1 (516) 673-0674

search

NEWS & PUBLICATIONS

Home » Stayin’ Alive: Quasi-contract Claims Against Affiliate Survive Dismissal of Contract Claims

Stayin’ Alive: Quasi-contract Claims Against Affiliate Survive Dismissal of Contract Claims

by

In a recent decision by New York County Commercial Division Justice Barry Ostrager in Matthews v. Symbion Power LLC, 2020 NY Slip Op 20189 (Sup. Ct. New York Cty. 2020), the Court analyzed whether, despite asserting claims for breach of contract against one defendant, a party could recover in quasi-contract from the defendant’s affiliate – a stranger to the contract – in the interest of justice. Here, the Court answered that question in the affirmative. 

Background

On June 6, 2019, Simon Matthews (“Matthews” or “Plaintiff”) filed a complaint against defendants Symbion Power LLC (“Symbion”) and Symbion Power (Europe) Ltd. (“Symbion Europe”) asserting breach of contract and New York Labor Law claims against Symbion and Symbion Europe. On August 20, 2020 Matthews filed an amended complaint asserting breach of contract and related quasi-contract claims against only Symbion after voluntarily discontinuing the claims against Symbion Europe.

According to the amended complaint, Symbion Europe (as Symbion’s agent) and Matthews entered into two written contracts, and Symbion and Matthews entered into an oral contract for work Matthews performed in 2010 as a project manager in relation to Symbion’s business of constructing and operating power plants in the developing world, including conflict zones. Matthews alleged that Symbion Europe and Symbion knew, acknowledged and agreed that Matthews would be paid and employed solely by Symbion. Matthews’ claims stemmed from Symbion’s refusal to pay pursuant to these written and oral contracts. 

Thereafter, Symbion moved to dismiss the complaint pursuant to CPLR § 327(a) (forum non conveniens) and CPLR §§ 3211(a)(1), (a)(5) and (a)(7). On January 28, 2020 the Court partially granted Symbion’s motion to dismiss the causes of action based on the written contract but denied the portions of the motion to dismiss the causes of action based on quasi-contract and forum non conveniens. By decision dated July 30, 2020 the Court entertained both parties’ motions to renew and Plaintiff’s motion to reargue.

The Court’s Determination

The Court began by reiterating its prior holding rejecting Plaintiff’s argument that Symbion Europe was acting as an agent of Symbion in relation to its written contracts with Plaintiff. However, based upon Plaintiff’s allegations that the work he performed was done for — and not compensated by — Symbion, the Court did not dismiss Plaintiff’s quasi-contract claims. The Court noted that “generally a plaintiff may not recover in quasi-contract if there is a valid agreement governing the same subject matter” but held that, in the interest of justice, Matthews could recover in quasi-contract from Symbion, a “stranger” to the contract. The Court based its holding on the fact that although the contracts were unmistakably signed by Symbion Europe, Matthews’ work was directed and controlled by Symbion. For example, Matthews reported directly to Paul Hinks (“Hinks”), Symbion’s past and present chief executive officer (who held no position at Symbion Europe) with whom Matthews negotiated his salary and other terms of employment. Further, Matthews’ past complaints of non-payment were directed to and answered by Hinks and Matthews was held out to foreign governments as an employee of Symbion, not Symbion Europe. 

The Court then clarified its holding that Symbion Europe was not an agent of Symbion for purposes of enforcing the contracts. Matthews contended that the Court erroneously applied a piercing the corporate veil test despite the fact that Royal Indus. Ltd. V. Kraft Foods, Inc., 926 F. Supp. 407 (S.D.N.Y. 1996) and the Restatement (Second) of Agency, instructs that where there is a parent/subsidiary relationship, the court should apply common-law agency principles, not piercing principles. Symbion responded to this argument by citation to LoCurto ex rel. Estate of LoCurto v. Jevic Transp., Inc. No. 99 CV 2314(ILG), 2004 WL 469820, at *2 (E.D.N.Y. Jan. 14, 2004), for the proposition that “[i]n the case of a parent-subsidiary relationship, the same factors informing a judgment regarding the piercing of a corporate veil are applied in determining whether one corporation is acting as the agent of a related corporation. Applying a different standard would undermine the strong policy that exists concerning the presumption of separateness and respecting the corporate entity.” The Court observed this apparent dichotomy in authority but determined that neither line of cases were binding as Symbion and Symbion Europe were not parent/subsidiary companies but were sister companies as subsidiaries of Symbion Holdings LLC. Thus, absent clear controlling precedent, the Court determined that no agent/principal relationship existed by relying on the fact that Matthews admittedly understood that he was signing a contract with Symbion Europe “so that” all claims relating to the contracts would have to be against Symbion Europe in Cyprus. 

While under the facts of this case, the Court did not find an agent/principal relationship between Symbion and Symbion Europe, its decision left open the possibility that under the right circumstances, sister companies could be held liable under an agent/principal theory. However, and most important to Matthews, the existence of two written contracts with Symbion Europe did not preclude his recovery in quasi-contract from a “stranger”, Symbion, and at least for now, those claims are Stayin’ Alive. 

SEND US A MESSAGE