Daniel Lund III | Phelps Dunbar
A defaulted general contractor advancing a wrongful termination argument against the project owner found itself faced with an argument that the contractor had no rights remaining against the owner.
At issue was the series of transactions leading to the takeover by the surety of a Hartford, Connecticut, baseball stadium project: “[I]n the view of the [project owner] … [the GC’s] assignment to [the surety of its ‘rights under all Bonded Contract(s)’ and ‘all claims of all causes of action against any parties’ deprives it of any real interest in any cause of action against the City.”
Indeed, the GIA between the surety and the general contractor provided that “effective as of the date of this Agreement, but enforceable only in the event of a Default, Principal … do[es] hereby assign, transfer and set over to Surety, all of their rights under all Bonded Contract(s) including … (c) all claims and causes of action against any parties ….” The court noted that the general contractor did “not dispute that it was in technical default as that word is used in the GIA.”
For its part, the general contractor argued that “it has standing because as an assignor of claims for collateral security, it retains a colorable claim of direct injury.” The court agreed: “… the clear status of the present assignment as one providing collateral security, which under our law reserves in the assignor an interest in an assigned cause of action, requires the court to conclude that [the GC] retains standing to assert the present claim and to deny the motion to dismiss.”
As a belt and suspenders approach the general contractor asserted that the surety specifically authorized the contractor’s action against the government. Over arguments by the owner that “there is nothing in the Takeover Agreement that can be construed as an express grant of authority to pursue [the GC’s] claim against it” – a fact acknowledged by the court – the court found that the general contractor’s action against the owner was authorized by the surety. This finding was predicated in principal part upon testimony by the surety’s AVP concerning the reservation of claims against the project owner in the takeover agreement between the surety and the owner: “The reason the reservation was included in the Takeover Agreement, according to [the surety AVP], was because [the surety] wanted to make sure that [the GC] preserve ‘[its] day in court …. It was [the surety’s] view that [the GC’s suit] was something worthwhile protecting.’”
Centerplan Constr. Co. LLC v. City of Hartford, 2023 Conn. Super. LEXIS 2302 (Super. Ct. Sep. 11, 2023)
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