No Retroactive Conversion of Contract Termination Grounds: Eleventh Circuit Clarifies Contract-For-Cause vs. For-Convenience Rights

Introduction

This commentary examines the United States Court of Appeals for the Eleventh Circuit’s decision in Lewis C. McKinney, Jr. v. Portico LLC (No. 23-11398, Jan. 22, 2025). Architect Lewis McKinney, Jr., and his two affiliated entities (M2 Studio LLC and M2 Studio PLLC) sued Portico LLC and its related parties after Portico terminated an agreement for architectural services at a Florida condominium project. Plaintiffs alleged breach of contract, copyright infringement, conversion, unjust enrichment, quantum meruit, and tortious interference. The district court dismissed all claims with prejudice, and the Eleventh Circuit reviewed those dismissals on appeal.

Summary of the Judgment

The Eleventh Circuit:

• Vacated the dismissal of the breach of contract claim, holding it was substantively plausible that Portico could not defend by retroactively converting a purported termination for cause into a termination for convenience.
• Vacated the dismissal of the copyright infringement claim, because if the cause-based termination was invalid, no post-termination license would arise under the AIA B101-2017 documents.
• Affirmed the dismissal of conversion, unjust enrichment, quantum meruit, and tortious interference claims, as plaintiffs did not challenge the district court’s alternative grounds for dismissal on appeal.
• Remanded the breach of contract and copyright claims for further proceedings.

Analysis

1. Precedents Cited

• Federal Pleading Standards: The court reaffirmed the Iqbal (556 U.S. 662, 2009) and Twombly (550 U.S. 544, 2007) plausibility standards for § 12(b)(6) motions and cited Dorman v. Aronofsky, 36 F.4th 1306 (11th Cir. 2022) on plenary review.
• Termination-For-Convenience Cases: The court compared jurisdictions. In Texas (Accent Builders Co. v. Southwest Concrete, 679 S.W.2d 106 (Tex. App. 1984)), a party could assert an alternative termination ground absent bad faith or detrimental reliance. By contrast, Alabama (Public Bldg. Auth. v. St. Paul Fire & Marine, 80 So.3d 171 (Ala. 2010)) held no retroactive conversion unless the contract expressly allowed it.
• Procedural Posture: The Eleventh Circuit cited American Railcar Industries, Inc. v. Gyansys, Inc., No. 14-8533 (AT), 2015 WL 5821636 (S.D.N.Y. Sept. 9, 2015) to underscore that factual disputes on conversion of termination grounds may preclude dismissal at the pleading stage.

2. Legal Reasoning

The court’s reasoning unfolded in two key steps:

1. Breach of Contract: The parties’ agreement incorporated AIA Document B101-2017. Section 9.4 permits termination for cause; Section 9.5 permits termination for convenience. Portico’s letter expressly invoked Section 9.4. The district court nonetheless held that, as a matter of law, Portico could cure any defect by relying on its broad termination-for-convenience right. The Eleventh Circuit disagreed. In the absence of Florida authority expressly allowing retroactive conversion, it held plaintiffs had plausibly alleged that Portico could not shield itself—a dispositive point on a motion to dismiss.
2. Copyright Infringement: Under Article 7 and Section 9.7 of the AIA form, an owner retains a limited license to use architects’ instruments of service after termination. If Portico’s cause-based termination was invalid, no license ever took effect; therefore, plaintiffs’ infringement claim survived dismissal.

3. Impact

This decision establishes in the Eleventh Circuit that:

• Post-termination, a party cannot automatically rely on a termination-for-convenience clause to defeat a breach claim when it expressly invoked a unrelated cause-based termination provision—unless the contract expressly permits such after-the-fact conversion.
• Courts should permit factual development to determine whether a cause-based termination was in fact pretextual and whether a defendant may invoke alternative grounds.
• In AIA-form contracts, architects retain leverage: an invalid termination for cause may revive claims for fees and for post-termination copyright use.

Complex Concepts Simplified

• Termination for Cause vs. Convenience: “Cause” means a specific contractual breach; “convenience” means no-fault termination. You cannot mix them if the contract doesn’t say you can.
• 12(b)(6) Pleading Standard: A complaint survives if it plausibly alleges facts showing breach and damages. Legal theories that rest on disputed facts should not be dismissed out of hand.
• Post-Termination License: Many architectural contracts give owners a narrow right to use drawings after termination. That license only exists if the termination itself was valid.

Conclusion

The Eleventh Circuit’s ruling in McKinney v. Portico LLC clarifies that, absent contract language to the contrary, a party cannot retroactively transform a cause-based termination into a convenience termination in order to avoid liability at the pleading stage. This decision bolsters contractual predictability, ensures full airing of factual disputes, and underscores the importance of precise drafting when multiple termination rights co-exist. Architectural and other professional-services agreements incorporating AIA forms should be carefully reviewed to specify whether after-the-fact conversions of termination grounds are permitted—or prohibited.