Money partners or lenders in complex real estate transactions are often sued by entities looking for the storied "deep pockets" believed to be behind the transaction. These claimants may run the gamut from frustrated purchasers or sellers to brokers in search of their commission. As is typical in cases arising out of sophisticated transactions, courts regularly look to the contracts memorializing the terms of the deal to apportion liability and award damages. One exception to this had beenuntil recentlyclaims for unjust enrichment. Unjust enrichment claims, by their very nature, depend on the absence of a contract dealing with the subject matter of the claim and ask the court to do equity and award relief. Accordingly, in the real estate financing context, brokers seeking to recover fees, have, in the absence of a signed brokerage agreement with a money partner, brought unjust enrichment claims to recover unpaid commissions.
A trio of New York Court of Appeals cases, however, has made clear that these unjust enrichment claims by brokers against third parties to recover broker fees are becoming increasingly difficult to win. Collectively, this trio of cases narrowed the availability of unjust enrichment claims against third parties by requiring that (1) the relationship between the plaintiff and the third party cannot be "too attenuated," and (2) that relationship could have caused reliance or inducement by the plaintiff. In real estate transactions involving brokers, capital firms that finance real estate transactionsbut that otherwise only have an attenuated, if any, relationship with a brokerhave a strong defense against unjust enrichments claim brought by brokers.1 Despite this increasing hurdle for brokers, or other service providers, third-party venture partners canand shouldprotect themselves even further from unjust enrichment claims by ensuring that their joint-venture principals make clear to brokers, in writing, who is responsible for paying the broker’s fee.
New York Law, Generally
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