On July 7, 2023, Justice Reed of the New York County Commercial Division issued a decision in Quinn v. GCB Capital, LLC, 2023 NY Slip Op. 50674(U), holding that an unjust enrichment claim failed for lack of a sufficiently close relationship between the plaintiff and the defendant, explaining:
To state a cause of action for unjust enrichment, the plaintiff must plead that (1) the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered. Relevant herein is Section 5 of the settlement agreement, titled “Other Obligations,” which provides, in part:
MHI must issue the shares of common stock to GCB under the GCB Agreement. At the time that MHI is required to issue shares of MHI common stock to GCB pursuant to the GCB Agreement, after a stock split by MHI whereby GCB shall be entitled to receive 27 million shares of MHI common stock less the shares of common stock to be issued to Quinn and Tobin, MHI will directly issue nine percent (9%) of the common shares of MHI, post-stock split, to Quinn and MHI will directly issue nine percent (9%) of the common shares of MHI, post-stock split, to Tobin.
The unverified complaint alleges that GCB and/or Condon have wrongfully retained the MHI shares that should have been issued to them. Quinn avers that when the settlement agreement was executed, it was anticipated that MHI would issue 5.4 million of its 60 million common shares to him. MHI, though, never issued those shares. The complaint alleges that GCB should have received only 16.2 million shares of common stock from MHI (27 million shares less the 10.8 million total shares to be issued to Quinn and nonparty Morrie Tobin [Tobin]), but MHI issued 28 million shares to GCB. It further alleges that the shares GCB received include the shares Tobin received under the settlement agreement from MHI, but GCB acquired Tobin’s shares under a stock purchase agreement to which neither plaintiff was a party. Plaintiffs’ counsel affirms that he exchanged several emails and telephone calls with GCB’s counsel prior to the filing this action in which GCB’s counsel indicated that its client had instructed an agent to transfer 5.4 million of the common shares GCB owned in MHI to Onorevole, but GCB has not done so.
To sustain a cause of action for unjust enrichment privity between the parties is not required, but an unjust enrichment claim will not be supported unless there is a connection or relationship between the parties that could have caused reliance or inducement on the plaintiff’s part. The mere fact that plaintiffs and GCB were parties to the same settlement agreement is insufficient to establish a sufficiently close connection or relationship between them that could have caused or induced reliance on plaintiffs’ part. The settlement agreement resolved disputes related to consulting services furnished to MHI. Plaintiffs have not alleged that they furnished GCB with consulting services, nor have they alleged that they had engaged in direct dealings with GCB. The settlement agreement plainly states that MHI, not GCB, was obligated to transfer a certain percentage of common shares to Quinn, and GCB’s purchase of Tobin’s shares in MHI is a separate and distinct transaction from the settlement agreement. Plaintiffs’ reliance on email correspondence between their counsel and GCB’s counsel is similarly unavailing as the emails do not establish a relationship of reliance or inducement. Here, plaintiffs have failed to demonstrate the merits of the unjust enrichment claim against GCB.
(Internal quotations and citations omitted).