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Dismissal of unjust enrichment suit against Starr affirmed

Dismissal of unjust enrichment suit against Starr affirmed

A federal appeals court has affirmed dismissal of a lawsuit filed by an electronics recycling firm against Starr Indemnity & Liability Co. in connection with a warranty firm that went out of business.

New York-based Starr had entered an administrative services agreement with St. James, New York-based Global Warranty Group L.L.C. under which Global would administer service contracts and/or insurance policies for consumer cellphones underwritten by Starr, according to Monday’s ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Inc. v. Starr Indemnity & Liability Co.

The agreement obligated Global to establish and maintain a checking account to facilitate the payment and disbursement of claims, with Starr responsible for depositing money into the account sufficient to fund claims made under the service plans, said the ruling.

Global would adjust and settle valid claims, issuing payments from the account to individuals and vendors, including iRecycleNow, that provided repair and replacement work on the cellphones, according to the ruling.

Global eventually went out of business, and Starr responded by filing suit against it in New York state court, alleging that it had absconded with funds Starr deposited in the account, according to the ruling. 

iRecycleNow, which did not join Starr’s suit, nor bring its own action against Global, filed suit against the insurer in U.S. District Court in Philadelphia, charging unjust enrichment and claiming it was owed $667,000 for warranty work it had performed, according to the ruling.

The District Court granted Starr’s motion to dismiss the case, which a three-judge panel unanimously affirmed.

Under Pennsylvania law, a third party that benefits from a contract between two other parties, in this case iRecycleNow and Global, “is not unjustly enriched unless the third party requested to benefit, or misled the plaintiff into performing the contract,” said the panel’s ruling.

That is not the case here, said the ruling. “iRecycleNow only alleges that Starr paid money into Global’s claims-disbursement account, that Global was responsible for administering the account, and that iRecycleNow was paid from the account,” said the ruling.

“The amended complaint contains not a word alleging that Starr requested a benefit from iRecycleNow or misled it in any way. Absent such allegations, no claim of unjust enrichment can be maintained and the District Court was correct to grant dismissal,” said the ruling in affirming the District Court’s order.

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