McGraw Property Solutions, LLC v. Fortress Investment Group LLC

Background

A storm damaged the roofs of five properties in Glenview, Illinois, on April 7, 2020. The properties were then owned by Atlas Holdings Investment, LLC and its affiliates. In October 2020, McGraw Property Solutions, LLC agreed with Atlas to repair the roofs and provide labor and materials for work approved or paid for by Atlas’s insurer, Westchester Surplus Insurance Company.

Atlas assigned its insurance claim to McGraw. McGraw began the roofing work while Atlas owned the properties. After Atlas defaulted on a loan and its equity interest in the properties was sold in a foreclosure sale, Fortress allegedly acquired the properties in February 2021. McGraw alleged that Fortress continued to retain McGraw to complete the roofs and communicated with McGraw about the work, including requesting updates and completion estimates. McGraw also alleged that it completed the work by the end of 2021 and that Fortress was satisfied with the results.

McGraw first sued Westchester in an earlier related proceeding for payment under the insurance policy. The Northern District of Illinois granted Westchester summary judgment after finding that McGraw had failed to cooperate with Westchester’s investigation and had not complied with a required examination-under-oath provision. McGraw later sent Fortress invoices totaling $1,111,310.19, but Fortress declined to pay and said it had sold the properties.

Claims and Motion

McGraw asserted two claims against Fortress: an implied-in-fact contract claim seeking payment for the reasonable value of its services, described as quantum meruit, and an alternative unjust-enrichment claim. Fortress moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states enough facts to present a legally plausible claim.

The court rejected Fortress’s argument that the assignment of insurance benefits automatically barred McGraw’s claims. The assignment covered work approved or paid for by the insurer and did not necessarily prevent McGraw and Fortress from forming a separate express or implied agreement concerning other work or payment if insurance proceeds were unavailable.

Implied-in-Fact Contract Claim

Under New York law, an implied-in-fact contract requires the same basic elements as an express contract, including mutual assent and consideration. For a quantum meruit claim based on such a contract, the plaintiff must allege that it performed services in good faith, the defendant accepted them, the plaintiff expected compensation, and the services had reasonable value.

The court held that McGraw had not adequately alleged mutual assent. Fortress’s alleged requests for updates and completion dates, communications about punch-list items, request to be listed as an additional insured, and payment to another roofing company did not plausibly show that Fortress agreed to pay McGraw if McGraw did not receive insurance proceeds. The court also found that McGraw had not identified circumstances allowing an inference that Fortress would have made such a promise if the issue had been discussed directly.

The court further held that McGraw had not alleged consideration because McGraw was already performing the roofing work under the assignment before Fortress allegedly acquired the properties. Finally, the court found that McGraw’s allegation that it never agreed to work for free did not establish a reasonable expectation that Fortress would pay, particularly because the parties discussed the insurance litigation but never formally agreed that Fortress would assume payment responsibility.

The court dismissed the implied-in-fact contract claim.

Unjust-Enrichment Claim

Under New York law, an unjust-enrichment claim requires allegations that the defendant was enriched at the plaintiff’s expense and that fairness requires the defendant to pay. The court held that McGraw had not adequately alleged either the required unfairness or that its services were intended to enrich Fortress.

Although Fortress or a related company benefited from the roofing work, the court reasoned that McGraw’s inability to recover from Westchester resulted from McGraw’s failure to cooperate with Westchester’s investigation. In the court’s view, requiring Fortress to pay merely because McGraw could not obtain payment from Westchester would be unfair.

The court also found that McGraw had agreed to perform the work in exchange for payment from Westchester and had described Westchester as responsible for paying in the earlier related proceeding. The court concluded that McGraw’s allegations showed, at most, Fortress’s knowledge of a benefit, not a sufficiently close relationship or facts showing that the services were performed for Fortress in a way supporting unjust enrichment.

The court dismissed the unjust-enrichment claim.

Disposition

The court granted Fortress’s motion to dismiss, directed the clerk to terminate all pending motions, and closed the case. The opinion does not expressly state whether the dismissal was with or without prejudice.