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Bransten who presided over the matter of Gotham Greenwich Construction Company, LLC v.
Phoenix Contracting Group, Inc. [Supreme Court, New York County, Index Number
651937/2010] (“New York litigation”) in a motion to enforce a settlement agreement made
between counsel for Colonial and all other parties in the New York litigation except for Phoenix.
It is plaintiffs’ position that Colonial is wrong and that res judicata and collateral estoppel should
not apply in this matter. And as such Colonial’s motion for summary judgment must be denied.
4. The Barbaras believe that Colonial is improperly making a motion for summary
judgment to dismiss the complaint instead of making its third pre answer motion to dismiss
because Colonial has yet to file its answer in this action.
5. This action was originally assigned to Judge Barry Stevens out of Derby and he
heard two motions to dismiss all or a portion of the complaint. He denied both motions. As
Colonial was unhappy with Judge Steven’s rulings, Colonial requested that this matter be
transferred to the Complex litigation docket so as to have it assigned to another judge.
6. Colonial filed a motion to dismiss this action under the prior pending action
doctrine on April 27, 2018. On October 30, 2018, Judge Stevens rendered a decision (see,
Exhibit “A”) on Colonial’s motion to dismiss denying it on grounds that are relevant to the
instant motion.
7. In that motion Colonial sought to dismiss this action on the ground that the
matter of Colonial Surety Company v. Phoenix Contracting Group, Inc. et al, the action
consolidated with this action (“New Haven action”) rendered this action subject to a prior
pending action motion to dismiss as the two actions were virtually alike.
8. Colonial issued a performance bond for Phoenix Contracting Group, Inc.
(“Phoenix”) based upon a subcontract with Gotham Greenwich Construction Co. LLC (“GGC”)
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to install window wall (an exterior glass façade) throughout a 26 story hotel in downtown
Manhattan. Phoenix is owned by the Barbaras and at all relevant times James Barbara was CEO
of Phoenix and Lina Barbara was President.
9. Prior to issuance of said payment and performance bond, Phoenix and the
Barbaras had to execute a General Indemnity Agreement issued by Colonial (“IA”). A copy is
annexed as Exhibit “B”.
10. James Barbara on behalf of Phoenix signed the payment and performance bond (a
copy is annexed as Exhibit “C”) issued by Colonial once he reviewed the bond language because
as per paragraph 4(B) of the IA, Colonial had the right to incur such expenses in handling a
claim as it deems in good faith to be necessary or advisable.
11. GGC and/or the construction manager on the project 1 failed to provide the jobsite
as per project drawings, specifications, and approved shop drawings, which was a default of the
subcontract between GGC and Phoenix (“Subcontract”) which is the underlying subcontract
which this action arises from. As a result of GGC and/or the construction manager on the
project’s defaults of the Subcontract, Phoenix incurred additional costs and expenses of about $5
million dollars, which remains due and owing.
12. On or about August 2009, GGC sent Phoenix a letter advising that it was
considering declaring Phoenix to be in default of the Subcontract. Colonial hired Beacon
Consulting to investigate the potential claim. At that time, GGC/GCC was claiming that Phoenix
had failed to install two complete floors of windows a week and as such was in default. At that
time Phoenix could not even install one complete floor of windows due to GGC/GCC’s failure to
1
Phoenix signed the Subcontract with GGC but shortly after it was signed GGC unbeknownst to Phoenix assigned
all rights, interests and title to the construction management agreement, including the Subcontract to Gotham
Construction Co. LLC (“GCC”). See the GMP excerpts annexed hereto as Exhibit “D”. As per deposition testimony
from GGC and GCC, GGC has no separate employees and the work was conducted by GCC’s employees.
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provide the jobsite as per specifications, approved shop drawings and project drawings which
constituted a breach of the Subcontract which should have negated GGC/GCC’s ability to make
a claim on Phoenix’s performance bond because there was a pre condition to bond liability was
that there be a lack of owner default. (see paragraph 3 of the bond annexed as Exhibit “C”) Here
there was substantial owner default. 2
13. After Jim McInerney of Beacon investigated the potential claim, Colonial set
forth that Phoenix was not in default and that all the extra time and work Phoenix had to do was
because of conditions on the jobsite. (see, Nunziata letter annexed as Exhibit “E”) These
conditions constituted breaches of the Subcontract.
14. One month after the Subcontract work was completed, in September 2010,
Gotham sent Phoenix and Colonial a Notice of Termination. (A copy has been provided a
number of times in movant’s papers. In October 2010 Colonial commenced the action
consolidated with this one (“New Haven action”) in New Haven Superior Court. In November
2010, GGC commenced the New York litigation against Phoenix and Colonial for breach of the
Subcontract.
15. Lina Barbara is a New York state licensed attorney who represented Phoenix in
the New York litigation since the Barbaras and Phoenix could not afford to hire an attorney and
James Barbara was actively involved in the litigation conducting document review and attended
almost all the depositions 3
2
Without getting into substantial details, as a result of GGC/GCC’s failure to provide the jobsite as per
specifications and approved shop drawings and project drawings, Phoenix had to redesign and order new slab
cover for almost the entire building, had to purchase and install additional hat channels throughout the entire
building in order to hold the windows in because GGC/GCC failed to provide a decking with an average rib width in
excess of 4” (the specifications required minimum was 6”). This project was a debacle.
3
Jim McInerney from Beacon told Phoenix to continue to supply extra material and not put any claims on GGC’s
bond until the job was complete despite GGC/GCC not paying Phoenix monies it was owed for work completed.
The Barbaras were told that if they protected the bond, the bond would walk.
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16. In the New Haven action, Colonial was suing Phoenix and the Barbaras under the
IA for collateral and to obtain a judgment for fees and monies it expended and would expend in
defending itself in the New York litigation.
17. Because the Barbaras believed that Colonial and Phoenix’s interests were aligned
in the New York litigation (they should have been), the Barbaras agreed to cooperate with
Colonial’s counsel in a joint defense of the New York litigation. This was oral because
Colonial’s counsel and the Barbaras could not agree on some of the language in the agreement.
Because Colonial was also suing the Barbaras in the New Haven action which made working
together very acrimonious Colonial’s counsel Douglas Poulin, a partner at Colonial’s counsel’s
firm agreed that he would not pursue a motion for default judgment against Phoenix without 2
weeks notice and he asked the Barbaras to allow him to submit bills to the Court in camera so
they could not be used for discovery in the New York litigation when he needed to increase the
PJR amount. Lina Barbara agreed to increasing the amount of the PJR but asked Douglas Poulin
to give her an redacted copy of the bills. He agreed and never provided it. Steven Lapp also
suggested that the Barbaras not attend the deposition of Danny Monosson at K&M because he
felt that Monosson would give more information if the Barbaras were not there. Steven Lapp
also brought up that he didn’t want Jim McInerney’s report to go to Gotham’s counsel and said
that if the Barbaras had it, it would not be considered privileged and would need to be provided
to Gotham’s counsel. It was made clear and understood that any discovery the Barbaras had
would have to be handed over to Gotham’s counsel so in order to protect Colonial’s interests and
supposedly Phoenix’s interests Phoenix did not request discovery it would have been entitled to
in the New Haven action.
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18. The certificate of closed pleadings and claim for trial list was filed on April 2,
2014 in the New Haven action without any discovery being done.
19. In the New York litigation, Colonial elects to answer the complaint instead of
moving for a pre answer motion to dismiss on March 11, 2011. A copy of this answer is annexed
as Exhibit “F”
20. After several years of discovery in the New York litigation (instigated mostly by
Steven Lapp), and after Steven Lapp telling the Barbaras that he was going to move for summary
judgment after discovery was complete, Colonial settled the New York litigation with all the
parties to the New York litigation by agreeing to pay GGC $100,000 and dismissing Phoenix’s
affirmative claims.
21. Colonial settled the New York litigation and filed an Order to Show Cause on
April 20, 2015 to move the New York Court to enforce the settlement as it had been settled on
Phoenix’s behalf without the Barbaras’ consent. According to the Connecticut court’s website,
the pleadings were closed in the New Haven action in 2014. No discovery had been done in the
New Haven action.
22. The Barbaras moved to reopen the case in New Haven, allow the Barbaras to file
an amended answer with counterclaims, allow discovery and to strike it off the trial calendar.
This was denied without any explanation. The Barbaras appealed this decision and the appeal
was dismissed as it was not a final adjudication of the case.
23. It is the Barbaras’ position that Colonial deliberately remained in the New York
litigation instead of moving for a pre answer motion to dismiss because Gotham failed to comply
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with condition precedents of the performance bond, so that Colonial could make a back door deal
with Gotham for future business using Colonial’s ability to settle Phoenix’s claims as leverage or
as a trade off. Then after failing to move for a pre answer dismissal, Colonial engaged in
substantial discovery to ensure that Colonial maintained its ability to settle Phoenix’s claims by
ensuring that Phoenix would not be able to pay off the money owed to Colonial by continuing to
incur costs. The Barbaras also maintain that Colonial should not have settled the New York
litigation for money as it had no liability under the performance bond, and did so because it made
a back door deal for future business with Gotham.
24. When Colonial moved to enforce the settlement in April 20, 2015, Phoenix and
the Barbaras had no way of opposing Colonial’s motion as it had no way of obtaining any proof
of Colonial’s bad faith behavior or improper motive or back door deal. Such information could
only be obtained through discovery. At the time Phoenix opposed the motion to enforce the
settlement, there was no way Phoenix could have submitted actual proof of bad faith or improper
motive as there was no avenue to do so.
25. The culmination of the bad faith behavior and improper motive which resulted in
a back door deal for future business being made did not happen until shortly before Phoenix had
to oppose the motion to enforce settlement.
26. When Colonial made a back door deal with Gotham, they needed to hide it from
the Barbaras and Phoenix. And proof of said back door deal would not be available until after the
deal was made. The Barbaras or Phoenix would have no method of obtaining such proof and as
a result could not prove bad faith on the part of Colonial when opposing the motion to enforce
the settlement.
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27. The Barbaras could not obtain any evidence through discovery in the New Haven
action because Colonial’s counsel had convinced the Barbaras that doing discovery in the New
Haven litigation would lead to weakening Colonial’s case in the New York litigation and the
time to do discovery had already expired the year before the back door deal was made.
28. Without actual proof of Colonial’s bad faith behavior Phoenix had no way of
successfully opposing Colonial’s motion to enforce the settlement and would have lost in the
appeal as well had Phoenix elected to appeal Justice Bransten’s ruling.
29. Colonial is trying to ensure Phoenix and the Barbaras are unable to get any
discovery to prove Colonial’s bad faith behavior and this motion for summary judgment is more
of the same.
30. Judge Stevens recognized when Colonial moved to have this action either
dismissed or stayed until resolution of the New Haven action where the Barbaras had not been
able to conduct any discovery, under pending prior action that “The application of the prior
pending action doctrine in the manner asserted by the defendant…cannot be viewed as being
consistent with any notion of justice and equity particularly under the circumstances where
adjudication of the plaintiffs’ claims can only be assured by the prosecution of the present action
in light of the timing of the defendant’s institution of the Indemnity Suit vis-à-vis when its
alleged wrongful acts occurred. “ (see page 10 of Judge Barry Steven’s decision annexed hereto
as Exhibit “A”).
31. Judge Stevens recognized that the Barbaras would not be able to effectively or
fully defend themselves in the New Haven action because judgment would have to enter, without
benefit of discovery in this action. (see, page 12 of Judge Barry Stevens decision annexed as
Exhibit “A”).
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32. That remains just as true for this motion for summary judgment.
33. Colonial is now again seeking to dismiss the only action where the Barbaras have
the opportunity to obtain discovery from Colonial in order to prove that Colonial engaged in bad
faith behavior for improper motive. The Barbaras were cut off from the ability to do discovery in
both the New Haven action and the New York litigation prior to Colonial making the back door
deal for improper motive settling the New York litigation.
34. Colonial claims that the complaint in this action should be dismissed as the
Barbaras are precluded from asserting these actions due to res judicata and collateral estoppel as
the Barbaras had the ability and opposed Colonial’s motion to enforce the settlement in the New
York litigation.
35. This is again similar to Colonial’s previous attempt to have the complaint
dismissed which if granted would end up in an unfair and inequitable result.
36. Colonial is arguing that it is entitled to dismissal of the entire complaint in this
action because all of the issues in the complaint were already fully or necessarily adjudicated in
Colonial’s motion to enforce the settlement agreement in the New York litigation by Justice
Bransten.
37. In motions for summary judgment, the burden of showing that there are no
genuine issues as to all the material facts, which would entitle the movant to judgment as a
matter of law falls upon the movant. (see, Girolametti v. Michael Horton Associates, Inc., 173
Conn. App. 630, 647). Thus the burden falls upon Colonial as it is the party moving for summary
judgment. The non moving party has no obligation to submit documents establishing the
existence of such an issue. (Id. At 743). It is the affiant’s position that Colonial has failed to meet
its burden.
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38. Both issue and claim preclusion express no more than the fundamental principle
that once a matter has been fully and fairly litigated, and finally decided , it comes to rest. (see,
Id. At 650). This should not apply to the case at bar.
39. Phoenix and the Barbaras were unable to fully and fairly litigate Phoenix’s claims
about Colonial’s bad faith actions because when Colonial finally settled the New York litigation
Phoenix had no method of obtaining discovery to prove Colonial’s bad faith.
40. To have been able to prevail in the motion to enforce the settlement upon bad
faith would have required that Phoenix have actual proof of Colonial’s bad faith. Phoenix would
not be able to get such proof in such a short period of time especially with no method of
obtaining discovery, as the pleadings had already been closed in the New Haven action. Those
bad faith claims were not fully and fairly litigated due to the actions of Colonial.
41. Prior to this, plaintiffs had believed that Colonial and Phoenix were working
under an oral joint defense agreement and that their interests were aligned. Absent a back door
deal their interests would have been aligned.
42. Until Colonial actually made the back door deal and settled the New York
litigation, the plaintiffs would not have any way of knowing about this bad faith behavior or
improper motive because Colonial would have to keep it secret from Phoenix and the Barbaras.
43. According to Girolametti, the Supreme Court has differentiated between
collateral estoppel and res judicata. Under collateral estoppel, preclusion only occurs if a claim
has actually been litigated and under res judicata a former judgment on a claim if rendered on the
merits is an absolute bar to a subsequent action on the same claim…the appropriate inquiry with
respect to [claim] preclusion is whether the party had an adequate opportunity with respect to the
claim preclusion to litigate the matter in the earlier proceeding. (see, Id. At 651)
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44. Implicit in the determination that a prior judgment had been validly rendered is
the notion that it was not procured by fraud or collusion, as new litigation will not be barred if
the former judgment was procured through such means. (see, Id. At 652).
45. Collateral estoppel prohibits the relitigation of an issue when the issue is actually
litigated and necessarily determined in a prior action between the same parties or those in privity
with them. An issue is actually litigated if it is properly raised in the pleadings or otherwise
submitted for determination and in fact determined or necessarily determined. (see, Id. At 649).
46. In the complaint, the plaintiffs plead that Colonial acted in bad faith and had an
improper motive of trying to make a back door deal with Gotham for future business. In
Phoenix’s opposition to Colonial’s motion to enforce the settlement, there is no mention of
improper motive in any part of the opposition papers so such issue was never submitted to
Justice Bransten for determination.
47. In the case at bar, despite Colonial’s claims otherwise, collateral estoppel and res
judicata do not apply to the complaint in this action. Colonial is misreading the decision rendered
by Justice Bransten. (see, a copy of the transcript annexed hereto as Exhibit “G”).
48. On page 5 line 16 to page 6 line 25 the language makes it clear that Justice
Bransten granted the motion to enforce the settlement agreement because it was undisputed that
Phoenix failed to deposit cash or collateral with Colonial that was sufficient to cover Gotham’s
claim in the New York litigation and as such Colonial gained the sole and exclusive right to pay
or defend the claims against Phoenix.
49. Justice Bransten sums up Phoenix’s argument as simply that Phoenix purportedly
had meritorious defenses against Gotham Greenwich that were not pursued to Phoenix’s liking
by Colonial. There is no mention of claims of bad faith or good faith and in fact Justice Bransten
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goes further and says that Phoenix’s objections are moot because it did not post cash or collateral
and as a result Colonial gained the sole and exclusive right to pay or defend Phoenix’s claims.
(see, page 6 line 18-25 of Exhibit “G“). Therefore, Justice Bransten deliberately never reached
the issue of the validity of Phoenix’s claims of bad faith and others about Colonial. This is
confirmed by language on page 7 line 23-26 where Justice Bransten states that “Phoenix is put
in the position that should there be a desire on the part of Colonial to go after Phoenix for the
$100,000 it’s about the pay, that is between you and Colonial…” This shows that Justice
Bransten had no desire to address the issue of whether Phoenix would have to pay Colonial
money under the IA.
50. Accordingly, since Justice Bransten did not reach the issue of the validity of
Phoenix’s bad faith claims amongst others against Colonial as they were moot, collateral
estoppel does not apply as the issues were not fully litigated and a determination was never made
as to their validity. The fact that Justice Bransten decided the motion as she did shows that she
specifically meant to not determine the validity of Phoenix’s claims.
51. As to res judicata, the Court in Girolametti, specifically stated that in instances of
claim preclusion it was important to look at whether the parties had an adequate opportunity to
litigate the matter in the earlier action (see, Girolametti, at 651).
52. As set forth above, the plaintiffs argue that the Barbaras did not have an adequate
opportunity to litigate the matter in the motion to enforce the settlement in the New York
litigation.
53. Neither the Barbaras nor Phoenix had an adequate opportunity to litigate the
issues set forth in plaintiffs’ complaint, including but not limited to Colonial’s bad faith
behavior. If the Court read Phoenix’s opposition papers to the motion to enforce the settlement
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and plaintiffs’ complaint the claims on bad faith are different. Phoenix did not even address any
improper motive with respect to bad faith in its opposition to the motion to enforce the
settlement, while it is plead in the complaint.
54. At the time of the motion for enforcement first filed April 20, 2015, Phoenix had
no idea what had happened. The Barbaras and Phoenix had learned of the settlement by Lina
Barbara receiving a notification from the Court filing system that Colonial was submitting an
Order to Show Cause to enforce a settlement it had made with the parties to the New York
litigation. Prior to this, the Barbaras were under the impression that Phoenix and the Barbaras
interests were aligned with Colonial which was to get Colonial out of the New York litigation
and force Gotham to settle the New York action for money with Phoenix which could be used in
part to pay Colonial. Colonial and Phoenix were supposed to be operating under an oral joint
defense agreement in the New York litigation and the Barbaras were not conducting discovery in
the New Haven action so as to make Colonial’s case stronger believing Phoenix and Colonial
were on the same side.
55. The Barbaras asked Attorney Lapp when Colonial was going to get out of the
New York litigation and he had indicated he was going to move for summary judgment after
discovery was completed. Since the Barbaras and Colonial should have been on the same side
the Barbaras did not have any reason to believe he was not being truthful. Colonial was being
deceptive with the Barbaras and Phoenix, it was trying to hide the back door deal it was making
with Gotham.
56. Colonial claims that it submitted proof in its papers in the motion to enforce the
settlement in the New York litigation that such settlement was made at arms length and in good
faith.
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57. Said proof was merely self serving statements made by an individual who was
hiding a back door deal.
58. Furthermore, GGC lacked standing to sue as the construction management
agreement including the Subcontract had been assigned by GGC to GCC (see, last page of
Exhibit “D”) Why would Colonial agree to pay $100,000 to a company that lacked standing to
sue unless they cut a back door deal?
59. Wayne Nunziata (“Nunziata”) the president of Colonial states that there were
conflicting evidence on numerous legal and factual issues implicated by the claims alleged by
and against Phoenix in the lawsuit (see, paragraph 33 of Exhibit “H”) and that since Phoenix and
the Barbaras did not indemnify Colonial and provide collateral security, the risk exposure to
Colonial of proceeding further in the lawsuit and the favorable aspects of settlement that it was
in Colonial’s best interests to settle. (see, paragraph 38 of Exhibit “H“) Nunziata submits no
evidence except his own affidavits that he acted in good faith in settling the New York litigation.
60. Nunziata does not address any of the weaknesses of Colonial’s defenses.
61. What is most telling is the silence of Steven Lapp and his actions. According to
Nunziata the settlement was negotiated at arms length through counsel. (see, paragraph 11 of
Nunziata’s supplemental affidavit in response to Phoenix’s opposition annexed as Exhibit “I”).
62. Therefore Steven Lapp would know details about the deal negotiated with
Gotham’s counsel as he took part in them. Yet he does not swear to it in his affidavit as to any
details with respect to the settlement discussions with Gotham’s attorneys or its terms.
63. Instead Steven Lapp is doing everything he can to try to get rid of this case
without allowing the plaintiffs to obtain discovery. If there is no back door deal, the discovery
would bear it out but Attorney Lapp does not want discovery done.
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64. Colonial also stated that Gotham submitted evidence that prove that Colonial and
Gotham negotiated in good faith. That evidence is comprised of documents generated by
Gotham which are self serving and does not address Colonial’s liability to it. The evidence is
annexed as Exhibit 28 to the Affidavit of Steven Lapp.
65. The evidence submitted by Gotham was provided in a reply therefore not
addressed by Phoenix. There were affidavits from only two individuals general counsel and
Frederick Rohn, attorney of record for Gotham on the New York litigation. Frederick Rohn only
addresses GGC’s failure to comply with paragraph 3.3 of the Bond and states that it had been
agreed that the parties would go back and determine what balance was due. This is inaccurate as
James Barbara was at that meeting and what was discussed was that Gotham and Phoenix both
give a break down of what additional monies were owed. Phoenix provided Gotham with
change orders for additional work outside of the scope of the Subcontract and Gotham never
responded to it. GGC never agreed to pay Phoenix or Colonial the balance of monies due. In
further support of this, Colonial plead that Gotham failed to comply with paragraph 3.3 of the
performance bond in all of its answers. (see third affirmative defenses of both answers annexed
as Exhibit “F“).
66. Christopher Jaskiewicz general counsel of Gotham simply sets forth that they
decided to settle in order to avoid cost, disruption and risk of further litigation despite the belief
that Colonial owed them the $6.2 million. His position is supported primarily by self serving
documents created by Gotham to place blame on Phoenix, a report from FSA which shows
Phoenix allegedly failed to attach certain fasteners properly which was taken before Phoenix had
received approval to install hat channel which was not received until August 28, 2009. At that
point Phoenix could not install any complete floor as it lacked approvals from Gotham. This was
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likely done as a deliberate attempt to bolster GGC’s August 24, 2009 letter claiming GGC was
considering putting Phoenix in default.
67. Neither Colonial or Gotham submit any proof or evidence that GGC had the
ability to overcome the precondition in paragraph 3 of the performance bond, (see, Exhibit “C”,
“H”, “I” and Exhibit 28 to Affidavit of Steven Lapp in the moving papers) which required that
there be no owner default before liability arose for the surety.
68. Owner default includes Gotham’s failure to pay Phoenix for the monies due to it
for work already done. (see, paragraph 12.4 of the performance bond Exhibit “C”).
69. Neither Colonial nor GGC address the issues of the floors being out of tolerance,
the shearwall being out of tolerance or any other of the owner defaults that were documented.
70. Neither Colonial nor Gotham submit any proof or evidence that GGC could
overcome the issue that GGC lacked standing to sue as it had assigned all rights, interests and
title to the construction management agreement which included the Subcontract to GCC prior to
the bonds being issued. (see, excerpts from the GMP annexed as Exhibit “D”)
71. Neither Colonial nor Gotham addressed the issue that most if not all of the
damages claimed by GGC (see, responses to interrogatories 8 and 20 of GGC’s response to
interrogatories annexed as Exhibit “J”) were no longer applicable against Phoenix or Colonial
because since GGC did not do the job it could not have been damaged by monies GCC paid for
delay damages which only the construction manager would be liable for. 4
72. Neither Colonial nor Gotham addressed the issue of why GGC was paying K&M
extra money for installation of window wall when GGC had no obligation to install the windows
4
Gotham was seeking reimbursement for general conditions costs which are those costs necessary to run the job
like lights, night security, project manager’s salary, foremen salary, lifts, etc.
An example of general conditions
costs is included in the GMP excerpt annexed as Exhibit “D “.
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as the construction management agreement had already been assigned to GCC rendering the
payment voluntary and Phoenix and K&M had a lump sum contract and Phoenix had paid K&M
in full.
73. Neither Colonial nor Gotham addressed the admissions made by Gotham that
Phoenix did not delay the project thereby making the remainder of GGC’s claims for damages
not existent as they consisted of interest fees on building loans the owner of the property had..
74. Neither Colonial nor Gotham address the specifics of how GGC/GCC’s failure to
provide the jobsite as per specifications, approved shop drawings and project drawings did not
constitute Owner default. And that a condition precedent to bond liability is lack of owner
default. (see, paragraph 3 of Exhibit “C”).
75. Nunziata claims that Colonial had the potential to be liable for up to $6.35 million
to GGC but this was not realistic nor supported by the evidence. Colonial was aware of its lack
of liability on the bond because it plead them as affirmative defenses. (see, Colonial last answer
annexed as second answer in Exhibit “F”).
76. The affiant respectfully refers the Court to Exhibit “N” which is plaintiff’s
opposition to Colonial’s motion for summary judgment in the New Haven case for additional
proof and detail as to Gotham’s default of the Subcontract.
77. Colonial’s behavior in choosing to remain in the New York litigation was
puzzling at the time. When the New York litigation was commenced Colonial had expended
nothing on the jobsite and only incurred legal and investigative fees which were self inflicted.
Phoenix completed the job, paid for all material and labor and was still owed $800K on the base
contract plus over $5 million in change orders.
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78. Instead of moving for a pre answer dismissal where Colonial could have gotten
out cheap as Gotham had not complied with the conditions precedents on the bond. Colonial
elected to remain in the New York litigation for self serving reasons.
79. It is well settled law in New York and the 1st Department, that Courts require
strict compliance with conditions set forth in bonds and that if owner failed to comply strictly
with the conditions of the performance bond, this warranted summary dismissal of the complaint
against the bond with costs. (see, 150 Nassau Associates, LLC v. Liberty Mutual Insurance
Company, 36 A.D.3d 489 [1st Dept. 2007]; Tishman Westwide Construction LLC et al v. ASF
Glass, Inc., 33 A.D.3d 539 [1st Dept. 2006]; 153 Hudson Development, LLC v. Dinunno, et al., 8
A.D.3d 77 [1st Dept. 2004]; Walter Concrete Construction Corp. v. Lederle Laboratories, et al,
99 NY2d 603[2003].) [Copies of the New York caselaw is annexed as Exhibit “K“]
80. That means if condition precedents of bond liability are not met, that the case
should be dismissed against the surety, Colonial in New York. Good faith would dictate that if
condition precedents were not met by Gotham than Colonial should have made a pre answer
motion to dismiss as to do otherwise would have incurred additional unnecessary and inadvisable
expense. 5
81. About a month before electing to answer instead of making a pre answer motion
to dismiss, on February 18, 2011, the Barbaras had advised Nunziata president of Colonial that
they lacked sufficient funds to offer for collateral in writing (see, Exhibit 16 to Affidavit of
Steven Lapp or annexed hereto as Exhibit “L”) and that the only way Colonial was going to get
paid was for Phoenix to recover on its counterclaims against Gotham.
5
It was even more inadvisable to incur unnecessary expense because neither Phoenix or the Barbaras had paid
Colonial any monies it had requested for reimbursement of monies spent in the investigation of the potential
claims. The Barbaras had indicated that they had spent all their money funding the new slab cover and hat channel
they had to supply which Gotham was not paying Phoenix for nor was it willing to sign change orders.
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82. At that point, Colonial’s counsel had been telling Phoenix and the Barbaras that
the bond was going to walk due to GGC defaults and Phoenix was going to obtain 7 figures for
its change orders.
83. Colonial always knew that it had a strong case against GGC. Every single answer
Colonial filed in the New York litigation, Colonial plead that GGC had failed to comply with the
terms of the performance bond. (see, Colonial’s first and last answer annexed hereto as Exhibit
“F”) In fact Colonial felt it had such a strong case, Attorney Lapp wanted to make sure that
Colonial could still file a motion for summary judgment in case the New York Court would not
enforce the settlement agreement. (see, corr. Annexed as Exhibit “M”).
84. Colonial spent in excess of $1.6 million unnecessarily and in bad faith so that
Colonial could obtain a promise of future business from a top construction manager who does
over $3 billion a year in bonded work in the New York City market. Now Colonial seeks to
recover said monies from Phoenix and the Barbaras.
85. Colonial’s motion should be denied as there are questions of fact that remain such
as whether Colonial acted in bad faith, made a back door deal and its terms, whether Colonial
had an improper motive, which should preclude the granting of summary judgment in Colonial’s
favor, and whether Colonial acted in good faith by staying in New York litigation and spending
$1.6 million dollars and another $100,000 to a company that lacked standing to sue and had
substantial owner default.
86. As per paragraphs 3, 3.1 and 3.3 of the performance bond, (see, Exhibit “C”)
condition precedents of liability on the part of the plaintiff was that there be no owner default,
that the subcontractor be formally terminated and that the owner on the bond offer the remaining
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funds on the project to the surety. These were all plead as affirmative defenses in the New York
litigation by Colonial.
87. There was substantial owner default on the jobsite which Colonial was aware of.
which would have warranted summary dismissal of the New York action against Colonial.
88. Under the substantial completion rule in New York, once substantial completion
has occurred on the Subcontract, the construction manager can no longer terminate the contract
for the subcontractor’s alleged default. (see, 845 UN Limited Partv. Flour City Arch Metals, 28
A.D.3d 271 [1st Dept. 2006] included in Exhibit “K”). Therefore the plaintiff in the New York
action could not meet this condition precedent since termination was not attempted until after
actual completion of the work on the subcontract, which would warrant summary dismissal of
the New York action against the surety Colonial as it failed to meet 3.2 of the performance bond.
89. According to GGC’s responses to Interrogatories in the New York litigation,
substantial completion of the window wall installation occurred on May3, 2010 with actual
completion occurred on August 5, 2010. (see, response to Interrogatory 19 of Exhibit “J”)
90. Notice to Terminate was served in September 2010 therefore Gotham was unable
to terminate the Subcontract since it waited until after actual completion of the window wall
installation.
91. Continuing with the New York litigation was not necessary or advisable, but
Colonial did it anyway as it wanted to ensure that it could have future business with Gotham
which is one of the top ten construction managers in the New York City market. Colonial knew
that Phoenix no longer had money as it had provided so much extra material and incurred so
much additional expense at Colonial’s direction and Phoenix was not being paid by Gotham.
20
92. During discovery in the New York litigation, Colonial learned that Gotham
transferred all rights, title and interest to another party before the work started and suffered no
loss. This should have prompted Colonial to file for summary judgment and dismissal.
93. Due to the assignment of the construction management agreement from GGC to
GCC, GGC did not sustain any damages that were not voluntary in nature as it had no
obligations under the construction management agreement. 6
94. Instead of moving for summary judgment, Colonial merely added these as the
twentieth and twenty first affirmative defense in it’s last amended answer (see, Exhibit “F”)
95. Colonial and Phoenix’s case just kept on getting stronger and Colonial still did
not move for summary judgment instead Colonial settles with GGC paying GGC money and
dismissing Phoenix’s affirmative claims. And now Colonial is coming after the Barbaras.
96. Colonial knows that it would have won in the New York litigation because
Colonial had no liability.
97. This case is not one where Colonial is the innocent party and it is just stuck
between Phoenix and Gotham. Colonial paid NOTHING on the Project for labor or material only
on legal fees and investigation. All fees expe
Preview
Bransten who presided over the matter of Gotham Greenwich Construction Company, LLC v. Phoenix Contracting Group, Inc. [Supreme Court, New York County, Index Number 651937/2010] (“New York litigation”) in a motion to enforce a settlement agreement made between counsel for Colonial and all other parties in the New York litigation except for Phoenix. It is plaintiffs’ position that Colonial is wrong and that res judicata and collateral estoppel should not apply in this matter. And as such Colonial’s motion for summary judgment must be denied. 4. The Barbaras believe that Colonial is improperly making a motion for summary judgment to dismiss the complaint instead of making its third pre answer motion to dismiss because Colonial has yet to file its answer in this action. 5. This action was originally assigned to Judge Barry Stevens out of Derby and he heard two motions to dismiss all or a portion of the complaint. He denied both motions. As Colonial was unhappy with Judge Steven’s rulings, Colonial requested that this matter be transferred to the Complex litigation docket so as to have it assigned to another judge. 6. Colonial filed a motion to dismiss this action under the prior pending action doctrine on April 27, 2018. On October 30, 2018, Judge Stevens rendered a decision (see, Exhibit “A”) on Colonial’s motion to dismiss denying it on grounds that are relevant to the instant motion. 7. In that motion Colonial sought to dismiss this action on the ground that the matter of Colonial Surety Company v. Phoenix Contracting Group, Inc. et al, the action consolidated with this action (“New Haven action”) rendered this action subject to a prior pending action motion to dismiss as the two actions were virtually alike. 8. Colonial issued a performance bond for Phoenix Contracting Group, Inc. (“Phoenix”) based upon a subcontract with Gotham Greenwich Construction Co. LLC (“GGC”) 2 to install window wall (an exterior glass façade) throughout a 26 story hotel in downtown Manhattan. Phoenix is owned by the Barbaras and at all relevant times James Barbara was CEO of Phoenix and Lina Barbara was President. 9. Prior to issuance of said payment and performance bond, Phoenix and the Barbaras had to execute a General Indemnity Agreement issued by Colonial (“IA”). A copy is annexed as Exhibit “B”. 10. James Barbara on behalf of Phoenix signed the payment and performance bond (a copy is annexed as Exhibit “C”) issued by Colonial once he reviewed the bond language because as per paragraph 4(B) of the IA, Colonial had the right to incur such expenses in handling a claim as it deems in good faith to be necessary or advisable. 11. GGC and/or the construction manager on the project 1 failed to provide the jobsite as per project drawings, specifications, and approved shop drawings, which was a default of the subcontract between GGC and Phoenix (“Subcontract”) which is the underlying subcontract which this action arises from. As a result of GGC and/or the construction manager on the project’s defaults of the Subcontract, Phoenix incurred additional costs and expenses of about $5 million dollars, which remains due and owing. 12. On or about August 2009, GGC sent Phoenix a letter advising that it was considering declaring Phoenix to be in default of the Subcontract. Colonial hired Beacon Consulting to investigate the potential claim. At that time, GGC/GCC was claiming that Phoenix had failed to install two complete floors of windows a week and as such was in default. At that time Phoenix could not even install one complete floor of windows due to GGC/GCC’s failure to 1 Phoenix signed the Subcontract with GGC but shortly after it was signed GGC unbeknownst to Phoenix assigned all rights, interests and title to the construction management agreement, including the Subcontract to Gotham Construction Co. LLC (“GCC”). See the GMP excerpts annexed hereto as Exhibit “D”. As per deposition testimony from GGC and GCC, GGC has no separate employees and the work was conducted by GCC’s employees. 3 provide the jobsite as per specifications, approved shop drawings and project drawings which constituted a breach of the Subcontract which should have negated GGC/GCC’s ability to make a claim on Phoenix’s performance bond because there was a pre condition to bond liability was that there be a lack of owner default. (see paragraph 3 of the bond annexed as Exhibit “C”) Here there was substantial owner default. 2 13. After Jim McInerney of Beacon investigated the potential claim, Colonial set forth that Phoenix was not in default and that all the extra time and work Phoenix had to do was because of conditions on the jobsite. (see, Nunziata letter annexed as Exhibit “E”) These conditions constituted breaches of the Subcontract. 14. One month after the Subcontract work was completed, in September 2010, Gotham sent Phoenix and Colonial a Notice of Termination. (A copy has been provided a number of times in movant’s papers. In October 2010 Colonial commenced the action consolidated with this one (“New Haven action”) in New Haven Superior Court. In November 2010, GGC commenced the New York litigation against Phoenix and Colonial for breach of the Subcontract. 15. Lina Barbara is a New York state licensed attorney who represented Phoenix in the New York litigation since the Barbaras and Phoenix could not afford to hire an attorney and James Barbara was actively involved in the litigation conducting document review and attended almost all the depositions 3 2 Without getting into substantial details, as a result of GGC/GCC’s failure to provide the jobsite as per specifications and approved shop drawings and project drawings, Phoenix had to redesign and order new slab cover for almost the entire building, had to purchase and install additional hat channels throughout the entire building in order to hold the windows in because GGC/GCC failed to provide a decking with an average rib width in excess of 4” (the specifications required minimum was 6”). This project was a debacle. 3 Jim McInerney from Beacon told Phoenix to continue to supply extra material and not put any claims on GGC’s bond until the job was complete despite GGC/GCC not paying Phoenix monies it was owed for work completed. The Barbaras were told that if they protected the bond, the bond would walk. 4 16. In the New Haven action, Colonial was suing Phoenix and the Barbaras under the IA for collateral and to obtain a judgment for fees and monies it expended and would expend in defending itself in the New York litigation. 17. Because the Barbaras believed that Colonial and Phoenix’s interests were aligned in the New York litigation (they should have been), the Barbaras agreed to cooperate with Colonial’s counsel in a joint defense of the New York litigation. This was oral because Colonial’s counsel and the Barbaras could not agree on some of the language in the agreement. Because Colonial was also suing the Barbaras in the New Haven action which made working together very acrimonious Colonial’s counsel Douglas Poulin, a partner at Colonial’s counsel’s firm agreed that he would not pursue a motion for default judgment against Phoenix without 2 weeks notice and he asked the Barbaras to allow him to submit bills to the Court in camera so they could not be used for discovery in the New York litigation when he needed to increase the PJR amount. Lina Barbara agreed to increasing the amount of the PJR but asked Douglas Poulin to give her an redacted copy of the bills. He agreed and never provided it. Steven Lapp also suggested that the Barbaras not attend the deposition of Danny Monosson at K&M because he felt that Monosson would give more information if the Barbaras were not there. Steven Lapp also brought up that he didn’t want Jim McInerney’s report to go to Gotham’s counsel and said that if the Barbaras had it, it would not be considered privileged and would need to be provided to Gotham’s counsel. It was made clear and understood that any discovery the Barbaras had would have to be handed over to Gotham’s counsel so in order to protect Colonial’s interests and supposedly Phoenix’s interests Phoenix did not request discovery it would have been entitled to in the New Haven action. 5 18. The certificate of closed pleadings and claim for trial list was filed on April 2, 2014 in the New Haven action without any discovery being done. 19. In the New York litigation, Colonial elects to answer the complaint instead of moving for a pre answer motion to dismiss on March 11, 2011. A copy of this answer is annexed as Exhibit “F” 20. After several years of discovery in the New York litigation (instigated mostly by Steven Lapp), and after Steven Lapp telling the Barbaras that he was going to move for summary judgment after discovery was complete, Colonial settled the New York litigation with all the parties to the New York litigation by agreeing to pay GGC $100,000 and dismissing Phoenix’s affirmative claims. 21. Colonial settled the New York litigation and filed an Order to Show Cause on April 20, 2015 to move the New York Court to enforce the settlement as it had been settled on Phoenix’s behalf without the Barbaras’ consent. According to the Connecticut court’s website, the pleadings were closed in the New Haven action in 2014. No discovery had been done in the New Haven action. 22. The Barbaras moved to reopen the case in New Haven, allow the Barbaras to file an amended answer with counterclaims, allow discovery and to strike it off the trial calendar. This was denied without any explanation. The Barbaras appealed this decision and the appeal was dismissed as it was not a final adjudication of the case. 23. It is the Barbaras’ position that Colonial deliberately remained in the New York litigation instead of moving for a pre answer motion to dismiss because Gotham failed to comply 6 with condition precedents of the performance bond, so that Colonial could make a back door deal with Gotham for future business using Colonial’s ability to settle Phoenix’s claims as leverage or as a trade off. Then after failing to move for a pre answer dismissal, Colonial engaged in substantial discovery to ensure that Colonial maintained its ability to settle Phoenix’s claims by ensuring that Phoenix would not be able to pay off the money owed to Colonial by continuing to incur costs. The Barbaras also maintain that Colonial should not have settled the New York litigation for money as it had no liability under the performance bond, and did so because it made a back door deal for future business with Gotham. 24. When Colonial moved to enforce the settlement in April 20, 2015, Phoenix and the Barbaras had no way of opposing Colonial’s motion as it had no way of obtaining any proof of Colonial’s bad faith behavior or improper motive or back door deal. Such information could only be obtained through discovery. At the time Phoenix opposed the motion to enforce the settlement, there was no way Phoenix could have submitted actual proof of bad faith or improper motive as there was no avenue to do so. 25. The culmination of the bad faith behavior and improper motive which resulted in a back door deal for future business being made did not happen until shortly before Phoenix had to oppose the motion to enforce settlement. 26. When Colonial made a back door deal with Gotham, they needed to hide it from the Barbaras and Phoenix. And proof of said back door deal would not be available until after the deal was made. The Barbaras or Phoenix would have no method of obtaining such proof and as a result could not prove bad faith on the part of Colonial when opposing the motion to enforce the settlement. 7 27. The Barbaras could not obtain any evidence through discovery in the New Haven action because Colonial’s counsel had convinced the Barbaras that doing discovery in the New Haven litigation would lead to weakening Colonial’s case in the New York litigation and the time to do discovery had already expired the year before the back door deal was made. 28. Without actual proof of Colonial’s bad faith behavior Phoenix had no way of successfully opposing Colonial’s motion to enforce the settlement and would have lost in the appeal as well had Phoenix elected to appeal Justice Bransten’s ruling. 29. Colonial is trying to ensure Phoenix and the Barbaras are unable to get any discovery to prove Colonial’s bad faith behavior and this motion for summary judgment is more of the same. 30. Judge Stevens recognized when Colonial moved to have this action either dismissed or stayed until resolution of the New Haven action where the Barbaras had not been able to conduct any discovery, under pending prior action that “The application of the prior pending action doctrine in the manner asserted by the defendant…cannot be viewed as being consistent with any notion of justice and equity particularly under the circumstances where adjudication of the plaintiffs’ claims can only be assured by the prosecution of the present action in light of the timing of the defendant’s institution of the Indemnity Suit vis-à-vis when its alleged wrongful acts occurred. “ (see page 10 of Judge Barry Steven’s decision annexed hereto as Exhibit “A”). 31. Judge Stevens recognized that the Barbaras would not be able to effectively or fully defend themselves in the New Haven action because judgment would have to enter, without benefit of discovery in this action. (see, page 12 of Judge Barry Stevens decision annexed as Exhibit “A”). 8 32. That remains just as true for this motion for summary judgment. 33. Colonial is now again seeking to dismiss the only action where the Barbaras have the opportunity to obtain discovery from Colonial in order to prove that Colonial engaged in bad faith behavior for improper motive. The Barbaras were cut off from the ability to do discovery in both the New Haven action and the New York litigation prior to Colonial making the back door deal for improper motive settling the New York litigation. 34. Colonial claims that the complaint in this action should be dismissed as the Barbaras are precluded from asserting these actions due to res judicata and collateral estoppel as the Barbaras had the ability and opposed Colonial’s motion to enforce the settlement in the New York litigation. 35. This is again similar to Colonial’s previous attempt to have the complaint dismissed which if granted would end up in an unfair and inequitable result. 36. Colonial is arguing that it is entitled to dismissal of the entire complaint in this action because all of the issues in the complaint were already fully or necessarily adjudicated in Colonial’s motion to enforce the settlement agreement in the New York litigation by Justice Bransten. 37. In motions for summary judgment, the burden of showing that there are no genuine issues as to all the material facts, which would entitle the movant to judgment as a matter of law falls upon the movant. (see, Girolametti v. Michael Horton Associates, Inc., 173 Conn. App. 630, 647). Thus the burden falls upon Colonial as it is the party moving for summary judgment. The non moving party has no obligation to submit documents establishing the existence of such an issue. (Id. At 743). It is the affiant’s position that Colonial has failed to meet its burden. 9 38. Both issue and claim preclusion express no more than the fundamental principle that once a matter has been fully and fairly litigated, and finally decided , it comes to rest. (see, Id. At 650). This should not apply to the case at bar. 39. Phoenix and the Barbaras were unable to fully and fairly litigate Phoenix’s claims about Colonial’s bad faith actions because when Colonial finally settled the New York litigation Phoenix had no method of obtaining discovery to prove Colonial’s bad faith. 40. To have been able to prevail in the motion to enforce the settlement upon bad faith would have required that Phoenix have actual proof of Colonial’s bad faith. Phoenix would not be able to get such proof in such a short period of time especially with no method of obtaining discovery, as the pleadings had already been closed in the New Haven action. Those bad faith claims were not fully and fairly litigated due to the actions of Colonial. 41. Prior to this, plaintiffs had believed that Colonial and Phoenix were working under an oral joint defense agreement and that their interests were aligned. Absent a back door deal their interests would have been aligned. 42. Until Colonial actually made the back door deal and settled the New York litigation, the plaintiffs would not have any way of knowing about this bad faith behavior or improper motive because Colonial would have to keep it secret from Phoenix and the Barbaras. 43. According to Girolametti, the Supreme Court has differentiated between collateral estoppel and res judicata. Under collateral estoppel, preclusion only occurs if a claim has actually been litigated and under res judicata a former judgment on a claim if rendered on the merits is an absolute bar to a subsequent action on the same claim…the appropriate inquiry with respect to [claim] preclusion is whether the party had an adequate opportunity with respect to the claim preclusion to litigate the matter in the earlier proceeding. (see, Id. At 651) 10 44. Implicit in the determination that a prior judgment had been validly rendered is the notion that it was not procured by fraud or collusion, as new litigation will not be barred if the former judgment was procured through such means. (see, Id. At 652). 45. Collateral estoppel prohibits the relitigation of an issue when the issue is actually litigated and necessarily determined in a prior action between the same parties or those in privity with them. An issue is actually litigated if it is properly raised in the pleadings or otherwise submitted for determination and in fact determined or necessarily determined. (see, Id. At 649). 46. In the complaint, the plaintiffs plead that Colonial acted in bad faith and had an improper motive of trying to make a back door deal with Gotham for future business. In Phoenix’s opposition to Colonial’s motion to enforce the settlement, there is no mention of improper motive in any part of the opposition papers so such issue was never submitted to Justice Bransten for determination. 47. In the case at bar, despite Colonial’s claims otherwise, collateral estoppel and res judicata do not apply to the complaint in this action. Colonial is misreading the decision rendered by Justice Bransten. (see, a copy of the transcript annexed hereto as Exhibit “G”). 48. On page 5 line 16 to page 6 line 25 the language makes it clear that Justice Bransten granted the motion to enforce the settlement agreement because it was undisputed that Phoenix failed to deposit cash or collateral with Colonial that was sufficient to cover Gotham’s claim in the New York litigation and as such Colonial gained the sole and exclusive right to pay or defend the claims against Phoenix. 49. Justice Bransten sums up Phoenix’s argument as simply that Phoenix purportedly had meritorious defenses against Gotham Greenwich that were not pursued to Phoenix’s liking by Colonial. There is no mention of claims of bad faith or good faith and in fact Justice Bransten 11 goes further and says that Phoenix’s objections are moot because it did not post cash or collateral and as a result Colonial gained the sole and exclusive right to pay or defend Phoenix’s claims. (see, page 6 line 18-25 of Exhibit “G“). Therefore, Justice Bransten deliberately never reached the issue of the validity of Phoenix’s claims of bad faith and others about Colonial. This is confirmed by language on page 7 line 23-26 where Justice Bransten states that “Phoenix is put in the position that should there be a desire on the part of Colonial to go after Phoenix for the $100,000 it’s about the pay, that is between you and Colonial…” This shows that Justice Bransten had no desire to address the issue of whether Phoenix would have to pay Colonial money under the IA. 50. Accordingly, since Justice Bransten did not reach the issue of the validity of Phoenix’s bad faith claims amongst others against Colonial as they were moot, collateral estoppel does not apply as the issues were not fully litigated and a determination was never made as to their validity. The fact that Justice Bransten decided the motion as she did shows that she specifically meant to not determine the validity of Phoenix’s claims. 51. As to res judicata, the Court in Girolametti, specifically stated that in instances of claim preclusion it was important to look at whether the parties had an adequate opportunity to litigate the matter in the earlier action (see, Girolametti, at 651). 52. As set forth above, the plaintiffs argue that the Barbaras did not have an adequate opportunity to litigate the matter in the motion to enforce the settlement in the New York litigation. 53. Neither the Barbaras nor Phoenix had an adequate opportunity to litigate the issues set forth in plaintiffs’ complaint, including but not limited to Colonial’s bad faith behavior. If the Court read Phoenix’s opposition papers to the motion to enforce the settlement 12 and plaintiffs’ complaint the claims on bad faith are different. Phoenix did not even address any improper motive with respect to bad faith in its opposition to the motion to enforce the settlement, while it is plead in the complaint. 54. At the time of the motion for enforcement first filed April 20, 2015, Phoenix had no idea what had happened. The Barbaras and Phoenix had learned of the settlement by Lina Barbara receiving a notification from the Court filing system that Colonial was submitting an Order to Show Cause to enforce a settlement it had made with the parties to the New York litigation. Prior to this, the Barbaras were under the impression that Phoenix and the Barbaras interests were aligned with Colonial which was to get Colonial out of the New York litigation and force Gotham to settle the New York action for money with Phoenix which could be used in part to pay Colonial. Colonial and Phoenix were supposed to be operating under an oral joint defense agreement in the New York litigation and the Barbaras were not conducting discovery in the New Haven action so as to make Colonial’s case stronger believing Phoenix and Colonial were on the same side. 55. The Barbaras asked Attorney Lapp when Colonial was going to get out of the New York litigation and he had indicated he was going to move for summary judgment after discovery was completed. Since the Barbaras and Colonial should have been on the same side the Barbaras did not have any reason to believe he was not being truthful. Colonial was being deceptive with the Barbaras and Phoenix, it was trying to hide the back door deal it was making with Gotham. 56. Colonial claims that it submitted proof in its papers in the motion to enforce the settlement in the New York litigation that such settlement was made at arms length and in good faith. 13 57. Said proof was merely self serving statements made by an individual who was hiding a back door deal. 58. Furthermore, GGC lacked standing to sue as the construction management agreement including the Subcontract had been assigned by GGC to GCC (see, last page of Exhibit “D”) Why would Colonial agree to pay $100,000 to a company that lacked standing to sue unless they cut a back door deal? 59. Wayne Nunziata (“Nunziata”) the president of Colonial states that there were conflicting evidence on numerous legal and factual issues implicated by the claims alleged by and against Phoenix in the lawsuit (see, paragraph 33 of Exhibit “H”) and that since Phoenix and the Barbaras did not indemnify Colonial and provide collateral security, the risk exposure to Colonial of proceeding further in the lawsuit and the favorable aspects of settlement that it was in Colonial’s best interests to settle. (see, paragraph 38 of Exhibit “H“) Nunziata submits no evidence except his own affidavits that he acted in good faith in settling the New York litigation. 60. Nunziata does not address any of the weaknesses of Colonial’s defenses. 61. What is most telling is the silence of Steven Lapp and his actions. According to Nunziata the settlement was negotiated at arms length through counsel. (see, paragraph 11 of Nunziata’s supplemental affidavit in response to Phoenix’s opposition annexed as Exhibit “I”). 62. Therefore Steven Lapp would know details about the deal negotiated with Gotham’s counsel as he took part in them. Yet he does not swear to it in his affidavit as to any details with respect to the settlement discussions with Gotham’s attorneys or its terms. 63. Instead Steven Lapp is doing everything he can to try to get rid of this case without allowing the plaintiffs to obtain discovery. If there is no back door deal, the discovery would bear it out but Attorney Lapp does not want discovery done. 14 64. Colonial also stated that Gotham submitted evidence that prove that Colonial and Gotham negotiated in good faith. That evidence is comprised of documents generated by Gotham which are self serving and does not address Colonial’s liability to it. The evidence is annexed as Exhibit 28 to the Affidavit of Steven Lapp. 65. The evidence submitted by Gotham was provided in a reply therefore not addressed by Phoenix. There were affidavits from only two individuals general counsel and Frederick Rohn, attorney of record for Gotham on the New York litigation. Frederick Rohn only addresses GGC’s failure to comply with paragraph 3.3 of the Bond and states that it had been agreed that the parties would go back and determine what balance was due. This is inaccurate as James Barbara was at that meeting and what was discussed was that Gotham and Phoenix both give a break down of what additional monies were owed. Phoenix provided Gotham with change orders for additional work outside of the scope of the Subcontract and Gotham never responded to it. GGC never agreed to pay Phoenix or Colonial the balance of monies due. In further support of this, Colonial plead that Gotham failed to comply with paragraph 3.3 of the performance bond in all of its answers. (see third affirmative defenses of both answers annexed as Exhibit “F“). 66. Christopher Jaskiewicz general counsel of Gotham simply sets forth that they decided to settle in order to avoid cost, disruption and risk of further litigation despite the belief that Colonial owed them the $6.2 million. His position is supported primarily by self serving documents created by Gotham to place blame on Phoenix, a report from FSA which shows Phoenix allegedly failed to attach certain fasteners properly which was taken before Phoenix had received approval to install hat channel which was not received until August 28, 2009. At that point Phoenix could not install any complete floor as it lacked approvals from Gotham. This was 15 likely done as a deliberate attempt to bolster GGC’s August 24, 2009 letter claiming GGC was considering putting Phoenix in default. 67. Neither Colonial or Gotham submit any proof or evidence that GGC had the ability to overcome the precondition in paragraph 3 of the performance bond, (see, Exhibit “C”, “H”, “I” and Exhibit 28 to Affidavit of Steven Lapp in the moving papers) which required that there be no owner default before liability arose for the surety. 68. Owner default includes Gotham’s failure to pay Phoenix for the monies due to it for work already done. (see, paragraph 12.4 of the performance bond Exhibit “C”). 69. Neither Colonial nor GGC address the issues of the floors being out of tolerance, the shearwall being out of tolerance or any other of the owner defaults that were documented. 70. Neither Colonial nor Gotham submit any proof or evidence that GGC could overcome the issue that GGC lacked standing to sue as it had assigned all rights, interests and title to the construction management agreement which included the Subcontract to GCC prior to the bonds being issued. (see, excerpts from the GMP annexed as Exhibit “D”) 71. Neither Colonial nor Gotham addressed the issue that most if not all of the damages claimed by GGC (see, responses to interrogatories 8 and 20 of GGC’s response to interrogatories annexed as Exhibit “J”) were no longer applicable against Phoenix or Colonial because since GGC did not do the job it could not have been damaged by monies GCC paid for delay damages which only the construction manager would be liable for. 4 72. Neither Colonial nor Gotham addressed the issue of why GGC was paying K&M extra money for installation of window wall when GGC had no obligation to install the windows 4 Gotham was seeking reimbursement for general conditions costs which are those costs necessary to run the job like lights, night security, project manager’s salary, foremen salary, lifts, etc. An example of general conditions costs is included in the GMP excerpt annexed as Exhibit “D “. 16 as the construction management agreement had already been assigned to GCC rendering the payment voluntary and Phoenix and K&M had a lump sum contract and Phoenix had paid K&M in full. 73. Neither Colonial nor Gotham addressed the admissions made by Gotham that Phoenix did not delay the project thereby making the remainder of GGC’s claims for damages not existent as they consisted of interest fees on building loans the owner of the property had.. 74. Neither Colonial nor Gotham address the specifics of how GGC/GCC’s failure to provide the jobsite as per specifications, approved shop drawings and project drawings did not constitute Owner default. And that a condition precedent to bond liability is lack of owner default. (see, paragraph 3 of Exhibit “C”). 75. Nunziata claims that Colonial had the potential to be liable for up to $6.35 million to GGC but this was not realistic nor supported by the evidence. Colonial was aware of its lack of liability on the bond because it plead them as affirmative defenses. (see, Colonial last answer annexed as second answer in Exhibit “F”). 76. The affiant respectfully refers the Court to Exhibit “N” which is plaintiff’s opposition to Colonial’s motion for summary judgment in the New Haven case for additional proof and detail as to Gotham’s default of the Subcontract. 77. Colonial’s behavior in choosing to remain in the New York litigation was puzzling at the time. When the New York litigation was commenced Colonial had expended nothing on the jobsite and only incurred legal and investigative fees which were self inflicted. Phoenix completed the job, paid for all material and labor and was still owed $800K on the base contract plus over $5 million in change orders. 17 78. Instead of moving for a pre answer dismissal where Colonial could have gotten out cheap as Gotham had not complied with the conditions precedents on the bond. Colonial elected to remain in the New York litigation for self serving reasons. 79. It is well settled law in New York and the 1st Department, that Courts require strict compliance with conditions set forth in bonds and that if owner failed to comply strictly with the conditions of the performance bond, this warranted summary dismissal of the complaint against the bond with costs. (see, 150 Nassau Associates, LLC v. Liberty Mutual Insurance Company, 36 A.D.3d 489 [1st Dept. 2007]; Tishman Westwide Construction LLC et al v. ASF Glass, Inc., 33 A.D.3d 539 [1st Dept. 2006]; 153 Hudson Development, LLC v. Dinunno, et al., 8 A.D.3d 77 [1st Dept. 2004]; Walter Concrete Construction Corp. v. Lederle Laboratories, et al, 99 NY2d 603[2003].) [Copies of the New York caselaw is annexed as Exhibit “K“] 80. That means if condition precedents of bond liability are not met, that the case should be dismissed against the surety, Colonial in New York. Good faith would dictate that if condition precedents were not met by Gotham than Colonial should have made a pre answer motion to dismiss as to do otherwise would have incurred additional unnecessary and inadvisable expense. 5 81. About a month before electing to answer instead of making a pre answer motion to dismiss, on February 18, 2011, the Barbaras had advised Nunziata president of Colonial that they lacked sufficient funds to offer for collateral in writing (see, Exhibit 16 to Affidavit of Steven Lapp or annexed hereto as Exhibit “L”) and that the only way Colonial was going to get paid was for Phoenix to recover on its counterclaims against Gotham. 5 It was even more inadvisable to incur unnecessary expense because neither Phoenix or the Barbaras had paid Colonial any monies it had requested for reimbursement of monies spent in the investigation of the potential claims. The Barbaras had indicated that they had spent all their money funding the new slab cover and hat channel they had to supply which Gotham was not paying Phoenix for nor was it willing to sign change orders. 18 82. At that point, Colonial’s counsel had been telling Phoenix and the Barbaras that the bond was going to walk due to GGC defaults and Phoenix was going to obtain 7 figures for its change orders. 83. Colonial always knew that it had a strong case against GGC. Every single answer Colonial filed in the New York litigation, Colonial plead that GGC had failed to comply with the terms of the performance bond. (see, Colonial’s first and last answer annexed hereto as Exhibit “F”) In fact Colonial felt it had such a strong case, Attorney Lapp wanted to make sure that Colonial could still file a motion for summary judgment in case the New York Court would not enforce the settlement agreement. (see, corr. Annexed as Exhibit “M”). 84. Colonial spent in excess of $1.6 million unnecessarily and in bad faith so that Colonial could obtain a promise of future business from a top construction manager who does over $3 billion a year in bonded work in the New York City market. Now Colonial seeks to recover said monies from Phoenix and the Barbaras. 85. Colonial’s motion should be denied as there are questions of fact that remain such as whether Colonial acted in bad faith, made a back door deal and its terms, whether Colonial had an improper motive, which should preclude the granting of summary judgment in Colonial’s favor, and whether Colonial acted in good faith by staying in New York litigation and spending $1.6 million dollars and another $100,000 to a company that lacked standing to sue and had substantial owner default. 86. As per paragraphs 3, 3.1 and 3.3 of the performance bond, (see, Exhibit “C”) condition precedents of liability on the part of the plaintiff was that there be no owner default, that the subcontractor be formally terminated and that the owner on the bond offer the remaining 19 funds on the project to the surety. These were all plead as affirmative defenses in the New York litigation by Colonial. 87. There was substantial owner default on the jobsite which Colonial was aware of. which would have warranted summary dismissal of the New York action against Colonial. 88. Under the substantial completion rule in New York, once substantial completion has occurred on the Subcontract, the construction manager can no longer terminate the contract for the subcontractor’s alleged default. (see, 845 UN Limited Partv. Flour City Arch Metals, 28 A.D.3d 271 [1st Dept. 2006] included in Exhibit “K”). Therefore the plaintiff in the New York action could not meet this condition precedent since termination was not attempted until after actual completion of the work on the subcontract, which would warrant summary dismissal of the New York action against the surety Colonial as it failed to meet 3.2 of the performance bond. 89. According to GGC’s responses to Interrogatories in the New York litigation, substantial completion of the window wall installation occurred on May3, 2010 with actual completion occurred on August 5, 2010. (see, response to Interrogatory 19 of Exhibit “J”) 90. Notice to Terminate was served in September 2010 therefore Gotham was unable to terminate the Subcontract since it waited until after actual completion of the window wall installation. 91. Continuing with the New York litigation was not necessary or advisable, but Colonial did it anyway as it wanted to ensure that it could have future business with Gotham which is one of the top ten construction managers in the New York City market. Colonial knew that Phoenix no longer had money as it had provided so much extra material and incurred so much additional expense at Colonial’s direction and Phoenix was not being paid by Gotham. 20 92. During discovery in the New York litigation, Colonial learned that Gotham transferred all rights, title and interest to another party before the work started and suffered no loss. This should have prompted Colonial to file for summary judgment and dismissal. 93. Due to the assignment of the construction management agreement from GGC to GCC, GGC did not sustain any damages that were not voluntary in nature as it had no obligations under the construction management agreement. 6 94. Instead of moving for summary judgment, Colonial merely added these as the twentieth and twenty first affirmative defense in it’s last amended answer (see, Exhibit “F”) 95. Colonial and Phoenix’s case just kept on getting stronger and Colonial still did not move for summary judgment instead Colonial settles with GGC paying GGC money and dismissing Phoenix’s affirmative claims. And now Colonial is coming after the Barbaras. 96. Colonial knows that it would have won in the New York litigation because Colonial had no liability. 97. This case is not one where Colonial is the innocent party and it is just stuck between Phoenix and Gotham. Colonial paid NOTHING on the Project for labor or material only on legal fees and investigation. All fees expe