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Fixture Specialists, Inc. v. Global Construction

March 30, 2009

FIXTURE SPECIALISTS, INC., PLAINTIFF,
v.
GLOBAL CONSTRUCTION, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Wolfson, U.S.D.J.

OPINION

This case concerns a contract dispute between Plaintiff Fixture Specialists, Inc. ("Plaintiff" or "Fixture") and defendants, Global Construction, LLC ("Global") and Liberty Mutual Insurance Co. ("Liberty")(collectively, "Defendants"), arising from the construction of a housing project in Princeton, New Jersey. Global, the general contractor for the project, subcontracted with Plaintiff for plumbing work, and Liberty issued a labor and material payment bond to Global in connection with the project. In the instant matter, Plaintiff moves for partial summary judgment on the issue of whether Defendants can assert a defense to Plaintiff's claim for certain payments based upon a "Pay-When-Paid" clause contained in the agreement between Global and Fixture.*fn1 The questions presented in this motion, which require an interpretation of the subcontract between the parties, are (1) whether under New Jersey contract principles the "pay-when-paid" clause in the parties' agreement establishes a condition precedent to any obligation of Global or Liberty, a surety company, to pay Plaintiff, or whether it merely postpones payment for a reasonable time frame; and (2) whether the payment clause conflicts with the anti-lien waiver provisions of the construction lien law. For the reasons set forth below, Plaintiff's motion is DENIED.

BACKGROUND

The issues herein are legal in nature and thus, for the purposes of this motion, the Court will not make findings of fact not pertinent to the present dispute. Global is a construction firm which has served as general contractor on a number of projects, including the Estates at Princeton Junction project (the "Project"), a residential complex located in Princeton, New Jersey. The complex was owned by Princeton Junction Apartments, L.P. (the "Owner"). See Pechin's Dec., ¶¶ 1 and 3.

Defendant Liberty, a surety company, issued a labor and material payment bond in the amount of $38 million to Global in connection with the Project (the "Surety Bond"). Id. ¶ 4. Under the Surety Bond, Liberty has to satisfy any and all claims made for unpaid labor or materials provided to the Project. See the Surety Bond.

On May 25, 2005, Global entered into a subcontract (the "Subcontract") with Fixture under which Fixture agreed to perform plumbing work on the Project. See Plaintiff's Statement of Undisputed Facts (Plaintiff's Statements"), p. 5. The Subcontract obligated Global to pay Fixture $2,262,727.00 for the work. The payments were to be made monthly upon application by Fixture. Id. The Subcontract also provided that Global would withhold 10% of every progress payment (the "Retainage"). Id. In or about November 2006, Fixture completed the work and applied to Global for payment of the Retainage in the amount of $230,466, as well as $806,091 for additional plumbing work performed by Fixture; however, Global refused to pay because it had not been fully paid by the Owner for the Project. Id. at p. 6.*fn2

Central to this matter is a provision contained in the Subcontract which states:

5.3. Pay When Paid - Subcontractor agrees that Contractor shall never be obligated to pay Subcontractor under any circumstances, unless and until funds are in hand received by Contractor in full, less any applicable retainage, covering the Work or material for which Subcontractor has submitted an Application for Payment. This is a condition precedent to any obligation of Contractor, and shall not be construed as a time of payment clause. This condition precedent also applies to Contractor's obligation to pay retainage, if any, Contractor shall never be obligated to pay retainage to Subcontractor until Contractor has received its retainage in hand in full. This paragraph governs all other portions of this Subcontract, and any conflicting language shall be modified or deemed to be consistent herewith.

See Section 5.3 of the Subcontract dated May 25, 2005. Global invokes this provision and maintains that full payment by the Owner is a condition precedent to any obligation of Global's duty to pay Plaintiff . Consistent with that position, Liberty also refuses to pay Fixture on the surety bond since it declares that it is entitled to the benefit of all defenses of its principal, Global.

Now in this motion, Plaintiff challenges (1) the validity of the "Pay-When-Paid" clause by urging the Court to find the clause unenforceable pursuant to New Jersey's contract principles; and (2) Liberty's position with respect to using the same clause as a defense to nonpayment.

DISCUSSION

I. Standard of Review

Summary judgment is appropriate where the Court is satisfied that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. (56)(c); Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id. The burden of establishing that no "genuine issue" exists is on the party moving for summary judgment. Celotex, 477 U.S. at 323. Once the moving party satisfies this initial burden, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). To do so, the non-moving party must "go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324. In other words, the non-moving party must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also Ridgewood Bd. of Ed. v. Stokley, 172 F.3d 238, 252 (3d Cir. 1999). A genuine issue of material fact is one that will permit a reasonable jury to return a verdict for the non-moving party. Anderson, 477 U.S. at 248. In evaluating the evidence, a court must "view the inferences to be drawn from the underlying facts in the light most favorable to the [non-moving] party." Curley v. Klem, 298 F.3d 271, 276-77 (3d Cir. 2002)(citations omitted).

II. Whether Section 5.3 of the Subcontract Create a Condition Precedent to Global's Liability to Fixture

Defendants rely upon Section 5.3 of the Subcontract in their refusal to pay Plaintiff for work performed. Specifically, Global reasons that because it has not received full payment from the Owner of the Project, it is exercising its right under the Subcontract to withhold payment from Fixture.*fn3 In addition, Global posits that the clear and unambiguous language of the provision disavows Plaintiff's attempt to render it unenforceable. Responding to Global's position, Plaintiff cites various cases that it believes would demonstrate that the Subcontract at issue contains no express intention of the parties to transfer the risk of collection to Fixture. It argues that absent such ...


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