Court Opinion

ID: 9960256
Source: CourtListenerOpinion
Date Created: 2024-04-15 20:07:47.977521+00
Date Added: 2024-06-11T08:19:19.526893
License: Public Domain

Newstone AECC, LLC v Newstone AECC US Inc.
               2024 NY Slip Op 31244(U)
                      April 9, 2024
           Supreme Court, New York County
        Docket Number: Index No. 653133/2023
                  Judge: Joel M. Cohen
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
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                       publication.
                                                                                                                        INDEX NO. 653133/2023
  NYSCEF DOC. NO. 81                                                                                              RECEIVED NYSCEF: 04/09/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M
            ----------------------------------------------------------------------------------- X

             NEWSTONE AECC, LLC, YAAKOV NEWHOUSE,                                                   INDEX NO.         653133/2023

                                                          Plaintiffs,
                                                                                                    MOTION DATE        11/14/2023
                                                - V -
                                                                                                    MOTION SEQ. NO.        003
             NEWSTONE AECC US INC., HILLEL LICHTENSTEIN,
             HILLY SERVICES INC.
                                                                                                      DECISION+ ORDER ON
                                                          Defendants.                                       MOTION
            ----------------------------------------------------------------------------------- X

            HON. JOEL M. COHEN:

            The following e-filed documents, listed by NYSCEF document number (Motion 003) 69, 70, 74, 75, 76
            were read on this motion to                                                             DISMISS

                      Defendants Newstone AECC US, Inc.'s ("Newstone Inc."), Hillel Lichtenstein's

            ("Lichtenstein") and Hilly Services Inc.' s ("Hilly" and with Newstone Inc. and Lichtenstein

            "Defendants") partial motion to dismiss Plaintiffs Newstone AECC, LLC's ("Newstone LLC")

            and Yaakov Newhouse's ("Newhouse" and together "Plaintiffs") Verified Complaint

            ("Complaint" [NYSCEF 2]) pursuant to CPLR 321 l(a)(7) is denied.

                A. Background

                      This is a dispute between former partners, and now competitors, in the 3-D laser scanning

            business. The Complaint asserts fourteen causes of action based on allegations that Defendants

            stole Newstone LLC's business by creating the similarly named Newstone, Inc. and representing

            (inaccurately) to third parties that it was a successor entity.

                      Defendants move to dismiss Plaintiffs' replevin, unjust enrichment, breach of fiduciary

            duty and fraud claims on the grounds that they are either duplicative or not sufficiently pled.

             653133/2023 NEWSTONE AECC, LLC ET AL vs. NEWSTONE AECC US INC. ET AL                                       Page 1 of 5
             Motion No. 003

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  NYSCEF DOC. NO. 81                                                                       RECEIVED NYSCEF: 04/09/2024

            Plaintiffs oppose and argue that they may plead claims in the alternative and that their claims are

            sufficient to withstand a motion to dismiss for failure to state a claim.

               B. Discussion

                       a. Legal Standard

                   On a motion to dismiss a complaint pursuant to CPLR 321 l(a)(7) for failure to state a

            cause of action, the Court must afford the complaint a liberal construction, accept all facts as

            alleged in the complaint to be true, accord the plaintiff the benefit of every possible favorable

            inference, and determine only whether the facts as alleged fit within any cognizable legal theory

            (Leon v Martinez, 84 NY2d 83, 87-88 [1994]). Generally, questions of fact are not properly

            resolved on a motion to dismiss (Sand Canyon Corp. v Homeward Residential, Inc., I 05 AD3d

            587, 587 [1st Dept 2013] [citations omitted]).

                       b. The Complaint Adequately Alleges Causes of Action for Replevin

                   The Complaint's Third, Fourth, Fifth and Sixth Causes of Action are for conversion of

            various physical, financial, and electronic assets ofNewstone LLC. The Complaint's Seventh

            and Eighth Causes of Action seek replevin of the same assets. Defendants argue that Plaintiffs'

            replevin claims should be dismissed as duplicative of the conversion claims.

                   "Two key elements of conversion are (1) plaintiffs possessory right or interest in the

            property and (2) defendant's dominion over the property or interference with it, in derogation of

            plaintiffs rights" (Pappas v Tzolis, 20 NY3d 228,234 [2012] quoting Colavito v. New York

            Organ Donor Network, Inc., 8 N.Y.3d 43, 50 [2006]). "To state a cause of action for replevin, a

            plaintiff must establish a superior possessory right to property in a defendant's possession" (Reif

            v Nagy, 175 AD3d 107, 120 [1st Dept 2019], lv dismissed 35 NY3d 986 [2020] [awarding both

            conversion and replevin]).

             653133/2023 NEWSTONE AECC, LLC ET AL vs. NEWSTONE AECC US INC. ET AL                  Page 2 of 5
             Motion No. 003

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  NYSCEF DOC. NO. 81                                                                       RECEIVED NYSCEF: 04/09/2024

                   CPLR 3014 provides, in relevant part, that "[c]auses of action or defenses may be stated

            alternatively or hypothetically." Accordingly, "plaintiff may plead alternative, inconsistent

            theories" (Kerzhner v G4S Govt. Sols., Inc., 138 AD3d 564, 565 [1st Dept 2016]). Plaintiffs'

            replevin claims are adequately pled as alternatives and are not subject to dismissal as duplicative

            of their conversion claims (Man Advisors, Inc. v Selkoe, 174 AD3d 435 [1st Dept 2019] [fraud

            and breach of contract actions could proceed where based on different allegations]). If

            appropriate, Defendants may reassert their arguments on summary judgment or at trial.

                       c. Unjust Enrichment May be Pied in the Alternative

                   To state a claim of unjust enrichment, Plaintiff must allege "that (1) the defendant was

            enriched, (2) at plaintiffs expense, and (3) that it is against equity and good conscience to permit

            the other party to retain what is sought to be recovered" ( Georgia Malone & Co., Inc. v. Rieder,

            19 N.Y.3d 511, 516, 950 N.Y.S.2d 333, 973 N.E.2d 743 [2012]). Plaintiffs allege each of the

            required elements (Cplt. ,J,Jl46-150).

                   Defendants submit that Plaintiffs are asserting unjust enrichment as "an impermissible

            catchall" that duplicates their replevin, conversion, and fraud claims. The Court disagrees as

            unjust enrichment, an equitable cause of action, may be pled in the alternative to claims at law,

            including conversion (New York Eye and Ear Infirmary v Bowne, 200 AD3d 467 [1st Dept

            2021 ]). At this juncture, the Court "cannot determine whether or not plaintiffs have an adequate

            remedy at law" and the unjust enrichment claim may proceed (Rosenbach v Diversified Group,

            Inc., 12 Misc 3d l 152(A) [Sup Ct New York County 2006]).

                       d. The Complaint States a Cause of Action for Breach of Fiduciary Duty

                   "To state a claim for breach of fiduciary duty, plaintiffs must allege that ( 1) defendant

            owed them a fiduciary duty, (2) defendant committed misconduct, and (3) they suffered damages

             653133/2023 NEWSTONE AECC, LLC ET AL vs. NEWSTONE AECC US INC. ET AL                  Page 3 of 5
             Motion No. 003

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  NYSCEF DOC. NO. 81                                                                        RECEIVED NYSCEF: 04/09/2024

            caused by that misconduct" (Burry v Madison Park Owner LLC, 84 AD3d 699, 699-700 [1st

            Dept 2011] [citations omitted]). Plaintiffs allege each of the required elements (Cplt. ,J,J87-91).

                   Defendants' argument that Plaintiffs claim is subject to dismissal based on the doctrine of

            unclean hands is rejected. Unclean hands is an affirmative defense which must be proven (CIBC

            Mellon Tr. Co. v HSBC Guyerzeller Bank AG, 56 AD3d 307,308 [1st Dept 2008]). While "a

            court may freely consider affidavits submitted by the plaintiff to remedy any defects in the

            complaint," there is no requirement that the Court credit, or even consider, Defendant

            Lichtenstein's self-serving affidavit (NYSCEF 74) at the motion to dismiss stage (Leon v.

            Martinez, 84 NY2d at 87-88).

                       e. The Complaint States a Cause of Action for Fraud

                   "The elements of a fraud cause of action consist of' a misrepresentation or a material

            omission of fact which was false and known to be false by [the] defendant, made for the purpose

            of inducing the other party to rely upon it, justifiable reliance of the other party on the

            misrepresentation or material omission, and injury'" (Pasternackv Lab. Corp. ofAm. Holdings,

            27 NY3d 817, 827 [2016] quoting Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178,

            919 N.Y.S.2d 465, 944 N.E.2d 1104 [2011]). CPLR 3016(b) provides, in relevant part, "[w]here

            a cause of action or defense is based upon ... fraud ... the circumstances constituting the wrong

            shall be stated in detail." CPLR 3016(b) "is satisfied when the facts suffice to permit a

            'reasonable inference' of the alleged misconduct" (Epiphany Community Nursery School v

            Levey, 171 AD3d 1, 9 [1st Dept 2019] [citations omitted]).

                   Plaintiffs allege each of the required elements (Cplt. ,J,Jl40-145). Specifically, Plaintiffs

            allege that Defendant Lichtenstein falsely represented that non-party Matterport, a software

            developer, would suspend its services to Newstone LLC if it was not paid $95,000. Plaintiffs

             653133/2023 NEWSTONE AECC, LLC ET AL vs. NEWSTONE AECC US INC. ET AL                    Page 4 of 5
             Motion No. 003

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            further allege that the money provided by Plaintiffs was improperly used instead by Lichtenstein

            to develop Newstone Inc. Finally, Plaintiffs allege that, as a result of the misrepresentation,

            Newhouse personally made the payment and has suffered damages.

                    To the extent Defendants dispute those facts, resolution must await summary judgment

            on a full evidentiary record or, if necessary, trial (Houbigant, Inc. v Deloitte & Touche LLP, 303

            AD2d 92, 96 [1st Dept 2003]). Plaintiffs' "allegations are sufficiently detailed to fairly apprise

            [Defendants] of the circumstances constituting the wrong" and dismissal is not warranted for

            failure to comply with CPLR 3016(b) (Merrill Lynch, Pierce, Fenner & Smith, Inc. v Wise

            Metals Group, LLC, 19 AD3d 273,275 [1st Dept 2005]).

                                                   *       *          *     *
                    Accordingly, it is

                    ORDERED that Defendants' motion to dismiss is DENIED; it is further

                    ORDERED that Defendants file an answer within twenty-one (21) days of this order.

                    This constitutes the decision and order of the Court.

                    4/9/2024
                      DATE                                                          JOEL M. COHEN, J.S.C.

                                     ~
             CHECK ONE:                  CASE DISPOSED                      NON-FINAL DISPOSITION

                                         GRANTED         0     DENIED       GRANTED IN PART          □ OTHER
             APPLICATION:                SETTLE ORDER                       SUBMIT ORDER

             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN         FIDUCIARY APPOINTMENT    □ REFERENCE

             653133/2023 NEWSTONE AECC, LLC ET AL vs. NEWSTONE AECC US INC. ET AL                     Page 5 of 5
             Motion No. 003

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