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Creative Trade Group, Inc. v. International Trade Alliance

November 4, 2009

CREATIVE TRADE GROUP, INC, A CONNECTICUT CORPORATION, PLAINTIFF,
v.
INTERNATIONAL TRADE ALLIANCE, INC., A FLORIDA CORPORATION, AND MCGRATH-COLOSIMO, LTD D/B/A MCGRATH LEXUS OF CHICAGO, AN ILLINOIS CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

In May 2008, Plaintiff Creative Trade Group, Inc. ("Creative")*fn1 filed a complaint in this court against Defendants, International Trade Alliance, Inc. ("ITA") and McGrath-Colosimo, LTD ("McGrath"), alleging that ITA and McGrath wrongfully retained $171,388 that Creative wire-transferred for the purchase of two rare Lexus luxury SUVs. Creative demanded its money back after the car deal, which involved a number of intermediaries, fell apart. Creative admits it had no agreement directly with Defendant McGrath, the car dealership who possessed the desired SUVs and to whom Creative wired the money. Creative now seeks summary judgment against McGrath on claims of conversion, unjust enrichment, and violation of the Illinois Consumer Fraud and Deceptive Practices Act. The relief Creative seeks includes the return of its $171,388, additional damages it claims to have suffered as a result of its inability to resell the SUVs, and punitive damages. For reasons stated herein, the court denies Plaintiff's motion for summary judgment [68] on all claims. Plaintiff also moves to strike Defendant's Local Rule 56.1 Response and attached affidavits. That motion is granted with respect to McGrath's 56.1 Response, but denied with respect to the attached affidavits.

BACKGROUND

The facts lie before the court "in a tangled web." Pourghoraishi v. Flying J, Inc., 449 F.3d 751, 754 (7th Cir. 2006). Despite Plaintiff's repeated insistence that "this is actually a very simple case," the court concludes it is anything but simple. (Pl.'s Reply, at 8.) To begin, Plaintiff's claims arise from a complicated transaction, the nature of which Plaintiff has been unable or unwilling to reveal to the court in full detail. Defendants, for their part, have failed to meet reasonable deadlines or provide appropriate citations. What does emerge from the record, however, are multiple, though incomplete, versions of the exchange in question. On summary judgment, the court's task is to determine "whether there is any material dispute of fact that requires a trial." Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994). In evaluating the record in the light most favorable to Defendant, as non-moving party, the court notes that "multiple versions of facts increase the chances that at least one of those conflicting facts will be material to the outcome of the case." Pourghoraishi, 449 F.3d at 754.

All of the parties in this case appear to be links in the same supply chain. Plaintiff Creative is an intermediary which identifies and buys sought-after vehicles that it then exports and resells to purchasers in Eastern Europe, primarily Ukraine. (Katz Dep. 9-11.)*fn2 Creative's sole owner and director is Gregory Katz, a resident of Connecticut. If the transaction at issue in this case is representative, there are many brokers in the world of international luxury automobile sales. One such broker is TVD Global Trade USA, LLC ("TVD Global"), a Nevada corporation, owned by Valeriy Pychnenko. Pychnenko's country of citizenship is not immediately ascertainable from the record, but statements of the parties suggest he is of Russian origin and likely resides in Canada. (Przybylski Dep. 48:3-5; Katz Dep. 23:11-24.) Brokers rely on their relationships with car dealers and other brokers to locate popular vehicles, which they then either purchase themselves and resell or broker to other buyers for a commission. (Pl.'s 56.1 ¶ 2.; Katz Dep. 34-37.)*fn3 Defendant ITA is also a broker. Defendant McGrath is a car dealership in the traditional sense, selling vehicles to the general public and to brokers such as ITA. (Pl.'s 56.1 ¶ 3-4.)

In December 2007, Katz approached Pychnenko at TVD Global about the prospect of obtaining a number of 2008 Lexus LX570 SUVs, a highly sought-after model of luxury automobile. (Katz Dep. 29-30.) In response to Katz's request, Pychnenko forwarded to Katz a promotional e-mail that Pychnenko had received from Yaroslav Farber, president and co-owner of ITA. (Pl.'s 56.1 ¶ 6.) Plaintiff has submitted a purported copy of that e-mail to the court. (Ex. I to Pl.'s 56.1 Stat.)*fn4 According to Plaintiff's Exhibit I, the e-mail (which was partially written in Russian) advertised the immediate availability of two 2008 Lexus LX570 SUVs at a cost of approximately $87,000 each with payment required in full. (E-mail, Ex. I to Pl.'s 56.1 Statement at 2.) Farber, who was born and educated in Russia but currently resides in Florida, testified that the promotional e-mail was sent only to ITA's past customers, one of which was TVD Global. (Farber Dep. 14-15; Farber Dep. 55:10-16.) The parties agree that ITA did not solicit business directly from Creative nor contact Creative directly in any way. Though Farber's e-mail makes no mention of it, the advertised SUVs were apparently expected to be supplied by McGrath, a regular supplier for ITA's transactions. (Farber Aff, ¶ 9, Ex. E to Def.'s 56.1 Resp.)*fn5

TVD Global had done business with ITA in the past, and Creative alleges that Pychnenko represented to Katz that Creative could rely on Pychnenko's contacts with ITA (and, in turn, ITA's contacts with McGrath) to obtain the SUVs advertised in the e-mail. (Katz Aff.¶ 4-6, Ex. A to Pl.'s 56.1 Statement.) Based on Pychnenko's assurances, Creative alleges, Katz and Pychnenko entered into an oral agreement for the purchase of the two Lexus automobiles for a total price of $177,000, whereby Creative would pay the sales price of $171,388 directly to McGrath and a finder's fee of $5,612 to TVD Global upon delivery of the cars. (Aff. Katz. ¶ 5-7, Ex. A to Pl's Rule 56.1 Stat.) ITA's principals deny having any knowledge of such an agreement. (Farber Aff., ¶ 9, Ex. E to Def.'s Rule 56.1 Resp.) Defendant McGrath's principals likewise deny having knowledge of any contract. (Simon Aff., ¶ 5-6, ¶ 8-9, Ex. A to Def.'s 56.1 Resp.) The parties do not dispute that Pychnenko and TVD Global had no authority to enter into contracts on behalf of ITA or McGrath. Creative concedes that it had no contract of any kind directly with ITA or McGrath. (Pl.'s Mem. at 14-16.)

According to Creative, it entered into a separate agreement with its own "long standing customer," Hazel U.K., in reliance on Pychnenko's promises. Under the terms of that agreement, Creative was obligated to supply two 2008 Lexus LX570 SUVs and to ship them to Hazel U.K.'s own customer, an unidentified buyer in Ukraine. (Pl.'s 56.1 ¶ 11.) Creative alleges that Hazel U.K. or its buyer prepaid the sale, and that Creative stood to make a $2,000 commission on the transfer. (Katz Aff. ¶ 8-9 Ex. A to Pl's 56.1 Statement.) Hazel U.K., has, in fact, dissolved as an entity since the alleged transaction took place. Although Creative presented the court with an assignment of rights from Hazel U.K. in order to pursue this litigation, Creative has never clearly articulated which entity prepaid the sale, nor has Creative disclosed the identity of the intended final buyer in Ukraine. The evidence before the court does not establish where the $171,388 that was ultimately transferred between the parties originated, whether with Creative, Hazel U.K., or some other entity.

Following his negotiations and agreement with Katz, Pychnenko contacted Farber at ITA and offered to purchase a block of four automobiles. Among the four were the two vehicles Creative requested, though Farber testified he was unaware of Creative's involvement in the deal. (Farber Dep. 53:1-6; Farber Aff. ¶ 8, Ex. E to Def.'s 56.1 Resp.) In January 2008, Farber sent a reply e-mail to Pychnenko, instructing him to wire $342,726.00, the agreed price for the four cars, directly to McGrath's business account.*fn6 (Id.) The e-mail, dated January 14, 2008, was directed and addressed only to Pychnenko and contained an account number for McGrath Lexus of Chicago at MB Financial Bank in Oak Brook, Illinois. (E-mail, Ex. J to Pl.'s Rule 56.1 Stat.)*fn7 The e-mail lists four vehicles and sets forth the total purchase price of $342,726, but makes no reference to Creative. (Id.)

Creative alleges that Pychnenko forwarded Farber's e-mail to Katz. (Pl.'s 56.1 ¶ 13.) Then, at Pychnenko's direction, Katz wired $171,388 from Creative's account at People's United Bank in Connecticut to the McGrath account listed in the e-mail, apparently with the expectation that the wired funds would be accepted as payment for the two Lexus SUVs Creative wanted. (Id. ¶ 13-15.) On January 18, 2008, MB Financial Bank logged an incoming wire transfer in the amount of $171,388 to McGrath's account, originating from Creative Trade Group's account at People's United Bank. (Transfer Document, Ex. M to Pl.'s Rule 56.1 Stat.) The wire transfer document, under the heading "Beneficiary Info," reads : "FOR ITA," followed by two six digit numbers. (Id.) Creative alleges that Katz attempted to identify the two desired automobiles by writing the last six digits of the Vehicle Identification Numbers ("VIN") on the face of the wire transfer document. (Id. at ¶ 15.) Mike McGrath, general manager of the McGrath dealership, stated that it is not the dealership's regular practice to identify vehicles by the last six digits of the VIN and suggested that a recipient of the transfer document would not know to what the numbers referred. (McGrath Aff.¶ 5, Ex. B to Def.'s 56.1 Resp.) Creative concedes that at no time prior to making the wire transfer did it make any further effort to contact McGrath or ITA to give either Defendant any directions with regard to the funds.

According to bank records reviewed by Luz Russell, the Legal Research Representative at People's United Bank, shortly before Creative wired its payment to McGrath's account on January 18, 2008, Creative's account was the recipient of an incoming wire transfer. (Russell Aff. ¶ 8-9, Ex. G to Def.'s Rule 56.1 Resp.) The transfer, in the amount of $182,290, originated at a Cyprus branch of a Ukraine-based bank, named Privat Bank, under the account of "Hazel U.K. Limited Companies House." (Id.) McGrath's investigator, John William Bennett, has learned that Hazel U.K. is a company registered with the British government. (Bennett Aff. ¶ 5, Ex. C to Def. 56.1 Resp.) The company maintains no publicly available telephone or fax numbers, however, and its registered address in the United Kingdom is in fact the address of a different company called Anglo Offshore Ltd. (Id. at ¶ ¶ 12, 16, 17). Anglo Offshore Ltd. is a UK-based company that registers the companies of non-British residents with the British government for a fee. (Id. at ¶ 15.) According to Bennett, Hazel U.K. maintains no offices at the Anglo Offshore address, and Anglo Offshore plays no day-to-day role in Hazel U.K.'s operations. (Id. ¶ 19.) Hazel U.K.'s sole registered director is a British national named Francis Mondon. (Id. at ¶ 7.) Mondon's listed address is in the Republic of Seychelles, an archipelago nation of 115 islands in the Indian Ocean. (Id.) Mondon has recorded approximately 68 other company appointments in the United Kingdom, one of which lists his occupation as "caterer." (Id. at ¶ 8.) Further, McGrath presents evidence in the form of an affidavit from Russian translator Dmitri Farber*fn8 that the contract-drafted in Russian-that Creative describes as "representative of the agreement" between it and Hazel U.K. is in fact an entirely different agreement between Creative and a company named Sozidatel-Avto. (Pl.'s Reply at 7; D. Farber Aff ¶ 8, Ex. D to Def. 56.1 Resp.) McGrath does not present a full English translation of the contract. Dmitri Farber describes only the signature page, which lists Sozidatel-Auto as "buyer" and Creative as "seller." (D. Farber Aff ¶ 8, Ex. D to Def. 56.1 Resp.) Neither party attempts to explain what kind of company Sozidatel-Avto is or what its involvement in the transaction, if any, may have been.

McGrath also presents the affidavit of Ukranian law expert Clifford Dammers; Dammers describes Ukraine's exchange control system, which imposes a series of import restrictions on goods like automobiles. (Dammers Aff., ¶ 6 Ex. G to Def.'s 56.1 Resp.) Dammer's affidavit suggests that the prepaid transaction giving rise to Creative's claims may run afoul of Ukraine's import restrictions. (Id., ¶ 6-12.) Other than Dammers' affidavit, the parties do not address how trade restrictions in either Ukraine or the United States might have operated to limit or prohibit the transaction at issue.

Katz stated that, following the wire transfer, he sent a facsimile letter to McGrath on January 22, 2008, directing McGrath to apply the funds to the purchase of the two Lexus SUVs. (Katz Aff. ¶ 15.) A purported copy of that fax, signed by Katz and dated January 22, 2008, is in the record. (Ex. 5 to Katz Aff.) The fax reads: "Please apply the wire transfer in the amount of $171,388.00 received on Friday, January 18, 2008 from Creative Trade Group, Inc. towards purchase of [two 2008 LX 570s] on behalf of ITA." (Id.) It is not clear from the record how Katz might have obtained McGrath's fax number, which does not appear on the document, nor is there evidence that shows whether Katz received any confirmation that the letter was properly transmitted or received. McGrath's principals deny having ever received such a letter. (Simon Aff. ¶ 4, Ex. A to Def.'s 56.1 Resp.; McGrath Aff. ¶ 7, Ex. B to Def.'s 56.1 Resp.) Instead, McGrath's sales manager Michael Simon testified that, after McGrath received the $171,388 wire transfer, he called Leszek Przybylski, part-owner of ITA, and sought instructions on how to apply the funds. (Simon Dep. at 21-24.) In response, Przybylski faxed a letter instructing Simon to credit the funds toward other cars purchased under ITA's general account. (Przybylski Dep. at 39.) A copy of that fax is in the record. (Ex. O to Pl.'s 56.1 Stat.) The facsimile letter is signed by Przybylski and addressed to McGrath Lexus of Chicago. (Id.) It reads: "Please apply the balance of the wire dated 1/18/08 to the following cars . . .," and then lists three vehicles unrelated to Creative's alleged request. (Id.) The letter is not dated.

According to Przybylski and Farber (ITA's owners), the reason for this instruction was Pychnenko's mounting debt. During the course of their four-year business relationship, Pychnenko had racked up approximately $700,000 in unpaid debt to ITA, and the two were in discussions to settle his outstanding balance. (Farber Dep., 37:3-7; Przybylski Dep. at 32-34.) Pychnenko had promised that he would wire payments to ITA as money became available. (Przybylski Dep. at 33-35.)

Przybylski testified that he believed the January 18 wire transfer came exclusively from Pychnenko as a partial payment on his outstanding debt. (Id. at 39.) This continues to be Przybylski's understanding, based on Pychnenko's own representations. "I still understand this is the money, Pyshnenko [sic] money, not anybody else," Przybylski said. "I don't know why he put Creative. Maybe as part of his company, I don't know, but this is money--the money belongs to Pyshnenko [sic]. . ."*fn9 (Id. at 32.) When asked follow-up questions about the basis for his belief that Pychnenko, not Katz, was the origin of the payment, Przybylski testified: "I'm positive about it. . . [because] [h]e [Pychnenko] tell us." (Id. at 33.) According to Przybylski, it was Pychnenko's regular practice to wire money to ITA using other companies as intermediaries. (Id. at 41.)*fn10

Przybylski's account conflicts to some extent with the affidavit and testimony of Yaroslav Farber, his partner at ITA. According to Farber, Pychnenko confirmed the wire transfer with Farber on January 18, 2008, and explicitly communicated that the money was intended as payment on two of the four vehicles Pychnenko had previously offered to buy. (Farber Aff., Ex. E to Def.'s Rule 56.1 Resp., at ¶ 12.) Farber agreed with Przybylski, however, that Pychnenko made no mention of Creative. (Id.) Farber viewed payment on only two vehicles as inconsistent with Pychnenko's initial offer to purchase four automobiles. (Id. at ¶ 13.) Given that inconsistency and concerns about Pychnenko's continuing creditworthiness, Farber took steps to terminate ITA's business relationship with Pychnenko and arranged to satisfy Pychnenko's outstanding debt. (Id.) According to Farber, it was as part of these steps that Przybylski directed McGrath to apply the $171,388 payment toward ITA's account. Like Pryzbylski, Farber testified that the funds wired to McGrath originated from Pychnenko, not Katz. "During our years working with TVD," Farber testified, "the--mostly where [sic] received payments from other companies, and very rarely from TVD. [T]hat's why I can make an assumption the companies TVD and [Creative] are the same company." (Farber Dep. at 61.)

McGrath denies having any knowledge of Creative's existence or of any dispute over the wired funds until February 13, 2008,*fn11 when Michael Simon, McGrath's sales manager, received a letter and telephone call from Glenn Seiden, who now represents Plaintiff. (Simon Dep. 51:10-15.) Seiden initially represented himself as the attorney for Pychnenko and TVD Global and made conflicting demands; first Seiden insisted that the vehicles be sent to TVD Global immediately and then he insisted that the money be returned to Creative's account. (Simon Aff. ¶ 5, Ex. A to Def.'s Rule 56.1 Resp.) According to copies of letters provided by McGrath, as late as March 24, 2008 (two months before he filed this suit on behalf of Creative), Seiden was still sending demand letters on behalf of TVD Global and Pychnenko to Defendant ITA. (Letter, Ex. 1 to Ex. E to Def. 56.1 Resp.)

In their initial February 2008 communication, Simon told Seiden he had never heard of Pychnenko, TVD Global, Creative or Katz, and informed Seiden that McGrath had no record of any purchase orders from those entities. (Simon Aff., ¶ 5. Ex. A to Def.'s Rule 56.1 Resp.) Simon then undertook an investigation, at the direction of General Manager Mike McGrath, to determine the merits of Seiden's allegations. (Id. at ¶ 9.) Simon first contacted ITA. Przybylski told Simon that there had been a misunderstanding, but that ITA would "get it straightened out." (Simon Dep. 52:4-14.) Przybylski further advised Simon that ITA had no dealings with Katz or Creative, but that it had previously done business with Pychnenko. Przybylski told Simon that the wire payment originated with Pychnenko and claimed the $171,388 as satisfaction of Pychnenko's outstanding debt to ITA. (Simon Aff. ¶ 6, Ex. A to Def.'s Rule 56.1 Resp.) According to Simon, ITA was "used to Mr. Pychnenko, who is apparently not a US national, making payments from different offshore and US bank accounts and/or through different offshore and US entities." (Id.) On that basis, Przybylski affirmed his previous instructions to credit the $171,388 to ITA's account with McGrath.

Simon relayed ITA's position to Seiden, and the two continued to have near-daily contact in an attempt to resolve the dispute. (Id. at ΒΆ 6-10.) According to Simon, however, Seiden could not provide "any proof of the initial origin of the funds in question such that a determination could be made whether TVD and/or Pychnenko funneled money ...


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