Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now
A subcontractor that was part of a delayed project at a BP plant in northwest Indiana can’t assert claims against the contractor based on unjust enrichment, the Court of Appeals of Indiana has ruled in affirming a number of decisions from a lower court.
The dispute centers around construction of a processing unit at a BP plant in Whiting that removes sulfur from gasoline. The project spanned several years and cost BP $385 million to complete.
BP entered into a master services agreement with Graycor Industrial Constructors to build the processing unit. Graycor also entered into a subcontract with Luse Thermal Technologies for the insulation and lagging work for the project.
The subcontract didn’t include a project schedule but held that Luse’s work would start May 21, 2018, and would reach substantial completion by Aug. 22, 2019.
There were several delays with the project that resulted in deadlines being pushed back. In February 2019, Graycor and BP entered into the first of three settlement agreements to resolve open change orders and claims that Graycor had submitted to BP.
In May 2019, Luse became concerned about small sections of pipe that had been released for insulation. As of the anticipated completion date, Graycor had only released a small fraction of the entire pipe portion to Luse to insulate.
A new project completion date was set for Jan. 31, 2020, and Graycor requested that Luse increase manpower to meet the deadline. Graycor also requested that Luse provide a cost proposal for the increased costs to complete the work.
Graycor never agreed to any of Luse’s cost proposals.
The processing unit became operational in late July 2020.
In order to protect itself from subcontractor liens and personal liability notice, or PLN, claims, BP inquired with Luse as to the amount it was owed by Graycor. Luse responded with about $3.7 million.
BP and Graycor then entered into the third settlement agreement by which BP agreed to pay Graycor a further $2 million for additional construction costs. The agreement also reaffirmed Graycor’s lien-related covenants and required Graycor to secure a $25 million bond that would be triggered if Graycor failed to bond over any lien filed against BP’s property.
In November 2020, Luse recorded a mechanic’s lien against the property on which BP’s plant is situated in the amount of $3.7 million.
In December 2020, Luse filed a complaint against Graycor and BP, seeking to foreclose its lien and recover the amount still owed for services. The complaint asserted claims for breach of contract and unjust enrichment against Graycor, and claims for PLN liability and unjust enrichment against BP.
Graycor filed a responsive pleading that included a counterclaim based on breach of contract against Luse and that asserted a claim for $1.7 million in direct expenses it had incurred as a result of delay and perceived faulty work caused by Luse.
In October 2022, Luse, BP and Graycor each filed motions for summary judgment. Graycor’s motion sought partial summary judgment on the breach of contract and unjust enrichment claims in Luse’s complaint; BP sought summary judgment on the PLN liability and unjust enrichment claim; and Luse sought partial summary judgment on Graycor’s counterclaim.
In February, the Lake Superior Court granted summary judgment to BP after granting its motion to strike Luse’s affidavit evidence. The trial court also granted Graycor’s motion for partial summary judgment, denied in part Luse’s motion for partial summary judgment, and granted BP and Graycor’s motion to strike Luse’s supplemental designation of evidence.
Luse raised several arguments on appeal, including whether the trial court abused its discretion by striking some of Luse’s designated evidentiary materials and whether the court erred in concluding Luse can’t assert a claim against Graycor based on unjust enrichment.
First addressing whether the trial court abused its discretion by striking certain designated materials submitted by Luse, the Court of Appeals determined Luse put the trial court in a bind by filing new designated evidence a little more than one month before the hearing.
That left the court with two options, the opinion says: admitting the designations and continuing the hearing, or denying the additional evidence.
The Court of Appeals ruled denial was not against the logic and effect of the facts and circumstances before the court, citing Webb v. City of Carmel, 101 N.E.3d 850 (Ind. Ct. App. 2018).
The appellate court came to the same determination for the trial court striking some statements made by Luse’s president.
Turning to Graycor’s motion for partial summary judgment, the Court of Appeals first looked at Luse’s alleged damages for delay.
The trial court concluded Luse’s damages constituted damages for delay, as defined by the subcontract between Luse and Graycor, and are not recoverable under the provisions of the subcontract.
The Court of Appeals affirmed that judgment, disagreeing with Luse’s characterizing of its delay claim as an acceleration of its work schedule.
“While we can support a distinction between delay and acceleration under certain circumstances, it would seem that in many cases, if not in most cases, the alleged ‘acceleration’ is in fact the result of ‘delay,’” the opinion says, “or, to put it differently, because of delay caused by or attributable to the owner or a contractor, a contractor or subcontractor is of necessity forced to compress or speed up the work necessary to be completed before the contract completion date.”
Next addressing the trial court’s determination that Luse can’t assert a claim against Graycor based on unjust enrichment, the Court of Appeals affirmed, citing the fact that Graycor never contractually agreed to Luse’s schedule.
“Luse was always contractually obligated to perform the insulation and lagging work of the project within a contractual timeframe,” the opinion says. “Due to delays on the part of Graycor and other crafts, the timeline for Luse’s work was pushed back, but the scope of the work remained the same.”
Turning to BP’s motion for summary judgment, the Court of Appeals first addressed Luse’s personal liability notice, which the trial court ruled Luse failed to comply with.
The PLN statute, according to the opinion, requires fair warning to a project owner that a subcontractor intends to impose personal liability.
“Even if we were to construe the PLN statute as requested by Luse and were to employ a substantial compliance interpretation — which we are not — Luse would still not prevail,” the Court of Appeals ruled, finding Luse made “no attempt” to convey its intention in a June 2020 email to hold BP personally liable for Graycor’s financial obligations to Luse.
Next addressing the trial court’s determination that Luse’s claim based on unjust enrichment against BP was precluded, the Court of Appeals again found no error.
“While Luse repeatedly in its appellate brief represents that there is a dispute between BP and Graycor as to whether Graycor was fully paid,” the opinion says, “Luse’s contention is in essence an argument related to the manner in which Graycor decided to allocate BP’s payments among the subcontractors and itself — a matter which is squarely addressed by the terms of the Subcontract and which thus precludes any claim of unjust enrichment by BP.”
Lastly, turning to Luse’s motion for partial summary judgment, the Court of Appeals agreed there are genuine issues of material fact related to Graycor’s counterclaim, which was remanded for further proceedings.
“While it is uncontroverted that the Project incurred delays,” the opinion says, “it is unclear whether the delay which made Graycor incur additional charges on the Project was the result of a fault by Luse or was merely the extension of delays incurred since the inception of the Project.”
The Court of Appeals also declined to address Graycor’s request for an award of appellate attorney fees, ruling it would be premature to determine who the prevailing party is.
Judge Patricia Riley wrote the opinion. Judges Paul Mathias and Terry Crone concurred.
The case is Luse Thermal Technologies, LLC v. Graycor Industrial Constructors, Inc. and BP Products North America, Inc., 23A-PL-633.
Please enable JavaScript to view this content.