Judge Beth Robinson. nominated by President Biden to the Second Circuit, cast the deciding vote to overturn a lower court that dismissed a claim by an independent contractor that a big bank was unjustly enriched when it replaced him with a large consulting firm that copied an important part of his work.  The court issued its ruling in Pauwels v Deloitte LLP  in October 2023.

 

 What happened in this case? 

 The Bank of New York Mellon Corp. LLP hired Andre Pauwels as an independent contractor to work on an investment valuation project. They continued to work together on a deal-by-deal basis for several years. To help carry out his work, Pauwels developed a valuation tool, called the Pauwels Model, which played an important role in helping monitor the Bank’s energy-related investments and evaluate new ones.

Several years later, however, the Bank decided to hire Deloitte LLP, a large consulting firm, to eventually take over the work that Pauwels was doing. Without getting his permission, the Bank shared with Deloitte several spreadsheets derived from the Model that Pauwels had given to Bank employees. Pauwels contended that Deloitte used the spreadsheets to reverse-engineer and thus use the Model in its work for the bank. When Pauwels learned about this and complained, the Bank fired him.

Pauwels filed suit against the Bank and Deloitte in federal court. Among his claims, Pauwels contended that the Bank and Deloitte had “unjustly enriched themselves at his expense through their use of the Pauwels Model.”  Without permitting discovery or a trial, however, the district court dismissed all of his claims.He appealed to the Second Circuit.

 

How did Judge Robinson and the Second Circuit Rule and Why is it Important?                                                             

Biden Judge Robinson cast the deciding vote in a 2-1 decision that partly reversed the decision below and ruled that Pauwels should be able to go forward with his unjust enrichment claim against the Bank. All three judges agreed that the claim should not go forward against Deloitte because Pauwels did not have a “close relationship” with it.  But the majority opinion, written by Judge Robert Sack, rejected the legal arguments used below to dismiss the unjust enrichment claim against the Bank as a matter of law.

Specifically, Judge Sack rejected the lower court’s dismissal of the unjust enrichment claim, explaining that the court had improperly relied on caselaw concerning unfair competition claims, not unjust enrichment. Sack also rejected the argument, pushed by the dissent, that Pauwels could not bring an unjust enrichment claim against the Bank because the two of them had an oral contract. Sack pointed out that according to the complaint, the contract was “for Pauwels’ advice and expertise, not for his models.” The contract thus did not cover, the majority went on, the financial benefit the Bank obtained by sharing the spreadsheets and model with Deloitte without the permission of, or any compensation to, Pauwels.. The majority thus concluded that Pauwels should have the chance to proceed below with his unjust enrichment claim against the Bank.

Judge Robinson’s deciding vote and the 2-1 ruling is obviously important to Pauwels’ ability to get his day in court on his claim that the Bank unjustly enriched itself at his expense. The decision is also important in future cases, particularly in New York, to preserve the ability of individuals to sue large corporations for unjust enrichment, even when there is a contract between them. The ruling also serves as another reminder of the importance of promptly confirming fair-minded Biden nominees like Judge Robinson to our federal courts.