Attisha Enters., Inc. v. Capital One, N.A.

• Decision Date: 07 December 2020
• Docket Number: Case No.: 3:20-cv-01366-BEN-RBB
• Citation: 505 F.Supp.3d 1051
• Court: U.S. District Court — Southern District of California
• Parties: ATTISHA ENTERPRISES, INC., a corporation, Plaintiff, v. CAPITAL ONE, N.A.; Does 1 to 25, inclusive, Defendants.

505 F.Supp.3d 1051

ATTISHA ENTERPRISES, INC., a corporation, Plaintiff,

v.CAPITAL ONE, N.A.; Does 1 to 25, inclusive, Defendants.

Case No.: 3:20-cv-01366-BEN-RBB

United States District Court, S.D. California.

Signed December 7, 2020

Steffan T. Keeton, The Keeton Firm LLC, Pittsburgh, PA, Michael A. Mills, Pro Hac Vice, The Mills Law Firm, Houston, TX, for Plaintiffs.

Franco A. Corrado, Pro Hac Vice, Morgan, Lewis & Bockius LLP, Philadelphia, PA, John K. Gisleson, Morgan, Lewis & Bockius LLP, Pittsburgh, PA, for Defendant.

ORDER GRANTING MOTION TO DISMISS

[ECF No. 7]

ROGER T. BENITEZ, United States District Judge

This matter comes before the Court on Defendant Capital One, N.A.'s ("Capital One") Motion to Dismiss the Complaint filed by Plaintiff Attisha Enterprises, Inc. ("Attisha Enterprises"). As specific state laws apply to these allegations that displace the pleaded common law claims, the motion to dismiss is granted with leave to amend .

I. BACKGROUND¹

On March 12, 2020, Attisha Enterprises filed suit against Capital One in San Diego County Superior Court alleging common law claims of negligence, conversion, and money had and received. Compl., ECF No. 1-2. Capital One was served with the Summons and Complaint on June 19, 2020, and timely removed the action to this Court on July 17, 2020. ECF No. 1. Capital One thereafter filed this motion to dismiss. ECF No. 7.

The claims here involve a wire transfer. On or about May 14, 2018, Attisha Enterprises entered into a purchase agreement to buy the Sweetwater 24/7 Convenience Store and Chevron Gas Station. Compl., ECF No. 1-2, ¶ 9. The parties to the purchase agreement opened escrow with TICOR Title Company of California ("TICOR"). Id. As part of the purchase agreement, Attisha Enterprises was to deposit $100,000.00 to be held in escrow by TICOR. Id. at ¶ 10.

On September 27, 2018, Attisha Enterprises received fraudulent wire instructions from the unnamed Defendants,² who were fraudsters using the name TICOR Title Company of California and a Capital One account number. Id. Attisha Enterprises caused $100,000.00 to be wired from its account to the fraudsters' account at Capital One because it did not know these instructions were fraudulent and not from TICOR. Id. at ¶ 11. Capital One accepted the wire transfer. Id. at ¶ 12.

Some time later, Attisha Enterprises realized the wire instructions were fraudulent and contacted Capital One. Id. at ¶ 13. It requested that Capital One not release the funds. Id. Nonetheless, Capital One allowed the account owner, who was not TICOR, to withdraw the majority of the funds. Id. The Complaint is unclear about when Attisha Enterprises realized the wire instructions were fraudulent, when and how it notified Capital One of the issue, and when the fraudsters withdrew most of the funds. Attisha Enterprises alleges that $25,000.00 remains in the account, but that Capital One refuses to return the funds to Attisha Enterprises. Id.

Attisha Enterprises alleges Capital One had "actual knowledge" the account holders were not in fact TICOR based on Capital One's internal procedures for opening a business account. Id. at ¶ 8. It argues Capital One owed a duty of care to Attisha Enterprises to not "allow persons or entities to open accounts in the name of another person or entity known not to actually be that person or entity" and that Capital One breached that duty by accepting and depositing the wire transfer in the numbered account. Id. at ¶¶ 15-16. Attisha Enterprises further alleges that once it notified Capital One of the fraudulent wire instructions, Capital One was obligated to return the funds but did not do so. Id. at ¶ 22.

II. LEGAL STANDARD

A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or absence of sufficient alleged facts under a cognizable legal theory. Johnson v. Riverside Healthcare Sys. , 534 F.3d 1116, 1121 (9th Cir. 2008) ; Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). When considering a Rule 12(b)(6) motion, the Court "accept[s] as true facts alleged and draw[s] inferences from them in the light most favorable to the plaintiff." Stacy v. Rederiet Otto Danielsen , 609 F.3d 1033, 1035 (9th Cir. 2010). A plaintiff must not merely allege conceivably unlawful conduct but must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim is facially plausible ‘when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ " Zixiang Li v. Kerry , 710 F.3d 995, 999 (9th Cir. 2013) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

If a court dismisses a complaint, it may grant leave to amend unless "the pleading could not possibly be cured by the allegation of other facts." Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc. , 911 F.2d 242, 247 (9th Cir. 1990).

III. ANALYSIS

Attisha Enterprises alleges common law claims for negligence, conversion, and money had and received. See generally Compl., ECF No. 1-2. Capital One argues that all claims are barred by Uniform Commercial Code Article 4A, codified at Division 11 of the California Commercial Code, and that even if some claims are not barred the Complaint contains insufficient factual allegations to plausibly state a claim for relief. Mot., ECF No. 7, 1-2. The Court examines each claim in turn.

A. Negligence

Attisha Enterprises' first claim alleges negligence. Compl., ECF No. 1-2, ¶¶ 14-19. The elements of a negligence claim are (1) the existence of a duty to exercise due care; (2) breach of that duty; (3) causation; and (4) damage. See, e.g. , Merrill v. Navegar, Inc. , 26 Cal. 4^th 465, 500, 110 Cal.Rptr.2d 370, 28 P.3d 116 (Cal. 2001). However, the negligence claim alleges three separate negligent acts. "A party may set out 2 or more statements of a claim or defense alternatively or hypothetically, either in a single count or defense or in separate ones." Fed. R. Civ. P. 8(d)(2). "If a party makes alternative statements, the pleading is sufficient if any one of them is sufficient." Id. Accordingly, the Court evaluates each alleged negligent act and determines whether any one of those allegations is sufficient to withstand the motion to dismiss. Because, as set out below, each allegedly negligent act is insufficient in at least one respect, the Court dismisses the negligence claim without prejudice.

1. Negligent Account Opening

Attisha Enterprises first alleges Capital One negligently allowed an entity that was not TICOR to open an account in TICOR's name. See Compl., ECF No. 1-2, ¶ 15 ("Capital One had a duty of care and obligation to Plaintiff and other members of the public not to allow persons or entities to open accounts in the name of another person or entity known not to actually be that person or entity"). Capital One argues this common law claim is displaced by the California Commercial Code. Mot., ECF No. 7, 4-7. Alternatively, Capital One argues California law does not impose on banks a duty of care towards noncustomers, and thus, the allegation fails to state a cognizable legal theory for recovery. Id. at 7-8.

"The California Uniform Commercial Code does not automatically displace all other legal principles." Zengen, Inc. v. Comerica Bank , 41 Cal. 4th 239, 247, 59 Cal.Rptr.3d 240, 158 P.3d 800 (Cal. 2007). Instead, it provides that "[u]nless displaced by the particular provisions of this code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions." Id. (quoting Cal. Com. Code § 1103 ). Thus, a plaintiff may bring a cause of action for negligence, conversion, or money had and received "unless some particular provisions of the California Uniform Commercial Code [has] displaced them." Id.

Capital One argues this claim arises from a wire transfer that Capital One allegedly should not have executed. Mot., ECF No. 7, 3-4. Common law claims involving wire transfers, Capital One contends, are displaced by the duties, allocation of risk, and remedies available in the California Commercial Code. Id.

However, at least with respect to the alleged fraudsters' opening of an account with Capital One, the California Commercial Code provisions regarding wire transfers do not apply. Section 11104 applies to "funds transfer[s]," defined as "the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order." Cal. Com. Code § 11104(a). Nothing in that section applies to opening an account Capital One allegedly knew was being created in a fraudulent name. Accordingly, this allegedly negligent act is not displaced by the California Commercial Code.

Turning to the factual sufficiency of the allegations, Capital One correctly notes that in California, "absent extraordinary and specific facts, a bank does not owe a fiduciary duty of care to a noncustomer." Software Design & Application, Ltd. v. Hoefer & Arnett, Inc. , 49 Cal. App. 4th 472, 479, 56 Cal.Rptr.2d 756 (Cal. Ct. App. 1996). Even "[v]iolation of a self-imposed rule does not create actionable negligence unless plaintiff (1) suffers the type of harm sought to be prevented by the rule and (2) is a member of the class of people for whose protection the rule was promulgated." Id. at 482, 56 Cal.Rptr.2d 756 (citing Fireman's Fund Ins. Co. v. Security Pacific Nat. Bank , 85 Cal. App. 3d 797, 829, 149 Cal.Rptr. 883 (Cal. Ct. App. 1978) ). However, "this general proposition of non-liability is far from...