| Georgia Malone & Co., Inc. v Rieder |
| 2011 NY Slip Op 05856 [86 AD3d 406] |
| July 7, 2011 |
| Appellate Division, First Department |
| Georgia Malone & Company, Inc., Appellant, v RalphRieder et al., Respondents, et al., Defendant. |
—[*1] Lichter Gliedman Offenkrantz PC, New York (Ronald J. Offenkrantz of counsel), for RalphRieder, Elie Rieder, Kenneth Gliedman and Fieldstone Properties, LLC, respondents. Westerman Ball Ederer Miller & Sharfstein, LLP, Uniondale (Michael J. Gelfand ofcounsel), for Rosewood Realty Group Inc. and Aaron Jungreis, respondents.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered July 27, 2009,which, to the extent appealed from, as limited by the briefs, in an action to recover real estatebrokerage commissions, dismissed the complaint as against defendant-respondent Ralph Rieder,and the unjust enrichment claim as against all of the defendants-respondents, modified, on thelaw, to reinstate the unjust enrichment claim as against Ralph Rieder and Elie Rieder, andotherwise affirmed, without costs. Order, same court and Justice, entered June 10, 2010, which,insofar as appealed from, denied plaintiff's motion to renew, affirmed, without costs.
Plaintiff Georgia Malone & Company, Inc. (MaloneCo) is a licensed real estate brokerageand consulting firm that provides its clients with information with respect to the purchase andsale of properties not yet on the market. MaloneCo and defendant CenterRock Realty, LLC, byits managing member, Ralph Rieder (Ralph), entered into a confidentiality agreement inNovember 2007. That agreement pertained to CenterRock's potential purchase of a group ofbuildings in Midtown Manhattan and required CenterRock to treat all information provided to itby MaloneCo as confidential. In addition, the agreement also required CenterRock to payMaloneCo a commission fee of 1.25% of the sale price of the property. The agreement wassigned by "Ralph Rieder of CenterRock Realty LLC" and MaloneCo. The purchaser is defined as"CenterRock Co" and its affiliates, and the signature line denotes CenterRock Realty as the"company," with Ralph Rieder as the "contact name."
After the agreement was signed, MaloneCo provided CenterRock, Ralph, Elie Rieder (Elie),an officer of CenterRock, and defendant-respondent Kenneth Gliedman, an attorney forCenterRock, with confidential information concerning financial projections, due diligence [*2]materials, and other information and advice relating to all aspects ofthe subject property and potential transaction. In December 2007, CenterRock entered into acontract of sale with the property owners to purchase the property for $70,000,000. CenterRockhad a 25-day period to perform due diligence investigations, during which time it could terminatethe deal without penalty. The property owners agreed to extend the due diligence period anadditional 21 days, to January 25, 2008. During the due diligence period, MaloneCo continued tocollect, create and provide CenterRock, Ralph, and Elie with confidential information regardingthe property. On January 25, 2008, the final day of the due diligence period, CenterRockterminated the transaction.
MaloneCo alleges that it provided valuable, confidential information to CenterRock, Ralph,and Elie, who then sold the information to defendants-respondents Rosewood Realty Group Inc.,a fellow brokerage firm, and Aaron Jungreis, a broker at Rosewood, for $150,000. MaloneCofurther contends that from about November 2007 through January 2008, Ralph continuallyaffirmed CenterRock's interest in completing the transaction. The complaint specifically allegesthat Ralph sent an e-mail to MaloneCo stating that he and Elie were working together tocomplete the transaction. However, during this time Ralph allegedly delayed the negotiations andtender of the down payment in order to provide himself, CenterRock, and Elie with more time tosecure an equity partner to participate in the transaction. It is further alleged that shortly afterCenterRock terminated the contract, Elie sold MaloneCo's confidential information to Rosewoodand Jungreis.
MaloneCo also contends that Rosewood and Jungreis then provided this information to itsclient, who in turn purchased the property resulting in a sizeable commission for Rosewood andJungreis.[FN1]According to the complaint, Ralph and Elie benefitted, separate and apart from any benefit toCenterRock, by profiting from the ultimate sale of the property, in addition to the $150,000received for selling the confidential information. MaloneCo further alleges that Gliedman wasthe attorney for both CenterRock and the ultimate purchaser of the subject property, with his onlybenefit being collection of his fees. Defendant-respondent Fieldstone Properties, LLC (FSP), acorporation in which Ralph and Elie are officers, also is alleged to have unjustly benefitted fromMaloneCo's work product.
MaloneCo commenced this action alleging breach of contract, breach of confidentiality,quantum meruit, and unjust enrichment against Ralph Rieder individually, and unjust enrichmentagainst the remaining defendants-respondents. Defendants-respondents moved to dismiss thecomplaint for failure to state a cause of action and the court granted the motions in their entirety.
The motion court properly dismissed the contract claims against Ralph,individually.[FN2]It is well established that officers or agents of a company are not personally liable on a contract ifthey do not purport to bind themselves individually (PNC Capital Recovery v MechanicalParking Sys., 283 AD2d 268, 270 [2001], lv dismissed 96 NY2d 937 [2001],appeal dismissed 98 NY2d 763 [2002]; see also Salzman Sign Co. v Beck, 10NY2d 63, 67 [1961]). Ralph is listed [*3]only as the "contact"and CenterRock is listed as the "company" on the signature block of the agreement. Theagreement specifically states it is between "Ralph Rieder of CenterRock" and MaloneCo. Indeed,Ralph only signed the contract once, rather than signing twice, which is the general practice whenan individual wishes to be personally bound (Salzman Sign Co., 10 NY2d at 67).
The unjust enrichment claim against Ralph and Elie, in their individual capacities, should nothave been dismissed. Unjust enrichment is a quasi contract theory of recovery, and "is anobligation imposed by equity to prevent injustice, in the absence of an actual agreement betweenthe parties concerned" (IDT Corp. vMorgan Stanley Dean Witter & Co., 12 NY3d 132, 142 [2009]). The plaintiff mustshow that the other party was enriched, at plaintiff's expense, and that "it is against equity andgood conscience to permit [the other party] to retain what is sought to be recovered" (Mandarin Trading Ltd. v Wildenstein,16 NY3d 173, 182 [2011] [internal quotation marks and citation omitted]). Further, althoughprivity is not required for an unjust enrichment claim (Sperry v Crompton Corp., 8 NY3d 204, 215 [2007]), a claim willnot be supported unless there is a connection or relationship between the parties that could havecaused reliance or inducement on the plaintiff's part (Mandarin Trading, 16 NY3d at182).
Prior cases from this Court and the other Departments have held that an unjust enrichmentclaim can only be sustained if the services were performed at the defendant's behest (Ehrlich v Froehlich, 72 AD3d1010, 1011 [2010]; Seneca Pipe &Paving Co., Inc. v South Seneca Cent. School Dist., 63 AD3d 1556 [2009]; JoanHansen & Co. v Everlast World's Boxing Headquarters Corp., 296 AD2d 103, 108 [2002];Kagan v K-Tel Entertainment, 172 AD2d 375, 376 [1991]). The Court of Appeals inMandarin Trading held that the plaintiff was unable to establish an unjust enrichmentclaim where the "pleadings failed to indicate a relationship between the parties that could havecaused reliance or inducement" (Mandarin Trading, 16 NY3d at 182). The Court did notdiscuss the "behest" language in Kagan and its progeny. However, there was no reasonfor the Court to do so because there was no claim of a contract between the plaintiff and thedefendant, nor was there a claim of any direct contact such that the plaintiff could have acted atthe defendant's behest. In any event, even under the language of Mandarin Trading, theunjust enrichment claim survives against Elie and Ralph.
MaloneCo contends that Ralph personally affirmed his, CenterRock's, and Elie's interest incompleting the transaction and assured MaloneCo that it would receive its commission, even ifthe deal was not completed. Based on these assurances, MaloneCo continued to collect andprovide Ralph, Elie, and CenterRock with the confidential information. Thus, MaloneCo hassufficiently pleaded that there was direct contact and a relationship with Ralph and Elie thatcould have caused reliance or inducement (cf. Mandarin Trading, 16 NY3d at182-183).
In contrast, no such allegations exist as to FSP, Gliedman, Rosewood, and Jungreis.MaloneCo dealt solely with CenterRock, Ralph, and Elie. It is not enough, as the dissentsuggests, that CenterRock, Ralph, and Elie had a connection with the remainingdefendants-respondents. MaloneCo does not allege that it relied upon any statements or actionsof FSP, Gliedman, Rosewood or Jungreis, that those defendants acted in any way to induceMaloneCo to provide the confidential information, in the first instance, to CenterRock, Ralph,and Elie, or even that those defendants knew MaloneCo had not been paid. It also is notsufficient, as the dissent contends, to merely show that FSP, Gliedman, Rosewood and Jungreiswere aware of MaloneCo's existence. A mere awareness standard would result in liability foranyone who simply knew of the plaintiff's existence. Similarly, the dissent also incorrectlycontends that an [*4]unjust enrichment claim can exist solelybecause defendants may have profited, in one form or another, from plaintiff's work. Such abroad reading improperly expands the claim of unjust enrichment, absent any contention thatdefendants induced plaintiff to do the work. It is this lack of reliance or inducement that is fatalto the unjust enrichment claim against the third parties, and not merely the lack of behestlanguage, as the dissent suggests in its opening paragraph.
Contrary to the dissent's suggestion, we see no contradiction between our holding and thelanguage of the Court of Appeals in Mandarin Trading, nor do we see any internalinconsistency in the Court of Appeals' opinion. That case noted that an unjust enrichment claimwas deficient without an allegation of a relationship that caused reliance or inducement. The briefreference to one party's "awareness" of the other party's existence in Mandarin Tradingwas used simply to highlight the fact that, in that case, the two parties had no connectionwhatsoever and thus their relationship was "too attenuated" (Mandarin Trading, 16 NY3dat 182). It was not intended, as the dissent suggests, to create an entirely new pleading rule,overruling existing Appellate Division precedent. The dissent's response to Kagan and itsprogeny is to announce that those cases were overruled by the Court of Appeals in Sperryand Mandarin Trading. The holding in Sperry stated that privity is not required (8NY3d at 215), a principle which is not in dispute here. However, the dissent fails to adequatelyexplain why the Court of Appeals, in either case, would have overruled controlling precedentfrom this Department, as well as the other Departments, without a clear indication that it wasdoing so.[FN3]
Finally, the dissent continues to maintain, despite the clear language to the contrary in thisopinion, that we are requiring privity. Requiring plaintiff to plead facts from which it can beinferred that there was a relationship that involved reliance or inducement is not the same asrequiring privity. We are not, as the dissent contends, applying too high a standard for a CPLR3211 motion. Nor are we requiring plaintiff to plead the minutia of its unjust enrichment claim.Rather, we are properly requiring MaloneCo to plead facts that are within its knowledge, andfrom which a relationship that caused reliance or inducement could be inferred.
To the extent that MaloneCo asserts an action in quantum meruit against Ralph individually,it was properly dismissed. In order to establish a quantum meruit claim, plaintiff must show "theperformance of services in good faith, acceptance of the services by the person to whom they arerendered, an expectation of compensation therefor, and the reasonable value of the services"(Freedman v Pearlman, 271 AD2d 301, 304 [2000]). Here, there is no allegation that theservices performed by MaloneCo were requested by Ralph or performed on his individual behalf.
Denial of MaloneCo's motion to renew also was proper as it did not submit any new [*5]material demonstrating Ralph Rieder's intent to be personally boundunder the contract (see CPLR 2221 [e] [2]). Concur—Friedman, Catterson andRichter, JJ.
Saxe, J.P., and Acosta, J., dissent in part in a memorandum by Acosta, J., as follows: Irespectfully dissent because I believe that my colleagues are in error and ignore clear Court ofAppeals precedent in upholding the dismissal of the unjust enrichment claims against FieldstoneProperties, LLC (FSP), Gliedman, Rosewood and Jungreis. Specifically, while the majoritywould require that plaintiff plead that the property be provided in the first instance at the behestof the defendants, I believe that it was sufficient that plaintiff alleged that defendantsknew at all times that they were using information that had been wrongfully obtained bythe individuals that sold it to them.
It is well established that to successfully plead unjust enrichment "[a] plaintiff must showthat (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equityand 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] [internal quotation marks omitted]; see also Wiener v LazardFreres & Co., 241 AD2d 114, 119 [1998] ["(a) cause of action for unjust enrichment is statedwhere plaintiffs have properly asserted that a benefit was bestowed . . . by plaintiffsand that defendants will obtain such benefit without adequately compensating plaintiffs therefor"(internal quotation marks omitted)]). A claim for unjust enrichment "is undoubtedly equitableand depends upon broad considerations of equity and justice" (Paramount FilmDistrib. Corp. v State of New York, 30 NY2d 415, 421 [1972], cert denied 414 US829 [1973] [emphasis added]).[FN1]It is "[d]uty, and not a promise or agreement or intention of the person sought to be charged,[that] defines it" (Bradkin, 26 NY2d at 197, quoting Miller v Schloss, 218 NY400, 407 [1916]). Where a plaintiff's property is wrongfully [*6]misappropriated by a third party and given to a defendant, thedefendant who receives the misappropriated property has a duty to return it to the plaintiff andmay be compelled on equitable grounds to compensate the plaintiff (see Carriafielio-Diehl & Assoc., Inc. vD&M Elec. Contr., Inc., 12 AD3d 478, 479 [2004]; Wolf v National Council ofYoung Israel, 264 AD2d 416, 417 [1999]; Nakamura v Fujii, 253 AD2d 387, 390[1998]; Cohn v Rothman-Goodman Mgt. Corp., 155 AD2d 579, 581 [1989]). In order toadequately plead an unjust enrichment claim there must be allegations of a connection betweenthe plaintiff and the defendant that is not too attenuated; that is, the parties must have somethingakin to specific knowledge of one another's existence (see Mandarin Trading, 16 NY3d at182 ["Although privity is not required for an unjust enrichment claim, a claim will not besupported if the connection between the parties is too attenuated"], citing Sperry v Crompton Corp., 8 NY3d204, 215 [2007]; see also 26 Lord, Williston on Contracts § 68:5 [4th ed][noting that one of the elements of an unjust enrichment claim is "an appreciation orknowledge by the defendant of the benefit" (emphasis added)]).
Before Sperry, there was a split of authority in New York regarding the extent towhich parties needed to be in privity with one another to state a claim for unjust enrichment(see e.g. NY PJI 4:2, Comment ["There is a split of authority as to whether privity isrequired in a claim seeking damages for unjust enrichment"]; Bildstein v MasterCard Intl.,Inc., 2005 WL 1324972, *5, 2005 US Dist LEXIS 10763, *15 [SD NY 2005] ["WhetherNew York law imposes a nexus requirement to state a claim for unjust enrichment is unsettled"]).For example, one case in this Department essentially discarded the privity requirement (see e.g. Cox v Microsoft Corp., 8AD3d 39, 40 [2004]), while another line of cases in this Department held that the partiesneeded to be in direct privity with one another to plead unjust enrichment (see e.g. JoanHansen & Co. v Everlast World's Boxing Headquarters Corp., 296 AD2d 103, 108 [2002],quoting Kagan v K-Tel Entertainment, 172 AD2d 375, 376 [1991]).[FN2]In Sperry and Mandarin Trading, I believe that the Court of Appeals resolved thissplit and staked out a middle ground between the two different schools of thought.Indeed, after Sperry and Mandarin Trading, a party is now allowed to bring aclaim for unjust enrichment under a loosened privity standard. Where a party bringing such aclaim pleads that the other party had knowledge or awareness of its existence, the claim shouldnot be dismissed for lack of privity.
In Sperry, the Second Department affirmed Supreme Court's decision dismissingSperry's claim for unjust enrichment on the ground that plaintiff was not in privity with thedefendants (26 AD3d at 489). In so doing, the Second Department noted its disagreement withthis Department's decision in Cox vMicrosoft Corp. (8 AD3d 39, 40 [2004]). It also cited, inter alia, this Department'sdecision in Kagan (172 AD2d at 376) to support its narrow view of privity (26 AD3d at489). Notably, some of the cases cited by the Second Department in Sperry adopted theelement being advanced by the majority here—namely, that services be performed at thedefendant's "behest" (see e.g. Outrigger Constr. Co. v Bank Leumi Trust Co. of N.Y., 240AD2d 382, 384 [1997], lv denied 91 NY2d 807 [1998]). The Court of Appeals affirmedthe Second Department's decision; however, the Court "agree[d] with Sperry that a plaintiff neednot [*7]be in privity with the defendant to state a claim for unjustenrichment" (Sperry, 8 NY3d at 215).[FN3]In light of the fact that the Court of Appeals saw fit to lay out an alternative rationale from theone articulated by the Second Department and that the Court did not adopt the "behest"requirement in the various opinions cited by the Second Department's opinion, I believe that theCourt of Appeals has overruled the line of cases adding the "behest" requirement as an elementof unjust enrichment (see e.g. Joan Hansen & Co., 296 AD2d 108, quotingKagan, 172 AD2d at 376).[FN4]I also believe that Cox (8 AD3d 39) is no longer good law.
Contrary to the majority's position, to plead unjust enrichment, there is no requirement thatthe property be provided in the first instance at the behest of the defendant[FN5](see Monex Fin. [*8]Servs., Ltd. v Dynamic Currency Conversion, Inc., 62 AD3d675, 676 [2009] ["(T)he complaint sufficiently pleaded a cause of action sounding in unjustenrichment. The latter cause of action did not plead a quantum meruit theory; therefore, theplaintiffs were not required to plead that they performed services for the defendants" (citationsomitted)];[FN6]Aetna Cas. & Sur. Co. v LFO Constr. Corp., 207 AD2d 274, 277 [1994] ["The unjustenrichment claim does not require that the party enriched take an active role in obtaining thebenefit"]; see also T.D. Bank, N.A. v JP Morgan Chase Bank, N.A, 2010 WL 4038826,*5, 2010 US Dist LEXIS 109471, *19-20 [ED NY 2010] ["The claims for restitution asserted byChase require proof of no other, independent relationship between the parties . . .Accordingly, Chase's failure to allege privity or direct dealings between itself and Kahan does notdefeat its claims for . . . unjust enrichment"]; Manufacturers Hanover Trust Co.v Chemical Bank, 160 AD2d 113, 117 [1990], lv denied 77 NY2d 803 [1991][noting that "(i)t does not matter whether the benefit is directly or indirectly conveyed" inaddressing an unjust enrichment claim where the parties had direct contact with one another];Dreieck Finanz AG v Sun, 1989 WL 96626, *4, 1989 US Dist LEXIS 9623, *13 [SD NY1989] [in applying New York law to adjudicate an attachment claim based on an unjustenrichment theory where some of the parties knew of each other, the District Court noted, "(n)oris it necessary for plaintiff and defendant to have had direct dealings with oneanother"]).[FN7]It was sufficient that plaintiff alleged that defendants knew at all times that they wereusing for their own benefit information that had been wrongfully obtained by the very individualsthat sold it to them at a significant[FN8]discount (Mandarin Trading, 16 NY3d at 182 ["Mandarin's unjust enrichment claim failsfor the same deficiency as its other claims—the lack of allegations that would indicate arelationship between the parties, or at least an awareness by Wildenstein of Mandarin'sexistence" (emphasis added)]; Davenport v Walker, 132 App Div 96 [1909];[FN9]see [*9]also Mason v Prendergast, 120 NY 536, 536[1890] [holding that where a person that has a specific fund belonging to another, "who isentitled thereto on demand, delivers the money, without the consent of the owner, to a thirdperson, and the latter refuses to pay it over on demand, an action . . . is maintainableagainst him, and for the purpose of relief it is not necessary to join as plaintiff the one who madethe delivery"]; RenerGlobe, Inc. v Northeast Biofuels, LLC, 24 Misc 3d 1212[A], 2009NY Slip Op 51430[U] [2009] [upholding a complaint alleging that the new owners of a facilityreceived valuable permits and contracts as a result of the plaintiff's work on behalf of theprevious owner, and that it would be unjust and inequitable for the new owner and operators ofthe facility to retain such services and benefits without compensating the plaintiff]). Thelanguage in Mandarin Trading that "the pleadings failed to indicate a relationshipbetween the parties that could have caused reliance or inducement" focused on the nature of theenrichment conferred upon the defendant, that is, the "equity" of the enrichment (16 NY3d at182). That language did not address the necessary nexus between the parties.[FN10]The majority's interpretation [*10]of the "reliance" or"inducement" language in Mandarin Trading essentially transforms the language in thepreceding paragraph, establishing "awareness" as a sufficient basis to state a cause of action(id.), into mere surplusage.[FN11]Judge Jones' opinion should not be read to include purposeless phrases that serve as nothingmore than mere ornamentation. Moreover, I do not believe that the Court of Appeals was socareless as to write what would amount to, under the majority's interpretation, an internallyinconsistent opinion.[FN12]Accordingly, I reject the majority's use of the "reliance" or "inducement" language inMandarin Trading to reintroduce what amounts to a direct privity requirement to plead acause of action for unjust enrichment.
Here, plaintiff factually and pointedly alleges, in the absence of discovery, that defendantsmisappropriated its confidential information and benefitted from its property. Specifically, italleges that it had provided valuable, confidential information to CenterRock and Ralph Rieder,and that Rieder and his affiliated defendants wrongfully sold the information to defendantsRosewood and Jungreis, who in turn used it to obtain a sizeable commission. Plaintiff furtheralleges in its complaint that "defendants Rieder, CenterRock, Elie, Gliedman, FSP, Rosewoodand Jungreis knew at all times that [plaintiff] had performed the aforementioned work,labor and services and had supplied the aforesaid information with the expectation that [plaintiff]would be compensated therefor[ ] in the event that an agreement was reached to purchase theProperty" (emphasis added).[FN13]Because defendants allegedly knew of the benefit that plaintiff conferred upon them, theconnection between the parties is not too attenuated (cf. Mandarin Trading, 16 NY3d at182). Indeed, unlike in Mandarin Trading, the parties here were not total strangers to oneanother. Assuming the truth of plaintiff's assertions as we must on a motion to dismiss (seeFischbach & Moore v Howell Co., 240 AD2d 157 [1997]), defendants should not be able toprofit from what they allegedly knew to be the wrongful dissemination of plaintiff's confidentialproprietary information, while plaintiff receives nothing for its work and valuable workproduct[FN14](cf. Joan Briton, Inc., 36 AD2d at 465-466 ["The defendant deRham was not merely theinnocent recipient of an unsolicited gift. It is indicated that she was intimately involved in everystage of the arrangements, and having benefited therefrom, ought without any doubt also beliable to the plaintiff for what she received"]).[FN15][*11]
Saying that these allegations are "conclusory" does notmake it so, particularly in the context of a glaring misappropriation of plaintiff's property. Themajority wants to raise the CPLR 3211 bar by requiring, in the absence of discovery, that plaintiffnot simply allege its claim, but support it with evidence as well. At this stage of the action,however, the information that would satisfy the majority is generally within the knowledge of thedefendants alleged to have misappropriated the property. Accordingly, it is extremely unfair andimproper, in the context of a CPLR 3211 motion, where "the criterion is whether the proponentof the pleading has a cause of action, not whether he has stated one" (Leon v Martinez,84 NY2d 83, 87-88 [1994], quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275[1977]), to require that plaintiff plead the minutia of the unjust enrichment claim (see SuffolkCounty Water Auth. v Dow Chem. Co., 30 Misc 3d 1202[A], 2010 NY Slip Op 52243[U],*4 [2010] ["While much of what (plaintiff) has stated may need to be demonstrated with specificinformation . . . such will be done through the discovery process. . . .However, as set forth, the complaint places the movants on notice of the conduct. . . with which it charges them; it gives notice of the manner in which some of theevidence exists; it sets forth the method by which the harm . . . assertedly occurred;and it sets forth its basis for . . . damages. This does not mean such can be proved;however, it is sufficient to satisfy the requirements of CPLR § 3211 (a) (7)"]; seealso CPLR 3211 [d]). Plaintiff should be entitled to seek recovery for the unjust enrichmentof those who knowingly and wrongfully misappropriated its property as well as those whobenefitted from property that they knew came into their hands as a result of the wrongful actionof a third party.[FN16]
Finally, I believe there are strong prudential reasons for rejecting the majority's attempt toreintroduce a heightened privity requirement (cf. Perillo, Restitution in a ContractualContext, 73 Colum L Rev 1208, 1211 [1973] [describing privity as an "unintelligible"requirement "in a context where liability may be thrust upon the defendant by a stranger"]). Assuch, plaintiff's fourth cause of action should be reinstated. If plaintiff prevails, it should beentitled to obtain restitution for the full amount (i.e., $750,000) that it alleges it would havereceived had the parties not misappropriated its property.
Footnote 1: The complaint does not allegethat Rosewood and Jungreis knew that MaloneCo had not been compensated by CenterRock orthe Rieders.
Footnote 2: The motion court deniedCenterRock's motion to dismiss in its entirety and CenterRock is not a party to this appeal.
Footnote 3: The dissent's contention that weare requiring the Court of Appeals to name every case it is overturning is a misreading of thismajority opinion. It is worth noting that neither the briefs filed in the Court of Appeals inMandarin Trading, nor the opinion itself focuses on the precedents we are citing here,and thus we adhere to our position that Mandarin Trading did not necessarily overrulethose cases. In any event, the difference between our view and that of the dissent turns on theinterpretation of a few sentences in Mandarin Trading, which ultimately resulted indismissal of the unjust enrichment claim.
Footnote 1: As the Court of Appeals hasexplained: "A quasi or constructive contract rests upon the equitable principle that aperson shall not be allowed to enrich himself unjustly at the expense of another. In truth it is nota contract or promise at all. It is an obligation which the law creates, in the absence of anyagreement, when and because the acts of the parties or others have placed in thepossession of one person money, or its equivalent, under such circumstances that in equity andgood conscience he ought not to retain it, and which ex aequo et bono belongs toanother." (Bradkin v Leverton, 26 NY2d 192, 197 [1970] [emphasis added], quotingMiller v Schloss, 218 NY 400, 407 [1916]).
Footnote 2: There was also a division amongthe federal courts applying New York Law in diversity actions, as noted in Bildstein(2005 WL 1324972, *5, 2005 US Dist LEXIS 10763, *15).
Footnote 3: The majority's claim that theCourt of Appeals in Mandarin Trading did not discuss the "behest" requirement inKagan because the requirement did not apply in that case is perplexing. Of course, suchlanguage would have had direct application in that case. It could certainly have been used as thebasis for denying the plaintiff's claim. The Court of Appeals could well have adopted the generalrule articulated by the majority and applied it to the facts in Mandarin Trading. Yet, theCourt chose not to do so. I believe that the Court of Appeals' unwillingness to apply the "behest"requirement in Mandarin Trading and Sperry is more consistent with myview—that the "behest" requirement is no longer good law—than with the majority'sposition. In short, if the Court believed that the "behest" language was good law, it would havesaid so, even if it chose not to apply it.
Footnote 4: The majority justifies its defenseof Kagan on the ground that the Court of Appeals did not give a "clear indication that itwas [overruling controlling precedent from this Department]." I believe, however, that JudgeJones' opinion in Mandarin Trading was crystal clear in rejecting the behest requirement.The Court of Appeals does not have to name every case that it is overturning; it merely has toarticulate a new rule that is logically inconsistent with this Court's prior precedent.
Footnote 5: A cause of action for unjustenrichment has traditionally been understood to reach situations beyond the scope of a claimbrought for quantum meruit. Unsurprisingly, the case cited by Kagan in support of the"behest" element was an action for quantum meruit (see Citrin v Columbia BroadcastingSys., 29 AD2d 740 [1968]). The majority's insistence on limiting unjust enrichment claims tothose where the benefit was conferred at the behest of the defendant, after the Court of Appealsdid away with that requirement in Sperry, virtually collapses the distinction betweenclaims for quantum meruit and those for unjust enrichment. Troublingly, by limiting the scope ofunjust enrichment to such a significant degree, the majority would preclude a party fromrecovering for, inter alia, a mistake. In so doing, the majority runs roughshod overwell-established principles of American law, the origins of which can be traced to Roman times(see Corbin, Quasi-Contractual Obligations, 21 Yale LJ 533, 543 [1912] ["Wheremoney is paid under the mistaken belief that it was due, when in fact nothing was due, an actionwill lie to recover it. This was true also under the Roman law and it is true under all the civilcodes based on the Roman law"]). Moreover, the majority is adding an element to the unjustenrichment cause of action that (1) is nowhere to be found in the Court of Appeals precedentsand (2) cannot be reconciled with existing precedent (see Mandarin Trading, 16 NY3d at182 [articulating three elements of an unjust enrichment claim, none of which included arequirement that the benefit be conferred at the defendant's "behest"]).
Footnote 6: Notably, in arriving at the sameconclusion that I have reached respecting the relationship between quantum meruit and unjustenrichment, the Second Department rejected Supreme Court's application of Kagan in anaction for unjust enrichment (62 AD3d at 676).
Footnote 7: The facts of this case aremore fully elaborated in Dreieck Finanz AG v Sun, 1990 WL 11537, 1990 US DistLEXIS 1438 [SD NY 1990].
Footnote 8: The majority maintains thatmy standard would "expand[ ] the claim of unjust enrichment." On the contrary, the majority'sreading would narrow the claim in a way that countless federal and state courts have rejected(see 26 Lord, Williston on Contracts § 68:5 [4th ed]).
Footnote 9: In Davenport, theplaintiff John S. Davenport, as receiver of the Bank of Staten Island, brought an unjustenrichment action against defendants Norman S. Walker, Jr., and another, doing business asWalker Bros. The complaint alleged that Ahlmann, the cashier of the Bank of Staten Island, drewa cashier's check upon the bank and delivered it to the defendants, who received it in partpayment of his indebtedness (132 App Div at 98). Ahlmann lacked the bank's approval to takesuch action. The complaint further alleged that defendants accepted the check that Alhmanntendered "with notice and knowledge that the said funds were the funds of the said bank"(id. [internal quotation marks omitted]). The Court allowed the action to proceed,holding: "It may be conceded, in view of Ahlmann's relations to the bank, that the mere fact thatthe check was a cashier's check would not be sufficient to put the defendants upon notice thatfunds of the bank were being used to pay his individual debt. But this complaint alleges furtherthat at the time that the defendants applied this $40,000 in part payment of Ahlmann'sindebtedness to them they accepted such part payment 'with notice and knowledge that the saidfunds were the funds of the said bank.' . . . If the defendants knew thatAhlmann was paying his debts with the bank funds, equity and good conscience would forbidthem to retain the same. Under this allegation the plaintiff is not limited to any inference that maybe drawn from the form of the check, but may prove full and complete notice and knowledge,actual or constructive, that the money which defendants received was money of the bank whichAhlmann had no right to use" (id. [emphasis added and citations omitted]).
Footnote 10: Indeed, the Court of Appealslanguage in Mandarin Trading echoes the language of this Court's majority opinion inMandarin Trading (65 AD3d 448 [2009], affd 16 NY3d 173 [2011]). Notably, themajority quoted Paramount Film Distrib. Corp. (30 NY2d at 421), for the proposition that"[t]he essential inquiry in any action for unjust enrichment or restitution is whether it is againstequity and good conscience to permit the defendant to retain what is sought to be recovered"(Mandarin Trading, 65 AD3d at 451). I believe that the majority's link between the lackof reliance and inducement on the part of Mandarin and the "equity" requirement of an unjustenrichment claim supports my view that the language respecting "reliance or inducement" in theCourt of Appeals opinion (16 NY3d at 182) was similarly tied to the "equity"requirement—and not the "privity" requirement, as the majority maintains.
Footnote 11: Frankly, I fail to understandhow such a requirement could be met without also requiring that the parties have a directrelationship with one another—something the Court of Appeals has said in MandarinTrading is unnecessary. To wit, the interaction that is required to cause a person to rely uponanother person or induce a person to take some action necessitates more than mere awareness ofthe other parties' existence.
Footnote 12: That is, I do not believe thatJudge Jones' opinion suffers from any internal inconsistency. Rather, I believe that the majorityinterprets his opinion in a way that makes it internally inconsistent.
Footnote 13: The majority seeminglymisunderstands the nature of plaintiff's claim, as plaintiff has alleged more than that it was on theunfortunate end of a business deal that may have involved some unsavory parties.
Footnote 14: The contract betweenCenterRock and Georgia Malone & Company, Inc. (MaloneCo) obligates the former to pay thelatter a commission of 1.25% of the purchase price of a building procured using MaloneCo'sinformation. Rosewood and Jungreis are alleged to have received MaloneCo's confidentialinformation for $150,000. Accepting the alleged ultimate purchase price of $68,500,000 as true,MaloneCo would have been paid $856,250 for its information had it contracted directly withRosewood and Jungreis. This represents a benefit (i.e., a discount) of $706,250 to Rosewood andJungreis for MaloneCo's information. Such a windfall to defendants who knowingly acquiredmisappropriated property should not be given legal sanction (see Joan Briton, Inc. vStreuber, 36 AD2d 464, 466 [1971], affd 30 NY2d 551 [1972] ["A windfall creates achilling effect"]).
Footnote 15: There was a dissent at theAppellate Division in Joan Briton, Inc. Notably, the dissent did not disagree with themajority position respecting privity (see 36 AD2d at 467 ["if the defendant has obtained a(benefit) from a third person which should have gone to the plaintiff, it may be recovered on thistheory"]), which is consistent with the view articulated in this dissent. Rather, the dissent'sdisagreement with the majority was related to the wrongfulness of the plaintiff's actions(id. at 466-467 ["There is not even a contention, much less a suggestion, that thisdefendant knew or had reason to suspect that (the codefendant) would not pay according to hisundertaking. Nor is there any suggestion that she would have undertaken or could afford theproject absent his agreement to be responsible"]). Here, the complaint alleges that the variousparties took actions that they knew would ultimately deprive MaloneCo of the benefit of itshard-earned commission. Such actions are wrongful.
Footnote 16: Contrary to the majority'sassertion, the standard I am proposing would not "result in liability for anyone who simply knewof the plaintiff's existence." My standard would only result in liability when a party was enrichedand had awareness that the other party was conferring a benefit upon it that in equity and goodconscience it could not retain.