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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: August 12, 2020

Plaintiff May Recover in Quasi-Contract From a Stranger to the Contract in the Interest of Justice

On July 30, 2020, Justice Ostrager of the New York County Commercial Division issued a decision in Matthews v. Symbion Power LLC, 2020 NY Slip Op. 20189, holding that a plaintiff may recover in quasi-contract from a stranger to a contract in the interest of justice, explaining:

While generally a plaintiff may not recover in quasi-contract if there is a valid agreement governing the same subject matter, plaintiff here cited compelling authority demonstrating that a plaintiff may recover in quasi-contract from a stranger to the contract in the interest of justice.

In a 2019 decision, United States District Court Judge Jesse Furman reviewed conflicting authority in New York regarding this precise issue. In Lee v. Kylin Mgmt. LLC, No. 17-CV-7249 (JMF), Judge Furman chronicled several cases which held that the mere existence of a written contract governing the same subject matter does not preclude recovery in quasi-contract from non parties so long as the other requirements for quasi contracts are met. Judge Furman found that this rule is more consistent with precedent from the New York Court of Appeals, which recognized an unjust enrichment claim brought against a third party despite a related contract in Bradkin v. Leverton, 257 N.E.2d 643 (NY 1970). Moreover, Judge Furman opined that this rule is more consistent with the very logic of the equitable doctrine of quantum meruit which is designed to prevent unjust enrichment where the absence of an enforceable contract otherwise prevents recovery from noncontracting parties.

Indeed, the Lee Court echoes the New York Court of Appeals in Bradkin v. Leverton, 26 NY2d 192, 196 (1970). In Bradkin the Court permitted a claim for unjust enrichment against a company’s owner despite a written contract between the plaintiff and the company, stating that a quasi-contractual obligation is one imposed by law where there has been no agreement or expression of assent, by word or act, on the part of either party involved. The law creates it, regardless of the intention of the parties, to assure a just and equitable result. Analyzing Miller v. Schloss, 218 NY 400, 407 (1916), the Court of Appeals noted although there was no agreement between them, express or implied, the defendant received a benefit from the plaintiff’s services under circumstances which, in justice, preclude him from denying an obligation to pay for them.

Here, the Court dismissed plaintiff’s claims for breaches of contracts that were unmistakably signed by a non-party Symbion Europe. Nevertheless, the Court recognizes that plaintiff has put forth evidence, both in opposition to the pre-answer motion to dismiss and in opposition to the present motion, supporting plaintiff’s allegations that defendant Symbion Power made promises to pay plaintiff for his services and caused plaintiff to incur unreimbursed expenses related to those services, and that Symbion Power was enriched to plaintiff’s detriment. Indeed, there is no real dispute that plaintiff’s work was directed and controlled by Symbion Power. For example, plaintiff reported to Paul Hinks (“Hinks”), who was then, and is now, chief executive officer of Symbion Power and holds no position at Symbion Europe. Plaintiff negotiated salary and other terms of his employment with Hinks and Del Copeland (“Copeland”), who was then Symbion Power’s Chief Operating Officer. Plaintiff was held out to foreign governments as an employee of Symbion Power LLC. Complaints that plaintiff was not being paid were directed to and answered by Hinks. Accordingly, based on the specific circumstances of this case, and in the interest of justice, the Court found, and now reaffirms, that plaintiff’s quasi-contract claims IV and V are sufficiently pled to survive a pre-answer motion to dismiss.

(Internal quotations and citations omitted).

Unjust enrichment is a common claim in commercial litigation. It is used when there was not a contract between the litigants, but the defendant received an unfair benefit at the plaintiff’s expense. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether you have, or are the subject of, a claim for unjust enrichment.

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