Commercial Construction Dispute Kicked From Commercial Division

On February 13, 2024, Administrative Justice Adam Silvera denied a letter application, in Island Exterior Fabricators LLC v. Tishman Construction Corp. of New York, Index No. 654788/2023, to transfer a commercial construction dispute to the Commercial Division, holding that the case did not belong in the Commercial Division, explaining:

By letter dated November 3, 20232 (the Letter Application) (Doc No. 6) plaintiff's attorney, Roland P. Driscoll, Esq. (Counsel), seeks an Administrative Order, pursuant to 22 NYCRR § 202.70 (e), transferring this case to the CD part on grounds that: (1) the original request for assignment to the CD part was timely made; (2) this matter falls within the scope of 22 NYCRR § 202.70(b)(1) and is "particularly complex as it involves a dispute related to the construction of the Richard Gilder Center for Science, Education and Innovation, an intricately designed 7-story, 230,000 square foot, $465 million dollar project which creates 33 connections among 10 museum buildings for which Island was retained to provide a sophisticated building enclosure system. At issue are complicated claims associated with significant project delays and design changes during the project's performance, which took place during the COVID-19 pandemic" (construction project); and (3) plaintiff seeks damages in an amount exceeding $8 million dollars and therefore, has met the monetary threshold requirement necessary for assignment to the CD part pursuant to 22 NYCRR § 202.70 (a).

The Letter Application is denied. The controversy in question involves the alleged breach of a "Subcontract" and/or "Master Construction Management Agreement" whereby defendant was the general contractor for the subject construction project (see the Complaint at 9). The alleged "breach of contract" did not arise out of "business dealings" as that term is generally defined by 22 NYCRR § 202.70 (b) (1) "(e.g., sales of assets or securities; corporate restructuring; partnership, shareholder, joint venture, and other business agreements; trade secrets; restrictive covenants; and employment agreements not including claims that principally involve alleged discriminatory practices)." Moreover, in this case, the Complaint's principal claims seeking damages for (i) the delay of construction, (ii) design scope of change, (iii) acceleration, (iv) gross negligence, (v) unforeseen and unavoidable delays, (vi) promissory estoppel, (vii) for negligent misrepresentation, and (viii) for unpaid balance due on the Subcontract, are not the type of claims consisting of a "complex and consequential commercial matter" ordinarily heard in the Commercial Division (see, 22 NYCRR § 202.70 [1]). The mere fact that plaintiff seeks damages in excess of the monetary threshold amount needed for CD assignment, pursuant to 22 NYCRR § 202.70 (a), does not, on its own, render this action a "commercial case."

Under the logic of this ruling, commercial construction disputes can virtually never qualify for the Commercial Division. Whether the courts (and clerks) will adhere to this going forward remains to be seen. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning whether a case qualifies for the Commercial Division or how to appeal from a clerk's decision to bounce a case from the Commercial Division.