METCAP SECURITIES LLC v. PEARL SENIOR CARE, 2129-VCN (Del.Ch. 6-29-2007)

C.A. No. 2129-VCN.Court of Chancery of Delaware.Date Submitted: June 5, 2007.
June 29, 2007.

Joel E. Friedlander, Esquire, Bouchard Margules Friedlander, P.A., Wilmington, DE.

Bruce E. Jameson, Esquire, Prickett, Jones Elliott, P.A., Wilmington, DE.

JOHN W. NOBLE DOVER, Vice Chancellor.

Dear Counsel:

Plaintiff MetCap Securities LLC (“MetCap”) has moved, under Court of Chancery Rule 59(f), for reargument of a portion of this Court’s May 16, 2007, memorandum opinion and order (the “Memorandum Opinion”).[1] At issue is the Court’s conclusion that the Amended Complaint failed to state a claim for unjust enrichment against the Defendants as to the work MetCap performed up to the time

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of the Third Amendment’s execution. Among other reasons, the Court relied upon the fact that prior to the Third Amendment, MetCap’s services were performed exclusively for one party — NASC — and that the appropriate path for recovery for work it had performed was under the Advisor Contract with that party.

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The standard applicable to a motion for reargument is well-settled. A court may grant reargument when it appears that the Court overlooked or misapprehended facts or principles of law that would have had a “controlling effect” on the outcome of a particular decision.[2] It is not an opportunity, however, to rehash arguments already made or to raise new ones.[3]

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MetCap challenges the Court’s application of the unjust enrichment doctrine with respect to the work it performed through the time of the Third Amendment. First, MetCap asserts that the Court erred by focusing on whether MetCap performed its services at the behest of any of the Defendants, instead of examining the circumstances in which the Defendants obtained the benefit of MetCap’s

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services. More specifically, MetCap asserts that the Court improperly relied upon an opinion applying New York law, which, it argues, is less friendly to unjust enrichment claims than is Delaware law.[4] Second, MetCap contends that the Court misunderstood a portion of the tentative draft of the Restatement (Third) of Restitution and Unjust Enrichment to which the Memorandum Opinion cited and that it ignored an important allegation made in the Amended Complaint: that absent a recovery from the Defendants, MetCap will not be paid. Moreover, MetCap appears to cite as error the Court’s acknowledgement that holding the Defendants liable for work performed prior to adoption of the Third Amendment might violate the parties’ expectations that the Defendants would be free from such an obligation. For the reasons set forth below, the Defendants’ motion for reargument is denied.

1. The Court Did Not Apply an Overly Restrictive Application of the Unjust Enrichment Doctrine to MetCap’s Claim

MetCap’s criticizes the Court’s citation to Michele Pommier Models, Inc. v. Men Women NY Model Management, Inc.[5] for the proposition that, in the context of an unjust enrichment claim, a plaintiff must demonstrate that work was

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performed for the defendant’s benefit. It argues that the Court, by citing an opinion which applied New York law, failed to review less restrictive Delaware case law, which permits a court to look to the “`circumstances’ under which the defendant obtained the benefit of the plaintiff’s services, and not limit its inquiry to whether the work was performed at the behest of the defendant.”[6] The problem with MetCap’s criticism is twofold: it is premised on an erroneous understanding of the factors to which a court looks when determining whether a party is entitled to an equitable remedy for unjust enrichment and it fails to identify how the New York proposition is materially inconsistent with Delaware law.

MetCap’s motion states that the “only” elements of an unjust enrichment claim in Delaware are whether (1) the defendant was enriched, (2) the enrichment was at the plaintiff’s expense, and (3) injustice would result from the defendant’s retention of the benefit. As the Memorandum Opinion made clear, however, this Court has looked for more than a mere showing of enrichment of one party and impoverishment of another. There must be some relationship or connection between that enrichment and impoverishment.[7] Without some relationship, it is

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difficult to understand why the recipient’s retention of the benefit would constitute an “injustice.”

In expanding upon this necessary “relationship” (and the necessity of determining whether a plaintiff had acted for a defendant’s benefit), the Court quoted from Michele Pommier Models:

[T]o recover under a theory of quasi contract, a plaintiff must demonstrate that services were performed for the defendant resulting in its unjust enrichment. It is not enough that the defendant received a benefit from the activities of the plaintiff . . .[8]

It is not apparent from MetCap’s motion, however, how the New York court’s opinion offends Delaware law. This is, of course, the motion’s central weakness.

Nonetheless, MetCap presents the Court with additional authority in support of its argument that the Court should have looked to the broader circumstances in which Pearl received the benefit of MetCap’s services, namely, Silva’s alleged awareness that MetCap was expecting a fee. MetCap invokes Cura Financial Services, N.V. v. Electronic Payment Exchange, Inc.,[9] a decision in which this Court noted the risks of being a “middleman.” The Court declined in that case to decide whether a corporation had been unjustly enriched through its dealings with

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a particular bank when that banking relationship had been solely cultivated by the plaintiff and restricted pursuant to a non-circumvention agreement. Interestingly, however, the Court found instructive a New York case confronting an analogous situation.[10]

In Bradkin v. Leverton,[11] the New York Court of Appeals held that a plaintiff-broker properly pleaded an unjust enrichment claim against the officer of a company that had employed him to find financing deals in exchange for a fee and 10% of the profits from a second-round of financing. After the broker had received a finder’s fee from his employer-company, an officer of the employer-company circumvented the compensation agreement by arranging the second-round of financing himself and keeping the 10% cut of the profits. The Bradkin court observed that, “[a]lthough there was no agreement between them, express or implied, the defendant received a benefit from the plaintiff’s services under circumstances which, in justice, preclude him from denying an obligation to pay for them.”[12]

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MetCap relies upon this language from Bradkin as a basis for its argument that the Court erred by not fully appreciating Silva’s awareness that MetCap was expecting a fee from NASC.[13] MetCap likens Silva’s “self-interested shedding of a contractual obligation [he] previously agreed to assume as the purchaser of NASC” to the inequitable conduct and circumstances found in Cura and Bradkin.”[14]

For MetCap, the challenge with such a comparison is that it ignores precisely what this Court did conclude that the Amended Complaint, read under the standard necessarily imposed by Court of Chancery Rule 12(b)(6) did allege: that there was no relationship between MetCap and the Defendants through the execution of the Third Amendment, which is the time period pertinent to this motion. Before the Third Amendment, MetCap worked exclusively for NASC; it owed no allegiance to Pearl (or its related entities) and it conferred no benefit on

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Pearl (or its related entities).[15] In short, the relationships, or “circumstances,” among the parties in Bradkin and Cura are not found here.[16]

In any event, the Court identified the period following the execution of the Third Amendment as distinct. Its observation that “MetCap’s work was no longer for NASC” but “most likely for the benefit of Pearl” illustrates that due consideration was given to the possible “circumstances” that would have led the Court to conclude that MetCap had also stated a claim for unjust enrichment for the period leading up to the execution of the Third Amendment.

In sum, the motion demonstrates no error in this Court’s application of the unjust enrichment doctrine to the pre-Third Amendment portion of MetCap’s claim. MetCap may not now attempt to relitigate a claim that has already been considered — and rejected — by this Court.[17]

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2. The Tentative Draft of the Restatement (Third) of Restitution and Unjust Enrichment Did Not Have a Controlling Effect on the Court’s Decision to Dismiss MetCap’s Claim

The second portion of MetCap’s motion concerns the Court’s citation in a footnote to the tentative draft of the Restatement (Third) of Restitution and Unjust Enrichment (the “Tentative Draft”).[18] The Court cited Section 29 of the Tentative Draft to suggest what “more” might be required by a party invoking the doctrine of unjust enrichment than, in the words of Section 110 of the Restatement (Second) of Restitution, “merely [alleging] failure of performance by [a] third person.”

MetCap takes issue with two of the Court’s observations: first, that if the Tentative Draft were literally applied, MetCap’s claim would fail because it never alleged that, “absent liability in restitution,” it would not be paid (i.e., the Amended Complaint made no direct reference to SBEV’s inability to pay); second, that it is possible that imposing liability on Pearl would contravene an understanding between the parties that Pearl would be free from having to pay the MetCap fee. MetCap argues that by alleging that it would not receive payment for its work “[a]bsent a recovery . . . against defendants,” it encompassed SBEV’s

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inability to pay (as NASC’s guarantor).[19] And repeating its allegation that Silva had always known MetCap was expecting a fee from Beverly’s acquirer (whoever that might be), MetCap also argues that the Court was misguided in its concern that the Defendants would be responsible for a fee for which everyone knew they were not obligated.

MetCap may have a point that it alleged — albeit in a less than precise way[20] — that SBEV could not pay its fee when it alleged — more precisely — that recovery could only be had against the Defendants.[21] Regardless, however, what

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MetCap fails to acknowledge in its motion is that the Court left little room for doubt as to the limited authoritative weight it was according the Tentative Draft. The portion of the Memorandum Opinion in which the Court introduces the Tentative Draft — and, briefly, views MetCap’s claim within the prism provided by Section 29 — is well outside of the Court’s analysis of MetCap’s claim under controlling legal authority.

Because the Court did not rely on the Tentative Draft for its decision, noted that the Tentative Draft was, not surprisingly, tentative in nature, and acknowledged that the analysis under the Tentative Draft was “less clear” on the question of imposing liability on Pearl for something the parties, as evidenced by the Third Amendment, may have agreed would not have been Pearl’s obligation, the Court concludes that MetCap cannot successfully argue that the Court erred in discussing the Tentative Draft in its Memorandum Opinion.

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MetCap’s motion for reargument fails to demonstrate that the Court misapprehended any facts or misapplied any legal principles material to the outcome of the Memorandum Opinion. Accordingly, it is denied.

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IT IS SO ORDERED.

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