By: Alexander A. Miuccio Gregory J. Spaun Published: April 2018

Sub's Claim of Quantum Meruit and Unjust Enrichment are Rejected

Where there is no written or oral contract between the parties, a contractor cannot recover for work performed based on a breach of contract. The alternatives are to sue under the legal theories of either quantum meruit or unjust enrichment to recover the value of the labor and materials. To recover on a claim of quantum meruit, a claimant must establish the performance of the services in good faith, which were accepted, the expectation of compensation from the person who accepted the services, and the reasonable value of the services.

To recover on a claim of unjust enrichment, a claimant must show that the recipient of the work was benefitted at the contractor’s expense, a relationship between the parties, and equity and good conscience require restitution to the contractor.

In the recent case of Prime Rebar, LLC v Foundations Group, Inc., the court dismissed a subcontractor’s claims based on theories of quantum meruit and unjust enrichment.

Background

The facts of Prime Rebar arise out of a somewhat convoluted, but not altogether unforeseeable circumstance. The owner, 204 Forsyth LLC, entered into a contract with Foundations Group, Inc. In August of 2015, Foundations Group, as general contractor, entered into a subcontract with MR Builders Group, Inc. and Michael Rubenstein for the superstructure work at the project. In October of 2015, the claimant, Prime Rebar LLC, entered into a sub-subcontract with MR Builders, Rubenstein, and another entity, Professional Grade Construction, Group, Inc., to supply labor and materials for rebar and steel in connection with the superstructure contract. Prime Rebar performed work and provided materials to the project between October 13, 2015 and December 3, 2015, but was never paid. At some point during that period, Foundations Group terminated the superstructure subcontract with MR Builders and, by December 3, 2015, the replacement superstructure contractor was at work on the project.

Prime Rebar filed a mechanic’s lien, and later sued to foreclose its lien. In the lawsuit, Prime Rebar also asserted a quantum meruit claim directly against the owner, 204 Forsyth, and the general contractor, Foundations Group. Under this claim, Prime Rebar argued that the owner and general contractor allowed Prime Rebar to enter into a sub-subcontract with Professional Grade, MR Builders and Rubenstein despite the fact that they planned to terminate the superstructure subcontract, and that the owner and general contractor accepted Prime Rebar’s materials knowing that Prime Rebar would not be paid once the superstructure subcontract with MR. Builders was terminated.

Decision

The owner and general contractor moved to dismiss Prime Rebar’s quantum meruit claim, arguing that it did not set forth all of the necessary elements of the claim. The court agreed, holding that Prime Rebar did not, and could not, claim that it expected compensation from 204 Forsyth or Foundations Group—a required element of a quantum meruit claim—in light of its own sub-subcontract with Professional Grade, MR Builders and Rubenstein.

Prime Rebar also argued that it should have labeled its cause of action as an unjust enrichment claim. While the unjust enrichment claim, unlike the quantum meruit claim, does not require the expectation of compensation, it does require that Prime Rebar have some kind of relationship with the parties to show that Prime Rebar relied upon statements or actions of the owner or general contractor to induce Prime Rebar to deliver the materials or perform the work. It is not sufficient for an unjust enrichment claim to merely show that the owner or general contractor was aware of Prime Rebar’s work, or that they benefitted from such work. Accordingly, the court dismissed the claim, leaving Prime Rebar to continue its action for foreclosure of its mechanic’s lien against the owner, and its breach of contract and related claims against MR Builders, Rubenstein and Professional Grade.

Comment

Quantum meruit and unjust enrichment claims, unlike breach of contract and related claims, are equitable claims. When a court undertakes an equitable analysis of such claims, it must weigh both the harm to the party who is asserting the claim, as well as the basis for making someone else pay for services they did not specifically contract for. Here, in the absence of some specific statements or actions relied upon by Prime Rebar, the owner and general contractor would not be equitably required to make payment to Prime Rebar for the services performed under a sub-subcontract with a third party. 

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