New York Business Litigation Lawyer Blog
Nastasi & Associates, Inc., was a subcontractor for Turner Construction Corp. Payment to Nastasi was conditioned on Turner being paid by the owner. Turner had the right to terminate the parties’ agreement by written notice, with any payments due to Nastasi, again, conditioned on Turner being paid. The agreement also included a one year period in which claims against Turner or the owner could be brought.
In April 2015, Nastasi asked for certain payment from Turner. Turner responded by informing Nastasi that it was working on processing paperwork so payment could be obtained from the owner and paid. In May 2015, Turner terminated its agreement with Nastasi. Between May 2015 and April 2017, Turner continued promising payment to Nastasi. Instead, in April 2017, Turner sued Nastasi for more than $4 million. Nastasi responded with counterclaims, to which Turner moved to dismiss based on the expiration of the one-year limitation period. Nastasi responded by arguing that it had been negotiating with Turner for years. Supreme Court granted Turner’s motion.
The First Department, however, disagreed. While the court agreed that parties may contract to shorter limitation periods, they could not where “a contract imposes a condition precedent that cannot reasonably be met within the time frame of the limitations period under the available facts,” with the “‘circumstances, not the time, … the determining factor.’”
In this case, the shorter limitation period was not objectionable. The court instead focused on the condition precedent—the owner’s payment to Turner before Turner was obligated to pay Nastasi, finding that “it was neither fair nor reasonable to impose such a condition precedent, which was not in Nastasi’s control, but had the capability of nullifying its claim.”
The court was not impressed with Turner’s argument that there was no proof that the payment to Nastasi was in fact delayed by the owner’s payment to Turner, holding that issue was not relevant because it allowed Turner to remain silent and “unilaterally set the accrual date for the claim.” The court also used Turner’s representations that it was working to obtain payment from the owner without ever informing Nastasi that it would not pay, to support its holding. The court did not indicate its opinion of the ultimate outcome of the dispute, only that dismissal was improper at the pleading stage, without even knowing when Turner was paid.
Turner Constr. Co. v. Nastasi & Assoc., Inc.