Court Enforces AIA Dispute Resolution Steps Against Contractor Suing School District

In a recent decision, the Ontario County Supreme Court held that a construction contractor could not skip contractually required dispute resolution steps and initiate litigation against a school district for breach of contract. In Massa Construction, Inc. v. Williamson Central School District the Court dismissed a contractor’s lawsuit alleging breach of contract for nonpayment because it failed to first bring its claims to mediation, as the parties’ contract required. For school districts with capital projects underway, the decision confirms that the standard AIA claims provisions are enforceable and mandatory for the parties. The decision also serves as a reminder of a school district’s own contractual obligations under such provisions.

In this case, Massa Construction, Inc. contracted with the Williamson Central School District to provide labor and materials for the School District’s 2020 capital improvement project. Massa claimed it completed its work and met all contractual obligations but was not paid in full. Prior to filing the lawsuit, Massa served two notices of claim on the School District, encompassing the total outstanding amount owed on the contract and additional costs owed to the architect and construction manager due to delays. Massa subsequently filed a lawsuit alleging breach of contract and, alternatively, quantum meruit. The district moved to dismiss based on documentary evidence and failure to state a cause of action, relying on the contract and its general conditions.

The parties used the AIA form Construction Manager contract. The general conditions of the contract set out a mandatory process for addressing any “claims,” which the contract defined broadly to include demands for payment and any other dispute arising out of or relating to the contract. The claimant was required to first initiate a claim in writing by sending it to the other party and the designated “Initial Decision Maker,” in this case, the Architect. The Architect would review and issue a decision either approving or rejecting the claim, which would be final and binding on the parties, but subject to mediation and then binding dispute resolution if the parties failed to resolve their dispute. If such claims were not resolved by mediation, only then could a party commence litigation in State Supreme Court.

With respect to the breach of contract claim, the Court found that Massa failed to abide by the contractual requirement that all controversies related to the contract be mediated prior to the initiation of litigation, despite the contract clearly stating that such actions were conditions precedent to filing a lawsuit in court. Although Massa complied with notice of claim requirements under the NYS Education Law and put the School District on notice of the amounts in dispute, it clearly failed to refer its claim to the initial decision maker, and failed to subsequently engage in mediation as required by the contract. The Court therefore held that Massa had not satisfied the conditions precedent prior to filing its lawsuit, and the School District was entitled to judgment in its favor as a matter of law.

The Court also dismissed Massa’s quantum meruit, or quasi-contract, claim, because there was an existing, valid contract between the parties covering the dispute at issue, and there was no evidence that Massa had provided work outside the scope of the contract.

The Court dismissed Massa’s claims without prejudice, meaning the contractor is not foreclosed from returning to court. However, the decision affirms the importance of establishing clear dispute resolution provisions in construction contracts, and complying with those procedures.