breach of contract. See AW's Second Amended Complaint ¶¶ 28-74.
III. RELEVANT FACTS*fn2
Assuming plaintiffs allegations to be true, the facts relevant
to this motion are as follows. In December, 1998, AW and certain
other investors formed a limited liability company called
Millenium Cell LLC ("MCEL LLC"). See 8/1/01 Affidavit of
Russell J. Steward, AW employee ("Steward Aff.") ¶ 2. No
certificates evidencing the interests of investors in MCEL LLC
were ever issued. See id. In or around February 2000, Anderson
and Weinroth offered to sell Phansalkar up to $100,000 worth of
their interests in MCEL LLC, representing a percentage ownership
of the company. See Defendants' Statement of Material Facts
Pursuant to Local Civil Rule 56.1(a) ("Def.56.1") ¶ 3 (citing
3/27/01 Deposition of Stephen D. Weinroth ("Weinroth Dep."), Ex.
B to 8/1/01 Affidavit of Defendants' Attorney Jaculin Aaron
("Aaron Aff."), 46-47). In or around February 2000, Phansalkar
purchased 637,902 shares of MCEL LLC from Anderson and Weinroth
for $60,000 (the "MCEL Shares"). See Plaintiffs Statement of
Material Facts Pursuant to Local Civil Rule 56.1(a) ("Pl.56.1")
¶ 1. Phansalkar delivered to both Anderson and Weinroth a check
for $30,000 as payment for those shares, which each deposited in
his respective personal bank account. See Phansalkar checks,
Ex. B to 8/13/01 Affidavit of Plaintiffs Attorney Sapna
Mirchandani ("Mirchandani Aff.").
In April 2000, MCEL was converted into a corporation which was
called Millenium Cell Inc. ("MCEL"). See Steward Aff. ¶ 4. No
common stock certificates for MCEL were issued at this time.
See id. ¶ 5.
In or about May 2000, AW prepared and maintained ownership
schedules reflecting the names, shares and percentage ownership
of MCEL investors, including Phansalkar (the "MCEL Ownership
Schedules"). See P1. 56.1 ¶ 2. The schedules identified
Phansalkar as the owner of 637,902 shares of MCEL. See id.;
MCEL Ownership Schedules, Ex. C to Mirchandani Aff. In or about
May 2000, at the instruction of Weinroth, AW employee Russell J.
Steward requested that Phansalkar identify any designees to whom
he wished to grant his shares of MCEL stock. See P1. 56.1 ¶ 4.
Phansalkar complied with this request and designated certain of
his shares to various individuals. See id. These designations
were reflected on the MCEL Ownership Schedules. See MCEL
On May 25, 2000, MCEL submitted an S-1 filing with the
Securities Exchange Commission. See P1. 56.1 15. The S-1
Filing listed the amount of shares held by each of Andersen and
Weinroth as well as other principal shareholders, but did not
include the 637,902 MCEL Shares owned by Phansalkar. See id.
One of the items submitted to the underwriters, accountants and
attorneys involved in the proposed public offering was the MCEL
Ownership Schedules. See 8/2/01 Deposition of Russsell J.
Steward, AW employee ("Steward Dep.") at 188-89; Weinroth Dep.
MCEL's initial public offering occurred on August 9, 2000.
See Steward Aff. ¶ 6. Common stock certificates were issued
that same month. See id.
In June 2000, Phansalkar resigned from AW. When Phansalkar
tendered his resignation, Phansalkar and Anderson discussed the
terms of Phansalkar's departure. Anderson codified these terms
memo (the "June 19th Memo"). See June 19th Memo, Ex. D to
Mirchandani Aff. On page two of the June 19th Memo, Anderson
4. MILLENNIUM CELL
In December, 1999 Steve & I agreed to sell 637,902
shares to RP from our own positions for $60,000. In
May, 2000 AW sold shares for the company at
$2.90/share. Based on that price 637,902 shares would
have been $1,849,916. Upon the conclusion of the
I.P.O. now in registration (est. price of $10.00 or
$6,379,020 value) the shares will be distributed.
Id. at 2.
In late June or July of 2000, Weinroth instructed Steward to
redistribute the 637,902 MCEL Shares owned by Phansalkar equally
to Weinroth and Anderson, thus transferring 318,961 MCEL shares
to each of them. See P1. 56.1 ¶ 7. On September 6, 2000, a
month after the MCEL IPO, Anderson and Weinroth first notified
Phansalkar that they had redistributed his MCEL Shares to
themselves. See id. ¶ 8.
AW argues that, even if Phansalkar's factual allegations are
true, he cannot maintain an action for conversion under New York
A. Legal Standard for Conversion
Conversion is the "[u]nauthorized and wrongful exercise of
dominion and control over another's personal property." Pioneer
Commercial Funding Corp. v. United Airlines, Inc., 122 B.R. 871,
883 (S.D.N.Y. 1991) (quoting Black's Law Dictionary 300
(5th ed. 1979)). To establish a cause of action for conversion
under New York law, a plaintiff must show (1) "legal ownership
or an immediate superior right of possession to a specific
identifiable thing" and (2) that the defendant "exercised an
unauthorized dominion over the thing in question, to the
alteration of its condition or to the exclusion of the
plaintiffs rights." Id. (quoting Independence Discount Corp.
v. Bressner, 47 A.D.2d 756, 365 N.Y.S.2d 44, 46 (2d Dep't
Under New York law, the general rule is that "a claim for
conversion does not lie for the withholding of indefinite,
intangible, and incorporeal species of property." Matzan v.
Eastman Kodak Co., 134 A.D.2d 863, 521 N.Y.S.2d 917, 918 (4th
Dep't 1987); see also Speigel v. Quality Bakers of Am.
Cooperative, Inc., No. 91 Civ. 5703, 1992 WL 349799, at *6
(S.D.N.Y. Nov. 10, 1992) (holding that conversion was not
applicable to a provision in a nonexclusive license); Ippolito
v. Lennon, 150 A.D.2d 300, 542 N.Y.S.2d 3, 6 (1st Dep't 1989)
("New York does not generally recognize a cause of action for
conversion of intangible property.") (holding that conversion
did not apply to musician's intangible property interest in
concert performance). However, New York has extended the tort of
conversion to intangible property fights that are "merged in or
identified with, identifiable money."*fn3 In re Chateaugay
Corp., 156 B.R. 391, 400 n. 10 (S.D.N.Y. 1993) (holding that
conversion does not apply to tax benefits allegedly owed under
an indemnity contract); see also Iglesias v. U.S.,
848 F.2d 362, 364 (2d Cir. 1988) (noting that conversion does "include
documents which embod[y] an intangible right, such as stock
certificates and bonds") (citing Pierpoint v. Hoyt, 260 N.Y. 26,
29, 182 N.E. 235 (1932), rev'd on other grounds,
236 A.D. 802, 259 N.Y.S. 956 (2d Dep't 1932)).
AW claims that Phansalkar cannot sustain a claim for
conversion because his interest in MCEL was an intangible
interest that was not "specifically identifiable" property.
Memorandum of Law in Support of Defendants' Motion for Partial
Summary Judgment ("Def.Mem.") at 2. First, AW asserts that
Phansalkar's interest in MCEL was not "merged into or embodied
in a tangible document" because, at the time of the alleged
conversion, "no stock certificates had been issued." Def. Mem.
at 7. Second, AW argues that, even if Phansalkar's intangible
interest was embodied in some tangible document, that document
was not converted. See Reply Memorandum of Law in Support of
Defendants' Motion for Partial Summary Judgment ("Reply Mem.")
at 2-3, 5.
1. Documents That May Embody or Identify an Intangible
AW provides no support for the proposition that the only
document that can establish Phansalkar's interest in MCEL is a
stock certificate. While New York recognizes that "stock
certificates and bonds" are "documents which embod[y] an
intangible right," Iglesias, 848 F.2d at 364; see also
Pierpoint, 260 N.Y. at 29, 182 N.E. 235 (recognizing that an
interest in shares may be represented by a stock certificate),
the courts have not held that the word "documents" is limited to
these two items. Indeed, such a proposition would be directly at
odds with the New York rule that a certificate is not essential
to the existence of a share and that a shareholder may prove her
interest by evidence other than that of a certificate. See In
re Zarnin, 229 A.D.2d 347, 645 N.Y.S.2d 304, 305 (1st Dep't
1996) ("A stock certificate is evidence of shareholder status,
but is not necessary to its creation."); Benincasa v.
Garrubbo, 141 A.D.2d 636, 529 N.Y.S.2d 797, 799 (2d Dep't 1988)
("[T]he mere fact that the petitioner's name does not appear on
a record of stockholders or the fact that he does not physically
possess stock certificates is not . . . conclusive evidence of
not owning stock."); In re Rappaport,