This case concerns a dispute over a factoring agreement entered into by Beiononi of N.Y., Inc. ("Beinoni") and Westgate Financial Corp. ("Westgate"). Westgate alleges that defendants fraudulently sold and assigned receivables to Westgate to obtain financing under the factoring agreement. Westgate brings contract claims, claims under the Racketeering Influenced and Corrupt Organizations ("RICO") statute, 18 U.S.C. § 1961, and claims under New York Uniform Fraudulent Conveyance Act, N.Y. Debtor & Creditor Law sections 270-81 ("DCL"). Defendants move to dismiss pursuant to Rule 12(b)(6) and, in the alternative, move for summary judgment.
The court grants in part and denies in part defendants' motion to dismiss, and the court denies defendants' motion for summary judgment in its entirety.
Except where otherwise indicated, all facts are drawn from the complaint and are assumed to be true for purposes of this motion. The Parties Plaintiff Westgate Financial Corp. is a factoring company based in New Jersey. Defendants Beinoni, Bapaz Garments Corp. ("Bapaz"), Shalom Tex International Corp. ("Shalomtex"), Multinational Impex Inc. ("Multinational"), Modeani Group Ltd. ("Modeani"), and Modeani of NY Inc. ("ModeaniNY") are garment companies that are, or were, based in New York (some of these companies have been dissolved). Defendants Payman Kafash a.k.a. Peter Kafash ("PKafash"), Mousa Kafash ("MKafash"), Abihey Kafash ("AKafash"), and Neda Kafash ("NKafash") (collectively, the "Individual Defendants") are members of the same family and are residents of New York.
The garment companies named as defendants are generally owned or controlled by the Individual Defendants. Westgate claims that Beinoni, Bapaz, Modeani, ModeaniNY, Multinational, and Shalomtex were "related companies" due to their alleged common ownership and control by the Individual Defendants.
Westgate and Beinoni entered into a factoring agreement on or about November 17, 2005. Pursuant to this factoring agreement, Beinoni granted Westgate a first-priority security interest in, among other things, its present and future accounts and accounts receivable, as well as the proceeds thereof. In performance of this agreement, Beinoni sold and assigned all of its accounts receivable to Westgate, and Westgate made loans to Beinoni from time to time against the payments of the purchase price of the receivables. Beinoni submitted written sales and assignments of invoices to Westgate, and represented and warranted that all invoices represented bona fide sales of goods to the listed customers on each invoice. PKafash and Multinational executed guaranty agreements guaranteeing Beinoni's performance of its obligations under the factoring agreement. AKafash also executed a guaranty agreement guaranteeing the validity of invoices assigned to Westgate under the factoring agreement.
Westgate alleges that in 2006, the defendants "embarked on a series of schemes to steal from lenders and trade credit insurers of entities they owned . . . or controlled including Westgate, Coface and Euler Hermes American Credit Indemnity Company by means of various false pretenses and fraudulent activities." Westgate claims that Beinoni began assigning it fraudulent invoices in August 2009 and that it suffered $1,523,591.95 in damages due to this alleged scheme. As part of this scheme, Westgate alleges that Beinoni fraudulently sold and assigned receivables to Westgate pursuant to the factoring agreement, including the following types of invoices:
* invoices based on transactions that never occurred;
* invoices from future sales of goods not yet shipped or which were never shipped;
* invoices for goods not shipped by Beinoni, but by one or more affiliated defendants;
* invoices against purchase orders issued to an affiliated defendant and not lawfully assigned to Beinoni;
* double invoices issued on account of one shipment;
* invoices representing the sale of goods that were not compliant with the terms ...