Jennifer Nelson for www.theindianalawyer.com

The Indiana Court of Appeals agreed with a trial court that a propane company is on the hook for two customers’ attorney fees after it failed to deliver prepaid propane gas under an agreement with the couple.

In July 2013, John and Leola Caffrey signed an agreement with South Indiana Propane Gas Inc., paying $1.28 a gallon for 300 gallons. The agreement said the Caffreys agreed to pay all costs incurred by SIPG if it had to enforce any terms of the agreement, including attorney fees, but there was not a similar provision for the Caffreys.

In the third week of January 2014, John Caffrey called SIPG and sought delivery of the prepaid gas. The company’s agent told him that due to the national propane shortage that winter, the company was not sure what it was “going to do” with its prepaid contracts. Leola Caffrey also followed up, but was unable to receive a response from the company.

They and several other people complained to the Indiana Attorney General’s Office, which sent SIPG a civil investigative demand seeking information on the matter. The AG’s office closed the investigation in December 2014 without taking action.

The Caffreys hired an attorney iand filed a complaint in small claims court Feb. 26, 2015, for breach of contract. SIPG’s attorney contacted the Caffreys’ attorney and said that customers who had not received their prepaid gas could do so under former agreement rates until March 31, 2016. This was the first time the Caffreys learned they could call and place an order at the same price they had paid in 2014.

The small claims court decided in May 2015 that SIPG had fulfilled its obligation under the agreement and only ruled on the attorney fees matter. The judge awarded the couple $756, finding that SPIG “settled” in its March 2015 letter by agreeing to perform the contract under its original terms. The judge used March 12, 2015, as the cutoff date to award the fees.

SIPG appealed, claiming the court erred in finding that SPIG’s defense to its liability was unreasonable, groundless or in bad faith. SIPG asserted that its defense that it was not required to pay the Caffreys’ attorney fees under the Agreement was worthy of litigation. The company also claimed it did not act with “obdurate, vindictive[,] or untruthful behavior” because it delivered the propane within 30 days of “learning about the problem.”

The appellate court noted that the trial court did not order SIPG to pay the attorney fees accrued by the Caffreys litigating the attorney fees issue. It is clear that the award was based on the company’s” continued unreasonable, groundless and/or bad faith defense that it was not liable under the contract due to the national propane shortage, not its defense that it was not liable for attorney fees under the Agreement,” Judge Rudolph Pyle wrote.

The judges also noted that SIPG did not perform under the agreement for 14 months and never made an attempt to perform or notify the Caffreys that it was unable to perform under the agreement. That as a result “had the effect of perpetuating its defense that it was excused from performance by the propane shortage,” he continued.

“We are not convinced that this delay and SIPG’s continuance of its defense that it was excused from performance for such an extended period was not unreasonable, groundless, or in bad faith.”

The case is South Indiana Propane Gas, Inc. v. John Caffrey and Leola Caffrey, 19A05-1506-SC-716.