Manufacturers Could Be Liable for Unjust Enrichment by Receiving Indirect Benefits in a Class Action Against Skinnygirl Margarita Beverages

Used with permission from Microsoft.

Judge Noel Hillman in the U.S. District Court of New Jersey denied the defendants’ motion to dismiss in a consumer class action suit involving “Skinnygirl Margarita” beverages.  Plaintiffs alleged that the Skinnygirl Margarita drinks were marketed as “all natural” but actually contained a chemical preservative, sodium benzoate.  See Stewart v. Beam Global Spirits and Wine, Inc., No. 11-5149 (D.N.J. June 29, 2012).  The false and misleading marketing campaign occurred in a number of states, including New York and New Jersey.  See id. at 4.  Plaintiffs point out that the chemical preservative when mixed with citric acid can become a potential carcinogen. See id.

Plaintiffs brought claims under New Jersey’s Consumer Fraud Act, in addition to negligent misrepresentation, breach of express and implied warranties, and unjust enrichment.  See id. at 5.  The defendants moved to dismiss the unjust enrichment claim.

In New Jersey, a claim for unjust enrichment requires the plaintiff show that the “defendant received a  benefit and that retention of that benefit without payment would be unjust.”  VRG Corp. v. GKN Reality Corp., 641 A.2d 519, 526 (N.J. 1994). And because unjust enrichment imposes quasi-contractual liability, New Jersey requires “some direct relationship between the parties.”  Callano v. Oakwood Park Homes Corp., 219 A.2d 332, 335 (N.J. 1966).

In Stewart, the court distinguished from a New Jersey Supreme Court case in order to explain New Jersey’s rejection of a bright line rule for the “some direct relationship” element.  In Callano, an individual contracted to purchase a house from a developer.  While the house was being built, the soon-to-be homeowner contracted with a plant nursery to landscape the property.  But the individual never paid the nursery, and he died before he purchased the property.  Callano, 219 A.2d at 334. Thereafter, the developer sold the property to another individual, which included the newly planted shrubbery.  Id.   The developer had no knowledge of the non-payment by the deceased individual.  Id.  The plant nursery sued the developer for unjust enrichment.  In finding no unjust enrichment, the Callano court explained that there were “no dealings with the developer.”  Id. at 335.  The developer was entirely unaware of any agreement between the deceased and the nursery.  See id.  Moreover, the nursery still had a claim against the decedent’s estate.  Importantly, the court emphasized that the developer did not engage in any fraudulent activity.  See id.

After a review of other New Jersey Supreme Court precedent, the court in Stewart held that the “‘some direct relationship’ element of an unjust enrichment claim does not . . . preclude a consumer from ever brining an unjust enrichment claim against a manufacturer simply because the consumer purchased the product . . . from a third-party retailer and not directly from the manufacturer.” Stewart, No. 11-5149, Slip Op. at 18–19.  The court viewed the “some direct relationship” element not as requiring privity but more broadly as a means to limit recover from a defendant “whose involvement is to far removed or too attenuated from the facts” surrounding the plaintiff’s claims.  See id. at 19.  The court pointed out that this manufacturer was not an innocent third-party, according to the plaintiffs’ pleadings.  See id.  The manufacturer engaged in a misleading and fraudulent national marketing campaign consisting of billboards, signs, and print and Internet advertisements.  See id. at 20.  In concluding, Judge Hillman stated, “This court is of the view that it would be inequitable to suggest that the [defendants] can insulate themselves from liability on an unjust enrichment claim simply by asserting that retail sales by liquor stores cut off any relationship between the consumers and the manufacturer.  This is particularly true in this case where plaintiffs cannot seek a remedy directly from the liquor stores based on misrepresentations allegedly made by the [manufacturer defendants] themselves as the to the ‘all-natural’ nature of Skinny Girl Margarita.” Id. at 20–21.

As the court in Stewart points out, a few other courts have reached the same conclusion.  Unjust enrichment claims will survive a motion to dismiss where, in addition to showing the other elements of the claim, some benefit is conferred on the defendant, which may be indirectly conferred on the defendant, e.g., where a product was bought through a retailer after it was previously purchased from a manufacturer.

David Brown is 2012 graduate of New York Law School. He was Executive Editor of the Law Review. He will be a law clerk to the Honorable Robert L. Vining, US District Court, Northern District of Georgia in the Fall of 2012 and has interned at the US Attorney’s Office for the Eastern District of New York.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.