Commercial Litigation Update: Fifth Circuit reinstates lawsuit between contractors over Houston METRO project

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by Jay Pate

Parsons Transportation Group, Inc. is an Illinois general contracting firm that contracted with the Harris County, Texas Metropolitan Transit Authority (“METRO”) to design, build, and operate a Houston-area transit system. MetroplexCore LLC is a Texas environmental engineering firm. The initial bid submitted by Parsons to be the lead contractor for the passenger rail line had included, among other companies, MetroplexCore as a “team member” responsible for various supervisory and environmental projects.

Parsons did not win the initial bid, and another company began work on the project. Several years later, the initial contractor was unable to proceed with the project, and METRO awarded Parsons the contract for the remainder of the project (“Phase II”), along with a new set of Parsons subcontractors. After several months had elapsed, MetroplexCore notified Parsons that it believed it was entitled to a share of the profits. Parsons denied it had an agreement with MetroplexCore, and MetroplexCore filed suit.

MetroplexCore argued that Parsons represented that it would have the same role in “Phase II” of the project as provided in Parsons’ original bid. Parsons argued there was no agreement as to Phase II. Finding there was no enforceable agreement between the parties, the district court granted summary judgment in favor of Parsons. MetroplexCore appealed.

The Fifth Circuit Court of Appeals agreed that there was no written agreement between the parties. MetroplexCore LLC v. Parsons Transportation Group, Inc., No. 12-20466 (5th Cir, February 28, 2014). However, the court of appeals reversed as to MetroplexCore’s cause of action based on promissory estoppel. The Fifth Circuit found the evidence established disputed questions of fact as to the promissory estoppel claim and thus summary judgment was improper. Id.

“The function of the doctrine of promissory estoppel is . . . defensive in that it estops a promisor from denying the enforceability of the promise.” Wheeler v. White, 398 S.W.2d 93, 96 (Tex. 1965). In sum, “[w]here a promisee acts to his detriment in reasonable reliance upon an otherwise unenforceable promise, . . . the disappointed party may have a substantial and compelling claim for relief. . . . ‘A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.’” Id. (quoting RESTATEMENT OF CONTRACTS § 90). Under Texas law, the requisites of promissory estoppel are: (1) a promise, (2) foreseeability of reliance thereon by the promisor, and (3) substantial reliance by the promisee to his detriment. English v. Fischer, 660 S.W.2d 521, 524 (Tex. 1983).

MetroplexCore presented evidence that Sally Perrin, a Parsons Vice-President, repeatedly promised to include MetroplexCore in the project if Parsons was awarded the contract. According to MetroplexCore, Perrin made statements such as “[O]ur commitment to you is still in play with METRO and we can still get the contract”; “[I]f Parsons gets the Facility Provider contract after the Washington Group’s contract is terminated, we are still committed to MetroplexCore being on the management team”; “[P]lease stay on our team because we can still get the METRO contract if the Washington Group does not finalize the contract with METRO”; “Let’s keep our team together because we don’t know what’s going to happen with the Washington Group and the final contract”; and “[W]e are going to live up to our commitment to you.”

Because “[t]he summary judgment record is replete with references to the specific “reassurances” that [Parsons] made to MetroplexCore during and leading up to the Phase II negotiations.” The Fifth Circuit found that there was a genuine issue as to whether Parsons made promises that it could have reasonably foreseen would induce reliance. MetroplexCore, No. 12-20466.

Moreover, given the parties’ prior relationship during the original bidding process, and the specific nature of Perrin’s alleged repeated reassurances, a reasonable trier of fact could conclude that Perrin could have reasonably expected her promises to induce substantial reliance on the part of MetroplexCore. A fact-finder could reasonably conclude that Perrin was promising to abide by the same terms to which MetroplexCore and Parsons had agreed during their first round of bidding.

Id.

The court of appeals also found there was a genuine issue as to whether MetroplexCore “reasonably and substantially” relied on Perrin’s promises. Id. MetroplexCore presented evidence that its members genuinely believed and relied upon Perrin’s statements and promises. Furthermore, MetroplexCore’s evidence reflected that, in reliance upon Parsons’ agreement to enter into a joint venture with MetroplexCore to pursue the Project, MetroplexCore severed ties with Team Express, Inc., the Washington Group’s project, at Parsons’ behest. As a result, MetroplexCore forfeited a subcontract it estimated to be worth $2 million, passed up other business opportunities and retained extra personnel for several years in anticipation of working on the Project at great expense.

The Fifth Circuit concluded that “[g]iven the public and repeated nature of Perrin’s alleged statements, and given the plainly conflicting accounts of what transpired, the question of MetroplexCore’s reliance must be resolved by a trier of fact.” Id. The district court’s order as to MetroplexCore’s promissory estoppel claim was revered and the case remanded for further proceedings.

Commercial Litigation at Heygood, Orr & Pearson

At Heygood, Orr & Pearson, our attorneys have handled hundreds of commercial litigation cases ranging in value from tens of thousands of dollars to tens of millions. We have successfully represented businesses of all sizes, from small “mom and pop” businesses to some of the largest corporations in the world.

Whether we are representing a huge, multi-national corporation or a small local business, we understand that clients want their legal representation to be not only excellent but cost-effective and efficient. For that reason, we will often offer our clients flexible fee structures such as contingent fees, flat fees, reduced hourly fees with a bonus payment contingent on success and reverse contingent fees.

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As a result of their experience, expertise and trial ability, our attorneys have obtained dozens of significant commercial verdicts and settlements for our commercial clients. Among the more notable are the following:

  • Obtained an $18 million verdict in favor of a European entrepreneur in a lawsuit against a subsidiary of a Fortune 500 company involving the sale and distribution of computer products in Europe.
  • Successfully defended an international businessman in a $200 million fraud and breach of contract case arising out of the discovery of the world’s largest nickel deposit in Labrador.
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Regardless of the type of claim, the size of the client or the complexity of the dispute, Heygood, Orr & Pearson has the legal ability, financial wherewithal and level of commitment necessary to successfully represent the interests of any commercial client. If you or your company is in need of representation in a commercial dispute, contact us for a free consultation by calling toll-free at 1-877-446-9001, or by filling out our free case evaluation form located on this page.

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Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.

** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.