RMG Financial Management LLC v. Grantham et al

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
______________________________________
RMG FINANCIAL MANAGEMENT LLC,
REPORT
Plaintiff, 	and
v. 	RECOMMENDATION
JESSE GRANTHAM, 	24-CV-1180-JLS-LGF
ALL AMERICAN REFINERY, and
ISLAND L.P. GAS SERVICES INC., doing
Business as Propane Man,
Defendants.
______________________________________
APPEARANCES: 	KEENAN LAW FIRM
Attorneys for Plaintiff
JOHN JAMES KEENAN, of Counsel
3123 Cloverbank Road
Hamburg, New York 14075
JURISDICTION
This case was referred to the undersigned by Honorable John L. Sinatra, Jr. on
April 11, 2025, for all pretrial matters including preparation of a report and
recommendation on dispositive motions. (Dkt. 14). The matter is presently before the
court on Plaintiff’s motion for default judgment (Dkt. 13), filed April 10, 2025.
BACKGROUND
Plaintiff RMG Financial Management LLC (“Plaintiff” or “RMG”), commenced this
action on December 3, 2024, alleging fraud and breach of contract against Defendants
Jesse Grantham (“Grantham”), All American Refinery (“AAR”), and Island L.P. Gas
Services Inc., doing business as Propane Man (“Island”) (together, “Defendants”).
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Plaintiff’s claims are based on an alleged series of failed business transactions into
which RMG maintains it was fraudulently induced by Defendants who never intended to
fulfill their contractual obligations.
Jurisdiction is based on diversity. Plaintiff is a Wyoming limited liability company
with its principal place of business in Hamburg, New York, and another office in Tel
Aviv, Israel. RMG has two board members, both of whom are residents of Israel.
Grantham is a resident of Mississippi and is both a shareholder and the principal of
Defendants AAR and Island. AAR is a Louisiana corporation with its principal place of
business in Mississippi. Island is a Hawaii corporation with its principal place of
business in Hawaii. Plaintiff asserts four claims for relief including fraud, Complaint,
Count 1 (“fraud claim”), fraudulent inducement, id., Count 2 (“fraudulent inducement
claim”), conversion, id., Count 3 (“conversion claim”), breach of contract, id., and Count
4 (“breach of contract claim”), and also seeks injunctive relief, id., Count 5 (“injunctive
relief request”).
Affidavits of service filed in this action establish that Defendants Grantham and
AAR were each served with a copy of the summons and complaint on December 12,
2024, Dkt. 7 (affidavit of service on Grantham); Dkt. 8 (affidavit of service on AAR), and
on Island on December 10, 2024, Dkt. 9. On January 8, 2025, Plaintiff requested entry
of default against all Defendants, Dkt. 11, asserting that no Defendant had appeared,
answered, or otherwise defended this action and the time in which to do so had
elapsed. Declaration [of John J. Keenan, Esq.] in Support of Request for Entry of
Default (Dkt. 11-1), ¶¶ 4-5. On January 16, 2025, the Clerk of Court entered default
against Defendants (Dkt. 12).
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On April 11, 2025, Plaintiff filed the instant motion for default judgment (Dkt. 13)
(“Plaintiff’s motion”), attaching the Declaration of Rami Michaeli (Dkt. 13-1) (“Michaeli
Declaration”), a proposed Judgment by Default (Dkt. 13-2), and a Certificate of Service
establishing copies of Plaintiff’s motion and Michaeli Declaration were served by U.S.
Mail on each Defendant (Dkt. 13-3). A Text Order entered June 2, 2025 (Dkt. 16) (“Text
Order”), set June 17, 2025 as the deadline for Defendants to respond to Plaintiff’s
motion for default judgment; copies of the Text Order were mailed to each Defendant at
the addresses of record. Dkt. 16. The copies of the Text Order were not returned as
undeliverable but, to date, no Defendant has appeared in this action nor responded to
Plaintiff’s motion for default judgment.
Oral argument was deemed unnecessary.
FACTS1
Plaintiff, RMG, an international investment firm with offices in Tel Aviv, Israel and
New York, invests in commodities to earn financial returns for its investors. Plaintiff has
two principals (“RMG’s principals”), including Rami Michaelis (“Michaelis”),2 both located
in Israel. In September 2023, RMG’s principals were introduced to Defendant
Grantham who represented he was a shareholder and principal of Defendants AAR and
Island. Grantham described AAR as a disadvantaged, veteran-owned corporation
involved in the purchase and sale of oil including bidding on government contracts to
1 The Facts are taken from the pleadings and motion papers filed in this action.
2 Plaintiff’s other principal is not identified.
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supply fuel3 to U.S. government facilities such as Veterans Administration facilities. On
August 19, 2024, Plaintiff entered into a joint venture agreement (“the Agreement”)
pursuant to which Plaintiff would provide financing for AAR and Island to pay for fuel
supply contracts (“fuel supply contracts”)4 with Plaintiff setting up a special trust bank
account (“the trust account”) to handle transactions in connection with the Agreement.
Purchasers of fuel under the fuel supply contracts were to remit prepayment for the
contracted purchases to the trust account where the funds would remain until the fuel
was delivered and bills of lading were endorsed by the intended recipients, after which
RMG would release the funds for payment of the fuel supply contracts directly to the
fuel supplier.
Separate from the Agreement between Plaintiff and AAR and Island, Plaintiff
located investors5 who were ready to deliver precious stones, including diamonds and
rubies (“the stones”), to RMG, but the stones first needed to be monetized, i.e.,
converted to their cash value either through a sale or a loan.6 Pursuant to a “contract,”7
ownership of the stones was transferred to RMG to facilitate monetization while the
stones remained physically stored at Global Trust Depository, Inc. (“Global Trust”),
located in Irvine, California. Complaint ¶¶ 34-35. Grantham informed RMG’s principals
3 The court notes the Complaint refers to the parties contracting to supply “oil” and “fuel” and it is not clear
that all the fuel supply contracts would be for fuel oil.
4 No copy of the Agreement executed by the parties is in the record.
5 The investors are not identified other than an averment that “[t]hey [the stones] were owned by a
gentleman from Montreal.
6 A licensed appraiser appraised the value of the diamonds at $ 35 million and the rubies at
$ 1.6 billion.
7 No copy of the contract is in the record nor does Plaintiff allege the identity of the parties to this contract.
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that Grantham “had a bank officer at a major bank” who would arrange a loan to
monetize the stones at an 80% loan-to-value (“LTV”) ratio, id. ¶ 36, but Grantham first
needed to transfer the stones to a different facility for a second appraisal, specifically, to
18 Karats Appraisers (“18 Karats”) in Los Angeles, California. The cost to transfer the
stones to 18 Karats from Global Trust exceeded $ 300,000 (“the transfer costs”), which
was charged to, but not paid by, Grantham, and RMG incurred additional costs in
sending representatives to California from New York to supervise the transfer of the
stones. Because Grantham never paid the transfer costs, RMG must now pay the
transfer costs to have the stones released from 18 Karats. According to Plaintiff, there
never was any offer from a bank officer to issue a loan to monetize the stones, and
Grantham’s statements to that effect were fraudulent and intended to defraud RMG by
converting the stones to Grantham’s personal use.
While the transactions involving the stones were occurring, Grantham suggested
that “RMG conduct a test of the commodity trading system,” Complaint ¶ 44, with
Grantham stating “he was also involved in the supply of propane and suggested the first
trade occur in that commodity.” (“the propane investment”). Id. ¶ 45. Grantham
“promised” RMG’s profit for the propane investment would be $ 1 per gallon of propane
for each dollar invested which would be paid within one month of the investment. Id. ¶¶
46-47. RMG sent $ 368,227.83 (“the investment principal”) to Grantham and AAR for
the propane investment for which Defendants represented Plaintiff would receive a
return of principal and profits by October 5, 2024. More than three months after
October 5, 2024, Plaintiff had yet to receive a return of any of the propane investment
principal or any profits, and Defendants have failed to account for any of the principal or
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to provide any “legitimate account of what was done with the money provided by RMG.”
Id. ¶ 53. Grantham, on a daily basis, promised the RMG Principals that he would wire
the money owed to RMG, but has yet to do so.
Plaintiff maintains Grantham used AAR and Island to convert the monies owed to
Plaintiff to Grantham’s personal use and intended to defraud RMG and RMG Principals.
Plaintiff claims Grantham’s actions caused RMG to incur costs to pay RMG’s investors
for the amounts Grantham converted to his personal use.
DISCUSSION
1. 	Default Judgment
Plaintiff moves for default judgment against all Defendants and an award of
damages, including lost principal, lost profits, interest, and attorney fees for a total
judgment of $ 2,723,490.69. Plaintiff’s motion is supported by the averments of RMG
Principal Michaelis. Defendants have not opposed Plaintiff’s motion.
Default judgments are governed by Fed.R.Civ.P. 55 which “provides a two-step
process for obtaining a default judgment.” Priestley v. Headminder, Inc., 647 F.3d 497,
504 (2d Cir. 2011). First, the Clerk of Court enters a party's default after an affidavit or
other evidence shows that the “party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend.” Fed.R.Civ.P. 55(a). Only after default
has been entered can a party seek a default judgment. See Fed. R. Civ. P. 55(b);
United States v. $25,348 U.S. Currency, 2022 WL 16755844, at *2 (W.D.N.Y. Aug. 23,
2022) (“Entry of a party's default pursuant to Rule 55(a) is a mandatory prerequisite for
entry of a default judgment pursuant to Rule 55(b)”). It is the second step, entry of a
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default judgment pursuant to Rule 55(b) that “converts the defendant's admission of
liability into a final judgment that terminates the litigation and awards the plaintiff any
relief to which the court decides it is entitled, to the extent permitted by Rule 54(c).” City
of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011). Here, the
first step was satisfied with the Clerk of Court’s entry of default on January 16, 2025
(Dkt. 12), and the court thus must consider whether the record supports entry of default
judgment pursuant to Rule 55(b) as Plaintiff requests.
By failing to answer the Complaint or to otherwise oppose Plaintiff’s claims,
Defendants are deemed to have admitted the Complaint's factual allegations for entry of
a default judgment under Rule 55(b). Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty
Corp., 973 F.2d 155, 158 (2d Cir. 1992) (“Greyhound Exhibitgroup”) (“a party's default is
deemed to constitute a concession of all well pleaded allegations of liability.”). See
Mickalis Pawn Shop, LLC, 645 F.3d at 128 (a court's entry of default “formalizes a
judicial recognition that a defendant has, through its failure to defend the action,
admitted liability to the plaintiff.”). Nevertheless, “[a] court's decision to enter a default
against defendants does not by definition entitle plaintiffs to an entry of a default
judgment; rather, the court may, on plaintiffs’ motion, enter a default judgment if liability
is established as a matter of law when the factual allegations of the complaint are taken
as true.” Bricklayers and Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v.
Moulton Masonry & Const., LLC, 779 F.3d 182, 188 (2d Cir. 2015) (“Bricklayers”). In
other words, upon entry of the default, “[t]he Court must then determine ‘whether the
unchallenged facts constitute a legitimate cause of action.’” Freedom Mortgage Corp. v.
Bullock, 2023 WL 5266343, at * 3 (E.D.N.Y. Aug. 4, 2023) (“Bullock”) (quoting 10A
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Charles Alan Wright & Arthur R. Miller, et al., Federal Practice and Procedure § 2688.1
(4th ed. 2022) (“Once the default is established, defendant has no further standing to
contest the factual allegations of plaintiff's claim for relief. Even after default, however, it
remains for the court to consider whether the unchallenged facts constitute a legitimate
cause of action, since a party in default does not admit conclusions of law.”)). Despite a
defendant's admitting all well-pleaded facts in the complaint by virtue of default, a
district court “need not agree that the alleged facts constitute a valid cause of action,”
and may decline to enter a default judgment on that ground. Mickalis Pawn Shop, LLC,
645 F.3d at 137. Significantly, prior to entering default judgment, “a district court is
‘required to determine whether the [plaintiff's] allegations establish [the defendant's]
liability as a matter of law.’” Id. (quoting Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir.
2009)). “The decision whether to enter default judgment is committed to the district
court's discretion . . . .” Greathouse v. JHS Sec., Inc., 784 F.3d 105, 116 (2d Cir. 2015).
If liability is established to support default judgment, the court “must then determine the
proper amount of damages, which typically requires evidentiary support.” Irmarfer U.S.
LLC v. C4 Live, 2024 WL 4502295, at *2 (W.D.N.Y. Oct. 16, 2024) (“Irmarfer”) (citing
Bricklayers, 779 F.3d at 187).
2. 	Liability
Before a district court enters a default judgment, it must determine whether the
allegations in a complaint establish the defendants' liability as a matter of law. See
Finkel, 577 F.3d at 84. A default “only establishes a defendant's liability if those
allegations are sufficient to state a cause of action against the defendants.” Gesualdi v.
Quadrozzi Equip. Leasing Corp., 629 Fed.Appx. 111, 113 (2d Cir. 2015). The court
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thus first discusses whether Plaintiff’s allegations, taken as true, establish Defendants’
liability as a matter of law with regard to any of the five claims for relief.
“The Court cannot simply accept at face value that a defendant is liable. Rather,
‘judgment against a defaulting party should be granted only after careful examination of
the moving party's claim by the district court. . . . Indeed, a defendant's default does not
in itself warrant a court in entering a default judgment because there must be a
sufficient basis in the pleadings for the judgment entered.’” Irmarfer, 2024 WL 4502295,
at *2 (quoting Bianco v. Seaway Indus. Services, Inc., 2004 WL 912916, at *1
(W.D.N.Y. Apr. 1, 2004) (internal citations and quotations omitted); see also Enron Oil
Corp. v. Diakuhara, 10 F.3d 90, 95–96 (2d Cir. 1993). It is “the plaintiff's burden to
demonstrate that those uncontroverted allegations, without more, establish the
defendant's liability on each asserted cause of action.” Gunawan v. Sake Sushi Rest.,
897 F. Supp. 2d 76, 83 (E.D.N.Y. 2012) (collecting cases). Further, a federal court
sitting in diversity, as in the instant action, must apply the substantive law of the state in
which it sits. Pappas v. Philip Morris, Inc., 915 F.3d 889, 893 (2d Cir. 2019) (citing Erie
R. Co. v. Tompkins, 304 U.S. 64, 78 (1983)). The court thus considers whether Plaintiff
has sufficiently alleged each of the asserted claims for relief to plausibly state the
causes of action asserted against Defendants under New York law. Gesualdi, 629
Fed.Appx. at 113 (vacating default judgment granted by the district court because the
district court failed to discuss whether the complaint’s allegations were sufficient to
plausibly state claims for the relief sought). See Flawless Style LLC v. Saadia Group
LLC, 2025 WL 2780121, at * 4 (S.D.N.Y. Sept. 29, 2025) (when considering a motion
for default judgment, “[t]he Court evaluates the legal sufficiency of the non-defaulting
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party's claims using the plausibility standard set forth in Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), ‘aided by the
additional step of drawing inferences in the movant's favor.’” (quoting WowWee Grp.
Ltd. v. Meirly, 2019 WL 1375470, at *5 (S.D.N.Y. Mar. 27, 2019)).
A. 	Breach of Contract
Under New York law, “there are four elements to a breach of contract claim: (1)
the existence of an agreement, (2) adequate performance of the contract by the plaintiff,
(3) breach of contract by the defendant, and (4) damages.” Ellington Credit Fund, Ltd.
v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d 162, 188-89 (S.D.N.Y. 2011) (internal
quotation marks omitted). Relevantly, “[a] breach of contract claim ‘that fails to allege
facts sufficient to show that an enforceable contract existed between the parties is
subject to dismissal.’” DeMarle v. Videk, Inc., 2023 WL 4138880, at *6 (W.D.N.Y. June
20, 2023) (quoting Fuji Photo Film U.S.A., Inc. v. McNulty, 669 F. Supp. 2d 405, 412
(S.D.N.Y. 2009)). Accordingly, before the court considers whether the allegations of the
Complaint sufficiently plead a breach of contract, the court must determine whether the
Complaint sufficiently alleges the existence of an enforceable contract between the
parties.
“‘To show that an enforceable contract existed, the claimant must plead facts
surrounding the formation of the contract such as the date the parties entered into the
contract, the major terms of the contract, the parties to the contract, and that the party to
be bound assented to the contract.’” Waziry v. Fnu, 2024 WL 2702205, at *6 (W.D.N.Y.
May 24, 2024) (quoting Fuji Photo Film U.S.A., Inc., 669 F. Supp. 2d at 412, and citing
Berman v. Sugo LLC, 580 F. Supp. 2d 191, 202 (S.D.N.Y. 2008)). Here, the
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Complaint’s allegations regarding the Agreement fail to plausibly allege the Agreement
was an enforceable contract and, as such, the Complaint also fails to establish a breach
of contract.
In particular, the Complaint’s allegations regarding the Agreement are brief and
conclusory, consisting only of allegations that on August 19, 2024, RMG, AAR and
Island “entered into a joint venture agreement . . . under which RMG was to provide
financing for AAR and Island to pay for supply contracts.” Complaint ¶ 20. “Under the
Agreement, the purchaser of the fuel under the fuel supply contracts would make a
prepayment for the contracted purchase to RMG’s trust account.” Id. ¶ 22. “The money
would remain in RMG’s trust account until the fuel was delivered and bills of lading were
endorsed by the intended recipient.” Id. ¶ 23. “Upon confirmation of delivery, payment
for fuel supply contracts would go directly from RMG to the fuel supplier.” Id. ¶ 24.
Plaintiff’s allegations that Plaintiff and Defendants “entered into a joint venture
agreement,” Complaint ¶ 20, “lack the requisite specificity as to the circumstances of
such an agreement.” Grayson v. Ressler & Ressler, 271 F. Supp. 3d 501, 521
(S.D.N.Y. 2017) (dismissal appropriate where plaintiff alleged, inter alia, that parties
agreed to “work together”). “[F]or a contract to be valid, the agreement between the
parties must be definite and explicit so their intention may be ascertained to a
reasonable degree of certainty.” Cambridge Cap. LLC v. Ruby Has LLC, 675 F. Supp.
3d 363, 439 (S.D.N.Y. 2023) (citation omitted). There must be evidence of a meeting of
the minds on all materials terms and a standard by which a party can know its
contractual obligations and a court can enforce them. See Starke v. SquareTrade, Inc.,
913 F.3d 279, 288-89 (2d Cir. 2019) (“It is a basic tenet of contract law that, in order to
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be binding, a contract requires a ‘meeting of the minds’ and ‘a manifestation of mutual
assent.’ The manifestation of mutual assent must be sufficiently definite to assure that
the parties are truly in agreement with respect to all material terms.” (citations omitted)).
Here, not only is no copy of the Agreement attached to the Complaint, but the
Complaint’s failure to allege whether the alleged Agreement was oral or written deprives
the court of the ability to ascertain “‘whether or how’” Defendants may have “‘assented
to the contract.’” Waziry, 2024 WL 2702205, at *6 (quoting Fuji Photo Film U.S.A., Inc.,
669 F. Supp. 2d at 412). Nor is there any indication as to whether the Agreement is an
open-ended contract or has an end date, or any provision regarding how RMG would
provide financing for the asserted supply contracts or the timing of such financing. The
Complaint also fails to explain what approval was needed for other considerations such
as the fuel supply contracts which raises questions about the need to vet the purported
fuel suppliers, as well as whether the fuel supply contracts were limited to any type of
fuel, domestic or international sources, insurance concerns, and the conditions under
which title to the fuel would transfer. The Complaint’s allegations are simply too sparse
to establish the existence of an enforceable contract. Because Plaintiff has failed to
plausibly allege the existence of an enforceable contract, default judgment cannot be
granted on Plaintiff’s breach of contract claim. Irmarfer, 2024 WL 4502295, at *3-4.
Plaintiff’s motion therefore should be DENIED as to the breach of contract claim.
B. 	Fraud
To state a claim for fraud under New York law, “a plaintiff must allege a
representation of material fact, the falsity of the representation, knowledge by the party
making the representation that it was false when made, justifiable reliance by the
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plaintiff and resulting injury.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 291 (2d Cir.
2006) (quotations, citation, and alteration omitted). Further, pursuant to Fed.R.Civ.P.
9(b) (“Rule 9(b)”), a claim for fraud must be pleaded with particularity. In particular,
Plaintiff must “(1) specify the statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements were made, and (4)
explain why the statements were fraudulent.” Lerner, 459 F.3d at 290 (citation omitted).
In the instant case, Plaintiff’s fraud claim is based on the asserted transaction involving
monetization of the stones and the propane investment.
With regard to the stones, Plaintiff alleges that after obtaining the stones valued
in excess of $ 1.6 billion, Grantham’s statements that Grantham “has a banker and a
major bank who were willing to monetize the Stones at a loan to value ratio of 80%,”
Complaint ¶ 62, but that such monetization required the stones be transferred to 18
Karats from Global Trust for a second appraisal, id. ¶ 63, were lies as Grantham had
never located any banker or major bank which was willing to make a loan to monetize
the loan, id. ¶¶ 65-67, and that Plaintiff, as a result of relying on such lies, incurred
expenses in excess of $ 300,000 in arranging for and supervising the transfer of the
stones to 18 Karats. Id. ¶¶ 68. Plaintiff, however, fails to allege when and where
Grantham allegedly made the fraudulent statements, a requirement to state a plausible
claim for fraud. Lerner, 459 F.3d at 290. Plaintiff thus has not stated a claim for fraud
based on the stones.
With regard to the propane investment, Plaintiff alleges that Grantham
“presented an opportunity to test the commodity trading system,” Complaint ¶ 70, and
“asked RMG to fund a test of the commodity trading system.” Id. ¶ 71. Grantham
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reported he “had an opportunity in the propane business,” id. ¶ 72, and that Grantham
“would provide profits of $ 1 for each dollar invested.” Id. ¶ 73. Plaintiff alleges it relied
on such statements and “provided $ 368,227.83 to facilitate the first commodity trade,”
id. ¶ 74, which Defendants “took” and then “failed to return the principal amount or to
provide the promised profits within one month,” id. ¶ 75, and the money has never been
returned nor an accounting for the money provided. Id. ¶¶ 76-77. According to Plaintiff,
Grantham took the money intended for the propane investment for his own personal
use. Id. ¶¶ 9-80. Again, Plaintiff fails to allege when and where the allegedly fraudulent
statements regarding the propane investment were made. Nor does Plaintiff allege how
the $ 368,227.83 was “provided to facilitate the first commodity trade.” Id. ¶ 74.8
Accordingly, Plaintiff’s allegations regarding the propane investment fall short of Rule
9(b)’s particularly requirement, and Plaintiff has failed to state a claim for fraud based on
such statements.
Plaintiff’s motion for default judgment thus should be DENIED as to the fraud
claim.
C. 	Fraudulent Inducement
Under New York law, “‘[t]he elements of fraudulent inducement are substantially
the same as those for common law fraud.’” Green Star Energy Sols., LLC v. Edison
Props., LLC, 2022 WL 16540835, at *5 (S.D.N.Y. Oct. 28, 2022) (quoting
Sawabeh Info. Servs. Co. v. Brody, 832 F. Supp. 2d 280, 297–98 (S.D.N.Y. 2011)
(citing Braddock v. Braddock, 871 N.Y.S.2d 68, 70 (1st Dep't 2009))). See Fax
8 The court notes that RMG principal Michaelis states that “[i]n reliance on Granthan’s statements, RMG
invested $ 368,227.83 on September 13, 2024, Michaelis Declaration ¶ 12, and that “[a] copy of the wire
transfer to Grantham is attached as Exhibit “A’.” Id. ¶ 13. Nevertheless, no copy of the wire transfer is
attached as Exhibit A to the Michaelis Declaration nor is found elsewhere in the record.
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Telecommunicaciones Inc. v. AT & T, 138 F.3d 479, 490 (2d Cir. 1998) (considering
whether the plaintiff had alleged claims for fraud and fraudulent inducement) (citing,
inter alia, Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 310 (2d Cir.1994)
(enumerating elements of common law fraud under New York law); Stone v. Schulz,
647 N.Y.S.2d 822, 823 (2 nd Dept.1996) (same for fraudulent inducement). Accordingly,
because Plaintiff has failed to state a claim for fraud, Plaintiff has also failed to plausibly
allege a claim for fraudulent inducement and Plaintiff’s motion for default judgment on
such claim should be DENIED.
D. 	Conversion
In New York, a cause of action for common law conversion is defined as “the
‘unauthorized assumption and exercise of the right of ownership over goods belonging
to another to the exclusion of the owner's rights.’” Vigilant Insurance Company of
America v. Housing Authority of the City of El Paso, Texas, 660 N.E.2d 1121, 1126
(N.Y.1995) (quoting Employers' Fire Ins. Co. v. Cotten, 156 N.E. 629, 630 (N.Y.1927)).
“Two key elements of conversion are (1) plaintiff's possessory right or interest in the
property and (2) defendant's dominion over the property or interference with it, in
derogation of plaintiff's rights.” Colavito v. New York Organ Donor Network, Inc., 860
N.E.2d 713, 717 (N.Y.2006) (citing cases). Further, when the defendant's original
possession of the alleged converted property is lawful, conversion does not occur until
the defendant refuses to return the property upon demand, or disposes of the property,
in which case no demand is necessary. Johnson v. Gumer, 464 N.Y.S.2d 318, 319 (4th
Dep't 1983) (citing MacDonnell v. Buffalo, Loan, Trust & Safe Deposit Co., 85 N.E. 801,
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803 (N.Y. 1908)). In the instant case, the allegations of the Complaint fail to plausibly
allege a cause of action for conversion.
Specifically, Plaintiff alleges that “RMG provided $ 368,227.83 to facilitate the
first commodity trade [the propane investment],” Complaint ¶ 117, which Defendants
“took” and failed to return along with the promised profits by October 5, 2024. Id. ¶ 118.
Plaintiff further alleges that “Grantham and AAR failed to account for the money or how
it was invested,” id. ¶ 120, and “Grantham did not invest the money in any commodity
trades,” id. ¶ 121, or use the money “for the purposes of the Agreement,” id. ¶ 122, but
instead “converted the $ 368,227.83 to his own uses. Id. ¶ 123. Nowhere within these
allegations, however is there any assertion that Plaintiff ever demanded Grantham and
Defendants return the investment principal and promised profits, or that Defendants
disposed of the money. Johnson v. Gumer, 464 N.Y.S.2d 318, 319 (4th Dep't 1983).
Because Plaintiff has failed to plausibly allege a claim for conversion, Plaintiff’s motion
seeking default judgment on the conversion claim should be DENIED.
E. 	Injunctive Relief and Damages
Because Plaintiff has failed to sufficiently allege any valid claim for relief, Plaintiff
is not entitled to a default judgment against Defendants and the court does not address
Plaintiff’s request for injunctive relief or for damages. See Jean-Baptiste v. United
States Dep't of Just., 2023 WL 2648152, at *4 (S.D.N.Y. Mar. 27, 2023) (denying
request for preliminary injunction where the complaint failed to sufficiently allege any
claim for relief), aff'd, 2024 WL 1193062 (2d Cir. Mar. 20, 2024); Friedman v. Cap.
Accts., LLC, 2020 WL 9422948, at *6 (S.D.N.Y. Apr. 21, 2020) (recommending
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damages be denied where denial of default judgment was also recommended), report
and recommendation adopted, 2021 WL 1721665 (S.D.N.Y. Apr. 30, 2021).
CONCLUSION
Based on the foregoing, Plaintiff’s motion for default judgment (Dkt. 13) should
be DENIED and the Complaint should be DISMISSED without prejudice and with leave
for Plaintiff to file, within 30 days, and serve an amended complaint that states a claim
for relief.9
Respectfully submitted,
/s/ Leslie G. Foschio
______________________________________
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
DATED: 	December 2, 2025
Buffalo, New York
9 Any amended complaint filed by Plaintiff would need to be served on Defendants. See Pitts ex rel. Pitts
v. Seneca Sports, Inc., 321 F.Supp.2d 1359, 1360 & n. 2 (S.D. Ga. 2024) (granting, after denying the
plaintiff’s motion for default judgment because the complaint failed to state a claim, the plaintiff’s motion
for leave to file an amended complaint, directing that such complaint be filed and served, as required by
Fed.R.Civ.P. 5, within 120 days).
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ORDERED that this Report and Recommendation be filed with the Clerk of the
Court.
ANY OBJECTIONS to this Report and Recommendation must be filed with the
Clerk of the Court within fourteen (14) days of service of this Report and
Recommendation in accordance with the above statute, Rules 72(b), 6(a) and 6(d) of
the Federal Rules of Civil Procedure and Local Rule 72.3.
Failure to file objections within the specified time or to request an
extension of such time waives the right to appeal the District Court's Order.
Thomas v. Arn, 474 U.S. 140 (1985); Small v. Secretary of Health and Human
Services, 892 F.2d 15 (2d Cir. 1989); Wesolek v. Canadair Limited, 838 F.2d 55 (2d
Cir. 1988).
Let the Clerk send a copy of this Report and Recommendation to the attorneys
for the Plaintiff and to the Defendants.
SO ORDERED.
/s/ Leslie G. Foschio
______________________________________
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
DATED: 	December 2, 2025
Buffalo, New York
Case 1:24-cv-01180-JLS-LGF Document 18 Filed 12/02/25 Page 18 of 18