Unjust Enrichment – February 2015

 

Under the terms of a brokerage agreement, where a commission was due upon completion of a deal with identified buyers, but the sale was to another, the broker was entitled to recover in quantum meruit upon the client’s unjust enrichment. An instructive explanation of the law of unjust enrichment by United States District Court Judge Richard G. Stearns:

 

Although the terms "unjust enrichment" and "quantum meruit" are used interchangeably, quantum meruit is not a freestanding cause of action but a measure of recovery applied where an unjust enrichment arises in the context of a failed contractual relationship. Unjust enrichment, in its common-law sense, is concerned with the obligation of the law to see that justice is done, regardless of whether a promissory relationship exists between the parties. While no showing of wrongful conduct on the part of a defendant is required to sustain a claim of unjust enrichment, see Metro. Life Ins. Co. v. Cotter, 464 Mass 623, 641 (2013), it is necessary to show a correlation between the enrichment of the one party at the impoverishment of the other. Damages at common law were typically restitutionary and involved tangible things, the compulsory return, for example, of a neighbor's wandering cow. The rendering of services, however, presents a more complex problem, because as here, there is nothing tangible to return. … In resolving similar dilemmas, the common law developed quantum meruit as a special form of compensatory damages. To recover under quantum meruit, a plaintiff must show "that it conferred a measurable benefit on a defendant", that it "reasonably expected compensation", and that the "defendant accepted the benefit with the knowledge, actual or chargeable, of the claimants reasonable expectation." Finard & Co. LLC v. Sitt Asset Mgmt., 79 Mass. App. Ct. 226, 230 (2011). The test, it will be noted, relies as much on what one party expects as on what the other party knows. Why do we allow a recovery at all where no enforceable contract exists? As the Supreme Judicial Court stated in Salamon v. Terra, 394 Mass. 857, 859 (1985),"[t]he underlying basis for awarding quantum meruit damages in a quasi-contract case is, in fact, the unjust enrichment of one party at the detriment of another." Or as expressed more eloquently in Liss v. Studeny, 450 Mass. 473, 480 (2008),"[t]he injustice of the enrichment or detriment equates with the defeat of a person's reasonable expectations." A contractual obligation and a duty under equity are not mutually exclusive. This is where I part company with … broad dicta in some cases, that where a contractual relationship exists between parties, it defines and limits the recourse they have against one another on any issue involving the same or related subject matter. This is not, to my mind, a correct reading of the rule of Boston Med. Ctr. v. Secy of HHS, 463 Mass. 447 (2012). Rather, Boston Med. Ctr. stands for the proposition that where a party has a remedy at law, even one that it deems inadequate, it is precluded from seeking an enhanced award from a defendant by way of a supplementary or substitute action for unjust enrichment. On the other hand, any number of Massachusetts cases are in accord with the Restatement of Restitution, that where a benefit is conferred on a party outside of the scope and confines of a contract, and where that benefit is willingly received by the beneficiary, recovery will be permitted to prevent the beneficiary from receiving a gift of the other's services. See, e.g., Oatley v. Duprey, 312 Mass. 281, 285-286 (1942).