A New York appellate court has upheld a lower court's decision to dismiss several claims in a construction contract dispute between Thorobird Grand LLC and M. Melnick Co., Inc. The court's ruling, issued on November 5, 2026, affects the parties involved in the construction of three buildings and clarifies the limits of damages that can be claimed under the contract.

The case, Thorobird Grand LLC v. M. Melnick & Co., Inc., was filed under Index No. 816972/22 and is significant because it addresses the enforceability of liquidated damages in construction contracts. The ruling is important for construction companies and contractors, as it sets a precedent regarding how damages can be assessed in similar disputes.

Background

The plaintiffs in this case, Thorobird Grand LLC, hired M. Melnick Co., Inc. as the general contractor for a construction project involving three separate buildings. Federal Insurance Company served as Melnick's surety, providing a performance bond that guaranteed Melnick's obligations under the construction contract.

In 2019, Thorobird Grand declared Melnick in default and terminated the construction contract. Following this, they demanded that Federal Insurance fulfill its obligations under the performance bond. On October 29, 2019, the parties executed a takeover agreement, allowing Federal Insurance to complete the work that Melnick had failed to perform. Thorobird Grand then initiated legal action, asserting breach of contract claims against both Melnick and Federal Insurance.

The Ruling

The Appellate Division of the Supreme Court of the State of New York affirmed the lower court's decision, which had granted partial summary judgment in favor of Melnick and Federal Insurance. The court ruled that the plain language of the construction contract limited the types of damages that could be claimed by Thorobird Grand.

The court stated, "the construction contract expressly limited delay damages to the liquidated damages set forth in the contract."

Additionally, the court found that the liquidated damages specified in the construction contract applied to the project as a whole, rather than on a per-building basis. The ruling clarified that the amount of daily liquidated damages was intended to cover the entire project, as indicated by a 2018 change order that stated, "liquidated damages would be assessed on a project basis and not a per building basis so that there is no duplication of recovery." The judges on the panel included Scarpulla, Gesmer, Rodriguez, Michael, and Hagler.

Impact

This ruling has significant implications for future construction contracts and disputes. By affirming that liquidated damages must be assessed on a project-wide basis, the court has provided clarity on how damages can be calculated in similar cases. This decision may influence how contractors draft their agreements and how they approach potential disputes over damages.

The ruling also reinforces the idea that the language of the contract is paramount in determining the rights and obligations of the parties involved. As a result, construction companies and contractors may need to be more diligent in their contract negotiations to ensure that their interests are adequately protected.

What's Next

It remains unclear whether the plaintiffs will seek to appeal this decision. There are no related cases pending that could affect this ruling. The court filing did not provide details on any potential next steps from the plaintiffs.