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Choice Money Transfer, Inc. v. Societe International de Change

United States District Court, S.D. New York

December 18, 2017



          JED S. RAKOFF, U.S.D.J.

         Plaintiff Choice Money Transfer, Inc. ("Choice") provides consumer money transfer services, facilitating international money transfers in 181 countries worldwide. See Plaintiff's Response to Defendants' Rule 56.1 Statement of Undisputed Material Facts and Counterstatement of Facts ("PI. Response to Rule 56.1 Statement) ¶¶ 5-6, ECF No. 31; Defendants' Reply to Plaintiff's Rule 56.1(b) Counterstatement of Material Facts ("Defs. Reply to Rule 56.1 Counterstatement") ¶ 6, ECF No. 32. Defendant Societe International de Change ("SIC") is a Mauritanian company that, among other things, executes payments for international money transmitters, such as Choice. Id. ¶ 1. Defendant Arimec, LLC ("Arimec") exports goods from the United States to Mauritania and, most relevant here, owns the bank account to which Choice made payments to SIC. Id. at ¶ 2. Defendant Mohamed Nagem is the majority owner and president of the board of SIC and sole owner of Arimec. Id. at ¶ 3.

         In this action, Choice makes claims for breach of contract, fraud, and money had and received, alleging that SIC, beginning in 2013 and continuing through February 2017, improperly calculated and deliberately obfuscated its invoices so as to conceal the miscalculation. Specifically, Choice alleges that SIC provided it with U.S. Dollar ("USD")/Mauritanian Ouguiya ("MRO") and Euro/MRO exchange rates inconsistent with the USD/Euro exchange rate and calculated amounts owed by applying the USD/MRO rate to the total number of MROs paid out regardless of whether the transaction originated in Euros or dollars. The result, says Choice, is that SIC requested and received payment beyond what it was owed. See Complaint, ECF No. 1. In addition to denying those claims, SIC brings a counterclaim for breach of contract based on Choice's refusal to pay SICs final invoice. Answer, Affirmative Defenses and Counterclaim of Defendants Societe International de Change, Arimec, LLC, and Mohammed Nagem, ECF No. 19.

         Before the Court is the motion for summary judgment of defendants SIC, Arimec, and Nagem. Memorandum of Law in Support of Defendants' Motion for Summary Judgment Pursuant to Rule 56 of the Federal Rules of Civil Procedures ("Defs. Mem."), ECF No. 26. For the reasons set forth below, the Court grants the motion in part and denies it in part. Specifically, the Count denies summary judgment on both parties' breach of contract claims because there is a genuine dispute as to whether SIC breached an obligation to set MRO exchange rates consistent with the USD/Euro rate and as to whether the voluntary payment doctrine bars Choice's breach of contract claim. The Court grants summary judgment for defendants on Choice's claims for money had and received and fraud because those claims arise out of the same subject matter as, and legal duties derived from, the parties' written agreement.

         It is, of course, a truism that summary judgment is only appropriate "if the pleadings, depositions, answers to interrogatories on file, together with the affidavits, if any, show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the burden of demonstrating the absence of any genuine disputes of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). In determining whether summary judgment is appropriate the court must resolve all ambiguities and draw all reasonable inferences against the movant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         The pertinent facts, undisputed except where indicated, are as follows:

         SIC and Choice entered into a written agreement "made as of July 1, 2007, " pursuant to which SIC would serve as Choice's delivery correspondent in Mauritania (the "Agreement"). Pi. Response to Rule 56.1 Statement ¶ 13. As Choice's delivery correspondent, SIC was obligated to deliver funds to beneficiaries m Mauritania m the local currency - Mauritaman Ouguiya - in accordance with Choice's payment instructions. Id. ¶¶ 16-17. Under Section 5.2 of the Agreement, Choice agreed “[t]o deposit into [SIC's] bank account (as per instructions) the equivalent of the funds, which [SIC] delivered to the Beneficiaries in the Territory [of Mauritania] on a daily basis or as agreed upon between [SIC] and [Choice]." Id. ¶ 19. SIC originally acted as the delivery correspondent only for transactions originating in the United States. Id. ¶ 24. At some later point, SIC began acting as the correspondent for European transactions as well. Id. ¶ 25.

         In practice, the parties fulfilled money transfer requests in the following manner: First, before Choice's customers made any money transfer requests, SIC provided Choice with MRO exchange rates. Defs. Reply to Rule 56.1 Counterstatement ¶ 28. SIC did this even though the Agreement neither required SIC to set the exchange rates nor established the mechanism by which it was to establish MRO exchange rates. Id. ¶ 26. Choice allowed SIC to set the rates at which SIC would pay out in local currency because SIC had knowledge of the local market. Id. ¶ 27. Two factors SIC considered in setting rates were the rates of Choice's competitors, such as Money Gram and Western Union, and the rates set by the Central Bank of Mauritania. PI. Response to Rule 56.1 Statement ¶ 30. Second, Choice would receive customer requests for money transfers to Mauritania, passing on to its customers the rates provided by SIC. Id. ¶ 32. Third, after SIC paid MRO to the beneficiaries, it would seek reimbursement by Choice. Id. ¶ 27(g). SIC would issue an invoice to Choice requesting reimbursement for the MRO it had paid, plus the commissions due SIC. Id. ¶ 27(h). Choice was to pay a 30% net commission per order to SIC for all MRO payments originating in the United States, and a 25% commission on such payments originating in Spain and Italy. Reply to Defs. Rule 56.1 Counterstatement ¶ 22. Fourth and finally, Choice would pay SIC's invoices. PI. Response to Rule 56.1 Statement ¶ 27 (i). Choice almost always paid the invoices in USD, although SIC expressed a desire to be paid in Euros. Id. ¶¶ 27(k), 60-61.

         In the beginning of the parties' relationship, Dr. Joseph Neuschatz, the head of treasury and vice president of Choice, id. ¶ 8, reviewed SIC's invoices to determine whether the exchange rates SIC provided tracked the USD/Euro rate, Id. ¶ 53. Later, however, Neuschatz "only very casually checked." Id. ¶ 54. According to Choice, Neuschatz began only casually checking the rates because he "had built up trust with SIC . . . [and] trusted that [SIC] was . . . presenting these invoices with integrity." Id. ¶ 55, By contrast, defendants suggest that it was simply "because [Choice] had ... a tremendous amount of work and then it was very difficult for - for [it] to do that." Id. All parties agree that "[a]t the time [Choice] received each invoice from SIC it had the independent ability to verify whether the USD/MRO and EUR/MRO rates were tracking the USD/EUR rate." Id. ¶ 57.

         In late May 2008, SIC and Choice discussed how Choice would reimburse SIC for Euro-originating transactions. According to Choice, but disputed by defendants, Neuschatz had "several" discussions with SIC about the importance of SIC's setting out MRO exchange rates that tracked the USD/Euro exchange rate. See Defs. Reply to Rule 56.1 Counterstatement ¶ 42. Nagem asked Neuschatz: "For Euro let's say the rate is 360 (to simplify) and we pay about 3, 600, 000 MRO on [Choice's] behalf, the equivalence of about 10, 000 EURO, you would then take the 3, 600, 000/USD (237.35) to get = $15, 167, 474? A[m] I right about this? [O]r would you convert the 10, 000 Euro to USD and pay us about $15, 500?" Id. ¶ 47. Neuschatz responded, "I would take the total m the local currency and divide it by the dollar rate and get the amount in dollars that Choice would have to pay. If you paid 3, 600, 000 then we would divide that by the rate and pay the dollar equivalent. ... I would use the same rate as I use for the U.S. funding." Id. In an email several days later, SIC, providing Choice a Euro/MRO exchange rate, stated that the rate would be "more competitive than any rate money gram is offering in all European countries" and highlighted that "the equivalence of this [rate] would be 1EU=$1.55, which is what the current market is today (1.5628)." Id. ¶ 50.

         Nearly four years later - and about one year before SIC allegedly began seeking excessive reimbursement - Choice and SIC exchanged a series of emails in which Choice raised questions about how SIC set the MRO exchange rates. Upon receiving an invoice from SIC, Neuschatz complained that the Euro/MRO rate seemed too high. Pi. Response to Rule 56.1 Statement ¶ 41. Specifically, Neuschatz asked, "Isn't the euro rate supposed to relate to the dollar rate? Isn't the euro rate suppose[d] to adjjust [sic] as the dollar/euro exchange rate changes? How is this managed?" Id. ¶ 43. Nagem explained that SIC had been computing rates based on the Money Gram and Western Union rates. Id. ¶ 45. He further explained that, "the EURO/USD are related, but in Mauritania the ratio maybe [sic] different in the local currency than the Internationa[1] one, I am not sure. Money Gram Rates today: 372, and 286, so the ratio is th[en] = 1.30. The International ratio is = 1.35." Id. Nagem also asked for Choice's position on how it would like SIC to determine rates going forward: "D[o] we want to be competitive and follow Money Order [Money Gram] rates as we have done in the past? OR do you want to get rates that reflect a ratio: EURO/USD very close to market, and maybe lose customers by doing so?" Id. ¶¶ 47-48.

         Nagem did not recall Neuschatz responding to this email and could not locate any such response in SICs files. Id. ¶ 49. According to Neuschatz, but disputed by defendants, he followed up on this email by telephone and informed Nagem that Choice's expectation would be that the MRO rates SIC provide would track the USD/Euro exchange rate. See Defs. Reply to Rule 56.1 Counterstatement ¶¶ 57-58 (citing Declaration of Joseph Neuschatz in Opposition to Defendants' Motion for Summary Judgment ("Neuschatz Decl.") ¶ 51, ECF No. 30).[1]

         Choice paid all of SIC's invoices for the period of 2007 through February 14, 2017. PI. Response to Rule 56.1 Statement ¶ 59. According to Choice, it suffered only a few hundred dollars of loss in 2013 and 2014. Its losses in 2016 and 2017 were greater because: "(a) the dollar strengthened against the euro, such that the EUR/USD exchange rate dropped from about 1.33 to 1.06; and (b) the volume of euro-originating transactions that Choice processed for SIC increased substantially, from just a few million MROs disbursed in 2015 to tens of millions disbursed in 2017." Defs. Reply to Rule 56.1 Counterstatement ¶ 90. From 2013 to 2017, according to Choice, SIC's invoicing approach "sometimes resulted in undercharges and sometimes resulted in overcharges, " but the net result was an overcharge of $220, 665.72. Id. ¶ 77. Choice did not reimburse SIC for the period of February 15, 2017 through February 28, 2017, which was covered by a final invoice sent on March 1, 2017, Id. ¶¶ 80, 85. SIC's counterclaim for breach of contract seeks payment of that final invoice.

         Under New York law, a party claiming breach of contract must prove "(1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages." Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994). Choice alleges that SIC breached the contract by overcharging it. Specifically, Choice alleges that SIC supplied Choice with MRO exchange rates inconsistent with the USD/Euro exchange rate. This resulted in overcharges, notwithstanding that Choice passed on SIC's exchange rates to its customers, because SIC did not distinguish between transactions that originated in dollars and ...

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