We’ve seen an increase in allegations of “unjust enrichment,” particularly in strike suits seeking recovery of purely economic loss. A number of states don’t even recognize this theory as a separate cause of action (according to Bexis’ book, these include California, New Jersey, Pennsylvania, and Tennessee), and others preclude it when there is an “adequate remedy at law” (Florida, Louisiana, Massachusetts, Minnesota). But last week we ran across a case dismissing an unjust enrichment claim on a ground we hadn’t considered – privity.
In Smith v. Glenmark Generics, Inc., 2014 WL 4087968 (Mich. App. Aug. 19, 2014), the court dismissed a garbage class action for unjust enrichment based on alleged loss of value of birth control pills that had been mislabeled. As to such “losses,” the defendant asserted “that it sought to remedy the problem by directing patients to return the product to their respective pharmacies for replacement or reimbursement,” but the court never had to go there. Id. at *1. Instead, it affirmed dismissal on the basis of lack of “direct” enrichment, which in the case of products sold through supply chains, appears indistinguishable from privity:
[O]ur courts only employ the doctrine of unjust enrichment in cases where the defendant directly receives a benefit from the plaintiff. Notably, caselaw does not specifically state that the benefit must be received directly from the plaintiff, but these decisions make it clear that it must. This is particularly true where emphasis is placed on the fact that the defendant must receive a benefit from the plaintiff, and where the facts show that a benefit received indirectly is not enough to establish a claim for unjust enrichment.
Smith, 2014 WL 4087968, at *1 (citations omitted). This “direct benefit” requirement killed off all unjust enrichment claims under Michigan law because:
[D]efendant did not receive a direct benefit from plaintiff. Defendant did not sell the contraceptives directly to plaintiff, and plaintiff admitted that she did not purchase the contraceptives from defendant, but rather from a pharmacy.
Id. (emphasis added).
We confess that we haven’t looked very deeply at this cause of action, which is usually something of a throw-away, so we don’t know whether the direct benefit/privity defense discussed in Smith is widespread or peculiar to Michigan. Since we’re always on the lookout for “new” (or at least so old as to be new to us) defenses to any and all of the causes of action we encounter, we thought this one was worth passing along.