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Unjust Enrichment: An Alternative Theory in Product Liability Actions

A claim of ‘unjust enrichment’ is sometimes included among the theories of recovery pleaded in a product liability action. Pursuant to that theory, a product user seeks recovery from the defendant product manufacturer of all proceeds from the sale of the allegedly defective product, claiming the money made from selling the product unjustly enriched the defendant. Another sort of unjust enrichment claim has been asserted by insurers, governmental bodies, union funds and healthcare payers, in actions by those entities to recover expenses (such as, Medicare costs, asbestos or lead-abatement costs or healthcare premiums) that they paid on behalf of their members, allegedly resulting from injury to those members from the use of the manufacturer’s product.

Definition
Broadly defined, ‘unjust enrichment’ is “the retention of a benefit conferred by another, without offering compensation, in circumstances where compensation is reasonably expected”. A claim for unjust enrichment ordinarily comprises three elements:

a benefit conferred on the defendant by the plaintiff;
knowledge by the defendant of the benefit; and
retention of the benefit under circumstances where it would be unjust to do so without payment.
There is no requirement of privity between the plaintiff and defendant in order to pursue a claim for unjust enrichment.

Benefit to Defendant

The question of whether the plaintiff conferred a benefit on the defendant is often decided by determining whether the defendant had a duty to provide that which the plaintiff ended up providing. The question generally arises in cases in which an insurer asserts that a product manufacturer or seller was unjustly enriched because the insurer paid for expenses, allegedly caused by the product, which the manufacturer or seller should have paid.

Tobacco litigation

For example, after union welfare funds had paid out alleged smoking-related healthcare costs to their members, several such funds brought suits seeking reimbursement of those costs from tobacco manufacturers under, among others, an unjust enrichment theory. The union funds argued that paying costs allegedly arising from the manufacturers’ allegedly fraudulent marketing and manufacturing had unjustly enriched the manufacturers. In three such lawsuits the federal District Court for the District of Columbia dismissed the unjust enrichment claims as a matter of law because the Union Fund plaintiffs “failed to explain where the tobacco manufacturers’ duty to pay these medical costs arose, and failed to show that this ‘duty’ is legally cognizable”. Therefore, the court found, the funds could not have “conferred a legally cognizable benefit upon” the manufacturers. In the absence of an underlying duty to pay for the costs, the manufacturers received no benefit from the union funds’ payment of those costs.

A similar result befell unjust enrichment claims in an action by individual citizens who claimed that their higher medical-insurance premiums unjustly enriched tobacco manufacturers because those increased premiums represented a cost the manufacturers, not the individuals, should have been forced to bear. The Sixth Circuit affirmed the dismissal of the claims in that action, holding: “Plaintiffs have not ‘enriched’ defendants because defendants have no legal duty to smokers to pay their medical costs.”

An unjust enrichment claim brought by the state of Texas, seeking recovery of costs of medical care and other benefits paid to citizen smokers, also failed where the court found the state conferred no benefit on the tobacco companies. The court ruled that Texas’s expenditures could not be said to have unjustly enriched the tobacco companies because “the alleged benefit enjoyed by defendants is too attenuated and indirect to find support under the theory of unjust enrichment as enunciated in Texas”.

Firearms litigation

Suits against firearms manufacturers have included unjust enrichment arguments alleging that the costs of law enforcement paid by city governments amount to a benefit conferred on the gun maker. Some of these allegations have survived motions to dismiss. The rationale for these decisions, although not sharply articulated, appears to be that governmental expenses related to the societal consequences of illegal gun use could be considered a ‘benefit’ to gun manufacturers should the facts show the gun marketing and sales methods employed amounted to wrongdoing. If so, the expenses should have been borne by the manufacturers, and the fact that they were not establishes that those manufacturers received an unjust benefit. However, similar allegations brought by cities in other jurisdictions have been dismissed. In those decisions the municipal expenditures were found not to be a benefit to the defendant firearms manufacturers, because the defendants’ actions were found to be too remote from the alleged injuries.

Lead paint and asbestos litigation

In at least two actions, plaintiffs seeking to recover from lead paint manufacturers the money spent on medical monitoring for lead poisoning were not permitted to pursue their unjust enrichment claims because the court found no underlying duty to pay for such expenses. The same was found true in an action alleging that a supplier of asbestos products had a duty to pay for asbestos abatement. The rationale in both such cases was that where an underlying duty does not exist, there is no unjust enrichment to remedy. However, a different result occurred in actions by the city of New York demanding indemnification and restitution from manufacturers allegedly unjustly enriched by asbestos and lead paint abatement expenses the city had paid. In those actions the defendants’ motions to dismiss the actions were denied. While the decision allowing the claims based on unjust enrichment to proceed has been criticized as being “hard to explain” because the court seems to have suggested the existence of a duty on the part of the defendant manufacturers that did not previously exist, it appears to hold that the city, in removing lead and asbestos from its buildings, performed a duty the manufacturers of those products should have fulfilled, thus conveying a benefit on those manufacturers.

Similarly, the Eastern District of Pennsylvania, noting that “duty is a flexible concept” and employing what it called a “less restrictive interpretation of ‘duty’”, refused to dismiss a restitution claim by the city of Philadelphia seeking lead abatement expenses, finding that, even though there was no statutory duty imposed upon the lead paint manufacturer, the manufacturer did have a general duty to avoid gross negligence. The city properly stated a claim when it alleged that its clean-up effort satisfied the manufacturer’s duty, thereby unjustly enriching the manufacturer.

Not Unjust Enrichment to Retain Benefit

Many unjust enrichment claims in product liability cases have failed because, in the absence of an underlying wrong, courts have found nothing unjust about the defendant’s retention of whatever benefit it received. For instance, where a plaintiff allegedly conferred a benefit on a pharmaceutical manufacturer in the form of paying an unnecessarily high price for medicine, caused by the manufacturer’s failure to inform the plaintiff about an existing, cheaper, alternative dosage, there was nothing unjust about the manufacturer receiving the higher price, because the court found that the manufacturer was prohibited, pursuant to federal regulations, from providing alternatives (including the alternative dosage) to a doctor’s prescription. In yet another suit, an action in California alleging injury from cigarettes, there was nothing unjust about the manufacturer receiving cigarette revenues, in light of a state statutory immunity from product liability suits.

Some courts have found that it is not unjust for a manufacturer to retain a benefit when certain equitable defenses are present. Various courts view unjust enrichment claims as being claims in equity, dismissing them based on the doctrine of unclean hands or on the rule that a claim in equity will not lie where a remedy at law is available. Yet other courts have specifically rejected the notion that an unjust enrichment claim sounds only in equity. However, even in those jurisdictions in which an unjust enrichment claim is characterized as an equitable one, adequate remedies at law provided by both product liability statutes and deceptive consumer sales statutes may render the claim duplicative and therefore untenable.

Comment
Claims of unjust enrichment have been employed by plaintiffs in various product liability actions. For the most part, however, such claims do not survive, with plaintiffs instead being limited to pursuing statutory or other more conventional product liability remedies.

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