In the recent case of E.W. Howell Co., LLC v. Hill International, Inc., an appellate court reminded us of a construction manager’s duty of good faith and fair dealing to adequately protect a downstream contractor’s claims.
Background
In April of 2010, the City University Construction Fund entered into a Construction Management Agreement with Hill International for the construction of a new performing arts center at Brooklyn College. Two years later, Hill entered into a contract with E.W. Howell to be the general contractor for the Project. This contract contained an exclusive dispute resolution process whereby the City University of New York’s (CUNY) Executive Director would make a determination as to the validity (and amount) of Howell’s claim. To effectuate this process, the general contract required Howell to submit a Notice of Dispute to Hill within seven days of the claim arising, and 10 days later submit a “dispute report” with further information. Hill was then required to submit these documents to CUNY, along with its own dispute report setting forth the resolution Hill would like to see. An unfavorable decision from CUNY’s Executive Director could be appealed to its Vice Chancellor (and, after that, only via an Article 78 proceeding).
Of course, such a dispute arose, and Howell submitted both required notices to Hill. While Hill eventually passed along these documents, there was a significant delay in doing so, and Hill also failed to investigate Howell’s claims and prepare its own Dispute Reports as required by the contract. Ultimately, CUNY denied Howell’s claims, citing, amongst other things, the failure to submit proper documentation. Howell then sued Hill, claiming that Hill frustrated Howell’s rights under the dispute resolution process, and thereby breached the covenant of good faith and fair dealing found in its contract.
Decision
After discovery, Hill moved for summary judgment to dismiss Howell’s complaint, arguing that Hill’s failure to submit certain paperwork did not contribute to the substantive reasons for the denial of Howell’s claim and, therefore, Howell incurred no resulting damages. Howell opposed, claiming that there were issues of fact as to whether Hill’s failure to timely pass along Howell’s claims, and whether there was something contained in Hill’s submissions to CUNY (which were not shared with Howell) or said at Hill’s meeting with CUNY (at which Howell was not in attendance), that frustrated Howell’s claims. The trial court granted the motion, finding that there was no frustration of Howell’s claims.
Howell appealed, and the appellate court reversed. In doing so, the appellate court held that there were issues of fact as to whether Hill breached the covenant of good faith and fair dealing which, under well settled case law, “requires the [upstream] contractor to ‘take all reasonable steps so that the [downstream contractor’s] right to an eventual recovery, if any, from the [owner] w[ould] be protected.’” Accordingly, the appellate court reinstated the complaint and directed the matter to further proceedings and trial.
About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and BCA. He is the Founder of and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP. Gregory J. Spaun, Esq., is General Counsel to the Queens and Bronx Building Association and a partner with the firm.

To read the full report, see the April 2025 edition of CONSTRUCTION NEWS at cicbca.org.

Published: April 2, 2025.