Motion To Dismiss Quantum Meruit And Unjust Enrichment Claims Denied As To Corporation, Granted As To Its Principal

On August 23, 2024, Justice Nancy M. Bannon granted in part and denied in part a borrower’s motion to dismiss claims by a real estate capital advisory firm seeking compensation for its work in negotiating the restricting of a loan. The case is Lotus Capital Partners, LLC v.. SB Yen's Management Group, Inc., Index No. 652299/2023.

As alleged in the complaint, corporate defendant SB Yen entered into a written fee agreement whereby plaintiff Lotus agreed to negotiate the rrestructuring of an outstanding loan from a non-party lender. After Lotus had successfully completed that assignment and the written agreement had expired, SB Yen asked Lotus to pursue and negotiate a second restructuring of the same loan. The parties did not enter into a new written fee agreement.

SB Yen emails acknowledged that Lotus was representing it and had made significant efforts on the second restructuring and, as the deal approached closing, expressed the desire to compensate Lotus for its efforts. However, SB Yen made no payment after the closed.

Lotus sued SB Yen and its principal, Su-Mei Yen, for quantum meruit and unjust enrichment. Defendants moved to dismiss, relying principally on the stature of frauds as codified at New York General Obligations Law§ 5-701(a) which, among other things, requires that any contract “to pay compensation for services rendered in negotiating a loan” be in writing.

Justice Bannon wrote that the statute “extends to claims for quantum meruit and unjust enrichment, as ‘both are claims under 'a contract implied . . .in law to pay reasonable compensation.’” Slip op., p. 3, quoting Snyder v Bronfman, 13 N.Y.3d 504, 508 (2009). But while Lotus’ claims fell within the statute, “the writing requirement is ‘less exacting’ with respect to quantum meruit/unjust enrichment claims for the reasonable value of services rendered.” Id. For such claims, "'a sufficient memorandum need only evidence the fact of plaintiff's employment by defendant to render the alleged services.' The obligation to pay reasonable compensation is then implied.’" Id., pp. 3-4 (citations omitted.)

Justice Bannon denied SB Yen’s motion to dismiss because its emails acknowledging that Lotus was representing it in connection with the second loan restricting were sufficient under that standard. Id., p. 4. However, the claims against Su-Mei were dismissed. The complaint did not allege that Lotus did any work for Su-Mei Yen personally, and its\allegations that that she is the “CFO and sole beneficial owner of SB Yen”, made on information and belief' without identifying the basis for such information or belief, were insufficient to support piercing the corporate veil as necessary to extend the company’s obligation to its principal. Id., pp. 4-5.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning brokerage claims, equitable claims, piercing the corporate veil or the Statute of Frauds.