Moore Brothers Co. v. Brown & Root, Inc.

207 F.3d 717 (2000)

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Moore Brothers Co. v. Brown & Root, Inc.

United States Court of Appeals for the Fourth Circuit
207 F.3d 717 (2000)

  • Written by Joseph Bowman, JD

Facts

Brown & Root, Inc. (Brown) (defendant) is an equity partner in the Toll Road Investors Partnership II (TRIP). TRIP hired Brown as general contractor. Brown subcontracted with Moore Brothers Co., Inc. and The Lane Construction Corp. (plaintiffs) to build a road. Under the “pay when paid” clause of the subcontracts, TRIP paying Brown is a condition precedent of Brown’s obligation to pay the plaintiffs. Brown’s contract required payment for major changes. Because the lenders were concerned with overages, TRIP and Brown removed reference to changes that would require payment from the contract and incorporated them in a letter. TRIP and Brown told the lenders that no changes were likely even though they knew that a big change was needed. Brown had the subcontractors make the change. Brown and the plaintiffs brought TRIP to arbitration, and the arbitrator ordered TRIP to make payment. TRIP did not have the money, and Brown refused to pay the plaintiffs under the “pay when paid” clause. The plaintiffs sued in the United States District Court for the Eastern District of Virginia. The court ordered Brown to pay all subcontractors. Brown appealed to the United States Court of Appeals for the Fourth Circuit.

Rule of Law

Issue

Holding and Reasoning (Murnaghan, J.)

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