11th Circuit court of appeal reverses dismissal with prejudice of breach of contract and copyright claims asserted by architect, finding that factual issues surrounding the basis for termination preclude disposition of the claims on a motion to dismiss. The court found this to be the case despite the existence of a termination for convenience provision in the contract.
McKinney v. Portico LLC arises from a property owner’s termination of its contract with an architect for architectural and engineering services at a condominium project in Florida. Following termination, the architect sued the property owner and others, alleging claims for breach of contract, copyright infringement, conversion, unjust enrichment, quantum meruit, and tortious interference.
In its lawsuit, the architect alleged that the owner expressly terminated the agreement for cause (and not for convenience), and that the reason it provided in the termination letter was pretextual. The architect also alleged that they would have been due compensation even if the agreement had been terminated for convenience. As a result, the architect claimed, the owner breached the agreement.
The owner moved to dismiss, arguing that the breached of contract claims failed as a matter of law because whether it terminated the contract for cause or convenience, under either provision of the contract the architect was not entitled to additional compensation. The owner also argued that the copyright claims failed because once the contract was terminated, the owner had a license to use the materials provided by the architect. Further, the owner attacked the remaining claims as well. The district court granted the motion with prejudice and the architect appealed.
In evaluating the dismissal of the breach of contract claim, the 11th Circuit found that while no Florida court appeared to have addressed the issue of whether a party could defend on the basis of a termination for convenience provision when it had expressly terminated for cause, other courts around the country were split on the issue. Further, the 11th Circuit reasoned that even if Florida law existed to support this proposition, it would require a factual inquiry that could not be resolved on a motion to dismiss. Accordingly the court reversed the dismissal of the breach of contract action.
As a result, the court also reversed the dismissal of the copyright infringement claims, because if the contract was not properly terminated, then no rights to use the materials created by the architect existed post-termination. As to the remaining claims, the Court affirmed dismissal, largely due to the appellant’s failure to address those arguments in its initial brief.
The key takeaway from this case is that contractors and owners alike should be careful about the grounds for termination they provide when terminating a contract and to keep an eye on potential future claims or defenses when exiting any contract.