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Mullins v. Colonial Farms Ltd., et al. (Lawyers Weekly No. 12-077-17)

NO. 2013-04375 BLS1
JOSEPH R. MULLINS, on behalf of nominal defendants CMJ MANAGEMENT COMPANY and CMJMC, INC.
As reflected in the court’s earlier Memorandum of Decision and Order on the Parties’ Cross-Motions for Summary Judgment (the Decision, capitalized terms shall have the same meaning in this memorandum as in the Decision), it is undisputed that, at Corcoran’s direction, the Partnerships ceased making payment of the Incentive Management Fees to CMJ Management under the Supplemental Agreements in January, 2010. Further, the termination of these payments would constitute a breach of each of the Supplemental Agreements, unless Corcoran (on behalf of the Partnerships) proved at trial that (i) Corcoran, Jennison and Mullins had all agreed that the Supplemental Agreements were to be cancelled as part of the transaction in which each of them repurchased their interests in the Partnerships from Paine Webber in 1999, and (ii) this cancellation was not reflected in the 1999 transaction documents as a consequence of a mutual mistake. Following a jury trial, on March 1, 2017, the jury answered the single
1 Fawcett’s Pond Apartments Company (Fawcett), Holbrook Apartments Company (Holbrook) Marvin Gardens Associates (Marvin) Quaker Meadows Apartments Company (Quaker), Joseph E. Corcoran, and Gary A. Jennison and CMJ Management Company and CMJMC, Inc., nominal defendants.
question put to them in a special verdict slip concerning the existence of such a mutual mistake2: “NO.” The parties had previously agreed that if the jury found that no mutual mistake had occurred, they would submit the question of how much should have been paid to CMJ Management by the Partnerships to the court for its decision, jury-waived.
The court heard evidence on this issue on March 3, 2016 (as a supplement to the evidence presented during the jury trial). Three witnesses testified and an additional six exhibits were admitted in evidence. Thereafter, the parties submitted proposed findings of fact and conclusions of law.
Findings and Conclusions Addressing the Manner in which the Incentive Management Fees are Calculated During Years in which there were no Regulatory/Loan Restrictions on Distributions
The Supplemental Agreements for four of the Partnerships—Colonial, Marvin, Quaker, and Fawcett all provided that, “to the extent funds are available for [their] payment”:
The Incentive Management Fee shall be an annual, non-cumulative fee payable out of cash available therefor . . . in an amount equal to, for each year, 40% of the amount, if any, by which Cash Flow for such year exceeds one half of the maximum amount of distributable cash flow allowed by [the Federal and state regulator and the lender].3
The limitations on the amount of cash that a Partnership could distribute existed as long as it had a loan backed by a state or federal agency for the purpose of fostering the development of affordable housing projects. Fawcett paid off its loan in 2003 and the other three partnerships paid off their loans in 2012. The first question to be decided is the method for calculating the amount of Incentive Management Fees due CMJ Management for years in which there was no
2 The question was: “Have Joseph Corcoran and the Five Partnerships proved by full, clear, and decisive evidence that Joseph Corcoran, Joseph Mullins and Gary Jennison agreed that the Supplemental Management Agreements would terminate and the incentive management fees end as part of the Paine Webber buy-out and it was a mistake that the Paine Webber buy-out documents did not reflect their agreement?”
3 Each of the Partnerships was regulated by HUD, however, the state regulating body differed depending on the state in which the development was located. Holbrook had a different formula for calculating Incentive Management Fees, and there is no dispute concerning the amount of the fees due CMJ Management from Holbrook.
lender limitation on the amount of cash that could be distributed to the Partnerships’ owners. This question is principally a question of law because it requires the court to address the meaning of a provision in a contract. Where the court is basing its decision on any factual finding it will make this clear.
Most of the background facts that provide the context for this question are undisputed and set out in the Decision. Briefly stated, in 1983, Paine Webber purchased a limited partnership interest in each of the Partnerships from Corcoran, Mullins, and Jennison and became the principal equitable owner of each.4 As part of that transaction, each Partnership entered into a Supplemental Agreement with CMJ Management that provided for the payment of Incentive Management Fees. The court finds, as a matter of fact, that CMJ Management provided no additional services to the Partnerships under the Supplemental Agreements. Rather, these Supplemental Agreements were a means to achieve the financial terms of the deal that had been negotiated with Paine Webber. The Supplemental Agreements provided a mechanism for CMJ Management to receive supplemental cash distributions, i.e., supplements to the minimal cash that Corcoran, Mullins and Jennison would receive as deminimus owners of the Partnerships which were now principally owned by Paine Webber, if the cash available for and distributed each year exceeded certain base amounts. In 1999, Corcoran, Mullins and Jennison bought out Paine Webber’s interests in the Partnerships, returning ownership of the Partnerships to that which it was before 1983. As noted above, in 2003 and 2012 the agency backed loans to the Partnerships were retired.
While the agency backed loans were in place, a formula in the loan documents and related government regulations determined “the maximum amount of distributable cash flow” for
4 Paine Webber purchased 95% of the ownership interests in four Partnerships and 85% of one Partnership.
each Partnership based upon the economic performance of the Partnership, as established in its annual audited financial statements. The term “Cash Flow” as used in the Supplemental Agreements is defined in the Partnership Agreements. According to the provision of the Supplemental Agreements quoted above, in any given year in which the economic performance of a Partnership permitted cash to be distributed under the loan documents, the Incentive Management Fee paid in that year could be no greater than 20% of cash distributed: “40% of the amount, if any, by which Cash Flow for such year exceeds one half of the maximum amount of distributable cash flow allowed” under the loan documents. In consequence, if for any reason “Cash Flow” was less than the maximum amount that could be distributed under the loan agreements5, the Incentive Management Fees would be less than 20% of the total cash distributed in that year.
It is clear that once the agency backed loans were paid in full, there no longer was a “maximum amount of distributable cash flow allowed” by any lender. Mullins argues that this means that the Incentive Management Fee then simply became 40% of all Cash Flow, i.e., the incentive fee was due on the first dollar available for distribution by a Partnership. Clearly, that is not what the Supplemental Agreement says. It is also inconsistent with the premise underlying the purpose of the Supplemental Agreements, that is, that Incentive Management Fees would kick in only after Paine Webber, as the principal owner of the Partnerships, had first received some minimum return on its investment.6
5 This could happen if, for example, the general partner of the Partnership (in each case CMJ) decided to set aside reserves for capital expenditures greater than what was required by the loan documents. See par. of the Partnership Agreements.
6 Mullins points out that there was one year (2003) before this dispute erupted in which Fawcett made a distribution after the agency backed loan had been paid off and in that distribution the Incentive Management Fee was applied to the entire sum distributed. There was no evidence that any of the principals had any input into the decision to make the distribution in that manner, or, indeed that it was in an amount that the principals even noticed. The court did not find this 2003 distribution instructive in interpreting the Supplemental Agreements.
Mullins next argues that a fixed amount measured by what the “maximum amount of distributable cash flow allowed” by the lenders had been in years prior to the loans’ repayment should be established for each Partnership. The court does not believe that those amounts have been entered in evidence. But more to the point, it is clear that no language that would support the creation of a fixed sum to be paid before the Incentive Management Fee is due is found in the Supplemental Agreements. The court would have to rewrite the Supplemental Agreements to reach that result, and it is not permitted “to suppose a meaning [to a contract] that the parties have not expressed.” Rogaris v Albert, 431 Mass. 833, 835 (2000).
Corcoran argues that the Supplemental Agreement is unambiguous in providing that, when there are no loans outstanding that require a lender to set the “maximum amount of distributable cash flow allowed,” the “maximum amount of distributable cash flow allowed” is simply all the Cash Flow that a Partnership has available to distribute.7 That is, however, not what the Supplemental Agreement actually says, but rather an interpretation of it. It is also generally the interpretation that the court adopts as reasonable and consistent with evidence of what the real parties in interest to the Supplemental Agreements intended when they drafted them in 1983.
A contract provision can be facially ambiguous or ambiguous as applied to a certain set of circumstances. See Robert Ind. Inc. v. Spencer, 362 Mass 751, 753 (1973). In this case, it seems doubtful that when the Supplemental Agreements were drafted any particular thought was given to the question of whether they would still be in force when the agency backed loans were retired. They were drafted in 1983 as contracts between the Partnerships and CMJ Management,
7 Corcoran argues that, at least, this is true while the Partnerships are still subject to Section 8 contracts with HUD which provide for housing assistance payments to the Partnerships. The court does not find the existence of Section 8 contracts of value in its interpretation of the Supplemental Agreements, as those contracts do not place limitations on distributions, only the agency backed loans did that.
but their purpose was to address the economics of the deal between Corcoran, Mullins, and Jennison, on the one hand, and Paine Webber, on the other. The court doubts that the parties contemplated that whey would remain in force after Paine Webber was bought out or the agency backed loans paid off. Therefore, the Supplemental Agreements do not unambiguously address how the Incentive Management Fees would be calculated when ownership returned to Corcoran, Mullins and Jennison and the loans were no longer in effect. Nonetheless, that is what happened.
There is, however, a reasonable interpretation of the Incentive Management Fee language in the Supplemental Agreements that addresses these circumstances. While the loans were still in effect, as explained above, the maximum amount of Cash Flow that could be paid as an Incentive Management Fee was 20% of cash distributed in any year. That happened whenever all cash that could be distributed under the distribution restrictions in the loans was also “Cash Flow,” as defined in the Partnership Agreements, and distributed to the owners of the Partnership and CMJ Management as distributions to equity holders and Incentive Management Fees. The court finds that the only reasonable interpretation of the Supplemental Agreements is that if the loans no longer restricted the amount of cash that could be distributed, the Incentive Management Fee would be 20% of Cash Flow available for distribution, as the Supplemental Agreements provided for no situations in which Incentive Management Fees could ever exceed that ceiling. Stated differently, this interpretation is consistent with all extrinsic evidence concerning the intent of the parties when the Supplemental Agreements were negotiated in 1983, at which time the real parties in interest were Paine Webber and CMJ Management (owned by Corcoran, Mullins and Jennison) and these incentive fees were limited to no more than 20% of cash distributed. See Robert Industries Inc. v. Spencer, 362 Mass. at 754 (“When the written agreement, as applied to the subject matter, is in any respect uncertain or equivocal in meaning, all the circumstances of
the parties leading to its execution may be shown for the purpose of elucidating, but not of contradicting or changing its terms. Smith v. Vose & Sons Piano Co., 194 Mass. 193, 200, 80 N.E. 527; Goldenberg v. Taglino, 218 Mass. 357, 359, 105 N.E. 883. See Restatement 2d: Contracts (Tent. draft No. 5, March 31, 1970), §§ 235, 236 (Tent. draft No. 6, March 31, 1971), §§ 240, 241.”).
Findings of Fact and Conclusions of Law relating to the Calculation of Cash Flow under the Supplemental Agreements
Under the definition of “Incentive Management Fees” contained in each Supplemental Agreement (quoted above), the calculation of that fee in any given year begins with a determination of “Cash Flow” for the Partnership. Cash Flow is a capitalized term in the Supplemental Agreements, and, therefore, according to the terms of those Agreements, defined in the Partnership Agreements. While the definition of Cash Flow is multi-faceted and spread over several paragraphs of the Partnership Agreements, the parties’ dispute concerning the calculation of Cash Flow arises out of only one clause found in Section As relevant to this dispute, it provides: “In determining Cash Flow for any year, there shall be subtracted the following items which were not otherwise excluded or deducted from partnership income for such year in calculating Partnership Profits and Losses, . . . , (iii) other reasonable payments to the Partnership reserve accounts determined by the Operating General Partner, . . .”
Because this dispute again requires an interpretation of contract language, it involves mixed questions of law and fact. Nonetheless, here certain findings of fact are required before the Partnership Agreements provision quoted above can be applied to the circumstances presented by this dispute.
Factual Findings Relating to Reserve Issue
All of the buildings in CMJ’s portfolio are thirty to thirty-five years old. There are approximately 3700 units in those buildings; the five Partnerships constitute approximately 510 units of that total number. On average, during the period 2013 through 2017, $ 2,400 to $ 2,500 in capital expenditures have or will be spent on each unit in the portfolio. These expenditures are required for basic maintenance because of the age of buildings. Additionally, the subsidies provided by HUD are based on market rates for comparable units, so improvements to interior finishes and amenities increase HUD payments to the Partnerships.
Fawcett, in particular, required substantial work. As reflected in a 2007 internal memo prepared by a CMJ manager before the matters in dispute in this litigation arose, all of the siding and windows needed replacement. This was due, in part, to the manner in which Fawcett was constructed, where the siding was nailed directly to the sheet rock allowing moisture to invade and create substantial damage. This 2007 memo states that as a result of the capital needs of this project, there would likely be no cash available for distribution over the next ten years. The memo actually recommended that the project be sold. Nonetheless, the Project was not sold and the following distributions were made from Fawcett to its Partners during the years in question: 2012-$ 343,049; 2013-$ 132,195, and 2015-$ 212,605. Not only are the fact of these distributions inconsistent with the 2007 memo, the distributions are also inconsistent with credible testimony concerning the capital needs of and expenditures made for the Fawcett project. There is a suggestion in certain financial exhibits that at least some of the cash distributed came from the release of funds held in a restricted account. Then, in 2016, $ 877,000 was spent on capital
improvements, which included a substantial sum provided by Fawcett’s owner. No reserves for improvements were ever accounted for on Fawcett’s financial statements.
The first year that Colonial, Marvin, and Quaker were no longer subject to restrictions on cash distributions because of agency backed loans was 2013. The chart below shows the so-called Surplus Cash available at the end of each of these three years according to Mullins calculations. The parties agree that Surplus Cash is determined according to a formula used in determining the amount of cash available for distribution under the agency backed loans and the starting place for determining Cash Flow under the Partnership Agreements. They also agree on these figures (reflected in Mullins’ damages exhibit) except for the year 2015, for reasons that will be discussed further below.
$ 310,571
$ 480,011
$ 872,574
$ 364,548
$ 369,538
$ 573,436
$ 232,691
$ 792,031
$ 1,327,874
In fiscal year 2015 (as reflected in the audited financial statements for each Partnership), the Partnerships recorded capital reserves as follows: Colonial-$ 655,653; Marvin-$ 388,544; and Quaker-$ 797,531. The Partnerships transferred these sums to reserve accounts, and therefore they would not have been included in Surplus Cash, if the accounting policies followed in prior years had bee applied. Nonetheless, the table does not reflect the establishment of these reserves in 2015. Rather, the establishment of these reserves was not accounted for by Mullins at all.
Corcoran offered in evidence exhibit 216, which spread the reserves established for the three Partnerships in 2015 over three years (2013, 2014, and 2015). However, that allocation was performed in 2015 (or perhaps later). During 2013 and 2014, these sums were not reflected
in the audited financial statements, segregated from unrestricted cash, nor reflected in any subsidiary ledger, book or account maintained by CMJ Management.
Conclusions of Law Relating to Reserve Issue
Colonial, Marvin, and Quaker
With respect to Colonial, Marvin, and Quaker, Corcoran argues that Cash Flow, by definition is reduced by “reasonable payments to the Partnership reserve accounts determined by the Operating General Partner.” He then maintains that there is nothing in the Partnership Agreement that precludes the Operating General Partner from allocating reserve amounts retrospectively over prior years and then calculating Surplus Cash, retrospectively, as if these accounts had actually been created in those prior years. The court disagrees. As the court understands the accounting policies consistently employed by the Partnerships, if cash was reserved for capital needs, it would be transferred to a reserve account and therefore not be reflected in Surplus Cash. As result, it would also not be included in Cash Flow. Under generally accepted accounting principles this is part of the annual process of closing the Partnership’s books of account and preparing the financial statements for a fiscal year. Additionally, the Partnership Agreement provides that Cash Flow shall be determined on an annual basis and distributed as Incentive Management Fees on an annual basis.
Moreover, in this case, the Partnerships did not identify these reserves in some manner of internal ledger not accounted for in the audited financials or disclose their existence in footnotes to the audited financials.
There is simply no justification for including these after-the-fact declaration of reserves in the calculation of Cash Flow for 2013 and 2014. The court finds that Mullins proposed
calculation of Cash Flow (which avoids double counting by assuming that all of 2013’s Cash Flow had been distributed in determining 2014 Cash Flow) is fair and appropriate.
2015 is, however, more complicated. Reserves were taken in those years and reported in the Partnerships’ audited financial statements. Given the age of these facilities and the evidence entered, the court cannot find that these amounts were unreasonable. Furthermore, the cash required to establish the reserves was accumulated in the Partnerships’ and might well have been intended for capital improvements, even if not properly accounted for, as it had not been distributed and accumulated in a cash account. The court has spent much time trying to find a damages analysis that approaches this issue in an equitable manner. It concludes that, for each of the three Partnerships, in year 2015, the Incentive Management Fee should be Surplus Cash (as calculated by Mullins), less the reserves established according to the audited financial statements for that year, times 20%.8
With respect to Fawcett, the court finds such financial statements as have been provided, documents, and testimony confusing, if not contradictory. On the one hand, there is credible evidence that Fawcett was expending substantial sums on necessary maintenance including replacement of all of the siding and all of the windows. It credits the testimony that $ 877,000 was spent on capital improvements in 2016, and that included additional capital invested by Corcoran. On the other hand, each year Fawcett reported some surplus cash. Finally, it appears that in three years substantial cash was distributed to the owner, and in one of those years distributions far exceeded Surplus Cash. The court concludes that the Incentive Management
8 The court’s calculations reflect the following, but they should be checked: Colonial-$ 43,384; Marvin-$ 37,178; Quaker-$ 106,068.
Fee for the years in question should be the amount of distributions to the owner times 20%.9 Interest to accrue from the date of each distribution.
G. L. c. 156D, § 7.46
G.L. c. 156D, § 7.46 provides, in relevant part: “On termination of the derivative proceeding the court may: (1) order the corporation to pay the plaintiff’s reasonable expenses, including counsel fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation.” Mullins asks that the court make such a finding and then exercise its discretion to award him the legal fees he incurred in prosecuting this case.
Under § 7.46, the award of expenses to a plaintiff who succeeds in a derivative claim is clearly discretionary with the court. As the parties to this case recognized, and the jury was instructed at the outset of the trial, this was a dispute between Mullins and Corcoran10. While the Supplemental Agreement was between CJM Management and the Partnerships, it was from its inception understood to be a vehicle for distributing cash generated by the operation of the Partnerships to Corcoran, Mullins and Jennison (as the owners of CMJ Management), which would otherwise be distributed to the owners of the Partnerships (principally Paine Webber when the Supplemental Agreements were negotiated and executed in 1983). As noted above, CMJ Management performed no additional services for its Incentive Management Fees. As was clear from the evidence, because Corcoran, Mullins and Jennison did not pay any attention to the Supplemental Agreements when Paine Webber was bought out in 1999, they continued in force, and the jury so held. The award to CMJ Management in this case will then be distributed to Corcoran, Mullins and Jennison, as required under Section 4(c)(1) of the 1987 Agreement. It is
9 The court’s calculation is $ 137,569.80.
10 Jennison seemed to be a bystander, although his economic interests are the same as Mullins.
Mullins and Jennison who will personally, substantially benefit from the judgment entered in this law suit and Corcoran who will be personally disadvantaged. The court declines to award litigation expenses to Mullins.
The court orders that Mullins prepare a chart of damages, including accrued prejudgment interest, consistent with this Memorandum of Decision and an accompanying proposed form of Final Judgment and file it with the court within fourteen days of this order. Corcoran shall file a pleading within seven days of the Mullins filing indicating if he has any objections to the Mullins proposed form of Final Judgment. These filings should not be used to reargue any positions. All arguments previously raised are preserved for purposes of appeal. Rather, the pleadings are intended to insure that the amount of damages and accrued prejudgment interest awarded is consistent with the findings and rulings set out herein.
Mitchell H. Kaplan
Justice of the Superior Court
Dated: May 2, 2017 read more


Posted by Massachusetts Legal Resources - July 1, 2017 at 2:08 am

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Cumberland Farms, Inc. v. Tenacity Construction, Inc. (Lawyers Weekly No. 12-161-16)

CIV. NO. 15-1589 BLS 2
This case arises from a project for the construction of facilities located in Rhode Island and Massachusetts. The plaintiff Cumberland Farms, Inc. (CFI) is the owner of the properties on which the facilities were built. The defendant Tenacity Construction, Inc. (Tenacity) was the general contractor. CFI instituted this action to recover the difference between what it believes that it was obligated to pay Tenacity for its work and what it ended up paying, taking into account those amounts that CFI paid to Tenacity’s subcontractors on Tenacity’s behalf. Tenacity counterclaimed, maintaining that CFI wrongfully failed to pay Tenacity for costs attributable to winter conditions and that, to the extent it could not pay its subcontractors, this was due to CFI’s breach of contract. CFI now moves for summary judgment as to Tenacity’s counterclaims against it. Tenacity has cross moved as to the same claims, asking this Court to enter judgment in its favor. This Court concludes that CFI’s Motion must be Allowed and that Tenacity’s Motion must be Denied.
The following facts in the summary judgment record are undisputed.1 CFI owns properties
1 As CFI points out in its Reply Memorandum, Tenacity’s response to several of CFI’s fact allegations contain improper argument or unsupported denials. This does not comply with Rule 9(A)(b)(5). This approach is also not effective advocacy, since it obscures rather than illuminates the summary judgment record without advancing Tenacity’s position on the issues in any respect.
located at 15 Main Street in Northborough, Massachusetts (the Northborough Property) and at 2643 Hartford Avenue in Johnston, Rhode Island (the Johnston Property). CFI retained Tenacity as general contractor for the construction of a gas station/convenience store on the Northborough Property (the Northborough Project) and construction of a similar facility together with office space on the Johnston Property (the Johnston Project). On September 23, 2013, the parties entered into two construction contracts (the Master Contract) that governed Tenacity’s work. Ex. 8 of Joint Appendix. Under the Master Contract, Tenacity was responsible for paying the subcontractors on both Projects.
The Master Contract expressly incorporated two Work Orders, one for each Project. The Northborough Project Work Order provided that work was to start at the Northborough Property on October 7, 2013 and be completed within 112 days (January 27, 2014). The Johnston Project Work Order stated that work was to begin November 4, 2013, and was to be completed within 140 days (March 24, 2013). Both projects were substantially delayed: the Johnston Project was completed May 6, 2014 and the Northborough Project completed on April 28, 2014.
Tenacity’s counterclaim concerns the additional costs it alleges that it was forced to incur as a result of harsh winter conditions. and is based on its assertion that CFI is responsible for those additional expenses. According to the summary judgment record, the parties met in January 30, 2014 to discuss the impact that these winter conditions were having on completion of the projects. CFI agreed at that meeting that Tenacity would be paid for additional work due to winter conditions on a “time and materials” basis, as provided by the Master Contract. In the winter and spring of 2014, Tenacity submitted change order requests for time and materials due to winter conditions and CFI approved and paid all of them. Those requests included a markup for Tenacity’s overhead and profit. Every request was paid in full.
In a May 30, 2014 letter to CFI, Tenacity stated that it was entitled to an “equitable adjustment” to the Master Contract price for certain indirect costs attributable to winter conditions —
namely, those associated with diminished productivity and decreased efficiency in performing the work. Tenacity had expressed concern at the earlier meeting on January 30 that these indirect costs would not be covered by compensating it on strictly a time and materials basis. Other than CFI’s indicating that it would “wait and see how it goes,” there is nothing in the summary judgment record to show that CFI at any time agreed to compensate Tenacity for these indirect costs.
On June 6, 2014, Tenacity submitted a breakdown of costs that it sought in connection with this request to adjust the contract price. CFI asked for backup information on June 17, 2014 and on June 25, 2014. On July 8, 2014, CFI sent an email to Tenacity denying any responsibility for lost productivity costs but offered some amount in an effort to settle the dispute. Shortly thereafter, however, Tenacity informed CFI that it had been unable to make final payments to subcontractors and suppliers due to cash flow issues.
At CFI’s request, Tenacity provided CFI with a list of those subcontractors and suppliers who had not been paid, together with an amount believed to be due to each. Pursuant to 8(i) of the Master Contract, CFI had the right to pay off these obligations directly, upon notice to Tenacity. This notice was given by an August 1, 2014, letter to Tenacity. On August 8, 2014, CFI sent an email to Tenacity’s subcontractors and suppliers directing them to submit claims for outstanding payments to CFI. Over the next six months, CFI personnel reviewed and processed requests for payment from dozens of subcontractors and suppliers, confirming that there was backup documentation for them and that Tenacity had approved the work performed before any payment was made.
CFI made payments directly to subcontractors and suppliers in the total amount of $ 790,650.64. CFI made payments to Tenacity pursuant to the Master Contract (together with change orders) in the total amount of $ 2,983,261.92.2 Because the sum of these two figures exceeded that amount CFI believed that it was obligated to pay Tenacity, it refused to release retainage funds. It also brought this
2 Tenacity does not appear to dispute these figures except to insist that it is entitled to an adjustment of the contract price and that if that adjustment were made, it would have been able to pay its subcontractors.
lawsuit seeking to recover the difference between that amount it alleges that it was obligated to pay pursuant to the Master Contract and that amount it actually paid, taking into account the subcontractor payments. In counterclaiming, Tenacity asserts that CFI’s wrongful refusal to adjust the contract price for winter conditions and its retention of retainage amounts has caused Tenacity to suffer damages.
Tenacity’s counterclaim alleges the following: breach of contract (Count I), unjust enrichment/quantum meruit (Count II), detrimental reliance/promissory estoppel (Count III), declaratory judgment (Count IV) and a violation of G.L.c. 93A (Count V). Each of these counts depends upon Tenacity’s theory that it is entitled to an equitable adjustment to the Master Contract price for the loss of productivity due to winter conditions. In moving for summary judgment in its favor on all counts, CFI contends that the damages that Tenacity seeks to recover are expressly precluded by the Master Contract, and that the undisputed facts show that there was no modification of this provision. This Court is convinced that CFI’s position is the correct one.
Tenacity acknowledges that a claim for an equitable adjustment does not lie where the contract itself limits the remedies or prevents the recovery sought. That is precisely the case here. The Master Contract contains a broad “no damages for delay” clause that applies not only where the work force is idle and cannot perform any work but also where there is interference with or obstructions to the work so as to delay its completion. Specifically, Section 6(e) of the Master Contract states:
Except as otherwise provided by law, should contractor’s performance in whole or in part be interfered with, delayed, resequenced or disrupted, or be suspended in the commencement, prosecution or completion for reasons beyond Contractor’s control…Contractor’s sole remedy shall be an extension of time in which to complete the Work order…”
Section 6(e ) goes on to state that even if this provision is determined to be legally unenforceable so that Tenacity is not limited in its remedy to an extension of time, Tenacity may not recover from CFI any damages due to work inefficiency or loss of productivity, among other things. This limitation on
remedies is underscored by other provisions of the Master Contract. For example, Section 7(c ) states: “Any overruns or underruns in the amount of Work actually performed will not cause any price adjustments, unless mutually agreed upon, and will not relieve Contractor of its responsibility to perform the Scope of Work.” The undisputed facts show that Tenacity was allowed an extension of time to complete both the Northborough and the Johnston Projects. It is also clear that the basis for its theory calling for an equitable adjustment of the contract price rests on its contention that it must be compensated for loss of productivity and work inefficiencies – damages that are expressly ruled out by Section 6(e).
Tenacity cites Superior Court decisions in support of its position that its claim is not barred by Section 6(e). None of these decisions has any precedential value. As explained in CFI’s reply at pages 7 through 9, they are also factually distinguishable. For example, some of those decisions involved contractual provisions which prohibited damages for delay but did not directly address — as Section 6(e) does– damages occurring as a result of hindrances or disruptions. Still others involve situations where there was active interference by the contractor. The Appeals Court has suggested in dictum that these additional factors could permit a plaintiff contractor to recover even in the face of a “no damages for delay” provision. See B.J. Harland Elec. Co., Inc. v. Granger Bros, Inc. 24 Mass.App.Ct. 506, 509 (1987), citing John E. Green Plumbing & Heating Co., v. Turner Constr. Co., 742 F.2d 965, 966-967 (6th Cir. 1984) (where it was held that subcontractor was entitled to recover on a theory that the general contractor interfered with the work even though the contract barred delay damages, the court reasoning that the bar there applied only to the cost of an idle workforce). Those additional factors are simply not present in the instant case. The Court also attaches some significance to the fact that the Master Contract expressly addresses the problem of winter conditions—and provides that “any work requiring winter conditions and/or costs shall be completed on a time and material basis.” Section G.5 of Master Contract. Having compensated Tenacity for time and materials attributable to
winter conditions, CFI was not required to pay anything more.
Tenacity argues in the alternative that the Master Contract was modified as a result of the May 2014 letter that Tenacity sent to CFI asking to be compensated for the loss of productivity due to winter conditions. See Exhibit 11 of Joint Appendix. Tenacity assets that this letter was the equivalent of a change order and that, pursuant to the Master Contract, any change order that is not rejected within 30 days of receipt will be deemed approved. Section 5(j) of Master Contract. This Court disagrees. The letter is entitled “Request for Equitable Adjustment to Contract Price – Constructive Acceleration.” It was not submitted in accordance with the procedures established by the parties on forms (entitled Change Orders) intended for that purpose. Because Tenacity had not followed established protocols, CFI had no reason to view the letter as a change order. Nor did it at any time suggest that it intended to approve the request. In short, Tenacity has no reasonable expectation of providing that the Master contract was modified either orally or in writing. Because the Master Contract by its express terms bars Tenacity’s recovery for the indirect costs attributable to winter conditions, Tenacity’s counterclaim fails as a matter of law.
For all the foregoing reason, CFI’s Motion for Partial Summary Judgment as to Tenacity’s Counterclaim is ALLOWED, and the Counterclaim is DISMISSED with prejudice.
Janet L. Sanders
Justice of the Superior Court
Dated: November 16, 2016 read more


Posted by Massachusetts Legal Resources - December 7, 2016 at 1:39 am

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Cumberland Farms, Inc. v. City Council of Marlborough (Lawyers Weekly No. 11-162-15)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030;

14-P-1612                                       Appeals Court


No. 14-P-1612.

Middlesex.     May 11, 2015. – October 15, 2015.

Present:  Cypher, Meade, & Massing, JJ.

Practice, Civil, Relief in the nature of certiorari.  License. Municipal Corporations, City council.  Administrative Law, Judicial review.

Civil action commenced in the Superior Court Department on November 12, 2013.

The case was heard by Douglas H. Wilkins, J., on a motion for judgment on the pleadings. read more


Posted by Massachusetts Legal Resources - October 15, 2015 at 2:49 pm

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Verrill Farms, LLC v. Farm Family Casualty Insurance Company (Lawyers Weekly No. 11-141-14)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030;

13-P-1747                                       Appeals Court


No. 13-P-1747.

Middlesex.     May 2, 2014. – November 4, 2014.

Present:  Trainor, Fecteau, & Carhart, JJ.

Insurance, Business owner’s policy, Amount of recovery for loss, Construction of policy.  Contract, Insurance.

Civil action commenced in the Superior Court Department on September 17, 2010.

The case was heard by Kimberly S. Budd, J., on motions for summary judgment. read more


Posted by Massachusetts Legal Resources - November 4, 2014 at 3:51 pm

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Boston Residents Talk Chickens, Urban Farms

A slide from the BRA presentation on Monday, June 3, 2013.

Residents around the city are getting a chance to share their thoughts on Boston’s proposed new rules for urban farms, markets, composting and bee- and hen-keeping.

At the first public meeting on the topic, held Monday at Suffolk Law School in downtown Boston, the Boston Redevelopment Authority announced the dates of 10 additional meetings designed to gather community input about rules that could bring life to vacant lots and rooftops around the city.

The meeting was led by Tad Read, senior city planner for the BRA, and attended by Boston Chief Planner Kairos Shen, other city staff and members of the Urban Agriculture Working Group, which has been meeting for almost a year and a half to develop the rules outlined in Article 89.

“A couple of years ago there was a businessman in the city who wanted to start a lettuce farm, and he couldn’t do it because it’s not addressed in the zoning code; therefore it’s forbidden,” Read said. “He wasn’t the only one; there were other people who were following this national interest in urban agriculture and wanted to start farming in Boston and found they were meeting all kinds of barriers, primarily zoning. The purpose of Article 89 is to identify and address different agricultural uses so that they can be allowed or conditional, so that development can be facilitated in the city.” read more


Posted by Massachusetts Legal Resources - June 11, 2013 at 2:19 pm

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