United States District Court, E.D. Pennsylvania
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 ...