Preview
FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023
NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023
SUPREME COURT OF THE ST ATE OF NEW YORK
COUNTY OF WESTCHESTER
x
LEVEL 5 CONSTRUCTION, INC. Index No. 70587/2023
Plaintiff,
-against- NOTICE OF
ADDITIONAL MAILING
SKANSKA ECCO III2 JV, SKANSKA USA PURSUANT TO
CIVIL NORTHEAST INC., E.C.C.O III CPLR § 3215(g)(4)
ENTERPRISES, INC., ZURICH AMERCAN
INSURANCE COMPANY, LIBERTY MUTUAL
INSURANCE COMPANY, FEDERAL
INSURANCE COMPANY, THE CONTINENT AL
INSURANCE COMPANY and BERKSHIRE
HATHAW AY SPECIALTY INSURANCE
COMPANY,
Defendants.
x
PLEASE TAKE NOTICE that, the within is an additional copy of the Summons and
Complaint which was heretofore served upon you by service upon the Secretary of State
of the State of New York pursuant to New York Business Corporation Law Section 306,
and which additional copy is being served upon you in compliance with CPLR §
3215(g)(4),
Dated: New York, New York
November 15, 2023
TOD :VI. LLP
' .rybevi
/ / ,
tt rneys {t ff
444 Madison Avenue
Suite 1202
New York, New Yorlc 10022
(212) 308-7400
TO: Skanska USA Civil Northeast Inc.
75-20 Astoria Boulevard
Queens, New York 11370
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S{JPREME CO{JRT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
-X
LEVEL 5 CONSTRUCTION, INC. : Index No.
Plaintiff, Date Filed:
-against- SUMMONS
SKANSKA ECCO III2 JV, SKANSKA USA :
CIVIL NORTHEAST INC., E.C.C.O III - Plaintiff Designates Westchester
ENTERPRISES, INC., ZURICH AMERCAN : County as the Place of Trial:
INSURANCE COMPANY, LIBERTY MUTUAL :
INS{JRANCE COMPANY, FEDERAL a Venue is Based Upon Where
INS{JRANCE COMPANY, THE CONTINENTAL: a Substantial Part of the Events
INS{ITRANCE COMPANY and BERKSHIRE : Giving Rise to the Claims
HATHAWAY SPECIALTY INS{JRANCE a Occurred and the Payment Bond
COMPANY, Requires Westchester county
Defendants.
x
To the above named Defendants:
YOU ARE HEREBY SUMMONED to answer the complaint in this action and to serve a copy of
your answer, or, if the complaint is not served with this summons, to serve a notice of appearance, on the
Plaintiff's Attorney(s) within 20 days after tlie service of tliis sui'nmons, exclusive of the day of service
(or within 30 days a'fter the service is complete if this summons is not personally delivered to you within
the State of New York); and in case of your failure to appear or answer, judgment will be taken against
you by default for the relief demanded in the complaint.
Dated: New York, New York
November 9, 2023
Moy!?o"'n
Avenue
Suit{1202
New York, New York 10022
(212) 308-7400
Attorneys for Plaintiff
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Defendants' Addresses:
Skanska Ecco III 2 JV
75-20 Astoria Boulevard
Queens, New York 113 70
Skanska USA Civil Northeast Inc.
75-20 Astoria Boulevard
Queens, New York 113 70
E.C.C.O III Enterprises, Inc
201 Saw Mill River Road
Yonkers, New York 10701
Zurich Ai'nerican Insurance Company
1299 Zurich Way
Schaumberg, IL 60196
Liberty Mutual Insurance Company
175 Berkeley Street
Boston, Ma 02116-5066
Federal Insurance Company
202B Hall's Mill Road
Whitehouse Station, New Jersey 08889
The Continental Insurance Company
151 N. Franklin Street
Chicago, IlIinois, 60606
Berkshire Hathaway Specialty Insurance Company
1314 Douglas street, Suite 1400
Omaha, Nebraska 68102
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SUPREME CO{JRT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
LEVEL 5 CONSTRUCTION, INC.
Plaintiff,
-against- COMPLAINT
SKANSI(A ECCO III2JV, SKANSKA USA
CIVIL NORTHEAST INC., E.C.C.O III
ENTERPRISES, INC., ZURJCH ,'-MERCAN
INSURANCE COMPANY, LIBERTY MUTUAI, :
INS{JRANCE COMPANY, FEDERAL
INS{JRANCE COMPANY, THE CONTINENTAL:
INSURANCE COMPANY and BERKSHIRE
HATHAWAY SPECIALTY INSURANCE
COMPANY,
Defendants.
x
Level 5 Construction, Inc., by its attorneys, Todd & Levi, LLP, as and for its
Complaint herein, respectfully alleges as follows:
ALLEGATIONS APPLICABLE TO
ALL CAUSES OF ACTION
THE PARTIES
1. Level 5 Construction, Inc. ("Level 5"), is a corporation organized and
existing under the laws of the State of New York, maintaining a place of business at 136
Esplanade, Mount Vernon, New York 10553. Level 5 is a subcontractor providing
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drywall, acoustical ceilings and carpentry services for various public and private
improvement projects. Level 5 is a certified Minority Business Enterprise ("MBE").
2. Upon information and belief, at all relevant times herein, defendant
Skanska Ecco III 2 JV was an unincorporated entity (the "SE JV") fon'ned by Defendants
Skanska USA Civil Northeast Inc. and E.C.C.O III Enterprises, Inc. to enter into a
contract with Metro-North Commuter Railroad Company ("Metro North"), as general
contractor and design builder, and to furnish all labor and materials necessary to replace,
rebuild and design railroad car shop facilities at the Harmon Shop facility in Croton-On-
Hudson in Westchester County. Upon information and belief, SE JV maintains offices at
100 Croton Point Avenue, Croton-On Hudson, in Westchester County and at 75-20
Astoria Boulevard, Queens, New York 11370.
3. Upon information and belief, at relevant times herein, Defendant Skanska
USA Civil Northeast Inc. ("Skanska"), was a joint venture partner in the SE JV and is a
corporation organized and existing under the laws of the State of New York with its
offices at 75-20 AstoriaBoulevard, Queens, New York 11370. Upon information and
belief, Skanska is engaged in the construction business as a general contractor,
construction manager and design builder.
4, Upon information and belief, at all relevant times herein, Defendant
E.C.C.O III Enterprises, Inc ("ECCO," together with SE JV and Skanska, the "JV
Parties"), was a joint venture partner in the SE JV and is a corporation organized and
existing under the laws of the State of New York with its offices at 201 Saw Mill River
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Road, Yonkers, New York. Upon information and belief, ECCO is engaged in the
construction business as a general contractor, construction manager and design builder.
5. Upon information and belief, Defendant Zurich American Insurance
Company ("Zurich"), is a corporation organized and existing under the laws of the State
of New York, maintaining a principal place of business at 1299 Zurich Way,
Schaumberg, IL 60196, is engaged in business, among other things, as a surety company
and issues payment bonds for construction projects located within New York.
6. Upon information and belief, defendant Libeity Mutual Insurance
Company ("Liberty"), is a corporation organized and existing under the laws of the
Commonwealth aof Massachusetts, maintaining a principal place of business at 175
Berkeley Street, Boston, Ma 02116-5066, and is engaged in business, among other
things, as a surety company and issues payment bonds for construction projects located
within New York.
7. Upon information and belief, defendant Federal Insurance Company
("Federal"), is a corporation organized and existing under the laws of the State of
Indiana, maintaining a principal place of business at 202B Hall's Mill Road, Whitehouse
Station, New Jersey 08889, and is engaged in business, among other things, as a surety
company and issues payment bonds for construction projects located within New York.
8. Upon information and belief, The Continental Insurance Company
("Continental"), is a corporation organized and existing under the laws of the State of
Pennsylvania, maintaining a principal place of business at 151 N. Franklin Street,
3
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Chicago, Illinois, 60606, and is engaged in business, among other things, as a surety
company and issues payment bonds for construction projects located within New York.
9. Upon information and belief, defendant Berkshire Hathaway Specialty
Insurance Company ("Berkshire, together with Zurich, Liberty, Federal and Continental,
the "Sureties"), is a corporation organized and existing under the laws of the State of
Nebraska, maintaining a principal place of business at 1314 Douglas street, Suite 1400,
Omaha, Nebraska 68102, and is engaged in business, among other things, as a surety
company and issues payment bonds for construction projects located within New York.
NATURE OF ACTION
10. As more fully described below, this action arises from the failure and
refusal of the JV Parties and the Sureties to pay Level 5 the amounts due and owing for
the work and materials it furnished for the Harmon Project, as defined below, and the
material omissions made by the JV Parties, which fraudulently induced Level 5 to
underbid (by over two million dollars) the amount which it agreed to charge the JV
Parties for its work on the Harmon Project. Moreover, this action also arises out of the
brazen actions taken by the JV Parties designed to take advantage of an MBE contractor,
such as Level 5, in blatant violation of applicable law and the JV Parties' covenant of
good faith and fair dealing, and in breach of Level 5's agreement with the JV Parties and
the rules and regulations of Metro-North governing the treatment of MBE contractors.
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THE UNDERLYING FACTS
The Harmon Proiect, the SE Agreement and the Payment Bond
11. Upon information and belief, in or about October, 2018, SE JV, as general
contractor and design builder, entered into an agreement (the "SE JV Agreement") with
Metro North to furnish all labor and materials necessary to replace, rebuild and design
railroad car shop facilities at the Harmon Shop facility in Croton-On-Hudson in
Westchester County for a project la'iown as Design and Construction Services for the
Harmon Shop Replacement Program, Phase V-Stage 2, Contract No. 81933 (the
"Harmon Project").
12, Upon information and belief, in connection with the SE JV Agreement,
and as required by applicable law, SE JV as contractor and principal, and each of the
Sureties as surety, executed and delivered that certain payment bond bearing bond
numbers 9299553, 012207824/015203967, 82464330, 30026149, and 47-S'[JR-300013-
01-0173 in connection with the Harmon Project (the "Payment Bond").
13. By the terms of the Payment Bond, the JV Parties and the Sureties, among
other things, jointly and severally bound themselves to pay all persons furnishing labor,
materials and equipment to SE JV, for use by SE JV in the prosecution of the work
required in conriection with the Harmon Project.
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The Level 5 Bid Proposal and the Specifications
14. In or about April, 2020, an estimator for SE JV requested that Level 5,
among others, submit a bid proposal for Level 5 to perform a portion of the work
required by the SE JV for the JV Agreement. Specifically, Level 5 was requested to
submit a bid to perform the drywall (petitions and carpentry) and ceiling work
(acoustical and arywall) and to furnish the materials necessary to perform such work (the
"Level 5 Work Scope") for the Harmon Project.
15. At the time that Level 5 was requested by SE JV to submit its bid, it was
given the technical specifications dated February, 2020 for the Level 5 Work Scope,
namely the Specification Submittal #81933-RSS-RFC Specs dated February 3, 2020 (the
"February Specifications").
16. The February Specifications listed the carpentry requirements in Section 5
40 00 for the Cold Formed Metal Framing and Section 09 29 00 for Gypsum Board at
pages 429-446 thereof.
17, Or:i or about August 11, 2020, Level 5 submitted its bid proposal for the
Level 5 Work Scope in the amount of $4,750,000.00. In its proposal, Level 5 identified
that it would use the following materials for the Level 5 Work Scope: "All High
Partitions 18 Ga. Framing & 3" Deep leg top track with 1!/4" deep bottom track."
18. Level5'spricingforitsproposalwaspredicateduponthecostofthe
specified materials and the time it would require to work with such materials in
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performing the Level 5 Work Scope. Thus, Level 5's proposal was expressly predicated
upon its use of 18 gauge studs.
19. Level 5 reasonably relied on the February Specifications in offering its bid
to SE JV.
20. Not only was SE JV the contractor for the Harmon Project, but it was also
the design builder for the Harmon Project, so SE JV la'iew or had to have known of the
gauge requirements for the studs that Level 5 would need to complete the Level 5 Work
Scope.
21. Significantly, the February Specifications did not contain any requirement
that Level 5 use 16 gauge studs or 12 gauge studs, except for the accessories for the
Han'non Project.-
22. Both prior to asking Level 5 to submit its bid and after SE JV received the
Level 5 proposal for the performance of the Level 5 Work Scope, SE JV intentionally
failed to advise Level 5 and concealed from Level 5 that a heavier gauge stud, namely a
12 gauge or a 16 gauge stud, would be required to perform the Level 5 Work Scope in
furtherance of SE JV's design build for the Harmon Project.
23. In October, 2020, the specifications relevant to the Level 5 Work Scope
were amended (the "October Specifications").
24. The October Specifications did not change the Cold Form Metal Framing
specifications listed in Section 05 40 00 of the February Specifications, except to provide
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specifications for framing accessories which included a reference to a 16 gauge stud. The
reference to the 16 gauge stud was only for accessories and nothing else.
25. Ultimately, the price for Level 5's proposal was reduced to $4,700,000.00
and SE JV accepted the Level 5 bid proposal without ever disclosing that the Level 5
Work Scope worild change dramatically when the gauge and deflection requirements for
the Level 5 Work Scope were finally disclosed to Level5.
The Level 5 Subcontract Agreement Is Signed
26. On or about November 24, 2020 and December 3, 2020, Level 5 and SE JV
respectively, signed a subcontract (the "Subcontract") for Level 5 to perform the Level 5
Work Scope for the Harmon Project.
27. Pursuant to the Subcontract, SE JV represented that it was "committed to
maximizing opportunities for disadvantaged business enterprises.
28. The Subcontract also specifically incorporated by reference the Skanska
code of conducti including that Skanska allegedly was doing business with "a high degree
of integrity and transparency," that Skanska allegedly was committed to a "strong ethical
culture" and that Skanska was committed to providing "equal treatment and employment
opportunities, with an intolerance for "any form of harassment or discrimination."
29. At the time the Subcontract was signed, none of the specifications provided
to Level 5 for the Level 5 Work Scope, namely Section 5 40 00 for the Cold Formed
Metal Framing and Section 09 29 00 for Gypsum Board (except for accessories)
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included a requirement to use 16 or 12 gauge studs rather than the 18 gauge studs on
which Level 5's bid proposal was based and upon which Level 5 relied when it entered
into the SubcontIaact.
30. At the time the Subcontract was signed neither the architect nor the
engineer retained by SE JV advised Level 5 that there was any requirement to use 16 or
12 gauge studs rather than the 18 gauge studs on which Level 5's bid proposal was based
and upon which Level 5 relied when it entered into the Subcontract.
31. Moreover, even though the Level 5 Work Scope involved custom framing
requirements to install a specially designed top track and bottom track, which was needed
to accommodate a maximum deflection load for the roof at the Harmon Project, SE JV
provided no custom framing requirements for Level 5 to perform the Level 5 Work
Scope.
32. The custom design requirements referenced in paragraph 31 above, were
known and/or should have been laiown by SE JV as part of its duties and responsibilities
as the design builder for the Harmon Project,
33, At the time that SE JV asked Level 5 to bid on the Level 5 Work Scope and
at the time that SE JV fraudulently induced Level 5 to sign the Subcontract, SE JV never
disclosed (orally or in writing) the need for: a) the installation of high partition studs to
meet the additional deflection loads, thereby impacting the top and bottom deflection
requirements (i.e., custom design sheet metal material greater than 3" deep for leg top
track deflections using 12 gauge), and b) heavier 16-gauge metal studs in order to
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perform the Level 5 Work Scope and cariy out the design build of SE JV for the Harmon
Project (the "Undisclosed Specifications").
The Belated Disclosure of the Gauge Requirements
34. In April, 2021, Level 5 engaged the engineering services of ClarkDietrich
to calculate the quantities of materials required based upon the designs of SE JV and its
respective architects and engineers.
35. The responsibility for the design of the Harmon Project rested solely with
SE JV and it was never delegated to ClarkDietrich.
36. Clarllietrich issued many submittals which were not approved by the
architect for SE JV, largely because Level 5 was relying on furnishing: "all High
Partitions 18 Ga. Framing & 3" Deep leg top track with 1!/l" deep bottom track," as set
forth in Level 5's bid, when unbeknownst to Level 5, SE JV required compliance with
the Undisclosed Specifications.
3 7. During the Clarld)eitrich submittal process, SE JV's architect finally
disclosed that lei gauge studs were required instead of 18 gauge because of the roof
deflection requirements of the SE JV's design build. At such time, the significant
increase in costs for labor and material that would be incurred in using a heavier gauge
stud became readily apparent to Level 5.
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3 8. Accordingly, Level 5 promptly notified SE JV that the Undisclosed
Specifications changed the Level 5 Work Scope dramatically in terms of the cost for
materials and labor and the time it would take to complete the Level 5 Work Scope.
39. At,first, SE JV attempted to claim that the Undisclosed Specifications were
always contained in the specifications upon which Level 5 relied when it submitted its
bid and signed the Subcontract. However, such claim by SE JV was proven to be
completely false, when SE JV could not point to a single provision in the February
Specifications or the October Specifications which required the heavier gauge, except for
the accessories specification section.
40. The Undisclosed Specifications being mandated by SE JV (after the
Subcontract was signed), included a 16 minimum gauge stud, increased deep-leg top
track and bottoi'n track deflections for the roof and drilling changes for a 12 gauge
installation.
The Issuance of Change Orders which Failed to Address the
Impact of the Undisclosed Specifications
41. In or about June, 2022, while Level 5 and SE JV continued to discuss the
cost impact for implementing the Undisclosed Specifications, SE JV issued Change
Order #1 ("CO 1") to add a paltry sum of $362,071.24 to the amount of the Subcontract.
However, the change order amount proposed was woefully insufficient and SE JV was
well aware of same.
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42. Indeed, at such time, Level 5 estimated that the financial impact of
complying with the Undisclosed Specifications (which were known to SE JV before it
asked Level 5 to submit its bid and before the Subcontract was signed), resulted in
doubling the material costs for the heavier gauge studs from at least $1,000,000.00 to
$2,000,000.00 and increasing the labor costs from approximately $2,375,000.00 to
$4,085,000.00, resulting in a net increase for labor costs of approximately $1,710,000,00
(the manhours were estimated to increase from 25,000 hours to approximately 43,0000
hours at the rate of $95.00 per hour).
43. The cost of labor had to increase dramatically because the 16 gauge studs
were three times as heavy (75 pounds) as the 18 gauge studs (25 pounds), which changed
the Harmon Project from a one person job into a two person job, which was not only
more costly, but also required a longer time to complete.
44. SE JV refused to accept Level 5's estimated cost impact of the heavier
studs and dramatic change to the deflections. The change order would not have become
necessary at all had SE JV disclosed the Undisclosed Specifications prior to seeking and
accepting Level 5's bid and prior to the signing of the Subcontract.
45. Given the dramatic difference between the CO 1 amount ($362,071.24) and
Level 5's estimate (approximately $2,700,00.00), it was clear that CO 1 would not even
make a dent in compensating Level 5 for the cost impact of SE JV's eleventh hour
disclosure of the Undisclosed Specifications.
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46. However, in CO 1, SE JV finally acknowledged that there were changes in
the studs and deflection requirements that were not reflected in the February
Specifications or in the October Specifications, which changes SE JV had previously
claimed were in the specifications upon which Level 5 has issued its bid and signed the
Subcontract. No excuse was ever offered by the JV Parties for concealing the
Undisclosed Specifications to Level 5.
47. Although SE JV purported to fully resolve the cost impact of the
Undisclosed Specifications in CO 1, it did not do so. In any event, CO 1 only purported
to address the top track and certainly not the cost impact for the entire Harmon Project.
48. Indeed, knowing full well that CO 1 did not resolve the cost impact of the
Undisclosed Specifications, SE JV: a) subsequently issued Change Order #2 ("CO 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 ( approximately $27,000.00) and b) as discussed below, provided repeated
assurances to Level 5 throughout Level 5's performance, that as the work progressed and
the full cost impact of the Undisclosed Specifications was determined, SE JV would
make Level 5 whole at the end of the Harmon Project.
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SE JV's False Assurances of Payment to Induce
Level 5 to Stay with the Harmon Proiect
49. In order to induce Level 5 to continue working at the Harmon Project, and
as it became apparent to SE JV that the money being paid to Level 5 would not cover all
labor and materials required to complete the Level 5 Work Scope, SE JV (through Paul
01son and Michael Misfiid) made repeated assurances to Level 5 that once the full
financial impact was determined, it would compensate Level 5 for the increased costs.
50. Indeed, subsequent to the issuance of CO 1 and CO 2, SE JV advised
Level 5 that it was going to issue another change order for $600,000.00 (which amount
was still insufficient), to further address the financial impact of the Undisclosed
Specifications, but SE JV reneged on this commitment as well.
51. As part of the JV Parties' scheme to continue to get Level 5 to stay on the
Harmon Project, SE JV issued joint checks to a major material supplier for a portion of
Level 5's costs and also directly paid for some of the labor/union costs. However, the
monies SE JV paid on Level 5's behalf were all deducted from Level 5's contract
balances, which meant that Level 5's contract balances were rapidly diminishing and
soon no funds would be left to pay Level5.
52. In-or about February, 2022, when Level 5 insisted that the dramatic cost
shortfalls finally be addressed by SE JV, Paul 01sen of SE JV told Christopher Black,
the President of Level 5, an MBE contractor, that Level 5 was not sophisticated enough
to manage its work at the Harmon Project and he implied that Level 5 and its principal, a
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Preview
FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 SUPREME COURT OF THE ST ATE OF NEW YORK COUNTY OF WESTCHESTER x LEVEL 5 CONSTRUCTION, INC. Index No. 70587/2023 Plaintiff, -against- NOTICE OF ADDITIONAL MAILING SKANSKA ECCO III2 JV, SKANSKA USA PURSUANT TO CIVIL NORTHEAST INC., E.C.C.O III CPLR § 3215(g)(4) ENTERPRISES, INC., ZURICH AMERCAN INSURANCE COMPANY, LIBERTY MUTUAL INSURANCE COMPANY, FEDERAL INSURANCE COMPANY, THE CONTINENT AL INSURANCE COMPANY and BERKSHIRE HATHAW AY SPECIALTY INSURANCE COMPANY, Defendants. x PLEASE TAKE NOTICE that, the within is an additional copy of the Summons and Complaint which was heretofore served upon you by service upon the Secretary of State of the State of New York pursuant to New York Business Corporation Law Section 306, and which additional copy is being served upon you in compliance with CPLR § 3215(g)(4), Dated: New York, New York November 15, 2023 TOD :VI. LLP ' .rybevi / / , tt rneys {t ff 444 Madison Avenue Suite 1202 New York, New Yorlc 10022 (212) 308-7400 TO: Skanska USA Civil Northeast Inc. 75-20 Astoria Boulevard Queens, New York 11370 1 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 S{JPREME CO{JRT OF THE STATE OF NEW YORK COUNTY OF WESTCHESTER -X LEVEL 5 CONSTRUCTION, INC. : Index No. Plaintiff, Date Filed: -against- SUMMONS SKANSKA ECCO III2 JV, SKANSKA USA : CIVIL NORTHEAST INC., E.C.C.O III - Plaintiff Designates Westchester ENTERPRISES, INC., ZURICH AMERCAN : County as the Place of Trial: INSURANCE COMPANY, LIBERTY MUTUAL : INS{JRANCE COMPANY, FEDERAL a Venue is Based Upon Where INS{JRANCE COMPANY, THE CONTINENTAL: a Substantial Part of the Events INS{ITRANCE COMPANY and BERKSHIRE : Giving Rise to the Claims HATHAWAY SPECIALTY INS{JRANCE a Occurred and the Payment Bond COMPANY, Requires Westchester county Defendants. x To the above named Defendants: YOU ARE HEREBY SUMMONED to answer the complaint in this action and to serve a copy of your answer, or, if the complaint is not served with this summons, to serve a notice of appearance, on the Plaintiff's Attorney(s) within 20 days after tlie service of tliis sui'nmons, exclusive of the day of service (or within 30 days a'fter the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. Dated: New York, New York November 9, 2023 Moy!?o"'n Avenue Suit{1202 New York, New York 10022 (212) 308-7400 Attorneys for Plaintiff 2 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 Defendants' Addresses: Skanska Ecco III 2 JV 75-20 Astoria Boulevard Queens, New York 113 70 Skanska USA Civil Northeast Inc. 75-20 Astoria Boulevard Queens, New York 113 70 E.C.C.O III Enterprises, Inc 201 Saw Mill River Road Yonkers, New York 10701 Zurich Ai'nerican Insurance Company 1299 Zurich Way Schaumberg, IL 60196 Liberty Mutual Insurance Company 175 Berkeley Street Boston, Ma 02116-5066 Federal Insurance Company 202B Hall's Mill Road Whitehouse Station, New Jersey 08889 The Continental Insurance Company 151 N. Franklin Street Chicago, IlIinois, 60606 Berkshire Hathaway Specialty Insurance Company 1314 Douglas street, Suite 1400 Omaha, Nebraska 68102 2 3 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 SUPREME CO{JRT OF THE STATE OF NEW YORK COUNTY OF WESTCHESTER LEVEL 5 CONSTRUCTION, INC. Plaintiff, -against- COMPLAINT SKANSI(A ECCO III2JV, SKANSKA USA CIVIL NORTHEAST INC., E.C.C.O III ENTERPRISES, INC., ZURJCH ,'-MERCAN INSURANCE COMPANY, LIBERTY MUTUAI, : INS{JRANCE COMPANY, FEDERAL INS{JRANCE COMPANY, THE CONTINENTAL: INSURANCE COMPANY and BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY, Defendants. x Level 5 Construction, Inc., by its attorneys, Todd & Levi, LLP, as and for its Complaint herein, respectfully alleges as follows: ALLEGATIONS APPLICABLE TO ALL CAUSES OF ACTION THE PARTIES 1. Level 5 Construction, Inc. ("Level 5"), is a corporation organized and existing under the laws of the State of New York, maintaining a place of business at 136 Esplanade, Mount Vernon, New York 10553. Level 5 is a subcontractor providing 4 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 drywall, acoustical ceilings and carpentry services for various public and private improvement projects. Level 5 is a certified Minority Business Enterprise ("MBE"). 2. Upon information and belief, at all relevant times herein, defendant Skanska Ecco III 2 JV was an unincorporated entity (the "SE JV") fon'ned by Defendants Skanska USA Civil Northeast Inc. and E.C.C.O III Enterprises, Inc. to enter into a contract with Metro-North Commuter Railroad Company ("Metro North"), as general contractor and design builder, and to furnish all labor and materials necessary to replace, rebuild and design railroad car shop facilities at the Harmon Shop facility in Croton-On- Hudson in Westchester County. Upon information and belief, SE JV maintains offices at 100 Croton Point Avenue, Croton-On Hudson, in Westchester County and at 75-20 Astoria Boulevard, Queens, New York 11370. 3. Upon information and belief, at relevant times herein, Defendant Skanska USA Civil Northeast Inc. ("Skanska"), was a joint venture partner in the SE JV and is a corporation organized and existing under the laws of the State of New York with its offices at 75-20 AstoriaBoulevard, Queens, New York 11370. Upon information and belief, Skanska is engaged in the construction business as a general contractor, construction manager and design builder. 4, Upon information and belief, at all relevant times herein, Defendant E.C.C.O III Enterprises, Inc ("ECCO," together with SE JV and Skanska, the "JV Parties"), was a joint venture partner in the SE JV and is a corporation organized and existing under the laws of the State of New York with its offices at 201 Saw Mill River 2 5 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 Road, Yonkers, New York. Upon information and belief, ECCO is engaged in the construction business as a general contractor, construction manager and design builder. 5. Upon information and belief, Defendant Zurich American Insurance Company ("Zurich"), is a corporation organized and existing under the laws of the State of New York, maintaining a principal place of business at 1299 Zurich Way, Schaumberg, IL 60196, is engaged in business, among other things, as a surety company and issues payment bonds for construction projects located within New York. 6. Upon information and belief, defendant Libeity Mutual Insurance Company ("Liberty"), is a corporation organized and existing under the laws of the Commonwealth aof Massachusetts, maintaining a principal place of business at 175 Berkeley Street, Boston, Ma 02116-5066, and is engaged in business, among other things, as a surety company and issues payment bonds for construction projects located within New York. 7. Upon information and belief, defendant Federal Insurance Company ("Federal"), is a corporation organized and existing under the laws of the State of Indiana, maintaining a principal place of business at 202B Hall's Mill Road, Whitehouse Station, New Jersey 08889, and is engaged in business, among other things, as a surety company and issues payment bonds for construction projects located within New York. 8. Upon information and belief, The Continental Insurance Company ("Continental"), is a corporation organized and existing under the laws of the State of Pennsylvania, maintaining a principal place of business at 151 N. Franklin Street, 3 6 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 Chicago, Illinois, 60606, and is engaged in business, among other things, as a surety company and issues payment bonds for construction projects located within New York. 9. Upon information and belief, defendant Berkshire Hathaway Specialty Insurance Company ("Berkshire, together with Zurich, Liberty, Federal and Continental, the "Sureties"), is a corporation organized and existing under the laws of the State of Nebraska, maintaining a principal place of business at 1314 Douglas street, Suite 1400, Omaha, Nebraska 68102, and is engaged in business, among other things, as a surety company and issues payment bonds for construction projects located within New York. NATURE OF ACTION 10. As more fully described below, this action arises from the failure and refusal of the JV Parties and the Sureties to pay Level 5 the amounts due and owing for the work and materials it furnished for the Harmon Project, as defined below, and the material omissions made by the JV Parties, which fraudulently induced Level 5 to underbid (by over two million dollars) the amount which it agreed to charge the JV Parties for its work on the Harmon Project. Moreover, this action also arises out of the brazen actions taken by the JV Parties designed to take advantage of an MBE contractor, such as Level 5, in blatant violation of applicable law and the JV Parties' covenant of good faith and fair dealing, and in breach of Level 5's agreement with the JV Parties and the rules and regulations of Metro-North governing the treatment of MBE contractors. 4 7 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 THE UNDERLYING FACTS The Harmon Proiect, the SE Agreement and the Payment Bond 11. Upon information and belief, in or about October, 2018, SE JV, as general contractor and design builder, entered into an agreement (the "SE JV Agreement") with Metro North to furnish all labor and materials necessary to replace, rebuild and design railroad car shop facilities at the Harmon Shop facility in Croton-On-Hudson in Westchester County for a project la'iown as Design and Construction Services for the Harmon Shop Replacement Program, Phase V-Stage 2, Contract No. 81933 (the "Harmon Project"). 12, Upon information and belief, in connection with the SE JV Agreement, and as required by applicable law, SE JV as contractor and principal, and each of the Sureties as surety, executed and delivered that certain payment bond bearing bond numbers 9299553, 012207824/015203967, 82464330, 30026149, and 47-S'[JR-300013- 01-0173 in connection with the Harmon Project (the "Payment Bond"). 13. By the terms of the Payment Bond, the JV Parties and the Sureties, among other things, jointly and severally bound themselves to pay all persons furnishing labor, materials and equipment to SE JV, for use by SE JV in the prosecution of the work required in conriection with the Harmon Project. 5 8 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 The Level 5 Bid Proposal and the Specifications 14. In or about April, 2020, an estimator for SE JV requested that Level 5, among others, submit a bid proposal for Level 5 to perform a portion of the work required by the SE JV for the JV Agreement. Specifically, Level 5 was requested to submit a bid to perform the drywall (petitions and carpentry) and ceiling work (acoustical and arywall) and to furnish the materials necessary to perform such work (the "Level 5 Work Scope") for the Harmon Project. 15. At the time that Level 5 was requested by SE JV to submit its bid, it was given the technical specifications dated February, 2020 for the Level 5 Work Scope, namely the Specification Submittal #81933-RSS-RFC Specs dated February 3, 2020 (the "February Specifications"). 16. The February Specifications listed the carpentry requirements in Section 5 40 00 for the Cold Formed Metal Framing and Section 09 29 00 for Gypsum Board at pages 429-446 thereof. 17, Or:i or about August 11, 2020, Level 5 submitted its bid proposal for the Level 5 Work Scope in the amount of $4,750,000.00. In its proposal, Level 5 identified that it would use the following materials for the Level 5 Work Scope: "All High Partitions 18 Ga. Framing & 3" Deep leg top track with 1!/4" deep bottom track." 18. Level5'spricingforitsproposalwaspredicateduponthecostofthe specified materials and the time it would require to work with such materials in 6 9 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 performing the Level 5 Work Scope. Thus, Level 5's proposal was expressly predicated upon its use of 18 gauge studs. 19. Level 5 reasonably relied on the February Specifications in offering its bid to SE JV. 20. Not only was SE JV the contractor for the Harmon Project, but it was also the design builder for the Harmon Project, so SE JV la'iew or had to have known of the gauge requirements for the studs that Level 5 would need to complete the Level 5 Work Scope. 21. Significantly, the February Specifications did not contain any requirement that Level 5 use 16 gauge studs or 12 gauge studs, except for the accessories for the Han'non Project.- 22. Both prior to asking Level 5 to submit its bid and after SE JV received the Level 5 proposal for the performance of the Level 5 Work Scope, SE JV intentionally failed to advise Level 5 and concealed from Level 5 that a heavier gauge stud, namely a 12 gauge or a 16 gauge stud, would be required to perform the Level 5 Work Scope in furtherance of SE JV's design build for the Harmon Project. 23. In October, 2020, the specifications relevant to the Level 5 Work Scope were amended (the "October Specifications"). 24. The October Specifications did not change the Cold Form Metal Framing specifications listed in Section 05 40 00 of the February Specifications, except to provide 7 10 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 specifications for framing accessories which included a reference to a 16 gauge stud. The reference to the 16 gauge stud was only for accessories and nothing else. 25. Ultimately, the price for Level 5's proposal was reduced to $4,700,000.00 and SE JV accepted the Level 5 bid proposal without ever disclosing that the Level 5 Work Scope worild change dramatically when the gauge and deflection requirements for the Level 5 Work Scope were finally disclosed to Level5. The Level 5 Subcontract Agreement Is Signed 26. On or about November 24, 2020 and December 3, 2020, Level 5 and SE JV respectively, signed a subcontract (the "Subcontract") for Level 5 to perform the Level 5 Work Scope for the Harmon Project. 27. Pursuant to the Subcontract, SE JV represented that it was "committed to maximizing opportunities for disadvantaged business enterprises. 28. The Subcontract also specifically incorporated by reference the Skanska code of conducti including that Skanska allegedly was doing business with "a high degree of integrity and transparency," that Skanska allegedly was committed to a "strong ethical culture" and that Skanska was committed to providing "equal treatment and employment opportunities, with an intolerance for "any form of harassment or discrimination." 29. At the time the Subcontract was signed, none of the specifications provided to Level 5 for the Level 5 Work Scope, namely Section 5 40 00 for the Cold Formed Metal Framing and Section 09 29 00 for Gypsum Board (except for accessories) 8 11 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 included a requirement to use 16 or 12 gauge studs rather than the 18 gauge studs on which Level 5's bid proposal was based and upon which Level 5 relied when it entered into the SubcontIaact. 30. At the time the Subcontract was signed neither the architect nor the engineer retained by SE JV advised Level 5 that there was any requirement to use 16 or 12 gauge studs rather than the 18 gauge studs on which Level 5's bid proposal was based and upon which Level 5 relied when it entered into the Subcontract. 31. Moreover, even though the Level 5 Work Scope involved custom framing requirements to install a specially designed top track and bottom track, which was needed to accommodate a maximum deflection load for the roof at the Harmon Project, SE JV provided no custom framing requirements for Level 5 to perform the Level 5 Work Scope. 32. The custom design requirements referenced in paragraph 31 above, were known and/or should have been laiown by SE JV as part of its duties and responsibilities as the design builder for the Harmon Project, 33, At the time that SE JV asked Level 5 to bid on the Level 5 Work Scope and at the time that SE JV fraudulently induced Level 5 to sign the Subcontract, SE JV never disclosed (orally or in writing) the need for: a) the installation of high partition studs to meet the additional deflection loads, thereby impacting the top and bottom deflection requirements (i.e., custom design sheet metal material greater than 3" deep for leg top track deflections using 12 gauge), and b) heavier 16-gauge metal studs in order to 9 12 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 perform the Level 5 Work Scope and cariy out the design build of SE JV for the Harmon Project (the "Undisclosed Specifications"). The Belated Disclosure of the Gauge Requirements 34. In April, 2021, Level 5 engaged the engineering services of ClarkDietrich to calculate the quantities of materials required based upon the designs of SE JV and its respective architects and engineers. 35. The responsibility for the design of the Harmon Project rested solely with SE JV and it was never delegated to ClarkDietrich. 36. Clarllietrich issued many submittals which were not approved by the architect for SE JV, largely because Level 5 was relying on furnishing: "all High Partitions 18 Ga. Framing & 3" Deep leg top track with 1!/l" deep bottom track," as set forth in Level 5's bid, when unbeknownst to Level 5, SE JV required compliance with the Undisclosed Specifications. 3 7. During the Clarld)eitrich submittal process, SE JV's architect finally disclosed that lei gauge studs were required instead of 18 gauge because of the roof deflection requirements of the SE JV's design build. At such time, the significant increase in costs for labor and material that would be incurred in using a heavier gauge stud became readily apparent to Level 5. 10 13 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 3 8. Accordingly, Level 5 promptly notified SE JV that the Undisclosed Specifications changed the Level 5 Work Scope dramatically in terms of the cost for materials and labor and the time it would take to complete the Level 5 Work Scope. 39. At,first, SE JV attempted to claim that the Undisclosed Specifications were always contained in the specifications upon which Level 5 relied when it submitted its bid and signed the Subcontract. However, such claim by SE JV was proven to be completely false, when SE JV could not point to a single provision in the February Specifications or the October Specifications which required the heavier gauge, except for the accessories specification section. 40. The Undisclosed Specifications being mandated by SE JV (after the Subcontract was signed), included a 16 minimum gauge stud, increased deep-leg top track and bottoi'n track deflections for the roof and drilling changes for a 12 gauge installation. The Issuance of Change Orders which Failed to Address the Impact of the Undisclosed Specifications 41. In or about June, 2022, while Level 5 and SE JV continued to discuss the cost impact for implementing the Undisclosed Specifications, SE JV issued Change Order #1 ("CO 1") to add a paltry sum of $362,071.24 to the amount of the Subcontract. However, the change order amount proposed was woefully insufficient and SE JV was well aware of same. 11 14 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 42. Indeed, at such time, Level 5 estimated that the financial impact of complying with the Undisclosed Specifications (which were known to SE JV before it asked Level 5 to submit its bid and before the Subcontract was signed), resulted in doubling the material costs for the heavier gauge studs from at least $1,000,000.00 to $2,000,000.00 and increasing the labor costs from approximately $2,375,000.00 to $4,085,000.00, resulting in a net increase for labor costs of approximately $1,710,000,00 (the manhours were estimated to increase from 25,000 hours to approximately 43,0000 hours at the rate of $95.00 per hour). 43. The cost of labor had to increase dramatically because the 16 gauge studs were three times as heavy (75 pounds) as the 18 gauge studs (25 pounds), which changed the Harmon Project from a one person job into a two person job, which was not only more costly, but also required a longer time to complete. 44. SE JV refused to accept Level 5's estimated cost impact of the heavier studs and dramatic change to the deflections. The change order would not have become necessary at all had SE JV disclosed the Undisclosed Specifications prior to seeking and accepting Level 5's bid and prior to the signing of the Subcontract. 45. Given the dramatic difference between the CO 1 amount ($362,071.24) and Level 5's estimate (approximately $2,700,00.00), it was clear that CO 1 would not even make a dent in compensating Level 5 for the cost impact of SE JV's eleventh hour disclosure of the Undisclosed Specifications. 12 15 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 46. However, in CO 1, SE JV finally acknowledged that there were changes in the studs and deflection requirements that were not reflected in the February Specifications or in the October Specifications, which changes SE JV had previously claimed were in the specifications upon which Level 5 has issued its bid and signed the Subcontract. No excuse was ever offered by the JV Parties for concealing the Undisclosed Specifications to Level 5. 47. Although SE JV purported to fully resolve the cost impact of the Undisclosed Specifications in CO 1, it did not do so. In any event, CO 1 only purported to address the top track and certainly not the cost impact for the entire Harmon Project. 48. Indeed, knowing full well that CO 1 did not resolve the cost impact of the Undisclosed Specifications, SE JV: a) subsequently issued Change Order #2 ("CO 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 ( approximately $27,000.00) and b) as discussed below, provided repeated assurances to Level 5 throughout Level 5's performance, that as the work progressed and the full cost impact of the Undisclosed Specifications was determined, SE JV would make Level 5 whole at the end of the Harmon Project. 13 16 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/2023 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 11/15/2023 SE JV's False Assurances of Payment to Induce Level 5 to Stay with the Harmon Proiect 49. In order to induce Level 5 to continue working at the Harmon Project, and as it became apparent to SE JV that the money being paid to Level 5 would not cover all labor and materials required to complete the Level 5 Work Scope, SE JV (through Paul 01son and Michael Misfiid) made repeated assurances to Level 5 that once the full financial impact was determined, it would compensate Level 5 for the increased costs. 50. Indeed, subsequent to the issuance of CO 1 and CO 2, SE JV advised Level 5 that it was going to issue another change order for $600,000.00 (which amount was still insufficient), to further address the financial impact of the Undisclosed Specifications, but SE JV reneged on this commitment as well. 51. As part of the JV Parties' scheme to continue to get Level 5 to stay on the Harmon Project, SE JV issued joint checks to a major material supplier for a portion of Level 5's costs and also directly paid for some of the labor/union costs. However, the monies SE JV paid on Level 5's behalf were all deducted from Level 5's contract balances, which meant that Level 5's contract balances were rapidly diminishing and soon no funds would be left to pay Level5. 52. In-or about February, 2022, when Level 5 insisted that the dramatic cost shortfalls finally be addressed by SE JV, Paul 01sen of SE JV told Christopher Black, the President of Level 5, an MBE contractor, that Level 5 was not sophisticated enough to manage its work at the Harmon Project and he implied that Level 5 and its principal, a 14 17 of 32 FILED: WESTCHESTER COUNTY CLERK 11/15/2023 05:05 PM INDEX NO. 70587/202