The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 13, 14, 15, 18, 21, 22, 23, 24 were read on this motion to/for DISMISS. DECISION ORDER ON MOTION Upon the forgoing documents, defendants’ motion to dismiss is granted in part and denied in part for the reasons set forth herein. On or about November 27, 2019, plaintiff, Geneva Factors Ltd. (“Geneva”), commenced this action against Reverse Flow, LLC (“Reverse Flow”); Anthony Ottimo (“Ottimo”); DTLR, INC. (“DTLR”); Sneaker Villa, Inc. (“Sneaker Villa”); and Falcon Rappaport & Berkman PLLC (“RFB”) essentially to recover amounts due pursuant to a factoring agreement entered into between Geneva and Reverse Flow, which Ottimo, Reverse Flow’s principal, guaranteed (“the Agreement”). The complaint alleges nine causes of action, to wit, breach of contract against Reverse Flow (first cause of action); account stated against Reverse Flow (second cause of action); breach of contract against Ottimo (third cause of action); fees and expenses against Reverse Flow and Ottimo (fourth cause of action); preliminary and permanent injunction against all defendants (fifth cause of action); “value of collateral” against all defendants (sixth cause of action); replevin against Reverse Flow (seventh cause of action); conversion against all defendants (eighth cause of action); and aiding and abetting conversion against all defendants (ninth cause of action). The facts, simply stated, are as follows. In December of 2017 Geneva and Reverse Flow entered into the Agreement, whereby Reverse Flow sold and assigned its accounts receivable to Geneva in exchange for certain cash advances. As part of the Agreement, Reverse Flow assigned over to Geneva the right to collect the amounts owed to Reverse Flow by its customers. Reverse Flow was obligated to stamp customer invoices with instructions directing its customer to pay all amounts to Geneva or to an entity of Geneva’s choosing. Geneva filed a UCC-1 financing statement to perfect its security interest in Reverse Flow’s accounts receivable. Subsequently, Reverse Flow defaulted on its payment obligations under the Agreement. On or about September 26, 2018, Reverse Flow, through its counsel, FRB, filed a lawsuit against two if its customers, DTLR and Sneaker Villa, seeking to recover amounts allegedly owed to it for the sale of certain goods (“the Reverse Flow Action”). Geneva became aware of the Reverse Flow Action on or about November 28, 2018, when Reverse Flow’s counsel from FRB communicated with Geneva’s counsel as to the status of the Reverse Flow Action. Following this communication, Reverse Flow’s attorney requested that Geneva send a current statement of what is outstanding on the DTLR/ Sneaker Villa receivables. Geneva provided a list of open accounts receivable with back-up invoices. There was then a back-and-forth between Geneva’s counsel and Reverse Flow’s counsel regarding whether 100 percent of any recovery in the Reverse Flow Action would go to Geneva. Eventually, Geneva learned, through its own research and not through notice by any of the parties, that the Reverse Flow Action had been settled and discontinued. Geneva’s counsel then contacted DTLR and Sneaker Villa’s counsel on or about October 4, 2019, advising that the receivables upon which the Reverse Flow Action was premised was Geneva’s collateral and demanding that all amounts payable to Reverse Flow pursuant to the settlement should be made directly to Geneva. DTLR and Sneaker Villa’s counsel refused to discuss the details of the confidential settlement. Geneva’s counsel sent two more letters demanding that the settlement proceeds from the Reverse Flow Action be paid directly to Geneva. Geneva never received adequate assurance that payment was to be made to Geneva, and never received any payments. This action ensued. DTLR and Sneaker Villa (collectively “Moving Defendants”) now move, pursuant to CPLR 3211(a)(1) and (7), to dismiss all the causes of action as against them, being the fifth, sixth, eighth, and ninth causes of action. As a preliminary matter, this Court notes that Geneva has withdrawn, without prejudice, its fifth cause of action (for injunctive relief) as against the Moving Defendant. Discussion Dismissal pursuant to CPLR 3211(a)(1) is warranted where the documentary evidence submitted conclusively establishes a defense as a matter of law to the asserted claims. Leon v. Martinez, 84 NY2d 83, 88 (1994); accord; Warberg Opportunistic Trading Fund, L.P. v. GeoResources, Inc., 112 AD3d 78, 82-83 (1st Dept 2013) (“[d]ismissal under CPLR 3211(a)(1) is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law”). Dismissal pursuant to CPLR 3211(a)(7) is warranted where, after accepting the facts alleged as true and according plaintiff the benefit of every possible favorable inference, the court determines that the allegations do not fit within any cognizable legal theory. Leon v. Martinez, supra, 84 NY2d at 87-88; see also EBC I, Inc. v. Goldman, Sachs & Co., 5 NY3d 11, 19 (2005) (“[w]hether a plaintiff can ultimately establish its allegations is not part of the calculus” in determining a motion to dismiss for failure to state a cause of action). A complaint survives a motion to dismiss for failure to state a cause of action if it gives the court and the parties “notice” of what is intended to be proved and the material elements of a cause of action. CPLR 3013. Moving Defendants argue that their motion should be granted as they were not parties to the Agreement and they were not given proper notice, pursuant to New York UCC §9-406, of the assignment of its accounts receivable. Moving Defendants allege that the invoices they received from Reverse Flow were not authenticated and do not identify the rights assigned. Essentially, Moving Defendants argue that it was not until after they made payment to Reverse Flow pursuant to the settlement of the Reverse Flow Action that Geneva put them on notice of its interest to the monies owed. Geneva argues the opposite, claiming that all parties involved in the Reverse Flow Action had actual notice, by reason of the payment assignment instructions stamped on the invoices, that the monies were actually due to Geneva. New York’s UCC §9-406(a), as here relevant, states: [A]n account debtor on an account…may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor. This Court notes that some of the payment assignment instructions stamped on the invoices given to Moving Defendants state “Pay To: White Oak Commercial Finance,” while others state “This bill and all future bills are assigned to, owned by and are payable to: White Oak Commercial Finance…To whom prompt notice must be given of any merchandise returns and any claims or disputes whether based on shortages, non-delivery, offsets or any other claim[s].” This Court finds that the payment assignment instructions directing that “[t]his bill and all future bills are assigned to, owned by and are payable to: White Oak Commercial Finance” was sufficient to place Moving Defendants on notice that the invoices at issue in the Reverse Flow Action had been assigned from Reverse Flow to an entity, White Oak Commercial Finance, because it reasonably identifies the rights assigned and notifies Moving Defendants to direct payment to White Oak Finance’s address. See UCC §9-406. If Moving Defendants had any doubts whether the payment had been assigned, it could and should have contacted Reverse Flow and/or White Oak Finance for proof of the assignment. See UCC §9-406(c). Moving Defendants argue that the payment assignment instructions do not satisfy UCC §9-406 because they were not “authenticated.” However, pursuant to UCC §9-406 Official Comments, “this requirement normally could be satisfied by sending notification on the notifying person’s letterhead or on a form on which the notifying person’s name appears.” Here, the form invoices clearly have Reverse Flow’s name, thus, fulfilling the authentication requirement. Therefore, the fact that Moving Defendants made the settlement payment to Reverse Flow is not a defense to Geneva’s action to collect on the accounts. See IIG Capital LLC v. Archipelago, L.L.C., 36 AD3d 401, 404 (1st Dept 2007) (“That defendants reached a $3.1 million settlement in 2003 with MarketXT regarding these same accounts does not warrant a different result. If, as alleged, defendants’ accounts with MarketXT were assigned to plaintiff pursuant to the factoring agreement, and proper notice was given, defendants’ payment in settlement to MarketXT would not be a defense to an action by plaintiff to collect on the accounts”). Moving Defendants point out that in IIG Capital LLC v. Archipelago, L.L.C. the assignee sent out a letter to the debtors, however, this Court does not believe that the result would have been different without such a letter, as notice is notice in whatever form. See also GM Acceptance Corp. v. Clifton-Fine Cent. Sch. Dist., 85 NY2d 212, 236 (1995) (“Generally, after the account debtor receives notification that the right has been assigned and the assignee is to be paid, and it continues to pay the assignor, the account debtor is liable to the assignee and the fact that payment was made to the assignor is not a defense in an action brought by the assignee. The account debtor has a responsibility to make payment to the assignee after it receives notification that the contract has been assigned and that the payment is to be made to the assignee.”). As this Court has concluded that Moving Defendants received sufficient notice of assignment pursuant to UCC §9-406, this Court also finds that Geneva has sufficiently plead a cause of action against Moving Defendants for their alleged conversion. “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.” Colvito v. New York Organ Donor Network, Inc., 8 NY3d 43, 49-50 (2006) (citations omitted). “Two key elements of conversion are (1) plaintiff’s possessory right or interest in the property and (2) defendant’s dominion over the property or interference with it, in derogation of plaintiff’s rights.” Id. At 50 (citations omitted). Moving Defendants argue that they did not commit the tort of conversion and that Geneva has failed to allege so. Essentially, Moving Defendants argue that they did not commit conversion because they did not intentionally exercise control over personal property belonging to Geneva, as they never had notice of Geneva’s interest. Moving Defendants also contend that it is misplaced for Geneva to argue that Moving Defendants’ money was Geneva’s property before they paid it to Reverse Flow. This Court finds that Geneva has sufficiently plead the elements of conversion, i.e., that Geneva had an interest in the money needed to satisfy Moving Defendants’ accounts payable (i.e., Reverse Flows’ accounts receivable) and that Moving Defendants intentionally and without authority exercised control over the this money by paying the monies owed to Geneva and/or to an entity of Geneva’s choosing, to Reverse Flow. The argument that the monies owed were not specifically identifiable is unavailing as this Court finds that at the moment the monies were paid, but not to Geneva, it became an identifiable fund. Furthermore, this Court has determined that Moving Defendants were provided with adequate notice of assignment before Moving Defendants paid the settlement monies to Reverse Flow, thus, identifiable funds belonging to Geneva existed prior to the payment to Reverse Flow. See Peter Griffin Woodward, Inc. v. WCSC, Inc., 88 AD2d 883, 883 (1st Dept 1982) (“Money, if specifically identifiable, may be the subject of a conversion action.”). “Aiding and abetting conversion requires the existence of conversion by the primary tortfeasor, actual knowledge, and substantial assistance.” William Doyle Gallaries, Inc. v. Stettner, 167 AD3d 501, 505 (1st Dept 2018) (citations omitted). Moving Defendants argue that this claim must fail, as Moving Defendants did not have knowledge of Geneva’s purported interest, thus, they could not have knowledge of a conversion. However, as stated above, this Court finds that Geneva has sufficiently plead the elements of an underlying conversion by Moving Defendants and seemingly by Reverse Flow (presumably the primary tortfeasor). Additionally, this Court has already determined that Moving Defendants had knowledge of Geneva’s purported interest as evidenced by the UCC §9-406 notice, and thus, Moving Defendants had notice of the conversion when they knew the payments were going to Reverse Flow rather than Geneva. Lastly, Geneva has alleged substantial assistance by Moving Defendants (payment directly to Reverse Flow irrespective of the UCC §9-406 notice). Arguably, the allegations in the complaint illustrate that Moving Defendants aided and abetted Reverse Flow’s conversion. As to Genva’s sixth cause of action, for “value of collateral,” this Court does not recognize such a cause of action and as such it is subject to dismissal. Conclusion Moving Defendants’ request to dismiss the eighth cause of action, for conversion, and the ninth cause of action, for aiding and abetting conversion, are denied; Moving Defendants’ request to dismiss the sixth cause of action, for “value of collateral,” is granted and the Clerk is hereby directed to enter judgment dismissing this cause of action as against Moving Defendants. The Moving Defendants time to answer the complaint shall be thirty days from the date of this order CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION GRANTED DENIED X GRANTED IN PART OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE Dated: May 22, 2020
