The opinion of the court was delivered by: Kenneth M. Karas, District Judge
Plaintiff AD Rendon Communications, Inc. ("AD Rendon" or "Plaintiff") brings this action to recover money allegedly owed to it and wrongfully held by Defendant Lumina Americas, Inc. ("Lumina" or "Defendant"). The First Amended Complaint contains two causes of action. The first cause of action alleges that Lumina breached its contract with AD Rendon by transferring money without authorization, wrongfully withholding a refund check, failing to send a payment held for a media buy, and overcharging payroll expenses. The second cause of action, for conversion, is based on the same set of facts, excluding the payroll expenses. This conversion claim seeks both compensatory and punitive damages. With this Motion, Lumina moves to dismiss the second cause of action, the conversion claim, along with AD Rendon's request for punitive damages. For the reasons stated herein, the Motion is GRANTED in its entirety.
The Court will accept the following facts as true only for the purposes of this Motion. Plaintiff, AD Rendon, is a California corporation that provides strategic marketing services. (Am. Compl. ¶ 6.) Defendant, Lumina, is a Delaware corporation offering integrated marketing solutions for U.S. Hispanic and Latin markets. (Am. Compl. ¶ 8.)
In or about November 2001 through February 2002, Peter Davidson ("Davidson"), the co-founder and chairman of Lumina, approached Susana Rendon McHugh ("McHugh"), president of AD Rendon, and indicated that Lumina wanted to make an investment of approximately $1.3 million in AD Rendon. (Am. Compl. ¶ 9.) The two formed an agreement (the "Agreement"), which was "ratified, affirmed and clarified by letter dated February 24, 2003." (Am. Compl. ¶ 14.) AD Rendon's president wrote, "In an effort to clearly define the working relationship between AD Rendon Communications, Inc. and Lumina Americas, Inc. during this period of transition, I would like to reaffirm our agreement and method of working on the following areas . . . ." (Am. Compl. Ex. A.) Though the Complaint is sparse in its description of the contract details, a part of the Agreement between the Parties was that Lumina would provide certain services, "including first-class financial bookkeeping services which, in turn, included overseeing the preparation and maintenance of AD Rendon's financial books, records and payroll." (Am. Compl. ¶ 15.) In exchange, AD Rendon would pay Lumina a share of AD Rendon's profits. Id.
Because of Lumina's representations regarding its investment in AD Rendon, AD Rendon agreed to work with Lumina for the benefit of two of AD Rendon's clients, JP Morgan Chase and GSD&M, and to grant Lumina access to AD Rendon's financial books, records, and accounts. (Am. Compl. ¶ 13.) Lumina also insisted that it be given signature authority over AD Rendon's bank account. (Am. Compl. ¶ 19.) McHugh agreed to allow two signatories from Lumina on the bank account, so long as they did not sign without McHugh's co-signature. (Am. Compl. ¶¶ 20-22.) Despite these stipulations, Plaintiff alleges that a fourth signor, Davidson, was added to the signature card, that Davidson signed the card as the "Managing Partner" of AD Rendon, and that the signature card stated that "any 2 of 4 [could sign] for all checks." (Am. Compl. ¶ 26.) Plaintiff further alleges that, without AD Rendon's consent or knowledge, Lumina secretly created a password for internet access to AD Rendon's bank account. (Am. Compl. ¶ 30.)
Plaintiff sets forth two claims against Lumina. The first is for breach of contract. AD Rendon claims that "[f]rom on or about May 12, 2002 through February 28, 2003, Lumina breached the Agreement by not properly preparing or maintaining AD Rendon's books and records, deliberately misstating AD Rendon's financial information, overcharging AD Rendon's payroll fees, and misappropriating AD Rendon's funds by accessing AD Rendon's bank account without permission and removing monies belonging to AD Rendon." (Am. Compl. ¶ 63.) AD Rendon also alleges that in breach of the Agreement Lumina used its internet access and signatory authority to transfer funds, without authorization, from AD Rendon's account to Lumina's account. (Am. Compl. ¶¶ 31-32, 35-36.) Specifically, AD Rendon alleges that in breach of the Agreement Lumina transferred $1,149,689.50 from AD Rendon's account to an account controlled by Lumina. (Am. Compl. ¶ 64(a).) AD Rendon did not learn of Lumina's internet access to its account until mid-March 2003 (Am. Compl. ¶ 33), but upon discovery of this fact, AD Rendon made repeated demands for Lumina to return the monies. Between the months of March and June 2002, Lumina returned $819,061.33, leaving $330,629.17 unreturned. (Am. Compl. ¶¶ 35-36.) AD Rendon seeks the return of the remaining $330,629.17.
Additionally, AD Rendon claims that Lumina breached the Agreement with AD Rendon when Lumina wrongfully accepted a $20,000 refund check from Delta Media, which should have been paid to AD Rendon. (Am. Compl. ¶¶ 39, 64(b).) Lumina allegedly also retained $165,000 that AD Rendon gave it to purchase a "media buy" on AD Rendon's behalf. (Am. Compl. ¶¶ 51, 54, 64(c).) The purchase was never executed, though AD Rendon allegedly sent repeated demands to Davidson for proof that the media ran. (Am. Compl. ¶ 59.) Finally, AD Rendon claims that Lumina overcharged AD Rendon for payroll in excess of $101,439.34. (Am. Compl. ¶ 64d.) According to AD Rendon, each of these incidents was in breach of Lumina's duties under the Agreement. In total, as a result of the alleged breach of contract, AD Rendon claims to have suffered damages of at least $617,067.51. (Am. Compl. ¶ 65.)
AD Rendon's second claim for relief is for conversion. Paragraphs sixty-six through ninety of the Complaint set forth the allegations that AD Rendon believes constitute its conversion claim. Notably, the facts alleged to make up the conversion claim mirror those facts set forth in AD Rendon's breach of contract claim. Thus, AD Rendon seeks relief based on conversion for the $330,628.17 unreturned from Lumina's wrongful transfer of $1,149,689.50, the wrongfully accepted $20,000 Delta Media check, and the retained $165,000 media payment that was to be made on AD Rendon's behalf. (Am. Compl. ¶¶ 75, 78, 84.)
In short, Plaintiff's conversion claim lists the same allegations set forth in its breach of contract claim but adds that Lumina "engaged in a deliberate and malicious scheme to steal funds belonging to AD Rendon." (Am. Compl. ¶¶ 66-67.) AD Rendon claims that the $1,149,689.50 transferred to Lumina's account without authorization and the $330,618.17 which remained after Lumina returned $819,061.33 of the amount transferred are specific, identifiable funds subject to conversion because they were in AD Rendon's bank account before they were wrongfully converted. (Am. Compl. ¶ 71.) AD Rendon further claims that Lumina's actions were malicious because, inter alia, Lumina: (i) had no colorable right to the funds; (ii) used deceptive means to acquire the funds; (iii) accessed funds without authorization; (iv) established secret internet access; (v) gave false and misleading statements to conceal the transfer of funds; and (vi) acknowledged that it had money belonging to AD Rendon that needed to be returned. (Am. Compl. ¶ 77.) AD Rendon further alleges that Lumina poses a threat to engage in similar schemes to steal money from other businesses, and AD Rendon states, conclusorily, that Lumina's misconduct is directed at the public generally. (Am. Compl. ¶ 87.)
In total, AD Rendon seeks conversion damages of $515,628.17, which includes the $330,618,17 that Lumina has left to return from its bank transfer, the $165,000 intended for a media buy never executed, and the $20,000 payment check wrongfully held by Lumina. (Am. Compl. ¶ 91.) In addition, AD Rendon claims that it suffered "economic damages and has been forced to incur expenses related to this lawsuit, including but not limited to forensic accounting costs, and other costs, including lost business to AD Rendon proximately caused by Lumina's misconduct" in an amount believed to exceed $500,000. (Am. Compl. ¶ 93.) AD Rendon also seeks punitive damages in the amount of $5,000,000. (Am. Compl. ¶ 94D.)
This is the second motion to dismiss in this case. On June 7, 2006, Lumina moved to dismiss the conversion and punitive damages claims contained in the initial complaint pursuant to Federal Rule of Civil Procedure 12(c). The bases for Lumina's first motion to dismiss were the same as those contained in the instant motion. Lumina argued that AD Rendon's conversion claim did not constitute a cause of action distinct from AD Rendon's breach of contract claim, that AD Rendon would be fully compensated for its alleged loss under the breach of contract claim, and that AD Rendon's claim for punitive damages should be dismissed. See AD Rendon Commc'ns, Inc. v. Lumina Americas, Inc., No. 04-CV-8832, 2006 WL 1593884, at *2, *7 (S.D.N.Y. ...