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Brokerage Law: Appellate Division Reinstates Unjust Enrichment Claim Against Wrongdoers

By Jeffrey R. Metz


Taking over the matter from another law firm where a commercial brokerage firm had its complaint for various causes of action, including unjust enrichment, dismissed as against all defendants except a shell limited liability company with no assets, Adam Leitman Bailey, P.C. has achieved reinstatement of the complaint against two of the wrongdoers for unjust enrichment and the possibility of moving against the two other wrongdoers in the future.

In Georgia Malone & Co. v. Rieder, et. al., Malone & Co. entered into a brokerage agreement with Rieder’s company, CenterRock, to purchase as assemblage for $70,000,000.  In connection therewith, Malone & Co. furnished Rieder and CenterRock with confidential due diligence information about the assemblage.  Rieder ultimately backed out of the deal but he and his son then sold the confidential information to another broker, Jungreis, and his brokerage firm, Rosewood.  Jungreis then transmitted the confidential information to a third party which promptly bought the property.  Jungreis received a hefty commission and then gave the Rieders $150,000.00 for the confidential information they improperly supplied to him.
At the Supreme Court level, the court, relying on a certain Appellate Division opinion, found that unjust enrichment would not lie against the Rieders or Jungreis or Rosewood.

On appeal, the Appellate Division issued a 3-2 opinion.  All five justices agreed that the unjust enrichment claim must be reinstated against Rieder and his son.   The court split however on whether Jungreis and Rosewood could be held responsible.  The majority found that the link between Malone & Co. and Jungreis and Rosewood too attenuated to hold them liable even though there was no doubt that they had profited from the use of the confidential information.

The dissent, in a lengthy opinion, found that Jungreis and Rosewood had to be held responsible.  Whether the complaint gets reinstated against them will likely be decided by the Court of Appeals, the highest court in the state.  In any event, the opinion is a quite important exposition on the area of unjust enrichment.

Jeffrey R. Metz represented Malone & Co. before the Appellate Division.

Adam Leitman Bailey, P.C.

NEW YORK REAL ESTATE ATTORNEYS