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Silveira Industries, Ltd. v. Actus Lend Lease

December 24, 2008


The opinion of the court was delivered by: David N. Hurd United States District Judge



Plaintiff Silveira Industries, Ltd. ("Silveira" or "plaintiff") filed this breach of contract action in New York State Supreme Court, Jefferson County, on January 18, 2006. In its complaint, plaintiff asserted four causes of action: first, for breach of contract to recover for work performed; second, for unjust enrichment to recover for services, materials, and equipment performed and provided; third, for interference with performance of work due to disruption to recover for performance of additional services and provision of additional equipment and materials; and fourth, for breach of contract to recover for unperformed work due to defendant's alleged wrongful termination of the contract. Defendant Actus Lend Lease, LLC ("Actus" or "defendant") removed the action to the Northern District of New York on February 27, 2006. Defendant interposed an answer and counterclaims sounding in breach of contract, contractual indemnification, and for attorneys fees.

Defendant moved for partial summary judgment seeking: (1) a declaration that it validly terminated the contract; and (2) dismissal of plaintiff's Fourth Cause of Action. Plaintiff opposed. Defendant replied and moved to strike portions of the Affidavit of Michael W. Porter ("Porter") that was submitted in opposition to defendant's motion. Plaintiff opposed the motion to strike.

Oral argument was heard on March 17, 2008, in Utica, New York. Decision was reserved.


A. Facts

Actus was the prime contractor for a design-build contract for on-post housing units and related facilities on Fort Drum, a United States Army installation near Watertown, New York. Actus entered into a subcontract with Silveira to install concrete foundations for 64 buildings. The foundations were to be built using a frost protected shallow foundation designed by Actus. Although work was originally to be started in June 2005, Actus did not send a subcontract to Silveira until September 2, 2005. Actus held a preconstruction meeting on September 20, 2005, and executed the subcontract on September 29, 2005.

The subcontract provided for a completion date of May 31, 2006. It also provided that a winter break during which work was halted would occur. Thus, according to the construction schedule Silveira needed to complete an average of 2.5 foundations per week in order to meet its performance obligations under the subcontract. According to the subcontract, Silveira needed a labor crew of approximately 30 workers in order to meet the construction schedule. The total amount of the subcontract was $2,523,736.

After Actus executed the subcontract on September 29, 2005, Silveira mobilized at the work site for orientation and safety meetings on October 3, 2005. On October 4, 2005, it began excavation. It anticipated beginning excavation at a certain foundation site, then progressing in a logical fashion following the street line to the remaining 63 sites.

Silveira immediately encountered difficulty with the sandy soil because it could not be properly excavated and because soil compaction under the footers, as called for by Actus's frost protected shallow foundation design, could not be accomplished. In addition to the design/soil compaction problem, rainy weather also created problems. The rain caused the sandy soil to turn into a kind of soup, creating water migration and soft spots, making excavation nearly impossible. According to Silveira, pursuant to subcontract provisions it immediately notified Actus of the difficulties, and Actus commenced working on a redesign of the system given the sandy soil conditions. Actus contends that the redesign related to stone fill rather than the sandy soil conditions; however, it did halt construction. It further contends that although Silveira could not work on the scheduled first two foundation sites, it was able to continue with excavation on other sites. Thus, according to Silveira, Actus required it to jump from site to site, resulting in Silveira hopscotching around the foundation sites rather than proceeding in the sequenced fashion it originally anticipated.

Actus approved a redesign allowing Silveira to restart construction on October 11, 2005. The redesign required over-excavation and backfill with rock and fabric to provide the necessary compaction.

Although the subcontract anticipated that Silveira would utilize an average of thirty laborers each day, its work crew was actually about half that. Cold damp windy weather discouraged labor crews from the south from working in the harsh upstate New York weather. Further, Hurricane Rita caused severe damage along the Gulf of Mexico coast, especially in Texas and Louisiana, in late September 2005. Clean up and reconstruction in the aftermath of Hurricane Rita drew labor, materials, and equipment to the south, contributing to Silveira's difficulties obtaining sufficient labor crews.

Rain continued and Silveira's laborers refused to work in the rain. On Friday, October 14, 2005, Silveira's on-site construction manager H. Jack Wills ("Wills") fired the labor crew for refusing to work in the rain. Actus gave Downing Construction's ("Downing") name to Silveira as a potential source of labor. Wills then hired Downing to provide labor. According to their agreement, a certain price per unit completed would be paid, with Silveira paying Downing a draw every two weeks based upon units completed. The Downing labor crew started work on October 20, 2005. Downing was to have provided about 30 laborers; however, only about twelve to fourteen workers were on the job each day. On November 4, 2005, Silveira paid Downing ...

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