Asserting Multiple Claims in a Business Litigation
CLAIMS FOR UNJUST ENRICHMENT CANNOT BE SUSTAINED WHEN A COURT DETERMINES THERE IS A VALID CONTRACT REGARDING THE DISPUTE AT ISSUE. UNDER CERTAIN CIRCUMSTANCES, PARALLEL CLAIMS FOR BOTH FRAUD AND BREACH OF CONTRACT CAN BE SUSTAINED
The recent case of Congelados del Cibao v. 3 Kids Corp. (Case No. 190CV-7596) decided by Judge Lewis Liman in the Southern District of New York on May 3, 2022 provides an interesting opportunity to explore the interplay between claims for breach of contract, unjust enrichment and fraud- causes of action which are often asserted together by plaintiffs in business litigation matters.
In Congelados, a seafood exporter from the Dominican Republic named Congelado del Cibao (“CDC”) brought claims for breach of contract, unjust enrichment, and fraud against a New York seafood importer 3 Kids Corp. (“Kids”) and one of its owners. The crux of the action was the allegation that Kids had failed to pay for certain shipments of lobster tails. CDC moved for summary judgment on both its breach of contract claim and its claim for unjust enrichment. In evaluating the plaintiff’s claim for breach of contract, the Court determined that the breach of contract claim was governed by the United Nations Convention on Contracts for the International Sales of Goods as both the United States and the Dominican Republic are signatories to that treaty. In evaluating the record, the Court found that it was clear that Kids had breached it contractual obligations to Congelados and granted Congelados summary judgment on that count.
Judge Liman, however, dismissed Congelados’ claim for unjust enrichment citing the principle that under New York law a claim for unjust enrichment cannot be sustained when there is a valid contract between parties. This is a practical procedural point to highlight as when litigants commence an action they often assert claims for both breach of contract and unjust enrichment. Frankly, this is typically the cautious way to proceed particularly if there is any dispute regarding the existence of a contract or the terms of the contract. Ultimately, however, if it is determined on the merits that there is a valid contract regarding the dispute at issue, New York Courts have generally found that a claim for unjust enrichment cannot be sustained.
In Congelados, the individual owner of Kids also moved for summary judgment to have the fraudulent inducement claim asserted against him dismissed. The Court used this an opportunity to briefly discuss situation where parallel claims for fraud and breach of contract can both be asserted. This is an important area for examination as defendants faced with claims for fraud and breach of contract will often attempt to make the argument that such fraud claims cannot be sustained as they are duplicative of the breach of contract claims. In a footnote to his decision, Judge Liman highlighted certain circumstances where overlapping fraud and breach of contract claims can be sustained. Critically, he noted that a fraud claim cannot be dismissed as duplicative of a breach of contract claim where only the fraud claim (and not the breach of contract claim) is asserted against that party. While the court ultimately dismissed the fraud claim against the individual owner-defendant in Congelados, it noted that it did not- and could not- do so on the grounds that it was duplicative of the breach of contract claim as no claim for breach of contract was asserted against the individual owner-defendant.
This is an important nuance to keep in mind when dealing with multi party-litigations as it may be possible to assert fraud claims against certain parties and breach of contract claims against others without having to even address the issue as to whether the fraud claims are duplicative of the breach of contract claims.