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Structural Steel Fabricators, Inc. v. Consolidated Systems

November 16, 2010

STRUCTURAL STEEL FABRICATORS, INC., PLAINTIFF-APPELLANT,
v.
CONSOLIDATED SYSTEMS, INC., AND NEW JERSEY SCHOOLS DEVELOPMENT AUTHORITY, DEFENDANTS, AND DELRIC CONSTRUCTION COMPANY, INC., SAFECO INSURANCE COMPANY OF AMERICA, BIAGIO DELLA CERRA, INDIVIDUALLY, AND ROBERT RICCIARDI, INDIVIDUALLY, DEFENDANTS-RESPONDENTS, AND CONSOLIDATED SYSTEMS, INC., THIRD-PARTY PLAINTIFF,
v.
DELRIC CONSTRUCTION, INC., AND LINCOLN GENERAL INSURANCE COMPANY, THIRD-PARTY DEFENDANTS.



On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-0957-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 13, 2010

Before Judges Skillman, Parrillo and Espinosa.

Plaintiff Structural Steel Fabricators, Inc. (SSF) appeals from the August 28, 2009 order of the Law Division dismissing its complaint against defendant Delric Construction, Inc. (Delric) and its principals, Biagio Della Cerra and Robert Ricciardi, and compelling arbitration pursuant to the parties' subcontract. We affirm save for that portion of the order holding SSF judicially estopped from challenging the validity of the subcontract, which we vacate.

By way of background, Delric is a general contractor engaged in the construction of a school project - the Speedway Elementary School. Its contract with the New Jersey Schools Development Authority (SDA) was awarded as a result of a public bid, which Delric submitted on July 26, 2007, having been declared the lowest responsive bidder at $33,626,000. In its bid, Delric named SSF as its subcontractor for structural steel.

SSF is a subcontractor engaged in the business of fabricating and erecting steel for commercial and public entity construction projects. The day before Delric submitted its bid proposal to the SDA, on July 25, 2007, SSF submitted a bid quote to Delric in the amount of $2,875,552 for its steel services on the Speedway School project. Delric accepted and incorporated SSF's proposal into its overall bid to the SDA.

As noted, the SDA awarded Delric the project on September 12, 2007. Following the award, on October 8, 2007, the parties renegotiated a final subcontract price of $2,860,000, which reflected a $75,552 reduction from SSF's initial $2,875,552 proposal to Delric, inclusive of a $60,000 performance and payment bond required of SSF by Delric.*fn1 On March 11, 2008, the parties executed a subcontract agreement, listing the price for SSF services at $2,860,000.

The agreement contained an arbitration clause, granting Delric the unilateral right to compel arbitration for "any claims, disputes or other issues arising out of and/or related to the Subcontract and the performance of the work."*fn2

Specifically, the arbitration clause provided:

Except as provided in paragraph 24.2 below, any and all disputes or claims arising out of and/or related to the [s]ubcontract and the performance of the [w]ork at the [p]roject, shall be decided solely in the Superior Court of New Jersey and venue in any such action must be placed in the County of Passaic.

Notwithstanding the above, any claims, disputes or other issues arising out of and/or related to the Subcontract and the performance of the work may, at Delric Construction Company, Inc.'s sole option, be decided in binding arbitration administered by the American Arbitration Association in accordance with its Construction Industry Arbitration and Mediation rules. If arbitration is selected as the forum, the parties shall equally pay all AAA fees and arbitrator compensation, subject to reallocation in the arbitrator's award.

In connection with its work on the project, SSF entered into a contract with Consolidated Systems, Inc. (CSI) to supply SSF with metal floor and roof decking materials, supposedly specifically manufactured for the project.

From July 2008 until October 2008, Delric made installment payments to SSF for its work on the project. At some point, disagreements arose over Delric's payments to SSF for the added labor and materials due to change orders, SSF's adherence to the project schedule as well as engineering design standards, and CSI's delivery of metal decking materials.

On June 25, 2008, SSF filed, on an emergent basis, a verified complaint and order to show cause against CSI, seeking specific performance of its contract with CSI and alleging, among other things, that CSI's failure to deliver materials to SSF would expose SSF to liquidated damages arguably due Delric. That same day, the Law Division entered an order granting preliminary injunctive relief that required CSI to supply construction materials to SSF within forty-eight hours of being served with the order.

SSF amended its complaint against CSI on November 5, 2008 to add an intentional interference with contractual relations claim. On December 5, 2008, CSI filed an answer, counterclaim, and a third party complaint against Delric. On February 26, 2009, SSF amended its complaint a second time to add eight separate claims against Delric, some of which are also against two of its officers, Ricciardi and Della Cerra, including breach of contract, fraud, conversion and various violations of the New Jersey Trust Fund Act, N.J.S.A. 2A:44-148, and the Prompt Payment Act, N.J.S.A. 2A:30A-1 to -2. In the breach of contract claim, SSF alleged that Delric owed ...


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