Brightergy Louisiana, LLC v. GalCan Elec. & Gen. Contracting, LLC, CV 20-2018, 2021 WL 253830 (E.D. La. Jan. 26, 2021)
Authors: Donald C. Douglas and Mary Claire Kramer
A general contractor failing to pay its subcontractor may be considered a material breach of contract, which may relieve the subcontractor from abiding by otherwise enforceable contract provisions.
Brightergy Louisiana, LLC v. GalCan Elec. & Gen. Contracting, LLC is a case set for trial in September 2022. The issue presented in several motions for summary judgment is whether GalCan, a subcontractor hired by Brightergy Louisiana, LLC d/b/a Influent Energy to place solar panels on a roof under Influent’s contract with Entergy, is subject to contractual provisions in the Master Agreement between Entergy and Influent. The Master Agreement obligated Influent to install solar panels on rooftops leased to Entergy by the New Orleans Regional Transit Authority. Influent subcontracted with GalCan to install the solar panels. The Master Agreement was attached to the subcontract, and the subcontract clearly bound GalCan to each provision in both the subcontract and each provision in the Master Agreement, to the same extent that Influent was bound. Significantly, the Master Agreement contained a lien prohibition, creating an obligation for the parties to ensure that no liens of any kind were created on the property at issue in the contract.
Eventually, Influent terminated its contact with GalCan before paying the amounts owed to GalCan. In response, GalCan filed a Labor and Material Lien and Statement of Claims against the Regional Transit Authority property for $347,499.09, the additional amount that Influent owed to GalCan. Influent immediately filed suit against Galcan for breaching the Subcontract Agreement by filing the Lien due to the express lien prohibition in the contract.
The Court first found that GalCan breached the Subcontract Agreement by filing the lien, however, GalCan successfully argued that Influent’s failure to pay on the contract constituted a material breach which may result in a judicial dissolution and relieve GalCan of the otherwise enforceable lien prohibition. Under La. Civ. Code art. 2018, a dissolution of the contract would restore the parties to their pre-contractual situation. Thus, a dissolution may relieve a party of its contractual waiver, like relieving GalCan of its waiver to file a lien. Ultimately the court found that Influent’s failure to pay on the contract was a material breach and Influent owed GalCan the amount of the lien. However, it also ordered GalCan to indemnify Influent for the costs and other charges associated with Influent securing a bond and removing a lien.
This case provides an important lesson that a general contractor may inadvertently materially breach the contract if it fails to pay its subcontractor the money owed under a subcontract. In Louisiana, when a contract is materially breached, it may be dissolved and relieve a subcontractor of otherwise enforceable provisions, such as a lien waiver.
