SING For Service, LLC v. United Service Contract Group, LLC et al

Filing 33

MEMORANDUM ORDER granting 26 Motion to Dismiss: Accordingly, Virginia Surety's motion to dismiss for failure to state claim is hereby granted with prejudice. The Clerk of the Court is directed to close the entry at docket number 26. (Party Virginia Surety Company, Inc. (a Missouri corporation) terminated.) (Signed by Judge Jed S. Rakoff on 1/7/2021) (jwh) Modified on 1/7/2021 (jwh).

Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 1 of 11

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------SING FOR SERVICE, LLC, d/b/a MEPCO,
a Delaware limited liability
company,

x
:
:
:
:
:
:
Plaintiff,
:
:
-v:
UNITED SERVICE CONTRACT GROUP, LLC, :
d/b/a PROTECT MY CAR and PMC, a New :
:
Jersey limited liability company,
:
UNITED SERVICE CONTRACT GROUP OF
:
FLORIDA, INC., a Florida
:
corporation, CRAIG RUBINO, JOSEPH
:
RUBINO, and VIRGINIA SURETY
:
COMPANY, INC., a Missouri
:
corporation,
:
:
Defendants.
----------------------------------- x

20-cv-8458 (JSR)
MEMORANDUM ORDER

JED S. RAKOFF, U.S.D.J.
Plaintiff SING For Service, LLC, d/b/a MEPCO (“Mepco”) filed
this suit against defendants United Service Contract Group, LLC and
United

Service

Contract

Group

of

Florida,

Inc.

(collectively,

“USCG”), Craig Rubino, Joseph Rubino, and Virginia Surety Company,
Inc. (“Virginia Surety”), alleging that defendants breached a series
of agreements relating to certain vehicle service contracts funded
by Mepco, administered by USCG, and guaranteed by Virginia Surety.
Virginia Surety has moved pursuant to Federal Rule of Civil Procedure
12(b)(6) to dismiss the Complaint. Mepco opposes this motion. For

Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 2 of 11

the reasons set forth below, the motion is granted.
I.

Background1
USCG

is

an

administrator

of

vehicle

service

contracts

(“Service Contracts”). Compl. ¶ 16. “Service Contracts provide
additional

protection

for

automobile

owners

either

by

supplementing the protections of an existing factory warranty or
by extending the coverage period beyond the expiration of a factory
warranty.” Id. ¶ 14.
Mepco
Service

provides

Contracts.

funding
Id.

to

Mepco

sellers
and

and

USCG

administrators

are

parties

to

of
an

Administrator Agreement with an effective date of January 1, 2017.
Id. ¶ 17.2 Under this agreement, Mepco will front the entire amount
of a Service Contract to USCG, thereby enabling USCG to offer
customers the option of making monthly payments to Mepco, instead
of paying the entire amount of the Service Contract upfront to
USCG. Id. ¶ 20. When a customer chooses monthly payments, it enters
into a Payment Plan Agreement with Mepco. Id. ¶ 21.

The facts, taken from the Complaint (“Compl.”), Dkt. No. 6,
and documents incorporated therein, are, for purposes of this
motion to dismiss, presumed true.
1

Although not directly relevant to this motion, the parties
entered into a second Administrator Agreement, effective August 1,
2018, after USCG was purchased and underwent a name change. Compl.
¶ 40.
2

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The present dispute implicates USCG’s refund obligations to
Mepco when a customer cancels a Service Contract. Under the Service
Contracts (which are between USCG and the customer), the customer
reserves the right to cancel the Service Contract and, depending
on certain terms not here relevant, receive either a full or
partial refund. Id. ¶ 22. Where the customer fronts the money
herself, USCG will refund the money directly to the customer
according to the terms of the Service Contract. Id.
But the refund process is more complicated when Mepco is
involved. Under the Payment Plan Agreements (which are between
Mepco and the customer), the customer assigns to Mepco the right
to receive the refund amounts that would otherwise be due to the
customer under the Service Contract. Id. ¶ 25. In addition, the
Administrator

Agreement

(which

is

between

USCG

and

Mepco),

“triggers an independent refund obligation on the part of USCG to
Mepco for the as yet un-repaid funding that Mepco advanced to USCG”
--

the

so-called

“Refund

Amount,”

which

is

defined

in

the

Administrator Agreement. Id. ¶ 24. As a result, when a customer
cancels a Service Contract for which Mepco has advanced funding,
USCG’s

refund

obligation

to

Mepco

arises

under

two

distinct

agreements: (1) USCG owes the Refund Amount under the Administrator
Agreement to Mepco; and (2) USCG owes the refund money under the

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Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 4 of 11

Service Contract to Mepco as an assignee of the customer pursuant
to the Payment Plan Agreement. Id. ¶ 27.
Virginia Surety is the insurer and underwriter for USCG’s
Service Contracts. Id. ¶ 30. It issued Contractual

Liability

Insurance Policy No. 10136 (the “CLIP”) to insure USCG against
certain losses incurred in connection with its refund obligations.
Id.; see also CLIP, Dkt. No. 6-3, at 2 (agreeing to “reimburse
[USCG] for Loss,” defined as a “Claim” to perform a “Contractual
Obligation”

under

a

“Designated

Contract”).

The

CLIP

also

contains a Notice of Claim provision:
[USCG] shall notify [Virginia Surety] of each Claim, and
supply particulars of such Claim. [USCG] shall make such
notification prior to undertaking any performance of a
Contractual Obligation. [Virginia Surety] may reject any
Claim if not notified of such Claim as provided above
within ninety (90) days after such Claim first arose if
[Virginia Surety] was prejudiced by the [USCG]’s failure
to make notification within such time period, unless
[USCG] shows that it was not possible to give notice
within such time period and that notice of such Claim
was given as soon as reasonably practicable.
Id. at 3.
The

Administrator

Agreement

requires

USCG,

upon

Mepco’s

request, to cause each insurance company that provides coverage
for any of the subject Service Contracts to “execute and deliver
to [Mepco] an Unconditional Guaranty Agreement or other guaranty,
satisfactory

to

[Mepco],

to

fully

guarantee

the

payment

and

performance of all obligations of USCG pursuant to this Agreement.”

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Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 5 of 11

Administrator Agreement, Dkt. No. 6-2. Pursuant to that agreement,
Mepco initially requested that Virginia Surety guarantee USCG’s
total Refund Amount liability to Mepco, as that term is defined in
the Administrator Agreement. Id. ¶ 31. But Virginia Surety declined
that request. Id. 32. Instead, Virginia Surety offered to “pay the
[customer’s] refund amount to [Mepco] on behalf of [USCG] under
the terms of the [CLIP]” where “a [customer] has a loan outstanding
with [Mepco] in connection with an Insured Service Contract and is
entitled to a refund of a portion of the Insured Service Contract
retail price and [USCG] is unable to pay the [customer] the refund
when due under the Insured Service Contract.” Virginia Surety
Guaranty, Dkt. No. 6-6. Mepco agreed and the document was executed
by Virginia Surety on May 22, 2018. Compl. ¶ 34. The Complaint
refers to this agreement as the “Virginia Surety Guaranty,” id.,
although

the

word

“guaranty”

does

not

itself

appear

in

the

agreement.
In reliance on the Virginia Surety Guaranty, Mepco “advanced
funding and conducted business with USCG during the Summer and
Fall of 2018.” Id.3 By early 2019, USCG was in default and in

On October 3, 2018, roughly four months after the Virginia
Surety Guaranty was issued, Virginia Surety revoked the Virginia
Surety Guaranty in a newly issued guaranty letter. Compl. ¶ 37. In
the October 3, 2018 letter, Virginia Surety limited the amount
that it would pay to Mepco to “unearned Insurance Premium[s],” if
3

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Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 6 of 11

material breach of the Administrator Agreement “based on the
failure to pay its contractually obligated Refund Amount liability
to Mepco for monies that Mepco had previously advanced to USCG.”
Id. ¶ 41.
As relevant to this motion, Mepco alleges that Virginia Surety
“has not paid any amount to Mepco, in violation of its obligations
under the Virginia Surety Guaranty.” Id. ¶ 52; see also id. ¶ 78
(“Virginia Surety has failed to make the required payments under
the Virginia Surety Guaranty and has thus breached its obligations
under that agreement.”).
II.

Discussion
To survive a motion to dismiss for failure to state a claim

under Rule 12(b)(6), “a complaint must contain 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)). In considering a Rule 12(b)(6) motion, the Court generally
looks to “the allegations on the face of the complaint,” but may
also consider “[d]ocuments that are attached to the complaint or
incorporated in it by reference,” such as here, the Administrator

a customer cancelled a Service Contract. Dkt. No. 6-7. While the
parties dispute the legal effect of this revocation, it has no
bearing on the Court’s resolution of the instant motion.

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Agreement, the CLIP, and the Virginia Surety Guaranty. See Roth v.
Jennings, 489 F.3d 499, 509 (2d Cir. 2007).
Mepco alleges that Virginia Surety breached its Guaranty. “In
order to survive a motion to dismiss on a breach of guaranty claim
in New York,4 a plaintiff must plausibly plead ‘(1) that it is owed
a debt from a third party; (2) that the defendant made a guarantee
of payment of the debt; and (3) that the debt has not been paid by
either the third party or the defendant.’” Greenlight Reinsurance,
Ltd. v. Appalachian Underwriters, Inc., 958 F. Supp. 2d 507, 52122 (S.D.N.Y. 2013) (citing Chemical Bank v. Haseotes, 13 F.3d 569,
573 (2d Cir. 1994) (per curiam)).
The Court holds that the Complaint fails to state a claim for
breach of guaranty because Virginia Surety did not guarantee a
payment of USCG’s debt but simply agreed to redirect insurance
payments from customers (as assignors) to Mepco (as assignee). In
other words, Virginia Surety agreed to recognize Mepco’s status as

Although Virginia Surety suggests that the case is “likely
governed by Illinois law,” it sees “no difference between the law
of New York and Illinois law on the legal issues presented by this
motion,” and largely cites to New York law. Defendant Virginia
Surety Company, Inc.’s Reply Memorandum of Law in Further Support
of Its Motion to Dismiss the Complaint for Failure to State a Claim
(“Reply”), Dkt. No. 32, at 5 n.2. USCG’s brief, too, largely relies
on New York law. See generally Plaintiff’s Response in Opposition
to Defendant Virginia Surety Company, Inc.’s Motion to Dismiss the
Complaint for Failure to State a Claim (“Pl. Mem.”), Dkt. No. 30.
“Such implied consent . . . is sufficient to establish choice of
law.” Chau v. Lewis, 771 F.3d 118, 126 (2d Cir. 2014).
4

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an assignee of the insured customers. Indeed, Mepco initially
sought a guaranty along the lines of what it now seeks to enforce,
but Virginia Surety specifically declined to offer one. Instead,
Virginia Surety simply promised to pay customer refunds to Mepco
under the terms of the CLIP. That is not a guaranty but an insurance
agreement, and Mepco cannot sustain a claim for breach of guaranty
on that basis.
If Mepco has a claim, then, it

would be for breach of

contract. In order to survive a motion to dismiss on a breach of
contract claim in New York, a plaintiff must plausibly plead: “(1)
an agreement, (2) adequate performance by the plaintiff, (3) breach
by the defendant, and (4) damages.” Fischer & Mandell, LLP v.
Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011). As mentioned,
the Complaint alleges that Virginia Surety failed to make the
required payments under the Virginia Surety Guaranty and thus
breached its obligations under that agreement. Compl. ¶ 74.
Virginia
performed

Surety

under

the

contends
Virginia

that
Surety

Mepco

has

Guaranty.

not
That

adequately
agreement

provides that Virginia Surety would pay customer refunds to Mepco
“under the terms of the [CLIP].” The CLIP requires, among other
things, that a Notice of Claim be provided within 90 days after a
Claim arises. Yet, Virginia Surety points out, the Complaint does
not allege any Claim having been made by USCG (or a customer or
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Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 9 of 11

Mepco) to Virginia Surety. Defendant Virginia Surety Company,
Inc.’s Memorandum of Law in Support of its Motion to Dismiss the
Complaint for Failure to State a Claim (“Def. Mem.”), Dkt. No. 27,
at 9. Mepco responds that it had no obligation to make a Claim
under the CLIP because it is not an insured under that agreement.
Pl. Mem. at 16-17. Mepco also contends that the phrase “under the
terms of the [CLIP]” should be construed not as “a limitation or
condition on liability, but rather [as] an affirmation that payment
will be made by Virginia Surety under the CLIP.”

Id. at 17.

Finally, Mepco suggests that the Notice of Claim requirement, even
if applicable, permits Virginia Surety to reject a Claim only if
it was “prejudiced by the Insured’s failure to make notification.”
Id. at 18 (quoting CLIP at 3), and there is no prejudice here.
The Court agrees with Virginia Surety. Under the plain terms
of the agreement, Mepco is entitled to recover from Virginia Surety
under the terms of the CLIP. Having failed to abide by those terms,
Mepco cannot state a claim for breach of contract. Nor is the
CLIP’s prejudice requirement relevant. That requirement simply
prevents Virginia Surety from rejecting an untimely Claim without
a showing of prejudice. Here, however, the Complaint is devoid of
any allegation that any Claim, let alone a timely one, was made to
Virginia

Surety.

adequately

Because

performed

Mepco

under

the

fails

to

Virginia

-9-

allege
Surety

that

it

has

Guaranty,

its

Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 10 of 11

breach

of

contract

claim

against

Virginia

Surety

must

be

dismissed.5
Finally, Mepco

requests that, should the Court find its

pleadings inadequate, it be granted leave to amend. However, “[a]
party seeking leave to amend must provide some indication of the
substance of the contemplated amendment in order to allow the Court
to apply the standards governing Rule 15(a).” Chechele v. Scheetz,
819 F. Supp. 2d 342, 351 (S.D.N.Y. 2011). Mepco suggests that
“apart from any alleged technical deficiencies in the complaint
the basic factual allegations easily set out a prima facie case
for breach of guarantee contract.” Pl. Mem. at 19. But, for the
reasons discussed above, the Complaint’s deficiencies are not

Virginia Surety also contends, less persuasively, that the
Complaint must be dismissed because it fails to allege the
underlying cancelled Service Contracts and corresponding Payment
Plan Agreements that give rise to USCG’s refund obligations, and
because the Complaint fails to adequately allege damages. As for
the underlying agreements, a general allegation that Virginia
Surety was notified of each these refund obligations would likely
have sufficed under Federal Rule of Civil Procedure 8; however,
there are no such allegations because, as discussed above, Mepco
has taken the position that it is entitled to payment without
abiding by the terms of the CLIP. As for the damages, the Complaint
alleges that Mepco “has been damaged by Virginia Surety’s breach
of the Virginia Surety Guaranty in a total amount in excess of
$75,000.” Compl. ¶ 79. That allegation is more than sufficient.
See, e.g., Empire Merchants, LLC v. Merinoff, No. 16-cv-9590 (JMF),
2017 WL 5176384, at * 6 (S.D.N.Y. Nov. 8, 2017) (holding that
plaintiff’s “boilerplate allegations” that it has “suffered and
will continue to suffer damages as a direct and proximate result
of Defendants’ breach of [contract] in an amount to be proved at
trial” were sufficient to allege damages).
5

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Case 1:20-cv-08458-JSR Document 33 Filed 01/07/21 Page 11 of 11

technical but substantive, and the Complaint fails to make out a
prima facie case for either breach of guaranty or breach of
contract. In the absence of any proffered basis to find that the
defects in the Complaint could be cured through amendment, the
Court denies Mepco leave to amend.
Accordingly, Virginia Surety’s motion to dismiss for failure
to state claim is hereby granted with prejudice. The Clerk of the
Court is directed to close the entry at docket number 26.
SO ORDERED.
Dated:

New York, NY
January 7, 2021

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