Friday, July 25, 2014

New York Unjust Enrichment and the Quiet Final Friday in July

We have clearly hit the part of the summer when most people are on vacation and the pace and volume of work in my New York office seems to slow to a crawl. On my floor today, where you normally find about 30 - 35 people working, there are only 5 of us in the office today.

With the quiet of the office comes the ability to catch up on some research that has been piling up over the past few weeks. The top of the pile today comes from a series of cases dealing with the concept of unjust enrichment.

In 2012, the New York Court of Appeals discussed the standard to be used in unjust enrichment cases:
As we have stated on several occasions, "`[t]he theory of unjust enrichment lies as a quasi-contract claim'" and contemplates "an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties" (IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 142 [2009], quoting Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 572 [2005]). An unjust enrichment claim is rooted in "the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another" (Miller v Schloss, 218 NY 400, 407 [1916]). Thus, in order to adequately plead such a claim, the plaintiff must allege "that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" (Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011] [brackets and internal quotation marks omitted]).

In the cases that came across my desk a couple years ago, my various clients entered into transactions that they believed to be based upon a contract. However, each client failed to actually enter into a contract before transferring money to the other party and were left without any means of getting their money back unless they filed a lawsuit.

At this time, the cases are all at different stages, some initially filed, some in the middle of exchanging discovery documents, and two with trials scheduled for the fall of 2014.

My advice to my clients, at least before they enter into these transactions, is always to get the terms in writing, preferably in a contract that each party understands so that they do not end up in my office looking to start a lawsuit.


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