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Posted: September 12, 2018

Unjust Enrichment Claim Survives Dismissal Because of Questions of Fact Regarding Whether Contract Covers Claims

On August 21, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Georgetown Co., LLC v. IAC/Interactive Corp., 2018 NY Slip Op. 32078(U), declining to dismiss an unjust enrichment claim because of questions of fact regarding whether there was a contract covering the plaintiff’s claims, explaining:

The elements of a cause of action to recover for unjust enrichment are (1) the defendant was enriched, (2) at the plaintiffs expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered. The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered. Notably, although the existence of a valid and enforceable contract generally precludes quasi-contractual recovery, where a bona fide dispute exists as to the existence, or applicability, of a contract, the plaintiff may proceed on both breach of contract and quasi-contract theories.

Defendants argue that this claim must be dismissed because all the work performed by plaintiffs was done pursuant to paragraph 2.10 of the Development Agreement, in which Georgetown 19th Street Development agreed, at HTRF’s request and expense, to provide it with assistance obtaining financing, and in securing any tax abatements or incentives, for the Headquarters Project. However, it is not clear how the Development Agreement, Which was entered into for the purposes of constructing IAC’s headquarters, covers the work performed by plaintiffs on the zoning changes. There is no dispute the zoning changes were not necessary for the Headquarters Project. As plaintiffs note, the terms of the Development Agreement specifically refer to the “Project,” meaning the construction of the IAC headquarters. Notably, recital E of the Development Agreement defines the word “Project” as the “demolition of the Existing Building,” and the “planning and construction” of the IAC headquarters. Accordingly, defendants’ documentary evidence does not utterly refute plaintiffs’ unjust enrichment allegations conclusively or as a matter of law.

Moreover, while there is no dispute regarding the validity of the Letter Agreement or the other various documents executed by the parties, there is a bona fide dispute regarding the applicability of the Letter Agreement to facts of this case. Should it be determined that the Letter Agreement does not apply, that does not necessarily preclude plaintiffs from seeking to recover damages under the theory ·of unjust enrichment.

(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. As this decision discusses, the viability of an unjust enrichment claim often turns on whether there was a contract between the parties. 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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