Patricia Youdeem, D.D.S., P.C. v. Williams
| Decision Date | 26 August 2019 |
| Docket Number | 513069/16 |
| Parties | PATRICIA YOUDEEM, D.D.S., P.C. d/b/a Franklin Dental Health, Plaintiff, v. "Karen WILLIAMS a/k/a Stephanie Williams," "Dulce Jones," and "Shatrisse Vinson a/k/a Trisse Vinson," "Annesha Gayle," said individuals believed to be, and/or having been identified as being, in wrongful possession of funds intended for plaintiff as alleged herein, Oshun Salon, LLC, J.P. Morgan Chase Bank, N.A., TD Bank, N.A., Square, Inc., Paymentech, LLC, Capitalone Bank, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and Santander Bank, N.A., Defendants. |
| Court | New York Supreme Court |
Counsel for Plaintiff: Charles A. Stewart III, Esq., Stewart Occhipinti, LLP, One Exchange Plaza, 55 Broadway, Suite 1501, New York, New York 10006
Counsel for Defendant Square, Inc.: Isaac Zaur, Esq., Clarick Gueron Reisbaum LLP, 220 Fifth Avenue, 14th Floor, New York, New York 10001
Counsel for Defendant TD Bank, N.A.: Ronald M. Neumann, Esq., Zeichner Ellman & Krause LLP, 1211 Avenue of the Americas, New York, New York 10036
Counsel for Defendants JP Morgan Chase Bank, N.A. and Paymentech LLC: Christopher A. Pellegrini, Esq., Chuhak & Tecson, P.C., 68 West 238th Street, Suite A1, Bronx, New York 10463
In this action by plaintiff Patricia Youdeem, D.D.S., P.C. d/b/a Franklin Dental Health (FDH), defendant Square, Inc.(Square) moves, under motion sequence number 8, for an order, pursuant to CPLR 3212, granting it summary judgment dismissing FDH's complaint as against it. FDH cross-moves, under motion sequence number 10, for an order compelling Square to respond to its discovery demands or have its answer stricken.
Patricia Youdeem (Youdeem), now known as Patricia Moezinia, is the sole shareholder of FDH, a dental practice in Brooklyn, New York. FDH opened in 1993 and was originally a large, seven-chair dental office. After Youdeem's husband passed away in August 2010, Youdeem downsized FDH by reducing the number of dental chairs from seven to two, and she began to work part-time. Youdeem then decided that she needed a new office manager to handle all administrative responsibilities associated with her dental practice. After placing a "help wanted" advertisement for a dental office manager, Youdeem found Karen Williams (Williams), who used the false name Stephanie Williams. Youdeem interviewed Williams and decided to hire her. Williams started working for FDH in 2011. Williams handled all administrative functions at the dental office, including the submission of claims to patients dental insurance carriers, while Youdeem focused on treating patients. Williams worked as an officer manager for FDH from 2011 until May 2016 when she quit.
From 2011 and continuing through 2016, Williams began stealing the insurance checks which were payable to FDH and Youdeem. Williams fraudulently indorsed and electronically deposited these checks at J.P. Morgan Chase Bank, N.A. (Chase), TD Bank, N.A. (TD Bank), and other banks into her own personal bank account and the personal bank accounts of her accomplices, Dulce Jones (Jones), Shatrisse Vinson a/k/a Trisse Vinson (Vinson), and Annesha Gayle (Gayle). Williams has confessed to diverting $708,582.70 worth of dental insurance reimbursement checks that were made payable to "Patricia Youdeem DDS PC," "Franklin Dental Health," or "Patricia Youdeem."
Payments for dental services were also made to FDH by patients using credit cards. The only credit card processing company that FDH had authorized to process its patients' credit card payments was Paymentech, LLC (Paymentech). However, on March 26, 2014, Williams applied for and opened an account with Square in FDH's name.
Square is a California-based corporation, which provides payment processing services for individuals and small businesses. Using Square's card reader, users can access Square's platform on their mobile devices, such as mobile phones, iPads, or tablets, and start accepting credit and debit card payments from their customers. When an individual or small business uses Square's platform, a customer's funds are "captured" and then deposited (minus a processing fee) into the individual or small business' bank account.
FDH never authorized Williams to open a Square account in its name. In order to open a Square account, a merchant must electronically agree to Square's Seller Agreement. FDH never agreed to Square's Seller Agreement and was completely unaware that Williams had opened the Square account. Williams, rather than using Paymentech, FDH's authorized credit card processing company, used her Square account to "capture" the credit card payments of dental patients and deposit these payments into her own bank account. Thus, by using the Square platform, Williams was able to divert payments from FDH dental patients to her own personal bank account. Between March 26, 2014 and April 15, 2016, the Square account opened by Williams accepted payments from FDH's patients using the statement descriptions (i.e., the identity of the merchant that appears on a cardholder's statement) "FDH," "Franklin Dental Health" and "Franklin Dental Health Salon."
After one of Youdeem's patients, David Eaton (David), provided her with a copy of his credit card statement, she discovered that David's credit card payment had been processed by a Square account, which, as noted above, was a not a payment processing company affiliated with FDH or authorized to be used by it. At that point, Youdeem questioned Karen about this Square payment. While this situation with David's credit card payment was being reviewed, Williams abruptly quit. Shortly thereafter, Youdeem began to discover Williams' crimes, and filed a police report. Williams was arrested, and, on July 12, 2018, Williams pleaded guilty to various crimes, including committing grand larceny against FDH. Williams went to prison in September 2017 and currently remains incarcerated.
On July 28, 2016, FDH filed this action, by a summons with notice, against Square, Chase, TD Bank, Williams, Vinson, Gayle, Oshun Salon, LLC (who was allegedly involved in Williams' fraudulent scheme), Paymentech, and other banks. On October 21, 2016, FDH filed a supplemental summons and a verified complaint. FDH, in its complaint, alleges that Square, along with the other named defendants, is liable to it for "monies had and received/conversion/ UCC 3-419." Square has acknowledged that FDH's theory of liability against it is that it enabled Williams to steal money from FDH by using a Square account to accept FDH's patients' credit cards and divert the funds from the credit cards to Williams' own bank account.
On June 29, 2018, in response to a court compliance order, FDH served supplemental discovery requests upon all defendants, which included discovery demands specifically aimed at Square. Also on June 29, 2018, Square moved, under motion sequence number four, to dismiss FDH's action against it and to compel arbitration of the claims asserted by FDH. On August 1, 2018, FDH cross-moved, under motion sequence number five, to extend the time for service of the summons and complaint upon Square, pursuant to CPLR 306-b, and to compel Square to answer its complaint and respond to its discovery requests.
By a decision and order dated October 15, 2018, the court denied Square's motion in its entirety. The court held that Square's Seller Agreement, which was relied upon by Square in support of its motion to dismiss and to compel arbitration since it contained an arbitration clause, was wholly inapplicable because FDH did not sign Square's Seller Agreement, which was fraudulently entered into by Williams without FDH's knowledge or consent. The court found that FDH's cross motion was moot insofar as it sought to extend the time for service of FDH's summons and complaint upon Square because Square's counsel had previously accepted service of the summons and complaint. The court ordered Square to answer FDH's complaint and respond to FDH's document requests within 30 days after service of the decision and order with notice of entry. FDH, as discussed below, contends that Square has failed to fully produce all of the demanded documents in compliance with the court's October 15, 2018 decision and order.
On April 3, 2019, Square filed its instant motion. On June 7, 2019, FDH filed its instant cross motion.1
In support of its motion, Square argues that the legal theories asserted in FDH's complaint are insufficient to state a cognizable claim against it. Square contends that it cannot be held liable under the theory of money had and received. The requisite elements of a cause of action for money had and received are: "(1) the defendant received money belonging to the plaintiff, (2) the defendant benefitted from receipt of the money, and (3) under principles of equity and good conscience, the defendant should not be permitted to keep the money" ( Goel v. Ramachandran , 111 A.D.3d 783, 790, 975 N.Y.S.2d 428 [2d Dept. 2013] ; see also Matter of Witbeck , 245 A.D.2d 848, 850, 666 N.Y.S.2d 315 [3d Dept. 1997] ; Rocks & Jeans v. Lakeview Auto Sales & Serv. , 184 A.D.2d 502, 502, 584 N.Y.S.2d 169 [2d Dept. 1992] ). Square contends that this claim cannot be sustained against it because it is not in possession of any money belonging to FDH since the monies from FDH's patients were, through Williams' use of the Square account, already deposited in Williams' personal bank account, and it does not retain any of these monies (except for the fees it charged Williams for the use of the Square account) (see Goel , 111 A.D.3d at 790, 975 N.Y.S.2d 428 ).
Square further contends that it cannot be held liable for conversion. "A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession" ( Colavito v....
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