Learning Annex Holdings, LLC et al v. Whitney Education Group, Inc. et al

Filing 124

MEMORANDUM OPINION AND ORDER: For the aforementioned reasons, Learning Annexs unjust enrichment claim is dismissed. If Defendants wish to file a post-trial motion, they may now do so. Defendants may raise any issue they deem appropriate but should ad dress the propriety of the jurys award of damages. The moving brief is due within thirty days of the date of this order; the opposition brief is due thirty days later; and the reply is due fifteen days after submission of the opposition. (Signed by Judge Shira A. Scheindlin on 8/12/2011) (ab)

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Plaintiffs,

MEMORANDUM
OPINION AND ORDER
09 Civ. 4432 (SAS)

- against­
RICH GLOBAL, LLC, and
CASHFLOW TECHNOLOGIES, INC.,
Defendants.

----------------------------------------------------- X

SHIRA A. SCHEINDLIN, U.S.D.J.:
I.

INTRODUCTION
On July 13,2011, in a suit brought by Learning Annex Holdings, LLC

and Learning Annex, LLC (together "Plaintiffs" or "Learning Annex") against
Rich Global, LLC and Cash Flow Technologies, Inc. (together, "Defendants" or
"Rich Dad"), a jury awarded approximately $14.6 million in damages to Plaintiffs
on their quantum meruit claim. The parties returned to Court shortly thereafter to
separately argue Learning Annex's unjust enrichment claim, which this Court had
previously determined to be an equitable claim. For the reasons discussed below,
Plaintiffs' unjust enrichment claim is now dismissed.

1

II.

LEGAL BACKGROUND1
In deciding Rich Dad’s motion for summary judgement, I reasoned

that
[q]uantum meruit and unjust enrichment may be analyzed together
as a single quasi-contract claim. This is because unjust
enrichment is a required element for an implied-in-law, or quasi
contract, and quantum meruit . . . is one measure of liability. It
therefore stands to reason that a plaintiff must show unjust
enrichment before it can recover under quantum meruit.2
Later, when Rich Dad moved for judgment as a matter of law on
Plaintiffs’ unjust enrichment claim, I explained that
because the question of whether defendant has been “unjustly
enriched” or should “in equity and good conscience” repay is a
question for the Court after the jury has determined whether the
facts are as claimed, I need not decide Rich Dad’s motion at this
time. See 2 New York Pattern Jury Instructions: Comment to
Instruction No. 4:2 (“It should . . . never be left to the jury to say
whether defendant has been ‘unjustly enriched’ or should ‘in
1

This Opinion assumes familiarity with the background and procedural
posture of this case, as described in Learning Annex Holdings, LLC v. Whitney
Educ. Grp., Inc., 765 F. Supp. 2d 403 (S.D.N.Y. 2011) (“Summary Judgment
Opinion”) (granting Defendants summary judgment on all claims except for breach
of duty to negotiate in good faith, quantum meruit, and unjust enrichment);
Learning Annex Holdings, LLC v. Rich Global, LLC, No. 09 Civ. 4432, 2011 WL
2732550 (S.D.N.Y. July 11, 2011) (“Rule 50(a) Opinion”) (denying Defendants’
motion for judgment as a matter of law); Learning Annex Holdings, LLC v. Rich
Global, LLC, No. 09 Civ. 4432, 2011 WL 3423927 (S.D.N.Y. Aug. 3, 2011)
(“Rule 25(c) Opinion”) (granting Plaintiffs’ motion to join Learning Annex, L.P.
as a plaintiff).
2

Summary Judgment Opinion, 765 F. Supp. 2d at 413.
2

equity and good conscience’ repay.”). Thus, once the jury makes
the requisite findings of fact and returns a verdict on the quantum
meruit claim, the Court will determine whether Rich Dad was
unjustly enriched and therefore whether any verdict in Plaintiffs’
favor on the quantum meruit claim may be sustained.3
Nevertheless, I charged the jury as to both quantum meruit and unjust enrichment,
instructed the jury to “analyze these claims separately,”4 and took an advisory
verdict on unjust enrichment.5 The jury returned a verdict in Plaintiffs’ favor on
both claims.
III.

APPLICABLE LAW
A.

Law of the Case
“The law of the case doctrine ‘posits that when a court decides upon a

rule of law, that decision should continue to govern the same issues in subsequent
stages in the same case.’”6 “However, the doctrine ‘is, at best, a discretionary

3

Rule 50(a) Opinion, 2011 WL 2732550, at *1 n.3.

4

Learning Annex Holdings, LLC v. Rich Global, LLC Jury Charge at
14; Learning Annex Holdings, LLC v. Rich Global, LLC Trial Transcript at 989.
5

See Koppel v. 4987 Corp., Nos. 96 Civ. 7570, 97 Civ. 1754, 2001 WL
47000, at *12 (S.D.N.Y. Jan. 19, 2001) (after “plaintiffs’ claim of unjust
enrichment, an equitable claim, was submitted to the jury for an advisory verdict,”
and jury found for defendants, court held that “the facts established at trial do not
compel a finding that ‘equity and good conscience’ require restitution”); see also
Rule 50(a) Opinion, 2011 WL 2732550, at *6 & n.35.
6

DiLaura v. Power Auth. of State of N.Y., 982 F.2d 73, 76 (2d Cir.
1992) (quoting Liona Corp. v. PCH Assocs. (In Re PCH Assocs.), 949 F.2d 585,
3

doctrine, which does not constitute a limitation on the court’s power but merely
expresses the general practice of refusing to reopen what has been decided.’”7 As
on a motion for reconsideration, “[t]he major grounds justifying reconsideration
are ‘an intervening change of controlling law, the availability of new evidence, or
the need to correct a clear error or prevent manifest injustice.’”8 “In any event the
doctrine of law of the case ‘permits a change of position if it appears that the
court’s original ruling was erroneous.’”9
B.

Quantum Meruit/Unjust Enrichment
Neither the New York Court of Appeals nor the Second Circuit

(interpreting New York law) has explained precisely how to proceed when both
quantum meruit and unjust enrichment are pled. Claims for quantum meruit and
unjust enrichment require proof of distinct elements.10 While both theories of
592 (2d Cir. 1991)).
7

Doctor’s Assocs. Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir. 1997)
(quoting United States v. Martinez, 987 F.2d 920, 923 (2d Cir. 1993)).
8

Virgin Atl. Airways, Ltd. v. National Mediation Bd., 956 F.2d 1245,
1255 (2d Cir. 1992) (quoting 18 C. Wright, A. Miller & E. Cooper, Federal
Practice & Procedure § 4478).
9

DiLaura, 982 F.2d at 77 (quoting Kinsman Transit Co. v. City of
Buffalo, 388 F.2d 821, 825 n.9 (2d Cir. 1968)).
10

Compare Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine
Host Corp., 418 F.3d 168, 175 (2d Cir. 2005) (quotation marks and citation
omitted) (“In order to recover in quantum meruit under New York law, a claimant
4

relief are designed to prevent unjust enrichment,11 courts have distinguished the
causes of action based on the type of, and “rationale for[,] the relief sought.”12 Yet

must establish (1) the performance of services in good faith, (2) the acceptance of
the services by the person to whom they are rendered, (3) an expectation of
compensation therefor, and (4) the reasonable value of the services.”), with
Leibowitz v. Cornell Univ., 584 F.3d 487, 509 (2d Cir. 2009) (emphasis added)
(quotation marks and citation omitted) (“A claimant seeking relief under a theory
of unjust enrichment in New York must demonstrate (1) that the defendant
benefitted; (2) at the plaintiff’s expense; and (3) that equity and good conscience
require restitution.”).
11

See, e.g., New Windsor Volunteer Ambulance Corps, Inc. v. Meyers,
442 F.3d 101, 118 (2d Cir. 2006) (emphasis added) (“[W]here a valid agreement
exists between the parties, an action in quantum meruit to prevent unjust
enrichment ordinarily is not available.”); Matter of Cooperman, 83 N.Y.2d 465,
473 (1994) (emphasis added) (quotation marks omitted) (describing quantum
meruit as “a principle inherently designed to prevent unjust enrichment”); Seiden
Assocs., Inc. v. ANC Holdings, Inc., 754 F. Supp. 37, 38 (S.D.N.Y. 1991)
(emphasis added) (citing Black’s Law Dictionary 649 (abridged 5th ed.))
(“Quantum meruit, meaning ‘as much as he deserves,’ is an expression that
describes the extent of liability on a contract implied in law in order to prevent a
party’s unjust enrichment.”); 22A Laura Hunter Dietz et al., N.Y. Jur. 2d Contracts
§ 609 (emphasis added) (citations omitted) (“The doctrine of quantum meruit is
used as a device for the prevention of unjust enrichment of one party at the expense
of another in the absence of a valid contract on which liability may be based.”).
12

4A Robert L. Haig, New York Prac., Commercial Litig. in New York
State Courts § 71:12 (3d ed.) (“The quantum meruit and unjust enrichment rubrics
relate not so much to the form of action as to the rationale for the relief sought.
Quantum meruit applies where justice requires that the plaintiff be paid the
reasonable market value of his or her performance, while unjust enrichment
invokes the value to the defendant of plaintiff’s performance, which is not
necessarily the same as its market value.”); accord Seiden Assocs., Inc. v. ANC
Holdings, Inc., 768 F. Supp. 89, 96 (S.D.N.Y. 1991), rev’d on other grounds, 959
F.2d 425 (2d Cir. 1992) (“[Q]uantum meruit . . . is one measure of liability for the
breach of [of an implied-in-law] contract.”).
5

the “reasonable value of the services rendered” is a proper measure of damages
under both theories of relief.13 Moreover, under New York law, courts “may
analyze quantum meruit and unjust enrichment together as a single quasi contract
claim,”14 or as a single claim for unjust enrichment.15
13

Giordano v. Thomson, 564 F.3d 163, 170 (2d Cir. 2009) (quotation
marks and citation omitted) (“Recovery on [a claim for unjust enrichment] is
limited to the reasonable value of the services rendered by the plaintiff.”); New
Windsor, 442 F.3d at 118 (quoting Longo v. Shore & Reich, Ltd., 25 F.3d 94, 97
(2d Cir. 1994)) (“In the event that the breaching party is entitled to recover on such
an unjust enrichment theory, the amount to which he is entitled is measured . . . by
‘the reasonable value of services rendered.’”); Collins Tuttle & Co., Inc. v.
Leucadia, Inc., 544 N.Y.S.2d 604, 605 (1st Dep’t 1989) (citing Isaacs v. Incentive
Sys., 382 N.Y.S.2d 69 (1st Dep’t 1976)) (“Recovery on a claim premised upon
quasi-contract or unjust enrichment is limited to the reasonable value of the
services rendered by the plaintiff.”).
14

Mid-Hudson Catskill, 418 F.3d at 175 (“Applying New York law, we
may analyze quantum meruit and unjust enrichment together as a single quasi
contract claim.”); accord Seiden Assocs., Inc., 768 F. Supp. at 96 (“[Q]uantum
meruit and unjust enrichment are not separate causes of action. . . . Therefore, I
consider plaintiff’s [quantum meruit and unjust enrichment claims] to be a single
claim for recovery on an implied-in-law contract.”).
15

See Newman & Schwartz v. Asplundh Tree Expert Co., Inc., 102 F.3d
660, 663 (2d Cir. 1996) (“Counts Two and Three for quantum meruit and unjust
enrichment were quite properly subsumed by the district court into a single count
for restitution.”); Rule v. Brine, 85 F.3d 1002, 1011 (2d Cir. 1996) (emphasis
added) (quoting Bradkin v. Leverton, 26 N.Y.2d 192, 196, 197 (1970) and Miller v.
Schloss, 218 N.Y. 400, 407 (1916)) (“If the plaintiff fails to prove a valid contract,
the court may nonetheless allow recovery in quantum meruit ‘to assure a just and
equitable result,’ where ‘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.’ Such a recovery for unjust enrichment is permissible
‘when and because the acts of the parties or others have placed in the possession of
6

IV.

DISCUSSION
Although the law of this case is that unjust enrichment is a

prerequisite to (or element of) quantum meruit, I now conclude that this holding
was clearly erroneous. While I correctly held that Plaintiffs’ quantum meruit and
unjust enrichment claims should be analyzed together, it was error to require proof
of unjust enrichment in order to sustain recovery under quantum meruit.
The quantum meruit claim was properly tried before a jury, which
rendered a verdict and awarded damages. Today’s decision does not in any way
affect that verdict. But there is now no need to proceed on the unjust enrichment
claim. The jury found an implied-in-law contract and awarded the reasonable
value of the services rendered. While “principles of equity and good conscience”
were not implicated in the jury’s decision and will not now be addressed by this
Court, these considerations do not affect any of the elements of a claim for
quantum meruit – a claim into which concurrent claims for unjust enrichment are
properly “subsumed.”16 Perhaps this is because, upon a jury’s finding of an
implied-in-law contract, one party’s failure to pay the reasonable value of services

one person money, or its equivalent, under such circumstances that in equity and
good conscience he ought not to retain it, and which ex aequo et bono belongs to
another.’”).
16

Newman & Schwartz, 102 F.3d at 663.
7

rendered under that contract necessarily amounts to unjust enrichment. Thus, once
the jury awarded damages in quantum meruit, it essentially cured, or “prevent[ed,
any] unjust enrichment.”17 As such, the Court need not, and should not, separately
decide that claim, which should have been “analyze[d] . . . as a single quasi
contract claim”18 alongside Plaintiffs’ quantum meruit claim. Nevertheless, the
principles of equity and good conscience may yet be considered when the court
evaluates whether the jury’s damages award “‘deviates materially from what would
be reasonable compensation.’”19
V.

CONCLUSION
For the aforementioned reasons, Learning Annex’s unjust enrichment

claim is dismissed. If Defendants wish to file a post-trial motion, they may now do
so. Defendants may raise any issue they deem appropriate but should address the
propriety of the jury’s award of damages. The moving brief is due within thirty
(30) days of the date of this order; the opposition brief is due thirty (30) days later;
and the reply is due fifteen (15) days after submission of the opposition.
17

New Windsor, 442 F.3d at 118.

18

Mid-Hudson Catskill, 418 F.3d at 175.

19

Cross v. New York City Transit Auth., 417 F.3d 241, 258 (2d Cir.
2005) (quoting N.Y. C.P.L.R. § 5501(c)). “This standard ‘calls for closer
surveillance than shock the conscience oversight.’” Id. (quoting Gasperini v.
Center for Humanities, Inc., 518 U.S. 415, 424 (1996)).
8

SO ORDERED:

Dated:

New York, New York
August 12, 2011

9

-AppearancesFor Plaintiffs:
Jonathan Harris, Esq.
Julie Withers, Esq.
Charlotte Houghteling, Esq.
Harris Cutler & Houghteling LLP
111 Broadway, Suite 402
New York, New York 10006
[phone]

David Deitch, Esq.
Ifrah PLLC
1627 Eye Street NW, Suite 1100
Washington, D.C. 20006
[phone]

Edwin G. Schallert, Esq.
Debevoise & Plimpton, LLP
919 Third Avenue, 31st Floor
New York, New York 10022
[phone]

For Defendants:
John D. Rapoport, Esq.
John D. Rapoport, PC
c/o Marulli, Lindenbaum, LLP
5 Hanover Square, 4th Floor
New York, New York 10022
[phone]
Lewis Richard Clayton, Esq.
Daniel J. Leffell. Esq.
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
[phone]

10