Bench Trial Results In Award To Building Developer Against General Contractor, And Larger Award On General Contactor’s Counterclaim

On August 23, 2024, Justice Andrea Masley awarded both plaintiff and defendant partial recovery following a bench trial arising from a construction dispute, and dismissed defendant’s claim against a third party defendant/contractor. The case is KTG Hospitality, LLC v World Class Constr. Inc., Index No. 650482/2017.

Plaintiff KTG hired defendant WCC to serve as general contractor on the construction of a restaurant space in Manhattan. KTG replaced WCC as general contractor before the project was completed and sued WCC and Yacot Management, Inc. (“Yacot”), a related construction management company, for breach of contract, fraud, and unjust enrichment. WCC counterclaimed for unreimbursed expenses. Because KTG’s claims alleged that WCC was responsible for defective heating, ventilation, and air conditioning (“HVAC”) work done by Cobra Kitchen Ventilation, Inc. (“Cobra”), a subcontractor retained by WCC, WCC brought a third-party claim against Cobra.

After a six-day trial, Justice Masley awarded KTG $144,500, WCC/Yacot $263,608.31 and dismissed WCC’s third party claim against Cobra. She found Steven Traube, KTG’s principal, to be not credible due to his evasiveness and contradictions both within his testimony and between it and the record. Slip op., pp. 23-28 (collecting examples). But she also found the testimony of Isaac Fhima, principal of WCC and Yacot, to be unreliable due to non responsiveness and chaotic recordkeeping. Id., pp. 28-29. Justice Masley therefore found that the testimony of the non-party witnesses, whom she found to be “fair and balanced”, to be “at the heart of this decision.” Id., p. 29.

Special Inspector’s Reports prepared and testified to by a non-party engineer established that KTG was entitled to recover reimbursement for the costs of inspecting and remedying defects at the premises arising from the poor quality of defendants’ work. Id., pp. 29-30. WCC was entitled to recover for “soft costs” such as salary, insurance, parking cards, and rent, because Traube had admitted to budgeting for them. However, WCC’s recovery was discounted by $451,342.25 from the $714,950.56 it sought due to the disorganized state of its records. Id., pp. 31-32.

WCC’s third party claim against Cobra was dismissed because the HVAC system Cobra installed was not deficient and, to the extent it was rendered obsolete by KTG’s modifications of the building plan, could have been cured. Id., p. 33,

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning construction litigation.