## Facts

- Felix Industries, Inc. was the general contractor on a public sewage treatment/filtration plant project and subcontracted certain work to Northway Engineering, Inc.
- Felix paid Northway more than $900,000 but withheld payment on requisitions totaling $88,762.72.
- Northway sued Felix and Hartford Accident and Indemnity Company (the surety) for the unpaid contract balance, alleging full performance.
- Defendants answered with a general denial and asserted counterclaims for breach of contract and negligent performance, seeking $50,000; the counterclaims were also labeled as “defenses.”
- Northway demanded a bill of particulars directed to the counterclaims; defendants did not respond.
- The trial court issued a conditional order of preclusion tied to the failure to particularize the counterclaims; after continued noncompliance, the order became absolute, eliminating the counterclaims.
- Northway obtained an unopposed partial summary judgment for $58,227.83, leaving $30,534.89 in dispute.
- On Northway’s second summary judgment motion for the remaining balance, defendants submitted affidavits and documents asserting miscalculation, failure to credit prior payments, and chargebacks for incomplete work.
- The trial court treated the preclusion order as barring any defense to the complaint and granted summary judgment for the remaining balance; the Appellate Division affirmed.

## Issues

1. Whether a preclusion order entered for failure to provide a bill of particulars on counterclaims also precludes defendants from offering defenses and proof in opposition to the complaint.
2. Whether summary judgment may be granted by disregarding defendants’ evidence opposing the amount due solely because counterclaims were precluded.

## Decision

- The Court of Appeals reversed the Appellate Division and remitted for further proceedings.
- The Court held that the preclusion order, directed to failure to particularize counterclaims, removed the counterclaims but did not, without explicit scope, bar defenses to the complaint.
- The Court held that defendants’ submissions disputing the amount due could be considered as defensive proof rather than proof of precluded counterclaims, and could raise triable issues.

## Legal Principles

- A discovery sanction precluding proof on counterclaims generally eliminates the affirmative counterclaims but does not automatically extinguish a defendant’s ability to defend against the plaintiff’s claim.
- The scope of a preclusion order is confined to the discovery failure it addresses; courts should not treat a counterclaim-related preclusion order as a de facto default on the complaint absent clear language or procedural basis.
- On summary judgment, evidence must be viewed in the light most favorable to the nonmoving party; submissions disputing the calculation of damages may defeat summary judgment when they raise a material factual dispute.

## Conclusion

Because the preclusion order was limited to defendants’ failure to particularize their counterclaims, it did not bar defendants from contesting liability or the amount allegedly due under a general denial, and summary judgment based on treating the complaint as effectively undefended was improper.


Northway Eng'g, Inc. v. Felix Indus., Inc., 77 N.Y.2d 332 (N.Y. 1991)