Pizzarotti, LLC v. MDB Development Corp.
Attorneys and Parties
Brief Summary
Construction subcontract termination for cause—strict compliance with notice-and-cure provisions, waiver by continued performance, and whether punch list status or alleged abandonment can justify termination.
The Supreme Court, New York County, denied the subcontractor’s motion for summary judgment on liability for its breach-of-contract counterclaim and to dismiss the general contractor’s complaint.
The denial of summary judgment and refusal to dismiss the complaint.
The general contractor improperly terminated the subcontract: it failed to issue an effective written notice of default with a five-day cure opportunity under §11.5; any January 31, 2018 defaults were waived by allowing continued performance and substantial completion; later emails did not constitute default notices; lien issues had been resolved by the contractor itself; and there was no abandonment to excuse compliance with notice-and-cure.
Background
Plaintiff Pizzarotti, LLC was the general contractor and defendant MDB Development Corp. was the concrete subcontractor. The subcontract’s §11.5 allowed termination for cause only after written notice of default and a five-day opportunity to cure. Pizzarotti sent a January 31, 2018 list of outstanding items, followed by various emails in February through April 2018. On May 22, 2018, Pizzarotti terminated the subcontract. MDB asserted that termination was wrongful because it had substantially completed its scope, remaining tasks were punch list items, no valid default notice had been given, and MDB had not abandoned the project.
Lower Court Decision
Justice Andrew Borrok denied MDB’s motion for summary judgment on liability on its first counterclaim for breach of contract and denied dismissal of Pizzarotti’s complaint.
Appellate Division Reversal
Reversed on the law. The Appellate Division held that Pizzarotti’s January 31, 2018 correspondence could not support termination four months later because MDB had substantially completed the identified work, resulting in waiver. The February 27, 2018 emails were not default notices and acknowledged that most exposed rebar had already been eliminated; remaining rebar work was punch list consistent with substantial completion, barring termination. The March 16 and April 4, 2018 lien letters were not default notices; by April 4 Pizzarotti had removed the liens and intended only to withhold payment/back charge, leaving nothing to cure. MDB did not abandon the project; its emails showed it had finished punch list work and was awaiting direction from the engineer of record, and Pizzarotti did not respond. The court granted MDB summary judgment on liability on its first counterclaim and dismissed Pizzarotti’s complaint, directing entry of judgment.
Legal Significance
The decision underscores strict enforcement of contractual notice-and-cure provisions in construction subcontracts. Emails that do not expressly declare default and provide a cure period will not suffice; allowing continued performance to substantial completion can waive earlier defaults; punch list status precludes termination for cause; removing liens and back-charging eliminates any outstanding default to cure; and nonresponse to a subcontractor awaiting direction undermines an abandonment claim.
To terminate a subcontract for cause, a general contractor must issue a clear written default notice invoking the contract and allow the contractual cure period. Continuing the subcontractor’s performance to substantial completion or treating remaining tasks as punch list items can waive prior defaults, and wrongful termination will expose the contractor to liability.