Law Of The Case Applies To Privies, But Only As To Issues Resolved By Prior Decision

In an order dated December 23, 2024, Justice Andrew Borrok applied the law of the case doctrine in declining to dismiss a counterclaim for breach of contract. The case is JDS Construction Group LLC v. Copper Services, LLC, Index No. 56912/2020.

Defendant Copper Services, LLC (“Copper”) contracted with plaintiff JDS Construction Group LLC (“JDS”) to provide heating, ventilation and air conditioning work on a construction project in Manhattan. JDS obtained judgment against Copper’s surety, Talisman Casualty Insurance Company, LLC (“Talisman”) for Copper’s failure to make certain contractual payments, and a default judgment against Copper.

In January 2024, the Appellate Division affirmed JDS’ judgment against Talisman and, in April 2024, it vacated the judgment against Copper. Copper then counterclaimed against JDS and certain of its affiliates, and JDS moved to dismiss Copper’s breach of contract counterclaim as barred by the “law of the case”.

Borrok rejected Copper’s argument that, because Talisman was the appellant, Copper was not bound by the January 2024 opinion, but sustained Copper’s contract counterclaim because it was not precluded by either of the Appellate Division decisions:

JDS argues that Copper’s breach of contract counterclaim must be dismissed under the law of the case doctrine because the Court has already determined in the Prior Decision that Copper had breached the Construction Contract (NYSCEF Doc. No. 602 at 11). In opposition, Copper argues, in sum and substance, that (i) the April 2024 Decision supersedes the Prior Decision as the law of the case, and (ii) Copper cannot be bound by the Prior Decision because it did not have a full and fair opportunity to litigate its defenses due to the default judgment. Both parties are not correct.

Copper is not correct. Talisman is the Surety and stepped into the shoes of Copper. As such, Copper is bound by the prior decisions of the Appellate Division enumerated above. Indeed, the Appellate Division held that the Court properly invoked the principle that that a "surety . . . stands in the shoes of [its] principal and can avail [it]self of only those defenses available to [the principal]” (General Phoenix Corp. v Cabot, 300 NY 87, 95 [1949]). As such, the Appellate Division affirmed the Court’s finding that Talisman was bound by Copper’s default as surety. Thus, the law of the case precludes Copper from relitigating its concurrent delay defense to JDS’s claims.

However, JDS is also not correct that the Prior Decision precludes Copper from bringing a breach of contract claim against JDS. This issue was not in front of the Appellate Division.

In the April 2024 Decision, the Appellate Division held that Copper has a potentially meritorious claim against JDS based on JDS’s own default and underpayment under the Construction Contract (NYSCEF Doc. No. 590). These issues are relevant to Copper’s breach of contract counterclaim because the alleged breach is based on JDS’s underpayment and lack of payment (NYSCEF Doc. No. 639 ¶¶ 83-90). Thus, nothing in the January 2024 Decision or the April 2024 Decision precludes this claim (Parlux Fragnances, LLC v S. Carter Enterprises, 204 AD3d 72 (1st Dept 2022). Accordingly, the branch of JDS’s motion seeking dismissal of the cause of action sounding in breach of contract (first counterclaim) is denied.

JDS Construction, pp. 9-10.

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