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Seventh Circuit Rejects Quantum Meruit Claim for Ditched Contract

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By Robyn Hagan Cain on July 28, 2011 4:06 PM

It's no longer a bus shelter or a trash can. It's "street furniture." The difference? Advertising revenue. Much like other European exports H&M or The Office, street furniture is taking America by storm. Vendors make lucrative bids to cities to secure the rights to street furniture; then they install and maintain the fixtures, which they finance through advertising.

Corporación Europea de Mobiliario Urbano, S.A., a Spanish firm, places street furniture within the European Union. Its Delaware subsidiary, Cemusa, wanted to break into the United States market, so it hired White Pearl Inversiones as a consultant. Together, White Pearl and Cemusa decided to target the ultimate prize in street furniture markets: New York City.

The two companies executed two agreements to memorialize the deal. In a "Letter Agreement," White Pearl agreed to introduce Cemusa as an important international street furniture company and as a competent party to provide street furniture services in New York. Cemusa was to pay White Pearl $240,000 for this service.

In their subsequent "Master Agreement," Cemusa and White Pearl agreed that, for each city in which they joined forces, they would negotiate a city-specific Request For Proposal (RFP) Agreement. In the absence of a RFP Agreement providing a different fee for a given city, White Pearl would receive 3.75% of Cemusa's net advertising revenue realized after a successful bid. White Pearl's right to this fee would become vested once a given city issued its RFP, but until then the Master Agreement was terminable at either side's option on 30 days' notice.

Shortly before receiving New York's RFP, Cemusa realized that White Pearl's share of a New York City deal would be $12 million, and exercised its right to terminate the agreement. Cemusa bid and won the street furniture contract for all five NYC boroughs, but it refused to pay White Pearl beyond the $240,000 negotiated in the Letter Agreement.

White Pearl sued.

The court found that White Pearl was only entitled to the $240,000 fee memorialized in the Letter Agreement, reasoning that Cemusa agreed to pay White Pearl $240,000 for preparatory services and Cemusa kept that promise. Cemusa terminated the Master Agreement before New York issued the RFP, so White Pearl, like the real estate agent fired before a house is listed for sale, was not entitled to more.

Despite White Pearl's claim that it spent more on the deal than it earned, the court refused to invoke doctrines such as quantum meruit or unjust enrichment to change the price term in the contract.

Lawyers representing clients on this issue in the Seventh Circuit may be forced to rely on karmic retribution for relief: the court has no interest in reforming flat-rate contracts for jilted service providers.

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