Unjust Enrichment Under Minnesota Law

The unjust enrichment case of Mr. Paul Herlache against Ms. Amy Rucks is now pending before the Minnesota Supreme Court. (Here is the intermediate Minnesota Court of Appeals decision.)

Briefly, Ms. Rucks is a successful executive, bringing home $350,000-$500,00/year plus benefits and stock options from a medical device company (at least as of the date of the intermediate court’s decision). She started dating Mr. Herlache in 2012. He made less money ($110K/year) as a construction estimator.

Mr. Herlache moved into Ms. Rucks house, he paid rent to her, they got engaged in 2013 (he bought her a $24,500 engagement ring), and the both put money into improvements into the house (with no written agreement as to who would owe whom what if the two parted ways).

The two parted ways.

Does Ms. Rucks owe money to Mr. Herlache for the money he put into the home improvement project? How much? Does Ms. Rucks owe him every penny he paid? Does she owed him a percentage of the value of the improvements? What is “the value of the improvements”?

Under Minnesota law, “a claim for unjust enrichment does not exist simply because the defendant benefitted from the plaintiff’s efforts; rather, the defendant must be ‘unjustly enriched in the sense that the term ‘unjustly’ could mean illegally or unlawfully.'” Of course, there is no indication that Ms. Rucks behaved “illegally or unlawfully.” But “Minnesota courts have extended unjust enrichment to apply if a defendant’s retention of a benefit is ‘morally wrong.'” (Did she behave “morally wrong”? Who decides that? By reference to what?)

Long story, short, the Minnesota Court of Appeals held that Mr. Herlache’s claim failed because “he did not submit evidence showing that the increased value resulted from his contributions.” (Mr. Herlache had argued that this rule, which comes from an earlier case (“Marking”), did not apply because his “financial contributions were never an investment in real estate.” He “believed that he was investing in his relationship with Rucks.”)

Based on the tenor of the hearing before the Minnesota Supreme Court on January 31, it seems fairly clear to us that the Minnesota Supreme Court will reverse the Minnesota Court of Appeals decision.

The ruling should be of interest to Minnesotans and, more specifically, to Minnesota civil litigators because it reflects a further relaxation of the applicability of the equitable doctrine of unjust enrichment. If the facts are such that a Minnesota district court judge feels like someone took financial advantage of another person, it seems that the judge has significant latitude to “do justice” and the requirement that the plaintiff show “illegal” or “unlawful” conduct no longer applies.

[Post-script afterthoughts: Were the judges (that is, the trial court judge and one of the three appellate judges (Judge Smith dissented)) influenced by the economic disparity of the parties? Did they cobble together in their minds a narrative (along these lines: “The cunning executive used the construction estimator to help with her home project and then heartlessly cut him loose”)? Were they influenced by the side-story of the $24,500 engagement ring that Rucks did not return to Mr. Herlache when she broke off the engagement? If the genders were reversed, would that change the optics/sentiments/biases/predispositions/reactions to the facts? Things we will never know.)