U.S. District Court in Pennsylvania Rejects Subcontractor’s Unjust Enrichment Claim Against Owner: Standards For Unjust Enrichment Claims Reviewed

Goldsmith Assoc., Inc. v. Del Frisco’s of Philadelphia, Inc.
2009 U.S. Dist. LEXIS 92193 (E.D. Pa. Oct. 1, 2009)

Grasso Holding Acquisition, Inc. (“Grasso”) entered into a lease with Del-Frisco’s of Philadelphia (“Del-Frisco’s”) to occupy and renovate the bottom floors of the Packard Building in Philadelphia, PA for use as a restaurant. Building owners, Chest-Pac Associates, Inc. (“Chest-Pac”) and Grasso, reserved the right to review and approve the designs for the renovation. Once the lease expired, the renovation improvements were to become the sole property of Chest-Pac and Grasso. After negotiating the lease, Del-Frisco’s contracted with Lorient, LLC to serve as the general contractor for the renovations. Lorient then subcontracted with Plaintiff, Goldsmith Associates, Inc. (“Goldsmith”) to provide the electrical work. Goldsmith submitted invoices in the amount of $1,835,110.87 but was allegedly only paid $734,879.30. Goldsmith commenced an action against Del Frisco’s, Chest-Pac and Grasso, asserting a claim of unjust enrichment, and seeking to recover $1,100,231.57 in unpaid work. The defendants moved to dismiss the Complaint as legally insufficient.

In analyzing the defendants’ motion to dismiss, the Court recognized that, to state a claim for unjust enrichment, a plaintiff must plead the following elements: (1) benefits conferred on defendant by plaintiff; (2) appreciation of such benefits by defendant; and (3) acceptance and retention of such benefits under such circumstances that it would be inequitable for defendant to retain the benefit without the payment of value. In particular, with respect to an unjust enrichment claim by a subcontractor against an owner, the Court recognized that the Pennsylvania Supreme Court’s decision in D.A. Hill v. Clevetrust, 573 A.2d 1005 (Pa. 1990), requires a subcontractor to demonstrate that: (1) the owner requested the benefit or (2) the owner misled the subcontractor. The Court noted that “a contrary rule allowing subcontractors to recover directly from owners in other circumstances would destroy the balance of contractual relationships in the construction industry and reverse public policy of Pennsylvania as articulated by the Supreme Court.”

In support of its unjust enrichment claim, Goldsmith simply averred that defendants’ retention of the benefits Goldsmith provided would be unjust. The Court noted that, although the conferral of a benefit is a necessary condition of a valid unjust enrichment claim, the doctrine does not apply simply because the defendant may have benefitted as a result of the plaintiff’s actions. Rather, a subcontractor must allege facts showing that the owners specifically requested the benefits or misled the subcontractor. Because Goldsmith did not plead such facts, but instead “nakedly asserted” that defendants’ retention of the benefits would be “unjust”, the Court dismissed Goldsmith’s complaint as legally insufficient.

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