Comments on Recent Cases: October 2020

Part of my work involves reading court decisions to keep abreast of how judges decide the types of cases I handle. Below, I share some thoughts on recent decisions.

Courts May Limit Discovery in “Unjust Enrichment” Cases

Plaintiffs can sue to recover money, even without a contract, by alleging that recovering money is necessary to prevent “unjust enrichment” by the defendant.  In those claims, a plaintiff must establish that the defendant was enriched at her expense, and that it is against equity and good conscience to permit the defendant to retain the money at issue.

Because this test is a little vague, parties to an unjust enrichment dispute may not agree on how much evidence they need to exchange with each other.  This was an issue in a recent Manhattan federal court decision.  The defendant in that case sought evidence about how the plaintiff made large gifts to other people to establish that it would be fair for him to keep the money the plaintiff gave him.  But the appeals court affirmed the decision not to require the exchange of evidence on those subjects because the plaintiffs gifts to others were irrelevant to the fairness of the alleged gift to him.

It’s often a lawyer’s job to focus a judge’s attention on relevant facts and prevent the other side from distractions.  That can be easier with claims based on a written contract than with more abstract claims like unjust enrichment, but not impossible.

Sherrif's Car, Knox County (Image credit)

Courts May Permit Oral Modifications to Contracts, Even When Its Terms Prohibit It

Some contracts contain provisions that say that they can only be modified by a subsequent written agreement. But these provisions are generally unenforceable in some jurisdictions, since some courts say that the parties can just amend that provision with an oral agreement.

Even in New York, where a statute makes those provisions effective, a party may sometimes still modify an agreement without a new signed contract. For example, a recent decision by a Manhattan appellate court held that a contractor could bring a lawsuit over an oral modification to an agreement, even though its written contract had a provision that required changes to be in writing. The court held that oral directions to perform additional work could modify an agreement, as well as any other changes that were regularly accepted in the general course of business.

Cases like this remind parties to agreements with provisions like these that they should not rely too heavily on those provisions.

New York Courts Allow An Expedited Procedure to Collect Debts, But Only in Certain Situations

Normally, lawsuits begin when a plaintiff files a complaint against a defendant. But New York provides an expedited procedure to skip the complaint and proceed to filing a motion for a judgment to collect a debt.

But this procedure is not allowed for every kind of debt. A Manhattan appeals court recently reversed an order granting a judgment because the plaintiff used the procedure on the wrong kind of debt. The procedure may be used when enforcing an agreement that requires the payment of money by a certain date, like a note. But the court held that the defendant’s agreement did not qualify because it required it to pay only if a specified condition was met (the defendant’s failure to operate a tug boat in a certain geographic area). Agreements with conditions like that, it held, required the plaintiff to file a complaint and litigate a standard lawsuit.

When drafting agreements, parties should be aware of what kind of procedures are available to enforce the agreement and, if an expedited procedure is preferable, draft the agreement accordingly. They should also only file for summary judgment in lieu of complaint if the debt meets the applicable criteria.

Debt Collection Attorneys May Face Liability under Federal Law When They Allege They Made Mistakes

Once a plaintiff obtains a judgment, she does not automatically get money. Instead, if the defendant does not pay voluntarily, she must find the defendant’s assets and litigate further to collect them. And she must do so in compliance with the Fair Debt Collection Practices Act (the “FDCPA”).

A federal appeals court in New York recently reversed a trial court dismissal of an FDCPA case against a debt collection law firm. The law firm served debt collection papers on a man with the same name as its judgment debtor. The man twice told the law firm that he was not the debtor (citing his different date of birth and social security number). But he kept getting papers. Although the trial court dismissed the case because the law firm had only made a “bona fide mistake,” the Second Circuit held that a jury could find otherwise.

Cases like these illustrate why it is important to follow the very technical rules involved in enforcing a judgment.