Commercial Division Clarifies Application of “Sufficiently Close Relationship” Requirement for Pleading Unjust Enrichment Claims
Unjust enrichment offers an avenue for recovery in situations where no actual agreement exists between parties to a dispute. But this theory of quasi-contract does not apply to just any type of commercial arrangement.
In New York, although a written agreement may not be required to state a claim for unjust enrichment, there still must exist “a relationship or connection between the parties that is not too attenuated.” In other words, an unjust enrichment claim cannot withstand a motion to dismiss unless the plaintiff alleges a “sufficiently close relationship with the other party.” The absence of allegations indicating such a relationship between the parties, “or at least an awareness by the defendant of the plaintiff’s existence,” can be fatal.
One question facing litigants is how much must be pled to satisfy this requirement. Although a leading case from New York Court of Appeals confirms that mere awareness of the plaintiff’s existence will not suffice to state a claim, a recent decision by Commercial Division Justice Borrok also shows that it is not necessary to go so far as to plead a formal commercial relationship with the defendant. The sweet spot lies in the middle, with allegations suggesting an awareness of the material facts forming the basis of the alleged inequity. A comparison of the two cases illustrates the point.
Court of Appeals – Georgia Malone & Co. v. Rieder
In Georgia Malone & Co. v. Rieder, the New York Court of Appeals confronted a set of facts in which no prior commercial relationship existed between the parties. Plaintiff, a real estate broker, entered into a contract with a third-party real-estate developer to prepare due diligence reports in connection with the potential purchase of commercial properties. The terms of the agreement required the developer to keep the due diligence materials confidential and pay plaintiff a commission from the purchase price of the properties. The developer ended up selling the due diligence materials to defendant, another real estate broker, which used the materials for its own transaction. Defendant received a $500,000 commission from the transaction; plaintiff received nothing.
Plaintiff brought a claim for unjust enrichment, but the New York Court of Appeals affirmed its dismissal, reasoning that the pleadings “d[id] not implicate” defendant in the developer’s “wrongdoing.” Although the complaint alleged that defendant was aware plaintiff had produced the due diligence reports, “there [wa]s no allegation” defendant knew specifically about the confidentiality arrangement or that the developer had “failed to pay” plaintiff for its work. The court likened the defendant to a “good-faith purchaser for value” and concluded there was an insufficient “connection” between the parties to state a claim for unjust enrichment.
Commercial Division – SGB Packaging Group v. Saverglass SAS
Earlier this month, Commercial Division Justice Borrok confronted a similar fact pattern in SGB Packaging Group Inc. v. Saverglass SAS, but reached the opposite result based on certain distinguishing allegations.
Plaintiff SGB Packaging Corp. (“SGB”) served as the North American distributor of high-end glass bottles produced by Saverglass, a French company. Although the relationship was never reduced to a written agreement, SGB alleged that it invested significant resources in the relationship over a period of ten years, including by sharing customers and developing a new line of bottles. In 2019, Saverglass sold its business to Defendant Heinz Germany (“Heinz”).
The complaint alleged that, shortly before the sale, a representative from Heinz met with a representative from SGB and stated that (i) “[w]e look forward to working with SGB Packaging in the near future”; and (ii) “[t]his acquisition will be win/win for both companies.” After the sale closed, however, Heinz declined to enter into a letter of agreement with SGB and, instead, allegedly conducted business on its own using customer information and bottle designs that SGB had previously shared with Saverglass. SGB sued Heinz for unjust enrichment.
Relying on Georgia Malone, Heinz moved to dismiss the claim, but the court denied the motion. The Court reasoned that the complaint allegations were “quite different” from the fact pattern found in Georgia Malone. Even though no formal relationship existed between the parties, SGB alleged that Heinz was “aware” of SGB’s exclusive relationship with Saverglass as well as the confidential information and designs that had been shared with it, and that Heinz had “specifically assured SGB that the parties would continue to work together.” The Court observed that, accepting the allegations as true, Heinz did not fit the mold of a “good-faith purchaser for value.”
* * *
SGB Packaging offers a useful foil to the Court of Appeals’ decision in Georgia Malone. It shows that while mere awareness of a plaintiff’s existence may not suffice to state a claim for unjust enrichment, allegations indicating the defendant knew of the alleged inequity will allow a plaintiff to withstand a motion to dismiss, even where the parties otherwise appear distant and without any prior commercial relationship. Particularly, courts may be more likely to deny a motion to dismiss where the defendant is alleged to know that it benefited from the plaintiff’s confidential information or infringed on an otherwise exclusive relationship between the plaintiff and a third party.
 Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511, 516 (2012) (quoting Sperry v. Crompton Corp., 8 N.Y.3d 204, 215-16 (2007)).
 Id. (quoting Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011)).
 Id. at 518.
 Id. at 519.
 No. 650844/2020, 2021 BL 138269 (Sup. Ct. N.Y. Cnty. Apr. 12, 2021).
 Id. at *1-2, 5.
 Id. at *4.
 Id. at *4-5.