The New York Appellate Division has issued a significant ruling in the case of WDF, Inc. v. A.J. Pegno Construction Corp./Tully Construction Co., Inc., impacting how breach of contract claims are handled. The court's decision, which was released on July 1, 2026, addresses disputes over a liquidating agreement between the parties. This ruling is important for businesses and contractors involved in similar agreements, as it clarifies the interpretation of contract terms and the implications of release provisions.
The case stems from a dispute between WDF, Inc., a construction company, and A.J. Pegno Construction Corp. and Tully Construction Co., Inc. The conflict arose when WDF, Inc. sought damages for breach of contract related to a liquidating agreement. The defendants, Pegno and Tully, argued that a release provision in the agreement barred WDF's claims. The lower court, led by Justice Janice A. Taylor, denied the defendants' motion for summary judgment, prompting the appeal.
The Appellate Division's ruling focused on the interpretation of the release provision within the liquidating agreement. The defendants contended that the release should prevent WDF from pursuing its claims. However, the court found the language of the release to be ambiguous regarding whether it applied to claims arising from the settlement of litigation with the New York City Department of Environmental Protection. The court emphasized that ambiguity in a contract arises when its terms are subject to multiple reasonable interpretations.
In its decision, the court stated, "The defendants failed to establish, prima facie, that the parties to the liquidating agreement intended for the release to apply to these types of claims... Therefore, the Supreme Court properly determined that the defendants failed to establish their prima facie entitlement to judgment as a matter of law dismissing the second and fourth causes of action." The judges on the panel included Cheryl E. Chambers, Deborah A. Dowling, Lillian Wan, and Elena Goldberg Velazquez.
The ruling affirms the lower court's decision to deny the defendants' motion for summary judgment. It indicates that the ambiguity in the release provision allows WDF, Inc. to pursue its claims for breach of contract and breach of the implied covenant of good faith and fair dealing. The court also noted that the defendants did not adequately demonstrate compliance with the liquidating agreement's terms, further supporting WDF's position.
This ruling has broader implications for businesses entering into contracts that include release provisions. It highlights the importance of clear and unambiguous language in contracts. The court's decision reinforces that parties must clearly outline their intentions to avoid disputes over contract terms. The outcome of this case may influence how future contracts are drafted and interpreted, particularly in construction and business agreements.
Looking ahead, the defendants may consider appealing this ruling to a higher court. However, details regarding any potential appeal were not available in the court filing. The outcome of this case could set a precedent for similar disputes involving liquidating agreements and release provisions in New York.