Nissan Motor Acceptance Corporation v. Nemet Motors, LLC et al

Filing 29

MEMORANDUM & ORDER, Defendant Nemet Motors, LLC's (Dkt. 25) Motion to Dismiss Plaintiff's conversion claim is GRANTED. So Ordered by Judge Nicholas G. Garaufis on 7/21/2020. (Lee, Tiffeny)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
NISSAN MOTOR ACCEPTANCE
CORPORATION,

MEMORANDUM & ORDER
19-CV-3284 (NGG) (CLP)

Plaintiff,
-againstNEMET MOTORS, LLC d/b/a Nemet Auto
Group of Jamaica, Nemet Auto Group, Nemet
Motors, and Nemet Nissan; SCOTT PERLSTEIN;
CAROL JOY FAMILY PROPERTIES, LLC; and C.
JOY FAMILY PROPERTIES, LLC;
Defendants.

NICHOLAS G. GARAUFIS, United States District Judge.
Plaintiff Nissan Motor Acceptance Corporation (“NMAC”) brings
this action against Nemet Motors, LLC (“Nemet”); Scott Perlstein; Carol Joy Family Properties, LLC; and C. Joy Family
Properties, LLC. (Am. Compl. (Dkt. 18).) Nemet, an automobile
dealer, allegedly sold 192 Nissan vehicles to purchasers without
repaying the purchase price to NMAC within 24 hours, as required by their agreements. (Id. ¶¶ 1-4.) As per those agree
ments, NMAC retains title to those vehicles until it receives payment. (Id.) NMAC brings, inter alia, breach of contract and
conversion claims against Nemet. (See id. ¶¶ 112, 115.) Nemet
now moves pursuant to Federal Rule of Civil Procedure 12(b)(6)
to dismiss the second count of NMAC’s Amended Complaint—
conversion—as duplicative of its breach of contract claim.
(Nemet Mot. to Dismiss (Dkt. 25).)
For the reasons stated below, Nemet’s motion is GRANTED.

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BACKGROUND
A. Facts
The court takes the following statement of facts from Plaintiff’s
amended complaint, the well-pleaded allegations of which the
court accepts as true for purposes of the motion to dismiss. See
N.Y. Pet Welfare Ass’n v. City of New York, 850 F.3d 79, 86 (2d
Cir. 2017).
Nemet entered into a series of agreements with NMAC concerning the financing and sale of Nissan vehicles. (Am. Compl. ¶ 1.)
As per those agreements, vehicles owned by NMAC are held in
trust by Nemet. (Id.) After Nemet sells the vehicles, it is “required
to repay NMAC the full vehicle purchase price within 24 hours or
[it] will have violated the financing and security agreement.”
(Id.) Nemet is authorized to transfer title from NMAC to the purchaser only after the vehicle is sold and NMAC is paid. (Id. ¶¶ 34.) NMAC alleges that Nemet sold 192 Nissan vehicles—valued
at approximately $2.7 million—without repaying NMAC, therefore breaching the financing agreements. (Id. ¶ 5.) NMAC brings,
inter alia, breach of contract and conversion claims against
Nemet for its failure “to remit payment for the sales of the 192
vehicles to NMAC” and “to secure the proceeds of the sales of the
vehicles in trust.” (Id. ¶ 2.)
B. Procedural History
NMAC filed its original complaint on June 3, 2019, and an
amended complaint on September 13, 2019. (See Compl. (Dkt.
1); Am. Compl.) Currently pending before the court is Defendant
Nemet’s motion to dismiss for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6). (See Nemet Mot. to Dismiss (“Mot.”) (Dkt. 25); Mem. in Supp. of Mot. to Dismiss
(“Mem.”) (Dkt. 25-3); Mem. in Opp. to Mot. to Dismiss (“Opp.”)
(Dkt. 26); Reply (Dkt. 27).)

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LEGAL STANDARD
The purpose of a motion to dismiss for failure to state a claim
under Rule 12(b)(6) is to test the legal sufficiency of a complaint.
See Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir. 2007). A complaint will survive a motion to dismiss if it contains “sufficient
factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. On a
motion to dismiss under Rule 12(b)(6), the court must accept as
true the factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff. See Harris v. City of New
York, 186 F.3d 243, 247 (2d Cir. 1999) (citing Bolt Elec., Inc. v.
City of New York, 53 F.3d 465, 469 (2d Cir. 1995)).
DISCUSSION
Nemet seeks to dismiss Plaintiff’s conversion claim on the
grounds that it is duplicative of its breach of contract claim. “Conversion is any unauthorized exercise of dominion or control over
property by one who is not the owner of the property which interferes with and is in defiance of a superior possessory right of
another in the property.'" Schwartz v. Capital Liquidators,
Inc., 984 F.2d 53, 53 (2d Cir. 1993) (quoting Meese v. Miller, 79
A.D.2d 237, 241 (4th Dep’t 1981)). To state a claim for conversion under New York law, a plaintiff “must show (1) the property
subject to conversion is a specific identifiable thing; (2) plaintiff
had ownership, possession or control over the property before its
conversion; and (3) defendant exercised an unauthorized dominion over the thing in question, to the alteration of its condition or
to the exclusion of the plaintiff's rights.” Moses v. Martin, 360 F.
Supp. 2d 533, 541 (S.D.N.Y. 2004) (citation and internal quotation marks omitted).

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An otherwise properly pleaded conversion claim is susceptible to
dismissal if it is duplicative of a breach of contract claim. See Physicians Mut. Ins. Co. v. Greystone Servicing Corp., No. 07-cv-10490
(NRB), 2009 WL 855648, at *10 (S.D.N.Y. Mar. 25, 2009).
Courts in this circuit routinely dismiss duplicative conversion
claims under Rule 12(b)(6). See, e.g., Transcience Corp. v. Big
Time Toys, LLC, 50 F. Supp. 3d 441, 456 (S.D.N.Y. 2014) (collecting cases). “To sustain a conversion claim, a plaintiff must
allege acts that constitute unlawful or wrongful behavior separate from a violation of contractual rights.” Solomatina v. Mikelic,
370 F. Supp. 3d 420, 431 (S.D.N.Y. 2019) ((citation, internal
quotation marks, and alteration omitted)). To determine
whether claims are duplicative, courts look to the material facts
on which they are based, as well as the injuries for which damages are sought. See LaRoss Partners, LLC v. Contact 911 Inc., 874
F. Supp. 2d 147, 164 (E.D.N.Y. 2012).
Here, the two claims are duplicative because the facts that provide the basis for Plaintiff's breach of contract claim also underlie
its conversion claim, and Plaintiff seeks the same relief for both
claims. In its breach of contract claim, NMAC alleges that it “performed all of its obligations” under the various agreements, but
that Nemet “failed to make payments owed to NMAC, failed to
pay over the proceeds of sales to NMAC, failed to pay over the
proceeds of the rental of vehicles financed by NMAC, [and] failed
to comply with NMAC’s demands to cure payment defaults, all in
breach of the agreements between the parties.” (Am. Compl.
¶¶ 110-11.) In its conversion claim, NMAC alleges that: (1)
“Nemet Motors’ exercise of dominion and control over the sale
proceeds of the 192 Vehicles … that securitizes the [Automotive
Wholesale Financing and Security Agreement] and other agreements constitutes … conversion of NMAC’s property;” (2)
“Nemet Motors has intentionally and wrongfully interfered with
NMAC’s possession and ownership of the sale proceeds of the 192
Vehicles in violation of the superior rights of NMAC;” and (3)

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“[b]y virtue of the terms and conditions of the WFSA and UCC
Financing Statements, NMAC retains a perfected security interest
in the sale proceeds of the 192 [sold out-of-trust] Vehicles … and
thereby maintains superior possessory rights.” (Id. ¶¶ 115-118.)
In other words, the conversion claim arises out of Nemet’s alleged
violations of the agreements between it and NMAC, absent which
a conversion claim would not lie. Plaintiff appears to agree, as it
alleges that Nemet’s failure to repay it is a “severe breach of the
WFSA by Nemet Motors with NMAC akin to conversion of
NMAC’s vehicles.” (Id. ¶ 103 (emphasis added).)1
The damages NMAC seeks in its conversion claim are, for all intents and purposes, the same as the damages sought in its the
breach of contract claim. (See id. ¶¶ 111-112, 119-120). Although
NMAC seeks punitive damages on its conversion claim, punitive
damages are unavailable absent allegations of conduct actionable as an independent tort. See New York Univ. v. Cont’l Ins. Co.,
87 N.Y.2d 308, 316 (1995) (“Where a lawsuit has its genesis in
the contractual relationship between the parties, the threshold
task for a court considering defendant’s motion to dismiss a cause
of action for punitive damages is to identify a tort independent
of the contract.”). NMAC has not identified any independently
tortious conduct. Moreover, even if it had done so, it has not alleged the elements necessary to sustain a punitive damages
claim, to wit, that the conduct at issue was egregious, that it was
directed at NMAC, and that it was part of a pattern directed at
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Plaintiff’s reliance on Fabry’s S.R.I. v. IFT Int’l, Inc. and Moses v. Martin is
unavailing, as both cases involved conversion claims based on other alleged wrongful conduct. In Fabry’s, the defendants collected and retained
payments for merchandise without authorization after the termination of
the parties’ agreements. No. 02-cv-9855 (SAS), 2003 WL 21203405, at *4
(S.D.N.Y. May 19, 2003). In Moses, the defendants were allegedly involved
in a fraudulent scheme in which they “deceitfully claim[ed] that the [plaintiff] owed [them] money for ostensibly un-reimbursed advances.”
360 F. Supp. 2d at 539 (internal quotation marks omitted).

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the general public. See, e.g., AD Rendon Comms., Inc. v. Lumina
Americas Inc., No. 04-cv-8832 (KMK), 2007 WL 2962591, at *8
(S.D.N.Y. Oct. 10, 2007).
As such, Plaintiff’s conversion claim is duplicative of its breach
claim and must be dismissed.
CONCLUSION
For the reasons stated above, Defendant Nemet Motors, LLC’s
(Dkt. 25) Motion to Dismiss Plaintiff’s conversion claim is
GRANTED.
SO ORDERED.
Dated:

Brooklyn, New York
July 21, 2020
_/s/ Nicholas G. Garaufis_
NICHOLAS G. GARAUFIS
United States District Judge

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