7 F.4th 78
2d Cir.2021Background
- Moreno-Godoy and Al Kassar were convicted in federal court and retained Gallet Dreyer & Berkey (GDB) and partner Roger Stavis for post-verdict representation for a $125,000 flat fee; that fee was paid and undisputedly belonged to Al Kassar.
- At Stavis’s suggestion, both men also signed a retainer with attorney Steven Kartagener for additional appellate work for a $100,000 flat fee; Al Kassar’s wife, Raghdaa Habbal, transferred the $100,000 from Beirut.
- Moreno-Godoy, Al Kassar, and Habbal assert the $100,000 belonged to Moreno-Godoy. Kartagener was unable to perform (could not obtain a security clearance) and instead transferred $90,000 to GDB and $10,000 to Stavis; he never returned the retainer to Moreno-Godoy.
- Moreno-Godoy sued for breach of contract (against Kartagener, Stavis, and GDB) and quasi-contract remedies (unjust enrichment, money had and received, constructive trust against Stavis and GDB). The district court granted summary judgment for all defendants, finding Moreno-Godoy had not shown ownership of the $100,000 and thus could not show damages.
- On appeal the Second Circuit held: (1) ownership is not required to sustain a breach-of-contract claim (expectation damages may be recovered if a reasonable estimate of lost services exists); (2) quasi-contract claims do require proof the funds belonged to Moreno-Godoy, but the record contains sufficient admissible evidence for a jury to find ownership; and (3) summary judgment was improper as to Stavis personally because a jury could find he committed wrongful misconduct under NY Partnership Law § 26(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff must prove he owned the $100,000 to recover for breach of contract | Moreno-Godoy: ownership is unnecessary; he may recover expectation damages for Kartagener’s nonperformance if he can reasonably estimate the value of the services | Defendants: without proof the money belonged to Moreno-Godoy, he cannot show he was damaged and so cannot recover | Court: Ownership not required for breach claim; expectation damages recoverable if plaintiff can show a "stable foundation for a reasonable estimate" of value |
| Whether plaintiff presented sufficient evidence of ownership to sustain quasi-contract claims (unjust enrichment, money had and received, constructive trust) | Moreno-Godoy: deposition testimony, Habbal’s statements, third‑party declaration, and documents support ownership | Defendants: evidence is inadmissible/hearsay and too inconsistent to raise a triable issue | Court: Sufficient admissible evidence exists for a jury to find ownership; quasi-contract claims may proceed |
| Whether Stavis is shielded from personal liability under New York Partnership Law § 26(a) (LLP protection) | Moreno-Godoy: Stavis’s conduct (refusal to return funds, no engagement letter) could be "wrongful act or misconduct" and triggers § 26(b) personal liability exception | Stavis: acted in scope of LLP business and is protected from personal liability | Court: Summary judgment improper; a jury could find Stavis committed wrongful misconduct and be personally liable |
| Whether Kartagener’s defenses (impossibility or that he gave funds to Stavis as agent for plaintiff) defeat liability | Moreno-Godoy: impossibility does not excuse return of funds; Kartagener had no authority to divert funds to Stavis | Kartagener: unable to perform due to security clearance (impossibility); he handed funds to Stavis believing Stavis was agent | Court: Impossibility does not relieve obligation to repay; record does not show Kartagener intended Stavis to act as plaintiff’s agent—summary judgment improper |
Key Cases Cited
- Markson v. Markson’s Furniture Stores, 195 N.E. 824 (N.Y. 1935) (breach-of-contract claim may be pursued independent of plaintiff’s ownership of consideration)
- Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d Cir. 2007) (expectation damages require a "stable foundation for a reasonable estimate")
- Freund v. Washington Square Press, Inc., 34 N.Y.2d 379 (N.Y. 1974) (standard for measuring contract damages)
- Barclays Bank of N.Y. v. State, 563 N.E.2d 11 (N.Y. 1990) (quasi-contract requires plaintiff to have suffered a loss or property interest)
- Simon v. Electrospace Corp., 28 N.Y.2d 136 (N.Y. 1971) (damages are measured at time of breach)
- Sokoloff v. Nat'l City Bank of N.Y., 204 N.Y.S. 69 (App. Div. 1924) (impossibility may not excuse obligation to repay received funds)