Defendant moves pursuant to CPLR 3212 for summary judgment dismissing the complaint. Plaintiff cross-moves pursuant to CPLR 3211(b) to dismiss Defendant's fifth affirmative defense.

BACKGROUND

This is an action for breach of a public works contract. Plaintiff Blue Water Environmental, Inc. ("Blue Water") entered into a contract with Defendant Incorporated Village of Bayville ("Village") to perform certain maintenance and construction work at the Mill Neck Creek marina located in Bayville, New York. The contract called for Blue Water to dredge and dispose of approximately 6,000 cubic yards of waste material, replace the boat ramp and pavement and restore the site to its prior condition.

The Village initially solicited bids for the project in October 2003. Two bids were submitted, one by Blue Water in the amount of $1,235,300 and one by Newborn Construction in the amount of $1,076,000. Donald Sioss is the chief civil engineer of H2M Group ("H2M"), the engineering consulting firm which designed the project for the Village and inspected the work as it was being performed.

After the bids were received, Sioss spoke with Michael Posillico, the President of Blue Water, concerning Blue Water's calculation of the cost to dispose of the "dredge spoil" or waste material. Posillico stated that Blue Water's estimate was based upon a price of $70 per cubic yard quoted by the Town of Brookhaven's municipal waste facility. Posillico and Sioss also discussed the possibility of using Transmine, a private disposal facility, whose cost to accept the dredge material was understood to be $30 per cubic yard; significantly less than that of the Town of Brookhaven. Because of the contemplated cost savings to be realized by switching to Transmine, the Village ultimately decided to reject both bids and to call for a new round of bidding on the project.

In the new invitation for proposals, the Village permitted contractors to bid on the boat ramp and the dredging work separately. Bidders were also encouraged to offer a "credit", or package discount, as an incentive for the Village to award both jobs to the same contractor. New bids were to be submitted by December 2, 2003. Although two other contractors submitted bids for the boat ramp, Blue Water and Newborn were the only companies to bid on both projects. Newborn submitted a total bid for both projects of $1,196,000, and Blue Water submitted a combined bid of $945,000. The Village awarded the contract to Blue Water. The parties formally executed a written agreement on January 5, 2004.

The contract provided that all work was to be performed in "strict accordance" [*2]with all regulatory agencies, including specifically the New York State Department of Environmental Conservation ("DEC"). On January 18, 2002, the DEC had issued a permit to replace the boat ramp. A second permit to dredge 10,000 cubic yards of spoil and dispose of it at an upland landfill was granted by the DEC on March 14, 2003. The dredging permit authorized the removal of material to a depth of six feet below the apparent low water level. The dredging permit contained a special condition prohibiting dredging from June 1 to September 30 in order to protect spawning shellfish and finned species. In both permits, the DEC reserved the right to modify, suspend or revoke the permit based on a material change in environmental conditions or other newly discovered information .

The contract contained a "no damages for delay" clause which provided as follows:

"The contractor and all subcontractors agree to hold harmless from any and all claims for loss or damages of any nature against the owner or engineer for delays in commencement, performance or completion of the contract, regardless of whether said delays are, or maybe, caused by the owner, engineer, or any governmental agency." (Agreement ¶ 3.0)

The contract further provided that Blue Water was to commence work on or before the date specified in the owner's written notice to proceed and to complete the project within 60 consecutive calendar days. Blue Water also agreed to pay, as liquidated damages, the sum of $500 for each consecutive calendar day that the work was not completed.

H2M, on behalf of the Village, initially directed Blue Water to begin construction operations on January 8 and to have the work fully completed by March 8, 2004. However, because ice on the creek interfered with dredging, Blue Water requested that the starting date be changed to February 14 and the completion date to April 16, 2004. Although H2M refused to alter the starting date, it did extend the completion date to March 31. Nonetheless, because of weather conditions, Blue Water was not able to assemble its equipment and make the site ready until late in February.

On March 16, 2004, David Relyea, the owner of a shellfish hatchery located in Bayville, wrote to the Department of Environmental Conservation, noting that dredging had not yet begun. Relyea voiced concern that, if dredging were to be performed in April and May, it would damage the larval and juvenile oysters in his hatchery and have a negative impact upon his business. Relyea requested the DEC to postpone the dredging until October.

On March 24, 2004, Sioss, on behalf of H2M, wrote to Blue Water directing it to cease operations on the project. Citing regulations of the Army Corps of Engineers, Sioss instructed Blue Water to remove all materials and equipment located at the site and to await notification from H2M as to when work could recommence. On March 26, 2004, the DEC sent the Village a notice of intent to modify the dredging permit. The amendment authorized the Village to modify the area of the site used for staging materials and removing water from the dredge spoil. The amendment also changed the prohibited dredging period to April 13 to September 30, 2004. Absent an objection or request for a hearing, the modification was to become effective on April 13, 2004. [*3]

On March 29, 2004, Julia Schneider, an environmental scientist at H2M, wrote to the Army Corps of Engineers requesting a permit for the marina dredging and boat ramp rehabilitation project. In her letter, Ms. Schneider stated her belief that the project was covered under a pre-existing nationwide permit. On June 3, 2004, the Corps of Engineers advised that an individual permit was not required because the work was covered by two nationwide permits which had been issued by the Corps of Engineers. The opinion letter from the Corps of Engineers contained a special condition that dredging not be performed between April 13 and September 30, 2004, the same period during which dredging had been prohibited by the DEC.

Meanwhile, on March 29, 2004, Blue Water had advised the Village that it would comply under protest with the Village's directive to cease operations on the project. Blue Water also notified the Village that it intended to assert a claim for additional costs which were occasioned by the delay. On July 28, 2004, Blue Water submitted an itemized claim to the Village for additional costs in the amount of $436,970.77. The delay damages claim was allocated as to equipment and materials, labor and miscellaneous charges.

On August 31, 2004, H2M notified Blue Water to recommence operations on the project on September 20, 2004. On September 3, 2004, Blue Water filed a notice of claim with the Village for delay damages in the adjusted amount of $436,128.37, plus interest. On September 7, 2004, Blue Water wrote to H2M agreeing to "mobilize" immediately but asserting that they could not begin dredging until October 11. According to Sioss, Blue Water did not actually start dredging until October 20 and completed dredging nine weeks later on December 22. The project was substantially completed on January 26 and fully completed on April 7, 2005.

During the course of performing the contract, Blue Water determined that it would be necessary to remove certain floating dock piles and then reinstall the piles after the completion of dredging. Because removal of the piles was not listed as a separate item of work in the contract, Blue Water requested extra payment for removal and reinstallation of the piles. Sioss, the chief engineer for H2M, found that the piles were an existing condition of which the contractor should have been aware prior to bidding on the project.^[FN1] Thus, Sioss ruled that the cost of removal and reinstallation of the piles was included in the contract and denied the request for extra payment. A second notice of claim, seeking damages of $13,767.88 for extra work in connection with the dock piles was submitted on December 27, 2004.

On May 18, 2005, Blue Water submitted its third notice of claim, seeking $159,034.50 for work performed under the contract and an amount in excess of $1,000,000 for diminished ability to "bid, bond, and perform other projects" based upon the Village's delay of Blue Water's performance of the contract.

In this action, Plaintiff seeks to recover damages either in breach of contract (first [*4]cause of action) or quantum meruit (second cause of action). Defendant now moves for summary judgment dismissing the complaint except for $159,034.50, the unpaid balance on the contract. Plaintiff cross-moves to dismiss the fifth affirmative defense sounding in fraud.

DISCUSSION

A.Defendant's Motion for Summary Judgment

1.Delay Damages

The Village asserts that the "hold harmless" provision in the Agreement insulates the Village from the contractor's delay damages claim. A clause which exculpates the owner from liability to a contractor for damages resulting from delays in the performance of the latter's work is valid and enforceable and is not contrary to public policy, if the clause and the contract of which it is a part satisfy the requirements for the validity of contracts generally. Corinno Civetta Construction Corp. v. City of New York, 67 NY2d 297, 309 (1986). See also, Kalisch Jarcho, Inc. v. City of New York, 58 NY2d 377, 384 (1983).

Exculpatory clauses purporting to preclude damages for all delays resulting from any cause whatsoever are not read literally. Corinno Civetta Construction Corp. v. City of New York, supra. See also, Norman Corp. v. County of Nassau, 27 AD2d 936 (2nd Dept. 1967). Generally, even with such an exculpatory clause, the contractor may recover damages for (1) delays caused by the owner's bad faith or its willful, malicious, or grossly negligent conduct; (2) uncontemplated delays; (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the owner; and (4) delays resulting from the owner's breach of a fundamental obligation of the contract. Corinno Civetta Construction Corp. v. City of New York, supra at 309.

The delay in this case was caused by the directives from the DEC and the Army Corps of Engineers prohibiting dredging between June and September, during which time Blue Water was otherwise ready and able to perform the work. The Court concludes that the Village was clearly in good faith in complying with these administrative requirements. Moreover, the Village did not abandon the contract or breach a fundamental obligation arising from the agreement.

Nonetheless, the Court concludes that there is a triable issue of fact as to whether the DEC's modification of the prohibited dredging period in order to protect local fish and shellfish breeding interests was within the contemplation of the parties. As a contractor engaged in environmental clean-up, Blue Water was certainly on notice of the general requirement to obtain permits from environmental agencies. However, Blue Water was not necessarily aware of when the spawning season would take place or the effect of the dredging operations upon the young shellfish. The Village, particularly because of its proximity to Oyster Bay, in all likelihood had some familiarity with the local shellfish industry. However, it has not been established that the Village understood the effect that dredging would have upon the shellfish. Nor has it been shown whether the Village had previously undertaken dredging in the Mill Creek area. If the effect of dredging upon the shellfish was not within the contemplation of the parties, Blue Water may be able to recover delay damages as an unanticipated cost, despite the provision purporting to relieve the Village from liability.

Accordingly, Defendant's motion for summary judgment must be denied with [*5]respect to Plaintiff's delay damages claim.

2.Extra work

The Village asserts that Blue Water's claim for extra work is precluded by its engineer's determination which was issued pursuant to the dispute resolution provision in the Agreement (¶ 28). Alternate dispute resolution mechanisms are frequently contained in agreements between private contractors and public or governmental entities. Yonkers Contracting Co. v. Port Authority Trans-Hudson Corp., 87 NY2d 927 (1996). An alternate dispute resolution agreement, like an arbitration agreement, must be clear, explicit, and unequivocal (Thomas Crimmins Contracting Co. Inc. v. City of New York, 74 NY2d 166, 171 [1989]), since the parties are surrendering "many of [their] normal rights under procedural and substantive law of the State, and it would be unfair to infer such significant waiver on the basis of anything less than a clear indication of intent." Matter of Marlene Industries Corp. (Carmac Textiles Inc.), 45 NY2d 327, 334 (1978). This is true even where the parties did not provide for review of the arbitrator's determination. Yonkers Contracting Co. v. Port Authority Trans-Hudson Corp., supra at 930.

It is not grounds for disqualification that the arbitrator is subject to a conflict of interest or partiality. Id. The arbitrator may have a relationship with one of the parties, as long as it is fully disclosed. Matter of Siegel (Lewis) 40 NY2d 687, 690 (1976). See also, Matter of Astoria Medical Grp. v. Health Ins. Plan of Greater NY, 11 NY2d 128, 133 (1962). Indeed, the arbitrator may even be an employee of one of the parties. Yonkers Contracting Co. v. Port Authority Trans-Hudson Corp., supra at 929. Thus, the parties are almost completely free to agree upon the identity of the arbitrator (Id.), especially if the arbitrator has a particular expertise. Matter of Siegel (Lewis), supra at 689-90.

The dispute resolution provision in the Agreement between Blue Water and the Village appears to be binding on both of the parties to the contract. Although Sioss, the chief engineer, had a close relationship to the Village, he was not a Village employee. Sioss was clearly qualified to resolve the issue of whether removal of the piles was extra work, even if he was somewhat partial. Paragraph 28 specifically refers to arbitrating questions concerning "extra work orders." Because there is no evidence that Sioss' determination was "infected by fraud, bad faith, or palpable error," his ruling is binding upon Blue Water. Tufano Contracting Corp. v. Port of New York Auth., 18 AD2d 100 (2nd Dept.), 13 NY2d 848 (1963). See also, Ardsley Construction Co. Inc. v. Port Authority of New York and New Jersey, 54 NY2d 876, 877 (1981). Accordingly, Defendant's motion for summary judgment with regard to Plaintiff's claim for extra compensation for removing and reinstalling the piles should be granted.

3.Lost profits

The Village asserts that Blue Water may not maintain a claim for lost profits because such an item of damages was not foreseeable or within the contemplation of the parties. Ashland Mgt. Inc. v. Janien, 87 NY2d 395, 403 (1995); and Atkins Nutritionals, Inc. v. Ernst & Young LLP, 301 AD2d 547, 549 (2nd Dept. 2003).

The rules governing the recovery of lost profits as damages for breach of contract are precise and long established. Kenford Co. Inc v. County of Erie, 67 NY2d 257, 261 (1986). To recover lost profits, it must be demonstrated with certainty that [*6]such damages have been caused by the breach, and the alleged loss must be capable of proof with reasonable certainty. See, Kasem v. Phillip Morris, USA, 244 AD2d 532 (2nd Dept. 1997). The lost profits may not be merely speculative, possible or imaginary but must be directly traceable to the breach. See, Kenford Co. Inc. v. County of Erie, supra at 261. See also, Joseph v. Rubinstein Jewelry Mfg. Co., Inc., 18 AD3d 615 (2nd Dept. 2005). The damages may not be remote or the result of other intervening causes. See, Cambridge Assocs. v. Town of North Salem, 282 AD2d 702 (2nd Dept. 2001).

Blue Water's third notice of claim alleges, in substance, that it was prevented from bidding on and performing other projects because its performance of the Mill Creek contract was delayed by the Village. A loss of business by Blue Water may have been within the contemplation of the parties, if performing the dredging in the Fall, as opposed to the Spring, caused equipment, personnel, or working capital that was needed for other jobs to be unavailable. However, Blue Water has not submitted any proof, by affidavit or otherwise, as to the manner in which delay in performance caused the contractor to be unable to bid on or perform other projects. Thus, with the Village having met its burden, it became incumbent on Blue Water to come forward with evidentiary proof to avoid summary judgment. Zuckerman v. City of New York, 49 NY2d 557 (1980). Blue Water has failed to meet this burden.

Accordingly, Blue Water has not shown that its claim for lost profits is capable of proof with reasonable certainty. Because Blue Water's damages appear to be merely speculative, Defendant's motion for summary judgment must be granted as to Plaintiff's lost profits claim.

B.Plaintiff's Cross-Motion to Dismiss the Fifth Affirmative Defense

In its fifth affirmative defense, the Village alleges the contract is unenforceable because of fraud in the inducement.

After the bids had been received, Blue Water advised the Village that based upon savings to be realized by using Transmarine to dispose of the dredge spoil, Blue Water was prepared to submit a bid of $665,000.

In purported reliance upon this representation, the Village rejected the initial bids and called for a second round of bidding.

In the second round of bidding, Blue Water submitted a bid for $945,000 which was $280,000 dollars higher than the bid it had represented it would be submitting. Blue Water's bid on the second round was over $130,000 less than the lowest bid on

the first round of bidding and $251,000 less that the bid submitted by the next lowest bidder on the re-bid.

The Village asserts that it put the project up for a second round of bidding based upon Blue Water's representation. The second round of bidding delayed the commencement of the project. Had the Village not put the project up for a second round of bidding, the work would have commenced in November 2003 and would have been completed by January 2003.

The Village asserts that the contract is void or voidable because of Blue Water's misrepresentations thus barring Blue Water from maintaining an action on the contract.

A party seeking fraud based recision must establish "...a knowing misrepresentation, which is intended to deceive another party and to induced them to act upon it, causing injury (citations omitted)." Sokolow, Dunaud, Mercadier & Carreras [*7]LLP v. Lacher, 299 AD2d 64, 70 (1st Dept. 2002). "[F]raud in the inducement renders the obligation voidable based upon facts occurring prior of subsequent to its execution (citation omitted)." Dalessio v. Kressler, 6 AD3d 57, 61 (2nd Dept. 2004).

A contract that is voidable for fraud may be ratified by the party to whom the false representation was made. Strauss v. Title Guarantee and Trust Co., 284 NY 41 (1940). The party to whom the false representation was made may ratify the contract after that party has knowledge of the material facts relating to the transaction. New York State Medical Transporters Assoc, Inc. v. Perales, 77 NY2d 126 (1990); and Strauss v. Title Guarantee and Trust Co., supra.

Furthermore, a contract is not fraudulently induced if the misrepresentation could have been discovered through the exercise of due diligence. See, Danann Realty Corp. v. Harris, 5 NY2d 317 (1959); and Cohen v. Cerier, 243 AD2d 670 (2nd Dept., 1997).

The representation made by Blue Water as to the significant savings to be achieved by using Transmarine was relevant but did not effect the essential terms of the dredging and boat ramp rehabilitation contract. While the Village relied upon these representations in rejecting the first round of bids, the Village was well aware of the actual cost savings when it received and accepted Blue Water's bid on the second round. Thus, any misrepresentation by Blue Water as to the extent of the costs savings could not have induced the Village's assent to the agreement.

Therefore, Blue Water's cross-motion to dismiss the fifth affirmative defense must be granted.

C.Partial Summary Judgment

1.Breach of Contract

In moving for summary judgment, the Village did not request dismissal of Plaintiff's claim for $159,034.50, the unpaid balance of the contract price. The Village concedes that the project was fully completed and has not raised any objection to the quality of the work.

CPLR 3212(b) provides, "If it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion." Furthermore, CPLR 3212(e) authorizes the court to grant partial summary judgment as to one or more causes of action or part thereof. See, Dunham v. Hillco Construction Co., Inc., 89 NY2d 425 (1996).

Upon searching the record, it appears, as a matter of law, that Blue Water is entitled to judgment on its claim for the unpaid portion of the contract price which is subject to this motion. See, Costello v. Hapco Realty, Inc., 305 AD2d 445 (2nd Dept. 2003); and Tow v. Moore, 24 AD2d 648 (2nd Dept. 1965). Accordingly, Plaintiff's claim for the unpaid portion of the contract price is severed and the Court, pursuant to CPLR 3212(b) and (e) and on its own motion, grants partial summary judgment on that claim.

2.Quantum Meruit

The complaint alleges a cause of action in quantum meruit. Recovery cannot be had in quantum meruit unless the written contract between the parties has been rescinded, is unenforceable or is abrogated. Conlon v. Teicher, 8 AD3d 606 (2nd Dept. 2004); and Waldman v. Englishtown Sportswear, Ltd., 92 AD2d 833 (1st Dept. 1983).

Blue Water has not sought to have the contract rescinded or abrogated. In fact, Blue Water seeks recovery on the contract. Thus, it cannot, as a matter of law, [*8]successfully prosecute its quantum meruit claim.

Therefore, the second cause of action must be dismissed.

Accordingly, it is,

ORDERED, that Defendant's motion for summary judgment is granted with regard to Plaintiff's claim for extra work and lost profits and is denied with regard to Plaintiff's claim for delay damages; and it is further,

ORDERED, that Plaintiff's cross-motion to dismiss the fifth affirmative defense is granted; and it is further,

ORDERED, that, on the Court's own motion, Plaintiff is granted partial summary judgment on its breach of contract claims in the sum of $159,034.50 together with interest from April 7, 2005. Entry of judgment is hereby stayed pending the trial of this matter; and it is further,

ORDERED, that on the Court's own motion, Defendant is granted partial summary judgment dismissing the second cause of action; and it is further,

ORDERED, that counsel for the parties shall appear for a conference to schedule the trial of this matter on July 11, 2006 at 9:30 a.m.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY _____________________________

June 14, 2006 Hon. LEONARD B. AUSTIN, J.S.C.