Can One Recover Profits on Work Not Performed?

CAN ONE RECOVER PROFITS ON WORK NOT PERFORMED?

By: Larry R. Leiby, Esq. and Harry Malka, Esq

About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. For more information, please visit www.mkpalaw.com.

In The Plumbing Service Company v. Progressive Plumbing, Inc., Case No. 5D09-3171 (Fla. 5 th DCA Oct. 22, 2010), The Plumbing Service Company ("Plaintiff") had sub-subcontract with Progressive Plumbing, Inc. ("Subcontractor"). Plaintiff sued Subcontractor alleging that Plaintiff had completed its work on 15 of 230 condominium units when Subcontractor breached the agreement by ejecting Plaintiff from the project before Plaintiff had time to complete its work under the contract. Plaintiff had successfully recovered for the unpaid work performed against a surety that had issued a payment bond for the project.

Subcontractor argued to the trial court that because Plaintiff had already recovered from the surety, Plaintiff should be barred from suing Subcontractor. The trial court agreed and granted summary judgment to Subcontractor based on the theory that once one has recovered under its chosen remedy, that party should be precluded from then seeking recovery under an alternative theory. Plaintiff appealed.

The appellate court found that Plaintiff recovered in its earlier action against the surety for the work it had completed but had not been paid for. The law generally does not permit a double recovery. However, Plaintiff's suit against Subcontractor was not for the completed work. Plaintiff's suit against Subcontractor was for lost profits that resulted from Subcontractor preventing Plaintiff from completing its work. Subcontractor admitted that Plaintiff could not recover lost profits from the surety pursuant to the subject bond. In attempt to avoid liability, Subcontractor made a technical legal argument that Plaintiff's action for lost profits was barred by the "doctrine of election of remedies."

The doctrine of election of remedies is intended to "prevent a double recovery for the same wrong." It applies where the remedies sought are "coexistent and inconsistent," but does not prevent a person from pursuing additional remedies to achieve "full satisfaction."

The appellate court found that because Plaintiff could not recover lost profits from the surety, and lost profits were a permissible type of damages to recover under a breach of contract action against Subcontractor, the doctrine of election of remedies did not apply. Therefore, the appellate court sent the case back to the trial court of additional proceedings.

The sub-subcontractor in this case received legal advice that correctly informed the sub-subcontractor that it did not have to accept only payment for work performed. Additionally, the sub-subcontractor's lawyer made the proper allegations to allow the sub-subcontractor to pursue lost profits for the subcontractor's breach of the contract. If ultimately successful, the sub-subcontractor would recover its lost profits on work it never performed.