Opinion
Index No. 656596/2019
11-19-2021
ROXX ALISON LTD., Plaintiff, v. SHUTLE, INC., Spectrum by Roxx Ltd., Egor Israelov, Defendant.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 18, 19, 20, 21, 23, 24, 25, 26, 28 were read on this motion to/for DISMISSAL
Upon the foregoing documents, it is ordered that this motion for dismissal is granted in part and denied in part.
Plaintiff Roxx Alison LTD. ("Roxx Alison") brings this action involving contract and tort claims against defendants Shutle, Inc. ("Shutle"), Spectrum by Roxx Ltd. ("Spectrum"), and Egor Israelov ("Israelov"). Defendants collectively move to dismiss, pursuant to CPLR 3211(a)(7), the first, second, fifth, sixth, and ninth causes of action in the amended complaint. Plaintiff opposes the motion.
BACKGROUND
Plaintiff is a diamond and fine jewelry wholesaler. Shutle and Spectrum are manufacturers and sellers of jewelry. Plaintiff alleges that Israelov is a shareholder, director, officer, or employee of both Shutle and Spectrum.
Around January 2015, plaintiff hired Shutle to manufacture jewelry for plaintiff. Plaintiff would deliver pieces of jewelry and loose diamonds to Shutle. Shutle was to make molds and copies of the jewelry. Also, Shutle was to mount the loose diamonds in pieces of jewelry and return any unused loose diamonds to plaintiff. During the period from about March 2015 through about January 2017, plaintiff paid Shutle approximately $13,375.00 for the jewelry models and molds that Shutle created for plaintiff.
Plaintiff alleges that Shutle failed to provide the models and molds to plaintiff and did not return the jewelry or loose diamonds that plaintiff had tendered to Shutle. Plaintiff also alleges that Israelov transferred some or all the jewelry, loose diamonds, models, and molds to himself, his other companies, or third parties, or that Shutle and Israelov continue to possess those items. The total agreed value of the jewelry, loose diamonds, models, and molds that Shutle and Israelov have failed to return is approximately $224,145.09. The first cause of action claims unjust enrichment against Israelov and Shutle. The second cause of action claims conversion by Israelov and Shutle.
Plaintiff's allegations against Spectrum are similar to its allegations against Shutle. Plaintiff alleges that it delivered pieces of jewelry and loose diamonds to Spectrum so Spectrum could copy the jewelry styles and mount the loose diamonds on the manufactured pieces. Plaintiff alleges that there was a mutual understanding that Spectrum would return any loose diamonds, previously provided by plaintiff, that were not used by Spectrum to manufacture jewelry for plaintiff. During the period from about September 2016 through about January 2017, plaintiff paid Spectrum approximately $7,785.00 for the jewelry models and molds that Spectrum created for plaintiff.
Plaintiff alleges that, despite plaintiff's demands, Spectrum neither provided the models and molds to plaintiff nor returned the jewelry and loose diamonds plaintiff had previously delivered to Spectrum. Plaintiff further alleges that Israelov has transferred all or some of the jewelry, loose diamonds, models and molds to himself, his other companies or third parties or that Spectrum and Israelov have continued to enjoy possession, use and benefit of the jewelry up to and through the present time. The total agreed value of the jewelry, loose diamonds, models and molds that Spectrum has allegedly failed to return to plaintiff is approximately $325,875.48. The fifth cause of action alleges unjust enrichment against Israelov and Spectrum. The sixth cause of action alleges conversion by Israelov and Spectrum.
The ninth cause of action, solely against Israelov, asserts a claim for aiding and abetting a conversion by non-party Val Katayev ("Katayev"). In or around August 2016, Israelov introduced plaintiff's owners to his brother-in-law, Katayev, as a possible source of capital for plaintiff. Katayev has his own company, Spectrum Blue LLC ("Spectrum Blue"). In or around November 2016, Spectrum Blue began providing plaintiff with funding.
In or around April 2017, Katayev demanded that plaintiff consign jewelry and loose diamonds to Spectrum Blue as "collateral" for plaintiff's debt. Plaintiff began to consign jewelry and loose diamonds to Spectrum Blue on or about April 19, 2017. The total agreed fair market value of the jewelry and loose diamonds set aside by plaintiff as collateral for Spectrum Blue was $3,345,160.19 as of July 19, 2017.
Although the jewelry and loose diamonds were set aside as collateral for Spectrum Blue, they remained the property of plaintiff. The jewelry and loose diamonds for collateral were stored separate and apart from other merchandise in a safe at plaintiff's office—to which only Israelov and one of plaintiff's owners, Ronny Alibayof ("Alibayof"), had access. On or about August 21, 2017, when Alibayof tried to access the safe, he discovered that the key and combination locks on the safe had been changed. Plaintiff was not notified in advance that the consigned jewelry and loose diamonds would be removed from its office, and its consent to the removal was neither requested by nor given to Israelov or Katayev.
Plaintiff alleges that Defendant Israelov prevented plaintiff's owner, Alibayof, from accessing the safe. Plaintiff alleges that Israelov either removed all the jewelry and loose diamonds and delivered them to Katayev or provided Katayev with access to plaintiff's safe, allowing Katayev to remove the jewelry and loose diamonds from the safe. At the time that the consigned jewelry and loose diamonds were removed from plaintiff's safe, the amount of plaintiff's debt to Spectrum Blue was claimed to be approximately $946,238.99, which was less than one-third of the agreed value of the consigned jewelry and loose diamonds.
To the present time, plaintiff has not received any compensation for the portion of the agreed value of the consigned jewelry and loose diamonds that exceeded plaintiff's debt to Spectrum Blue. The amount of that portion of the agreed value of the consigned jewelry and loose diamonds is approximately $2,398,921.20.
The third, fourth, seventh, and eighth causes of action are contract claims. Defendants do not move to dismiss these contract claims.
DISCUSSION
At the motion to dismiss stage, the court generally accepts the complaint's allegations as true. This is a liberal standard. Dismissal is particularly unwarranted when a plaintiff has "not yet been accorded the opportunity to complete discovery as to critical facts in the exclusive possession of defendants" ( Marcus v Hemphill Harris Travel Coro. , 193 AD2d 543, 544 [1st Dept 1993] ; CPLR § 3211[d] ).
Defendants move to dismiss the first, second, fifth, sixth, and ninth causes of action. The motion to dismiss the first and fifth causes of action is granted. The motion is otherwise denied.
The First and Fifth Causes of Action (Unjust Enrichment)
The first cause of action alleges unjust enrichment against Shutle and Israelov. The fifth cause of action alleges unjust enrichment against Spectrum and Israelov. Defendants argue that the unjust enrichment claims are duplicative of the second and sixth causes of action, both for conversion against the same defendants.
"An unjust enrichment claim is not available where it simply duplicates, or replaces, a conventional contract or tort claim" ( Corsello v Verizon New York, Inc. , 18 NY3d 777, 790 [2012] ). "Typical cases are those in which the defendant, though guilty of no wrongdoing, has received money to which he or she is not entitled" (id. ).
Plaintiff's unjust enrichment claims are based on the same facts as the conversion claims. To the extent that the conversion claims succeed, the unjust enrichment claims are duplicative. If the conversion claims fail, the unjust enrichment claim does not remedy the defect. The first and fifth causes of action are dismissed.
The Second and Sixth Causes of Action (Conversion)
The second and sixth causes of action in the verified complaint allege the conversion of jewelry, loose diamonds, models and molds belonging to plaintiff by Shutle, Spectrum and Israelov. Defendants argue that Israelov should not be held individually responsible for the conversion claims. Defendants argue that the complaint does not establish a cause of action against Israelov under a theory of veil piercing. Plaintiff argues that it never pled veil piercing and does not need to rely on veil piercing to make out a conversion claim against Israelov.
There is case law to support plaintiff's position. "[I]t has long been held by [the Appellate Division, First Department] that ‘a corporate officer who participates in the commission of a tort may be held individually liable, ... regardless of whether the corporate veil is pierced’ " ( Fletcher v Dakota, Inc. , 99 AD3d 43, 49 [1st Dept 2012] [quoted and cited sources omitted]; accord L.I. City Ventures LLC v Sismanoglou , 158 AD3d 567, 568 [1st Dept 2018] ). Moreover, " ‘a director may be held individually liable to third parties for a corporate tort if he either participated in the tort or else directed, controlled, approved, or ratified the decision that led to the plaintiff's injury’ " ( Fletcher v Dakota. Inc. , 99 AD3d at 49 [quoted source omitted]).
Plaintiff alleges conversion — a tort — by Shutle, Spectrum, and Israelov. Plaintiff alleges that Israelov is "the controlling shareholder, director officer and/or employee of both Shutle and Spectrum." Therefore, Israelov may be held individually liable if he personally participated in the tort, as plaintiff alleges. Taking these allegations as true, the conversion claims survive.
The Ninth Cause of Action (Aiding and Abetting)
The ninth cause of action alleges that Israelov either directly committed the conversion of jewelry and loose diamonds by removing them from a safe in plaintiff's office and turning them over to Katayev, or else he acted as an accomplice to Katayev's conversion of the jewelry and loose diamonds, by providing Katayev with access to the safe so that Katayev could remove them.
"Aiding and abetting conversion requires the existence of a conversion by the primary tortfeasor, actual knowledge, and substantial assistance" ( William Doyle Gallerien Stettner , 167 AD3d 501, 505 [1st Dept 2018] ). Israelov was the only person other than one of plaintiff's owners to have access to the safe. Defendants argue that the allegations are too speculative to establish that Israelov substantially assisted Katayev. The exact nature of Israelov's involvement is a factual inquiry and cannot be determined at the motion-to-dismiss stage. The ninth cause of action is not dismissed.
Accordingly, it is
ORDERED that defendants’ motion to dismiss for failure to state a claim is granted with regard to the first and fifth causes of action, and, therefore, the first and fifth causes of action are hereby dismissed; and it is further
ORDERED that defendants’ motion to dismiss is otherwise denied.
This constitutes the decision and order of the court.