Court Denies Motion to Dismiss Aiding and Abetting Conversion

In Decision and Order, dated March 28, 2023, in NW Media Holdings Corp. v. IBT Media, Inc., Index No. 652344/2022, Justice Melissa Crane granted in part and denied in part defendant Etienne Uzac’s motion to dismiss. This blog commented on a separate opinion in this case on April 5, 2023. The case concerned the purchase of Newsweek by plaintiff NW Media Holdings from defendant IBT. Uzac is a founder and owner of IBT, as well as its CEO. Plaintiff brought several causes of action, but as relevant to the aiding and abetting conversion claim, the Court explained:

The court denies Uzac's motion to dismiss the cause of action for aiding and abetting conversion. A claim for aiding and abetting conversion requires "the existence of a conversion by the primary tortfeasor, actual knowledge, and substantial assistance" (William Doyle Galleries, Inc. v Stettner, 167 AD3d 501, 505, 91 N.Y.S.3d 13 [1st Dept 2018]; Sayles v Ferone, 137 AD3d 486, 26 N.Y.S.3d 527 [1st Dept 2016]; Dickinson v Igoni, 76 AD3d 943, 945, 908 N.Y.S.2d 85 [2d Dept 2010] [dismissing a cause of action for conversion and subsequently dismissing a cause of action for aiding and abetting conversion because "such a claim stands or falls with the underlying tort"] [internal quotation marks and citations omitted]). Here, the court has already found that the complaint states a claim for an underlying conversion against Choi (March 22, 2023 Decision and Order). Therefore, the first element is satisfied for purposes of this motion.

Additionally, the complaint sufficiently pleads actual knowledge. In order to state a claim for aiding and abetting conversion, a plaintiff must allege that the defendant had "actual knowledge that the person who directly converted the plaintiff's property did not own that property" (Starr Indemnity & Liability Co. v Global Warranty Group, LLC, 165 AD3d 1308, 1309, 87 N.Y.S.3d 635 [2d Dept 2018]; Torrance Const., Inc. v Jaques, 127 AD3d 1261, 1263 [3d Dept 2015], citing Weisman, Celler, Spett & Modlin v Chadbourne & Parke, 271 AD2d 329, 706 N.Y.S.2d 414 [1st Dept 2000]). Uzac argues that Plaintiffs did not meet their burden because NW Media "did not have superior possession over the data [in the Workspace], and therefore Mr. Uzac certainly could not have had 'actual knowledge' of any alleged conversion" (Opening Mem., NYSCEF Doc. No. 57, p. 11). This argument fails for two reasons. First, as this court has already held, the ownership of the data on the Workspace presents an ultimate issue of fact that cannot be determined at the motion to dismiss stage (see March 22, 2023 Decision and Order, p. 8). Second, the complaint does contain allegations that, accepted as true, raise an inference of actual knowledge (see Sayles v Ferone, 137 AD3d 486, 26 N.Y.S.3d 527 [1st Dept 2016]; Dragons 516 Ltd. V Knights Genesis Inv. Ltd., 77 Misc3d 1223(A), *15 [Sup Ct, NY County Jan 6, 2023] [allegations against one defendant were sufficient to state a claim for aiding and abetting conversion where the complaint contained allegations giving rise to a "strong inference" of actual knowledge]).

The complaint here alleges that Jang "directed Uzac and/or Davis to destroy any Newsweek records that might cause harm or embarrassment to him or his Church or subject IBT to liability" (Complaint, ¶ 16 [emphasis added]). The complaint additionally alleges that Uzac told Pragad that if documents were subpoenaed from Google for "certain IBT and/or Newsweek accounts, that would be a 'problem'" (Complaint, ¶ 144 [emphasis added]). These allegations suggest knowledge that at least some of the documents at issue were "Newsweek" documents.

Indeed, the allegation that, prior to the alleged deletion of files, Uzac approached Pragad—the President of the company that owns Newsweek—and indicated that they "needed to find someone to delete the accounts containing problematic information" (Complaint, ¶ 144) suggests knowledge that IBT did not own the documents. If Uzac believed that all of the documents belonged to IBT, it is not clear why Pragad's permission would have been necessary. Uzac's argument that the same interaction suggests that Uzac "viewed the data as collectively owned between NW Media and IBT" (Reply Mem., NYSCEF Doc. No. 116, p. 8) merely presents an alternate interpretation that raises an issue of fact.

Additionally, the complaint sufficiently alleges the element of substantial assistance. A plaintiff can satisfy the substantial assistance element through allegations of "concealing, or failing to act when required to do so, enabling the harm to proceed" (Sayles, 137 AD3d at 486; see also William Doyle Galleries, Inc. v Stettner, 167 AD3d 501, 506, 91 N.Y.S.3d 13 [1st Dept 2018] [finding that plaintiff sufficiently alleged substantial assistance through pleading that defendant "enabled" the conversion through "verbal and written assurances"]). Contrary to Uzac's argument, the complaint alleges that Uzac took an active role in the alleged conversion. In particular, the complaint alleges that Uzac "coordinated with Davis to locate and destroy any problematic documents or communications" and "assist[ed] Davis to identify documents to be deleted" (Complaint, ¶¶ 205-206, 226-227).

The attorneys at Schlam Stone & Dolan frequently litigate motions to dismiss concerning conversion and aiding and abetting. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such litigation.