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Shawnlee Construction, LLC v. J.K. Scanlan Company, Inc.

United States District Court, S.D. New York

August 27, 2014

SHAWNLEE CONSTRUCTION, LLC, Plaintiff,
v.
J.K. SCANLAN COMPANY, INC. and ARCH INSURANCE COMPANY, Defendants. SHEPARDVILLE CONSTRUCTION, LLC, Plaintiff,
v.
J.K. SCANLAN COMPANY, INC. and ARCH INSURANCE COMPANY, INC., Defendants

Decided Date: August 26, 2014.

For Shawnlee Construction, LLC, Plaintiff (1:12-cv-03346-ER): Charles F. Ahern, PRO HAC VICE, Corwin & Corwin LLP, Boston, MA; George Sitaras, Peter Justin Scutero, Sitaras & Associates, P.C., New York, NY.

For J.K. Scanlan Company, Inc., Defendant (1:12-cv-03346-ER): Stephanie R. Feldman, LEAD ATTORNEY, Feldman & Associates, PLLC, New York, NY.

For Arch Insurance Company, Inc., Defendant (1:12-cv-03346-ER): Lawrence S. Novak, Torre, Lentz, Gamell, Gary & Rittmaster LLP, Jericho, NY.

For Shepardville Construction, LLC, Plaintiff (1:12cv3347): George Sitaras, LEAD ATTORNEY, Marco & Sitaras PLLC, New York, N.Y. USA; Peter Justin Scutero, Sitaras & Associates P.C., New York, N.Y. USA.

For J.K. Scanlan Construction, Inc., Defendant (1:12cv3347): Stephanie R. Feldman, LEAD ATTORNEY, Feldman & Associates, PLLC, New York, N.Y. USA.

For Arch Insurance Company, Inc., Defendant (1:12cv3347): Lawrence S. Novak, Torre, Lentz, Gamell, Gary & Rittmaster LLP, Jericho, N.Y. USA.

Page 562

OPINION AND ORDER

Edgardo Ramos, United States District Judge.

The instant actions arise from a general contractor's alleged failure to pay two subcontractors, Shawnlee Construction, LLC (" Shawnlee" ) and Shepardville Construction, LLC (" Shepardville" ) (collectively, the " Plaintiffs" ), for work that they performed

Page 563

on a multifamily housing project.[1] Plaintiffs seek to collect the unpaid amount from J.K. Scanlan, the general contractor, as well as Arch Insurance Company, Inc. (" Arch," and together with J.K. Scanlan, " Defendants" ), which issued a payment bond in connection with the underlying project. Compl., Doc. 1.

Currently before the Court are Arch's motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Arch contends that Plaintiffs' suits are time-barred because they failed to commence these actions within one year of the date of completion of the contracted-for work, the limitations period set forth in the payment bond.

For the reasons set forth below, the motions are DENIED.

I. Background

The following facts are undisputed except where otherwise noted.

A. The Vineyard Commons Construction Project

On December 2, 2008, J.K. Scanlan entered into a contract (the " Construction Contract" ) for the construction of a multifamily housing project for the United States Department of Housing and Urban Development (" HUD" ), known as " Vineyard Commons" (the " Project" ), located in Highland, New York. Def.'s 56.1 Stmt. ¶ 1, Doc. 29; see also Ahern Aff. Ex. A (Baker Dep. 29:24 - 30:12, Dec. 5, 2012), Doc. 38. The Construction Contract defined " [t]he date of final completion" as " the date the HUD representative signs the final HUD Trip Report provided that the Trip Report is subsequently endorsed by the Chief Architect." Def.'s 56.1 Stmt. ¶ 5. The Construction Contract also required J.K. Scanlan to " correct any defects due to faulty materials or workmanship which appear within one year from the date of final completion." Baker Aff. Ex. 2 (Construction Contract Art. 2 ¶ B), Doc. 33.

With respect to landscaping, the Construction Contract provides as follows:

The Contractor shall assume full responsibility for the maintenance of all landscaping which may be required by the Drawings and Specifications until such time as both parties to this Contract shall receive written notice from the Commissioner that such landscaping has been finally completed. The Owner hereby agrees to make available to the Contractor, for such purpose, without cost to the latter, such facilities as water, hose and sprinkler.

Id. at Art. 5 ¶ D. Finally, the Construction Contract indicates that " the Contractor shall furnish to the Owner assurance of completion of the work in the form of ... 100% Performance and Payment Bond." Id. at Art. 6.

Page 564

1. The Subcontracts

Pursuant to written subcontract agreements dated April 5, 2009 and July 13, 2009, J.K. Scanlan hired Plaintiffs as subcontractors to assist with carpentry related services for the Project. Sitaras Aff. Ex. A (Feb. 8, 2012 Tolling Agreement), Doc. 36; Rathjen Aff. Ex. A (Jul. 13, 2009 Subcontractor Agreement between J.K. Scanlan and Shawnlee), Doc. 37.[2] The purpose of the subcontract with Shawnlee was " to furnish and install all of the work associated with the rough carpentry package of [the Project], which included all of the framing, the lumber, the material [and] the installation." Ahern Aff. Ex. A (Baker Dep. 100:18 - 101:2); Rathjen Aff. Ex. A (Jul. 13, 2009 Subcontractor Agreement between J.K. Scanlan and Shawnlee at Ex. A--" Scope of Work" ). Shepardville's role was to " provide[] the interior and exterior carpentry as well as miscellaneous door frame and hardware packages," including " siding, exterior siding, trim, porches, railings" and interior doors, frames and molding. Ahern Aff. Ex. A (Baker Dep. 106:1 - 106:10).

2. The Bond

On or about July 2, 2009, Arch, as surety, issued a payment bond in the penal sum of $36,964,970 on behalf of J.K. Scanlan, as principal, in favor of the owner of the Project, Vineyard Commons Holdings, LLC (the " Owner" ), as obligee (the " Bond" ). Def.'s 56.1 Stmt. ¶ 2. The Bond was issued for the " use and benefit" of claimants supplying labor and materials for the Project; in essence, the Bond ensures that J.K. Scanlan properly pays its subcontractors and suppliers. Baker Aff. Ex. 1 (Bond ¶ 1). The Bond defines a " claimant" as " one having a direct contract with the Principal or with a subcontractor of the Principal for labor ... used or reasonably required for use in the performance of the contract." Id. Pursuant to the Bond, every claimant " who has not been paid in full before the expiration of a period of ninety (90) days after the date on which the last of such claimant's work or labor was done or performed ... may sue on this bond for the use of such claimant." Id. ¶ 2.

Importantly, the Bond requires that all claims brought thereunder must be initiated within one year after J.K. Scanlan, the Principal, " ceased work" on the Construction Contract. Def.'s 56.1 Stmt. ¶ 3 (" [n]o suit or action shall be commenced hereunder by any claimant ... [a]fter the expiration of one (1) year following the date on which Principal ceased work on said Contract." ). Andrew R. Baker, a Vice President at J.K. Scanlan and the Project Manager for Vineyard Commons (" Baker" ), signed the Bond on behalf of J.K. Scanlan. See Baker Aff. Ex. 1 (Bond).

3. The Final Inspection and Certificate of Substantial Completion

On December 9, 2010, Baker attended the " final inspection" of Vineyard Commons with Charles Hockensmith, the HUD Inspector for the Project, Louis Iesu, another HUD employee, and Jay Diesing of Mauri Associates Architects, P.C., the Project Architect. Def.'s 56.1 Stmt. ¶ 6; Baker Aff. Ex. 2 (Construction Contract ¶ 1C). It is undisputed that, on the same day, they issued the " HUD ...


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