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Morales Electrical Contracting, Inc v. Siemens Building Technologies

March 28, 2012


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


This lawsuit arises out of a subcontract that Morales Electrical Contracting, Inc. ("Morales" or "the Plaintiff") entered into with Siemens Building Technologies, Inc.("Siemens" or "the Defendant") for the purpose of performing electrical work on a project at the JetBlue Airways terminal at John F. Kennedy International Airport ("JFK"). Presently before the Court is a motion by the Defendant for summary judgment dismissing all of the Plaintiff's claims, or, in the alternative, partial summary judgment limiting the Plaintiff's available damages. For the reasons set forth below, the motion is denied in its entirety.


Unless otherwise indicated, the following constitutes the undisputed facts of the case derived from the parties' submissions, accompanying affidavits, and Local Rule 56.1 Statements.

A. Factual Background

On March 23, 2006, Turner Construction Company ("Turner") and Siemens entered into a contract ("the Turner-Siemens Contract") whereby Siemens agreed to undertake a construction project at the JetBlue Airways terminal at JFK ("the JetBlue Project"). Pursuant to the Turner-Siemens Contract, Siemens agreed to perform and furnish all work, labor, services, materials, parts, equipment, tools, scaffolds, appliances and other things for Facility Management Systems (Control) Work on the Project (the "FMS Work"). (Def.'s 56.1, ¶ 6.) Incorporated into the Turner-Siemens Contract was the General Provisions document issued by Turner and dated March 20, 2006, ("Turner General Provisions"), which in turn incorporated a Turner Project Master Schedule dated March 21, 2006 (the "Project Master Schedule"). The parties dispute whether the Project Master Schedule was a multi-page detailed schedule, or a one page bar chart summary. Because the initialed schedule appended to the Turner-Siemens Contract was the one page bar chart summary, for the purposes of this motion, the Court will refer to the bar chart as the "Project Master Schedule". The Project Master Schedule identifies two milestones for the JFK Project: Temporary Certificate of Occupancy on or before July 1, 2008, and Substantial Completion on or before August 1, 2008. (Id., ¶ 11.) In addition, page 3Y of the Turner General Provisions identifies a requirement to provide temporary heat, stating:

For temporary heating/cooling seasons, all HVAC control work for the AHU‟s shall be complete to run equipment as a stand-alone control system from the control panel furnished and installed by the FMS subcontractor. Metering system must be functional during temporary operation. (Id., ¶ 72.) The parties agree that this language indicates that temporary heat would need to be provided by the fall of 2007.

By letter, dated April 18, 2006, Siemens Account Executive Geralyn Spadafino contacted Alan Smith, the Vice President of Morales to solicit a bid for the electrical installation portion of the FMS work ("the Work"), which stated that Morales should base its bid on 14 identified categories of information, including the Turner General Provisions, and various sketches, drawings, and diagrams that described the nature of the electrical work that Siemens sought ("Invitation to Bid"). (Id., ¶ 29.) The Invitation to Bid stated that Morales should "please let us know if you are missing any information" and invited Smith to contact Spadafino if Morales required any further information in order to prepare a bid. (Id., ¶ 71.) Siemens states that all of the documents listed on the Invitation to Bid, including the Turner General Provisions and the Project Master Schedule, were transmitted to Morales as part of the "Bid Package". (Id., ¶ 30.) Morales denies that it received the Turner General Provisions or Project Master Schedule, and states that it only received electrical drawings and mechanical drawings dated "1/17/06" through Addendum #34, 23 hand-drawn sketches and certain building management system specifications. (Pl.'s 56.1, ¶ 30.) In addition, Morales states that Siemens could not have sent the Turner General Provisions with the Invitation to Bid because evidence indicates that Siemens did not have the final version of the document as of that date. (Id., ¶¶ 10, 53.)

On May 16, 2006, Smith called Spadafino in order to determine when Siemens expected the work to be completed. According to Morales, Spadafino told Smith that the Work would begin in late 2006 and was to be completed in late 2008. (Id., ¶ 32.) For its part, Siemens states that Spadafino represented that the JetBlue Project was to be completed in late 2008, not the Work. (Def.'s 56.1, ¶ 32.) It is undisputed that during this conversation, Smith did not ask for a copy of the Turner General Provisions or any documented project schedule, and that Spadafino did not refer Smith to the Turner General Provisions or the Project Master Schedule for information about the duration of the JetBlue Project or the Work.

By letter dated May 17, 2006, Morales submitted an initial bid of $1,585,000 that it stated was based in part on the Invitation to Bid "1-page coversheet dated 4/18/06" and "Siemens one line diagrams 23 pages" ("Initial Bid"). (Spadafino Decl., Ex. B.) Subsequently, on August 30, 2006, another Morales employee, Giacomo Grandi, attended a meeting with Siemens employees Richard Dillon, William Anderson and Robert Hayes at Siemens' office in Pine Brook, New Jersey (the "Pine Brook Meeting"). The Pine Brook Meeting was a "scope review" meeting, to allow potential contractors to ask questions about the scope of the electrical installation work in order to assist them in preparing their bids.

The parties dispute whether and to what extent Hayes informed Grandi that the scope of the project was more expansive than what was reflected in the 23 pages of hand-drawn sketches transmitted with the Bid Package. At this meeting, Grandi was given access to a submittal book with information about the project (the "August Submittal Book"). The August Submittal Book contained several changes from the drawings and diagrams included with the Invitation to Bid. Although Grandi admits he was given the opportunity to look at the book and ask questions about it, the parties dispute whether Grandi was aware that the August Submittal Book contained material changes from the 23 hand-drawn sketches, and also dispute whether Grandi was given a copy of the August Submittal Book to take back to Morales. Morales asserts that Grandi could not have meaningfully reviewed the August Submittal Book at the Pine Brook Meeting because "the book consisted of several hundred pages of detailed shop drawings that were not capable of any meaningful "review" in one sitting". (Pl.'s 56.1, ¶ 83.)

In a letter, dated September 5, 2006, Smith wrote to Siemens's project manager, Robert Hayes, to break down the prices of Morales' revised bid, and stating "Completion is based on 12/08". (Morales Designee Dep., Ex. 9.) Subsequently, Smith had a conversation with Dillon to discuss whether Morales could lower its final bid by $100,000. (Smith Dep., 103--04.) Neither Dillon, Hayes, nor any other Siemens representative disputed Smith's understanding of the target completion date, sought to clarify whether Morales understood that the JetBlue Project completion date was December 2008, or referred Morales to the Turner General Provisions or Project Master Schedule.

On September 13, 2006, Morales submitted a second and final bid of $1,485,000, which was accepted by Siemens. (Def.'s 56.1 ¶¶ 94--95.) On October 25, 2006, the parties' agreement was formalized in a written contract ("the Subcontract"). The parties dispute whether the Subcontract incorporated the Turner-Siemens Contract, the Turner General Provisions, and the Project Master Schedule. However, there is no dispute that these documents were not attached to the Subcontract, and that no one at Morales read these documents prior to signing the Subcontract.

The provision of the Subcontract addressing the schedule for the project stated that "SUBCONTRACTOR shall commence the Work on September 21, 2006 and shall prosecute the Work diligently as required by the project schedule to allow for project completion on or before December 2008" (the "Term Provision"). The parties dispute whether the reference to "project" means the entire JetBlue Project or the FMS Work, and whether "project completion" refers to final completion or substantial completion. In addition, the Subcontract contained a provision allowing for the parties to enter "[s]pecific scheduling milestones and coordination requirements" ("the Milestone Provision"). However, this provision was left blank.

Other relevant portions of the Subcontract include: (1) a waiver by Morales of its reliance on any prior oral or written statements, agreements, or representations ("the Merger Clause"); (2) a provision authorizing Siemens by written order "to make changes in the Work, or the conditions under which it is to be performed, or . . . increase or decrease the services to be performed" and stating that Morales "acknowledges and agrees that it waives all right or claim for compensation for any additional or other work not specifically authorized in writing by [Siemens] prior to the commencement of such work"; (3) a limitation on consequential damages; and (4) a jury waiver for certain disputes.

Although the parties disagree about what documents constituted the Subcontract and the meaning of specific provisions, Morales does not dispute that its principal, Alan Smith, read the entire Subcontract carefully before signing it and made handwritten changes. In particular, Smith added to Article 1.3 of Exhibit A to the Subcontract listing the relevant scope documents the words "Morales quote dated 9-13-06" in the list of "Project Plans and Specifications" and "4-18-06 23 pages of panels, sketches, (i) riser diagram (1) scope page" following the term "Siemens Building Technologies submittal dated." (Def.'s 56.1, ¶ 105.)

On or about October 31, 2006, Morales began its work on the JetBlue Project. (Def.'s 56.1, ¶ 134.) According to Morales, after it began the work, it made numerous requests for a copy of a detailed trade-by-trade project master schedule. Although Siemens admits it did not respond to these requests, Siemens contends that it was not in possession of an accurate detailed schedule that it could provide Morales, and that all relevant scheduling information was available at the weekly foreman meetings, which a Morales representative could have attended, but did not.

On April 3, 2007, Hayes sent Smith a copy of the Project Master Schedule, which Morales contends was insufficient because it did not include information about the electrical installation work, and did not disclose the temporary heat deadline. (Def.'s 56.1, ¶ 196, Pl.'s 56.1, ¶ 196.) In July 2007, Siemens and Turner began meeting with Morales to review the progress of the FMS electrical installation as it pertained to the requirement to provide temporary heat. (Def.'s 56.1, ¶ 161.) Following this meeting, Turner directed Siemens to provide Morales with a comprehensive project schedule. On July 16, 2007, Siemens provided Morales with a Draft Preliminary Schedule with a run date of November 30, 2006, ("Turner November 30th Draft Schedule"). According to Morales, the Turner November 30th Draft Schedule was not the latest draft, and, in any event, for the first time showed that Morales needed to substantially complete its Work by October 2007.

Morales met the temporary heat deadline in November 2007. The parties dispute whether this constituted the "substantial completion" of Morales's work. Morales continued working on the JetBlue Project until January of 2009. However, Morales contends that in the last five months of 2008, it worked at the site only seven days and that the work it performed was change order work that was not part of the Subcontract. (Pl.'s 56.1, 230--32.)

Between October 6, 2006, and December 22, 2008, Morales made 134 Change Order requests for work performed that it believed was outside the scope of the original Subcontract. (Def.'s 56.1, ¶ 201.) Morales submitted change order requests totaling $746,136.97 and accepted payments from Siemens in respect of these change orders in the amount of $421,177.18. Siemens contends that Morales was adequately compensated for the additional work it performed. Morales disagrees, and claims it accepted lesser amounts for the work because: (1) it had to substantially complete its work in one year instead of the two years called for in the Subcontract; (2) it had already been directed to perform the work and had expended resources to do so; and (3) it was under "extreme financial duress" to accept amounts below what it was rightfully owed because the amounts were offered on a "take-it-or-leave-it" basis. (Pl.'s 56.1, 204--22.) The parties dispute whether the amount of change orders was typical for a project as large and complex as the work Morales was performing. (Def.'s 56.1, ¶ 224; Pl.'s 56.1, ¶ 224.) In total, Morales received $1,966,471.74 for its work on the JetBlue Project. (Def.'s 56.1, ¶ 225.)

B. Procedural History

On August 26, 2009, Morales filed an Amended Complaint against Siemens asserting the following five causes of action: (1) Siemens fraudulently concealed information it was obligated to disclose regarding the scope and duration of the JetBlue Project in order to induce Morales into submitting a lower bid for the Subcontract; (2) Siemens fraudulently induced Morales to enter into the Subcontract by misrepresenting the scope of the JetBlue Project and the duration of time Morales would have to complete the Work; (3) Siemens breached the Subcontract by expanding the scope of the Work and accelerating Morales's time to complete it (the "acceleration breach of contract claim"); (4) Siemens breached the Subcontract by failing to pay fair value for the additional work reflected in four change orders; and (5) Siemens breached the Subcontract by refusing to compensate Morales for the additional work associated with ten other change orders (together with the fourth cause of action the "scope breach of contract claims"). According to Morales, as a result of the acceleration and expanded scope of the Work, it was forced to incur additional costs beyond those it had contemplated in bidding on the Subcontract and ultimately led to the loss of its business, resulting in Morales being unable to repay millions of dollars in loans and the loss of millions of dollars in future profits. (Pl.'s 56.1, Add'l 46--50.)

In a Memorandum of Decision and Order dated February 16, 2010, the Court denied Siemens' motion to dismiss the Amended Complaint and permitted Morales to have an additional opportunity to amend the complaint to plead their scope fraud claims with greater particularity. (Docket Entry #29.) On March 8, 2010, Morales filed the Second Amended Complaint asserting the same causes of action, but providing additional detail about Siemens alleged misrepresentations about the scope of the work.

On August 29, 2011, Siemens filed the instant motion for summary judgment and on February 21, 2012, the Court held oral argument on the motion.


A. Standard of Review -- Fed. R. Civ. P. 56

It is well-settled that summary judgment under Fed. R. Civ. P. 56(c) is proper only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the burden of establishing the absence of a genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). A fact is "material" within the meaning of Fed. R. Civ. P. 56 when its resolution "might affect the outcome of the suit under the governing law." Id. at 248, 106 S. Ct. 2505. An issue is "genuine" when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. In determining whether an issue is genuine, "[t]he inferences to be drawn from the underlying affidavits, exhibits, interrogatory answers, and depositions must be viewed in the light most favorable to the party opposing the motion." Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir.1995) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 8 L. Ed. 2d 176 (1962) (per curiam), and Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989)).

Once the moving party has met its burden, "the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (quoting Fed. R. Civ. P. 56(e)). However, the nonmoving party cannot survive summary judgment by casting mere "metaphysical doubt" upon the evidence produced by the moving party. Matsushita, 475 U.S. at 586. Summary judgment is appropriate when the moving party can show that "little or no evidence may be found in support of the nonmoving party's case." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223--24 (2d Cir. 1994) (citations omitted).

B. Whether the Defendant is Entitled to Summary Judgment on the Plaintiff's Fraudulent Inducement and Fraudulent Concealment Causes of Action

The Plaintiff's fraudulent concealment and fraudulent inducement claims relate to alleged misrepresentations and omissions relating to the duration of the Work ("duration fraud") and the scope of the Work ("scope fraud"). As an initial matter, the Court notes that the Defendant moves for summary judgment on the ground that the Plaintiff's fraud claims are duplicative of the Plaintiff's breach of contract claims. This same argument was raised by the Defendant and rejected by this Court in its February 16, 2010 decision on the Defendant's motion to dismiss. The summary judgment record does not alter the Court's finding on this issue and therefore the Court finds that there are genuine issues of material fact precluding the Court from dismissing the fraud causes of action as duplicative of the breach of contract causes of action.

With respect to the duration fraud claim, the Plaintiff contends that the Defendant orally represented that it had until December 2008 to substantially complete the Work and that the Defendant confirmed this representation through the Term Provision of the Subcontract. The Plaintiff further alleges that this representation was false, because it had only one year to substantially complete its work insofar as its work had to be substantially complete by the October 2007 temporary heat deadline. According to the Plaintiff, Siemens was aware that the Work would have to be substantially completed within one year based on conversations with Turner, the Turner ...

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