Opinion ID: 681303
Heading Depth: 2
Heading Rank: 1

Heading: West's Appeal of the Unjust Enrichment Verdict

Text: 25 West's arguments for overturning the jury's unjust-enrichment verdict fall into two categories--those concerning West's liability and those concerning damages. After addressing both arguments, we then consider West's alternative motion for a new trial.
26 The trial judge charged the jury, without objection, as follows: 27 In order to award East damages on the basis of unjust enrichment, you must find that East has demonstrated by a preponderance of the evidence that one, West was enriched, two, the enrichment was at East's expense, and three, the circumstances are such that equity and good conscience required West pay East for the reasonable value of what it received. 28 Transcript of 10/28/92 at 31-32. The trial judge then elaborated on these instructions as follows: 29 Enrichment or benefit ... is not limited to pecuniary or monetary advantage. Whether equity and good conscience requires that West pay East for the value of any enrichment, if you find it was enriched, is not to be determined from a limited inquiry confined to an isolated transaction; it must be a realistic determination based upon a broad view of the human setting involved.... In this regard you can consider whether West overpaid East and Telefacs for their services, ... whether West intentionally misled East or induced East to stay on the GSA project intending not to pay East for its services, and the parties investments of time and resources. 30 Id. at 32; see generally McGrath v. Hilding, 41 N.Y.2d 625, 394 N.Y.S.2d 603, 363 N.E.2d 328 (1977); Bradkin v. Leverton, 26 N.Y.2d 192, 197, 309 N.Y.S.2d 192, 196, 257 N.E.2d 643, 645-46 (1970); Miller v. Schloss, 218 N.Y. 400, 113 N.E. 337 (1916); Mayer v. Bishop, 158 A.D.2d 878, 551 N.Y.S.2d 673 (3d Dept.1990). 31 West argues that East's unjust enrichment claims must fail as a matter of law because of the trial judge's finding, unchallenged on appeal, that the second-tier contract between Telefacs and East was not extinguished. 32 In support of its argument, West relies on the settled principle that [t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter. Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 656, 516 N.E.2d 190, 193 (1987); Miller v. Schloss, 218 N.Y. 400, 113 N.E. 337 (1916). This principle, West notes, has been relied on by New York's lower courts to dismiss quasi-contract claims by subcontractors against landowners with whom the subcontractors have not contracted. See Mariacher Contracting Co. v. Kirst Constr., Inc., 187 A.D.2d 986, 987-88, 590 N.Y.S.2d 613, 615 (4th Dept.1992); Metropolitan Elec. Mfg. Co. v. Herbert Constr. Co., 183 A.D.2d 758, 759, 583 N.Y.S.2d 497, 498 (2d Dept.1992); Sybelle Carpet and Linoleum of Southampton, Inc. v. East End Collaborative, Inc., 167 A.D.2d 535, 536, 562 N.Y.S.2d 205, 206 (2d Dept.1990); Perma Pave Contracting Corp. v. Paerdegat Boat and Racquet Club. Inc., 156 A.D.2d 550, 551, 549 N.Y.S.2d 57, 59 (2d Dept.1989); Schuler-Haas Elec. Corp. v. Wager Constr. Corp., 57 A.D.2d 707, 708, 395 N.Y.S.2d 272, 274 (4th Dept.1977); see also Tibbetts Contracting Corp. v. O & E Contracting Co., 15 N.Y.2d 324, 258 N.Y.S.2d 400, 206 N.E.2d 340 (1965) (where real estate developer denied any contractual relationship with subcontractor throughout their course of dealing, and subcontractor acquiesced in that interpretation by billing the general contractor, no contract between the developer and subcontractor could be implied in law or in fact). 33 The rationale behind this settled rule is that any services performed by the subcontractor were performed pursuant to its contract with the general contractor, and thus were done for the benefit of the general contractor ..., not for the benefit of the owner. Sybelle Carpet, 167 A.D.2d at 536, 562 N.Y.S.2d at 206 (quoting Schuler-Haas, 57 A.D.2d at 708, 395 N.Y.S.2d at 274; see also In re Loomis, 273 N.Y. 76, 6 N.E.2d 103 (1937) (the fact that third parties were benefited by services of attorney on behalf of his client does not, in the absence of agreement by them, impose a liability on them to pay); Restatement of Restitution Sec. 110 (1937) (A person who has conferred a benefit upon another as the performance of a contract with a third person is not entitled to restitution from the other merely because of the failure of the performance of the third person). Since the landowner has bargained only with the general contractor, and the subcontractor has done likewise, the reasoning goes, the subcontractor should not be allowed to perform an end-run around the bargained-for contractual structure by seeking relief directly from the landowner, with whom he has not bargained. 34 West argues that this rule should dispose of the matter: Because the trial judge found that the second-tier contract between East and Telefacs had not been extinguished, and that East had not entered into an additional contract with West, East's rights were solely against Telefacs, and its unjust enrichment claims against West must fail. 35 As the trial judge recognized, however, the same New York cases that set out the principle above recognize that the principle is not absolute. New York courts have not dismissed subcontractor claims in quasi-contract against landowners automatically; rather, before dismissing such claims, they have inquired whether the landowner acted in such a way as to incur obligations to the subcontractor outside the contractual structure. See, e.g., Metropolitan Elec., 183 A.D.2d at 759, 583 N.Y.S.2d at 498 (neither general contractor or landowners could be liable to subcontractor because there is nothing in the record to establish, that [the general contractor] or the owners ..., by their actions, assumed an obligation to pay for the goods ordered by [the subcontractor].); Perma Pave, 156 A.D.2d at 551, 549 N.Y.S.2d at 59 (where record contained no evidence that owner expressed willingness to pay subcontractor for its work, [t]he owner's mere consent to and acceptance of improvements placed on his property by the subcontractor, without more, does not render it liable to the subcontractor) (emphasis added); Contelmo's Sand & Gravel, Inc. v. J & J Milano, Inc., 96 A.D.2d 1090, 1091, 467 N.Y.S.2d 55, 57 (2d Dept.1983) (same). The principle has been stated as follows: 36 [A] landowner is not liable to a subcontractor for work performed on the owner's property in furtherance of the subcontract in the absence of an agreement to pay the general contractor's debt or circumstances giving rise to such an obligation. 37 Schuler-Haas, 57 A.D.2d at 708, 395 N.Y.S.2d at 274 (citing Woodruff v. Rochester & Pittsburgh R.R. Co., 108 N.Y. 39, 14 N.E. 832 (1888)); followed in Westinghouse Elec. Supply Co. v. R.P. Brosseau & Co., 156 A.D.2d 851, 549 N.Y.S.2d 851 (3d Dept.1989); see also Sybelle Carpet, 167 A.D.2d at 536, 562 N.Y.S.2d at 206; Custer Builders, Inc. v. Quaker Heritage, Inc., 41 A.D.2d 448, 451, 344 N.Y.S.2d 606 (3d Dept.1973); Restatement of Restitution Sec. 110 cmt. a (benefits conferred on a third-party beneficiary through performance of a contract with another may not be recovered from the beneficiary unless made in anticipation of a promise which is not performed by the transferee ) (emphasis added); 22 N.Y.Jur.2d Contracts Sec. 547 (1982) (In the absence of an agreement to pay what another person is obligated to pay, the mere fact of benefit from services rendered does not impose liability on a theory of quasi-contract) (emphasis added). This principle is equally applicable where, as here, the parties are a primary contractor and a second-tier subcontractor rather than a landowner and subcontractor. 38 West notes, correctly, that East has been unable to locate any cases in which a New York court has actually granted a subcontractor judgment against a landowner pursuant to this principle. The Third Department, however, has applied the principle in a relatively recent case, even though the subcontractor did not prevail. Westinghouse, 156 A.D.2d 851, 549 N.Y.S.2d 851. In Westinghouse, a subcontractor shipped electrical supplies to a landowner pursuant to its contract with a general contractor. Shortly thereafter, the general contractor abandoned the job site and breached its contract with the subcontractor. In response, the landowner sought a temporary restraining order to prevent the subcontractor from removing the materials from the job site. In support of its motion, the landowner submitted an affidavit which stated, among other things, that [p]ursuant to its contract with [the general contractor], [the landowner] is fully able and willing to make required payments for the supplies. Id. at 852, 549 N.Y.S.2d at 852. The trial court awarded summary judgment to the subcontractor on the principle set out above, and the landowner appealed. Before finding factual ambiguities which required reversal, the Appellate Division affirmed the principle that we have set out above--whether the landowner was liable, it concluded, depended on the existence of an agreement to pay the general contractor's debt or circumstances giving rise to such an obligation. Id. at 853, 549 N.Y.S.2d at 853. 39 West argues additionally that Westinghouse is distinguishable in a crucial detail: Before the landowner allegedly assented to pay the subcontractor, the prime contractor had abandoned the job and informed the subcontractor it would not be paid. Thus, West reasons, unlike in the case before us, the subcontract had been extinguished prior to the landowner's alleged assent to payment. The Westinghouse principle, West contends, should be applied, at most, to cases in which the subcontract is no longer valid. 40 We cannot find West's proposed distinction in the cases cited above. Those cases state a simple principle which applies whether or not the subcontract has been extinguished: A party, whether or not it is in a contractual relationship with another, may incur quasi-contractual obligations to a third party with whom it has not contracted, by virtue of its direct representations to that party. 41 This conclusion is supported, not undermined, by West's citation to the principle of Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 656, 516 N.E.2d 190, 193 (1987)--that [t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter. The principle of Clark-Fitzpatrick, while broad, is subject to exceptions. See id. at 388, 521 N.Y.S.2d at 656, 516 N.E.2d at 193 (recovery available in quasi-contract after rescission). Most relevant to the case before us, recovery in quasi-contract outside the existing contract may be had if a party has rendered additional services upon extra-contractual representations by the other party. See, e.g., United States ex rel. Falco Constr. Corp. v. Summit General Contracting Corp., 760 F.Supp. 1004, 1011 (E.D.N.Y.1991) (holding that subcontractor may recover in quasi-contract from contractor for work performed outside the subcontract between the two because contractor requested the services and derived substantial benefit from them); O'Keeffe v. Bry, 456 F.Supp. 822 (S.D.N.Y.1978) (when quantum meruit recovery is sought by a salaried employee for services rendered which fall outside the scope of duties of [the expressly agreed to] employment, entitlement to recovery turns on the question whether the additional services are so distinct from the duties of [the] employment that it would be unreasonable for the employer to assume that they were rendered without expectation of further pay) (quoting Robinson v. Munn, 238 N.Y. 40, 43 143 N.E. 784, 785 (1924)). 42 Thus, we conclude that, under New York law, a subcontractor may recover from a landowner (and a sub-subcontractor from a general contractor), even when a separate contract exists between the subcontractor and general contractor, if the owner has agreed to pay the general contractor's debt or if the circumstances surrounding the parties' dealings can be found to have given rise to an obligation to pay. 43 In the case before us, West's promise to East that it would get paid was in the nature of a guaranty on Telefacs' debt to East. That the promise was found to be unenforceable for lack of specificity and lack of consideration (see supra, pages 1295-96) does not prevent East from recovering in quasi-contract for the amount by which West, through its actions, was unjustly enriched. When two parties have bargained with each other on the terms of an express contract but have failed to create an enforceable contract, whether because of failure to reach a meeting of the minds on terms or because of noncompliance with some formal requisite of contract law, such as consideration, recovery may nevertheless be available in quasi-contract for the reasonable value of a party's services to the other. Moore v. New York, 73 N.Y. 238 (1878); Mayer v. Metropolitan Traction Co., 165 A.D. 497, 150 N.Y.S. 1026 (1914); 22 N.Y.Jur.2d Contracts Sec. 543 (1982). 44 Given the conclusions above, we affirm the trial court's judgment. It was not unreasonable for the jury to conclude that East's completion of work on the New York project conferred a benefit upon West. 2 It was not unreasonable, additionally, for the jury to conclude that East's completion of the project conferred this benefit at the expense of East. East would certainly have saved itself considerable losses had it walked off the job in the face of Telefacs' apparent repudiation. 45 Finally, it was not unreasonable for the jury to conclude that East completed the job in reliance, at least in part, on West's representations that East would get paid, and that, accordingly, equity and good conscience required West to pay East for the reasonable value of East's services. As the trial judge correctly concluded, evidence of such representations by West was extensive: 46 There was testimony, which the jury could reasonably have credited, that: (1) West's supervisory employees in New York dealt with East employees on a daily basis and, responding to East's expressions of concern about payment, assured East that they would see that it was paid; (2) at the meetings in Denver between East and West, East made clear that if it was not assured that it would be paid directly by West for outstanding invoices and future work, it would have to pull its men off the job because it would be unable to make its payroll; (3) in Denver, West agreed to pay East directly, or at least work out a mechanism to assure that East was paid by split checks, and requested East not to take its men off the job; (4) West told East it was working for West now; (5) despite its purported surprise at learning of the unauthorized existence of East, and its disapproval of the hourly billing which had occurred, West met with East personnel, encouraged them to submit a subcontract package for approval that would allow at least a future contractual relationship, and urged East to keep its employees working on the GSA job; (6) West had an interest in inducing East to keep its workers on the job because it had deadlines to meet to fulfill its obligations to GSA. 47 Opinion at 47-48. 48 This testimony is certainly sufficient to support the conclusion that West, under enormous pressure to complete the GSA Project in New York on time, convinced East to stay on a job which it would otherwise have abandoned in response to Telefacs' apparent inability to perform. This evidence that East stayed on the job in reliance on West's representations would support the jury's verdict that equity and good conscience require West to pay East for the reasonable value of its services. Cf., e.g., Mayer, 158 A.D.2d 878, 551 N.Y.S.2d at 675. Also supporting that verdict was documentary evidence, in the form of West internal memoranda, of West's intention to phase out East after lining up replacement subcontractors. Crediting all this evidence, and taking into account a broad view of the human setting involved, McGrath v. Hilding, 41 N.Y.2d 625, 394 N.Y.S.2d 603, 363 N.E.2d 328 (1977), we cannot conclude that the jury's verdict was unreasonable.
49 East sought, and the jury awarded, damages in the amount of $439,953.25, plus interest, for unjust enrichment. That amount represented the total of East's unpaid invoices covering work performed in January and February 1987. The trial court reduced the award to $436,928.25, plus interest, on finding discrepancies in East's invoices. The trial judge instructed the jury: 50 If you find that East is entitled to recover on its claim for unjust enrichment, East is entitled to receive the amount by which you find West was unjustly enriched. 51 In determining the amount by which West was unjustly enriched, you may consider the reasonable value of the services East rendered to West. In doing so, you may consider the price of such service and materials set forth in any relevant contract, but you're not bound by those figures. It's for you to determine, based on the evidence, what the reasonable value is of the services and materials provided by East. You may find that such value was greater or less than the amounts billed by East.... 52 In determining the amount of West's enrichment, you may also consider such factors as to [sic] West had to spend money to correct or complete East's work, whether West had already paid East more than East was entitled to for its services and whether the appropriate basis for any payment is task, or time and materials, about which you heard a great deal, or some combination thereof. 53 Transcript of 10/28/92 at 34-35; and see Collins Tuttle & Co. v. Leucadia, Inc., 153 A.D.2d 526, 544 N.Y.S.2d 604 (1st Dept.1989). 54 West contends that the trial court should have granted judgment as a matter of law on East's unjust enrichment claim because East offered no evidence from which a reasonable jury could determine the value of the services East performed. West's Brief at 29. We disagree. 55 East offered as evidence invoices which contained a summary of the hours worked by each employee and their hourly rate of pay, and supplemented the invoices with time sheets. West contends that the invoices were riddled with inaccuracies and that, additionally, East offered inadequate evidence of how its invoices were prepared. See Lewis v. Barsuk, 55 A.D.2d 817, 818, 389 N.Y.S.2d 952, 953 (4th Dept.1976) (reversing judgment in contract case where plaintiff offered suppliers' invoices without proving actual payments); Answering Serv., Inc. v. Egan, 785 F.2d 1084, 1088-90 (D.C.Cir.1986) (attorneys' billing statement not presumptively accurate or reflective of the true value of services provided). 56 East's proof, however, was not limited to the invoices and time sheets. There was testimony that West made no complaint about the quality of East's work and that East's hourly rates were reasonable in relation to those of other subcontractors in New York. East also presented documentary evidence from three federal agencies that East's work was competent. Additionally, and most significantly, the accuracy of East's time records was corroborated by a West supervisor, Mitch Sherman, who had first-hand knowledge of East's work. In an internal West memorandum, Sherman is reported as concluding that Telefacs--that is, through East--did expend the hours and men to support their hourly billing. See Memorandum of April 23, 1987 from Mike Hutson to Norm Curtwright, at 2, 6. As the trial court correctly concluded, the weight to be accorded East's documents and its witnesses' testimony was within the province of the jury. See Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d 326, 335 (2d Cir.1993); Sir Speedy, Inc. v. L & P Graphics, Inc., 957 F.2d 1033, 1039-40 (2d Cir.1992). Viewing the evidence in the light most favorable to East, we cannot conclude that the jury's damage award was unreasonable.
57 West contends, alternatively, that the trial judge abused his discretion in denying West's motion for a new trial on East's unjust enrichment claims. Whereas we review an order denying or granting a motion for judgment as a matter of law de novo, Kirschner v. Office of Comptroller, 973 F.2d 88, 92 (2d Cir.1992), we will afford considerable deference to a trial judge's decision whether to grant a new trial. Metromedia Co. v. Fugazy, 983 F.2d 350, 363 (2d Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 2445, 124 L.Ed.2d 662 (1993). The decision whether to grant a new trial on the ground that the verdict was against the weight of the evidence is committed to the sound discretion of the district court. Id. In exercising that discretion, a trial court may order a new trial when it is convinced that the jury has reached a 'seriously erroneous result' or that the verdict is ... against the weight of the evidence. Mallis v. Barkers Trust Co., 717 F.2d 683, 691 (2nd Cir.1983); see also Purnell v. Lord, 952 F.2d 679, 686 (2d Cir.1992). 58 There is serious doubt whether a district court's order denying a motion for a new trial because the verdict is against the weight of the evidence is even reviewable in this circuit. See Piesco v. Koch, 12 F.3d 332, 344 (2d Cir.1993); Fugazy, 983 F.2d at 363 (discussing authorities). Even if the district court's decision is reviewable, however, we will not reverse such a denial unless it constituted an abuse of discretion, Fugazy, 983 F.2d at 363, or unless the district court applied the wrong legal standard in denying the motion, Piesco, 12 F.3d at 344. 59 In urging a new trial, West essentially repeats its argument that it received no benefit from East because East was obligated to perform under its contract with Telefacs. Assuming arguendo that the decision of the trial court is reviewable, we reject West's argument for a new trial for the same reasons we deny West's motion for judgment as a matter of law. As we set out above, ample evidence was presented at trial that East continued work on the GSA Project in January and February 1987 in response, at least in part, to West's representations that East would get paid. Ample evidence was presented as well that West benefitted from East's decision to complete performance and that East was damaged. 60 Similarly, for the reasons set out above, we reject West's argument that the jury's award of damages was seriously erroneous. We therefore affirm the order of the trial judge denying West's alternative motion for a new trial.