ACR Systems, Inc. v. Woori Bank
OPINION & ORDER re: 101 MOTION to Amend/Correct First Amended Complaint filed by ACR Systems, Inc. For the reasons stated above, the SAC fails to cure the deficiencies identified by the Court in the February 8 Order. Ac cordingly, ACR's motion for leave to file the SAC is DENIED. Given ACR's concession that the SAC contains "all proposed amendments" regarding the independent torts that could form the basis for a claim of civil conspiracy, ACR 039;s claims for fraud, conversion, and conspiracy are dismissed with prejudice. Likewise, ACR's claims for aiding and abetting fraud and conversion are dismissed with prejudice. Woori is directed to file an answer to ACR's remaining claim by no later than fourteen days from the date of this Opinion. The Clerk of the Court is respectfully directed to close the motion docketed at ECF No. 101. (Signed by Judge John F. Keenan on 4/10/2018) (mro)
Case 1:09-md-02013-PAC Document 57
Filed 09/30/10 Page 1 of 45
DOC #: _________________
DATE FILED: 04/10/2018
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ACR UNITED STATES DISTRICT COURT :
SOUTHERN DISTRICT OF NEW YORK:
In re FANNIE MAE 2008 SECURITIES :
: No. 1408 Civ. 7831 (PAC)
Civ. 2817 (JFK)
09 MD & ORDER
OPINION 2013 (PAC)
OPINION & ORDER
HONORABLE PAUL A. CROTTY, United States District Judge:
FOR PLAINTIFF ACR SYSTEMS, INC.
John E. Cone Jr.
LAW OFFICE OF JOHN E. CONE JR.
Marc The early years of this decade saw a boom in home financing which was fueled, among
MARC M. COUPEY LAW, PLLC
other things, by low interest rates and lax credit conditions. New lending instruments, such as
FOR DEFENDANT WOORI BANK
Robert S. Friedman
subprime mortgages (high credit risk loans) and Alt-A mortgages (low-documentation loans)
Shin Y. Hahn
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
JOHN assumption that the market would continue to rise and that refinancing options would always be
F. KEENAN, United States District Judge:
Before the Court is a motion by Plaintiff ACR Systems, Inc.
available in the future. Lending discipline was lacking in the system. Mortgage originators did
(“ACR”) for leave to file a second amended complaint. ACR
not hold these high-risk mortgage loans. Rather than carry the rising risk on their books, the
asserts that new allegations in the proposed second amended
originators sold their loans into the secondary mortgage market, often as securitized packages
complaint (the “SAC”) cure the deficiencies identified by the
known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
Court in its previous Opinion and Order, which granted in part
But then the housing bubble burst. In 2006, the demand for housing dropped abruptly
and denied in part a motion by Defendant Woori Bank (“Woori”) to
and home prices began to fall. In light of the changing housing market, banks modified their
dismiss ACR’s first amended complaint (the “FAC”) pursuant to
lending practices and became unwilling to refinance home mortgages without refinancing.
Federal Rule of Civil Procedure 12(b)(6). For the reasons
stated below, ACR’s motion for leave to file the SAC is denied.
Unless otherwise indicated, all references cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.
The facts underlying this case were thoroughly discussed in
the Court’s Opinion and Order granting in part and denying in
part Woori’s motion to dismiss the FAC (the “February 8 Order”).
(See Op. & Order at 2-5, ECF No. 94 (filed Feb. 8, 2017).)
Nevertheless, the Court will summarize the factual and
procedural background that is relevant to the instant motion.
A. Factual Background
The following facts are drawn from the FAC and its attached
ACR is a Texas corporation that is authorized by the
U.S. Government to supply military goods to various foreign
governments. (Am. Compl. ¶¶ 2, 6, ECF No. 47 (filed Apr. 1,
2016) [hereinafter FAC].)
Woori is a South Korean bank, owned
in part by the government of South Korea, with a branch in
Manhattan. (Id. ¶ 3.)
Non-party Woong Kook Co. Ltd. (“Woong
Kook”) is an agent of the Defense Ministry of South Korea
(“DAPA”). (Id. ¶¶ 4-5.)
In January 2011, ACR entered into five contracts with Woong
Kook to supply custom military goods to DAPA. (Id. ¶¶ 16-17.)
The value of the first contract was $85,862, and the value of
the remaining four contracts totaled $250,270.08. (Id. ¶¶ 1718.)
ACR was to be paid by a letter of credit, which was
numbered MD1G8012GU00032 and dated December 28, 2010 (the
“Letter of Credit.”) (Id. ¶ 19.)
In the transactions
contemplated, Woong Kook would act as the purchaser-applicant,
Woori would issue the Letter of Credit, and ACR would act as the
seller-beneficiary. (See Op. & Order at 2-3, ECF No. 94.)
In January 2011, the Letter of Credit was amended to permit
Woori to make payments to ACR in the absence of an “inspection
acceptance certificate” from DAPA (“Acceptance Certificate”).
(See FAC ¶ 20; see also FAC Ex. B.)
In the event that ACR did
not receive an Acceptance Certificate within seven days of
DAPA’s receipt of a shipment, ACR’s “statement to [Woori]” that
no Acceptance Certificate was received would “be a cause to draw
against the Letter Of Credit.” (Id.)
At the end of February 2012, ACR shipped the military goods
covered by the first contract (the “Goods”) to South Korea. (FAC
Although the Goods were delivered to DAPA in “good order
and condition,” ACR did not receive an Acceptance Certificate.
(Id. ¶¶ 23-24.)
ACR notified Woori that it did not receive an
Acceptance Certificate and “timely complied with all
preconditions and requirements of the Letter of Credit by
tendering to Woori all documentation and information required by
the Letter of Credit[.]” (Id. ¶¶ 24-25.)
However, purportedly after applying deductions demanded by
Woong Kook and DAPA, Woori paid ACR only $28,099.11. (Id. ¶ 26.)
The partial payment left an amount of $57,762.89 outstanding.
Thereafter, ACR repeatedly requested payment of the
remaining amount due, but Woori refused to pay. (Id. ¶ 27.)
Despite its partial payment to ACR, Woori claimed that ACR’s
failure to present an Acceptance Certificate prevented it from
paying any amount under the Letter of Credit. (Id. ¶¶ 36-37.)
According to ACR, Woori and Woong Kook “colluded” in
various ways to injure ACR.
For example, the deductions
requested by Woong Kook and DAPA were “fabricated, wholly
false[,] and unjustified.” (Id. ¶ 37.)
Also, Woong Kook
allegedly “works extensively with and does multimillion dollars’
worth of business with Woori on a regular basis[.]” (Id. ¶
ACR claims further that “[n]either Woori nor Woong Kook
took any action, to date, to encourage, require or notify DAPA
to return” the Goods to ACR. (Id. ¶ 38(f).)
Finally, ACR points
to a separate lawsuit, filed in Texas by Woong Kook against ACR,
as evidence of collusion between Woori and Woong Kook. (Id. ¶
B. Procedural Background
After ACR filed the original complaint in the Supreme Court
of New York, County of Westchester, Woori removed the case to
this Court on the basis of diversity jurisdiction. (Notice of
Removal at 2, ECF No. 1 (filed Apr. 18, 2014).)
On June 23,
2014, Woori moved to dismiss the complaint for lack of standing
and failure to state a claim upon which relief may be granted.
(See Op. & Order at 6, ECF No. 94.)
On March 25, 2015, the
Court granted in part and denied in part Woori’s motion to
dismiss. (Op. & Order at 16, ECF No. 29 (filed Mar. 25, 2015).)
ACR filed the FAC on April 1, 2016, asserting claims for
civil conspiracy and punitive damages for the first time. (See
FAC ¶¶ 47-59.)
On February 8, 2017, the Court granted in part
and denied in part Woori’s motion to dismiss the FAC pursuant to
Rule 12(b)(6). (Op. & Order at 18, ECF No. 94.)
determined that the FAC stated a claim for wrongful dishonor.
(Id. at 12-14.)
The Court also found that the FAC did not state
a claim for civil conspiracy because ACR failed to adequately
plead the tort underlying its civil conspiracy claim, i.e.,
fraud. (Id. at 14-16.)
Finally, the Court dismissed ACR’s claim
for punitive damages with prejudice. (Id. at 16-18.)
However, the Court dismissed the claim for civil conspiracy
without prejudice. (Id. at 18.)
The Court observed that,
“[w]hile ACR claims to have recently discovered evidence showing
a payment of $85,862.00 from Woori to Woong Kook, this new
allegation does not support a claim for fraud and would not cure
the civil conspiracy claim’s deficiencies.” (Id. at 17 (citation
Accordingly, the Court ordered that, “if ACR wishes
to amend the civil conspiracy claim, it must file an application
with the Court attaching its proposed amendments and explaining
how those amendments would allow the civil conspiracy claim to
survive a motion to dismiss.” (Id.)
C. ACR’s Motion for Leave to File the SAC
On April 14, 2017, ACR filed the instant motion for leave
to file the SAC. (Mot. to Amend, ECF No. 101 (filed Apr. 14,
ACR interprets the February 8 Order as requiring it to
“include in its proposed Amended Complaint all independent torts
upon which its conspiracy claims are grounded.”1 (Pl. Reply at 45, ECF No. 105 (filed Apr. 14, 2017).)
Thus, whereas the FAC
asserted three causes of action (i.e., wrongful dishonor, civil
conspiracy, and punitive damages), the SAC asserts nine causes
ACR now brings claims for:
(1) wrongful dishonor;
(2) fraud; (3) conspiracy to commit fraud; (4) aiding and
abetting fraud; (5) fraudulent concealment; (6) conspiracy to
commit fraudulent concealment; (7) conversion; (8) conspiracy to
commit conversion; and (9) aiding and abetting conversion. (See
Decl. of Marc M. Coupey Ex. 1 ¶¶ 96-161, ECF No. 103-1 (filed
Apr. 14, 2017) [hereinafter SAC].)
The SAC re-alleges and attempts to expand on claims in the
FAC that Woori and Woong Kook colluded to defraud or otherwise
For example, ACR claims that the fact that Woori
“made all deductions from payment due under the [Letter of
Credit] enumerated by Woong Kook” is evidence of “a conspiracy
According to ACR, the SAC “include[s] all proposed amendments
to its complaint[.]” (Pl. Reply at 5 n.1, ECF No. 105 (filed
Apr. 14, 2017).)
and aiding and abetting the fraud of converting” the Goods. (Id.
ACR also alleges that Sun Pak, Woori’s “letter of credit
manager,” neglected to tell ACR that, when Woori made the
partial payment of $28,099.11, “Woori would only pay that amount
. . . and never intended to pay any more.” (Id. ¶ 50.)
According to ACR, Pak also claimed that, in the absence of an
Acceptance Certificate, Woori could not legally make payments to
ACR on the Letter of Credit, notwithstanding past practice to
the contrary. (Id. ¶¶ 56-57.) Additionally, Woori purportedly
“falsely transferred title” of the Goods to Woong Kook. (Id.
The SAC also contains allegations about Woong Kook’s
lawsuit—since dismissed—against ACR in Texas as well as a
general pattern of corruption in South Korean government
agencies. (Id. ¶¶ 83-87, 94-95.)
II. Legal Standard
Rule 15(a) of the Federal Rules of Civil Procedure allows a
party to amend its pleadings with leave of the court and further
directs that “[t]he court should freely give leave when justice
so requires.” Fed. R. Civ. P. 15(a)(2).
“Leave to amend, though
liberally granted, may properly be denied for:
bad faith or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of allowance of
the amendment, futility of amendment, etc.’” Ruotolo v. City of
New York, 514 F.3d 184, 191 (2d Cir. 2008) (quoting Foman v.
Davis, 371 U.S. 178, 182 (1962)).
“One appropriate basis for denying leave to amend is that
the proposed amendment is futile.” Lucente v. Int’l Bus. Machs.
Corp., 310 F.3d 243, 258 (2d Cir. 2002).
“An amendment to a
pleading is futile if the proposed claim could not withstand a
motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).” Id.
“Thus, the standard for denying leave to amend based on futility
is the same as the standard for granting a motion to dismiss.”
IBEW Local Union No. 58 Pension Trust Fund & Annuity Fund v.
Royal Bank of Scotland Grp., PLC, 783 F.3d 383, 389 (2d Cir.
2015); see also Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119,
123 (2d Cir. 1991) (“When the plaintiff has submitted a proposed
amended complaint, the district judge may review that pleading
for adequacy and need not allow its filing if it does not state
a claim upon which relief can be granted.”).
Accordingly, “[a]s it did in reviewing [Woori’s] motion to
dismiss the FAC, the Court treats all factual allegations in the
SAC as true and draws all reasonable inferences” in ACR’s favor.
Kuriakose v. Fed. Home Loan Mortg. Corp., 897 F. Supp. 2d 168,
175 (S.D.N.Y. 2012).
However, if the SAC does not “contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face,” then leave to amend may
be denied as futile. Balintulo v. Ford Motor Co., 796 F.3d 160,
164-65 (2d Cir. 2015) (internal quotation marks omitted).
A. Choice of Law
“Where jurisdiction is predicated on diversity of
citizenship, a federal court must apply the choice-of-law rules
of the forum state.” Thea v. Kleinhandler, 807 F.3d 492, 497 (2d
“Under New York choice-of-law rules, ‘where the
parties agree that [a certain jurisdiction’s] law controls, this
is sufficient to establish choice of law.’” Alphonse Hotel Corp.
v. Tran, 828 F.3d 146, 152 (2d Cir. 2016) (alteration in
original) (quoting Fed. Ins. Co. v. Am. Home Assur. Co., 639
F.3d 557, 566 (2d Cir. 2011)).
Here, Woori asserts that New
York law applies and argues that ACR “applied New York law in
its moving papers and also admitted that there was no conflict
between New York and Texas law on [ACR’s] claims.” (Def. Opp’n
at 9 n.7, ECF No. 104 (filed Apr. 14, 2017).)
In its reply, ACR
does not object to or otherwise challenge Woori’s contention.
Accordingly, it is appropriate to apply New York law. See Krumme
v. WestPoint Stevens Inc., 238 F.3d 133, 138 (2d Cir. 2000)
(“The parties’ briefs assume that New York law controls, and
such ‘implied consent . . . is sufficient to establish choice of
law.’” (quoting Tehran-Berkeley Civil & Envtl. Eng’rs v.
Tippetts-Abbett-McCarthy-Stratton, 888 F.2d 239, 242 (2d Cir.
B. Claims for Fraud, Fraudulent Concealment, and Conversion
ACR contends that the allegations in the SAC support claims
against Woori for fraud, fraudulent concealment, and conversion.
In opposition, Woori argues that the allegations in the SAC fail
to meet the applicable pleading standards and, therefore, would
not survive a motion to dismiss.
The Court concludes that the
SAC’s fraud-based claims do not satisfy Rule 9(b) and that the
SAC fails to state a claim for conversion.
“Under New York law, fraud requires proof of (1) a material
misrepresentation or omission of a fact, (2) knowledge of that
fact’s falsity, (3) an intent to induce reliance, (4)
justifiable reliance by the plaintiff, and (5) damages.” Loreley
Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160,
170 (2d Cir. 2015) (citing Eurycleia Partners, LP v. Seward &
Kissel, LLP, 910 N.E.2d 976, 979 (N.Y. 2009)).
Federal Rule of Civil Procedure 9(b) sets forth a heightened
pleading standard for allegations of fraud.
alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake.
intent, knowledge, and other conditions of a person’s mind may
be alleged generally.” Fed. R. Civ. P. 9(b).
“In essence, Rule 9(b) places two further burdens on fraud
plaintiffs—the first goes to the pleading of the circumstances
of the fraud, the second to the pleading of the defendant’s
mental state.” Loreley Fin., 797 F.3d at 171.
With respect to
the circumstances of the fraud, the complaint must “(1) detail
the statements (or omissions) that the plaintiff contends are
fraudulent, (2) identify the speaker, (3) state where and when
the statements (or omissions) were made, and (4) explain why the
statements (or omissions) are fraudulent.” Id. (quoting Eternity
Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375
F.3d 168, 187 (2d Cir. 2004)).
With respect to the necessary
mental state, although “mental states may be pleaded
‘generally,’ Plaintiffs must nonetheless allege facts ‘that give
rise to a strong inference of fraudulent intent.’” Id. (quoting
Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir.
“The requisite ‘strong inference’ of fraud may be
established either (a) by alleging facts to show that defendants
had both motive and opportunity to commit fraud, or (b) by
alleging facts that constitute strong circumstantial evidence of
conscious misbehavior or recklessness.” Lerner, 459 F.3d at 29091 (quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124,
1128 (2d Cir. 1994)).
In the SAC’s second claim for relief, ACR refers vaguely to
Woori’s “multiple material misrepresentations of fact” to ACR.
(SAC ¶ 106.)
Based on the SAC and ACR’s papers in support of
its motion, the Court discerns two statements or omissions by
Woori that, according to ACR, are fraudulent:
(1) Pak’s claim
that Woori was prohibited from making payments to ACR on the
Letter of Credit without an Acceptance Certificate, and (2)
Pak’s failure to tell ACR, in connection with a partial payment
of $28,099.11, that “Woori would only pay that amount . . . and
never intended to pay any more.” (SAC ¶¶ 50, 56-57.)
that it relied on these misrepresentations to its detriment by
continuing to manufacture custom military goods and delaying in
bringing suit against Woori. (Id. ¶ 108.)
First, ACR argues that, “shortly after June 15, 2012,”2
Woori informed ACR that it was prohibited from making payments
to ACR on the Letter of Credit without an Acceptance
Certificate. (Id. ¶¶ 56-57.)
According to ACR, this statement
was untrue because it deviated from past payment practices and
because, in fact, no legal or contractual impediment to payment
ACR allegedly received payments related to three prior
In its memorandum, ACR asserts that Pak informed ACR “shortly
after June 15, 2011, that Woori would not and could not legally
pay the [Letter of Credit] to ACR because it had not received an
acceptance certificate from DAPA.” (Pl. Mem. at 10, ECF No. 102
(filed Apr. 14, 2017) (emphasis added).) Looking to the other
allegations in the SAC to resolve this contradiction, the Court
concludes that ACR’s allegation is that Pak made this
purportedly fraudulent statement on June 15, 2012. (See SAC ¶ 41
(alleging that the Goods were “ultimately delivered on time on
or about March 8, 2012”).)
shipments despite the absence of an Acceptance Certificate. (SAC
¶¶ 6, 56.)
The SAC, however, inconsistently identifies the
entity that made the previous payments. (Id. ¶ 6 (“Woong Kook
accepted and paid for the first three shipments made pursuant to
the first contract secured by the Letter[.]”), ¶ 56 (“Ms. Pak
made this statement despite the fact that she had made payment
in full under the Letter for the first three shipments made by
ACR when no DAPA certificates were issued.”).)
that Woori had previously made payments to ACR without an
Acceptance Certificate, the SAC fails to demonstrate Pak’s
knowledge that her statement was false in an actionable sense,
rather than reflecting a new policy regarding payments or a
Second, ACR alleges that, on December 20, 2012, Pak
“convinced” ACR to accept a partial payment and suggested that
ACR could request full payment at a later time, but did not
disclose that “Woori would only pay that [partial] amount . . .
and never intended to pay any more.” (Id. ¶ 50.)
however, is devoid of allegations indicating that Pak had
contemporaneous knowledge that Woori planned to make no further
payments to ACR, thereby rendering her statement false.
Moreover, the Court declines ACR’s invitation to draw an
adverse inference from Pak’s deposition, where she allegedly
stated that “Woori had not made any payment whatsoever” under
the Letter of Credit. (See id. ¶ 62; Pl. Mem. at 10, ECF No. 102
(filed Apr. 14, 2014).)
The deposition transcript demonstrates
that Pak was responding to a question about a different document
numbered MD198012GU00032. (See Decl. of Marc M. Coupey Ex. G,
ECF No. 103-11 (filed Apr. 14, 2017).)
The parties agree that
the relevant letter of credit for purposes of this proceeding is
numbered MD1G8012GU00032. (See SAC ¶ 31; Def. Opp’n at 2 n.1.)
Thus, with respect to Pak’s alleged misrepresentations, the
Court concludes that the SAC fails to allege facts “that give
rise to a strong inference of fraudulent intent.” Loreley Fin.,
797 F.3d at 171 (quoting Lerner, 459 F.3d at 290-91).
Accordingly, the SAC fails to state a claim for fraud.
2. Fraudulent Concealment
“[I]nstead of an act of affirmative misrepresentation, a
fraud cause of action may be predicated on acts of concealment
where the defendant had a duty to disclose material
information.” Lerner, 459 F.3d at 291-92 (quoting Kaufman v.
Cohen, 760 N.Y.S.2d 157, 165 (N.Y. App. Div. 2003)).
a claim for fraudulent concealment, the plaintiff must plead the
elements of a fraud claim—substituting a description of what was
concealed for what was mis-stated—and must also allege that the
defendant had a duty to disclose the specified information and
failed to do so.” Lefkowitz v. Bank of N.Y., 676 F. Supp. 2d
229, 266 (S.D.N.Y. 2009).
A duty to disclose may arise in two
“first, where the parties enjoy a fiduciary
relationship, and second, where one party possesses superior
knowledge, not readily available to the other, and knows that
the other is acting on the basis of mistaken knowledge.” Lerner,
459 F.3d at 292 (quoting Aaron Ferer & Sons Ltd. v. Chase
Manhattan Bank, N.A., 731 F.2d 112, 123 (2d Cir. 1984)).
Like other claims sounding in fraud, a claim for fraudulent
concealment “must comply with the requirements for specificity
mandated by Rule 9(b).” Lefkowitz, 676 F. Supp. 2d at 266.
Where “the plaintiff is unable to specify the time and place
because no act occurred, ‘the complaint must still allege:
(1) what the omissions were; (2) the person responsible for the
failure to disclose; (3) the context of the omissions and the
manner in which they misled the plaintiff; and (4) what the
defendant obtained through the fraud.’” Manhattan Motorcars,
Inc. v. Automobili Lamborghini, S.p.A., 244 F.R.D. 204, 213
(S.D.N.Y. 2007) (quoting Odyssey Re (London) Ltd. v. Stirling
Cooke Brown Holdings Ltd., 85 F. Supp. 2d 282, 293 (S.D.N.Y.
Even assuming that Woori possessed a duty of disclosure
with respect to ACR, it is readily apparent that ACR’s claim for
fraudulent concealment fails to satisfy the heightened pleading
standard of Rule 9(b).
The omission in question is Woori’s
alleged failure to “tell ACR that it was working with Woong Kook
to maximize its profits and business with the government of
South Korea through DAPA[.]” (SAC ¶ 129.)
The allegations do
not identify who at Woori was responsible for the failure to
disclose this information. See Manhattan Motorcars, 244 F.R.D.
Nor do the allegations provide the context of the
omission or describe what Woori obtained as a result of its
nondisclosure. See id.
Additionally, the Court doubts that
Woori’s failure to announce its other business relationships or
efforts to “maximize its profits and business with the
government of South Korea” generates a strong inference of
fraudulent intent. See Bigsy v. Barclays Capital Real Estate,
Inc., 170 F. Supp. 3d 568, 578 (S.D.N.Y. 2016) (“Here, the
plaintiffs allege that the defendants’ motive was to profit
financially from their false representations.
proffer no evidence of who specifically in Barclays stood to
benefit from the alleged schemes. . . .
If a mere allegation of
corporate profit were sufficient to allege scienter, the
requirement would be effectively eliminated.”).
Accordingly, the SAC does not state a claim for fraudulent
ACR alleges that Woori converted the Goods when it
“transferred title or legal possession of the Military Goods
to Woong Kook, . . . [which] transferred same to DAPA.” (SAC
In New York, the “two elements of conversion are (1)
plaintiff’s possessory right or interest in the property and (2)
defendant’s dominion over the property or interference with it,
in derogation of plaintiff’s rights.” Grgurev v. Licul, 229 F.
Supp. 3d 267, 285 (S.D.N.Y. 2017) (internal quotation marks
omitted); see also Colavito v. N.Y. Organ Donor Network, 860
N.E.2d 713, 717 (N.Y. 2006)).
The SAC contains no non-
conclusory allegations that Woori exercised dominion over, or
otherwise interfered with, the Goods. (See SAC ¶ 148 (“To
complete this conversion, Woori transferred title or legal
possession of these Military Goods to Woong Kook[.]”).)
the SAC plainly establishes that ACR delivered the Goods
directly to Woong Kook. (See id. ¶ 34 (“After Woong Kook’s
receipt of the shipment of Military Goods . . . Woori was to pay
ACR the full amount due.”), ¶ 47 (“After having earlier tested
and passed the subject Military Goods received from ACR on March
8, 2012 . . . Woong Kook stated that a single inexpensive part
. . . was defective.”).)
Clearly, these allegations are not
sufficient to demonstrate that Woori exercised dominion over, or
otherwise interfered with, the Goods.
Accordingly, the SAC does not state a claim for conversion.
C. Claims for Civil Conspiracy
The SAC also seeks to hold Woori responsible for conspiracy
to commit fraud, fraudulent concealment, and conversion,
respectively. (SAC ¶¶ 114-119, 137-142, 151-156.)
does not recognize an independent tort of conspiracy.” Kirch v.
Liberty Media Corp., 449 F.3d 388, 401 (2d Cir. 2006).
“[i]f an underlying, actionable tort is established,” then a
plaintiff “may plead the existence of a conspiracy . . . to
demonstrate that each defendant’s conduct was part of a common
scheme.” World Wrestling Fed’n Entm’t, Inc. v. Bozell, 142 F.
Supp. 2d 514, 532 (S.D.N.Y. 2001) (internal quotation marks
“To establish its claim of civil conspiracy, the
[plaintiff] must demonstrate the primary tort, plus the
following four elements:
(1) an agreement between two or more
parties; (2) an overt act in furtherance of the agreement; (3)
the parties’ intentional participation in the furtherance of a
plan or purpose; and (4) resulting damage or injury.” Id.
As the Court has already explained, the SAC fails to state
a claim for the underlying torts of fraud, fraudulent
concealment, or conversion that would support a claim for civil
To whatever extent ACR contends that the SAC states
claims for the underlying torts based on its allegations of
conspiracy, such reasoning places the cart before the horse.
(See Pl. Reply at 10 (“Once a conspiracy is established between
Woong Kook and Woori . . . each party is liable for the actions
taken by the other in pursuit of this conspiracy.”).)
absence of an “actionable, underlying tort,” ACR’s conspiracybased claims may not proceed. Wang v. Enlander, 17 Civ. 4932
(LGS), 2018 WL 1276854, at *10 (S.D.N.Y. Mar. 6, 2018); see also
Kirch, 449 F.3d at 401 (“[S]ince [plaintiff] fails to state
causes of action for either of the torts underlying the alleged
conspiracy, . . . it necessarily fails to state an actionable
claim for civil conspiracy.
The district court thus properly
dismissed all of [plaintiff’s] claims.”).
D. Aiding and Abetting Claims
Finally, ACR argues that the SAC supports claims that Woori
aided and abetted the torts of fraud and conversion,
respectively. (SAC ¶¶ 120-127, 157-161.)
Under New York law,
the elements of aiding and abetting a conversion and aiding and
abetting a fraud are substantially similar. See Kirschner v.
Bennett, 648 F. Supp. 2d 525, 533 (S.D.N.Y. 2009).
“the existence of a primary violation, actual knowledge of the
violation on the part of the aider and abettor, and substantial
assistance.” Id.; see also Lerner, 459 F.3d at 292 (“To
establish liability for aiding and abetting fraud, the
plaintiffs must show ‘(1) the existence of a fraud; (2) [the]
defendant’s knowledge of the fraud; and (3) that the defendant
provided substantial assistance to advance the fraud’s
commission.’” (quoting JP Morgan Chase Bank v. Winnick, 406 F.
Supp. 2d 247, 252 (S.D.N.Y. 2005))).
Given the Court’s conclusion that the SAC fails to state a
claim for the underlying torts of fraud or conversion, ACR’s
claims for aiding and abetting fraud and conversion should be
dismissed due to failure to plead a primary violation. See
Prickett v. New York Life Ins. Co., 896 F. Supp. 2d 236, 251
(S.D.N.Y. 2012) (“With the dismissal of all claims for fraud and
breach of fiduciary duty, the claim for aiding and abetting
should be dismissed for failure to plead a primary violation.”).
For the reasons stated above, the SAC fails to cure· the
deficiencies identified by the Court in the February 8 Order.
ACR's motion for leave to file the SAC is DENIED.
Given ACR's concession that the SAC contains "all proposed
amendments" regarding the independent torts that could form the
basis for a claim of civil conspiracy, ACR's claims for fraud,
conversion, and conspiracy are dismissed with prejudice.
Likewise, ACR's claims for aiding and abetting fraud and
conversion are dismissed with prejudice.
Woori is directed to
file an answer to ACR's remaining claim by no later than
fourteen days from the date of this Opinion.
The Clerk of the Court is respectfully directed to close
the motion docketed at ECF No. 101.
New York, New York
April /0 , 2018
United States District Judge
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