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New York Appeals Court Allows Breach of Contract Claim on Alleged Joint/Venture Partnership Agreement of Lesbian Couple

Posted on: November 14th, 2013 by Art Leonard No Comments

A panel of the New York Appellate Division, 2nd Department, in Brooklyn, ruled on November 13 that a lesbian can sue her former same-sex partner for breach of an alleged contract that they would share assets equally, including retirement contributions and earnings, after their relationship ended.   While agreeing with the trial judge, Kings County Supreme Court Justice Yvonne Lewis, that plaintiff Laura Dee could not pursue an equitable claim on theories of constructive trust, unjust enrichment or action for an accounting, Justice Leonard B. Austin wrote for the court that Dee’s allegations provided a sufficient basis for a breach of contract claim.  One member of the four-judge panel, Presiding Justice Mark C. Dillon, wrote a dissenting opinion asserting that Dee had failed to allege that the parties had any agreement about what would happen if their relationship ended.

Laura Dee and Dena Rakower “lived together in a committed, same-sex relationship for nearly 18 years,” according to Justice Austin’s opinion.  They raised two children together.  Each of them was the biological mother of one of the children and the adopted mother of the other.  In 1996 they purchased a house as “joint tenants with rights of survivorship.”  After their first child was born, Dee alleges that they decided, in light of the cost of child care, that she would give up her full-time job and work part-time so that she could “be home with the child (later, children) and perform other non-financial services for the benefit of the family and for the parties’ partnership and/or joint venture.”  Rakower would continue working full-time.

Dee claimed that there was a mutual unwritten agreement about shared assets.  That is, they recognized that Dee would be making a non-economic contribution to the relationship by staying home to care for their children, and that Rakower “would be earning more income for, and [Dee] would be contributing more non-financial services to, the parties’ partnership/joint venture.”  Consequently, Dee claims, the women “specifically agreed to share equally in all financial contributions made by each of them and that such contributions were for their mutual benefit.”  As Justice Austin describes Dee’s allegations, “the parties allegedly specifically discussed that [Rakower] would continue to accrue retirement savings while [Dee] would no longer be able to, and agreed that [Dee] would be entitled to one half of [Rakower’s] retirement contributions and earnings for the period that [Dee] did not work at a job that provided her with a retirement plan.”  The parties split up before New York enacted marriage equality, so they were never married and could not use the state’s Equitable Distribution Law as a basis to divided up assets upon termination of their relationship.

Dee filed suit after the split-up, claiming, among other things, that she was entitled to have an accounting of the amount of money to which she was entitled under this agreement, and to have Rakower pay it over to her, either on a theory that Rakower had a contractual duty to do so, or alternatively that Dee had an equitable claim to the money.  Dee’s equitable claim pursued alternative theories: either that Rakower be treated as holding Dee’s share of the assets as a constructive trustee for Dee, or that Dee was entitled to the money on the theory that allowing Rakower to retain it under the circumstances would be unjust enrichment of Rakower.

Justice Lewis of Supreme Court in Brooklyn granted Rakower’s motion to dismiss these claims entirely, concluding that Dee’s factual allegations did not support any of these legal theories.

Reversing Justice Lewis on the contract claim, Justice Austin wrote, “These factual allegations adequately set forth the existence of a contract pursuant to which the plaintiff would quit working full-time, thereby ceasing to earn money toward her own retirement plan, and pursue part-time work enabling her to stay home to care for the parties’ children, in exchange for a one-half share in the defendant’s retirement accounts accrued during those years that the plaintiff refrained from working at a job which provided retirement benefits.”   These allegations, if proven at trial, would sufficiently show that each party assumed an obligation to the other for their mutual benefit, the essence of a contractual agreement.  Since Dee also alleged that Rakower breached their agreement by refusing her request for the money, the basic elements of a breach of contract claim were met.  Rakower, of course, is denying these allegations, but that is not relevant when the issue is whether the court should dismiss the case before trial for failure by the plaintiff to allege the necessary facts to state a legal claim.

“The fact that the alleged agreement was made by an unmarried couple living together does not render it unenforceable,” Austin wrote, pointing to an important 1980 decision by the New York Court of Appeals, Morone v. Morone, which established that such agreements between cohabiting unmarrid couples could be enforceable as contracts, “provided only that illicit sexual relations were not part of the consideration of the contract.”  Justice Austin found this case sufficiently similar to Morone to come within the scope of that precedent.

In his dissent, Justice Dillon argued that even if there was some oral agreement, it was not clear from Dee’s allegations that the parties had specifically agreed about what would happen if their relationship ended.  Giving a close reading to Dee’s allegations, he saw only an agreement that within their relationship there would be a sharing of assets, with each party’s contributions, whether economic or non-economic, being for the joint benefit of both of them.  Dillon argued that the court could not make a contract for the parties, only enforce whatever contract they actually made, and he did not think that Dee had alleged any specific agreement about what would happen if their relationship ended.

Austin’s responded that Dee’s allegations were sufficient, writing, “The plaintiff’s failure to specifically allege that there was a ‘meeting of the minds’ as to how the assets would be distributed upon the termination of the parties’ relationship does not compel the conclusion that the complaint fails to state a cause of action to recover damages for breach of contract.  There is no requirement that a breach of contract cause of action include such an allegation in order to survive a motion to dismiss . . .  where the complaint sets forth all of the elements necessary to plead a breach of contract cause of action.”  Austin found that Dee’s allegations included “sufficient definiteness to the material terms of the alleged agreement between the parties to establish an enforceable contract.”  That is, if a court ultimately found at trial that a contract was made, Dee’s allegations, together with evidence offered at trial, could provide the basis for a court to decide what to award as damages.

As to the constructive trust theory, Austin found that Rakower had correctly responded in this appeal that under the Employee Retirement Income Security Act, the money in her retirement account could not be subjected to a constructive trust.  Even though she hadn’t made that argument to Justice Lewis, “it is a legal argument that appears on the face of the record and could not have been avoided had it been brought to the attention” of the trial judge.  Austin also found that Dee had failed to allege that Rakower had been enriched at Dee’s expense, a necessary allegation for an unjust enrichment case.  He also found that Dee’s allegations fell short of those necessary for an equitable action for an accounting.

Thus the equitable claims are out of the case, but the breach of contract claim is revived for trial.  Dee also asserted other claims against Rakower, not specified in the appellate court’s opinion, so the case now resumes in Supreme Court in Brooklyn, including the contracts claim.

Michele Kahn represents Dee and David P. Rubinstein represents Rakower in this litigation.