Lower Township Settles with Bennett’s Crossing Construction Firm

VILLAS — Township Council approved a settlement Monday with Fondacaro Companies, the original contractors for the much-delayed Bennett’s Crossing Recreational Complex.
Mayor Michael Beck said when he took office last year, he expected the township to lose $100,000 to $200,000 from litigation with Fondacaro. He said it seemed outrageous to have to pay a contractor that left the township with a mess at Bennett’s Crossing
“We have some good news here,” said Beck.
Council approved a resolution authorizing a settlement of litigation known as Fondacaro Companies Inc. v. Lower Township v. Van Note-Harvey Associates and Bruce Graham P.E.
Township Solicitor Tony Monzo said there were settlements with Fondacaro and International Fidelity Insurance Company, the surety company that bonded the Bennett’s Crossing project. He said in January 2009, the lawsuit was dismissed and the case put into arbitration with Fondacaro seeking damages up to $290,000.
Following mediation, before Monzo returned as Township Solicitor after being replaced by Paul Baldini during Walter Craig’s administration, the mediator had suggested that the township consider a settlement because there was some liability from the township to Fondacaro.
When Monzo returned as Township Solicitor under Beck’s administration, he had the case returned to court on a motion and attempted throughout the year to resolve the case as they were preparing for trial.
Monzo said he was able to convince International Fidelity, even though they were not a party in the case, they had significant exposure to the extent the township was able to successfully assert claims against Fondacaro which was a bankrupt company.
“We never had the ability to recover anything from Fondacaro,” he said. “Our objective was to prevent the payment of any money to Fondacaro.”
International Fidelity finally agreed with the township’s position and stepped in and worked out an agreement with Fondacaro’s attorney for some payment of legal fees and worked on a settlement between all three parties that would dismiss all claims without any payment by the township, said Monzo.
The dismissal is without any prejudice to the township’s claims that it may have against third parties. Originally the allegations were that the engineer made some significant mistakes in the engineering of the project.
Monzo said when the lawsuit was filed there was a third party claim against the engineer which was “unfortunately dismissed because prior counsel did not file an affidavit of merit, so the township had no ability to recover against the engineer.” He said Fondacaro had no assets and when the township was able to get the case back in court, there was no expert, so the township had no ability to make a valid claim against Fondacaro.
Monzo said the township believes the release of the surety for any claims is minor in comparison to the savings of long, protracted litigation and the exposure.
“From a township standpoint, this finally ends the case with Fondacaro and with International Fidelity and council needs to assess and determine what claims, if any, are going to be brought against third parties,” he said.
He said there was no exposure pursuing third party claims other than some litigation expense. Monzo said one last wrinkle in the case, in the course of preparing for trial, he discovered evidence indicating there were several over billings for electrical work.
The change orders that were presented to the township by Fondacaro were higher than the change orders that Fondacaro presented to the electrical contractor by approximately $55,000. Monzo said he provided that information to the County Prosecutor’s Office and the over billings are under investigation.
Problems with the project started in 2005 when the project was 75 to 80 percent complete when Fondacaro stopped working and ceased paying subcontractors that still needed to complete a significant part of their jobs. The township received written authorization from Fondacaro to pay the subcontractors directly from the contract balance.
At that point, Fondacaro was no longer performing and was given several notices it was in default. Fondacaro turned everything over to International Fidelity, which bonded the contract for performance and payment which opened the door for the surety to negotiate with the township a method of taking over and completing the project, which the township carried out in 2006.
The surety company oversaw some of the work and allowed the township to hire contractors to do some of the work including a resurfacing of the hockey rink, work on the maintenance building and some of the perimeter areas of the playing fields.
In March 2007, Township Council approved a bond for $660,000 to purchase dirt to fill in playing fields at Bennett’s Crossing. At that point, the project was more than two years behind schedule and more than $1 million over budget.