GEM Industrial, Inc. v. Sun Trust Bank
2010 U.S. Dist. LEXIS 31042 (N.D. Ohio Mar. 31, 2010)

The United States District Court for the Northern District of Ohio denied a contractor’s claims against a project’s lenders, where the contractor’s claims were based on the lender’s representations that the contractor would be paid.

GEM Industrial was the mechanical contractor for the construction of an ethanol production plant owned by GOE Lima, LLC. Due to budget overruns and cash flow problems, GOE fell behind on monthly payments to GEM. Eventually, GOE requested that GEM enter into a formal payment deferral. Before agreeing to the deferral, GEM asked to meet with representatives of the project’s debt and equity investors, SunTrust Bank and Paladin Homeland Security Fund, LP and Paladin Capital Group, LLC to confirm that sources of funding were available to pay construction costs. GEM asserts that, during its calls with SunTrust and Paladin, representatives for both entities promised and assured GEM that it would be paid for both its already completed work and its work going forward on the plant. After its calls with SunTrust and Paladin, GEM agreed to the payment deferral and continued to perform its mechanical work at the plant.Continue Reading U.S. District Court in Ohio Rejects Claims Against Lenders Based on Theory That They Induced Contractor to Continue to Perform by Representing and Promising That It Would Be Paid