Date: 10-17-2006

Case Style: Ross Brothers Construction Co., Inc. v. Markwest Hydrocarbon, Inc.

Case Number: 05-6251

Judge: Ryan

Court: United States Court of Appeals for the Sixth Circuit on appeal from the Eastern District of Kentucky, Fayette County

Plaintiff's Attorney: Unknown

Defendant's Attorney: Unknown

Description:

Ross Brothers Construction Co., Inc., appeals a district court decision awarding summary judgment to MarkWest Hydrocarbon, Inc., on a contract claim. The district court found that MarkWest was entitled to judgment as a matter of law on its defense of accord and satisfaction under Kentucky Revised Statute § 355.3-311. We AFFIRM.

I.

On November 3, 1999, Ross Brothers Construction contracted with MarkWest to upgrade MarkWest's natural gas processing facility in Siloam, Kentucky, for the price of $1,114,944. Over the course of the project, Ross Brothers performed work beyond that contemplated in the original contract. Due to time constraints, the parties agreed to "negotiate" and to fix a "hard dollar price" after the project was completed. When the work was finished, MarkWest paid Ross Brothers $100,000 on the understanding that more would be paid "pending the outcome of cost evaluation discussions planned for a later date." Ross Brothers determined that the total value of the additional work was approximately $1.2 million dollars, but MarkWest submitted its own estimate for the additional work, which was less than a third of this amount. The parties were unable to agree on a final figure and negotiations broke down.

Then, on July 10, 2000, MarkWest sent a letter to Ross Brothers and enclosed a check payable to Ross in the amount of $449,718, on which was typed "full and final payment." The letter stated, inter alia, that the check was "full and final payment." Before negotiating the check, Ross Brothers struck out the "full and final payment" language on the check and wrote "no/under protest." MarkWest refused to make further payment, and on October 26, 2001, Ross Brothers filed suit in Kentucky State Court for breach of contract, seeking an additional $734,281.79.

The case was removed by MarkWest to the United States District Court for the Eastern District of Kentucky under 28 U.S.C. § 1441(a) and 28 U.S.C. § 1332. MarkWest then filed a motion for summary judgment on February 14, 2002, arguing that Ross Brothers' negotiation of the check bearing the restrictive endorsement "full and final payment" resulted in an accord and satisfaction of the claim. Ross Brothers challenged this motion, and the motion was denied by the district court on June 3, 2002. Almost three years later, on May 6, 2005, after lengthy discovery was completed, MarkWest filed another motion for summary judgment on the same theory as the first: accord and satisfaction. The district court granted this second motion, after finding that, as matter of law, the Kentucky requirements for a defense of accord and satisfaction had been met. In granting MarkWest's motion for summary judgment, the district court found that there was no genuine issue of material fact as to whether the "payment was tendered in good faith in full satisfaction of the . . . claim," "the amount of the claim was unliquidated or the subject of a bona fide dispute," and "the Plaintiff obtained payment of the instrument."

The district court also found both the check and the accompanying letter "‘contained a conspicuous statement . . . that the instrument was tendered as full satisfaction of the claim'" and that Ross Brothers knew a reasonable time ahead of negotiating the instrument that it was "in full satisfaction of the claim." (Citation omitted.) For this reason, the court noted an accord and satisfaction was appropriate under either Ky. Rev. Stat. Ann. §§ 355.3-311(2) or 355.3-311(4). Ross Brothers filed a Fed. R. Civ. P. 59 motion with the district court to amend this judgment, but the motion was denied. Ross Brothers has appealed.

II.

We review a district court's grant of summary judgment de novo. Kalamazoo Acquisitions, LLC v. Westfield Ins. Co., 395 F.3d 338, 341 (6th Cir. 2005). Under the Erie Doctrine, a federal court sitting in diversity applies the law of the state in which it sits. Davis v. Sears, Roebuck and Co., 873 F.2d 888, 892 (6th Cir. 1989). In this case, therefore, the substantive law of Kentucky applies.

Kentucky law sets out several conditions for an accord and satisfaction.

(1) If a person against whom a claim is asserted proves that:

(a) That person in good faith tendered an instrument to the claimant as full satisfaction of the claim;

(b) The amount of the claim was unliquidated or subject to a bona fide dispute; and

(c) The claimant obtained payment of the instrument[.]

Ky. Rev. Stat. Ann. § 355.3-311(1). If these conditions are met:

the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

Ky. Rev. Stat. Ann. § 355.3-311(2). Alternatively, the claim can be discharged:

if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.

Ky. Rev. Stat. Ann. § 355.3-311(4).

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Outcome: For the above reasons, we AFFIRM the district court’s judgment granting summary judgment to MarkWest.

Plaintiff's Experts: Unavailable

Defendant's Experts: Unavailable

Comments: None