The Connecticut Appellate Court Decides That Construction Contractor Was Not Obligated To Continue Accelerated Schedule to Mitigate Its Damages Following Late Delivery of Materials by Supplier

Robert M. Barrack | Gordon Rees Scully Mansukhani

In United Concrete Prods. v. NJR Constr., LLC, 207 Conn. App. 551, 263 A.3d 823 (2021), the Connecticut Appellate Court has issued a decision that should be of interest to the Connecticut construction industry and the construction bar. The lawsuit arose out of the late delivery of materials on a construction project, which is a frequent problem on construction projects. In United Concrete Products, the defendant general contractor, NJR Construction, LLC (“NJR”) was retained by the State of Connecticut Department of Transportation (“DOT”) to replace a bridge over the Hockanum River (“Project”). Id. at 555-58 (2021). The Prime Contract provided that NJR with an eight-week time-frame to perform the work, at which time the road would be closed to traffic. Id. The Prime Contract also provided for a bonus of $3,000 for each day the road was opened to traffic prior to the eight week deadline of August 8, 2016, and for liquidated damages of $3,000 for each day the road remained closed beyond the deadline. Id.

NJR subsequently entered into a purchase order (“Subcontract”) with the plaintiff, United Concrete Products, Inc. (“United”), whereby United agreed to provide certain concrete components for the Project, including ten pre-stressed concrete beams. Id. The Subcontract required that United deliver the concrete beams by June 7, 2016, but, NJR did not actually schedule the delivery until June 29, 2016. Id. Nevertheless, even with that schedule NJR could have reopened the road by July 19, 2016, which would have allowed it to receive the full $60,000 incentive bonus. However, United did not deliver the concrete beams until July 26, 2016, which caused NJR to lose the incentive bonus, be assessed liquidated damages by the DOT, and to incur additional delay damages. Id. After deducting the amount of $179,500 in damages that it incurred due to United’s late delivery of the beams, NJR paid United the balance of $66,074.75. Id.

United then filed a lawsuit in the Connecticut Superior Court seeking, among other things, payment of the full amount due under the Subcontract, without the offset, a claim for violation of Connecticut’s Prompt Payment Act, as well as a claim against NJR’s payment bond surety under the Connecticut’s Little Miller Act.1 Id. NJR asserted affirmative defenses and a counterclaim alleging, among other things, that United breached the Subcontract by failing to meet the delivery deadline for the beams, and violated the Connecticut Unfair Trade Practices Act (“CUTPA”) by repeatedly misrepresenting when it would deliver the materials. Id.

One of United’s defenses to NJR’s breach of contract counterclaim was that NJR had failed to mitigate its damages by failing to maintain its accelerated work schedule on the Project after United’s late delivery of the beams, which would have substantially reduced NJR’s damages. The defense was based upon the fact that prior to the delivery of the beams on July 26, 2016, NJR had been taking a “fast-track” approach to the Project; i.e., working on an accelerated schedule, in order to maximize its ability to receive the incentive bonus. Id. at 567. However, after United’s untimely delivery of the beams, and the realization that it would not receive any incentive bonus from the DOT, NJR abandoned its fast-track approach to the schedule, and proceeded at a regular pace. Id.

The trial court ultimately rendered judgment in favor of United on its breach of contract claim, finding that because the contract was for the sale of goods, and was therefore governed by the Article 2 of Uniform Commercial Code (“UCC”), the fact that NJR accepted the beams despite the late delivery, NJR was liable to pay for the full amount due under the Subcontract without a setoff. Id. at 560. The trial court also awarded NJR the full amount of its claimed damages against United on the counterclaim for late delivery of the beams, and also for United’s violation of CUTPA. Id. at 559. The trial court rejected United’s mitigation of damages defense. On appeal, the Connecticut Appellate Court affirmed the relevant portions of the judgment below, including with respect to the mitigation of damages issue.

The Appellate Court reiterated the general proposition that in the context of contracts and torts, the party receiving the damage award has a duty to make reasonable efforts to mitigate damages. Id. at 567. The Court further explained as follows: “To claim successfully that the plaintiff [or counterclaim plaintiff] failed to mitigate damages, the defendant [or counterclaim defendant] must show that the injured party failed to take reasonable action to lessen the damages; that the damages were in fact enhanced by such failure; and that the damages which could have been avoided can be measured with reasonable certainty. … Furthermore, [t]he duty to mitigate damages does not require a party to sacrifice a substantial right of his own in order to minimize a loss.” Id. (quoting Sun Val, LLC v. Commissioner of Transportation, 330 Conn. 316, 334, 193 A.3d 1192 (2018)).

Although United argued that the trial court erred by failing to offset or reduce NJR’s damages based on failure to mitigate because NJR abandoned its fast-track work schedule following the late delivery of the beams, the Appellate Court disagreed. The Court agreed with NJR’s position that once NJR realized that it was not going obtain the incentive bonus due to United’s late delivery of the beams, the was no reason for NJR to continue with the accelerated schedule. Id. at 567-68. Because NJR was only obligated to make reasonable efforts to mitigate its damages, such reasonable effort only entailed working at a normal, rather than an accelerated pace. Id. at 568.

What is interesting about this decision is that NJR had already established the fast-track schedule for the Project, but only reduced it to a normal schedule after United’s late delivery of the beams, rather than maintaining the status quo. Nevertheless, the Appellate Court found once United breached the Subcontract by delivering the beams late, thus eliminating the very reason that NJR was operating on the accelerated schedule, it was no longer reasonable to expect NJR to maintain that accelerated schedule. Accordingly, under the proper circumstances, a party can defeat a failure to mitigate defense, even if its post-breach conduct arguably increased its damages.
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1 The payment bond claim and other issues discussed in the lengthy appellate decision are outside the scope of this article, which is focused on the mitigation of damages issue.

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Construction Defect – Application of the Right to Repair Statute to Material Suppliers

Joseph M. Fenech | Low, Ball & Lynch |  February 2017

The Right to Repair Statute in California requires a homeowner show a breach of contract or negligence to succeed.

Acqua Vista Homeowners Association v. MWI, Inc.

California Court of Appeals, Fourth Appellate District (January 26, 2017)

Civil Code § 8951 et seq. (the “Act”) establishes a set of building standards pertaining to new residential construction and provides homeowners with a cause of action against, among others, material suppliers, for a violation of the standards(§§ 896, 936). Here, the Fourth District Court of Appeals was asked to decide whether the Act requires homeowners suing a material supplier to prove that material supplied violated a particular standard of the Act as the result of negligence or a breach of contract. The Court concluded that a homeowner must prove that the Act was violated by showing a breach of contract or negligence in order to prevail.

In this case, Acqua Vista Homeowners Association (the “HOA”) sued MWI, Inc. (“MWI”), a supplier of pipe used in the construction of the HOA condominium development. The operative third amended complaint contained a claim for a violation of the Act’s standards in which the HOA alleged that defective cast iron pipe was used throughout the project. At a pretrial hearing, the HOA explained that it was not pursuing any claim premised on the doctrine of strict liability and that it was alleging a single cause of action against MWI for violations of the Act’s standards.

A jury trial was held on the HOA’s claims under the Act against MWI, and another iron pipe supplier, Standard Plumbing & Industrial Supply Co. (“Standard”). At trial, the HOA presented evidence that the pipes supplied by MWI contained manufacturing defects, that they leaked, and that the leaks had caused damage to various parts of the condominium development.

Near the close of evidence, MWI filed a motion for a directed verdict on the grounds that the HOA failed to present any evidence that MWI had caused a violation of the Act’s standards as a result of MWI’s negligence or breach of contract. The trial court denied the motion, concluding that the HOA was not required to prove that any violations of the Act’s standards were caused by MWI’s negligence or breach of contract. In reaching this conclusion, the court relied on the final sentence of section 936, which states in relevant part, “[t]he negligence standard in this section does not apply to … material suppliers … with respect to claims for which strict liability would apply.”

The trial court entered a judgment against MWI in March, 2015 in the amount of $23,955,796.28, reflecting MWI’s 92 percent responsibility for the total damages suffered. After the jury rendered a verdict against MWI, MWI filed a motion for judgment notwithstanding the verdict (“JNOV”) on the same ground as it had raised in its motion for directed verdict. The trial court denied the JNOV on the same grounds it denied the motion for a directed verdict.

On appeal, MWI claimed that the trial court misinterpreted the Act and erred in denying its motion for a directed verdict and motion for JNOV. The Appellate Court agreed. According to the Fourth District, § 936 contains an “explicit adoption of a negligence standard for claims” under the Act against material suppliers. (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194 at p. 1216, fn. 14.) Since it was undisputed that the HOA’s claim was brought under the Act, it was required to prove that MWI “caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract.” (§ 936.) The court concluded that because there was no evidence that MWI caused a violation of the Act’s standards through its negligence or breach of contract, the trial court erred in denying MWI’s motion for a directed verdict and JNOV. Accordingly, the Court reversed the judgment and the trial court’s order denying MWI’s motion for JNOV and remanded the matter to the trial court with directions to grant MWI’s motion for a directed verdict and to enter judgment in favor of MWI.

The Court acknowledged that the plain language of the final sentence in § 936, when read in isolation, is ambiguous. However, in their view, the negligence standard in this section did not apply to any general contractor, subcontractor, material supplier, individual product manufacturers, or design professional with respect to claims for which strict liability would apply. The Court pointed out that this case involved only a cause of action for violation of the Act. There were no claims for strict liability which required proof of negligence or breach of contract to prevail.

COMMENT

This case held that a homeowner must prove that a material supplier was negligent or had breached a contract if the homeowner does not allege common law theories of strict liability in the operative complaint. This requirement can best be attacked at trial by way of a directed verdict or JNOV, because a demurrer or a motion for summary judgment would bring this pleading defect to the attention of plaintiff’s counsel and allow for amendment before trial.

For a copy of the complete decision, see: Acqua Vista Homeowners Assn. v. MWI, Inc.