NYU Hosps. Ctr. v. HRH Constr. LLC, 2015 U.S. Dist. LEXIS 31967 (S.D.N.Y. Mar. 12, 2015)

NYU Hospitals Center (“NYU”) hired HRH Construction LLC (“HRH”) to renovate NYU’s radiology center. HRH entered into subcontracts with various trades to complete the work. The renovation project was to proceed in several phases, and the contract between NYU and HRH called for HRH to submit monthly payment requisitions for costs and expenses incurred during the preceding month. The project experienced delays in the first phase of work, and NYU failed to make timely payments requested in HRH’s monthly requisitions. The parties executed an addendum to their contract that was aimed at advancing the project and addressing the unpaid requisitions. The parties agreed that NYU would pay for four unpaid requisitions, that HRH would achieve substantial completion of the first two phases by a certain date, and that the parties would thereafter meet to discuss any outstanding issues and negotiate a schedule for completion of the remaining phases of work. NYU paid the outstanding requisitions, and HRH timely achieved substantial completion of the first two phases. HRH requested the meeting called for by the addendum, but no meeting occurred.

NYU then suggested that HRH submit a written document identifying any outstanding issues, and HRH submitted a change order request. NYU rejected the change order request, contacted a replacement contractor, and gave the replacement contractor permission to contact HRH’s subcontractors to discuss completing the project. HRH completed little work on subsequent phases of the project.

NYU alleged that HRH breached the parties’ contract by failing to perform the remaining phases of the work. HRH argued that NYU was responsible for the uncompleted work because it refused to meet with HRH and failed to negotiate a schedule for the remaining phases of the project, as required by the addendum. The case proceeded to trial before the Bankruptcy Court for the Southern District of New York, and that court ruled in favor of HRH. NYU appealed, and the District Court affirmed.

The court found no evidence to support NYU’s allegations that HRH refused to proceed with the work or otherwise abandoned the project. Because HRH requested the meeting referenced in the addendum and sought to negotiate a schedule for completing the work, the court found no evidence of abandonment. The court also found that NYU’s affirmative obstructions frustrated HRH’s ability to complete the work, including NYU’s refusal to pay outstanding requisitions, contacting a replacement contractor, and giving the replacement contractor permission to contact HRH’s subcontractors. NYU’s failure to pay HRH’s requisitions left some of HRH’s subcontractors unpaid, and those subcontractors expected HRH to be replaced on the project when the replacement contractor contacted them. NYU’s actions thus frustrated HRH’s ability to complete the job with its subcontractors, and NYU could not hold HRH liable for failing to complete the work.

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