Multi-State Complex Legal Malpractice Award
In the construction industry, bonding is extremely important. Huge jobs, and large expenditures of money are based upon the belief that there is a pot of money protecting the process. Sub-contractors provide work and materials on the basis that there is someone who will pay, eventually. Sometimes it goes wrong, and a wedge of the legal industry is devoted to construction litigation. Injuries, as well as provision of work and materials are constantly being litigated.
In Phoenix Erectors LLC v Fogarty 2013 NY Slip Op 31936(U) August 14, 2013 Supreme Court, New York County Docket Number: 100701/10 Judge: Louis B. York we see a case that has been dismissed, appealed, reversed and sent back, now to plaintiff's successful motion for summary judgment.
"Plaintiff is a construction company, which was hired as a subcontractor by Hera Construction, Inc. (Hera) in connection with the construction of a monorail in Newark Airport, in New Jersey (project).
Hera was also the principal under a Subcontractor Labor and Material Payment Bond No. B99-020680 (bond), issued by Ulico Casualty Company (Ulico), as surety for amounts Hera was
obligated to pay subcontractors on the project. The bond, which was for $1,600,000, contained a forum selection clause requiring that Ulico could only be sued in the United States District Court
of the jurisdiction in which the bonded project was situated, here, New Jersey. A pay dispute arose between Phoenix and Hera, in which Phoenix claimed it was due approximately $180,000. Apparently, Hera got wind of plaintiff’s decision to commence a suit against Hera and Ulico in the New Jersey District Court, and commenced a peremptory suit against plaintiff in Supreme Court, Suffolk County, New York, in January 2002 (Hera Construction, Inc. v Phoenix Erectors, LLC., Index No. 00044/02)(Suffolk County action), seeking damages for plaintiff’s alleged failure to provide materials to the project, Fogarty was retained by plaintiff to represent it in the Suffolk County action. Fogarty served an answer on Hera, on plaintiff’s behalf, in April 2002. Plaintiff obtained New Jersey counsel, John Rittley (Rittley), to prosecute an action against Hera and Ulico in the United State District Court, District of New Jersey (New Jersey action). against Hera sounding in breach of contract, plaintiff brought a claim for payment against Ulico under the bond. Besides bringing claims in the New Jersey action Fogarty moved to dismiss the Suffolk County action, claiming
lack of jurisdiction and forum non conveniens. The motion, and a motion for reargument, were denied, based on a forum selection clause in the Hera-Phoenix contract calling for suits against
Hera to be brought in Suffolk County. Hera then moved in the New Jersey action to be dismissed
from the action based on the same forum selection clause. This motion was granted, and the New Jersey action continued against Ulico without Hera. At some point, Fogarty contacted Rittley to discuss adding Ulico to the Suffolk County action. The court notes that Ulico inserted a second affirmative defense in its answer, claiming that the New Jersey action should be dismissed, as the proper venue to settle disputes among plaintiff, Hera and Ulico was in Suffolk County, because Ulico’s forum selection clause was subordinate to Hera’s. Fogarty apparently never saw Ulico‘s
answer in the New Jersey action. Fogarty and Ulico‘s counsel discussed Ulico’s insertion into
the Suffolk County action. Apparently, Ulico refused to enter into a stipulation to become a defendant in a direct action against it, but agreed to stipulate to becoming a third-party
defendant in the Suffolk County action, waiving all jurisdictional defenses."
"W&M’s creative summation of the gist of plaintiff‘s complaint does not reflect the actual cause of action plaintiff has brought, and which the Appellate Division recognized in its decision. Plaintiff is claiming that it would have obtained a better result in the underlying litigations if it had been able
to pursue a direct action against Ulico in either New York or New Jersey, because Ulico is a solvent company whose bond covered the subject matter of the payment dispute, and that a judgment against Ulico would have been a more favorable outcome for plaintiff, since the judgment obtained against Hera implicated Ulico's bond, so that the bond would have been available to pay that judgment. Plaintiff is alleging that Fogarty failed to protect plaintiff's valid and valuable action against Ulico, in that he should have either gotten a stipulation allowing for a direct
action against Ulico in New York, waiving the statute of limitations, or, failing that, refused to permit Rittley to execute the New Jersey stipulation, so that the direct action could have proceeded against Ulico in New Jersey. Plaintiff is essentially faulting Fogarty for believing, without actual knowledge, that plaintiff could not sue Ulico in the New Jersey action without Hera, and not being aware that a third-party suit in New York was useless as a means to collect from Ulico."