Opinion
SUMMARY ORDER No. 06-1722-cv.
February 27, 2007.
Appeal from judgement of the United States district Court for the Southern District of New York (Kevin P. Castel, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.For Defendants-Appellants: Leonard Steiner, Steiner Libo, Beverly Hills, CA.
For Plaintiff-Appellee: Leonard Weintraub, Paduano Weintraub, LLP, New York, NY.
PRESENT: HON. GUIDO CALABRESI, HON. BARRINGTON D. PARKER, HON, PETER W. HALL, Circuit Judges.
Southern District of New York (Castel, J.) granting Plaintiff-Appellee Michael David Newbro's motion for summary judgment on claims of conversion and unjust enrichment and awarding prejudgment interest to Newbro. We assume familiarity with the facts and procedural history.
We first hold that the district court properly exercised personal jurisdiction over the Freeds. We review district court decisions regarding personal jurisdiction "for clear error on factual holdings and de novo on legal conclusions." D.H. Blair Co., Inc. v. Gottdiener, 462 F.3d 95, 103 (2d Cir. 2006) (internal quotation marks omitted). In a diversity case, such as this, the law of the forum state applies to the issue of personal jurisdiction. See id. at 104.
The district court correctly concluded, in a September 8, 2004 order, that the Freeds were subject to personal jurisdiction under New York's long-arm statute, C.P.L.R. § 302(a)(1). See Newbro v. Freed, 337 F. Supp. 2d 428 (S.D.N.Y. 2004). Section 302(a)(1) permits a New York court to exercise jurisdiction over an out-of-state defendant who "transacts any business within the state." For a court to maintain personal jurisdiction on this ground, there must also exist "a substanztial nexus between the business transacted and the cause of action sued upon." Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 31 (2d Cir. 1996) (internal quotation marks omitted).
The Freeds maintained an account in New York with Todd Eberhard, the financial consultant who committed the fraudulent transfer underlying the present action. The Freeds communicated on several occasions with Eberhard in New York, in person as well as by phone and mail, regarding their account and the specific transfers at issue here. Together, these contacts established a sufficient nexus between the Freeds' transaction of business and Newbro's claims to justify the district court's exercise of personal jurisdiction. Since significant events material to those claims occurred in New York, we likewise conclude that the district court did not abuse its discretion in denying the Freeds' motion to transfer venue. See Gottdiener, 462 F.3d at 105-06.
Turning to the merits, we find no error in the district court's grant of summary judgment in favor of Newbro on his claims of conversion and unjust enrichment. Under New York law, an action for conversion "does not require defendant's knowledge that he is acting wrongfully, but merely an intent to exercise dominion or control over property in a manner inconsistent with the rights of another." LoPresti v. Terwilliger, 126 F.3d 34, 42 (2d Cir. 1997) (internal quotation marks omitted). The Freeds nevertheless maintain that they had no obligation to return to Newbro any money they received via Eberhard.
The Freeds attempt to analogize the funds at issue here to funds held in a bank's general accounts, which New York courts have deemed insufficiently specific and identifiable to support a claim for conversion. See, e.g., Chemical Bank v. Ettinger, 196 A.D.2d 711, 714 (1st Dep't 1993). Here, however, the fact that the funds were withdrawn from another client's brokerage account and transferred to the Freeds appeared on the face of their own account statement, and an investigation initiated by the Freeds confirmed that the source of the funds was another Eberhard client. Although the Freeds did not wrongfully intend to deprive Newbro of his money at the time they received it from Eberhard, they were obligated to return it upon Newbro's demand. Cf. Boyce v. Brockway, 31 N.Y. 490, 493 (1865) (noting that even if defendants received certain goods "under an honest but mistaken belief that the property was their own, they would still be liable to plaintiffs if their acts in regard to it amount to a conversion").
With regard to unjust enrichment, the Freeds contend that they cannot be held liable because there was no privity between themselves and Newbro. While New York courts have occasionally found that an action for unjust enrichment cannot lie absent privity, see, e.g., Sperry v. Crompton Corp., 26 A.D.3d 488, 489 (2d Dep't 2006), that issue does not arise here. This case involves the very "essence" of an unjust enrichment claim under New York law, which "'is that one party has received money or a benefit at the expense of another."' Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000) (quoting City of Syracuse v. R.A.C. Holding, Inc., 258 A.D.2d 905, 906 (4th Dep't 1999)); see also Strong v. Strong, 277 A.D.2d 533, 534 (3d Dep't 2000) ("It is axiomatic that [a] cause of action for unjust enrichment arises when one party possesses money . . . that in equity and good conscience they should not have obtained or possessed because it rightfully belongs to another." (internal quotation marks omitted)). Even though the Freeds had no prior dealings with Newbro, the fact that money was transferred directly from his account to theirs (albeit by a third party) is enough to sustain a claim for unjust enrichment. The Freeds' equitable defenses also fail.
Finally, we conclude that the district court did not abuse its discretion in denying the Freeds' motion for reconsideration. Because they raised it for the first time on reconsideration, the court properly refused to consider the Freeds' argument that Newbro's actual damages were less than $1.12 million because a large portion of the money transferred originated not as cash but as a "debit" on Newbro's account. See Nat'l Union Fire Ins. Co. of Pittsburgh v. Stroh Cos., Inc., 265 F.3d 97, 115 (2d Cir. 2001) (noting that arguments raised for the first time on a motion for reconsideration may be rejected as untimely). Were we to entertain this argument here, we would reject its premise. Insofar as the funds in question were provided to the Freeds by margining securities that Newbro owned, Newbro's resulting loss was fully compensable.
We further conclude that the district court did not err in awarding prejudgment interest to Newbro, running from July 28, 2003 forward. Under C.P.L.R. § 5001(b), prejudgment interest is "computed from the earliest ascertainable date the cause of action existed." The district court determined that Newbro's cause of action for conversion first existed when he demanded the return of his money from the Freeds. See, e.g., D'Amico v. First Union Nat'l Bank, 285 A.D.2d 166, 172 (1st Dep't 2001) ("[W]here the original possession is lawful, a conversion does not occur until after a demand and refusal to return the property."). The Freeds' argument that this demand was insufficient is unavailing. In a July 28, 2003 letter to the Freeds, Newbro specified the amounts of the illegal transfers and the date they occurred, and asserted that he had not approved them. Under New York law, nothing more was required. See Feld v. Feld, 279 A.D.2d 393, 394-95 (1st Dep't 2001) ("A demand consists of an assertion that one is the owner of the property and that the one upon whom the demand is made has no rights in it other than allowed by the demander.").
We have considered the Freeds' remaining arguments and find that they lack merit. Accordingly, we affirm the district court's judgment.