Legal Document: Level 5 Construction, Inc. v. Skanska Ecco Iii 2 Jv, Skanska Usa Civil Northeast Inc., E.C.C.O Iii Enterprises, Inc., Zurich American Insurance Company, Liberty Mutual Insurance Company, Federal Insurance Company, The Continental Insurance Company, Berkshire Hathaway Specialty Insurance Company

On November 09, 2023 a MEMORANDUM OF LAW was filed involving a dispute between Level 5 Construction, Inc., and Berkshire Hathaway Specialty Insurance Company, E.C.C.O Iii Enterprises, Inc., Federal Insurance Company, Liberty Mutual Insurance Company, Skanska Ecco Iii 2 Jv, Skanska Usa Civil Northeast Inc., The Continental Insurance Company, Zurich American Insurance Company, for Commercial Division in the District Court of Westchester County.

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
-----------------------------------------------------------------------X
LEVEL 5 CONSTRUCTION, INC., Index No. 70587/2023

Plaintiff,

-against-

SKANSKA ECCO III 2 JV, SKANSKA USA CIVIL
NORTHEAST INC., E.C.C.O III ENTERPRISES, INC.,
ZURICH AMERICAN INSURANCE COMPANY,
LIBERTY MUTUAL INSURANCE COMPANY,
FEDERAL INSURANCE COMPANY, THE
CONTINENTAL INSURANCE COMPANY and
BERKSHIRE HATHAWAY SPECIALTY INSURANCE
COMPANY,

Defendants.
-----------------------------------------------------------------------X

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS
PLAINTIFF’S COMPLAINT

Mark L. Cortegiano, Esq.
65-12 69th Place
Middle Village, NY 11379
(718) 894-9500
mark@cortegianolaw.com
Attorney for Defendants

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Table of Contents
PRELIMINARY STATEMENT ............................................................................................................... 2
STATEMENT OF FACTS ......................................................................................................................... 3
1. The Parties .......................................................................................................................................... 3
2. The Relevant Contractual Agreements and Payment Requisitions .................................................... 3
LEGAL STANDARD ON MOTION TO DISMISS ................................................................................ 4
ARGUMENT ............................................................................................................................................... 5
1. The Evidence SE3 Relies Upon Is Documentary Evidence ........................................................... 5
2. There Is No Basis For Liability Against Defendants Skanska USA Civil Northeast or E.C.C.O
III Enterprises, Inc. .......................................................................................................................... 5
3. Each of Plaintiff’s Claims is Barred by Documentary Evidence, Waiver, or Failure to State a
Cause of Action ................................................................................................................................. 6
a. Plaintiff’s First Cause of Action for Breach of Contract Fails as Plaintiff Has Failed to State a
Cause of Action And Is Barred By the Waiver Provision In Change Order Nos. 1 and 2 and the
Termination Letter Sent to Plaintiff ............................................................................................... 6
i. Plaintiff Has Failed to State a Cause of Action For Breach of Contract by Failing to
Identify a Provision of the Subcontract That Was Breached ............................................ 7
ii. Plaintiff’s Cause of Action For Breach of Contract Is Barred By The Waiver Language
In Change Orders Nos. 1 and 2......................................................................................... 8
iii. Plaintiff’s Cause of Action For Breach of Contract Must Be Dismissed As The
Documentary Evidence Shows That Plaintiff Was Properly Terminated........................ 10
b. Plaintiff’s Second Cause of Action is Similarly Barred By the Waiver Provision of Change
Orders Nos. 1 and 2 ...................................................................................................................... 11
c. Plaintiff’s Cause of Action For Breach Of The Covenant Of Good Faith And Fair Dealing Must
Be Dismissed As Plaintiff Has Also Brought a Cause Of Action For Breach Of Contract Based
Upon The Same Facts................................................................................................................... 12
d. Plaintiff’s Causes of Action For Quantum Meruit And Unjust Enrichment Must Be Dismissed
Because There Was a Contract Between The Parties ................................................................... 14
e. Plaintiff’s Cause Of Action For Fraudulent Omission And Fraudulent Inducement Must Be
Dismissed Because Plaintiff Did Not Repudiate the Subcontract ................................................ 15
CONCLUSION ......................................................................................................................................... 16

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Table of Authorities

Cases

150 Broadway N.Y. Assoc. v. Bodner, 14 A.D.3d 1, 5 (1st Dep't 2004) ....................................................... 5
Barrier Sys. v. A.F.C. Enters., 264 A.D.2d 432, 433 (2d Dep’t 1999) ................................................. 15, 16
Caniglia v. Chicago Tribune-New York News Syndicate Inc., 204 A.D.2d 233, 234 (1st Dep’t 1994) ....... 7
Centro Empresarial Cempresa S.A. v. Am. Movil, S.A.B. de C.V., 17 N.Y.3d 269, 275 (2011)................... 4
Chrysler Capital Corp. v. Hilltop Egg Farms, 129 A.D.2d 927, 928 (3d Dep’t 1987) ................................ 7
Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 388 (1987) .......................................... 14, 15
Deer Park Enterprises, LLC v. Ail Systems, Inc., 57 A.D.3d 711, 712 (2d Dep’t 2008) ........................ 2, 12
Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep’t 2006) ............................................... 5
Gould v. Decolator, 121 A.D.3d 845, 847 (2d Dep’t 2014) ......................................................................... 4
Lamparter Acoustical Products, Ltd. v. Maryland Casualty Co., 64 A.D.2d 693, 693 (2d Dep’t 1978) ... 11
MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419, 420 (1st Dep’t 2011) .................................................. 12
Mercy Abundance, LLC v. Chapman, 2016 WL 3455943 at *3 (N.Y. Sup. Ct. June 20, 2016) .................. 7
Najjar Industries, Inc. v. City of New York, 57 N.Y.2d 647 (1982)........................................................ 5, 10
Sitar v. Sitar, 61 A.D.3d 739, 742 (2d Dep’t 2009) .................................................................................... 16
Victory State Bank v. Emba Hylan, LLC, 169 A.D.3d 963, 965 (2d Dep’t 2019) ................................ 4, 5, 6
Statutes

CPLR 3211(a)(1) (McKinney’s 2022) ...................................................................................................... 4, 5

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Defendants Skanska ECCO III 2 JV, Skanska USA Civil Northeast, Inc., E.C.C.O III

Enterprises, Inc., Zurich American Insurance Company, Liberty Mutual Insurance Company,

Federal Insurance Company, The Continental Insurance Company, and Berkshire Hathaway

Specialty Insurance Company (collectively “Defendants”)1 respectfully submit this memorandum

of law in support of their motion to dismiss each and every cause of action against Defendants in

the complaint (the “Complaint,” annexed hereto as Exhibit A) filed by plaintiff Level 5

Construction, Inc. (“Plaintiff”). The Complaint alleges causes of action against the JV Defendants

for breach of contract, breach of the covenant of good faith and fair dealing, quantum meruit,

unjust enrichment, and fraudulent omission and inducement. All of the claims against the JV

Defendants seek identical damages for the identical work and purported actions or omissions of

the JV Defendants. The sole claim against the Surety Defendants for failure to pay Plaintiff under

the surety bonds is also a claim for the same dollar amount and the same work. Defendants seek

dismissal of the Complaint under CPLR 3211(a)(1), (a)(5) and (a)(7) because Plaintiff’s contract

and surety claims are barred by documentary evidence, fail to state a cause of action and have been

waived in writing; Plaintiff’s quasi contract claims, equitable causes of action and claims of fraud

all fail as a matter of law. Quite simply, a written contract and signed change orders govern and

resolve the claims asserted by Plaintiff in the Complaint. When Plaintiff signed the change orders,

it waived its right to bring any claim for the damages it now seeks. The written contract, as well

1
Defendants Skanska ECCO III 2 JV, Skanska USA Civil Northeast, Inc., E.C.C.O III
Enterprises, Inc. may be collectively referred to in the Memorandum as the “JV Defendants,”
and Defendants Zurich American Insurance Company, Liberty Mutual Insurance Company,
Federal Insurance Company, The Continental Insurance Company, and Berkshire Hathaway
Specialty Insurance Company may be collectively referred to in this Memorandum as the
“Surety Defendants.”
1

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as the acceptance of payment for the work, bars any claim in equity or for supposed fraud. As

such, the complaint should be dismissed in its entirety and with prejudice.

PRELIMINARY STATEMENT

Plaintiff’s Complaint pleads facts in support of its claims which, even if accepted as true

for purposes of this motion, are barred by documentary evidence. Plaintiff alleges that Plaintiff

and defendant Skanska ECCO III 2 JV (“SE3”) entered into a subcontract, that SE3 failed to

disclose certain construction specifications, that Level 5 incurred additional costs in meeting those

specifications, and that the Defendants failed to properly pay Plaintiff for those additional costs.

See NYSCEF Docket No. 1.

Documentary evidence submitted herewith, however, shows that the “undisclosed”

specifications were actually design changes or corrections for which Level 5 was compensated for

its additional costs through change order modifications to the subcontract. Additionally, those

change orders show that Level 5 waived its right to bring the claims it now asserts in the Complaint.

Finally, the documentary evidence shows that after learning of the alleged “fraud” relating to the

“undisclosed” specifications, Plaintiff continued to perform work and accept payment under the

subcontract and change orders. Therefore, Plaintiff’s claims are entirely barred by documentary

evidence, and the Complaint should be dismissed with prejudice.

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STATEMENT OF FACTS

1. The Parties

Skanska-ECCO III 2 JV is an unincorporated joint venture of Skanska USA Civil Northeast

Inc. and ECCO III Inc. Plaintiff Level 5 Construction, Inc. is a New York corporation that provides

drywall, acoustical ceilings and carpentry services for public and private improvement projects.

See NYSCEF Docket No. 1 at ¶ 1.

2. The Relevant Contractual Agreements and Payment Requisitions

On or about October 31, 2018, SE3 entered into a public improvement contract with the

Metro-North Railroad (“MNR”) to furnish all labor, equipment, materials, plant, tools, supplies

and other means of construction necessary to replace railroad car shop facilities at the MNR

Harmon Shop facility in Croton-On-Hudson, NY (the contract is hereinafter referred to as the

“Metro-North Agreement” and the work thereunder is hereafter referred to as the “Project”). On

or about November 13, 2020, SE3 entered into a subcontract with Plaintiff (the “Subcontract”) to

furnish, install, and perform a scope of work specifically set forth in the Subcontract. See

Subcontract, annexed hereto as Exhibit B.

The Subcontract was modified from time-to-time by written modification, including

Change Order No. 1, which was executed by Plaintiff on June 28, 2022. Change Order No. 1

compensated Plaintiff for “material changes from 18 gauge to 12 gauge for the top track with

flatstock, material changes from 18 gauge to 16 gauge for the bottom track and material changes

from 18 gauge to 16 gauge” for the studs.2 See Change Order No. 1 annexed hereto as Exhibit C.

2
“Gauge” refers to the thickness of the steel in each component discussed. The higher the
number of the gauge, the thinner the steel, and the lower the number of the gauge, the thicker the
steel. In this case, changing from 18 gauge steel to 16 or 12 gauge steel means that thicker steel
was used. “Flatstock” refers to a rectangular bar used for support in construction projects.
3

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The Subcontract was further modified by Change Order No. 2, which was executed by Plaintiff on

March 6, 2023. See Change Order No. 2, annexed hereto as Exhibit D. Change Order No. 2

compensated Plaintiff for “Added Flatstock, Hardware Add Wiring Harnesses, Offset Partition at

Truss, Side Clips, Upcharge of Window Pocket and Install Window Sill.”

In other words, to compensate plaintiff for design changes, the use of thicker steel,

additional materials and associated labor, SE3 and Plaintiff negotiated and executed Change Order

Nos. 1 and 2. After Change Order Nos. 1 and 2 were executed, Plaintiff continued to perform its

work on the Project. Between September 6, 2022 and May 17, 2023, Plaintiff submitted payment

applications 14 through 31 for the work it performed during that time period. See Exhibits E-V.

SE3 paid, and Plaintiff accepted, $2,180,171.05 for the amounts requested in payment applications

14 through 31.

LEGAL STANDARD ON MOTION TO DISMISS

Under CPLR 3211(a)(1), a party may move to dismiss a cause of action on the ground that

“a defense is founded upon documentary evidence.” See CPLR 3211(a)(1) (McKinney’s 2022).

To succeed on such a motion, “the documentary evidence must utterly refute the plaintiff’s factual

allegations, conclusively establishing a defense as a matter of law.” Victory State Bank v. Emba

Hylan, LLC, 169 A.D.3d 963, 965 (2d Dep’t 2019) (quoting Gould v. Decolator, 121 A.D.3d 845,

847 (2d Dep’t 2014)).

Under CPLR 3211(a)(5), a party may move to dismiss a cause of action on the ground that

the “cause of action may not be maintained because of…payment, release…”. A defendant’s

motion to dismiss under CPLR 3211(a)(5) should be granted where there is a valid release granted

by the Plaintiff to the Defendant because “‘generally, a valid release constitutes a complete bar to

an action on a claim which is the subject of the release.’” See Centro Empresarial Cempresa S.A.

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v. Am. Movil, S.A.B. de C.V., 17 N.Y.3d 269, 275 (2011) (quoting Global Mins. & Metals Corp.

v. Holme, 35 A.D.3d 93, 98 (1st Dep’t 2006)); see also Najjar Industries, Inc. v. City of New York,

57 N.Y.2d 647 (1982).

Pursuant to CPLR 3211(a)(7), a party may move to dismiss a cause of action on the ground

that “the pleading fails to state a cause of action.” See CPLR 3211(a)(1) (McKinney’s 2022).

ARGUMENT

1. The Evidence SE3 Relies Upon is Documentary Evidence

To qualify as documentary evidence, evidence must be unambiguous and of undisputed

authenticity. Victory State Bank, 169 A.D.3d at 965. “Judicial records, as well as documents

reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the

contents of which are essentially undeniable, would qualify as documentary evidence in the proper

case.” Id. In particular, where a written agreement “unambiguously contradicts the allegations

supporting a litigant’s cause of action for breach of contract, the contract itself constitutes

documentary evidence warranting the dismissal of the complaint pursuant to CPLR 3211(a)(1),

regardless of any extrinsic evidence or self-serving allegations offered by the proponent of the

claim.” 150 Broadway N.Y. Assoc. v. Bodner, 14 A.D.3d 1, 5 (1st Dep’t 2004).

In support of this motion to dismiss, SE3 relies upon the Subcontract, the specifications

thereto, and Change Order Nos. 1 and 2, and Plaintiff’s payment requisitions. The Subcontract,

specifications, payment requisitions, and change orders are all parts of the contract between the

parties, and as such, qualify as documentary evidence. See Victory State Bank, 169 A.D.3d at 965.

2. There Is No Basis for Liability Against Defendants Skanska USA Civil Northeast or
E.C.C.O III Enterprises, Inc.

As an initial matter, there is no basis for liability against defendants Skanska USA Civil

Northeast, Inc. (“Skanska”) or E.C.C.O III Enterprises, Inc. (“ECCO”) as they are not parties to

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the Subcontract. See Exhibit B. SE3 and Plaintiff are the contracting parties to the Subcontract,

and Skanska and ECCO are merely partners in the SE3 joint venture. Plaintiff cannot assert a

cause of action for breach of contract against entities with whom it did not contract, and its cause

of action for breach of contract must be dismissed. See Victory State Bank, 169 A.D.3d at 965

(“One cannot be held liable under a contract to which he or she is not a party.”).

Next, Skanska and ECCO are not the sureties under the payment bonds referenced in

Plaintiff’s second cause of action. See Exhibit BB, Payment and Performance Bonds. The Surety

Defendants are the only obligors on claims made against the payment bonds. Therefore, based

upon the surety bond documents, Plaintiff’s second cause of action must be dismissed against

Skanska and ECCO.

With regard to the remaining causes of action, Plaintiff’s Complaint against Skanska and

ECCO must be dismissed for all of the reasons fully set forth in the memorandum below.

3. Each of Plaintiff’s Claims is Barred by Documentary Evidence, Waiver, or Failure
to State a Cause of Action

a. Plaintiff’s First Cause of Action for Breach of Contract Fails as Plaintiff Has Failed to
State a Cause of Action and is Barred by the Waiver Provision in Change Order Nos. 1
and 2 and the Termination Letter Sent to Plaintiff

Plaintiff’s cause of action for breach of contract is based upon the alleged “breach by the

JV Parties of their agreement to pay monies owed to Level 5 pursuant to the Subcontract, including

their failure properly to process change orders where additional materials and work were furnished

at their direction” and “SE JV’s wrongful alleged termination of the Subcontract.” See NYSCEF

Docket No. 1 at ¶ 77. This cause of action must be dismissed because: (1) Plaintiff has failed to

state a cause of action by failing to identify a provision of the Subcontract that was breached; (2)

documentary evidence shows that this cause of action is barred by a waiver provision in Change

Order Nos. 1 and 2; and (3) documentary evidence shows that Plaintiff was properly terminated

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pursuant to the Subcontract.

i. Plaintiff has Failed to State a Cause of Action for Breach of Contract by Failing
to Identify a Provision of the Subcontract That Was Breached

Plaintiff’s cause of action for breach of contract must be dismissed because Plaintiff alleges

a “breach by the JV Parties of their agreement to pay monies owed to Level 5 pursuant to the

Subcontract,” but does not identify what provision of the Subcontract was allegedly breached.

Mercy Abundance, LLC v. Chapman, 2016 WL 3455943 at *3 (N.Y. Sup. Ct. June 20, 2016)

(holding that failure to allege which contractual provisions of agreement were violated mandated

dismissal of breach of contract claim).

The law is clear that a cause of action for breach of contract should be dismissed where a

plaintiff fails to allege essential terms of the contract, including “those specific provisions of the

contract upon which liability is predicated…”. See Caniglia v. Chicago Tribune-New York News

Syndicate Inc., 204 A.D.2d 233, 234 (1st Dep’t 1994); see also Chrysler Capital Corp. v. Hilltop

Egg Farms, 129 A.D.2d 927, 928 (3d Dep’t 1987) (stating that “[i]n an action to recover damages

for breach of contract, the complaint must, inter alia, set forth the terms of the agreement upon

which liability is predicated, either by express reference or by attaching a copy of the contract.”).

Here, Plaintiff’s cause of action for breach of contract makes no reference to a specific

provision of the Subcontract that was purportedly breached. See NYSCEF Docket No. 1 at ¶¶ 76-

77. Indeed, Plaintiff does not reference any particular section of the Subcontract anywhere in its

114 paragraph Complaint. As such, Plaintiff has failed to state a cause of action for breach of

contract and this cause of action must be dismissed.

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ii. Plaintiff’s Cause of Action for Breach of Contract is Barred by the Waiver
Language in Change Order Nos. 1 and 2

Further, Plaintiff’s first cause of action for breach of contract is barred by a waiver provision

in Change Order Nos. 1 and 2, and as such, must be dismissed. Plaintiff’s first cause of action is

partly based upon SE3’s alleged failure to compensate Plaintiff for the additional work associated

with a change in construction specifications. Plaintiff, however, was compensated for this work in

Change Orders Nos. 1 and 2, and Plaintiff in executing those Change Orders waived its right to

bring this cause of action.

Specifically, Plaintiff seeks damages for the cost increases associated with: (1) a change to

a “16 minimum gauge stud”; (2) “increased deep-leg top track and bottom track deflections for the

roof”; and (3) “drilling changes for a 12 gauge installation.” See NYSCEF Docket No. 1 at ¶¶ 40,

77. The Scope of Work set forth in Change Order No. 1 shows that Plaintiff was compensated for

this work. First, under the heading “Studs,” Change Order No. 1 compensated Plaintiff for

“material changes from 18 gauge to 16 gauge for walls less than 18 feet.” See Exhibit C at “Scope

of Work.” Second, “due to deflection criteria,” Change Order No. 1 compensated Plaintiff for

“material changes from 18 gauge to 12 gauge” on the top track and for “material changes from 18

gauge to 16 gauge” on the bottom track. See Exhibit C at “Scope of Work.” Third, Change Order

No. 1 paid Plaintiff for the “material changes from 18 gauge to 12 gauge” and the associated labor.

See Exhibit C at “Scope of Work.”

Change Order No. 1 further provides that

In exchange for the additional money and/or time (if any) reflected in this Change Order,
Subcontractor waives any right to additional time or money for any Work associated with
this Change Order, including any impact on unchanged work. This Change Order
constitutes accord and satisfaction and is payment in full for all costs, claims, expenses, and
markups directly and indirectly attributable to the changes ordered herein, including any
delay, disruption, suspension, stoppage, interference, compression, acceleration, cumulative

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impacts, or loss of efficiency encountered by Subcontractor while performing any Work associated
with this Change Order.
See Exhibit C at p. 2 (emphasis added).

By executing this change order, Plaintiff waived its right to seek further compensation for the

work, and any related costs, described in Change Order No. 1. Nevertheless, Plaintiff’s cause of

action for breach of contract in the Complaint seeks compensation for the very same work. See

NYSCEF Docket No. 1 at ¶ 40. Accordingly, this cause of action should be dismissed.

Additionally, Plaintiff acknowledges that to the extent that Change Order No. 1 did not

address the entirety of the cost impact associated with the allegedly “Undisclosed Specifications,”

SE3 “subsequently issued Change Order #2 [ ], which included some additional compensation to

address the cost impact of requiring Level 5 to perform the Level 5 Work Scope consistent with

the Undisclosed Specifications.” See NYSCEF Docket No. 1 at ¶ 48. As such, Plaintiff’s own

Complaint avers that the work required by the design changes (the so-called “Undisclosed

Specifications”) was encompassed in Change Order Nos. 1 and 2, each of which contained a

waiver forfeiting any further right to assert a claim based on that work. See Exhibits C and D.

If Plaintiff did not agree with the dollar amounts or scope of work in Change Order Nos. 1

or 2, Plaintiff had options other than executing Change Order No. 1 or 2. Pursuant to Section 7.2

of the Subcontract, if the parties failed to negotiate a change order, “Contractor may direct the

Change Order Work to be performed on a time and material basis or Contractor may issue a

unilateral Change Order in good faith, subject to Subcontractor’s right to file a claim.” See Exhibit

B at Section 7.2. Instead of refusing to sign Change Order Nos. 1 and 2 and preserving its right to

file a claim, however, Plaintiff opted to execute Change Order Nos. 1 and 2, and thereby waived

its right to seek further compensation for the work described therein. See Exhibits C and D.

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As the documentary evidence shows that Plaintiff waived its right to seek further

compensation for the work described in Change Order Nos. 1 and 2, and Plaintiff nonetheless

seeks further compensation for that work in its Complaint, Plaintiff’s first cause of action must be

dismissed. See Najjar Industries, Inc. v. City of New York, 57 N.Y.2d 647 (1982) (holding that

release signed by plaintiff contractor confirmed their agreement in change order to accept unit

price for installation of pipe and precluded, as a matter of law, plaintiff’s “subsequent attempt to

litigate the issue of price to be paid for that work.”).

iii. Plaintiff’s Cause of Action for Breach of Contract Must be Dismissed as the
Documentary Evidence Shows that Plaintiff was Properly Terminated

Plaintiff’s cause of action for breach of contract is also based in part upon “SE JV’s

wrongful alleged termination of the Subcontract.” See NYSCEF Docket No. 1 at ¶ 77. To the

extent that this cause of action is based upon a purported wrongful termination, it must be

dismissed as documentary evidence shows that SE3 terminated Plaintiff in accordance with the

terms of the Subcontract.

Pursuant to Sections 10.1(d) and 10.1.1 of the Subcontract, SE3 had the right to terminate

the Subcontract if Level 5 “fail[ed] to pay its subcontractors, laborers, materialmen, or others to

whom it may be indebted when such debts become due” following a written notice and three-day

opportunity to cure. See Exhibit B at Section 10.1. On June 2, 2023, SE3 sent Plaintiff a letter

detailing outstanding amounts owed by Plaintiff for unpaid craft wages, outstanding union dues,

unpaid material invoices, and unpaid equipment rentals. See Exhibit W. On June 28, 2023, SE3

sent Plaintiff a letter detailing amounts still owed by Plaintiff to Plaintiff’s labor force. See Exhibit

X. On July 14, 2023, with Plaintiff’s vendors and labor force still unpaid, SE3 sent Plaintiff a

notice of default informing Plaintiff that if it did not cure its failure to pay outstanding craft wages,

union dues, and lower-tiered material suppliers, SE3 would terminate the Subcontract. See Exhibit

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Y. Plaintiff did not pay its outstanding balances during the cure period, and the Subcontract was

terminated pursuant to Section 10.1.1.

Plaintiff cannot assert a cause of action for breach of contract based on wrongful

termination where the documentary evidence shows that it was in fact Plaintiff who breached the

Subcontract and was terminated in accordance with its terms as a result. As such, this cause of

action should be dismissed.

b. Plaintiff’s Second Cause of Action is Similarly Barred by the Waiver Provision of
Change Order No. 1

Plaintiff’s second cause of action asserts a claim under the payment bonds issued by the

Surety Defendants in the amount of $2,343,828.00. As the Surety Defendants have the same

defenses as SE3, and these damages are also based upon the alleged “failure of [SE3] to

compensate [Plaintiff] for the Level 5 Work Scope which had to be performed consistent with the

Undisclosed Specifications,” this cause of action is barred by Contract Modification No. 1 for the

same reasons discussed at Section 3(a), supra. As such, the second cause of action in the Complaint

must be dismissed.

“It is fundamental that a surety’s liability on a contractor’s payment bond is limited to the

liability of the contractor.” See Lamparter Acoustical Products, Ltd. v. Maryland Casualty Co., 64

A.D.2d 693, 693 (2d Dep’t 1978). Here, as was discussed at length in Section 2(a), supra, there is

no basis to hold SE3 liable as the principal because Plaintiff waived its claims to the $2,343,828.00

sought in this cause of action by executing Change Order Nos. 1 and 2. As such, there is no basis

for liability against the Surety Defendants.

Further, Plaintiff’s allegations of “bad faith” against the Surety Defendants for non-

payment under the performance bond are belied by the documentary evidence. Plaintiff submitted

a proof of claim to defendant Zurich American Insurance Company (“Zurich”) dated August 15,

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2023. See Exhibit Z. On August 31, 2023, Plaintiff sent Zurich a large volume of documents and

notified Zurich that “the parties have agreed to mediate the claim.” See Exhibit AA. On October

12, 2023, Plaintiff and SE3 participated in mediation, and on November 9, 2023, Plaintiff

commenced this action by filing the Complaint. Contrary to Plaintiff's allegation that the Surety

Defendants acted in bad faith by not responding to Plaintiff’s notice of claim, the documentary

evidence shows that Zurich received the proof of claim, requested backup documentation, was

informed that the parties would be mediating the claim, and then was named as a defendant in this

action less than a month after the mediation concluded. As such, there is no basis for Plaintiff’s

allegation that the Surety Defendants have acted in bad faith in not paying Plaintiff’s claim under

the payment bonds, and the second cause of action should be dismissed with prejudice.

c. Plaintiff’s Cause of Action for Breach of the Covenant of Good Faith and Fair Dealing
Must be Dismissed as Plaintiff has Also Brought a Cause of Action for Breach of
Contract Based Upon the Same Facts

Plaintiff’s third cause of action for breach of the covenant of good faith and fair dealing is

barred by applicable law as it is premised on the same conduct underlying Plaintiff’s first cause of

action for breach of contract. Plaintiff’s third cause of action is based upon Plaintiff’s grievances

with the change order process and allegedly inadequate compensation paid under certain change

orders – just like Plaintiff’s cause of action for breach of contract, which is based in part on SE3’s

purported “failure to properly process change orders.” See NYSCEF Docket No. 1 at ¶¶ 77, 85-

88. A cause of action for breach of the implied covenant of good faith and fair dealing cannot be

maintained where it is premised on the same conduct that underlies a breach of contract cause of

action and is intrinsically tied to the damages allegedly resulting from a breach of the contract. See

MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419, 420 (1st Dep’t 2011); see also Deer Park

Enterprises, LLC v. Ail Systems, Inc., 57 A.D.3d 711, 712 (2d Dep’t 2008) (holding that the cause

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of action for breach of the covenant of good faith and fair dealing should have been dismissed

where conduct and resulting injury was identical to that alleged in cause of action for breach of

contract).

Here, Plaintiff’s cause of action for breach of the duty of good faith is premised on the

same conduct underlying Plaintiff’s cause of action for breach of contract and is intrinsically tied

to the damages resulting from the alleged breach of contract. Plaintiffs cause of action for breach

of the covenant of good faith and fair dealing is based on SE3’s purported failure “to disclose the

Undisclosed Specifications to Level 5” and allegedly inducing “Level 5 to continue to work on the

Harmon Project predicated upon their repeated commitments, which Level 5 accepted and relied

upon in good faith, to compensate Level 5 for the work it was performing, at cost far in excess of

Level 5 [sic] original subcontract amount.” See NYSCEF Docket No. 1 at ¶¶ 84, 85. These are the

same alleged facts that Plaintiff’s cause of action for breach of contract is based upon. Plaintiff’s

cause of action for breach of contract is based on an alleged “breach by the JV Parties of their

agreement to pay monies owed to Level 5 pursuant to the Subcontract, including their failure to

process change orders where additional materials and work were furnished and performed at their

direction…”. See NYSCEF Docket No. 1 at ¶ 77.

Both causes of action are based on SE3’s alleged failure to pay Level 5 for the additional

work that it had to perform pursuant to the alleged “Undisclosed Specifications.” As this alleged

conduct underlying both causes of action is the same, Plaintiff cannot maintain this cause of action

for breach of the covenant of good faith and fair dealing, and this cause of action must be

dismissed.

Additionally, Plaintiff cannot maintain this cause of action because SE3 followed the

contractually agreed upon process for issuing change orders. Pursuant to Section 7 of the

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Subcontract, “[w]ithout notice to or the consent of Subcontractor’s surety, Contractor may at any

time direct changes in Subcontractor’s Work consisting of additions, deletions, reductions, or other

revisions to the Scope of Work and/or Schedule (‘Change Order’).” Here, Change Orders No. 1

and 2 were, in relevant part, contractor initiated change orders under Section 7 of the Subcontract.

As such, the Change Orders were “signed by the representative of Contractor and Subcontractor

authorized to issue Change Orders” on the form attached to the Subcontract, as required by Section

7 of the Subcontract. Now, despite the fact that Plaintiff agreed to and executed the Change Orders

that were prepared in accordance with the terms of the Subcontract, Plaintiff maintains that SE3

acted in bad faith during the change order process. Again, if Plaintiff took issue with the change

order process or amount, Plaintiff could have exercised its rights under Section 7.2 of the

Subcontract and preserved its right to file a claim. See Exhibit B at Section 7.2. Instead, Plaintiff

participated in change order negotiations and executed Change Orders No. 1 and 2. As SE3

followed the contractually agreed-upon procedures for preparing change orders, and Plaintiff

participated in that process, this cause of action must be dismissed.

d. Plaintiff’s Causes of Action for Quantum Meruit and Unjust Enrichment Must Be
Dismissed Because There Was a Contract Between the Parties

Plaintiff’s causes of action for quantum meruit and unjust enrichment must be dismissed

because there is an express contract governing the subject matter of these claims. “The existence

of a valid and enforceable written contract governing a particular subject matter ordinarily

precludes recovery in quasi contract for events arising out of the same subject matter.” Clark-

Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 388 (1987).

Here, it is undisputed that there was a valid and enforceable written contract between

Plaintiff and SE3. See Exhibit A. As Plaintiff’s complaint states, “[o]n or about November 24,

2020 and December 3, 2020, Level 5 and SE JV respectively, signed a subcontract (the

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“Subcontract”) for Level 5 to perform the Level 5 Work Scope for the Harmon Project.” See

NYSCEF Docket No. 1 at ¶ 26. Plaintiff’s claims for quantum meruit and unjust enrichment are

based upon subject matter governed by the Subcontract. Both claims are based upon Level 5’s

performance of “the Level 5 Work Scope pursuant to the Undisclosed Specifications at the specific

request of the JV Parties, which performance the JV Parties accepted without objection.” See

NYSCEF Docket No. 1 at ¶¶ 101, 105. As Level 5’s performance of its Scope of Work and the

provisions regarding payment therefor are included in the Subcontract, these causes of action must

be dismissed. See Exhibit B at Sections 2, 8; see also Clark-Fitzpatrick, 70 N.Y.2d at 389 (holding

that causes of action based upon quasi contract should be dismissed where it was “undisputed that

the relationship between the parties was defined by a written contract, fully detailing all applicable

terms and conditions, and specifically providing for project design changes with adjustments in

compensation contemplated in light of those changes”).

e. Plaintiff’s Cause of Action for Fraudulent Omission and Fraudulent Inducement Must be
Dismissed Because Plaintiff Did Not Repudiate the Subcontract

Plaintiff’s cause of action for fraudulent omission and fraudulent inducement must be

dismissed because Plaintiff continued to accept benefits under the Subcontract that it was allegedly

fraudulently induced into entering, and therefore ratified the Subcontract.

“Whether under a waiver or ratification analysis, a party may not avoid an agreement on

grounds of fraud if, after acquiring knowledge of the fraud, he affirms the contract by accepting a

benefit under it.” Barrier Sys. v. A.F.C. Enters., 264 A.D.2d 432, 433 (2d Dep’t 1999). Here,

Plaintiff acquired knowledge of the alleged “fraud” no later than the date that the Change Order

No. 1 was executed – June 28, 2022. Plaintiff became aware of the purported fraud by this date

because Change Order No. 1 compensated Plaintiff for changes in the project specifications that

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
-----------------------------------------------------------------------X
LEVEL 5

Case Info

Judge

Linda S Jamieson Track Judge’s New Case

Case No.

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Document Filed Date

December 22, 2023

Case Filing Date

November 09, 2023

County

Parties

BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY Defendant
CORTEGIANO, MARK L Attorney for the Defendant
E.C.C.O III ENTERPRISES, INC. Defendant
FEDERAL INSURANCE COMPANY Defendant
LEVEL 5 CONSTRUCTION, INC. Plaintiff
LEVI, JILL Attorney for the Plaintiff
LIBERTY MUTUAL INSURANCE COMPANY Defendant
PONZO, BRANDON Attorney for the Plaintiff
SKANSKA ECCO III 2 JV Defendant
SKANSKA USA CIVIL NORTHEAST INC. Defendant
THE CONTINENTAL INSURANCE COMPANY Defendant
ZURICH AMERICAN INSURANCE COMPANY Defendant

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