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W. ELEC. v. NEW YORK CITY TRANSIT AUTH.

April 13, 1990

WESTINGHOUSE ELECTRIC CORPORATION, PLAINTIFF,
v.
NEW YORK CITY TRANSIT AUTHORITY AND METROPOLITAN TRANSPORTATION AUTHORITY, DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

  OPINION

Defendants New York City Transit Authority ("TA") and Metropolitan Transportation Authority ("MTA") move for summary judgment dismissing the action of plaintiff Westinghouse Electric Corporation ("Westinghouse"). For the reasons stated below, the motion is granted and the complaint is dismissed.

THE PARTIES

MTA and the TA are public benefit corporations created by the New York State Legislature pursuant to Public Authorities Law §§ 1201, 1263 to develop and improve commuter transportation in New York City and the greater metropolitan area. Westinghouse is a corporation that engages in diversified manufacturing and construction activities, which embrace government contracting.

PRIOR PROCEEDINGS

On October 4, 1988, Westinghouse commenced this action to obtain payment from defendants TA and MTA for certain work Westinghouse performed for defendants. Westinghouse contends the disputed work was beyond the scope of performance required by the parties' contract and beyond the scope of the competitive bid it submitted to obtain the contract award. Following extensive discovery conducted by both parties, the TA and MTA moved for summary judgment on October 18, 1989. After adjournments occasioned by requests of the parties to permit additional time to brief the issues, oral argument on the motion was heard on December 15, 1989 at which time it was fully submitted.

THE FACTS*fn1

This lawsuit concerns a public works contract, Contract P-36221 (the "Contract"), bid out by MTA (by its agent, TA) and awarded to Westinghouse, as part of the MTA's multi-million dollar capital program to develop and improve the transportation system of New York City. The Contract was for the purchase and installation of power rectifier equipment at several subway substations, including the Flatbush-Willoughby substations. At issue is whether Westinghouse is entitled to compensation in addition to that provided for under the Contract for certain disputed remote telephone communications work that Westinghouse performed in connection with the Contract.

  The work performed was the laying of new cable in subway
tunnels to remote destinations of the Flatbush-Willoughby
emergency alarm circuit that controls the DeKalb Avenue subway
hub (the "Flatbush-Willoughby remote communications work" or
the "disputed work"). Westinghouse contends that its accepted
bid did not contemplate the performance of the disputed work
nor was such work clearly called for under the Contract.
  A. The Bidding for Contract P-36221

On August 5, 1982, TA advertised the Contract and issued a Contract Book setting forth the Contract terms and conditions, the project drawings and specifications, and requirements for bidders' proposal. Although the Book originally called for bid submission by September 29, 1982, several addenda to the Contract were issued over the next three months, resulting in the adjustment of the bid deadline to November 16, 1982.

The specifications issued for the project contained no reference to a requirement that extensive lengths of new telephone cable be installed to run from the Flatbush-Willoughby substations to remote locations. The project drawings, and in particular, Telephone Drawing TE-7, indicated that some cable work would be required, and Drawing TE-1 stated that cable indicated on the drawings was to be new, unless otherwise indicated. Neither drawing specified the quantity of cable in question or the remote destination of most of the cable runs. Drawing TE-7 did schematically indicate that it was incomplete and that additional details as to the scope of the cable runs would be provided by a further drawing to be issued as an Addendum.

The Contract Book recommended site inspection to the bidders, who were urged to visit project sites to inform themselves of the nature and conditions of the work and were presumed by the bidding instructions to have acquired full knowledge of conditions at the sites relating to the work. Bidding Instruction ¶ 7. In addition, the TA conducted a pre-bid tour of inspection for bidders on October 19-20, 1982, which representatives from Westinghouse attended. The pre-bid tour did not go to the site of the disputed Flatbush-Willoughby communications installation, nor did Westinghouse request, at that time or otherwise, an inspection of that location.

On November 4, 1982, the TA issued by mail an Addendum No. 4 to the Contract. In addition to describing the major addition of a circuit breaker house at another site, the Addendum contained three telephone drawings, P-8A, P-9A, and P-10, which provided additional information about the communications work. Westinghouse received the drawings and passed them on to its electrical installation subcontractor, Mass. Transportation Electrical Construction Corp ("MTEC") on November 10, 1982, six days before the bidders' proposals were due.

MTEC believed it did not have time to survey the site to properly estimate the cost of the remote work, and was under considerable time pressures to prepare its portion of the Westinghouse bid. MTEC and Westinghouse did not seek a formal clarification of the drawings prior to preparing the bid for this work, nor seek the opportunity to inspect the Flatbush-Willoughby site.*fn3 MTEC proceeded to prepare a bid estimate of $438,415 for Job Item 21A (the item number designating the work that included the disputed portion of the communications project), omitting the remote work (the long cable runs) its estimator had been concerned was called for by the Addendum 4 drawings and including in its item price only the cost of doing the local (as opposed to local and remote) cable connections. Westinghouse incorporated MTEC's price without revision in its total bid and submitted the bid to the TA.

B. Bid Opening and Award

On November 16, 1982, TA opened the sealed bids for the Contract submitted by Westinghouse, English Electric Company, and General Electric Company. Westinghouse was the low bidder, with a bid of $21,121,481. The other bids were $325,000 to $800,000 higher. All the bids were considerably below (19% to 22% lower than) the TA's engineer's overall project estimate of $25.9 million. None of the bidders sought to rescind their bids due to mistake during the 24-hour rescission window provided by the Contract.

The bid analysis by the TA showed significant percentage and ranges of deviation on several particular component bid items, including deviations ranging from 2% (General Electric) to 50% (English Electric) less than engineer's estimate on Item 22U, 44% (General Electric) to 57% (English Electric) less on Item 22V, and 46% (English Electric) to 76% (Westinghouse) less on the disputed communications item in question, Item 21 A. Westinghouse's bid for this pay item was 76% below the TA's engineer's estimate, making it Westinghouse's and also G.E.'s (but not English Electric's) most deviant item bid.*fn4 The TA engineer's bid analysis concluded from the across-the-board level of lower-than-forecasted bidding that all of the bidders had been successful in obtaining much reduced prices for major items than the prices that had been paid in the previous TA contracts upon which the TA engineer had based his estimates, and that the inflation factor (15%) that TA had employed had seriously deviated from the then-current economic climate of 5% inflation.

The engineer recommended the Contract be awarded to the apparent low bidder, Westinghouse, and on December 28, 1982, the TA, acting as agent for the MTA, awarded the Contract to Westinghouse.

  C.  Filing and Approval of the Detailed Cost
      Breakdown

Westinghouse was required to submit a Detailed Estimate Breakdown ("DEB") within 30 days from the notice of award pursuant to Article 3.01 of the Contract. Westinghouse submitted a DEB 77 days after the Contract was awarded, on March 16, 1983. The Item 21A communications work portion of the DEB, prepared by Frank Caristia of MTEC, was consistent with the original Westinghouse bid in that it did not include cost estimates for installation of the remote cable connections and, for the same reason, the DEB was inconsistent with the scope of the work that TA intended to require through the telephone drawings.*fn5 Mr. Caristia states in preparing the DEB that he found the drawings governing this work to be illegible, unclear and inconsistent, but he did not request full-size drawings, seek clarification of the drawings, conduct a site survey, or report any inconsistencies to the TA.

The DEB for the disputed Item was received and reviewed by the TA and approved for payment by at least one official. At that time, the TA did not catch the missing items. A purchase order for the materials shown on the DEB for that item was approved on July 28, 1983 although the materials necessary to complete the disputed work were not included in the purchase order.

D.  The Disputed Remote Cable Work Resurfaces

Up to this point, Westinghouse and MTEC had performed no communications work on the Flatbush-Willoughby portion of the Contract. In late 1984 or in 1985, Caristia of MTEC for the first time reviewed full size bid drawings of the Flatbush-Willoughby communication work and conducted a site survey of the areas in which the disputed work was to be performed, in connection with the preparation by MTEC of the work drawings. As a result of his site survey, Caristia notified the TA that he had discovered that the existing remote cables were too deteriorated and of insufficient capacity to use. TA told MTEC that the Contract Drawings contemplated the installation of new cable to the remote destinations.*fn6 Russell Randazzo of MTEC orally advised Mr. Katz of the TA that MTEC had been intending only to splice into the existing wire, not to run new remote cables.

Thereafter, MTEC's performance ceased, it having prepared work drawings and purchased certain equipment materials. During Contract progress meetings in 1986 or 1987, Westinghouse indicated that the requirement to replace all the remote cable would result in its incurring substantially increased costs and balked at performing the work. After further discussions failed to produce a resolution, in the summer of 1987 Westinghouse was directed to perform the disputed work and to submit a formal claim under the Contract procedures if it believed it was entitled to additional monies.

Westinghouse still balked and on July 22, 1987, at another meeting addressing the emergency alarm systems, a Westinghouse representative proposed that instead of completing the disputed work, Westinghouse give a credit to TA permitting TA to go to another contractor for completion of the remote cable work. Westinghouse further indicated that if required to complete the work, it would request an additional work order under the Contract to cover its additional costs. Westinghouse's representative was again told by Mr. Katz of TA that the Contract required Westinghouse to do the work and if Westinghouse felt it had a claim for exceptional costs, it could submit one for consideration by the TA at the end of the Contract.

During the summer of 1987, Westinghouse resumed the communications work that its subcontractor MTEC had ceased doing in 1985, employing a different subcontractor, Forest Electronics. Written notice concerning the disputed communications work was submitted by Westinghouse to TA several months later on February 8, 1988. On May 26, 1988, Westinghouse made a formal submission to the TA's Chief Electrical Officer ("CEO") requesting additional compensation for the work pursuant to Chapter Four of the Contract (the "Request").

In the Request, Westinghouse stated that it had underbid the Contract by $1,097,450.50 because it had not known the scope of the work the TA intended to include in Addendum No. 4. Westinghouse contended it was entitled to reimbursement of that million dollar amount on several grounds: (a) reasonable bid mistake; (b) TA's "superior knowledge"; (c) TA's "snapping up" of its mistaken bid; and (d) TA's defective contract specifications. The Request was supplemented by an additional submission on July 14, 1988, addressing contract bar and laches problems.

  On July 15, 1988, the CEO, who is identified in the Contract
as arbiter of disputes arising thereunder, issued a one-page
written determination rejecting Westinghouse's claim. After the
Request denial, Westinghouse did not serve a Notice of Claim on
TA or on the MTA nor seek to have the determination of the
Chief Electrical Officer annulled in an Article 78 proceeding.
In October of 1988, it commenced this lawsuit in federal court.
                        ISSUES PRESENTED

On the following grounds, TA and MTA move for summary judgment against Westinghouse's claims for breach, equitable reformation, or declaration of rights under the contract:

1. Westinghouse's failure to seek pre-bid clarification in accordance with the Contract terms bars Westinghouse from claiming any benefit from the asserted ambiguity as to scope of work required by the Contract;

2. The law does not protect Westinghouse from its unilateral mistake, and there is no genuine issue as to fraud or overreaching on the part of TA or MTA;

3. The Contract's notice requirements and the doctrine of laches bar Westinghouse's late-filed claims;

4. The Contract's alternative dispute resolution procedures bar Westinghouse's action.

STANDARDS APPLICABLE TO SUMMARY JUDGMENT MOTIONS

Summary judgment is authorized if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Thus, TA and MTA, as the moving parties, bear the burden of proving that no genuine issue of material fact exists. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Corselli v. Coughlin, 842 F.2d 23 (2d Cir. 1988). All ambiguities are resolved against them, and all favorable inferences are drawn in favor of the party against whom summary judgment is sought. See Adickes v. ...


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