Opinion
No. 01 Civ. 8370 (GEL)
June 28, 2002
Malcolm I. Lewin (Andrew P. Schriever, on the brief), Morrison Cohen Singer Weinstein, LLP, New York, N.Y. for plaintiff First Merchant Bank OSH, Ltd.
James E. Brandt (Yoram J. Miller, on the brief), Latham Watkins, New York, N.Y. for defendant Village Roadshow Pictures (U.S.A.) Inc.
Bijan Amini (Adam D. Perlmutter, on the brief), Storch Amini Munves, P.C., New York, N.Y. for defendant Reliance Insurance Company.
OPINION AND ORDER
First Merchant Bank OSH, Ltd. ("FMB") filed this action in the Supreme Court of the State of New York, seeking compensatory and punitive damages for alleged malicious prosecution, abuse of process, wrongful attachment, and conversion by defendants Village Roadshow Pictures (U.S.A.) Inc. ("Roadshow"), and Reliance Insurance Company ("Reliance"), as the successor in interest by merger of the United Pacific Insurance Company ("United Pacific", as well as damages pursuant to New York's Civil Practice Law and Rules ("CPLR") 6212(e). Essentially, FMB, a bank in Northern Cyprus, charges Roadshow and United Pacific with "maliciously procuring a wrongful attachment of FMB's correspondent bank account." (Compl. ¶ 1.) Defendants removed the action to this Court, pursuant to 28 U.S.C. § 1446. Both now move to dismiss the Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). Roadshow argues that FMB fails to state a claim. Reliance argues that, as a matter of law, the issuance of a surety bond cannot create liability under any of FMB's claims, and that FMB cannot recover against Reliance because FMB is neither a party to the bond nor an intended third-party beneficiary. For the reasons stated below, this Court agrees that the Complaint does not adequately plead a cause of action for abuse of process, and that FMB cannot maintain any of its claims against Reliance, but fins that FMB has stated claims for malicious prosecution, wrongful attachment, damages pursuant to CPLR 6212(e), and conversion. Accordingly, all claims against Reliance are dismissed, and Roadshow's motion is granted in part and denied in part.
Roadshow also moved to dismiss for insufficient service of process, pursuant to Fed.R.Civ.P. 12(b)(5), but that motion was withdrawn and service deemed adequate at the proceeding before this Court on November 9, 2001. (11/9/01 Tr. at 15.)
FMB does not oppose Reliance's motion as to the causes of action for malicious prosecution, abuse of process, and conversion. (Pl. Opp. Mem. at 27 n. 11.)
BACKGROUND
Except where noted, the following material facts are alleged in plaintiff's Complaint and must be accepted as true for purposes of defendants' motions to dismiss. The allegations in the Complaint stem from the alleged misappropriation of $4,000,000 in February 1999 by Ross Henry ("Henry"), Roadshow's Chief Financial Officer. Henry transferred the funds from Roadshow's account in Los Angeles to account number 574073851441 at ABN AMRO Bank ("ABN-Amro") in New York, for the benefit of Sundance Financial Corporation ("Sundance"). (Lewin Decl. Ex. C.) According to FMB, this ABN-Amro account does not belong to Sundance, but rather is a correspondent account held by FMB, and was used in this transaction simply to implement a transfer of Roadshow's funds to Sundance's account number 1-3-10-700 at FMB in Cyprus. (Compl. ¶ 11.) The record does not establish what then became of the funds, but it appears that neither Sundance, nor its president Lawrence Ryckman ("Ryckman"), nor the funds, can now be found. At any rate, the record contains a letter dated February 1, 1999, from Ryckman to Henry, confirming transfer of $4,000,000 to Sundance account number 1-3-10-700 for Henry's exclusive benefit. (Lewin Decl. Ex. B.)
According to the Bank's website, the correct spelling is ABN AMRO. The Court, like all parties to the litigation, will use ABN-Amro as a less flamboyant shorthand.
A correspondent bank account holds funds "in the name of a foreign financial institution unable to maintain a branch office in the United States, which is maintained to effect dollar transactions, in which `neither the originator who initiates payment nor the beneficiary who receives it holds title to the funds at the correspondent bank.'" Village Roadshow Pictures (U.S.A.) Inc. v. Sundance Fin. Corp., Inc., No. 600767/00, at 4-5 (N.Y.Sup.Ct. Apr. 27, 2000) (order directing hearing on motion to vacate attachment and denying cross-motion to extend attachment) (quoting Sigmoil Resources. N.V. v. Pan Ocean Oil Corp. Nigeria, 23 A.D.2d 103, 104 (1st Dep't 1996)). Since funds are "immediately credited to the beneficiary's account at the local branch of the foreign financial institution," these accounts "cannot be attached to restrain funds transferred there for the benefit of the party to be attached." (Id;)
In February 2000, in an effort to recover the stolen $4,000,000, Roadshow sued Sundance and Ryckman (collectively the "Sundance defendants") for fraud in New York state court. In an ultimately frustrated effort to attach the funds, Roadshow asserted, inaccurately (and, according to FMB, with deliberate intent to mislead the court), that the $4,000,000 had been transferred into Sundance's account number 1-3-10-700 at ABN-Amro in New York. (Compl. ¶ 12.) No such account exists at ABN-Amro, however, and that account number actually corresponds to Sundance's account at FMB in Cyprus. (Id.) On February 24, 2000, the state court granted Roadshow's motion for an order to show cause and a temporary restraining order ("TRO") against the Sundance defendants, restraining, pending a hearing, any funds held by ABN-Amro in which the Sundance defendants had an interest, specifically including funds allegedly held in account number 1-3-10-700 at ABN-Amro. (Id.)
Roadshow's complaint also named John Does 1-10 as defendants.
The day after receiving the TRO, Roadshow informed the court that it had provided an incorrect account number, stating that "the account in question at ABN-Amro Bank in New York is numbered 574073351441, under the name of First Merchant Bank." (Id. ¶ 15.) The TRO was amended to restrain the funds in that account, which is FMB's correspondent account. (Id. ¶ 16.) FMB's Complaint charges that Roadshow knew that Sundance's actual account was held at a foreign bank abroad (and was therefore beyond the reach of a state court injunction), and used the mistaken account numbers solely to obtain an ex parte TRO restraining FMB's account. (Id. ¶ 12.) According to FMB, Roadshow misled the state court to "unwittingly (and unlawfully) attach FMB's own funds by convincing the Court. . . that these funds belonged to the Sundance defendants." (Id. ¶ 13; emphasis in original.) FMB claims that Roadshow "thought it could use this wrongful attachment of FMB's own funds as leverage to force FMB to tap into or freeze the Sundance defendants' funds in Cyprus." (Compl. ¶ 2.)
Pursuant to the terms of the TRO, United Pacific, to whom Reliance is the successor in interest, executed an undertaking on Roadshow's behalf and in favor of the Sundance defendants, covering damages sustained by reason of the TRO up to $200,000. (Perlmutter Aff. Ex. E.). Although the amended TRO ran against FMB as well as ABN-Amro (Id. Ex. D), FMB was neither a defendant in the case nor specifically referred to in the undertaking, which ran in favor of Sundance, Ryckman, and John Does 1-10.
After the amended TRO was issued, FMB entered an appearance to oppose the proposed attachment by submitting the affidavit of Cenk Ermiya, Director of International Operations of FMB. (Lewin Decl. Ex. 6 at 2-3.) In that affidavit, Ermiya claimed that none of the money in account number 574073851441 belonged to the Sundance defendants. (Id. Ex. 2 at ¶¶ 3-4.) The state court was apparently not persuaded that the account did not hold some of the Sundance defendants' funds, the court issued an order of attachment on March 16, 2000. (Compl. ¶ 17.) That order directed the Sheriff of the City of New York to levy upon property of the Sundance defendants, again specifically "including without limitation the funds in Account No. 574073851441 at ABN-Amro Bank in New York City under the name First Merchant Bank," and continued the restraining order pending the sheriff's levy. (Perlmutter Aff. Ex. B at ¶¶ 4, 5.) On March 14, 2000, in support of this attachment, United Pacific had executed a second undertaking for $450,000 — $50,000 for sheriff's fees and the remaining $400,000 for any damages suffered by Sundance and Ryckman "if [they] recover judgment, or if it is finally decided that [Roadshow] was not entitled to the attachment." (Perlmutter Aff. Ex. C.) This undertaking does not purport to cover FMB.
Although this affidavit is headed an "Affidavit, to Vacate Attachment" (Lewin Decl. Ex. 2 at 1), the affidavit was in fact submitted on February 29, 2000, and the order of attachment did not issue until March 16. The affidavit is described by the state court in a later order as having been submitted in opposition to the attachment. (Id. Ex. 6 at 2-3.)
Specifically, the undertaking provides a guarantee of $400,000 that "the Plaintiff [Roadshow] will pay to the Defendants, SUNDANCE FINANCIAL CORPORATION and LAWRENCE G. RYCKMAN, all costs and damages including reasonable attorney's fees which may be sustained by reason of the attachment if the Defendants recover judgment, or if it is finally decided that the Plaintiff was not entitled to an attachment of the property of the Defendants." (Perlmutter Aff. Ex. C.)
Although Roadshow amended the complaint on March 16, 2000, to include FMB as a defendant, claiming that FMB had conspired in the fraud (Lewin Decl. Ex. 4), and although FMB submitted an affidavit opposing the attachment, FMB does not appear in the caption on the order of attachment. Indeed, the state court later rejected a motion by Roadshow to extend the order of attachment to include FMB. Village Roadshow No. 600767/00, at 8-12. Like the TRO, the order of attachment on its face purports to attach only assets in which the Sundance defendants have an interest. However, the order also specifically stated that the restrained assets of the Sundance defendants "includ[ed]. . . funds in Account No. 574073851441 at ABN-Amro Bank." (Perlmutter Aff. Ex. B at ¶ 4.) At any rate, the Sheriff never levied on any property. Instead, apparently in an effort to avoid the Sheriff's fees, "[a]t the consent of the parties, ABN-Amro put the funds into a separate account that was set aside." (11/9/01 Tr. at 6.)
In an order entered on April 27, 2000, the state court addressed a motion by FMB to vacate the attachment and a motion by Roadshow to extend the attachment to cover funds belonging to FMB. As noted above, Roadshow's motion was denied. The court described Roadshow's evidence of FMB's involvement in the underlying fraud, which principally pertained to alleged money laundering and other unrelated fraudulent activity on the part of persons associated with the bank, as "sorely lacking in probative value, being but an assemblage of hearsay, unsworn statements and insinuations" concerning acts not "in any way connected to the specific fraud which is the subject of this action." Village Roadshow, No. 600767/00, at 11-12. The court thus held that Roadshow had "failed to meet the standard for an attachment against FMB, or to `extend' the present order of attachment to include FMB." Id. at 13.
On its motion to vacate, FMB once again argued that the attached account contained no assets belonging to the Sundance defendants, claiming that the account is a correspondent account in which customers' funds are immediately credited to foreign branches. Id. at 3-4. The court agreed that such accounts cannot be restrained, since the funds that pass through them for the benefit of customers do not remain in them after they have been credited to the beneficiary's account outside the United States. Id. at 4-5. However, the court concluded that FMB had submitted insufficient proof concerning the nature of the account, since the documents provided were inadequate "proof of the banking relationship, . . . do not directly identify the Account as a correspondent account and do not unequivocally state when the $4,000,000 was credited to Sundance's account outside the United States." Id. at 7-8. Although agreeing that it was possible that the funds had been transferred from ABN-Amro to the Cyprus account, id at 8 n. 1, the court called for "[f]urther documentary evidence. . . to fill in the gaps in FMB's argument that the Account in question was a correspondent bank account, which no longer contains any funds belonging to the beneficiary of the transfer, Sundance," id. at 8. Finding that the evidence presented by FMB was "equivocal," id at 7, and that FMB had the burden of "coming forward with evidence demonstrating the relationship between the foreign bank and its depositors," id. at 5, the court therefore reserved decision on the motion to vacate the attachment pending a hearing. That hearing was intended to address, among other things, whether the ABN-Amro account is a correspondent account, the relationship between FMB and ABN-Amro with regard to the account, and whether and when the $4,000,000 was transferred into the ABN-Arnro account and credited to an FMB account outside the United States. Id. at 13.
FMB argues, with considerable force, that the state court's opinion decided that "upon confirming that the Account was a correspondent account. . . the attachment would be vacated as groundless." (Pl. Opp. Mem. at 4.) The state court, however, never had an opportunity to confirm the nature of the account or to finally resolve the factual issues identified in its opinion, because Roadshow discontinued the action on May 5, 2000, six days before the scheduled evidentiary hearing. (Compl. ¶ 4.) FMB asserts that Roadshow discontinued the action "[w]hen it became abundantly clear that the Court was going to grant FMB's motion to vacate after the hearing." (Compl. ¶ 4.)
More than a year later, on August 3, 2001, FMB filed this action in state court against Roadshow and United Pacific. After removing the action to this Court, Reliance and Roadshow now move to dismiss. Oral argument was held on November 9, 2001.
DISCUSSION
On a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must accept "as true the facts alleged in the complaint," Jackson Nat'l Life Ins. Co. v. Merrill Lynch Co., 32 F.3d 697, 699-700 (2d Cir. 1994), and may grant the motion only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Thomas v. City of New York, 143 F.3d 31, 36 (2d Cir. 1998) (citations omitted); see also Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996) (when adjudicating motion to dismiss under Fed.R.Civ.P. 12(b)(6), the "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims" (internal quotation marks and citations omitted)). When deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents attached to the complaint as exhibits or incorporated in it by reference. See Brass v. American Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993) ("the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference") (citing Fed.R.Civ.P. 10(c)).
1. Roadshow's Motion to Dismiss: Failure to State a Claim
Defendant Roadshow moves to dismiss plaintiff's five causes of action pursuant to Rule 12(b)(6) on grounds that the Complaint fails to adequately plead each of the claims. In deciding this motion, the Court will consider, in addition to the allegations of the Complaint, the state court orders and the undertakings accompanying them, since FMB explicitly refers to them in its Complaint, relies upon them to establish essential elements of its claims, and has actual notice of their contents. See Yak v. Bank Brussels Lambert, 252 F.3d 127, 130-31 (2d Cir. 2001); see also Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000) (when adjudicating motion to dismiss, court may consider "documents that the plaintiffs either possessed or knew about and upon which they relied in bringing the suit"); Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991) ("[W]hen a plaintiff chooses not to attach to the complaint or incorporate by reference a [written instrument] upon which it solely relies and which is integral to the complaint, the defendant may produce the [instrument] when attacking the complaint for its failure to state a claim, because plaintiff should not so easily be allowed to escape the consequences of its own failure."); Barnum v. Millbrook Care L.P., 850 F. Supp. 1227, 1232 (S.D.N.Y. 1994) ("In the event that a plaintiff alleges a claim based on a written instrument, as is the case here, the court may consider such an instrument in ruling on a Rule 12(b)(6) motion even if it was not attached to the complaint and made a part thereof under Rule 10(c)"); aff'd without opinion, 43 F.3d 1458 (2d Cir. 1994).
A. Malicious Prosecution
In New York, a successful cause of action for malicious prosecution must have four elements: "(1) the initiation of an action by the defendant against the plaintiff, (2) begun with malice, (3) without probable cause to believe it can succeed, and (4) that ends in failure or, in other words, terminates in favor of the plaintiff." O'Brien v. Alexander, 101 F.3d 1479, 1484 (2d Cir. 1996) (citing Broughton v. State of New York, 37 N.Y.2d 451, 457 (1975)). In addition, New York courts require "proof of special injury as a necessary component of a malicious prosecution claim." Engel v. CBS. Inc., 93 N.Y.2d 195, 198 (1999). Until recently, parties had to show "interference from a provisional remedy [as] a prerequisite to a malicious prosecution claim where the action upon which that claim is founded is a civil action." O'Brien, 101 F.3d at 1485 (citations omitted). The Court of Appeals of New York, however, in answering a question certified by the Second Circuit, has since held that "New York law does not confine special injury to the imposition of a provisional remedy." Engel, 93 N.Y.2d at 199. Instead, "burdens substantially equivalent to those imposed by provisional remedies are enough. Actual imposition of a provisional remedy need not occur, and a highly substantial and identifiable interference with person, property, or business will suffice." Id. at 204.
Roadshow addresses FMB's malicious prosecution claims as two separate causes of action: one dealing with the attachment against the Sundance defendants and one dealing with the effort to extend that attachment to FMB. (Roadshow Mem. at 12.) As to the proceedings against the Sundance defendants, Roadshow claims that FMB (1) fails to plead facts that show initiation of a proceeding by the defendant against the plaintiff, and therefore lacks standing to bring a malicious prosecution claim, and (2) fails to overcome the presumption of probable cause created by the state court orders. As to the proceedings against FMB, Roadshow claims that the Complaint fails to adequately plead special injury.
Roadshow's proposed distinction is misleading and unnecessary, as both proceedings referenced in the Complaint were actually parts of one continuous action. Accordingly, Roadshow's argument that FMB was not a defendant when the state court proceedings began, although technically accurate, is unpersuasive, because FMB was named as a defendant in the state action once Roadshow filed the amended complaint. The first element of a malicious prosecution claim is thus properly pleaded. Realistically viewing Roadshow's state court litigation, as described in the factual allegations of the Complaint, as a single effort wrongfully to bring claims and seek provisional remedies against FMB without probable cause, it is clear that FMB has alleged that Roadshow brought a civil action against it. We therefore turn our attention to Roadshow's other arguments, that FMB failed to satisfy the special injury requirement and failed to overcome the presumption of probable cause.
FMB argues that under Ford Motor Credit Co. v. Hickey Ford Sales, Inc., 62 N.Y.2d 291 (1984), it can still bring a malicious prosecution even if it fails to satisfy the first element — proceedings initiated by defendant against plaintiff. The plaintiffs in Ford, however, brought a statutory wrongful attachment cause of action, not a malicious prosecution claim. The Court of Appeals' holding that persons "who had an interest in the property attached but were not defendants in the action in which the order of attachment was granted" can get awards under CPLR 6212(2), Ford, 62 N.Y.2d at 300, has no direct bearing on the requirements for establishing a prima facie case of malicious prosecution. Because proceedings were brought against FMB, it is unnecessary in this case to decide whether New York would extend the logic of Ford Motor Credit to malicious prosecution actions. See, e.g., Kidder, Peabody Co. v. IAG Int'l Acceptance Group, 28 F. Supp.2d 126, 145 (S.D.N.Y. 1998) (distinguishing elements of malicious prosecution and wrongful attachment).
In New York, a malicious prosecution plaintiff must show special injury. "In most cases, special injury has been demonstrated through the use of provisional remedies, such as arrest, attachment, replevin, or injunction." Engel, 145 F.3d at 502. Roadshow argues that no such provisional remedy directed against FMB was ever entered here. Once again, Roadshow stresses hypertechnical form and ignores practical reality. It is true that the order of attachment that issued was not designed or intended by the court to reach FMB's assets. The state court specifically declined to extend the attachment to FMB, and intended its order to only reach assets in which Sundance and Ryckman had an interest. Nevertheless, FMB has put forward facts that might, if proved true, demonstrate significant interference with its assets "substantially equivalent to those imposed by provisional remedies." Engel. 93 N.Y.2d at 204. An injunction was issued by the state court specifically restraining FMB from utilizing funds that in fact belonged to it. As a result FMB's own funds and the funds of its other customers in the ABN-Amro account were set aside and frozen during the state court proceedings. See, e.g., Compl. ¶ 17. See also Lewin Decl. Ex. 1 (letters seeking release of funds belonging to a Korean customer); 11/9/01 Tr. at 6. FMB has specifically alleged that Roadshow, knowing that the account it sought to attach did not contain funds belonging to the Sundance defendants, deliberately presented misleading information to the state court in order to assure that the attachment, though nominally directed at a Sundance account, would restrain funds belonging to FMB. (Compl. ¶¶ 2, 34.) Assuming, as the Court must at this stage, the truth of the facts alleged, FMB has sufficiently pled special injury tantamount to an attachment directed at it.
Roadshow also argues that the Complaint has not overcome the presumption of probable cause created by the state court's issuance of the TRO and order of attachment, since a judicial officer "had to pass on the evidence-presented to it in order to ascertain whether or not" such relief was warranted. Horenstein v. Wolf, 491 N.Y.S.2d 183, 186 (2d Dep't), aff'd 499 N.Y.S.2d 938 (1986). To overcome that presumption, "fraud, perjury or the withholding of evidence in order to obtain the provisional order must be shown." Id. FMB has alleged precisely that, claiming that Roadshow knew that the funds had been transferred to Cyprus and intentionally misled the state court to attach FMB's funds. (Compl. ¶ 34.) The state court's April 27, 2000, order makes clear that Roadshow lacked probable cause to enjoin any of FMB's assets. As evidence that Roadshow knew the true nature of the attached account, FMB points to a letter on FMB's letterhead with the bank's Cyprus address confirming funds held for Sundance at FMB in Cyprus, which Roadshow attached to its state court amended complaint. (Pl. Opp. at 17.) FMB argues that Roadshow knew all along that ABN-Amro had no account matching the number given in the letter, and used that account number to seek the TRO, later substituting FMB's account number at ABN-Amro. (Compl. ¶ 16.) While the chain of inferences relied on by FMB to establish Roadshow's knowledge of the inaccuracy of its claims is hardly incontrovertible, at this stage of the proceedings, the factual record establishes that FMB has a good faith, non-frivolous basis for alleging fraud on the part of Roadshow. There is little doubt that the original attachment order was based on inaccurate information, and under all these circumstances, FMB's assertion that Roadshow was aware of the inaccuracy is surely sufficiently substantial to call for discovery. Taken as true, FMB's allegations that Roadshow misrepresented facts to the state court overcome the presumption of probable cause.
Accordingly, the cause of action for malicious prosecution survives Roadshow's motion to dismiss.
B. Abuse of Process
A plaintiff must show three elements for an abuse of process claim: "(1) regularly issued process, either civil or criminal, (2) an intent to do harm without excuse or justification, and (3) use of the process in a perverted manner to obtain a collateral objective." Curiano v. Suozzi. 63 N.Y.2d 113, 116 (1984). The Court of Appeals of New York defines process as "a "direction or demand that the person to whom it is directed shall perform or refrain from the doing of some prescribed act.'" Williams v. Williams, 23 N.Y.2d 592, 596 (1969) (citation omitted). In other words, for a successfully pled cause of action, "there must be an unlawful interference with one's person or property under the color of process." Id. Abuse of process has been described as a "form of extortion" where the defendant invokes legal process to coerce the plaintiff into doing something other than what the process contemplates." Vista Food Exchange. Inc. v. Joyce Foods, Inc., Civ. 0012 (MBM), 1996 WL 122419, at *5 (S.D.N.Y. March 20, 1996); see also Williams, 23 N.Y.2d at 596 n. 1.
The New York Court of Appeals has described the tort of abuse of process as "seldom considered," "obscure," and as "one which is rarely brought to the attention of the courts." Bd. of Educ. of Farmingdale Union Free Sch. Dist. v. Farmingdale Classroom Teachers Assoc., Inc., 38 N.Y.2d 397, 399 (1975). To show abuse of process, "proof of ulterior motive [is] not sufficient." Id. at 403 (citing Hauser v. Bartow, 273 N.Y. 370 (1937)). A cause of action exists only if the defendant wrongfully used process for an "intended and accomplished result [that] exceeds the scope of the provisional remedy." Vista Food. 1996 WL 122419, at *5. The tort requires.that "regularly issued process was perverted to the accomplishment of an improper purpose," which requires "something more than a proper use from a bad motive." Hauser, 273 N.Y. 370, 373 (1937) (citation omitted).
As discussed above, FMB has alleged facts suggesting interference with its account as a result of the TRO and attachment that ran against the Sundance defendants' interests in funds supposedly held in FMB's account. Assuming that this interference constitutes sufficient process, the Complaint fails to allege any improper use. FMB claims that Roadshow's intended collateral objective was "to force FMB to tap into or freeze the Sundance defendants' funds in Cyprus." (Compl. ¶ 2.) In addition to describing alleged misrepresentations offered to secure the attachment, the Complaint also describes a "smear" campaign conducted by Roadshow against FMB, consisting of evidence that the state court found lacking in probative value and largely inadmissible. (Compl. ¶¶ 4, 19, 21.) The Complaint, however, does not describe how Roadshow "perverted" the attachment to coerce FMB to reach Sundance's funds. Moreover, Roadshow argues correctly that FMB could have avoided the restraints of the TRO and attachment against the Sundance defendants by providing evidence showing that the account contained only its funds and money belonging to other customers, and thus, would have robbed the attachment of any alleged leveraging power.
Accepting the facts in the Complaint as true and drawing all inferences in FMB's favor, the Complaint, at most, shows that Roadshow acted in bad faith or with an ulterior motive. It does not, however, contain facts demonstrating how Roadshow used or attempted to use the attachment to obtain anything other than a restraint on its stolen funds. From applicable case law, "perversion" of process can be distinguished from a mere ulterior motive by focusing on the use of process after that process has been secured. A party can initiate process based on improper or ulterior motives without committing an abuse of process. Unlike malicious prosecution, which focuses on the deliberate prosecution of unfounded claims, abuse of process focuses on how process is used once obtained, not whether it was properly obtained to being with. To commit the tort, a party must improperly use that process after it is issued for a result and in a manner neither intended nor sanctioned by the law. See, e.g., Curiano, 63 N.Y.2d at 117 (affirming dismissal of abuse of process claim because "summons issued by defendants was [not] improperly used after it was issued"); Reiser v. Stoller, 51 F. Supp.2d 430, 456 (S.D.N.Y. 1999) (granting leave to replead abuse of process to demonstrate how defendant used warrant of eviction to gain "`collateral advantage' not sanctioned by law such as extortion, blackmail or retribution").
Here, FMB argues that Roadshow sought to use the attachment as leverage to secure FMB's assistance in pressuring Sundance to return funds stolen from Roadshow. This is hardly "extortion, blackmail or retribution"; nor is it doing "harm without excuse or justification." Curiano, 63 N.Y.2d at 116. If the attachment was properly obtained, Roadshow's hope that the attachment would induce FMB's cooperation in securing the return of stolen money was neither an illegitimate nor an unusual reason to pursue that remedy. The gravamen of FMB's complaint is not that the remedy was twisted to an improper purpose, but rather, as charged in the malicious prosecution count, that it was obtained by fraud when Roadshow knew that it had no right to the remedy. Accordingly, the cause of action for abuse of process is dismissed.
C. Wrongful Attachment and Damages Pursuant to CPLR 6212(e)
The Complaint alleges separate causes of action for common law wrongful attachment and for statutory damages under CPLR 6212(e). Since the claims are overlapping if not identical, see Ford Motor Credit, 62 N.Y.2d at 303 ("The award of damages under CPLR 6212 and 6221 is governed by the rules of law relating to an action for wrongful attachment"), the Court will consider them together.
To survive the motion to dismiss, the Complaint must adequately plead actual attachment of FMB's property and show that it was finally decided that Roadshow was not entitled to the attachment. FMB has alleged that the ABN-Amro account is in fact a correspondent account, and the state court clearly held that the attachment would be invalid if that fact could be established. The Complaint thus adequately alleges that Roadshow was not entitled to an attachment.
Roadshow argues, however, that the Complaint does not adequately plead actual attachment of FMB's property, because "no property was attached by the sheriff under any of the orders issued by the State Court." (Roadshow R. Mem. at 3.) Roadshow's argument combines two threads of authority, one holding that damages pursuant to CPLR 6212(e) only lie when property has actually been attached, and the other holding that an attachment only becomes effective upon levy by the sheriff. The whole of Roadshow's logic, however, is less persuasive than the sum of its parts.
As this Court has previously recognized, numerous New York cases "strongly suggest that the actual attachment of property is a prerequisite to maintaining a cause of action for damages under Rule 6212(e)." Kidder, Peabody Co. Inc. v. IAG Int'l Acceptance Group, 28 F. Supp.2d 126, 145 (S.D.N.Y. 1998) (citing Salamanca Trust Co. v. McHugh, 156 A.D.2d 1007, 550 N.Y.S.2d 764 (4th Dep't 1989) and Augsbury v. Adams, 108 A.D.2d 978, 484 N.Y.S.2d 962, 963 (3d Dep't 1985)). None of these cases, however, reject damages under Rule 6212(e) in a case such as this one, in which a court had actually issued an order of attachment, and the party whose assets were thus encumbered was actually deprived of the use of its property. Rather, they find such damages unavailable in cases where an attachment was never entered, Augsbury, 484 N.Y.S.2d at 962-63, even where a temporary restraining order had briefly restrained a party's property before the attachment was denied, Salamanca, 550 N.Y.S.2d at 766; Provisional Protective Committee v. Williams, 121 A.D.2d 271, 503 N.Y.S.2d 47 (1st Dept. 1986), or in which an order of attachment had issued, but only against a bank that held none of plaintiff's property, and was promptly vacated without any of the plaintiff's property ever having been restrained in any way, Kidder, 28 F. Supp.2d at 144-46. These cases quite naturally hold that the statutory action, which applies only to attachment and not to other provisional remedies, only provides damages where property has actually been attached.
None of the cases cited for the proposition that an attachment becomes effective at the time of levy, on the other hand, arise in the context of Rule 6212(e). There is no reason to believe that when the cases discussed above refer to property that is "actually attached," Salamanca, 550 N.Y.S.2d at 765-66, they had this technical rule in mind.
In the present case, unlike those relied on by Roadshow, an order of attachment actually issued, and property of FMB was actually encumbered, both by the continuance of the TRO post-attachment pending the sheriff's levy, and by the parties' agreement to set the funds aside in lieu of such levy. The reality of the situation was that FMB's account had been attached. The fact that the parties agreed to an accommodation in order to avoid the expense of a sheriff's levy has no impact on that reality; it would be counterproductive and wasteful for a court to hold that a party who believes that an order of attachment against it has been wrongfully maintained must insist on an expensive procedure that would actually increase the damage caused by the wrongful order if it wishes to preserve its rights under CPLR 6212(e). Moreover, the order of attachment was accompanied by a judicial order restraining the property pending levy. This is completely distinguishable from the kind of short-term TRO that has been held not to give rise to damages for wrongful attachment. As FMB correctly argues, if Roadshow's argument were accepted, then in cases in which an order of attachment has actually issued, accompanied by such a restraint, "any party may wrongfully attach the property of another by procuring a court order which [attaches the property and] enjoins the garnishee from taking any action relating to that property but evade the consequences of its interference simply by neglecting to have the sheriff levy." (P. Mem. at 7.) This cannot be the law, and Roadshow cites no case holding anything remotely similar.
D. Conversion
Conversion is "any unauthorized exercise of dominion or control over property by one who is not the owner of the property which interferes with and is in defiance of a superior possessory right of another in the property." See, e.g., Hart v. City of Albany, 272 A.D.2d 668, 668 (3d Dep't 2000) (citing Meese v. Miller, 79 A.D.2d 237, 242 (4th Dep't 1981); Galtieri v. Kramer, 232 A.D.2d 369, 369 (citing same). Roadshow claims that FMB's complaint is inadequate because any interference with its interest in property resulted from its failure to properly document the contents of the ABN-Amro account. (Roadshow Mem. at 16.)
On a motion to dismiss, the Court considers only "whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." Meese, 79 A.D.2d at 244 (citation and internal quotes omitted). To establish conversion, FMB "must demonstrate legal ownership" of property and prove that Roadshow "exercised an unauthorized dominion over that property." Id. at 242-43. The Complaint makes both claims, arguing that FMB's funds were frozen by Roadshow's attempts to reach the Sundance defendants and that any such dominion was unauthorized. Mistake is not a defense to conversion. See, e.g., Boyce v. Brockway, 31 N.Y. 490, 493 (1865).
Rather than arguing that FMB has failed to plead facts that could satisfy the elements of conversion, Roadshow claims that FMB could have prevented any such unauthorized dominion by presenting the state court with more persuasive evidence about the contents of the account. FMB did in fact present evidence on that subject, but the state court found that the materials presented were "equivocal" and ordered a hearing to determine the issue. Although FMB's failure to produce convincing evidence as to the nature or contents of its account might be relevant to factual issues concerning causation of damage, it has no bearing on the outcome of this motion. FMB has alleged facts supporting the conclusion that Roadshow interfered with its enjoyment of its property through fraudulent litigation tactics.
It is unclear what if anything the conversion claim adds to FMB's complaint. Any exercise of dominion over its property by Roadshow was pursuant to a court order, and was therefore only "wrongful" to the extent that Roadshow succeeds in its malicious prosecution and wrongful attachment claims. As New York courts have recognized, an action for wrongful attachment is "closely akin to malicious prosecution," and may "be denominated for trespass or conversion." Ford Motor Credit. 62 N.Y.2d at 303-04. There would seem to be little point in multiplying the number of overlapping legal theories that would need to be explained to a jury. At this point in the litigation, however, there is no basis for dismissing FMB's conversion claim as a matter of law.
II. Reliance's Motion to Dismiss: FMB's Standing under the Surety Agreements
Roadshow has named Reliance as a defendant on the grounds it is jointly and severally liable as the entity that posted the surety bond securing those harmed by the TRO and attachment secured by Roadshow. Reliance moves to dismiss, arguing that its undertaking did not run in favor of FMB, and that FMB has otherwise failed to state any claims against Reliance. As noted above, FMB does not oppose Reliance's motion as to the causes of action for malicious prosecution, abuse of process, and conversion. (Pl. Opp. Mem. at 27 n. 11.) Accordingly, Reliance's motion to dismiss is granted as to those claims.
Whatever the merits of FMB's wrongful attachment claims against Roadshow, FMB lacks standing to seek damages from Reliance on the bond accompanying the order of attachment. That bond, on its face, limits recovery to Sundance and Ryckman, and seems intentionally to exclude FMB, which was actively participating in the proceedings at the time the bond was issued. In New York, it is settled law "that contracts of sureties are to be construed like other contracts so as to give effect to the intention of the parties." United States v. Suffolk Construction Co., Inc., 95 Civ. 9363 (SS), 1998 WL 241628 (S.D.N.Y. May 12, 1998), at *3, quoting General Auth. for Supply Commodities v. Ins. Co. of N. Am., 951 F. Supp. 1097, 1109 (1997) (quoting People v. Backus, 117 N.Y. 196 (1889) (internal quotes omitted). "Once the meaning is ascertained, the responsibility of the surety is not to be extended or enlarged by implication or construction, and is strictissimi juris." Id. (citing General Authority, 951 F. Supp. at 1109). Thus, "[t]he limitation of liability imposed by the principle of strictissimi juris is not upon the interpretation but in the application of the contract after interpretation." Id. (citations omitted).
Here, the meaning of the bond is quite clear. The surety undertook to guarantee payment to Sundance and Ryckman, not to FMB. It cannot be argued that FMB was covered implicitly, or should be construed as one of the "John Does" included in the bond accompanying the TRO (which was only in effect for a brief period in any event), since FMB was a party known to Roadshow from the beginning, was named in the initial TRO, and was an active participant in the litigation from February 29, 2000. If Roadshow sought, or the court required, a bond to protect FMB against damage, it would have been easy to obtain one, but that was not done. The bond protects only Sundance and Ryckman, and cannot be expanded to include FMB.
CONCLUSION
For the reasons stated above, defendant Reliance's motion to dismiss is granted in its entirety. Defendant Roadshow's motion to dismiss is granted as to plaintiff's second cause of action, for abuse of process, which is hereby dismissed, and denied in all other respects.