Woodside Credit, LLC v. Prime Car Sales, Inc.
| Decision Date | 28 February 2020 |
| Docket Number | No. 19-CV-2819 (ERK) (RER),19-CV-2819 (ERK) (RER) |
| Parties | WOODSIDE CREDIT, LLC, Plaintiff, v. PRIME CAR SALES, INC. D/B/A ECARS BROOKLYN, ARI RENT A CAR CORP., RENT YOUR OWN 26 LLC, ARIK LEV A/K/A ERIC LEV, IVAN MAG, MATTHEW S. COLELLO, LORETTA WATERS-FALZO, JANE DOES 1-10, JOHN DOES 1-10, DOE BUSINESS ENTITIES 1-20, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
REPORT & RECOMMENDATION
Plaintiff Woodside Credit, LLC ("Plaintiff" or "Woodside") brought this diversity action under 28 U.S.C. § 1332(d) for breach of contract, fraud, conversion, and civil conspiracy. After all seven named defendants failed to answer or otherwise defend, the Clerk of the Court entered default against them. (Dkt. Nos. 13-15, 18-19, 26-27). Plaintiff subsequently filed a Motion for Default Judgment. (Dkt. No. 28 ("Mot. for Default J."). Your Honor referred the Motion for Default Judgment to me for a Report and Recommendation. (Order dated 10/08/2019). For the reasons below, I respectfully recommend the Motion for Default Judgment be denied without prejudice to renewal upon a properly pleaded amended complaint and adequate proof of damages.
Woodside is a "financer of classic [ ] and collector cars" based in California. . Defendant Prime Car Sales Inc. doing business as Ecars Brooklyn ("Ecars") is a car dealership incorporated in New York. (Id. ¶ 3). Defendants Arik Lev (a/k/a Eric Lev) ("Lev") and Ivan Mag ("Mag") are agents and/or employees of Ecars. (Id. ¶¶ 6-7). Defendants Matthew S. Colello ("Colello") and Loretta Waters-Falzo ("Waters-Falzo")2 (collectively, "the Borrowers") are two individuals who entered into financing agreements with Woodside to purchase vehicles from Ecars. (Id. ¶¶ 8-9). Two additional defendants are named in the Complaint: Ari Rent A Car Corp., "a New York corporation with a place of business" in Brooklyn, and Rent Your Own 26 LLC, "a limited liability company formed under the laws of New York. (Id. ¶¶ 4-5). Woodside alleges that Lev is "a shareholder, agent, and/or employee of Ari Rent A Car Inc. and a member, agent and/or employee of Rent Your Own." (Id. ¶ 6).
In early 2018, Woodside received two applications for loans to purchase vehicles from Ecars. (Compl. ¶¶ 14, 25). One application was for Colello to purchase a 2012 Rolls Royce Ghost (the "Rolls Royce"). (Id. ¶¶ 1, 14). The second was for Waters-Falzo to purchase a 2016 Ferrari California (the "Ferrari"). (Id. ¶¶ 1, 25). Woodside communicated with Ecars which provided the applications as well as all relevant materials for both Colello and Waters-Falzo. (Id. ¶¶ 15, 26).Mag was listed as the salesperson on both vehicles' pre-owned purchase agreements.3 (Id.). Woodside approved the financing agreements (Id. ¶¶ 19, 27) and wired the agreed upon purchase amounts to Ecars.4 (Dkt. No. 28-1 ("Trevisan Aff.") ¶¶ 9, 18). "[S]everal payments" were made on each loan before payments suddenly stopped. (Compl. ¶¶ 22, 30). Woodside then discovered that Colello and Waters-Falzo did not take possession of the vehicles. (Id. ¶¶ 23(b), 31(b)). Rather, the vehicles were kept by "Mag and/or Lev themselves, either individually or through an entity controlled by Mag and/or Lev." (Id. ¶¶ 23(c), 31(c)). Further, Woodside discovered the initial payments on the two loans had not been made by Colello and Waters-Falzo but by "Lev, Mag and/or Ecars." (Id. ¶¶ 23(e), 31(e)).
Woodside also alleges that some of the Defendants5 were "renting [the vehicles] by the day or the week for profit." (Compl. ¶¶ 23(d), 31(d)). After this discovery, Woodside "demanded Lev, Mag, and/or Ecars relinquish possession of the Rolls Royce and the Ferrari to Woodside." (Trevisan Aff. ¶ 24). In response, "Woodside was directed to an attorney representing Lev" who "confirmed that Lev has possession of the Vehicles, and provided recent pictures" of them. (Id. ¶ 25).
Woodside subsequently filed this action, alleging breach of contract against Colello for defaulting on his loan. (Compl. Count 1). Further, Woodside alleges Defendants engaged in a civilconspiracy wherein they successfully defrauded Woodside and converted its property. (Compl. Counts 3-7).
In considering default judgment, "the court must accept as true all well-pleaded allegations in the complaint." Said v. SBS Electronics, Inc., No. 08-CV-3067 (RJD) (JO), 2010 WL 1265186, at *2 (E.D.N.Y. Feb. 24, 2010), R&R adopted as modified by 2010 WL 1287080 (Mar. 31, 2010). "Even so, 'after default . . . it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law.'" Rolls-Royce PLC v. Rolls-Royce USA, Inc., 688 F. Supp. 2d 150, 153 (E.D.N.Y. 2010) (quoting Leider v. Ralfe, No. 01 Civ. 3137, 2004 WL 1773330, at *7 (S.D.N.Y. July 30, 2004)).
In making the damages determination, the court is not bound by the well-pleaded allegations in the complaint. Said, 2010 WL 1265186, at *2. Rather, after a finding of liability, "[i]t is the court's responsibility to establish that damages have an evidentiary basis that can be ascertained with 'reasonable certainty.'" Xin Long Lin v. New Fresca Tortillas, Inc., No. 18-CV-3246 (RJD) (RER), 2019 WL 3716199, at *2 (citing Cement and Concrete Workers Dist. Council Welfare Fund v. Metro Foundation Contractors, Inc., 699 F.3d 230, 235 (2d Cir. 2012).
Woodside alleges four causes of action under New York common law: (1) breach of contract, (2) fraud, (3) conversion, and (4) conspiracy. Portions of these claims are sufficiently pleaded for the purposes of a motion for default judgment, most are not. I briefly address the issueswith liability. However, the Court need not reach them given Woodside's failure to meet its burden of showing damages for these claims.
While Woodside's breach of contract claim is inexplicably argued under New York law despite a California choice-of-law clause in the Agreement, (Dkt. No. 28-6 ("Ex. E") at 4), the claim appears to be sufficiently alleged. Under California law "the elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." Oasis West Realty, LLC v. Goldman, 250 P.3d 1115, 1121 (Cal. 2011) (citing Reichert v. General Ins. Co., 442 P.2d 377, 381 (Cal. 1968)).
Here, Woodside alleges the existence of a contract between itself and Colello and provides a copy of the Agreement signed by Colello. (Ex. E). Second, Woodside alleges its performance by paying Ecars $148,000. (Trevisan Aff. ¶ 9). Third, Woodside alleges Colello's breach by defaulting on his monthly payments and not keeping the Rolls Royce at his residential address. (Trevisan Aff. ¶¶ 12-13). Fourth, one can infer Woodside was damaged in the amount remaining on the Rolls Royce Agreement.
Woodside's fraud claim is insufficiently pleaded. To plead a claim of fraud, plaintiff must "allege each of the elements of the claim as defined by state law, and must also meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b)." Dessert Beauty, Inc. v. Platinum Funding Corp., No. 06 Civ. 2279 (SAS), 2006 WL 3780902, at *5 (S.D.N.Y. Dec. 26, 2006)(citing Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006). "Rule 9(b) requires that a complaint '[i] specify the statements that the plaintiff contends were fraudulent, [ii] identify the speaker, [iii] state where and when the statements were made, and [iv] explain why the statements were fraudulent.'" Corley v. Vance, 365 F. Supp. 3d 407, 456 (S.D.N.Y. 2019) (quoting ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007)).6 "If a plaintiff fails to satisfy the requirements of Rule 9(b), entry of default judgment should be denied." 3801 Beach Channel, Inc. v. Shvartzman, No. 05-CV-0207 (CBA) (JO), 2010 WL 6471990, at *3 (Sept. 30, 2010) (citing Liberty Mut. Ins. Co. v. Luxury Transp. Mgmt. Inc., No. 07-CV-0608 (RJD) (JO), 2009 WL 1033177, at *1, *8 (E.D.N.Y. Apr. 16, 2009)).
Woodside's allegations are broad and conclusory, failing even to identify statements it claims are fraudulent, much less provide the who, when, where, and why requirements of Rule 9(b). For example, Woodside alleges that "Ecars, Mag, and Colello intentionally and falsely represented to Woodside that Colello was purchasing the Rolls Royce from Ecars by paying a down-payment of $42,825 with a remaining $148,000 due on delivery to be financed by Woodside." (Compl. ¶ 16, Trevisan Aff. ¶ 5).7 This allegation alone does not suffice to show which defendant made which misrepresentations, when and where the statements were made and why they are false. In a case of multiple defendants, "'a plaintiff must plead with particularity by setting forth separately the acts complained of by each defendant.'" Sofi Classic S.A. de C.V. v. Hurowitz, 444 F. Supp. 2d231, 248-9 (S.D.N.Y. 2006) (emphasis added) (quoting Ellison v. Am. Image Motor Co., 36 F. Supp. 2d 628, 640 (S.D.N.Y. 1999)).
While itself not a sufficiently pleaded false statement, the allegation can be considered Woodside's "theory of the events giving rise to" its claim. Amusement Industry, Inc., 693 F. Supp. 2d at 350. Looking to the other allegations in the Complaint and accompanying material for support of such a theory is fruitless. Woodside alleges that on January 22, 2018 it received an application "from Ecars with a request to enter into a sales financing agreement with Colello to fund the purchase of the Rolls Royce."8 (Compl. ¶ 14; Trevisan Aff. ¶ 3). Ecars also "provided Woodside with Colello's driver's license, and a pre-owned purchase agreement showing that Colello was purchasing the Rolls Royce from Ecars, with Mag...
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