MNW, LLC v. Mega Auto Grp., Inc.

• Decision Date: 01 August 2012
• Docket Number: Cause No. 1:08–CV–119–TLS.
• Citation: 884 F.Supp.2d 740
• Parties: MNW, LLC, an indiana limited liability company, Plaintiff, v. MEGA AUTO GROUP, INC., a Delaware corporation; Perfect Auto Sales, Inc., a New York corporation; Mark Shulman; Flash Auto Group, Inc., a New York corporation; and VIP Motor Group, LLC, a New York limited liability company, Defendants.
• Court: U.S. District Court — Northern District of Indiana

884 F.Supp.2d 740

MNW, LLC, an indiana limited liability company, Plaintiff,

v.MEGA AUTO GROUP, INC., a Delaware corporation; Perfect Auto Sales, Inc., a New York corporation; Mark Shulman; Flash Auto Group, Inc., a New York corporation; and VIP Motor Group, LLC, a New York limited liability company, Defendants.

Cause No. 1:08–CV–119–TLS.

United States District Court,

N.D. Indiana,

Fort Wayne Division.

Aug. 1, 2012.

Karen T. Moses, Kevin J. Mitchell, Michael Leon James, Shannon K. Reed, Faegre Baker Daniels LLP, Fort Wayne, IN, for Plaintiff.

Eric M. Douthit, Steven Michael Lutz, Church Church Hittle & Antrim LLP, Fishers, IN, Brent R. Borg, Church Church Hittle & Antrim LLP, Noblesville, IN, for Defendants.

OPINION AND ORDER

THERESA L. SPRINGMANN, District Judge.

This case concerns the export of forty-one Mercedes–Benz automobiles. All were purchased from the Plaintiff. All were purchased pursuant to contracts with either Defendant Mega Auto Group, Defendant Perfect Auto Sales, or Defendant Mark Shulman. Both Defendants Mega and Perfect have been defaulted in this action. All of the purchase contracts were negotiated by Defendant Shulman, who was never served with process in this action. Defendants Flash Auto Group and VIP Motor Group ultimately obtained several of the forty-one vehicles in question, and exported many of the vehicles so obtained. As of November 30, 2009, the Plaintiff had been assessed $65,650.28 in penalties by Mercedes–Benz; of these penalties, $38,280.46 are attributed to vehicles exported by Defendant VIP, and $6,983.07 to a vehicle exported by Defendant Flash. From April 14–18, 2008, Defendants VIP and Flash deposited a total of $296,615 into the Plaintiff's account for the purchase of five different Mercedes–Benz vehicles. The Plaintiff has refused to either deliver the vehicles or return the $296,615 to the Defendants. The Plaintiff purports to withhold the funds pursuant to a right of offset under an Indemnity Agreement signed on April 17, 2008. The Plaintiff seeks a declaratory judgment on Count II of its Amended Complaint [ECF No. 7] that it is entitled to retain the $296,615 under the terms of the Indemnity Agreement, and further seeks attorney fees. Defendants VIP and Flash counterclaimed for conversion and criminal conversion, seeking treble damages and attorney fees.

The case proceeded to a three-day bench trial from October 11–13, 2011, on the contract and tort issues. The Court, having heard and determined the credibility of the witnesses and having considered the arguments of counsel and the applicable law, in accordance with Federal Rule of Civil Procedure 52(a), enters the following findings of fact and conclusions of law.¹

FACTUAL FINDINGS

After considering the evidence and arguments of counsel, the Court now finds the following facts to be material and supported by a preponderance of the evidence:

1. The Plaintiff, MNW, LLC, is a limited liability company with its principal place of business in Fort Wayne, Indiana. The Plaintiff owns and operates the Mercedes–Benz dealership in Fort Wayne, Indiana, known as Mercedes–Benz of Fort Wayne. The Plaintiff is owned by Douglas McKibben and Paul Webb. Webb also acts as general manager of the dealership.

2. Defendant VIP is a limited liability company organized under the laws of the State of New York. Defendant VIP is owned by Alex Kart and Genady Furman. Defendant VIP is a licensed automobile wholesaler. Defendant VIP did not, however, maintain a dealership lot. Rather, Defendant VIP maintained solely an office location. Defendant VIP opened its office on February 13, 2008.

3. Defendant Flash was a New York corporation with its office in Brooklyn, New York. Defendant Flash was in the business of wholesaling vehicles and, on occasion, would retail a vehicle. Defendant Flash, however, operated without a wholesale or retail license. Michael Lykov was Defendant Flash's business manager, and Constantine Pshenichniy was the sole member.

4. Defendant Mega was a Delaware corporation. Defendant Mega's principal, Igor Oranski, passed away during the pendency of this case. Prior to Oranski's death, Defendant Mega was in the business of buying and selling automobiles. Defendant Mega was a licensed wholesaler. Defendant Mega initially appeared and defended in this action. But after the Court granted motions to withdraw by the attorneys for Defendant Mega, and after Defendant Mega failed to obtain successor counsel, the Clerk entered default against Defendant Mega on June 1, 2011 [ECF No. 170].

5. Defendant Perfect was a New York corporation. Oleg Chelchilnitsky was Defendant Perfect's sole owner. Chelchilnitsky filed bankruptcy on or about August 2009, and took no further action in this case. (See In Re Chelchilnitsky, United States Bankruptcy Court for the Eastern District of New York, Cause No. 1–09–47157.) Defendant Perfect, prior to June 2008, was a licensed wholesaler in the business of buying and selling automobiles. Although Defendant Perfect initially appeared and defended in this action, after the Court granted motions to withdraw by the attorneys for Defendant Perfect, and after Defendant Perfect failed to obtain successor counsel, the Court entered default against Defendant Perfect on March 30, 2010 [ECF No. 120].

6. Defendant Mark Shulman, also known as Alex Shulman, was an individual who held himself out as the owner of Defendants Mega and Perfect. Defendant Shulman produced dealer licenses and tax information for both companies and held himself out as authorized to purchase vehicles from the Plaintiff. Defendant Shulman was personally known to both Kart and Lykov and lived in the same neighborhood as Kart.

7. In November 2007, the Plaintiff purchased the Mercedes–Benz car dealership located in Fort Wayne, Indiana. Prior to November 2007, the dealership had been owned by Shaver Imports.

8. Prior to November 2007, Defendant Shulman had purchased a number of vehicles from Shaver Imports. Defendant Shulman worked with a salesman named Shaun Ivancic. Ivancic continued to work with Defendant Shulman upon the Plaintiff's purchase of the dealership.

9. From November 2007 to April 14, 2008, Defendant Shulman purchased 71 vehicles on behalf of Defendants Perfect and Mega, using first Defendant Perfect's and then Defendant Mega's dealer licenses. Defendant Shulman provided the Plaintiff with copies of the dealer licenses and tax exemption information for both Defendants Perfect and Mega. Defendant Shulman also provided a copy of Defendant Mega's insurance certificate. Notably, the dealer license furnished by Defendant Mega and relied upon by the Plaintiff in spring 2008 was purportedly issued on November 31, 2008, and expired on December 31, 2008. (Pl.'s Ex. 5.)

10. In November 2007, when Defendant Shulman, on behalf of Defendant Perfect, contacted the Plaintiff to purchase vehicles, he executed at least two Acknowledgments of Export Policy. The Acknowledgments stated:

MERCEDES–BENZ OF FORT WAYNE, AS AN AUTHORIZED MERCEDES–BENZ DEALER IS SOLELY PERMITTED TO DISTRIBUTE MERCEDES–BENZ VEHICLES WITHIN MBNA'S EXCLUSIVE SALES TERRITORY (NORTH AMERICA). IN THE EVENT THAT A MERCEDES–BENZ VEHICLE, WHICH IS SOLD BY MERCEDES–BENZ OF FORT WAYNE, IS EXPORTED FROM

THE PERMITTED SALES TERITORY [SIC], MBNA ASSESSES CHARGES AND OTHER RELATED COSTS AGAINST THE DEALER WHICH SOLD OR LEASED THAT VEHICLE. AS SUCH, MERCEDES–BENZ OF FORT WAYNE, AS AN AUTHORIZED DEALER REQUIRES THAT A PURCHASER OR LESSEE OF A NEW MERCEDES–BENZ VEHICLE AFFIRMATIVELY WARRANT AND REPRESENT IN WRITING THAT THE VEHICLES BEING PURHCASED [SIC] OR LEASED ARE INTENDED FOR USE WITHIN THE AFOREMENTIONED SALES TERRITORY AND THAT THE VEHICLES WILL NOT BE EXPORTED DIRECTLY OR INDIRECTLY FROM THE SALES TERRITORY. IT IS DIFFICULT TO ASCERTAIN THE SPECIFIC AND TOTAL COST OF ALL CHARGES AND ASSESSMENTS THAT MAY OCCUR IN THE EVENT OF AN EXPORT OF A VEHICLE SOLD OR LEASED BY MERCEDES–BENZ OF FORT WAYNE. THEREFORE, THE PURCHASER OR LESSEE OF SAID VEHICLE AGREES THAT THE SUM OF $7,500.00 (SEVENTY–FIVE HUNDRED DOLLARS) IS A REASONABLE ESTIMATE OF THE COSTS WHICH WILL BE INCURRED BY MERCEDES–BENZ OF FORT WAYNE AS A DIRECT AND PROXIMATE RESULT OF SAID NEW MERCEDES–BENZ VEHICLE BEING EXPORTED FROM THE MBNA SALES TERRITORY. THE PURCHASER OR LESSEE OF ANY NEW MERCEDES–BENZ VEHICLE FROM MERCEDES–BENZ OF FORT WAYNE AGREES THAT, IN THE EVENT THE NEW MERCEDES–BENZ VEHICLE IS EXPORTED FROM THE PERMITTED SALES TERRITORY WITHIN ONE YEAR FROM THE INITIAL DELIVERY OF SAID VEHICLE, THE PURCHASER OR LESSEE SHALL BE OBLIGATED TO PAY MERCEDES–BENZ OF FORT WAYNE AS LIQUIDATED DAMAGES, THE SUM OF $7,500.00. EXECUTION OF THE PURCHASE/LEASE DOCUMENTS BY THE PURCHASER/LESSEE SHALL CONSTITUTE ACCEPTANCE OF THESE TERMS AND CONSTITUTE ACCEPTANCE OF THE TERMS AND CONDITIONS AGREEMENT THERETO.

(Pl.'s Ex. 2 at MNW 37, 39.) Defendant Shulman subsequently, in March 2008, began purchasing vehicles for Defendant Mega. He executed an Acknowledgment on behalf of Defendant Mega. ( Id. at MNW 8.) Although it was the stated policy of the Plaintiff that an Acknowledgment of Export Policy would be executed for each vehicle sale, many of the vehicle sales at issue do not include Acknowledgments. Furthermore, many of the Acknowledgments included with purchase orders are not signed or witnessed.

11. Ivancic continued working with Defendant Shulman through January 21, 2008; however, later that month, Webb began working directly with Defendant Shulman so Ivancic would have more time to attend to his retail customers. Defendant Shulman usually contacted the Plaintiff by telephone and inquired whether the Plaintiff could locate a specific vehicle for him.

12. If the Plaintiff was able to accomplish the dealer trade, it would negotiate the price with Defendant Shulman. Once a price had been negotiated, the Plaintiff's internal computer system would generate an internal transaction report which was sent to Defendant Shulman...