Avilon Auto. Grp. v. Leontiev

• Decision Date: 18 May 2021
• Docket Number: 13852,Index No. 656007/16,Case No. 2020-03776
• Citation: 149 N.Y.S.3d 30,194 A.D.3d 537
• Parties: AVILON AUTOMOTIVE GROUP, et al., Plaintiffs–Appellants, v. Sergey LEONTIEV et al., Defendants–Respondents, Southpac Trust International Inc., etc., Defendant.
• Court: New York Supreme Court — Appellate Division

194 A.D.3d 537

149 N.Y.S.3d 30

AVILON AUTOMOTIVE GROUP, et al., Plaintiffs–Appellants,

v.Sergey LEONTIEV et al., Defendants–Respondents,Southpac Trust International Inc., etc., Defendant.

13852

Index No. 656007/16

Case No. 2020-03776

Supreme Court, Appellate Division, First Department, New York.

ENTERED May 18, 2021

Kaplan Hecker & Fink, New York (Sean Hecker of counsel), for appellants.

Gibson, Dunn & Crutcher LLP, New York (Robert L. Weigel of counsel), for respondents.

Kern, J.P., Oing, Singh, Moulton, JJ.

, J.), entered March 23, 2020, which granted defendants' motions pursuant to CPLR 3211(a)(7) to dismiss the second amended complaint as against them, unanimously modified, on the law, to deny the motions as to the unjust enrichment claim as against Sergey Leontiev, Leonid Leontiev, and Legion Trust, and otherwise affirmed, without costs.

The complaint states a claim for unjust enrichment against defendantsSergey Leontiev(Leontiev), Legion Trust, and Leonid Leontiev(Leonid)(seeGeorgia Malone & Co., Inc. v. Rieder,19 N.Y.3d 511, 516–517, 950 N.Y.S.2d 333, 973 N.E.2d 743[2012];Philips Intl. Invs., LLC v. Pektor,117 A.D.3d 1, 7–8, 982 N.Y.S.2d 98[1st Dept.2014] ).It alleges that Leontiev instructed his business partner, Alexander Zheleznyak, to induce plaintiffs to lend money to certain shell companies owned and controlled by Leontiev, and then siphoned the loan funds from the shell companies by transferring them to defendantWonderWorks Investments Limited and ultimately to Legion Trust, in the Cook Islands, all entities he controlled, for personal use.Although Legion Trust and Leonid lacked a direct relationship with plaintiffs, Leontiev's knowledge of the scheme is imputable to them, since, as alleged, he created Legion Trust as a vehicle to conceal the stolen funds and designated Leonid a beneficiary and "Protector" of the trust (seePhilips Intl. Invs.,117 A.D.3d at 7, 982 N.Y.S.2d 98;L.I. City Ventures LLC v. Sismanoglou,158 A.D.3d 567, 568, 71 N.Y.S.3d 462[1st Dept.2018] ).Viewed in plaintiffs' favor, these allegations support an inference that Legion Trust and Leonid knowingly received proceeds of wrongdoing and benefitted from them (seeMetropolitan Bank & Trust Co. v. Lopez,189 A.D.3d 443, 445, 137 N.Y.S.3d 319[1st Dept.2020] ).

The complaint fails to state an unjust enrichment claim against WonderWorks or its managing director, defendantVadim Kolotnikov, who is alleged to have assisted Leontiev in transferring the funds to Legion Trust.Even if Leontiev's alleged scheming could be imputed to WonderWorks, the allegations would establish only that the loaned funds passed through it, not that it benefitted from them.Similarly, as to whether Kolotnikov benefitted from any receipt of the funds, the compensation he received from WonderWorks is "too attenuated to support an unjust enrichment claim"( Bilinski v. Keith Haring Found., Inc.,96 F. Supp. 3d 35, 52[S.D. N.Y.2015], affd632 F. Appx. 637[2d Cir.2015] ).The allegation that his compensation was drawn from the loaned funds is speculative.

The unjust enrichment claims are not barred by the loan agreements between plaintiffs and the shell companies, because they are based on looting and wrongful retention of funds, not conduct covered by the agreements (seeSergeants Benevolent Assn. Annuity Fund v. Renck,19 A.D.3d 107, 111–112, 796 N.Y.S.2d 77[1st Dept.2005];see alsoHughes v. BCI Intl. Holdings, Inc.,452 F. Supp. 2d 290, 304[S.D. N.Y.2006] ).

The bare allegation in the complaint that the "transfer rendered ... Leontiev and/or WonderWorks insolvent and was made without fair consideration" is insufficient to state a claim for fraudulent conveyance under the applicable Debtor and Creditor Law former § 273(seeJaliman v. D.H. Blair & Co. Inc.,105 A.D.3d 646, 647, 964 N.Y.S.2d 112[1st Dept.2013];NTL Capital, LLC v. Right Track Rec., LLC,73 A.D.3d 410, 412, 901 N.Y.S.2d 4[1st Dept.2010] ).The complaint fails to plead the Debtor and Creditor Law former § 276 claim with sufficient particularity ( CPLR 3016[b];Ray v. Ray,108 A.D.3d 449, 451–452, 970 N.Y.S.2d 9[1st Dept.2013] ), since the allegations about Leontiev's transfer from WonderWorks to Legion Trust were all made "on information and belief"(seeCarlyle, LLC v. Quik Park 1633 Garage LLC,160 A.D.3d 476, 477, 75 N.Y.S.3d 139[1st Dept.2018];DDJ Mgt., LLC v. Rhone Group L.L.C.,78 A.D.3d 442, 443, 911 N.Y.S.2d 7[1st Dept.2010] ).In addition, "badges of fraud" are not pleaded with particularity (seeRay,108 A.D.3d at 451–452, 970 N.Y.S.2d 9;Wall St. Assoc. v. Brodsky,257 A.D.2d 526, 529, 684 N.Y.S.2d 244[1st Dept.1999] ).

The complaint fails to state a breach of contract claim against Leontiev.The recording of the August 2015 meeting in London confirmed the absence of a binding agreement.Even assuming that the meeting related to discussions about Leontiev's repayment of the debt owed to plaintiffs, the record reflects at most a nonbinding proposal to enter into a repayment agreement (seeFCRC Modular, LLC v. Skanska Modular LLC,159 A.D.3d 413, 414, 73 N.Y.S.3d 25[1st Dept.2018];Aksman v. Xiongwei Ju,21 A.D.3d 260, 261, 799 N.Y.S.2d 493[1st Dept.2005], lv denied5 N.Y.3d 715, 807 N.Y.S.2d 16, 840 N.E.2d 1030[2005] ).Although Leontiev stated repeatedly that he would repay Zheleznyak's debt, he refused to memorialize anything in writing and insisted that any further agreement be contingent on...