Seventh Circuit Weighs In On Unjust Enrichment Debate

Cleary v. PHILIP MORRIS INCORPORATED, Court of Appeals, 7th Circuit 2011 - Google Scholar:

The Seventh Circuit recently affirmed the dismissal of an "unjust enrichment" class action against Philip Morris. Plaintiffs alleged that Philip Morris was unjustly enriched because it conspired to conceal the facts about the addictive and dangerous nature of cigarettes.

The Seventh Circuit frames the issue as follows: "A preliminary matter argued by the parties is whether Illinois law recognizes an independent cause of action for unjust enrichment, or whether unjust enrichment must always be tied to another underlying claim found in tort, contract, or statute."

The Court then notes that the Illinois cases are not entirely clear on whether unjust enrichment is a separate cause of action or whether it must be tied to an underlying cause of action, such as fraud or breach of fiduciary duty.

The Seventh Circuit summarizes the conflicting cases as follows: "The Illinois Supreme Court appears to recognize unjust enrichment as an independent cause of action. In Raintree Homes, Inc. v. Vill. of Long Grove, 807 N.E.2d 439, 445 (Ill. 2004),the plaintiffs were seeking the refund of overpaid fees under an unjust enrichment theory. No other underlying cause of action was alleged. The Court noted: "Here, plaintiffs have no substantive claim grounded in tort, contract, or statute; therefore the only substantive basis for the claim is restitution to prevent unjust enrichment." Id. Similarly, in another case before theIllinois Supreme Court, Indep. Voters v. Ill. Commerce Comm'n, 510 N.E.2d 850, 852-58 (Ill. 1987), the plaintiffs had filed suit to recover refunds for excessive utility charges and their claim for restitution of the charges was not tied to another cause of action. Finally, the IllinoisSupreme Court has articulated the elements of unjust enrichment without reference to a separate underlying claim in tort, contract, or statute. See HPI Health Care Servs., 545 N.E.2d at 679; see also Peddinghaus v. Peddinghaus, 692 N.E.2d 1221, 1225 (Ill. App. Ct. 1998)(ruling that Illinois recognizes an independent cause of action for unjust enrichment based on HPI Health Care Services). From these cases, it appears that the Illinois Supreme Court recognizes unjust enrichment as an independent cause of action.

In contrast to this case law, there is a recent Illinois appellate court that suggests the opposite, namely, that an unjust enrichment claim cannot stand untethered from an underlying claim. See Martis v. Grinnell Mut. Reinsurance Co., 905 N.E.2d 920 (Ill. App. Ct. 2009). The Martis court stated the following:

The doctrine of unjust enrichment underlies a number of legal and equitable actions and remedies. Unjust enrichment is not a separate cause of action that, standing alone, will justify an action for recovery. Rather, it is a condition that may be brought about by unlawful or improper conduct as defined by law, such as fraud, duress, or undue influence, and may be redressed by a cause of action based upon that improper conduct. When an underlying claim of fraud, duress or undue influence is deficient, a claim for unjust enrichment should also be dismissed.

Id. at 928 (internal quotation and citations omitted) (emphasis added)."

The Seventh Circuit then offers its own suggested resolution to the debate: "Without setting out a comprehensive treatise on Illinois unjust enrichment law in an attempt to resolve the apparently conflicting language of the Raintree Homes and Martis cases, we suggest one way to make sense of it. Unjust enrichment is a common-law theory of recovery or restitution that arises when the defendant is retaining a benefit to the plaintiff's detriment, and this retention is unjust. What makes the retention of the benefit unjust is often due to some improper conduct by the defendant. And usually this improper conduct will form the basis of another claim against the defendant in tort, contract, or statute.^[2] So, if an unjust enrichmentclaim rests on the same improper conduct alleged in another claim, then the unjustenrichment claim will be tied to this related claim—and, of course, unjust enrichment will stand or fall with the related claim. See, e.g., Ass'n Benefit Servs. v. Caremark Rx, Inc., 493 F.3d 841, 855 (7th Cir. 2007) ("[W]here the plaintiff's claim of unjust enrichment is predicated on the same allegations of fraudulent conduct that support an independent claim of fraud, resolution of the fraud claim against the plaintiff is dispositive of the unjust enrichment claim as well.")."

After offering this suggestion to resolve the conflicting cases, the Seventh Circuit affirms the dismissal of the unjust enrichment claim on the ground that the plaintiffs failed to state a claim because they failed to allege a detriment tied to the wrongful conduct of the defendant.

The Illinois Supreme Court may ultimately weigh in on this issue. The Seventh Circuit's opinion offers a possible resolution to the debate.

Edward X. Clinton, Jr.