The majority of the New York Court of Appeals found that this was the case in Georgia Malone & Co, Inc v Rieder, 2012 NY LEXIS 1890 (CA, 28 June 2012). Georgia Malone & Co (GM), a real estate brokerage and consulting firm, prepared confidential due diligence reports for a developer with respect to potential purchases of commercial properties. GM alleged that the developer sold the reports to Rosewood, a rival brokerage firm, which received the commission GM would have been paid when the deal closed. GM sued the developer for breach of contract, and both the developer and Rosewood in unjust enrichment.
The unjust enrichment claim against Rosewood was dismissed by two levels of court. In the view of the majority in the appeal court, an unjust enrichment claim has its origin in what used to be called (not very helpfully) quasi-contract, which requires ‘a sufficiently close relationship’ between claimant and defendant for the latter’s gain to be recoverable. Here, there were no dealings at all between the rival brokerage firms; GM was not even aware of the Rosewood’s existence, making their relationship ‘too attenuated’ to allow the unjust enrichment claim to go forward. Two of the five judges on the panel dissented: the majority seemed to be requiring privity as a precondition for an unjust enrichment claim, when the real question is whether one party holds property which in equity and good conscience it ought not to because the property was obtained at another’s expense. Rosewood would have seen GM’s name on the reports and ‘should have known the materials were suspect’. The majority were wrong to say that allowing GM’s claim would place an undue burden on commercial parties ‘to probe the underlying relationships between the business with whom they contract and other entities tangentially involved but with whom they have no direct connection’.