A federal judge in Oregon has tossed a subcontractor’s unjust enrichment or “quantum meruit” claim against the owner because the subcontractor did not first exhaust its contractual remedies against the contractor.
Exhaustion of remedies is a common legal doctrine that generally requires parties to pursue relief in a particular order. In dealing with appeals from a government agency, for example, parties must first avail themselves of the agency’s internal or administrative appeals process before seeking relief in court. Parties who do not exhaust their administrative appeals may be thrown out of court if they try to skip ahead. Some jurisdictions, like Oregon, apply this concept in the construction setting to bar a subcontractor’s non-contractual claims if contractual claims remain viable (see Shoestring Valley Holdings v. Exp US Services Inc., et al, Case No. 3:25-cv-974-SI, 2025 WL 2336496 (D. Or. Aug. 13, 2025)).
In Shoestring, the subcontractor had simultaneously filed suit against both the contractor and the owner. The owner moved to dismiss the subcontractor’s quantum meruit claim arguing that the subcontractor had not first exhausted its contractual remedies against the contractor. The court agreed, holding that it was not sufficient to merely allege exhaustion. Rather, the court held that exhaustion of remedies against the contractor must be “alleged and proved” “before a subcontractor with no contractual relationship with a property owner can bring a claim for unjust enrichment against the owner.”
Consider this next time you are contemplating, pursuing, or defending non-contractual claims against an owner or similarly situated party. While we often focus on the lack of contractual privity defense, exhaustion of remedies may also be a viable defense depending on the law in your jurisdiction (which can vary greatly from state to state).
A copy of the court’s decision is located here.