had pursued the administrative remedy mandated by the contract. It states that the Court concluded in its 1977 Memorandum and Order "that Piracci had pursued its administrative remedy on the third claim." Memorandum in Opposition to Defendant's Motion for Summary Judgment ("Piracci's May 8 Mem.") at 6-7. Accordingly, it reasons, the cause of action did not accrue until the completion of the administrative proceedings on August 29, 1974. In support of this contention, Piracci states that "SOM is in privity with GSA and the cause of action for intentional interference is based on the same acts and occurrences as in the administrative proceeding." Piracci's May 8 Mem. at 8. It adds that Piracci would not have a claim against SOM if it had been fully compensated by the GSA and that damages from pursuing its administrative remedy would not even come into existence until completion of the administrative proceedings.

 SOM replies that Piracci's cause of action is for intentional interference with a contract, and not for professional malpractice; accordingly, the "continuous treatment" reasoning does not apply. Moreover, it continues, the policy considerations underlying the "continuous treatment" doctrine are not applicable here: Piracci was not dependent on SOM as a client is on an architect, and the parties were not in a position of total trust and reliance. Secondly, SOM replies that Piracci's intentional interference cause of action arises under tort law, not under the Piracci-GSA contract. Accordingly, there was no contractually mandated administrative remedy and no basis for tolling the statute of limitations. In any event, SOM continues, statutes of limitations are not tolled during administrative proceedings.

 DISCUSSION

 In its 1977 Memorandum and Order at 11, the Court concluded:

 
Plaintiff does appear to have a valid claim for the tortious interference with contractual relations even though the complaint does not denominate it as a tort claim. Such a claim does not arise under the Piracci/GSA contract and thus could be maintained against SOM in its individual capacity. One court has aptly explained that:
 
"The tort extends to cases in which performance of the contract is rendered more difficult or a party's enjoyment of the contract's benefits is lessened by the wrongdoer's actions. In New York, "an unlawful interference with a person in the performance of his contract with a third party is just as much a legal wrong as is an unlawful inducement of a breach of that contract by the third party." Goodall v. Columbia Ventures, Inc., 374 F. Supp. 1324, 1332 (S.D.N.Y.1974), quoting from Morris v. ...

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