Florida Federal Court Dismisses Fluor Enterprises’ $67M Claim Against Duke Energy for Wrongful Draw Down of Credit Letter

Tampa D Fluor Enterprises, Inc. v. Duke Energy Florida, LLC, No. 8:19-cv-00224, 2019 BL 135007, at *1 (M.D. Fla. Apr. 16, 2019)

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Anthony Finizio

On April 16, 2019, a Florida federal court dismissed without prejudice Fluor Enterprises’ claim that Duke Energy wrongfully drew down a $67 million letter of credit issued in connection with Fluor’s construction of a gas-fired electrical generation facility in Citrus County, Florida.  In addition to the core breach of contract claim which suffered from several procedural issues, the court dismissed extra-contractual claims for conversion, civil theft, breach of the implied covenant of good faith and fair dealing, and violation of the Florida Deceptive and Unfair Trade Practices Act.

According to Fluor’s  complaint, it reached an agreement with Duke Energy in October 2014 for the engineering, procurement and construction of a $566.6 million combined cycle electrical generation facility, including two heat recovery steam generators used to harness exhaust heat from the gas-fired turbine generators in order to produce steam for further power generation.  When Fluor failed to meet the guaranteed mechanical completion dates by approximately six months, the contract allowed Duke Energy to claim various costs incurred as a result of the delay.

On December 21, 2018, Duke Energy submitted an invoice demanding payment of nearly $109 million in 15 days with no breakdown or itemization of the delay costs.  On January 4, 2019, Duke provided a more detailed cost summary, and Fluor assumed the parties “would, in good faith, continue their discussions” and proceed in accordance with the contractual dispute resolution process if necessary.  Instead, on January 8, 2019, without further notice, Duke Energy drew down the full amount of the letter of credit requiring Fluor to immediately reimburse the issuing bank.  Fluor claimed that Duke’s draw on the letter of credit was “wrongful, premature, in bad faith, deceitful, unreasonable and in material breach” of the contract.

The court summarily dismissed the primary claim for wrongful draw on the letter of credit due to numerous procedural issues, including Fluor’s failure to attach as exhibits the applicable contract and letter of credit.  In addition, the court dismissed several of Fluor’s extra-contractual claims and expressed skepticism over their viability.

Fluor’s conversion claim asserted that by improperly and prematurely drawing down the letter of credit, Duke Energy “wrongly asserted dominion over Fluor’s property . . . and deprived Fluor of said funds.”  In dismissing this claim, the court warned that any repleading must address a harm or loss separate from, and caused independently of, breach of contract.  Similarly, the court noted that Fluor’s civil theft claim must be repled to establish “criminal felonious intent.  An aggressive, intentional breach of contract is not sufficient.”

With respect to Fluor’s claim that Duke Energy violated the implied covenant of good faith and fair dealing contained within the contract, the court found that “[a] stand-alone or independent claim for breach of the implied covenant of good faith and fair dealing is disfavored in the case law . . . .  This type of claim cannot be used to substitute for an express term/breach of contract.”  The court also dismissed Fluor’s claim for relief under the Florida Deceptive and Unfair Trade Practices Act (Fla. Stat. § 5.01.204(1)), asking that Fluor’s second amended complaint “address why this ostensible consumer statute is applicable to the transaction” where Fluor was neither a purchaser nor a consumer of anything.

The court gave Fluor ten days to file a second amended complaint curing the procedural defects, as well as addressing the shortcomings in Fluor’s ancillary claims.

To view the full text of the court’s decision, courtesy of Bloomberg Law, click here.