District court dismisses 2 counts in construction companies' breach of contract dispute

By Charmaine Little | Nov 12, 2018

A construction subcontractor was partially victorious in its breach of contract lawsuit against a related business in the U.S. District Court for the Eastern District of Louisiana on Oct. 25.

U.S. District Judge Barry Ashe ruled on the case.

The court denied the dismissal of a handful of the claims it evaluated in Max Foote Construction Co. LLC’s (MFCC) legal battle against MWH Constructors Inc. MWH filed a motion to dismiss the counts, and the court sided with the defendant for a majority of them as MFCC accused MWH of wrongfully ending their contract.

The court only looked at two of the four counts as those are the only ones MWH raised in its motion to dismiss: Count III (Prompt-Pay Claims, which it dismissed), and two portions of Count IV (unjust enrichment/quantum meruit claims, which it also dismissed), and Choice-of-Law Rules, which it refused to dismiss.

On Count III, MFCC said MWH’s failure to lower the plaintiff’s retainage and failure to pay MFCC for past due invoices within 30 days violates the subcontract as well as prompt-pay laws. MWH said MFCC’s prompt-pay claims are only evaluated by federal law, so MFCC’s claims can’t stand under the prompt-pay regulations in Louisiana or New Jersey, where the subcontract was said to be governed. Still, it added New Jersey law applies based on a clause in the subcontract. 

As for the court, it said in subject-matter jurisdiction cases the federal court will comply with the choice-of-law rules for the state, in this case Louisiana. It added the federal Prompt Pay Act allows a subcontractor to raise breach of contract and prompt pay claims via state law, so MFCC’s claim is valid. The court granted MWH’s motion to dismiss the prompt-pay claims for Louisiana, but not for New Jersey.

The court also dismissed the unjust enrichment claims. MWH said MFCC can’t maintain a cause of action for unjust enrichment in either Louisiana or New Jersey. The court pointed out, “There are no contacts to New Jersey stated in any of the documents before the court, other than the parties’ express choice of New Jersey law to apply to the subcontract, which choice is not relevant to the law applicable to extra-contractual claims.” Considering this, the court determined Louisiana laws were relevant to MFCC’s claims and dismissed the unjust enrichment claims for New Jersey.

Finally, the court took a look at the Louisiana unjust enrichment claim and refused to dismiss it. It said while MFCC has recognized it can’t request unjust enrichment damages since there’s a fix for it in the contract, it also acknowledged that it pleaded unjust enrichment as an alternative, and that it can have receive damages it suffered from MWH’s behavior after the contract ended. The court pointed out other cases in Louisiana have allowed a plaintiff to recover unjust enrichment damages for injuries that happened after a contract ended. Considering this, it didn’t deny MFCC’s unjust enrichment claims brought via Louisiana law.

Their working relationship went awry after MFCC was hired to do subcontracting work for MWH amid MWH’s contract with another company for a project. The project included the tear down of two water treatment plants as well as construction of a new wastewater treatment plant at Fort Polk in Vernon Parish. MFCC said it started to back away from MWH when it noticed several delays, disruptions and interferences that were preventing and postponing MFCC from completing tasks. MWH then notified MFCC that it was ending its subcontract with accusations MFCC “abandoned the project,” according to the opinion. MFCC then filed a lawsuit for breach of contract on four counts.

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