Porter Hedges Secures Victory in Construction Dispute at the Fifth Circuit

Porter Hedges secured a victory in the United States Court of Appeals for the Fifth Circuit on behalf of a major midstream company. The case arose from a bankruptcy proceeding filed by a general contractor after its contract was terminated on a refinery project in Midland County, Texas. A subcontractor, who had outstanding invoices on the project, sued the general contractor for breach of contract, but also sued the property owner, for claims based on an implied contract, namely quantum meruit and unjust enrichment. The owner moved to dismiss the claims against it, arguing in part that the “express contract rule”—the long-standing principle that a party cannot recover on an implied contract for work performed under an express contract—barred the subcontractor’s claims.  The Bankruptcy Court granted the owner’s Motion to Dismiss, and the subcontractor appealed to the District Court, which affirmed the dismissal.

On appeal to the Fifth Circuit, the subcontractor argued that the express contract rule did not apply to its claims against the owner, and also argued that its complaint in the Bankruptcy Court included a breach of contract action that should not have been dismissed. The Fifth Circuit, in a published opinion, affirmed the order dismissing the subcontractor’s case, holding that “the quantum meruit claim is barred by the existence of an express contract that covers the services at issue, and that “the unjust enrichment claim . . . [fails] for the same reasons the quantum meruit claim fails.” Finally, the Fifth Circuit held that the record showed the subcontractor “failed to assert a breach of contract claim in the bankruptcy court” and therefore waived its claim.  

Attorneys Amy Wolfshohl and Joshua Wolfshohl represented the midstream owner in the Bankruptcy Court and on appeal, with assistance at the District Court and Fifth Circuit from Lauren B. Harris.