The opinion of the court was delivered by: Seybert, District Judge:
Plaintiff Parviz Farahzad ("Plaintiff") commenced this action on October 8, 2010 in New York State Supreme Court, Suffolk County against Defendants Lawyers Title Insurance Company ("LTIC") and Fidelity National Title Insurance Company ("FNT," and together with LTIC, "Defendants") asserting state law claims for breach of contract, negligence, fraud, and conversion. Defendants removed the action to federal court on December 28, 2010 on the grounds of diversity jurisdiction, and on March 10, 2011 this case was transferred to the United States District Court for the District of South Carolina for consolidated pretrial proceedings pursuant to 28 U.S.C. § 1407 by the United State Judicial Panel on Multidistrict Litigation. On September 30, 2011, Defendants moved to dismiss the Complaint in the District of South Carolina, and on March 12, 2012 the action was remanded to the undersigned. Defendants' motion to dismiss is now pending before this Court. For the reasons that follow, the Court GRANTS Defendants' motion.
On June 26, 2008, Plaintiff entered into 1031 Exchange Agreement (the "Agreement") with non-party LandAmerica Exchange Services ("LES"), whereby LES agreed to act as a qualified intermediary for Plaintiff to facilitate a "like-kind" exchange pursuant to Section 1031 of the Internal Revenue Code. (Compl. Ex. A.) The Agreement provided that all communications with LES be directed to Andrea Levine (Compl. Ex. A. § 9), who, according to the Complaint, was also an employee of Defendant LTIC (Compl. ¶ 10). Both LES and LTIC were subsidiaries of non-party LandAmerica Financial Group; however, only LES was a party to the Agreement (Compl. Ex. A).
Pursuant to the Agreement, on July 8, 2008 Plaintiff sold a parcel of real property that he owned for investment purposes and transferred the proceeds, totaling $1,492,355, to LES. (Compl. ¶¶ 4, 7, 10.) The Complaint alleges that LTIC:
(i) wrongfully instructed LES to "deposit Plaintiff's monies into an account at Sun Trust Bank commingled with other 1031 exchanges instead of segregating said monies in Chase [Bank] in Plaintiff Farahzad's name as instructed in writing by Plaintiff" (Compl. ¶ 14); (ii) "knew or should have known" that LES had invested Plaintiff's (and other's) escrowed funds in auction rate securities that were illiquid as of February 2008 (Compl. ¶ 21); and (iii) together with LES, engaged in a Ponzi scheme whereby they continued to process new 1031 exchange agreements to cover expenses associated with older 1031 exchange agreements (Compl. ¶¶ 22-23).
On November 26, 2008, both LandAmerica Financial Group and LES filed voluntary petitions for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the Eastern District of Virginia (the "Bankruptcy Court").*fn2 On December 22, 2008, pursuant to an order of the Bankruptcy Court, LandAmerica Financial Group sold LTIC to Defendant FNT. (Compl. ¶ 16; see also Bankr. Docket Entry No. 1017.)
A joint Chapter 11 plan (the "Plan") was submitted to the Bankruptcy Court on September 9, 2009. The Bankruptcy Court held a Plan confirmation hearing on November 18, 2009 and issued an order confirming the Plan three days later on November 23. (Bankr. Docket Entry Nos. 2634, 2666.) As a result of Plaintiff's filing a claim with the Bankruptcy Court, on December 22, 2009 he received $359,496.16 under the Plan "regarding his 1031 claim against LES, leaving a balance of $1,132,858.84" (Compl. ¶ 26).
On October 8, 2010, Plaintiff commenced this action against LTIC and FNT seeking $1,132,858.84 in damages. He asserts two causes of action: one for "breach of contract/negligence" (Compl. ¶¶ 14-18) and the other for "fraud and conversion" (Compl. ¶¶ 19-32).
Defendants have moved to dismiss on the grounds that:
(1) Plaintiff lacks standing, (2) the claims are barred under the doctrine of res judicata, and (3) the Complaint fails to state a claim upon which relief may be granted. Because Plaintiff's claims are barred by res judicata,*fn3 the ...