By: Alexander A. Miuccio Published: April 2012

Court Allows Subcontractor's Unjust Enrichment Claim

Unjust enrichment is a legal theory of recovery holding that no person should be allowed to unfairly profit at another's expense without making restitution or compensation to the other person. The concept of unjust enrichment is often used in construction litigation as an alternative to breach of contract or when there is no adequate remedy at law.

Recovery on a theory of unjust enrichment typically occurs when there was no contract between the parties or a contract turns out to be invalid.

In the case of Power v Darren Henault Interiors, Inc., the court ruled on whether a subcontractor stated a claim for unjust enrichment against a contractor.

Background

N. Power Painting, Inc. performed painting services at the 2010 Kips Bay Decorating Showhouse. The Showhouse is a charitable event which benefits the Boys and Girls Clubs. Darren Henault Interiors, Inc., was one of the designers who designed rooms at the Showhouse without compensation. Duce Construction Corp. was employed as a contractor on that jobsite. Duce approached Power to provide painting services at the Showhouse.

Duce informed the painting subcontractor that the painting job would not be compensated, but Power was assured that it would be worth it to work for free on the charity project since Darren, the designer, would then engage Duce on a future project on West 70th Street and Duce would, in turn, then engage Power as the painting subcontractor on the project.

No contract was entered into by the painting subcontractor with either Darren or Duce. Although Duce informed Power that the Showhouse project "was not a paying job", he assured Power that it would be "worth it for [Power] in the long run to eat this one, because if we do , Darren will give us the job he has coming up on West 70th Street".

Duce was given the West 70th Street project, but did not hire Power for the project. Power sued Duce and Darren on the basis of unjust enrichment to recover the cost of performing the painting work at the Showhouse. Duce and Darren moved to dismiss the claims of the painting subcontractor.

Decision

The Court ruled that the painting subcontractor's claim against both Duce and Darren sufficiently established a cause of action for unjust enrichment. In doing so, the Court held that unjust enrichment is an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties concerned. According to the Court, "the essential inquiry...is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered...A plaintiff must show that (1) the other party was enriched, (2) at the plaintiff's expense, and (3) that it is against equity and good conscience to permit [the defendant] to retain what is sought to be recovered".

The Court pointed out that that: (1) Darren was enriched by having received a finished showroom at the Showhouse project for which he received positive publicity; (2) Power contributed its time and effort before, during and after the project and expended $13,500 in performing their services at the Showhouse; (3) because of Power's efforts, Duce did not have to send one of its own men to paint the showroom or hire another sub-contractor to do the work plaintiffs performed; and (4) because Power would be working with Duce and Darren on the more lucrative project at West 70th Street, it withdrew its demand for compensation on the Showhouse project and chose to forego other possible paying work to complete the work at the Showhouse. However, because Duce was given the project at West 70th Street by Darren and failed to hire Power as the subcontractor on the project as promised, the Court found that a claim for unjust enrichment had been established against Darren and Duce.

Comment

Here, the Court found that the elements of an unjust enrichment claim were sufficiently alleged to withstand a motion to dismiss the claim. If proven at a trial, Duce and Darren unjustly retained a benefit to the detriment of the painting subcontractor, and the retention of those benefits violated the fundamental principles of justice, equity and good conscience.

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