United States District Court, D. Hawaii
ORDER DENYING PLAINTIFF GRAMERCY GROUP, INC.'S
MOTIONS FOR PARTIAL SUMMARY JUDGMENT, ECF NOS. 98, 100,
Michael Seabright, Chief United States District Judge
case arises from a construction project (the
“Project”) at Honolulu's International Market
Place (the “Property”). Gramercy Group, Inc.
(“Gramercy”) was the prime contractor on the
Project. It entered into an agreement (the
“Subcontract”) with D.A. Builders, LLC
(“DAB”) to perform a portion of the Project work,
but it terminated the Subcontract before the work was
completed. In this action it seeks, among other things, a
determination that the termination was proper. DAB disagrees
and has filed a multi-count counterclaim.
before the court are Gramercy's Motions for Summary
Judgment on Count Eight of its First Amended Complaint
(“FAC”) and on all counts of DAB's Second
Amended Counterclaim (“SACC”).
after Gramercy had been engaged to do demolition and
environmental work on the Project, it became interested in
bidding for the drywall work as well, and it sought bids from
local contractors to perform the work. Vincent Parziale
(“Parziale”) Dep. 28:22-29:1, 36:11-37:7, ECF No.
210-4. Acting as Gramercy's broker, Gene Kung Ho Lum
(“Lum”) met with DAB's owner David Alcos
(“Alcos”). Lum Decl. ¶¶ 9, 18, ECF No.
210-1. Initially, Alcos told Lum that the job was too big for
DAB to handle. Alcos Dep. 36:2-5, ECF No. 210-16. And Lum
states in his declaration that he “could tell right
away that [Alcos and DAB] were not prepared to handle a
project of this size. DAB was small and [Alcos] did not have
the experience. [Alcos] also could not get bonding.”
Lum Decl. ¶ 19. It was not until Lum proposed that
Gramercy would make necessary cash advancements to fund
DAB's work on the Project that DAB considered bidding for
the job. Alcos Dep. 36:5-8, 39:4-21.
to Lum, Parziale and John Giarrusso (“Giarrusso”)
of Gramercy “recognized that if they contracted with
DAB, Gramercy would have to finance the Project because DAB
did not have the capital to support the labor force, vendors,
and materials.” Lum Decl. ¶ 21. And Alcos asserts
that Gramercy promised to provide such funding:
[Giarrusso] repeatedly assured me that Gramercy “had my
back”, would “work the project together”
and ensured that DAB “would not get hurt.” [He]
told me that Gramercy would pay DAB or the money would come
from the owner of the Project . . . . And more specifically,
[Parziale] told me that Gramercy would advance and furnish
the capital to allow DAB to properly pay my employees and
trade creditors . . . . There weren't any conditions
attached to these promises.
Alcos Decl. ¶ 8, ECF No. 210-2.
eventually bid for the work with the understanding that
“Gramercy would be acting as a partner, ” with a
“shared . . . goal of completing the project
together.” Id. ¶ 11. The alleged funding
promises, however, were never reduced to writing and are not
included in the Subcontract. See id. ¶ 15.
DAB's final bid did not cover all of the expenses for
which DAB contends it was promised payment. Specifically, it
did not include costs associated with meeting “FM
Global standards because the plans and specifications
provided did not include that information.”
Id. at ¶ 12. According to Alcos, however,
Gramercy instructed DAB to tell general contractor dck/FWF
(“DCK”) that FM Global was included in the bid.
Id. ¶¶ 3, 14. Alcos contends that Gramercy
assured him that DAB would be paid for these costs (as well
as others, including those associated with change orders,
increases in DAB's scope of work, and overtime).
Id. ¶¶ 17, 30-31. And he states that
“Gramercy did not accept any of my requests to amend
the [S]ubcontract, but they still promised me that they would
advance me the necessarily (sic) capital to carry the job and
cover the added FM Global costs.” Id. ¶
admits that it promised to provide some funding to DAB, but
it disputes DAB's allegations about the scope of that
promise. Gramercy's Vice President of Operations, Gregg
Jenkinson (“Jenkinson”), testified that his
“only understanding was that we were going to support
[DAB] with payroll and we were going to advance [it] money
for long lead or large procurement items. But I never
understood that as a . . . permanent function.”
Jenkinson Dep. 10:20, 27:10-14, ECF No. 210-10. And at least
initially, he did not understand the agreement to have been
for the “full payroll.” Id. at 28:7-8.
to Alcos, “[o]ther than paying for FM Global, Gramercy
was good about advancing the costs as promised up until
November, 2015.” Alcos Decl. ¶ 18. Beginning in
November, however, Gramercy began funding only a portion of
DAB's gross payroll, yet it “ordered [DAB] to work
overtime and . . . to submit change orders for work [it was]
performing outside of [its] scope.” Id.
¶¶ 20, 22. Alcos also contends that DAB was
“getting pressured to make up for other trades'
delays and to meet the February 25
back-of-the-house-milestone, so [he] was increasing [his]
work force and asking them to work overtime.”
Id. ¶ 22.
“texted, emailed, and talked to [Jenkinson] about this
shortfall a bunch of times.” Id. ¶ 23.
And “[i]n December, [Alcos] told [Jenkinson] that DAB
would not be able to pay [its] state and federal taxes, and
also wouldn't be able to cover all of the unions'
requirements without Gramercy funding the gross
payroll.” Id. His repeated requests in January
and February for full funding went unmet. See id.
¶¶ 24-32. And in February, Gramercy canceled the
Subcontract. Notice of Termination (“Notice”),
ECF No. 210-12.
Notice, dated February 23, 2016, invokes the Termination
Provision in paragraph twenty of the Subcontract, and
terminates the Subcontract effective February 26, 2016.
Id. As grounds for termination, the Notice states
that DAB materially breached the Subcontract by failing to
“properly prosecute and perform its work” and by
failing to meet financial obligations to pay taxes,
appropriate wages, union dues and fringe benefits, and
amounts owed to vendors and subcontractors. Id.
relevant part, the Subcontract's Termination Provision
Should the Subcontractor become insolvent, the Subcontractor
may be deemed to be in material breach of this Agreement. For
the purpose of this paragraph . . . any failure to pay
financial obligations as they become due including tax
liability and union agreement fringe benefits, shall be
deemed an act of insolvency. Further, the Contractor may deem
this contract materially breached if the Subcontractor fails
to properly prosecute and perform any part of its work, fails
to exert its best performance efforts, becomes the subject of
any claim ...