The Loose and Uncertain Idea of “Unjust Enrichment” under Minnesota Law

Update (August 26, 2014):  Veterinarian Terrance Rapacz does not appear to have had a very good business, but he did have a very good friend, John Sluck.

With very little documentation, Sluck agreed to help Rapacz out in Rapacz’s failing business to the tune of more than $250,000.  Then, sadly, Mr. Sluck died. And then, sadly for Dr. Rapacz, Mr. Sluck’s widow sued Rapacz for repayment of Mr. Sluck’s generous loans. There was no contract, really. The question is whether the court should intervene and order Mr. Rapacz to pay up because, otherwise, he would be “unjustly enriched.”

The case is noteworthy as yet another Minnesota case in which it is clear that the law on “unjust enrichment” is unclear.

It would be unjust for Rapacz to ‘evade repayment’ if he is able to repay the funds or if he has unlawfully or immorally acted to undermine his ability to do so. But it would not be unjust for Rapacz to retain the loaned funds if he remains unable to repay them.

Is this a correct decision? On the one hand, it may appeal in that it seems fair. On the other hand, I wonder if this sets up a good rule in general. Maybe we should devise rules so that the John Slucks of the world recognize and adhere to the need for meaningful documentation of financial transactions, even between friends, or otherwise bear the risk?

Also, the Court of Appeals’ unpublished decision raises a question or two. For example, the court says, “it would not be unjust for Rapacz to retain the loaned funds if he remains unable to repay them…” What if he is able to repay them partially? What if he is able to repay them two years from now but not today?

Original post (June 3, 2011) (under subject line: Getting Your Own Money Back From a Thief = Unjust Enrichment?): There is more than a hint of irony when Grandmother Dot Anderson parts with $102,000 supposedly to be invested with her grandson’s employer, Trevor Cook, learns of Cook’s “legal troubles” (a.k.a. the unraveling of his $190M Ponzi scheme), demands and gets her money back…only to have the court-appointed Receiver bring a claim against her for “unjust enrichment” based on her recovery of her own money.

Her lawyer sought to be dismissed, but the motion was denied by U.S. District Court Judge Susan Richard Nelson (D. Minn.).

“Unjust enrichment” has got to be one of the most vague and indefinite claims in U.S. law.  Under Minnesota law, unjust enrichment “may be found…where the result induced by that conduct will be unconscionable either in the benefit to himself or the injury to others.”

Almost every case, however, requires at a minimum that “defendants’ conduct in retaining the benefit is morally wrong.”

It seems that this loosening of the law of unjust enrichment (which used to be limited to cases where the unjust enrichment defendant acted illegally or unlawfully) to include an “immoral”  or “unconscionable” windfall gains is loosened still further in the context of so-called clawback litigation to clean up the putrid and chaotic morass that is the aftermath of Ponzi schemes.

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