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Understanding unjust enrichment in California: Analysis and examples

Understanding Unjust Enrichment California Analysis Examples
What is unjust enrichment in California, how does it affect organizations, and how should its principles be navigated by attorneys?

Some might say the doctrine of unjust enrichment in California presents a unique paradox. On one hand, it’s a concept deeply rooted in historical jurisprudence, recognized for its importance in maintaining equitable balance in civil law.

On the other, recent judicial interpretations within the state have thrown its standalone legitimacy into question, creating a dizzying display of legal uncertainty.

This dichotomy in judicial opinion leaves an environment fraught with ambiguity that’s worthy of exploration.

So, let’s dive in, shall we?

Unjust enrichment in California

Since graduating from law school, I haven’t had many opportunities to ponder legal concepts with histories tracing all the way back to ancient Rome, but the doctrine of unjust enrichment is such an occasion.

In California, unjust enrichment is a legal concept that allows a person to recover benefits conferred upon another when it would be unfair for the recipient to retain those benefits without compensating the provider.

Unjust enrichment is based on the principle that one party should not be allowed to unjustly benefit at the expense of another and is a central aspect of ethical responsibility for California attorneys to be aware of.

It’s based on a simple yet profound principle articulated by the Roman jurist Pomponious; “For this by nature is equitable, that no one be made richer through another’s loss.”

Good stuff. Yet, somehow, California has managed to twist and turn this easily-understood doctrine into something that will make your head spin.

Indeed, the journey of unjust enrichment through California’s courts has been anything but linear.

Un-justifying unjust enrichment

The most recent important case in this unfolding narrative is the 2020 decision in Hooked Media Group, Inc. v. Apple Inc. In that case, Hooked Media Group accused Apple of unjust enrichment (among other claims) after Apple hired away one of its key engineers.

Hooked Media claimed that in doing so, Apple benefited from its assets without compensation. The Court of Appeal disagreed.

In a stark contradiction to the historical prominence of unjust enrichment claims, the Court flat-out stated, “California does not recognize a cause of action for unjust enrichment” and granted Apple summary judgment on that issue.

Perhaps surprisingly, this bold assertion aligns with a growing body of case law in California, which views unjust enrichment not as a separate legal theory but as an effect; the result of a failure to make restitution in situations where it is equitable to do so.

This perspective was also seen in another important appellate case, Melchior v. New Line Productions, Inc. That case essentially redefined unjust enrichment as a secondary outcome of other legal failures, particularly in quasi-contractual situations. 

Courts following Melchoir tend to lean hard into a more compartmentalized approach, requiring plaintiffs to establish an independent and more narrowly defined legal claim, such as a quasi-contract, in order to seek restitution.

This interpretation effectively sidelines unjust enrichment as a standalone claim.

The dual faces of unjust enrichment in California

Don’t get too comfortable with the idea that unjust enrichment is not an independent cause of action, however. The truth is that some California courts have specifically upheld its enforceability.

One notable case that supports the validity of unjust enrichment claims is Elder v. Pacific Bell Telephone Co. In Elder, the plaintiff alleged that telephone public utilities had overcharged him for unauthorized premium content charges and, among other things, pleaded a cause of action for unjust enrichment. 

The Elder court upheld the unjust enrichment claim, recognizing its viability as an enforceable legal action. The elements of the claim were articulated simply as “receipt of a benefit and [the] unjust retention of the benefit at the expense of another.” With that, the pleading for unjust enrichment survived a demurrer. 

In addition to Elder, other precedents in California have at least tacitly recognized the viability of unjust enrichment claims. In Ghirardo v. Antonioli, for example, the seller of real estate was entitled to seek recovery under unjust enrichment because the buyers were unjustly enriched by a mistake made in the initial payoff amount.

Likewise, in Lectrodryer v. SeoulBank, the court found that the plaintiff had satisfied the elements for a claim of unjust enrichment where a bank accepted prepayment on a letter of credit and then later refused to honor that letter. 

Arguably, these cases form a collective body of law that upholds unjust enrichment as a legitimate claim that is capable of standing on its own merits.

Somewhere in the middle

Yet another case to consider within the unjust enrichment labyrinth is Rutherford Holdings, LLC v. Plaza Del Rey. In Rutherford, a real estate purchaser sued for unjust enrichment (among other things) after losing a $3 million non-refundable deposit because both parties failed to perform their respective obligations under a real estate contract.

The trial court granted a demurrer to Rutherford’s unjust enrichment claim but the appellate court reversed that decision. The court explicitly recognized that unjust enrichment is not a stand-alone cause of action where a breach of contract claim can be validly pleaded.

Here, however, Rutherford argued that the non-refundable deposit clause was contrary to public policy, rendering it void. Viewed in that light, the court found that Rutherford could amend the complaint to include a quasi-contract claim for restitution based on unjust enrichment.  

Confused yet?

Navigating the legal maze

Given the divergent views on unjust enrichment in California, legal professionals face a complex and often unpredictable terrain.

Navigating this maze requires not only an in-depth understanding of the prevailing legal doctrines but also strategic acumen in pleading and arguing cases.

Here are some ways to survive the confusion:

Step 1: Understand the dilemma

The first crucial strategy for attorneys is, of course, simply recognizing the diverse nature of unjust enrichment jurisprudence in California. While some courts may honor an independent unjust enrichment claim some of the time, it’s probably not a good bet to put all of your client’s eggs in the unjust enrichment basket.

Step 2: Find an anchor

Given the state’s ambivalent stance, it is prudent to anchor an unjust enrichment claim within a broader legal context, such as a quasi-contractual framework. 

This approach aligns with the reasoning in cases like Melchior v. New Line Productions, Inc., and Rutherford Holdings, LLC v. Plaza Del Rey, which seem to require an independent legal basis for seeking restitution.

By using this tactic, attorneys can safeguard their claims against challenges based on the recent trend of diminishing unjust enrichment as a standalone cause of action.

Step 3: Plead in the alternative

Pleading an independent legal claim alongside unjust enrichment is not merely a tactical consideration; it has become a near necessity in the current legal quagmire of California. 

Attorneys should, therefore, meticulously craft their pleadings to include alternative theories of recovery, ensuring that the essence of their client’s grievance is captured within the bounds of more than one recognized legal construct.

Navigating the legal intricacies of unjust enrichment in California demands a blend of historical knowledge, legal acumen, and strategic flexibility.

Legal professionals working in this area must be adept at maneuvering within a legal framework that is both deeply rooted in tradition and subject to contemporary reinterpretation.

WWCSCD? (What will the California Supreme Court do?)

Eventually, the California Supreme Court will have to weigh in definitively on this issue; a decision that will hopefully cement the trajectory of unjust enrichment jurisprudence in the state.

Such a ruling could either restore unjust enrichment to its historical status as an independent legal claim or affirm its relegation to a secondary role within the broader context of restitution and quasi-contract law.

The decision of the Supreme Court, whenever it comes, will have far-reaching implications for how unjust enrichment is pleaded and argued in California courts.

Until then, attorneys and paralegals must approach this uncertain area with caution, being mindful of both historical principles and current judicial trends.

The ability to adeptly maneuver through this complex legal environment is key to effectively advocating for clients and achieving equitable outcomes in cases involving claims of unjust enrichment.

Conclusion

In the intricate legal landscape of California, the doctrine of unjust enrichment presents a paradox of historical significance and contemporary ambiguity.

While deeply rooted in jurisprudence, recent judicial interpretations have cast doubt on its standalone legitimacy, challenging legal professionals to navigate a maze of uncertainty.

The dichotomy in judicial opinion underscores the need for exploration and strategic adaptation. Amidst conflicting perspectives, practitioners must grasp the evolving nature of unjust enrichment law.

Anchoring claims within broader legal contexts and pleading in the alternative become imperative strategies.

As we await clarity from the California Supreme Court, legal professionals must tread cautiously, blending historical principles with contemporary interpretation.

Adept maneuvering in this complex terrain is vital for equitable outcomes and effective advocacy in unjust enrichment cases.

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