McGlinchey’s Commercial Law Bulletin is a biweekly update of recent, unique, and impactful cases in state and federal courts in the area of commercial litigation.
Ohio
Unjust Enrichment
Bova v. B&J Pools, Inc., 7th Dist. Mahoning, No. 2023-Ohio-1680.
In this appeal, the Seventh Appellate District affirmed in part and reversed in part the trial court’s decision following a bench trial finding that the defendant was liable for breach of contract and unjust enrichment because no evidence was presented to establish that the defendant had been unjustly enriched.
The Bullet Point: To prove an unjust enrichment claim, the plaintiff must prove: (1) he conferred a benefit on the defendant; (2) the defendant knew of the benefit; (3) the defendant retained the benefit under circumstances where it would be unjust for him to retain that benefit without payment. Generally, the doctrine of unjust enrichment is “inapplicable if an express agreement existed concerning the services for which compensation is sought; [and] the parameters of the agreement limit the parties’ recovery, in the absence of bad faith, fraud or illegality.” However, both claims may be viable when evidence is presented at trial that a party breached the contract and was unjustly enriched by separate conduct.
The Basis for an Enforceable Contract
Danzinger & De Llano, LLP v. Morgan Verkamp, LLC et. al., 1st Dist. Hamilton No. 2023-Ohio-1728.
In this appeal, the First Appellate District affirmed the trial court’s decision to grant the defendant’s motion to dismiss on the plaintiff’s attempt to recover attorney’s fees, finding that no enforceable contract existed between the parties.
The Bullet Point: To establish a claim for breach of contract, a plaintiff must show the existence of a contract, performance by the plaintiff, breach by the defendant, and resulting damage or loss to the plaintiff. For a contract to exist, there must be an offer, acceptance, and consideration. The alleged contract must also reflect the essential terms with definiteness and certainty, as there must be a meeting of the minds as to all essential terms. In other words, the parties must have a “distinct and common intention” that is communicated by each other to the other in order for an enforceable contract to exist.
Breach of Fiduciary Duty
Hoffman v. Atlas Title Sol., LTD., 3rd Dist. Union No. 2023-Ohio-1706.
In this appeal, the Third Appellate District reversed the trial court’s decision to grant the defendant summary judgment on a breach of contract and breach of fiduciary claims, finding that an issue of fact exists regarding who ultimately bore responsibility for escrow fraud and whether the defendant had maintained proper security measures to prevent such fraud from occurring in the first place.
The Bullet Point: The elements for a breach of fiduciary duty claim are: “(1) the existence of a duty arising from a fiduciary relationship; (2) a failure to observe the duty; and (3) an injury resulting proximately therefrom.” “A claim of breach of fiduciary duty is basically a claim for negligence that involves a higher standard of care.” “Thus, the party asserting such a breach must establish the existence of a fiduciary duty, a breach of that duty, and an injury proximately resulting therefrom.” In the escrow services context, “[t]he very name ‘escrow’ gives it the earmarks of a trust.” “Thus, the escrow agent is a fiduciary agent for both parties to a purchase agreement” under Ohio law. That said, “[a]n escrow agent, despite fiduciary status, will not be liable when he or she acts in accordance with the escrow agreement or instructions.”
Florida
Determination of “Regular Rate” Under the FLSA
David Thompson v. Regions Security Services, Inc., No. 21-10954 (11th Cir. May 18, 2023)
The Eleventh Circuit examined whether there was a reasonable basis to conclude that an employer fluctuated an employee’s “regular rate” in order to circumvent the overtime provisions set forth in the Fair Labor Standards Act (FLSA).
The Bullet Point: Section 207(a)(1) of the FLSA prohibits an employer from scheduling an employee to work longer than forty hours in a given workweek without paying that employee overtime compensation. To enforce this provision, an employer is required to pay two different compensation rates: (1) a regular rate, which describes the non-overtime hourly rate that the employee regularly earns; and (2) an overtime rate, which must be at least one-and-one-half times the employee’s regular rate. In this case, an employee’s $13.00 non-overtime hourly rate was reduced to $11.15 after his employer began scheduling him to work overtime. Then, when his employer reverted his schedule to forty-hour workweeks, his $13.00 hourly rate was restored. Accordingly, the employee alleged that the $11.15 rate was not his “regular rate” but an artificial rate designed to avoid complying with the FLSA’s overtime-compensation requirement.
On appeal, the Eleventh Circuit concluded that the facts plausibly suggest that the employer used the fluctuation in the employee’s non-overtime hourly rate as a device to evade paying him overtime compensation as required by the FLSA. In reaching its conclusion, the Court considered the Department of Labor’s interpretation of the FLSA overtime provisions, which prohibits an employer from using “simple arithmetic” as a means to ensure that an employee earns no more than his non-overtime hourly rate. Applying this interpretation to the employee’s allegations, the Court found there is a reasonable inference that the employer used prohibited arithmetic to circumvent the FLSA overtime provisions. Therefore, the trial court’s order granting the employer’s motion for judgment on the pleadings was vacated.
Breach of Implied Contract
Global Network Management, Ltd. v. Centurylink Latin American Solutions, LLC, No. 21-13719 (11th Cir. May 18, 2023)
The Eleventh Circuit affirmed a trial court’s dismissal with prejudice of a plaintiff’s claims for breach of contract implied in law and breach of contract implied in fact.
The Bullet Point: In Florida, a contract implied in law exists where the parties have never indicated any agreement between them. However, the circumstances are such that it would be unjust for one party to have received a benefit without paying compensation. A contract implied, in fact, on the other hand, is founded upon a meeting of the minds, which, although not incorporated in an express contract, is inferred from the conduct of the parties. Contracts implied in fact, therefore, require the assent of the parties, whereas contracts implied in law are created without regard to the parties’ expression of assent.
At issue in this appeal was a district court’s dismissal of a plaintiff’s claims for breach of contract implied in law and breach of contract implied in fact, which arose from the theft of memory cards that belonged to the plaintiff and were being stored in the defendant’s data center. The Eleventh Circuit concluded that the district court correctly dismissed these claims, reasoning that there was an earlier express agreement governing the relationship between the two parties that set out the defendant’s security obligations with respect to the plaintiff’s property. The existence of this contract precluded the plaintiff from bringing a claim for breach of contract implied in law, as a topic that is addressed by a valid contract cannot be the subject of a contract implied in law. Similarly, the plaintiff could not bring the claim for breach of implied contract in fact because the law will not recognize an implied-in-fact contract where an express contract already exists. Accordingly, the district court’s dismissal of the plaintiff’s claims for breach of contract implied in law and breach of contract implied in fact was affirmed.
