Schenck v. K.E. David, Ltd

In Schenck v. K.E. David, Ltd., 446 Pa. Super. 94, 666 A.2d 327 (Pa. Super. 1995), K.E. David, LTD., and Kenneth David (appellants) appealed from an entry of judgment following a nonjury verdict in favor of Peter F. Schenck and Elizabeth K. Ainslie, of the law firm Ainslie & Schenck (appellees). Appellees represented appellants in a federal criminal antitrust trial, at which appellants were acquitted of all charges. Subsequently, appellees represented appellants in civil antitrust proceedings brought by various parties, one of which was the Commonwealth of Pennsylvania. The Commonwealth sought damages in excess of $ 225,000.00. Appellees negotiated a settlement agreement whereby appellants were obligated to pay only $ 82,000.00 to the Commonwealth. The settlement included an agreement by the Commonwealth that it would attempt to collect $ 32,000.00 of the settlement amount from another settling defendant. Appellants then paid $ 40,000.00 to the Commonwealth and their insurance company paid another $ 10,000.00, leaving only the $ 32,000.00 outstanding. However, the other settling defendant died and his company became insolvent. Thereafter, the Commonwealth notified appellees that appellants were responsible for the debt. Without notifying appellants, appellees advanced the $ 32,000.00 out of the law firm funds. Appellants then refused to repay appellees, resulting in litigation. The trial court found in favor of appellees on the basis that appellants had been unjustly enriched. Appellants appealed to the Superior Court, claiming that the trial court erred in applying the doctrine of unjust enrichment to the facts of this case. The Superior Court affirmed the trial court and determined that the appellees paid the debt of appellants with the reasonable expectation that it would be reimbursed and with the belief that it had the implied authority to pay such debt on behalf of appellants. The Superior Court stated that "it would be unconscionable and unjust to allow appellants to retain the benefit of appellees' payment to the Commonwealth." Schenck, 666 A.2d at 329.