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Automotive Finance Corporation v. DZ Motors, LLC

United States District Court, D. New Jersey

July 26, 2017

DZ MOTORS, LLC, et al., Defendants.



         This matter comes before the Court on Defendants DZ Motors, LLC ("DZ Motors"), Dmitriy Zholobov, and Elena Zholobov's (collectively, "DZ Defendants") motion to dismiss Counts Three and Four as to DZ Motors and Dmitriy Zholobov and all Counts as to Elena Zholobov of the Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (ECF No. 13.) Additionally, Defendant United Teletech FCU ("United Teletech") filed a motion to dismiss Count One of the Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 20.) Plaintiff Automotive Finance Corporation ("Plaintiff) filed opposition to DZ Defendants' motion and requested leave to amend (ECF No. 18), and DZ Defendants replied (ECF No. 19). Plaintiff also filed opposition to United Teletech's motion and requested leave to amend (ECF No. 28), and United Teletech did not reply. The Court has carefully considered the parties' submissions and decides the matter without oral argument pursuant to Local Civil Rule 78.1. For the reasons set forth below, the Court grants in part and denies in part DZ Defendants' motion to dismiss, and grants United Teletech's motion to dismiss.

         I. Background[1]

         Plaintiff is an automotive finance company organized under the laws of the State of Indiana and has its principal place of business in Indiana. (Am. Compl. 1, ECF No. 6.)[2] On or about May 13, 2010, Plaintiff, A to Z Auto Connection[3] ("A to Z"), and DZ Motors[4] entered into a Demand Promissory Note and Security Agreement (the "Note"), which Dmitriy Zholobov signed, individually and as manager of DZ Motors. (Id. at 2.) Between 2010 and 2015, Plaintiff and DZ Motors executed numerous "Aggregate Advance Limit Amendments" to the Note, ultimately increasing the aggregate advance limit from $250, 000 to $4, 600, 000.[5] (Id. at 3.) DZ Motors and Dmitriy Zholobov failed to make timely payments[6] as per the terms of the Note. (Id. at 5.) In or around October 2016, Plaintiff exercised its rights under the Note[7] and repossessed eighty-two vehicles to satisfy DZ Motors, A to Z, and Dmitriy Zholobov's debt. (Id. at 4.) Plaintiff alleges that three vehicles[8] (the "Three Vehicles") are "missing" and are in the possession of DZ Defendants. (Id.)

         On information and belief, Plaintiff alleges that DZ Defendants (1) did not act as "buyers in the ordinary course" as defined by the Uniform Commercial Code ("UCC"); (2) conspired to fraudulently transfer title to the three missing vehicles; and (3) obtained financing from Defendant Raritan Bay Federal Credit Union[9] ("Raritan Bay") in a fraudulent manner. (Id. at 4-5.) Plaintiff further alleges that DZ Motors failed to satisfy Plaintiffs lien and provide purchasers with titles to sixty-two vehicles which have been sold "out of trust."[10] (Id. at 4.) Additionally, Plaintiff alleges that one vehicle, a 2015 Porsche 911 (the "Porsche"), was transferred from DZ Motors to Defendants Rossi Collantes and Shiel Patel, both of whom are believed to be buyers outside the ordinary course of business, with United Teletech listed as a lienholder. (Id. at 5.)

         Plaintiff filed a five-count Amended Complaint against DZ Defendants, A to Z, Raritan Bay, Rossi Collantes, Shiel Patel, United Teletech, and John Does 1 to 100. (See Id. at 1.) The Amended Complaint brings counts for: (1) Replevin ("Count One"); (2) Release of Raritan Bay Federal Credit Union Inferior Liens ("Count Two"); (3) Violation of the civil New Jersey Racketeer Influenced and Corrupt Organizations Act ("NJ RICO") ("Count Three"); (4) New Jersey and Indiana Common Law Fraud ("Count Four"); and (5) Breach of Contract ("Count Five"). (Id. at 5-9.) On December 6, 2016, DZ Defendants moved to dismiss Counts Three and Four, and all Counts as to Elena Zholobov.[11] (DZ Defs.' Moving Br. 1, ECF No. 13-1.) On December 29, 2016, United Teletech moved to dismiss all claims against it.[12] (United Teletech's Moving Br. 5, ECF No. 20-2.)

         II. Legal Standard

         On a motion to dismiss for failure to state a claim, the "defendant bears the burden of showing that no claim has been presented." Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). A district court is to conduct a three-part analysis when considering a Rule 12(b)(6) motion to dismiss. See Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). "First, the court must 'tak[e] note of the elements a plaintiff must plead to state a claim." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 675 (2009)). Second, the court must "review[] the complaint to strike conclusory allegations." Id. The court must accept as true all of the plaintiffs well-pleaded factual allegations and "construe the complaint in the light most favorable to the plaintiff." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (citation omitted). In doing so, the court is free to ignore legal conclusions or factually unsupported accusations that merely state "the-defendant-unlawfully-harmed-me." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Finally, the court must determine whether "the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief" Fowler, 578 F.3d at 211 (quoting Iqbal, 556U.S. at 679). A facially plausible claim "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 210 (quoting Iqbal, 556 U.S. at 678).

         Additionally, Federal Rule of Civil Procedure 9(b) applies when a plaintiff alleges fraud. Fed.R.Civ.P. 9(b). "[C]onclusory allegations are not sufficient to withstand Rule 9(b), " and instead "the circumstances constituting fraud . . . shall be stated with particularity." Grant v. Turner, No. 09-2381, 2010 WL 4004719, at *4 (D.N.J. Oct. 12, 2010); Hemy v. Perdue Farms, Inc., No. 11-888, 2013 WL 1338199, at *9 (D.N.J. Mar. 13. 2013). "To satisfy this standard, the plaintiff must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation." Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007).

         III. Discussion

         Count One of the Amended Complaint alleges a replevin action against DZ Defendants and United Teletech. (Am. Compl. 5-6.) In its Amended Complaint and opposition briefs, Plaintiff fails to state whether Indiana or New Jersey law governs Count One. (See id.; PL's Opp'n Br. to DZ Defs.' Mot. to Dismiss. 10-12, ECF No. 18; PL's Opp'n Br. to United Teletech's Mot. to Dismiss 11-13, ECF No. 28.) With respect to this issue, DZ Defendants and United Teletech are also silent on which state's laws apply. (See DZ Defs.' Moving Br. 7; DZ Defs.' Reply Br. 5, ECF No. 19; United Teletech's Moving Br. 10-13.) Accordingly, the Court will conduct a choice of law analysis for Count One based on the facts alleged in the Amended Complaint to determine whether Plaintiff has sufficiently pleaded a claim for replevin under New Jersey and Indiana law.[13]

         A. Replevin (Count One)

         Under New Jersey law, replevin is governed by N.J.S.A. 2B:50-1, which states that "[a] person seeking recovery of goods wrongly held by another may bring an action for replevin." N.J.S.A. 26:50-1. A plaintiff bears the burden "to establish ownership, absolute or qualified, with the right to exclusive possession at the time of bringing the [replevin] action[.]" Isr. Disc. Bank of N.Y. v. H.N. Int'l Grp., Inc., No. 16-6258, 2016 WL 6023155, at *9 n.2 (D.NJ. Oct. 14, 2016) (citing Mandelbaum v. Weiss, 77 A.2d 493, 495 ( N.J.Super.Ct.App.Div. 1950)). A plaintiff must prove its right to recovery "based upon the strength of [its] own title rather than upon the weakness of the defendant's title." Naso v. Pogach, No. 09-3766, 2011 WL 2518786, at *6 ( N.J.Super.Ct.App.Div. June 27, 2011) (quoting Grimbalis v. Stelling, 18 A.2d 412, 413 (N.J. 1941)). New Jersey law requires that a plaintiff demand possession of the property and allege a refusal of such demand by the defendant. Isr. Disc. Bank of N.Y., 2016 WL 6023155, at *9 n.3.

         Under Indiana law, a plaintiff seeking to recover in an action for replevin must prove that the plaintiff has title or a right to possession, that the property is unlawfully detained, and that the defendant wrongfully holds possession of the property. United Farm Family Mitt Ins. Co. v. Michalski,814 N.E.2d 1060, 1067 (Ind.Ct.App. 2004); Prmgle v. Garcia, No. 09-22, 2013 WL 6178237, at *20 (N.D. Ind. Nov. 25, 2013). Similarly, to state a valid replevin action under Indiana law, a plaintiff must demand possession of the property and allege a refusal of such demand by ...

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