Shop illustrations the center of steel-fabrication dispute

Blog Entry June 12, 2013

Larry Caudle is a principal in Kraftson Caudle LLC, a law firm in McLean, Va., specializing in heavy-highway and transportation construction.

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Mometal Structures, Inc. v. T.A. Ahern Contractors Corp., No. 09-CV-2791, 2013 WL 764717 (E.D. NY Feb. 28, 2013) involves a dispute between a prime contractor, Ahern, and its steel fabrication and erection subcontractor, Mometal, on a public-school project in New York City. Ahern provided Mometal with a project schedule that indicated steel erection should commence in October 2007. From this, Mometal created an internal schedule that addressed preparation of fabrication shop drawings, preparation of erection drawings, steel fabrication and on-site erection.  

As it turned out, the project experienced significant delays due to design issues, design changes and unforeseen site conditions. These issues, in turn, delayed Mometal in its preparation of steel shop drawings because much information Mometal sought in requests for information forwarded to the project owner through Ahern remained unanswered. By October 2007, Mometal had completed only a portion of the shop drawings, and foundation and building excavation work on the site was only partially complete.

Between October 2007 and July 2008, Mometal sent dozens of letters to Ahern setting forth in detail the outstanding information and unanswered questions that were preventing it from completing shop drawings. Information from Ahern trickled in at best, and in many instances Mometal’s letter went unanswered. Mometal also submitted two requests for steel-escalation costs, to which Ahern failed to respond. Finally, on July 29, 2008, Mometal sent a letter to Ahern requesting a meeting to discuss the delays and steel escalation costs, stating that “Mometal will not commit to an erection start date until a meeting is held with [the owner’s senior officials].” On Aug. 7, 2008, the parties met and Ahern advised Mometal that it should begin erecting steel on Sept. 22, 2008.

On Aug. 11, 2008, Mometal formally advised Ahern that it could start erecting the structural steel on Sept. 22, 2008, but only if a satisfactory agreement was reached on the additional amounts Mometal sought for delays and materials escalation. On Aug. 15, 2008, Ahern notified Mometal that it was in default of the subcontract for ceasing work on the project and “seeking relief beyond the express terms of the subcontract and the contract documents.” Ahern demanded that Mometal cure its default by withdrawing its demands.  
On Aug. 19, 2008, Mometal wrote a letter to Ahern disputing that it had stopped any work, but reiterating its demand that its claims be settled as a condition of commencing steel erection. In response, Ahern terminated Mometal, employed another subcontractor to perform the work and brought suit against Mometal to recover its additional costs.  

The central issue at trial was whether Mometal was in default of the subcontract in light of the fact it never ceased working on the shop drawings and at all times was proceeding to meet the Sept. 22, 2008, target date to begin erection on the project. The court acknowledged the parties’ agreed-upon dispute resolution process prescribed in the subcontract as well as the requirement that Mometal continue working pending resolution of any dispute. The court ruled that although Mometal may have never ceased work, the mere threat that it would not start erection unless an agreement was reached on the delays and materials escalation amounted to an anticipatory repudiation. In this case, Ahern was not obligated to wait until Sept. 22, 2008, to see if Mometal showed up on the project and it was justified as treating the repudiation as a default.

The record in the case clearly revealed that Mometal had experienced delays and that it was entitled to an adjustment in the subcontract as a result. However, Mometal essentially forfeited its rights when it refused to abide by the disputes procedure to which it previously agreed and threatened not to perform. R&B

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