Tennessee Business Litigation Lawyers Blog
In many, if not just about every, breach of contract case filed in Tennessee, the plaintiff will include a quantum meruit claim with his, her or its breach of contract cause of action. Why is that done? What is a quantum meruit claim?
Quantum meruit is a legal cause of action which allows a court to award damages to the plaintiff even where there is no enforceable contract between the plaintiff and defendant. When a court uses quantum meruit, essentially, it implies a contract between the plaintiff and defendant pursuant to which the defendant must pay the plaintiff for whatever the plaintiff provided. Quantum meruit can be used by a plaintiff to recover for goods, services, or both.
Quantum meruit claims accompany breach of contract claims so often because they provide a way for the court to award money to the plaintiff even when the plaintiff cannot prove that there was an enforceable contract. In fact, a court cannot even award damages pursuant to a quantum meruit claim if there was an enforceable contract between the parties. A quantum meruit claim can be an invaluable claim for a plaintiff because contracts, even written ones, may fail for various reasons: the statute of frauds; indefiniteness; mutual mistake; etc.
A fairly recent case from the Court of Appeals for the Sixth Circuit, in which the court applied Tennessee quantum meruit law, is illustrative of how important a quantum meruit claim can turn out to be. It also sheds light on how courts calculate damages for quantum meruit.
In FLSmidth, Inc. v. Fiber Innovation Technology, Inc., 626 Fed.Appx. 625 (6th Cir. 2015), the Plaintiff and Defendant entered into an apparently oral agreement. The Plaintiff and Defendant were in the same supply chain. The Defendant manufactured resin fiber. The Plaintiff sold pollution filtration bags to third parties which incorporated resin fiber.
Under the parties’ agreement, Defendant agreed to pay Plaintiff a rebate of $.57 for each pound of resin fiber which Plaintiff bought from Defendant pursuant to purchase orders generated for third parties in which the Plaintiff specified the use of Defendant’s resin fiber.
The Plaintiff specified the use of the Defendant’s resin fiber in many orders over a period of years. Defendant never paid the rebates it agreed to pay.
The Plaintiff sued the Defendant for breach of contract, and for quantum meruit. The trial court dismissed the Plaintiff’s breach of contract claim based on a statute of frauds defense asserted by the Defendant. Fortunately, the Plaintiff had asserted a quantum meruit claim. The trial judge found for the Plaintiff under the quantum meruit claim. To calculate the Plaintiff’s damages, the trial court used the $.57 per pound rate which had been agreed to by the parties in their unenforceable contract.
To be entitled to recover under a quantum meruit theory, a plaintiff must prove several elements, perhaps the two most important and hardest to prove being that it provided valuable goods or services to the defendant and the reasonable value of the goods or services provided.
On appeal, the Defendant argued that the Plaintiff had not provided it anything of value as it was Defendant which supplied the fiber resin to the Plaintiff. The appellate court made short work of this argument. It held that, by specifying the Defendant’s resin fiber in its purchase orders, the Plaintiff had provided a service to Defendant by creating sales for it.
The Defendant also argued that the trial court had erred in awarding damages based on the price per pound agreed to by the Plaintiff and the Defendant in their unenforceable contract. It based this argument on the fact that, under Tennessee law, an award for quantum meruit must be based on the reasonable value of the services based on the “customs and practices prevailing” in the kind of business involved. In Tennessee, an award for quantum meruit is not to be based on the contract price, although, as seen below, the contract price and the prevailing industry price are frequently the same.
The appellate court held that, while the contract price was $.57 per pound, there was proof in the record that $.57 per pound was also the prevailing industry rate for such rebates. So, it affirmed the trial court’s use of the $.57 per pound rate.
Finally, the above case proves how important it is for a Tennessee breach of contract lawyer to assert a quantum meruit claim where appropriate.