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Seacoast Builders Corp. v. Rutgers

March 24, 2003

SEACOAST BUILDERS CORPORATION, PLAINTIFF-APPELLANT,
v.
RUTGERS, THE STATE UNIVERSITY, DEFENDANT-RESPONDENT,
AND SMITH-MIDLAND CORPORATION, DEFENDANT-APPELLANT,
AND GRAD ASSOCIATES, P.A., DEFENDANT. *FN1



On appeal from Superior Court of New Jersey, Law Division, Essex County, L-6522-00. Joseph A. Battipaglia argued the cause for appellant Seacoast Builders Corporation (Duane Morris, attorneys; Mr. Battipaglia, on the brief).

Before Judges Stern, Coburn and Collester.

The opinion of the court was delivered by: Coburn, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 4, 2003

In this breach of contract case, we were asked to review pretrial orders of a Law Division judge denying discovery of documents that he found were protected by the attorney-client privilege, the work-product rule, or both. We granted appellants' separate motions for leave to appeal, which we now consolidate for purposes of this opinion. Our primary conclusion is that the documents must be disclosed as a sanction for attorney misconduct.

The Law Division judge failed to find the facts, which was contrary to his obligation under the law governing in camera review of allegedly privileged documents, Payton v. New Jersey Turnpike, 148 N.J. 524, 550 (1997), and contrary to our temporary remand for that specific purpose. However, the parties have urged that we definitively resolve their discovery dispute based on the record. Since an "appellate court may exercise such original jurisdiction as is necessary to the complete determination of any matter on review," R. 2:10-5, and since that course is pragmatic in these circumstances, we will proceed. Our statement of facts is based on the pleadings, certifications, and documents.

I This action arose from a July 18, 1997, public works contract for the renovation of Bradley Hall, a building owned by defendant Rutgers, the State University ("Rutgers"). Plaintiff, Seacoast Builders Corporation ("Seacoast"), a general contractor, was the successful bidder. The initial contract price was $5,712,600, and the work was to be substantially completed by October 21, 1998. After that date, Seacoast was liable for $3,000 a day in liquidated damages until substantial completion of the project. Approved change-orders increased the price to $6,183,530.28, and Rutgers has paid all but $542,014.96 of that sum.

At the beginning of the project, Rutgers retained an entity called either Lehrer McGovern Bovis, Bovis Lend Lease, Inc., or Bovis Construction Corp. ("Bovis") to serve as its "Owner's Representative." Bovis's duties included review and evaluation of "claims for additional compensation submitted to Rutgers by Seacoast." After reviewing these claims, or proposed change- orders, Bovis would advise Rutgers or Seacoast, or both, usually by letter, explaining why Bovis was recommending that the claim be approved or denied in whole or in part.

After getting Rutgers' approval for a modification of the specifications, Seacoast entered into a subcontract with defendant Smith-Midland Corporation ("SMC"). SMC was to manufacture and supply a "Slenderwall Panel System" to cover the building's existing exterior. Seacoast entered into another subcontract for demolition of the building's existing windows and their replacement with Efco windows. Seacoast alleged that Rutgers delayed completion of the project by repeatedly rejecting proposals for the Efco windows before finally accepting them, and increased the cost of the windows by insisting on a custom design.

By August 1998, Rutgers became convinced that Seacoast would not complete the contract on time, giving rise to a possibly substantial liquidated damages claim, and that disputes were likely to arise with respect to the SMC contract and the Efco windows. Believing that litigation was likely, Rutgers retained Lowenstein Sandler PC ("Lowenstein"). In or about October 1999, Lowenstein asked Bovis "to prepare a number of documents to assist Rutgers and its attorneys in analyzing the claims and preparing for the incipient litigation." The record, however, does not contain any Lowenstein request for the preparation by Bovis of any particular document.

On or around November 4, 1999, Seacoast sent Rutgers a change-order for about $2.6 million in relation to the SMC Slenderwall Panel System and the Efco windows. That change- order is the main element of Seacoast's claim against Rutgers. As had been the practice from the beginning of the project, Bovis was asked for its recommendation. That request resulted in the creation of three documents that are a major focus of the dispute.

Before discussing those documents, five individuals must be identified: Robert Pasqual is a vice-president of Bovis who certified that he served as the "Project Executive" for the Bradley Hall renovation contract; Alex Andrews is Rutgers' Director of Facilities Construction Management; Vernie R. Coston is Rutgers' "Assistant Vice President for Facilities Project Administration," and was responsible for supervising the Seacoast contract; Bill Chipps, another Rutgers administrator, was also involved in supervising this construction project; and Peter J. Witt was a Bovis employee who, according to his letters, was this job's "Project Manager."

On November 18, 1999, Pasqual sent a "Fax" to Andrews enclosing a draft letter, dated November 17, 1999. This two- page letter was addressed to Seacoast and was, in final form, to be signed by Coston. The letter denied Seacoast's proposed change-order; however, it was never sent to Seacoast. On January 5, 2000, Coston wrote a five-page letter to Seacoast, based in part on the Pasqual draft letter, denying the change- order.

In the meantime, by letter dated November 24, 1999, Witt wrote to Coston recommending payment of a portion of the change- order in the amount of $600,000. Because this letter is the primary focus of the discovery dispute, and because it was submitted to Seacoast as part of Rutgers' document production, however inadvertently, we reproduce it in full, while noting that in accordance with the parties' approach, we will refer to it as the Witt Letter:

November 24, 1999

Mr. Vern Coston Rutgers University Building #4116 Livingston Campus P.O. Box 5076 New Brunswick, NJ 08903-5076 RE: Bovis Review of Seacoast Builders Claim Dated August 1999 Bradley Hall and Chiller Plant Renovations Rutgers University Newark Campus Dear Mr. Coston, Thank you once again on meeting with me on the above referenced claim.

As stated Bovis Construction is viewing this as a contractor who would have been bidding this work. The documents presently show all the attachments anchored with a sleeve anchor to the existing structure. It is our opinion that any contractor would have assumed that the structure is in reasonably good condition and that the areas that are being fastened to are anchored to a solid material. In order to win this public bid project these assumptions would have been made and would have been assumed based upon the existing conditions and the contract documents at the time of the bid. Remember this is public bidding, low bid wins the contract.

Though the specifications clearly state that the low bidder is required to survey and test the building, this cannot be done until the contract is awarded. I have never heard of a contractor surveying or testing a building prior to a bid. All survey and test information completed by the Architect and Engineer should have been included in the contract documents and they were not. The complete responsibility was passed on to the bidder.

We believe Seacoast Builders subcontractor Smith Midland assumed that the building was in reasonably good condition and their design and costs were based on that. Being on site for over a year I know first hand that the building in (sic) not in good shape, particularly the top portion of the windows, all the parapits (sic), the existing slab edge and the spandrel areas below the window openings which would have been a problem with the original EIFS system or any other system used.

Listed below are the items that Bovis Construction believes Rutgers The State University should consider as realistic costs to the project.

1. Additional anchoring costs

2. Additional equipment costs. (Based on 4 month period)

3. Additional general condition costs. (Based on 4 month period) These costs were included in the claim and have been reviewed and adjusted accordingly by Bovis Construction (See attached Claim Review). All other portions of the claim we believe should be denied as noted in our claim review.

In addition the window claim that was submitted late in 1998 in (sic) viewed in our opinion as follows. From our research of the past history of this item EFCO was brought in by Grad Associates and Bovis Construction and asked if they could provide a window within a certain budget amount and match the design intent as indicated on the contract drawings prior to bid. At that meeting they noted they could meet the budget as required and Grad Associates revised the specifications to include "EFCO as the basis for design". (sic) If they were, why did it take 4 submissions to approve the shop drawings? Also the window that they said was the design that they included in their bid (2nd Submission), would have met all design requirements as indicated in the specifications. Bovis also notes that there were definite changes between the 2nd submission and the window presently installed on site. Though Seacoast Builders has not provided die cost back up and authorization to proceed with these changes since cost was involved Bovis believes that consideration of these costs should be considered. This is due to EFCO being the basis of design as noted in the specifications. The changes that occurred during the shop drawing process should have never taken place.

Listed are the costs for each that should be considered.

1. Additional anchoring costs: $515,000.00 Based on verified time occurred.

2. Additional storage costs for windows: $30,000.00 Due to delay in anchor installation.

3. Additional costs for window design: $55,000.00 Die costs only.

Total Cost $600,000.00

When having your discussions with Seacoast, the following issues are not completed and need to brought (sic) into the conversation.

1. Cleaning and patching of the precast panels.

2. Inspection and repair of all windows by EFCO.

3. Completion of all precast returns at ...


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