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M&A intermediary not entitled to success fee, but was entitled to compensation for actual services

Posted by Peter Papagianakis | Mar 01, 2021 | 0 Comments

In Sonenshine Partners, LLC v. Duravant LLC, 2021 NY Slip Op. 01135, the court held that an exchange of e-mails--when combined with a contract on a related topic, could serve as the basis of an unjust enrichment claim. An unjust enrichment claim is available to a party to receive compensation for actually performing services that benefit of another party, even if there is not a binding contract for those services to be performed.

Generally, to prevail (in court) based on an unjust enrichment claim, there must be reasonable evidence that (i) the other party benefited from those services and (ii) it was reasonable for the party (claiming unjust enrichment) to (a) rely on whatever correspondence (including emails) was exchanged and (b) it did actually perform the services that benefited the other party.

At the early stage of a lawsuit, however, there is no need to submit formal evidence--but there must be allegations that such facts/evidence exists.

In this particular case, a business intermediary did have a contract with the other party. However, the contract was not clear as to whether it was engaged to broker and help negotiate the prospective purchase of a business ("target") and, therefore, the contract was unclear as to whether the business intermediary would be entitled to a success fee. Accordingly, the business intermediary could not prevail on its claim that the the other party breached the contract with the intermediary. Fortunately, there were emails that at a minimum supported the business intermediary's allegations that the business intermediary performed services that benefited the other party. Thus, when the contract was combined with those emails, the court held that the requirements of New York's General Obligations Law 5-701(a)(10) were satisfied in order to be able to proceed with the lawsuit because that statute's standard (when claiming unjust enrichment) is not as stringent as other statutes that require that certain contracts be in a definitively binding written form.

In conclusion, the business intermediary's unjust enrichment claim was (allegations were) sufficient to allow it to proceed to the next stage of the litigation--which can provide the business intermediary in this case with leverage to negotiate a settlement.

 

About the Author

Peter Papagianakis

Peter Papagianakis chairs the firm's matters pertaining to business deals. Since commencing his legal career in 1997, the firm's founding partner, has practiced law exclusively in the area of business contracts and transactions. His experience has been as an attorney for a national law firm and...

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