Can a Subcontractor Sue an Owner for Unjust Enrichment?

Construction lawyers representing owners frequently defend claims brought by subcontractors for unjust enrichment.  Lacking the privity necessary to bring a breach of contract claim, subcontractors allege that the owner has benefited (or been enriched by) the unpaid subcontractors work and under an unjust enrichment theory of liability should compensate the subcontractor for this work.  The law is Pennsylvania is well settled on the issue.  A subcontractor lacking privity of contract with the owner may not bring an unjust enrichment claim against the owner unless (a) the owner promised the subcontractor payment, or (b) otherwise misled the subcontractor into believing the owner would pay it directly.  Ira G. Steffy & Sons, Inc. v. Citizens Bank of Pennsylvania, 7 A.2d 278 (Pa.Super. 2010)

This apparently well settled legal theory makes a recent ruling in Lackawanna County curious.  As reported by Erin Nissley in the Times Tribune, there a unpaid concrete subcontractor’s unjust enrichment claim against Clark Summit Borough survived preliminary objections, despite the Borough not being a party to any agreement.  The project in question was apparently developed by the County’s Department of Planning and Economic Development and was simply located in the Borough.  After the general contractor allegedly failed to pay the subcontractor responsible for the concrete sidewalk portion of the project, the subcontractor sued the Borough for unjust enrichment claiming “Clarks Summit “has appreciated the benefits” of the sidewalk and driveways Valvano built and it would be inequitable for the borough to “retain the benefits of the work performed … without making payment” to the construction company for the value of the work.”

The Judge did indicate that if the subcontractor did not produce evidence that “Clarks Summit either requested the improvements … or misled” then the claims would ultimately be dismissed.  While this would seem to indicate that well settled law will ultimately prevail, it is of no solace to Clarks Summit who until then will have to spend tax payer money on attorneys fees to defend an action that fails squarely within the types of claims that Pennsylvania Law prohibits.