United States District Court, E.D. Pennsylvania
January 30, 2015
EURO MOTORCARS GERMANTOWN, INC, Plaintiff,
MANHEIM REMARKETING, INC., Et al., Defendants
For EURO MOTORCARS GERMANTOWN, INC., Plaintiff, Counter Defendant: JOHN B. CONSEVAGE, LEAD ATTORNEY, DILWORTH PAXSON LLP, HARRISBURG, PA; MATTHEW P. FARANDA-DIEDRICH, LEAD ATTORNEY, MARK A. WACHLIN, DILWORTH PAXSON LLP, PHILADELPHIA, PA.
For VICKY MANCHESTER, Defendant, Cross Claimant, Counter Claimant: KENNETH MILLMAN, LEAD ATTORNEY, THAD MELVIN GELSINGER, LEISAWITZ HELLER ABRAMOVWITCH PHILLIPS PC, WYOMISSING, PA.
For MAZ COMPANY, NADER AMIRKABIRIAN, Defendants: MATTHEW C. INDRISANO, PRO HAC VICE, ALLRED BACON HALFHILL & YOUNG PC, FAIRFAX, VA; MICHAEL W. CLINTON, CLINTON & MCKAIN, P.C., HUNTINGDON VALLEY, PA.
For MANHEIM REMARKETING, INC., Defendant: ALEXANDRA J. CHANIN, LEAD ATTORNEY, THOMPSON HINE LLP, ATLANTA, GA; EDWIN L. STOCK, LEAD ATTORNEY, ROLAND STOCK, LLC, READING, PA; PETER D. COFFMAN, LEAD ATTORNEY, PRO HAC VICE, THOMPSON HINE LLP, ATLANTA, GA.
For NADER AMIRKABIRIAN, MAZ COMPANY, Cross Defendants: MATTHEW C. INDRISANO, ALLRED BACON HALFHILL & YOUNG PC, FAIRFAX, VA; MICHAEL W. CLINTON, CLINTON & MCKAIN, P.C., HUNTINGDON VALLEY, PA.
REPORT AND RECOMMENDATION
RICHARD A. LLORET, United States Magistrate Judge.
Before me is the motion of Defendant Manheim Remarketing, Inc. (" Manheim") to dismiss Count Five of the Amended Complaint which alleges unjust enrichment. Because Plaintiff Euro Motorcars Germantown, Inc. (" EMG") has pleaded a viable claim for unjust enrichment, I recommend that Manheim's motion to dismiss be denied.
I. FACTUAL BACKGROUND
EMG is a Mercedes Benz automobile dealership with its principle place of business in Germantown, Maryland. Amend. Compl., Doc. No. 44, ¶ 1. Manheim is a wholesale vehicle marketplace, with 106 operating locations worldwide. Id. ¶ 8. The auction house particularly at issue in this lawsuit is the Manheim Auction House located in Manheim, Pennsylvania. Id. at ¶ ¶ 8, 9. EMG used Manheim to sell certain of its cars through auction -- specifically used cars EMG had acquired through trade-in and wholesale, as well as cars acquired through auction sales at Manheim. Id. ¶ 9. Manheim earned money by charging buy, sell, and run fees for the purchase and sale of vehicles sold through its auctions. See id. ¶ 10. In 2007, EMG used the services of wholesaler Maz Company (" Maz"), and its principal, Nader Amirkabirian (" Nader"), who had a dedicated lane at Manheim auctions. Id. ¶ ¶ 11, 12. EMG entrusted vehicles to Maz for sale through Manheim. Id. ¶ 13. When Maz sold an EMG vehicle through Manheim, Maz would keep its fee and then forward the remainder of the sale proceeds to EMG. Id. Manheim deducted it's fee from the sale proceeds prior to forwarding those proceeds to Maz. Id. Pursuant to it's agreement with EMG, Maz was to timely and accurately report to EMG when an EMG vehicle was sold by Maz at Manheim. Id. ¶ 14.
With regard to its used vehicle inventory, EMG obtained dealer floor plan financing for certain vehicles from Mercedes Benz Financial Services (" MBFS"). Id. ¶ 15. MBFS acquired a lien on each vehicle financed by EMG. Id. Pursuant to the financing agreements between EMG and MBFS, EMG is required to account for every vehicle in which MBFS has a security interest. Id. at 16. Additionally, consistent with industry custom, EMG is required by its agreement to pay MBFS promptly after the sale of a vehicle. Thus, the vehicles sold by Maz on behalf of EMG at Manheim were acquired by EMG with its own funds or floor planned through MBFS, and then turned over to Maz and Nadar for reconditioning and sale at Manheim. Id. ¶ 19.
Once vehicles were entrusted to Maz and Nadar, they were stored on Manheim property until they were auctioned. Id. ¶ 20. The vehicles remained the property of EMG unless or until they were sold at auction. Id. ¶ 21. Manheim gave each vehicle a " run week" designation to identify when the vehicle was to be put up for auction. Id. ¶ 22. In addition to entrusting the vehicle itself to Maz and Nadar, EMG would forward to Manheim in advance of the run week date titling and Maryland state re-assignment paperwork. Id. ¶ 23. The paperwork was sent to " Manheim Auto Auction" to the attention of " Title Department Maz Co." Id. The forms were sent to Manheim partially executed with the understanding that they were not to be fully executed and given to the purchaser until the auction and sale of a particular vehicle was complete. Id. at ¶ ¶ 24-26. Once notified that a vehicle had sold, EMG would generate an invoice reflecting the sales price and that the vehicle had been sold to Maz for that price. Id. ¶ 27. If a vehicle did not sell, it would either be relisted for auction another week, or returned with the partially executed paperwork to EMG. Id. ¶ 29.
MBFS had the right to audit EMG's floor plan inventory on a regular basis based upon the floor plan agreement between MBFS and EMG. Id. ¶ 31. Audits are conducted to verify that vehicles financed by MBFS are actually present in EMG's inventory. Id. Since at least 2010, MBFS has used DataScan Technologies, Inc. (" DataScan") to conduct the quarterly audits of EMG's floor plan inventory. Id. ¶ 31. DataScan worked with EMG at EMG's Germantown, Maryland facility when conducting the audits. Id. Upon completion of the audits, DataScan would present an audit report to EMG for signoff. Id. ¶ 32. The audit reports verified that vehicles floor planned by EMG through MBFS remained in EMG's inventory either at the dealership and storage lot in Germantown, at Manheim, or at other locations as specified in the audit reports. Id. EMG believed that DataScan was verifying through Manheim employees who were physically present at the auction location that vehicles identified in the audit reports as being present at Manheim were in fact present and had not yet been sold. Id. ¶ 33. EMG relied on these audits to make business decisions, including the decision to continue working with Maz and Manheim. Id. ¶ 34.
DataScan's practice in conducting the audits was to call the general telephone number at Manheim and ask to speak to the title department and/or a title clerk. Id. ¶ 35. The call was then routed by the Manheim operator to one of Manheim's title clerk employees. Id. The DataScan employee would then proceed to verify, vehicle by vehicle, that each vehicle was physically present at Manheim. Id. ¶ 36. DataScan also would verify the next intended run week for each vehicle, and would verify that the title form for each vehicle was present at Manheim. Id. ¶ 37, 38. The Manheim employee who verified each vehicle would be identified and a written audit report would then be created. Id. ¶ 38, 39. These quarterly audits began in 2007 and continued through April 2013. Id. ¶ 40. In 2010, Michael Nicoletti was the Manheim employee verifying EMG's floor plan inventory to DataScan. Id. ¶ 41. From 2011 to 2013, Vicki Manchester was the Manheim employee verifying inventory for the audits. Id. ¶ 42.
On April 18, 2013, DataScan's audit revealed that 129 EMG vehicles had been sold by Maz at Manheim without proper reporting and remittance of net proceeds to EMG. Id. ¶ 44, 45. Thus, vehicles that EMG/MBFS/DataScan believed were being held at Manheim in preparation for action, had actually already been sold, but had not been reported as having been sold. See Id. ¶ 46. A review by EMG of a test sampling of vehicles sold between July 2010 and August 2013, conducted initially with Manheim's assistance, showed that Nicoletti and Manchester lied when communicating with DataScan during audits. Id. ¶ 52. More specifically, false information was provided as to whether vehicles and their title paperwork actually were physically present at Manheim at the time of various audits and as to the date of the run week for particular vehicles. Id. EMG was able to determine based upon the limited sampling it conducted that Manheim employees misrepresented the physical presence of 157 of 211 vehicles going as far back as July 22, 2010. Id. ¶ 54. EMG further determined that it had not been paid for 53 MBFS floor planed vehicles (totaling $1, 772, 804.00), and also had not been paid for 76 additional vehicles purchased with $2, 102, 291.00 of EMG funds and subsequently sold at Manheim. Id. ¶ 55. All of these vehicles were sold at Manheim by Maz without the fact of the sale being reported to EMG and without proceeds of the sale being forwarded to EMG. Id.
Because of the failure to report the actual sales dates to EMG, EMG was delinquent in its repayments to MBFS for floor planned vehicles. Thus, during the week of April 22, 2013, EMG paid MBFS $1, 772, 804.00 as required by its floor plan agreement. Id. ¶ 56. This payment was made despite the fact that EMG did not receive from Maz the proceeds from any of the underlying sales. Manheim General Manager Tim Van Dam conceded to EMG's Chief Financial Officer Duke Mercer on May 1, 2013, that Manchester made false representations to DataScan regarding EMG vehicles on behalf of Nadar. Id. ¶ 62. Van Dam first admitted that Manchester made the false statements because " Nadar told her to say that." Id. ¶ 63. Subsequently, Van Dam insisted that Manchester had done nothing wrong, but that DataScan had persistently asked the wrong question and that Manchester simply continued to truthfully answer the erroneous question. Id. ¶ 64.
Following the discovery of the fraud, Nadar and Maz admitted that from almost the beginning of their relationship with EMG in 2007, Nadar and Maz had engaged in a " Ponzi scheme" whereby they fraudulently misrepresented the alleged sales prices of the majority of EMG vehicles sold by Nadar and Maz through Manheim. Id. ¶ 65. Nadar and Maz systematically understated losses and overstated gains in reporting vehicle auction sales to EMG in an effort to falsely portray the success of their activities at Manheim. Id. ¶ 66. This false reporting caused EMG to pay additional commissions that were never actually earned by Nader and/or Maz. Id. ¶ 68. The misrepresentations also created the illusion that EMG was earning a profit through Nadar/Maz auction activities on EMG's behalf when, in fact, they were not earning a profit. Id. ¶ 69. In reliance on these misstatements, EMG continued to entrust Maz with cars to auction at Manheim. Maz and Nadar's misrepresentations directly resulted in their improper receipt of $1, 060, 626.29 in commissions, and approximately $850, 000 in fees paid by EMG. Id. ¶ 73. Based upon the misrepresentations, EMG believed it was earning profits of $1.2 million, when in reality, EMG had incurred losses of approximately $3.2 million. Id. ¶ 75.
EMG contends that Manheim participated in and facilitated the Ponzi scheme through the actions of employees Nicoletti and Manchester. Id. ¶ 77. The misrepresentations that these employees made in the context of the DataScan audits facilitated Maz's ability to continue to acquire additional vehicles from EMG and falsely and improperly generate additional revenues, commissions and fees on the sale of EMG vehicles at Manheim. Id. ¶ 78. Had Manheim's employee's truthfully and accurately responded to the DataScan audits, EMG alleges that it would have learned of the Ponzi scheme years prior to April 18, 2013. See id. ¶ 82.
II. STANDARD OF REVIEW
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of a complaint. To survive a motion to dismiss, EMG must plead in the amended complaint " factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell A. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). " Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements will not suffice." Id. " The question is not whether the claimant 'will ultimately prevail . . . but whether [the] complaint [is] sufficient to cross the federal court's threshold.'" Blocker v. Community Ed. Centers, Inc., 2014 WL 1348959 *2 (E.D. Pa. April 7, 2014) (Pratter, J.) (citing Skinner v. Switzer,
__ U.S. __, 131 S.Ct. 1289, 1296 (2011)). " Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on judicial experience and common sense." Iqbal, 556 U.S. at 679.
In Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009), the Court of Appeals for the Third Circuit further explained:
[A]fter Ibqal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a " plausible claim for relief." In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to " show" such an entitlement with its facts.
Id. (internal citations omitted).
Manheim has moved to dismiss Count Five of the Amended Complaint. Count Five contends that Manheim was unjustly enriched because it accepted benefits from EMG in the form of transaction fees allegedly procured amidst " pervasive and wide-ranging" fraud against EMG in which Manheim employees were crucial participants. See Doc. No. 44, ¶ 153. Manheim contends that this claim fails because Manheim provided auction services to EMG, and received its fees only in exchange for those services rendered. Doc. No. 48-1, at 4. To state a claim for unjust enrichment under Pennsylvania law, EMG must show that (1) a benefit was conferred on Manheim; (2) Manheim retained the benefit; and (3) it would be inequitable for Manheim to retain the benefit without paying full value for it. See Lampe v. Lampe, 665 F.3d 506, 520 (3d Cir. 2011). " To sustain a claim of unjust enrichment, a claimant must show that the party against whom recovery is sought either 'wrongfully secured or passively received a benefit that it would be unconscionable for her to retain.'" Torchia v. Torchia, 499 A.2d 581, 582 (Pa. Super. 1985) (quoting Roman Mosaic & Tile Co. v. Vollrath, 313 A.2d 305, 307 (Pa. Super. 1973)). " 'In order to recover, there must be both (1) an enrichment, and (2) an injustice resulting if recovery for the enrichment is denied.'" Torchia, 499 A.2d at 582-83 (quoting Samuels v. Hendricks, 445 A.2d 1273, 1275 (Pa. Super. 1982)). The focus of the court's inquiry is on whether the defendant has been unjustly enriched. Hecht v. Malvern Prep., 716 F.Supp.2d 395, 403 (E.D. Pa. 2010) (citing Schenck v. K.E. David, Ltd., 666 A.2d 327, 328 (Pa. Super. 1995)). " The most significant element of the doctrine is whether the enrichment of the defendant is unjust; the doctrine does not apply simply because the defendant may have benefited as a result of the actions of the plaintiff." AmeriPro Search, Inc. v. Fleming Steel Co., 787 A.2d 988, 991 (Pa. Super. 2001). Instead, " a claimant must show that the party against whom recovery is sought either wrongfully secured or passively received a benefit that ... would be unconscionable for her to retain." Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162, 180 (3d Cir. 2008) (quoting Torchia v. Torchia, 346 Pa.Super. 229, 499 A.2d 581, 582 (1985)).
Construing the facts of the complaint in EMG's favor, as I must at this juncture, I recommend denying Manheim's motion to dismiss. The Amended Complaint alleges that Manheim's employees were complicit in the alleged fraud, and that their participation in the fraud (by repeatedly lying to DataScan during the audits) was instrumental to the Ponzi scheme remaining undiscovered for a period of years. Under similar but less egregious circumstances, the Malvern Preparatory School's motion to dismiss an unjust enrichment claim was denied. See Hecht, 716 F.Supp.2d at 402-403. In Hecht, the Receiver supervising the recovery of assets on behalf of investors defrauded by a Ponzi scheme sought to recover monies that had been paid into the Ponzi scheme then given to the Malvern Preparatory School as a charitable contribution. Judge Diamond found that under Pennsylvania law " the Receiver has sufficiently alleged 'that [Malvern] either wrongfully secured or passively received a benefit that it would be unconscionable for [the School] to retain." Id. at 403 (citing Torchia, 499 A.2d at 582). In Hecht, Malvern Preparatory School was merely a passive recipient of proceeds of the Ponzi Scheme, yet the unjust enrichment claim stood.
Likewise, in Bechtle v. Wister, 2013 WL 6712173, No. 13-3798 (E.D. Pa. Dec. 20, 2013), Judge Padova denied a motion to dismiss an unjust enrichment claim of the Reciever (Bechtle) who " sought to avoid the transfers made to [the Wisters] by and through the Unitrust and the Foundation, during the course of Young's operation of the Ponzi scheme." Id. at *2. Noting the elements of an unjust enrichment claim under Pennsylvania law, Judge Padova found that the complaint alleged that " it would be inequitable for the Wisters to retain the benefits . . . because those payouts . . . from the Acorn II Fund were the product of a Ponzi scheme and were comprised of money paid into the Ponzi scheme by other Limited Partners[, ]" and that the Receiver had thereby " plausibly alleged that the Wisters' recovery and retention of almost their entire principal investment is inequitable vis-à-vis other investors in the Acorn II fund. . . ." Id. at *5.
Both Hecht and Bechtle involved passive recipients of fraudulent proceeds. Here, the allegations in the Amended Complaint place Manheim employees in the more serious role of actually " wrongfully securing" the funds at issue by virtue of supporting and perpetuating the fraud from which the transaction fees were derived. EMG alleges that it was misled into continuing to work with Maz and Manheim because the scheme made it appear that Maz and Manheim were generating significant profits for EMG when, in fact, EMG was incurring even more significant losses. The transaction fees at issue are alleged to have resulted from the Ponzi scheme. See generally, Doc. No. 44, ¶ ¶ 65-83. " The polestar of the unjust enrichment inquiry is whether the defendant has been unjustly enriched[.]" Limbach Co., LLC v. City of Philadelphia, 905 A.2d 567, 577 (Pa. Commw. Ct. 2006) (emphasis in original); see AmeriPro Search, Inc., 787 A.2d 991. Where the wrong was an alleged fraud scheme, courts have provided a remedy, even against a party who passively or innocently received proceeds from the scheme. See Hecht, 716 F.Supp. at 402-03. Where the alleged wrong is essentially a " failed tort claim [" courts have been reluctant to provide a remedy in unjust enrichment. See Steamfitters Local Union No. 420 Welfare Fund v. Phillip Morris, Inc., 171 F.3d 912, 936-37 (3d Cir. 1999) (" In the tort setting, an unjust enrichment claim is essentially another way of stating a traditional tort claim, " and explaining the reluctance to effectively expand tort liability when a claim does not fit within the boundaries of tort liability).
I find Hecht and Bechtle more analogous to the instant case than those cases that Manheim urges me to follow. Manheim focuses on several cases involving unjust enrichment claims in the context of consumer product tort litigation. Tatum v. Takeda Pharmaceuticals North America, Inc., 2012 WL 5182895 (E.D. Pa. Oct. 19, 2012), involved a product liability action alleging that the makers of Prevacid knew that taking Prevacid could cause Necrosis, but chose not to disclose the risk. Id. at *1. Having denied a motion to dismiss various tort claims, Judge DuBois dismissed the unjust enrichment claim noting that " [u]just enrichment is not a substitute for failed tort claims in Pennsylvania . . . .[, ]" and finding that " there is no allegation that defendants refused to provide a service or goods after Tatum provided defendants with a benefit." Id. at *4. Similarly, Mazur v. Milo's Kitchen, LLC, 2013 WL 3245203, No. 12-1011 (W.D. Pa. June 25, 2013), involved a class action lawsuit filed by customers who allegedly purchased dog treats that were " unsafe, defective, dangerous, [and] culpably misrepresented as safe and healthy . . . ." Id. at *1. Having denied a motion to dismiss various strict liability and breach of warranty claims, the court dismissed the unjust enrichment claim, finding that it " cannot be said that the benefit bestowed on Defendants in the form of a profit from the sale" was " wrongly secured." Id. at *5, 6, 10. Finally, Zafarana v. Pfizer, Inc., 724 F.Supp.2d 545 (E.D. Pa. 2010), involved a class action suit in which Plaintiffs alleged that Pfizer had violated a number of consumer protection statutes by engaging " in a campaign of fraudulent and misleading marketing" by advertising drugs for " off-label uses." Id. at 549. Judge Joyner addressed each of the statutory bases for liability and dismissed each in turn, as a result of various pleading defects. Id. at 556, 558, 560, 561. Judge Joyner then found that because plaintiffs did not plead " a separate tort, the damages from which could be supported by a theory of unjust enrichment[, ]" there could be no recovery under an unjust enrichment theory. Id. at 561.
The doctrine of unjust enrichment is not a unified theory that provides an easy answer to the question of what, exactly, is " unjust" about a given " enrichment." See Restatement (Third) Of Restitution And Unjust Enrichment § 1 (2011); Emily Sherwin, Restitution and Equity: An Analysis Of The Principle Of Unjust Enrichment, 79 Tex. L. Rev. 2083, 2085 (2001) (" the nature of the principle [of unjust enrichment] is somewhat mysterious"); Chaim Saiman, Restating Restitution: A Case of Contemporary Common Law Conceptualism, 52 Vill. L. Rev. 487, 498-99 (2007) (" the most obvious statement about the American law of restitution is that it lacks any kind of system") (quoting John P. Dawson, Unjust Enrichment: A Comparative Analysis 111 (1951)); Eric J. Konopka, Hey, That's Cheating! The Misuse of The Irreparable Injury Rule As A Shortcut To Preclude Unjust-Enrichment Claims, 114 Colum. L. Rev. 2045, 2048 (2014) (unjust enrichment is " ill-defined" and " not well understood.") Rather, the case law points to various concrete circumstances in which a remedy should be supplied. The inquiry is necessarily " fact sensitive." Limbach Co., LLC v. City of Philadelphia, 905 A.2d 567, 577 (Pa. Comm. Ct. 2006). Careful attention to the circumstances under which a remedy has been either granted or denied is therefore crucial to the application of precedent. Enrichment as the consequence of a fraud scheme has traditionally been an instance in which courts find liability for unjust enrichment. See Hecht, 716 F.Supp.2d at 402-403; Sherwin, supra at 2089. Using unjust enrichment to expand tort liability where the elements of a tort have not been satisfied is not. See Steamfitters Local Union, 171 F.3d at 936-37.
The cases relied upon by Manheim are not convincing. This case involves fraud and conspiracy to defraud allegations against Manheim and Maz. Doc. No. 1, at ¶ ¶ 84-114 (Count Two, fraud against Manheim), 155-167 (Count Six, fraud against Maz), 222-226 (Count Twelve, conspiracy to defraud by Maz and Manheim). To the contrary, in Zafarana the various statutory consumer protection claims were dismissed. There was nothing left to define what was " unjust" about the purported enrichment. 724 F.Supp.2d at 556, 558, 560, 561. Courts have been reluctant to effectively expand tort or statutory liability through an unjust enrichment claim. See Douglas Laycock, The Death of the Irreparable Injury Rule, at 194, 193-95 (1991) (The " reason for denying relief . . . is to avoid undermining the substantive restrictions on the more particular theory."). Although the district court in Tatum merely cited the general rule that unjust enrichment is not a substitute for failed tort claims, 2012 WL 5182895, at *4, the reason for the rule is clear enough, and does not apply here, where fraud is alleged. While it is true that fraud is a type of tort, it is also clear that the cases treat fraud quite differently from torts sounding in negligence or strict liability. Compare Hecht, 716 F.Supp.2d at 402-403 with Tatum, 2012 WL 5182895 at *1.
I also am reluctant to rely on Mazur's holding dismissing an unjust enrichment claim because plaintiff in that case conceded it had not stated the elements of unjust enrichment. 2013 WL 3245203, at *9. The Mazur court seems to have adopted defendant's position and dismissed the unjust enrichment claim, notwithstanding a surviving fraud claim. Id. at *8. The Mazur court cited to the opinion in Bral Corp. v. Johnstown Am. Corp., 919 F.Supp.2d 599 (W.D. Pa. 2013), for the proposition that each unjust enrichment claim must be judged by its own unique facts. 2013 WL 3245203, at *10. Bral Corp . involved an elaborate scheme by a supplier to overcharge its customer for parts and to interfere with competitors trying to sell the customer cheaper parts. 919 F.Supp.2d at 605. The court in Bral Corp . denied the motion to dismiss, pointing out that defendants not only received benefits, but " received benefits from a scheme designed to defraud [plaintiff] and interfere with a business relationship." Id. at 621. The court found that the existence of an appropriately pled fraud scheme underpinning the unjust enrichment claim precluded dismissal. Id. Bral Corp . contradicts the notion that simply because the victim of an alleged fraud receives some value for services or goods provided by the putative fraudster, an unjust enrichment claim is precluded.
It is clear that where there is a viable fraud claim, a claim for unjust enrichment may be an appropriate adjunct. See, e.g., Com. ex rel. Pappert v. TAP Pharm. Products, Inc., 885 A.2d 1127, 1137-38 (Pa. Commw. Ct. 2005). The district court in Zafarana cited to TAP as an example of when unjust enrichment applies, in contrast to the circumstances before the court in Zafarana . 724 F.Supp.2d at 560-61. As TAP illustrates, even if the benefit conferred upon the defendant is indirect and potentially difficult to prove, it is not a basis for dismissing an unjust enrichment count where a fraud scheme undergirds and forms the basis of the alleged injustice. 885 A.2d at 1137-38.
Hecht and Bechtle should guide decision in this case, because the amended complaint alleges a Ponzi-type scheme and the receipt of benefits from that scheme by Manheim. The gravamen of EMG's unjust enrichment claim is that Manheim received transaction fees in connection with the sale of cars that Maz never reported as sold, depriving EMG of the proceeds of the sale. Doc. No. 44, ¶ ¶ 52-83. Manheim's argument that EMG has failed to allege a claim of unjust enrichment because EMG received auction services for the benefit conferred (transaction fees) misses the point. Doc. No. 48-1, at 7. EMG alleges there would have been no auctions or transaction fees involving Manheim had Manheim employees not facilitated the scheme to defraud, nor would EMG have been defrauded of the proceeds of 129 automobiles (representing about $3, 875, 095). Doc. No. 44, at ¶ ¶ 55, 56, 76-83, 98. The Amended Complaint frames the transaction fees as proceeds of the Ponzi scheme, not as benign fees given for services rendered. Id. at ¶ ¶ 92-95. Based on the information it developed before Manheim stopped cooperating, EMG believes the fraud involved thousands of vehicles, not just the 129 revealed through the audit performed on April 18, 2013. Doc. No. 44, ¶ ¶ 44 (date of audit), 53, 85, 99.
EMG may or may not have difficulties proving that it was unjust for Manheim to have received transaction fees, particularly where EMG received sale proceeds from given cars. Unjust enrichment, if granted, may or may not exclude transaction fees to Manheim for auction services it rendered for particular cars. But these possibilities do not address the issue whether EMG has alleged a viable unjust enrichment claim, taking the allegations of the amended complaint as true. Recalling that " [t]he most significant element of the doctrine is whether the enrichment of the defendant is unjust[, ]" Ameripro, 787 A.2d at 991, the amended complaint alleges facts that support a claim that it would be unconscionable for Manheim to retain benefits - transaction fees - wrongfully obtained through the operation of a Ponzi scheme in which Manheim's employees played a crucial role. The allegations of the complaint plead a fraud scheme, and resulting unjust enrichment to Manheim, with sufficient detail and coherence to survive a Rule 12(b)(6) motion.
Based upon the foregoing, I recommend that Manheim's Motion to Dismiss Count Five of the Amended Complaint be denied. EMG has pleaded a viable claim for unjust enrichment under Pennsylvania law.