Usov v. Lazar et al

Filing 22

OPINION re: 8 MOTION to Dismiss the Complaint filed by Marc Lazar, Marc Lazar Inc. Based upon the conclusions set forth above, Defendant's Motion to Dismiss is denied in part and granted in part, and Plaintiff's Motion to Compel discovery is granted. Leave to replead within twenty days is granted. (Signed by Judge Robert W. Sweet on 6/18/2013) (ft)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

- --- -----------------------------x
GREGORY USOV,
Plaintiff,
13 Civ. 818

(RWS)

- against
OPINION
MARC LAZAR and MARC LAZAR INC.,
Defendants.

---------- --- ------------------x

A P PEA RAN C E S:

USOV
THE ROTH LAW FIRM, P.L.L.C.

295 Madison Avenue, 22nd Floor

New York, New York 10017

By:
chard A. Roth, Esq.

s Marc Lazar and Marc Lazar
Inc.
ROBINSON BROG LEINWAND
GREENE GENOVESE & GLUCK P.C.
875 Third Avenue, 9th
oor
New York, New York 10022
By:
David C. Burger, Esq.
Michael A. Eisenberg, Esq.

Sweet, D.J.

Defendants Marc Lazar ("Mr. Lazar") and Marc Lazar Inc.
("Lazar Inc.")

(collectively, the "Defendants") have moved

pursuant to Rule l2(b) (6) of the Federal Ru

of Civil

Procedure to dismiss the complaint filed by Plaintiff Gregory
Usov ("Plaintiff" or "Mr. Usov").
discovery pr

Plaintiff moves to compel

to the preliminary conference on this matter set

for September 18, 2013.

For the reasons set forth below,

Defendants' Motion to Dismiss is denied in part and granted in
part and Plaintiff's Motion to Compel Discovery is granted.

I. PRIOR PROCEEDINGS
The Plaintiff initiated these actions against Defendants
Mr. Lazar and Lazar Inc. with the filing of the Summons and
Complaint on February 5, 2013.

Plaintiff's Complaint alleges

that Plaintiff and Defendants entered into an agreement whereby
Plaintiff owned 66% of a certain diamond col

ction (the "large

diamond collection" or "large collection") and that Defendants
breached this agreement by refusing to pay pro

ts of any sales

of diamonds in the large collection or by turning over the
remaining inventory, and that as a result of this breach,
Plaintiff has and will continue to suffer damages from
Defendants' unjust enrichment in retaining the large collection
1

(See Complaint

and profits owed.
66% of all prof

~~

29-36.)

Plaintiff seeks

s from any diamonds of the large collection

that Defendants have already sold as well as compensation for
66% of the remainder of the collection, punitive damages and
attorneys' fees or, in the alternative, return of the remainder

(See

of the large diamond collection.

.)

On April 1, 2013, Defendants filed a Motion to Dismiss
its entirety.

Plaintiff's complaint

This motion was marked

ly submitted on May 22, 2013.
On June 4, 2013, Plaintiff filed a Motion to Compel
discovery.

This motion was marked fully submitted on June 14,

2013.
II .

BACKGROUND

In 2006, Pinnacle Trading Limited ("Pinnacle") was
established.

(Compl.

of Pinnacle.

(Id. )

for holding t

~

9.)

Mr. Usov was t

sole shareholder

In or about 2006, Defendants, in exchange

large diamond collection at issue and providing

insurance coverage, were granted 33% ownership interest in the
collection.

(See Compl.

~

10.) In approximately 2007, Mr. Usov

created Mervia Investments SA ("Mervia"), of which Mr. Usov was
the sole shareholder, and transferred Pinnacle's assets,
including the interests

the large diamond collection, to
2

Mervia.

(Compl. 1 12.) On or about August 23, 2011, Mr. Lazar

signed a memorandum confirming that t
large diamond collection was trans
personally.

(Compl. 1 13.)

66% interest in the

rred from Mervia to Mr. Usov

Mr. Usov attached a schedule to

this memorandum which confirmed a list of all the diamonds in
the large collection.

(Id.)

In 2002, Mr. Usov cosigned five diamonds

(the "small

diamond collection") to Defendants, which Defendants agreed to
liver all proceeds of any sales directly to Mr. Usov.

sell and

(See Compl. 1 15.)

In 2010,

Defendants returned four diamonds

of the small collection but kept the fifth diamond, a 1.75 Carat
diamond.

(Compl. 1 16.)

By October 19, 2010,

Defendants

therefore had in their possession 34 diamonds belonging to Mr.
Usov, including the large diamond collection consisting of 33
diamonds and the 1.75 Carat diamond remaining from the small
diamond col

ion.

(Compl. 1 17.)

On March 25, 2012,

Defendants informed Elena Harris

("Ms.

Harris"), Mr. Usov's daughter, that they had sold a diamond from
the large collection for approximately $125,000.
Despite requests,

(Compl. 1 18.)

Defendants did not provide any documentation

or information concerning the sale, the customer, or the price
of the transaction.

(Id.)

On or about April 25, 2012,

Defendants informed Ms. Harris that they had sold two additional
3

diamonds, one from the large diamond collection and the 1.75
Carat diamond from the small collection, for $4.65 million and
$350,000, respectively.

~

(Compl.

19.)

Based on the relevant

agreements, Defendants were obligated to pay to Mr. Usov two­
thirds of the proceeds of the diamond sold from the large
diamond collection, or $3.09 million, and the entire proceeds of
the sale of the 1.75 Carat diamond from the small collection.
Defendants did not pay any profits from these diamond sales to
Plaintiff, and continued to refuse to provide Ms. Harris with
any documentation or information about these sales whatsoever.
(Compl.

~

21.)

alleges that

During this time through June 16, 2012, Mr. Usov
made several attempts to contact Mr. Lazar

directly regarding these profits owed, including leaving
messages on his voicemail, and that Mr. Lazar never responded to
any of his attempts.

(Compl.

~

22.)

On or about July 23, 2012, October 17, 2012 and October 22,
2012, Ms. Harris met with Mr. Lazar in further attempts to
obtain proceeds of the sale of the diamonds and to deliver the
remaining diamonds, and additionally to obtain an independent
assessment of the value of the remaining diamonds in the large
collection.

(Compl.

~

23.) On October 17, 2012, Ms. Harris and

Mr. Lazar, with the assistance of others, derived a valuation
for the remaining pieces in inventory of the large diamond

4

collection, calculating the total owed by Mr. Lazar to Plainti
at $3.5 million, in addition to the profits from the diamonds
already sold.

(Compl.

~

26.)

To date, Defendants have not paid

Plaintiff any profits from the diamonds sold, or returned any of
the remai

ng diamonds from the large collection still in
(Compl.

Defendants' possession.

~

intiff further

27.)

leges that Defendants continue to di

lay the large diamond

collection in industry shows in an effort to build name
recognition and reputation despite Mr. Usov's repeated requests
that the diamonds, or prof
In response,

s, be returned.

~

(Compl.

28.)

Defendants assert that Lazar Inc. is the so

owner of the large diamond collection, having purchased the
large diamond

lection from Andre Runte

(Mem. at 2.)

7, 2005.

("Mr. Runte")

on April

In contrast, Ms. Harris contends that in

or around 1997, Ms. Harris's then husband, Harvey Harris

("Mr.

Harris"), entered into an agreement with Mr. Runte regarding the
large diamond collection .
. ");

~

6.)

(Affidavit of Elana Har

s

("Harris

After Mr. Runte brought arbitration proceedings

against Mr. Harris regarding the large diamond collection in
1997, which resulted in a judgment against Mr. Harris, Mr.
Harris and Mr. Lazar agreed to purchase the stones from Mr.
Runte with money from Mr. Harris covering two-thirds of the
purchase price and Mr. Lazar covering one-third.

5

(Id.

~~

7-8.)

During this t

, Mr. Harris had terminal Leukemia,
him concerning the purchase

therefore asked Mr. Lazar to act
of the large

lection.

(Id.

9.)

<j{

2006, because of his impending

, Mr.

red his 66% ownership interest in

large

In or
Harris trans

diamond collection to Pinnacle, which Defendants acknowledged in
an agreement
12.) Pla

tween Mr. Lazar and Pinnacle in 2006.

(Id.

'j[

iff therefore asserts that in signing this agreement,

and the subsequent agreements transferring

le's interest

to Mervia and then to Mr. Usov personally, Mr. Lazar
acknowledged Mr. Usov's two-third interest in the large diamond
collection.

(Id.

'j[

13.)

In addition, Plaintiff alleges that

Mr. Lazar partially performed under the contract in that upon
selling two of the diamonds in the large col
pursuant to the 2006 contract, wired money
procee

of both sales to Pinnacle.

(Id.

Independently, Ms. Harris also all

ction, Mr. Lazar,
r two-thirds of

at 14.)
that she had

numerous meetings with Mr. Lazar where he confirmed that he was
personally obligated to Plaintiff
diamond collection.

. at 15.)

two-thirds of the large
As

intentions, Ms. Harris points to:

ce of Mr. Lazar's

(1) Mr. Lazar telling her the

ices for all diamonds he sold from t

large collection, and

(2) a conversation with Mr. Lazar on July 23, 2012, which Ms.
6

Harris allegedly recorded, during which Mr. Lazar acknowledged
that Plaintiff was owed two-thirds of any profits on diamonds
(Id.

sold from the large collection.

q[q[ 17-24.)

On May 9, 2013, Plaintiff served a First Request for
Documents on Defendants, which Defendants rejected.

Defendants

instead responded that discovery should be stayed pending the
instant pre-answer Motion to
III.

smiss.

STANDARD OF REVIEW

On a motion to dismiss pursuant to Rule 12(b) (6), all
factual allegations
all in

t

complaint are accepted as true, and

rences are drawn in favor of the pleader. Mills v. Polar

Molecular Corp., 12 F.3d 1170,

1174 (2d Cir. 1993). The issue

"is not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
claims." Villager Pond, Inc. v. Town of Va
(2d Cir. 1995)

en, 56 F.3d 375,

(quoting Scheuer v. Rhodes, 416 U.S. 232, 23

378
36

(1974)).
To survive a motion to dismiss pursuant to Rule 12(b) (6),
"a complaint must contain sufficient factual matter, accepted as
true, to 'state a claim to relief that is plausible on
face.'

" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)

Bell Atl. Corp.

v.

Twombly, 550 U.S.
7

544, 570 (2007)).

s
(quoting

aintiffs must allege sufficient
claims across the line from conce

s to "nudge [ ] their
e to plausible." Twombly,

550 U.S. at 570. Though the court must accept the factual
allegations of a complaint as true, it is "not bound to accept
as true a legal conclusion couched as a factual allegation."

Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555).
The Court may cons
to the complaint, rega

outside documents that are int
ess whether attached to the compla

so long as the pleader has notice of them or refers to them. See

Gregory v. Daly, 243 F.3d 687, 691 (2d Cir.2001); Schnall v.
Marine Midland Bank, 225 F.3d 263,266 (2d Cir.2000). "[W]

le

courts generally do not consider matters outside the pl
they may consider documents attached to the pleadings, documents
referenced in the pleadings, or documents that are
the pleadings in

1 to

to determine if a complaint should

survive a 12(b) (6) motion." Garcia v. Lewis, No. 05
1153(SAS), 2005 WL 1423253, *3, 2005 U.S. Dist. LEXIS 11955, at
*10 (S.D.N.Y. June 16, 2005). When ruling on a motion to
dismiss, the Court may also take judicial not
documents attached to the complaint. Calcutti v.
F.Supp.2d 691, 696 (S.D.N.Y.2002).

8

of copies of

Inc., 224

IV. PLAINTIFF'S BREACH OF CONTRACT CLAIM IS ALLOWED AS
PERTAINING TO LAZAR INC., and DISMISSED AS TO MR. LAZAR
IN HIS INDIVIDUAL CAPACITY

In order to prevail on a breach of contract claim under New
York law, a plaintiff must prove "(1) the existence of a
contract;
plaintiff;

(2) adequate performance of the contract by the

(3) breach of contract by the

fendant; and (4)

damages." Uni ted Resource Recovery Corp. v. Ramko Venture Mgmt.,
584 F.Supp.2d 645,

652

Plaintiff to prove t

(S.D.N.Y.2008). The burden rests upon the
se elements by a preponderance of the

evidence. See e.g., Enercomp, Inc. v. McCorhill Pub., Inc., 873
F.2d 536, 542 (2d
A.

~rc

r.1989).

Lazar Inc.

Defendants contend that Plaintiff's breach of contract
claim fails because Plaintiff does not establi

any ownership

of the diamonds, and to the contrary, documentary evidence shows
Lazar, Inc. as the sole owner of the large collection.
(Declaration of David C. Burger ("Burger Decl."); Exhibits B &
C. )

However, Plaintiff's claim arises from two documents
showing a contract between Mr. Lazar and Mr. Usov establi

ing

ownership interest in the large diamond collection: first, an
agreement in June of 2006 whereby Mr. Lazar signed his name, on
Lazar Inc. letterhead, documenting the large diamond collection
9

and establishing ownership in Pinnacle Trading Limited at 66%
(Burger Decl. Exhibit A); and second, an agreement on August 23,
2011, signed by Mr. Lazar as President of Lazar Inc., where Mr.
Lazar acknowledged that a 66% ownership interest in the large
diamond collection was transferred from Mervia to Mr. Usov
personally (Burger Decl. Exhibit A) .

Both agreements are

sufficient at this stage to establish the existence of the
parties'

intent to create Plaintiff's 66% ownership interest in

the large diamond collection.

1

See Tractebel Energy Marketing,

Inc. v. AEP Power Marketing, Inc.,
2007)

487 F.3d 89,

97

(2d Cir.

("The existence of a contract may be established through

the conduct of the parties recognizing the contract" and the
"totality of all acts of the parties")

(internal citations

omitted) .
In addition,

Plaintiff asserts that Mr. Lazar personally

reassured Ms. Harris that Mr. Usov was entitled to 66% of any
Defendants point to a purported contract between Defendants and Mr. Runte
establishing a purchase agreement whereby Defendants purchased the large
diamond collection from Mr. Runte in August of 2005 (the document is signed
by Mr. Runte but not by Mr. Lazar).
Defendants argue that this document
conclusively demonstrates their sole ownership in the large collection.
Plaintiff contends first that this is an unexecuted document that predates
the current relationship between the parties, as evidenced by the later
contracts, and second that the document should not be considered because it
was not attached to the Complaint.
The Court declines to reach either
whether the document is executed and valid, or whether it should be
considered, as the document in question predates the 2006 and later
contracts, which are sufficient at this stage to establish an intent between
Defendants and Mr. Usov to create a 66% ownership interest in the large
diamond collection by Plaintiff.
1

10

proceeds of diamonds sold from the large collection and that Mr.
Lazar would in fact pay Mr. Usov these profits.
allegedly part

Mr. Lazar also

lly performed under the contract by wiring money

after 2006 for two-thirds of the proceeds of two diamonds sold
from the large collection.

(Harris Aff.

~~

17-24.)

Despite these documents and Mr. Lazar's apparent
assurances, Mr. Lazar has not, in his personal capacity or
through Lazar Inc., paid PI

ntiff for any of the diamonds sold

from the large collection, or for the remainder of the
collection still in Defendants' possession.

Accordingly, based

upon Plaintiff's allegations and the documents before the Court
at the motion to dismiss phase, Plaintiff has established a
val

breach of contract claim.
B. Marc Lazar

Individua~~y

"It is well established in New York that an officer of a
corporation is not individually liable for the contractual
obligations of that corporation absent a clear intent to create
individual liability."

Rotter v. Institutional Brokerage Corp.,

1994 U.S. Dist. LEXIS 10157, 5-6 (S.D.N.Y. July 22, 1994)
(citing Puma Indus. Consulting v. Daal Associates, Inc.,

F.2d 982, 986 (2d Cir. 1987).

808

Here, the agreements establishing

a contract include a memorandum addressed to Marc Lazar, Inc.
and a letter signed by Marc Lazar as President of Marc Lazar
11

Inc.

The agreements are thus between Plaintiff and Lazar Inc.,

and do not

dence an intent to include Mr. Lazar in his

dual capacity.
and belief

Mr. Lazar signed these agreements in his

1 capa
contract

Ms. Harris's allegations upon informat

ty, and that he partially performed under the
s

sonal capacity, are insufficient to establish

that Mr. Lazar intended to create individual liability.

(See

Harris Aff. ~~ 9 10, 14.)2
Nor are Ms. Harris's allegations sufficient to establish
the elements necessa
veil."

To

rce

for the Court to "pierce the corporate
corporate veil, the requesting party must

prove: "(I) the owner

s exercised such control that the

corporation has become a mere instrumentality of the owner,
which is the real actor;

(2) such control has been used to

commit a fraud or other wrong; and (3) the fraud or wrong
results in an unjust loss or

jury to pI

iff. "

Freeman v.

Complex Computing Co., 119 F.3d 1044, 1052 (2d Cir. 1997).

In

establishing the first element, Courts have looked to factors
st

such as where the individual

"exe

sed considerable

Further, "Personal liability will be
if the Plaintiff shows
that the officer or employee acted outside the scope of his employment by
committing an independent tort of by
a personal interest." Tsegaye
v. Impol Aluminum Corp., 2003 U.S. Dist. LEXIS 1397, *27 (S.D.N.Y. Jan. 30,
2003). Plaintiff, as discussed, has not
sufficient facts establishing
that Mr. Lazar acted outside the scope of his
or that he pursued a
personal interest.
2

12

authority over [the corporation]

... to the point of completely

sregarding the corporate form and acting as though [its]
assets were his alone to manage and distribute./I
(citing Lally v. Catskills Airways Inc.,
(3d Dep't 1993)).

Id. at 1051

603 N.Y.S.2d 619, 621

Plaintiff's allegations that Mr. Lazar owns

Lazar Inc., is the president, and was the only individual who
dealt with the purchases and sales of the

rge diamond

collection are insufficient to establish the requisite authority
or domination over the company by Mr. Lazar necessary to "pierce
the corporate veil./I
Plaintiff's claim for breach of contract is therefore
dismissed as to Mr. Lazar in his individual capacity.
V. PLAINTIFF ADEQUATELY ALLEGES UNJUST ENRICHMENT AS TO MARC
LAZAR INC. BUT FAILS TO STATE A CLAIM AGAINST MR. LAZAR
INDIVIDUALLY

Under New York law, a claim of unjust enrichment "requires
simply an allegation that (1) the defendant was enriched,

(2)

the enrichment was at the plaintiff's expense, and (3) t
defendant's retention of the benefit would be unjust." M'Baye v.
World Boxing Ass'n., No. 0

9581(DC), 2006 WL 2090081, at *5

(S.D.N.Y. July 28, 2006). "The notion of unjust enrichment
appl

s where there is no contract between the parties."

Maryland Cas. Co. v. W.R. Grace & Co., 218 F.3d 204, 212 (2d
Cir. 2000). Thus, generally, quasi-contractual relief, such as
13

unjust enrichment, is not permitted when an express agreement
sts that governs the dispute between

tzpa
(1987)

parties. See Clark­

ck, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 388
(citations omitted).

However, "[wJhile a party generally may not simultaneously
recover upon a breach of contract and unjust enrichment claim
arising from the same facts, it is still permissible to plead

s.

such claims as alternative

II

F.Supp.2d ----, 2012 WL 1071274, at *8

Singer v. Xipto Inc., --­
(S.D.N.Y. Mar. 20, 2012);

see also Wilk v. VIP Health Care Servs., Inc., No. 10­
5530 (ILG) (JMA) , 2012 WL 560738, at *5 (E. D.N. Y. Feb. 21, 2012)
(noting that "while it is true that a claim for quantum meruit
luded when a valid contract

or unjust enrichment is

governing the same subject matter exists between the part
quantum meruit claim may

s, a

alleged alongside a breach of

contract claim.").
A.

Marc Lazar Inc.

Plaintiff

that if there is no en

between Plaintiff and
unjust enrichment

Defendants, Plaintiff p
im as an alternative to the

e contract
the
of

contract cause

action.

See Wilmoth v. Sandor,

686 N.Y.S.2d

388, 390 (App.

. 1999)

(where there is a "bona

dispute

14

as to the existence or application of a contract" both breach of
contract and unjust enrichment claims may su

a motion to

smiss) .
Here, Plaintiff adequately alleges

Lazar Inc. was

enriched by the large diamond collection both through
reputational value and profit from sa

s of certain of the

diamonds; that this enrichment was at Pl
that he owned 66% the diamonds in

tion; and that retention

by Defendants of the full value of t

1

would be unjust based on the parties'
interests involved.

s

Plaintiff

iff's expense in

unjust enrichment as an alternat

diamond collection
ent as to the ownership

refore adequately plead
to the breach of contract

claim with respect to Lazar Inc.
B. Marc Lazar Individually

As discussed above, Pla
Mr. Lazar acted in anything

iff

r than in his capacity as an
y allege that Mr. Lazar had

officer of Lazar Inc., or
the requisite cont

or domination over the company to

establish individual li
Accordingly, Plainti

ils to substantiate that

's

1

Y and "pierce the corporate veil."
of unjust enrichment with

to Mr. Lazar individually is dismissed.

15

VI. PLAINTIFF FAILS TO STATE A CLAIM FOR BREACH OF COVENANT
OF GOOD FAITH AND FAIR DEALING AS TO BOTH DEFENDANTS

Under New York law, all contracts include an implied
covenant of good faith and fair dealing that "includes an
implied undertaking on the part of each party that he will not
intentionally and purposely do anything to prevent the other
party from carrying out the agreement on his part." Kader v.
Paper Software r Inc'
omitted).

r

111 F.3d 337, 342 (2d Cir.1997)

(citations

A claim for breach of the implied covenant will be

dismissed, however, "as redundant where the conduct allegedly
violating the implied covenant is also t

predicate for breach

of covenant of an express provision of the underlying contract."
ICD Holdings V. Frankel r

976 F.Supp. 234, 243-44

(citation omitted); see also Gencor Ind.
CO'

r

r

(S.D.N.Y.1997)

Inc. v. Ingersoll-rand

No. 99 Civ. 9225(TPG), 2000 WL 1876651, at *9 (S.D.N.Y. Dec.

22, 2000); EUA Cogenex Corp. v. North Rockland Cent. School
Dist'

r

124 F.Supp.2d 861, 873 (S.D.N.Y.2000); D'Accord Financial

Servs. r Inc. v. Metsa-Serla OYr No, 98 Civ. 5847(DLC), 1999 WL
58916, at *2 (S.D.N.Y. Feb. 8, 1999).
Plaintiff asserts that Defendants breached the covenant of
good faith and fair dealing, as an alternative to its breach of
contract claim, by failing to pay Mr. Usov or turn over the
remainder of the large diamond collection.

(Compl.

~~

38-41.)

But the factual predicates for Plaintiff's claim are identical
16

to Plaintiff's breach of contract claim.
therefore dismissed as redundant.
Ltd. v. Alliance Indus.

aintiff's

aim is

See, e.g., Boart Longyear

Inc., 869 F. Supp. 2d 407, 420 (holding

that Second Circuit precedent indicates that a duplicative
breach of covenant of good faith and

ir dealing claim should

be dismissed as redundant and not allowed as an alternative to
breach of contract claim); Matsumura v. Benihana Nat'l Corp.,
465 Fed.Appx. 23, 29 (2d Cir.2012)

("Plaintiffs based their

breach of good faith claim on the same operative facts as their
breach of contract claim; accordingly, the District Court did
not err

dismissing the former c

latter."); Harris v. Provident Li
F.3d 73,81 (2d Cir.2002)
a separate cause of action

im as duplicative of the

& Accident Ins. Co., 310

("New York law

does not recognize

r breach of the implied covenant of

good faith and fair dealing when a breach of contract claim,
based upon the same facts, is also pled.").
VII. PLAINTIFF FAILS TO STATE A CLAIM FOR REPLEVIN
A replevin action may be maintained only by one who has a
superior possessory right to the chattel, although he need not
prove that the defendant has no tit

to the chattel.

Honeywell

Information Systems Inc. v. Demographic Systems, Inc., 396
F.Supp. 273, 275 (S.D.N.Y.1975)

(in an action

r replevin, "the

issue is strictly whether plaintiff or defendant has the
17

superior posses

St. Corp., v.

right."); Benj. H. Tyrrel and 110 Greenwich

Computer Corp., No. 81-1530, slip Ope at 3

(S.D.N.Y. Dec. 15, 1981); 23 N.Y.Jur.2d Contracts § 105 (1982),

Paetow v. Van

, 54 A.D.2d 976, 388 N.Y.S.2d 669 (2d

1976) .

Mr. Usov has sufficiently pI

that he has a 66% possessory

right, superior to that of Defendants, to the large diamond
collection.

However, "where pIa

iff is essentially seeking

enforcement of the bargain, the action should proceed under a
contract

ry." Sommer v.

1 Signal Corp., 79 N.Y.2d 540,

583 N.Y.S.2d 957, 593 N.E.2d 1365, 1369 (N.Y.1992); see also

Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 899 (2d Cir.1980)
("If the only interest at sta

is that of holding the defendant

to a promise, the courts have said that the pIa
transmog

the contract cIa

iff may not

into one for tort.");

Spanierman Gallery PSP v. Love, 2003 WL 22480055, *3 (S.D.N.Y.
Oct. 31, 2003)

(holding that where Plaintiff's

arose only from allegat
object

evin claim

that Defendants did not return

violation of a contract, Plaintiff

iled to allege

any distinct duties giving

se to tort liabil

cIa

Because Plaintiff does not allege

should be dismissed).

y and replevin

any independent duty by Defendants outside of the purported

18

~-----.-----~~

..

~~

­

......

fails to adequately state a claim for

contracts, Plainti
replevin.

VIII. PLAINTIFF'S CONVERSION CLAIM IS DISMISSED AS

DUPLICATIVE

Under New York law, 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

a superior possessory right of another in the

property./I Schwartz v. Capital Liquidators, Inc., 984 F.2d 53,
53-54

(2d Cir.1993)

Republic of Hai

(per curiam)

(citation omitted)

i

see also

v. Duvalier, 626 N.Y.S.2d 472, 475

(N.Y.App.Div.1995).

"Where the original possession is lawful, a

conversion does not occur until the defendant refuses to return
the property after demand or until he sooner disposes of the
property./I Thryoff v. Nationwide Mut.
Fed.Appx. 179, 180 (2d Cir.2010)

United Arab Agen

Ins. Co.

(Thryoff II), 360

(quoting Seanto Exports v.

es, 137 F.Supp.2d 445, 451 (S.D.N.Y.2001)

(internal quotation marks omitted)). "A conversion claim may
only succeed if the party alleges a wrong that is distinct from
any contractual obligations./I Command Cinema Corp. v. VCA Labs.

Inc., 464 F.Supp.2d 191, 199 (S.D.N.Y.2006)

(citing Peters

Griffin Woodward, Inc. v. WCSC, Inc., 88 A.D.2d 883, 452
N.Y.S.

559, 600 (1st Dep't 1982)i see also LaRoss Partners,

LLC v. Contact 911 Inc., 874 F.Supp.2d 147, 163 (E.D.N.Y.2012).
19

r conversion thus cannot lie when

A claim
dupl

is

ive of the breach of contract cause of action. See,

e.g., Jain v.

T & C Holding Inc., No. 10 Civ. 1006, 2011 WL

814659, at *6 (S.D.N.Y. Mar. 3, 2011)

(c

ing AD Rendon

Comm'cns, Inc. v. Lunina Americas, No. 04-CV-8832, 2007 WL
(S.D.N.Y. Oct. 10, 2007); Reade v. SL Green

2962591, at *4

Operating P'ship, 30 A.D.3d 189, 817 N.Y.S.2d 230, 231
Oep't 2006); Command Cinema Corp. v. VCA
F.Supp.2d 191, 199 (S.D.N.Y.2006)

(1st

. Inc., 464

("A conversion claim may only

succeed if the party alleges a wrong that is distinct from any
contractual obligations."); Leisure Direct, Inc., v. Glendale
tal, LLC, No. 05-CV-4473, 2010 WL 3782049, at *4
July 27, 2010)

(rejecting pla

(E.D.N.Y.

iff's conversion claim under New

York law as duplicative of breach of contract claim); NTL
tal, LLC v. Right Track Recording, LLC, 73 A.O.3d 410, 412,
901 N.Y.S.2d 4,

6 (lst Dep't 2010)

action, for conversion, is duplicat

("The fourth

[ ] cause of

of the breach of contract

cause of action"); Rolls-Royce Motor Cars, Inc. v. Schudroff,
929 F.Supp. 117, 124

(S.D.N.Y.1996)

(a conversion claim will "be

deemed redundant when damages are merely being sought for breach
of contract")

(internal citation and quotation marks omitted).
that a simple breach of

"It is a well-established pri

contract is not to be considered a tort unless a legal duty
20

independent of the contract itself has been violated.

. ..

[T]his legal duty must spring from circumstances extraneous to,
and not constituting elements of, the contract, although it may
connected with and dependent upon the contract." ClarkFitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 521
N.Y.S.2d 653, 516 N.E.2d 190, 193 (N.Y.1987)
omitted).

(citations

Here, Plaintiff's claim for conversion is based on the

same facts upon which Plaintiff

ed its breach of contract

claim, and Plaintiff does not identify any legal duty
independent of

purported contractual agreements between Mr.

Usov and Mr. Lazar.
ls as dupl

IX.

As such,

Plaintiff's claim for conversion

ive of its breach of contract

im.

PLAINTIFF'S MOTION TO COMPEL DISCOVERY IS GRANTED

A party may file a motion to compel
37 (a) (2), "where another party

scovery under Rule

ils to respond to a discovery

request, or where the party's response is evas
incomplete." Fed. R. Civ. P. 37(a) (2).

or

While discovery may in a

proper case be stayed pending the outcome of a motion to
dismiss, "the issuance of a stay is by no means automatic." In
re WRT Energy Secs.

tig., No. 96 Civ. 3610, 1996 WL 580930, at

*1 (S.D.N.Y. Oct. 9, 1996)

(Keenan,

J.)i

see Moran v. Flaherty,

No. 92 Civ. 3200, 1992 WL 276913, at *1 (S.D.N.Y. Sept. 25,
19

("[Djiscovery should not be routinely stayed simply on the
21

basis that a motion to dismiss has been filed;" .

. "had the

Federal Rules contemplated that a motion to dismiss under FRCP
12(b) (6) would [automatically] stay discovery, they would
contain a provision."); In re Chase Manhattan Corp. Sees.
Litig., No.

19 91 )

90 Civ. 6092, 1991 WL 79432, at *1 (S.D.N.Y. May 7,

(same) .
Here, Defendants have rejected

aintiff's discovery

requests and instead argued that because Plaintiff's Compla
states no cause of action, and because Mr. Lazar owns

large

diamond collection in question, discovery should not be
commenced pending the Motion to

smiss.

Defendants are

incorrect, though, that discovery must automati
pending a motion to dismiss.

ly be stayed

In any event, staying discovery

pending the Motion to Dismiss is irrelevant given that the
Motion to Dismiss is denied in part.
proceed accordingly.

22

Discovery

11

refore

X. CONCLUSION

Based upon the conclusions set forth above, Defendant's
Motion to Dismiss is denied in part and granted in part, and
Plaintiff's Motion to Compel discovery is granted.
replead within twenty days is granted.
It is so orde
New York, NY
June

fi'

2013

U.S.D.J.

23

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