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Valparaiso Univ. Law School

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Tuesday, April 7, 2009

Employee bonuses as "unjust enrichment"

Aaa Some contract law types have floated the idea of "unjust enrichment" law as a means of clawing back compensation paid to employees at failing firms.  A union-affiliated investment advising company is now raising just that theory in a call to Bank of America to go after some of the $3.6 billion in employee compensation that Merrill Lynch & Co. paid to employees in December 2008, just before its acquisition by BAC.

CtW Investment Group, in an open letter to BAC directors, is demanding that the company recoup individual bonuses of over $1 million paid to 696 Merrill employees.  CtW (sic) argues:

[T]hese bonus payments, which came at the expense of Bank of America and its shareholders, constitute “unjust enrichment” under Delaware Law. The Delaware Supreme Court has defined unjust enrichment as “the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.”  Schock v. Nash, 732 A.2d.217,232 (Del. 1999).

The Schock opinion is here.

[Frank Snyder]

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