Miami-Dade judge hits Codina Partners’ affiliate with $6M in damages

Thrilled to obtain this great win on behalf of Grycon. It’s a construction tale as old as time. A developer attempts to squeeze a contractor at the end of a project and assert claims to reduce the final payment owed. Too often, contractors faced with the reality of drawn-out litigation against high-profile developers have opted to accept less to the detriment of their company and those subcontractors who worked hard to deliver the project. This scenario reared its ugly head on a condominium tower in Doral, FL where I represented Grycon, the general contractor on the Project. Grycon, with its "truetothetop" motto and commitment to building quality projects, had the fortitude to pursue its claim and have its day in Court.  Some of the highlights of the Court’s findings include:

Wrongful Termination.  As a basis for termination, the Developer claimed that Grycon failed to achieve Substantial Completion because, in the Developer’s subjective judgment, the units were not in “Move In Condition” as “punch list” items remained to be completed.

a. The Court found that the quality of the punch list items was too small or unimportant to be worthy of any consideration by a developer or owner who was not being excessive or inappropriate. For the Developer to prevail on its claims, the Court would be required to conclude that something as insignificant as a one-inch scratch on drywall “could be” material, and the Court would not approve such an unreasonable position.

b. The Developer asserted that hundreds of purportedly “minor” issues amounted to a material breach of the contract. The Court did not find such testimony credible given that the Developer occupied the common elements, and buyers walked the units and found either none or only the most minor, incidental, immaterial items were left to be corrected.

c. While the Developer relied upon various parts of the contract, essentially arguing that the contract allows them not to be governed by or act according to reason, such subjective judgment is not without boundaries. 

d. Reserving to Developer unbridled, subjective discretion whether to accept Punch List work violates the implied covenant of good faith and fair dealing and invites arbitrary and capricious application of the clause by Developer – precisely in the manner it attempts here – by withholding certification of Substantial Completion to artificially prolong the period during which it assesses liquidated damages.

e. The Developer did not act fairly with Grycon when the Developer refused to accept the units or common elements. The Developer cannot capriciously exercise discretion afforded it under a performance-based contract to thwart Grycon’s reasonable expectations, nor can the Developer actively interfere with Grycon’s performance of the contract.

f. Further, the Developer added to Grycon’s scope of work the very same day it claimed Grycon was to achieve substantial completion. The date for substantial completion by necessity gets pushed out.

Liquidated Damages. The Developer attempted to assert millions of dollars in liquidated damages against Grycon.

a. The Court disagreed with Developer’s position that Substantial Completion, as defined in the Tower Contract, requires the completion of minor and incidental items.

b. The Court determined that the liquidated damage provision in the Tower Contract as applied by the Developer is being used to induce full performance by Grycon rather than compensate the Developer for damages it might sustain by a delay in making the Project available to the Developer for its intended use. The record evidence can support no other conclusion as the Developer made multiple representations to the public and its buyers, allowing the Developer to use the project for its intended purpose – closing on the sale of units and making $22.5 million in profits. 

c. The Developer “failed miserably” in its attempt to demonstrate that the unacceptable condition of the units prevented it from bringing brokers and buyers to the property. The record evidence revealed that 1) on average, one item was reported on Buyer’s punch lists; 2) the Developer never told buyers about alleged punch list issues; 3) the Developer never provided any concessions due to alleged punch list conditions; and 4) the Developer was able to actually enter into purchase agreements with buyers between the time of the TCO (11/27/19) and the substantial completion date (1/15/20) despite the conditions that purportedly existed.

d. The Developer’s retroactive calculation of liquidated damages to November 27, 2019, is a penalty intended to induce Grycon to obtain substantial completion by January 15, 2020.

e. The Developer’s attempt to assess liquidated damages for the common areas of $2,000 per day is unsustainable as 1) the Developer testified that the issues with the common areas did not delay closings; 2) the Developer occupied the common areas before the date of substantial completion; 3) the Developer filed its prospectus confirming that “construction of the Condominium is substantially complete and…currently operational”; 4) the Developer’s wrongful termination of Grycon prevented Grycon’s performance of any remaining work; 5) the Developer admitted that it had not repaired the exterior common areas; and 6) the Developer turned over the condominium association to the unit owners.

Cross-Default Provision. The Developer did not demonstrate that Grycon defaulted on the Garage/Amenities contract.

The uncontradicted testimony established that Grycon was paid $39,546,283.66 against Termination for Convenience chargeable costs of $45,964,405.42, resulting in damages due to Grycon from Developer of $6,418,121.76 plus interest, attorneys’ fees, and costs.

This was scorched earth litigation. It included an alleged conflict of interest and an unsuccessful attempt to disqualify my firm, an appeal, a motion to stay, and an Emergency Petition for Writ of Prohibition to delay and stop the trial from proceeding, dramatically increasing the litigation fees and costs. Grycon withstood all this and every attempt to outspend and frustrate their belief that the justice system and the truth would prevail at the end of the day.  

While I know Grycon is proud of the result we accomplished, it has and continues to be a pleasure representing this first-class organization. Representing Grycon in this righteous cause made the litigation grind and long days and nights of the trial easier and all worth it. Thank you, Grycon, for believing in Siegfried Rivera and the trial team of Stu Sobel, myself, Steve Siegfried, Zachary Smith, and our paralegals – Christina Neyra and Kelly Rodriguez. And thank you for stepping up on behalf of contractors and the construction industry and not backing down and accepting anything less than what you and your subcontractors deserve.