Cumis Ins. Soc'y, Inc. v. Clark

• Decision Date: 19 July 2018
• Docket Number: Civil Action No. 05-1277 (PLF)
• Parties: CUMIS INSURANCE SOCIETY, INC., Plaintiff, v. Reginald CLARK, et al., Defendants.
• Court: U.S. District Court — District of Columbia

318 F.Supp.3d 199

CUMIS INSURANCE SOCIETY, INC., Plaintiff,
v.
Reginald CLARK, et al., Defendants.

Civil Action No. 05-1277 (PLF)

United States District Court, District of Columbia.

Signed July 19, 2018

318 F.Supp.3d 204

Amy Sanborn Owen, Kristin Anne Martin Zech, Brigliahundley, P.C., Tysons Corner, VA, for Plaintiff.

Reginald Clark, Washington, DC, pro se.

OPINION

PAUL L. FRIEDMAN, United States District Judge

This matter comes before the Court on plaintiff CUMIS Insurance Society, Inc.'s motion for summary judgment, originally filed on November 8, 2007, and supplemented on May 26, 2017, and defendant Reginald Clark's motion to dismiss, originally filed on September 18, 2009, and supplemented on May 30, 2017. For the following reasons, the Court will deny both motions.¹ The Court will deny the motion for summary judgment without prejudice.

I. FACTUAL AND PROCEDURAL BACKGROUND

This case has a long history, with two lengthy stays in the litigation due to related criminal proceedings. As a result, the Court is only now tasked with resolving the parties' first substantive dispositive motions in the case. Because it has not had prior occasion to do so, the Court briefly summarizes here the factual and procedural background.

Between April 2001 and July 2003, defendant Reginald Clark was employed as an accountant for Hoya Federal Credit Union ("Hoya") at its Georgetown University branch in Washington, D.C. See Am. Compl. at ¶¶ 8-9; Answer at ¶¶ 8-9.² CUMIS alleges that during the course of Mr. Clark's employment, he engaged in fraudulent

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conduct that caused financial damages to Hoya. As Hoya's insurer, CUMIS seeks to recover the funds it disbursed to Hoya pursuant to its fidelity bond.

More specifically, CUMIS alleges that Mr. Clark engaged in several types of fraudulent conduct or schemes. First, CUMIS alleges that Mr. Clark "often volunteered" to bring the daily deposits to Hoya's bank, but then "took the deposit bag to his residence, removed the cash from the deposits, created new deposit slips without a reference to a cash deposit, and then deposited the checks the following business day." See Am. Compl. at ¶ 12. Second, CUMIS alleges that Mr. Clark participated in "stop payment" schemes with checks written from his own account and the accounts of other Hoya members. See id. at ¶¶ 13-14. Essentially, by placing "stop payment" orders on checks written from these accounts and subsequently deleting the records of the "stop payment" orders, as well as the drafts themselves, Hoya's bank would pay out the check amounts, but the funds would not be debited from the accounts. See id. Finally, CUMIS alleges that Mr. Clark arranged fraudulent wire transfers on at least three occasions, processing the largest two "when Hoya's manager was out of the office" and asserting to another employee that he "had instructions from Hoya's manager to carry out the transactions," thereby "cloaking himself in false authority." See id. at ¶¶ 15-16, 23. CUMIS alleges that this conduct caused Hoya to suffer losses "in excess of $540,196.14." See id. at ¶ 17. And as Hoya's insurer, CUMIS compensated Hoya in the amount of $540,196.14 and now is subrogated to Hoya's rights in that same amount. See id. at ¶ 18.

On June 28, 2005, CUMIS brought suit against Mr. Clark alleging fraud, breach of fiduciary duty, and unjust enrichment. See Am. Compl. at ¶¶ 19-34.³ Mr. Clark filed his answer on February 13, 2006, denying liability on all counts and including his demand for a jury trial.⁴ On

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July 14, 2006, Mr. Clark moved to stay the case, invoking his Fifth Amendment privilege against self-incrimination in light of a parallel criminal investigation and grand jury proceedings. See Mot. to Stay at 1-2. In his motion to stay, Mr. Clark also asserted that the criminal investigation was interfering with his discovery rights in the instant case. See id. at 4; Reply to Mot. to Stay at 1-2. CUMIS opposed the motion to stay. See Opp'n to Mot. to Stay. On August 22, 2006, the Court granted Mr. Clark's motion and entered the first of two stays in the case. See Order [Dkt. No. 44] (Aug. 22, 2006). On June 27, 2007, CUMIS moved to lift the stay in light of the fact that no criminal charges had been brought and all requested discovery materials had been made available to Mr. Clark. See Mot. to Lift; Reply to Mot. to Lift. On July 18, 2007, the Court issued a minute order granting this motion and lifting the stay. Thereafter, on November 8, 2007, CUMIS filed a motion for summary judgment, and on September 18, 2009, Mr. Clark filed a motion to dismiss.⁵ The parties thereafter filed responsive briefs opposing and supporting their respective motions.

On December 15, 2009, Mr. Clark again moved to stay the proceedings. In light of an ongoing grand jury investigation, the Court issued a minute order on January 25, 2010, granting the motion to stay. Mr. Clark was subsequently indicted and then convicted of three counts of bank fraud (in violation of 18 U.S.C. § 1344 ), two counts of wire fraud (in violation of 18 U.S.C. § 1343 ), and two counts of creating a false entry in federal credit institution records (in violation of 18 U.S.C. § 1006 ). See Suppl. Mot. for Summ. J. Ex. E; Suppl. Mot. for Summ. J. Ex. F. Following Mr. Clark's conviction, Judge Reggie B. Walton sentenced him to sixty-three months of imprisonment, to be followed by a term of supervised release, and required him to pay restitution in the amounts of $140,000 to Hoya and $79,286.41 to CUMIS, a total of $219,286.41. See Suppl. Mot. for Summ. J. Ex. F. Mr. Clark appealed his conviction and sentence, and the United States Court of Appeals for the District of Columbia Circuit affirmed his conviction and restitution obligation, but remanded the case for resentencing. See United States v. Clark, 747 F.3d 890, 897 (D.C. Cir. 2014). On remand, Judge Walton reduced Mr. Clark's term of imprisonment, but the restitution amounts remained unchanged. See Suppl. Mot. for Summ. J. Ex. G. There are no longer any pending appeals in the criminal case, and that judgment is final.

On February 1, 2017, CUMIS filed a motion to lift the stay. After a status conference, the Court issued a minute order on April 3, 2017, granting CUMIS's motion to lift the stay. The Court also issued a separate order permitting the parties to

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supplement their unresolved dispositive motions. See Order [Dkt. No. 162] (Mar. 23, 2017). On May 26, 2017, CUMIS filed a revised memorandum in support of its motion for summary judgment, and on May 30, 2017, Mr. Clark filed a supplemental motion to dismiss. The parties thereafter filed responsive briefs opposing and supporting their respective motions.

II. MOTION TO DISMISS

In his motion to dismiss, Mr. Clark asks the Court to dismiss CUMIS's complaint on grounds that the Court lacks subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure. He also asserts that CUMIS has failed to state a claim upon which relief can be granted and failed to plead fraud with the requisite particularity, warranting dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Finally, Mr. Clark requests dismissal as a discovery sanction.

A. Dismissal for Lack of Subject Matter Jurisdiction Under Rule 12(b)(1)

1. Legal Standard

Federal courts are courts of limited jurisdiction, possessing only those powers authorized by the Constitution and an act of Congress. See, e.g., Janko v. Gates, 741 F.3d 136, 139 (D.C. Cir. 2014) ; Beethoven.com LLC v. Librarian of Cong., 394 F.3d 939, 945 (D.C. Cir. 2005) ; Abulhawa v. U.S. Dep't of the Treasury, 239 F.Supp.3d 24, 30 (D.D.C. 2017). On a motion to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of establishing that the Court has jurisdiction. See Walen v. United States, 246 F.Supp.3d 449, 452 (D.D.C. 2017) ; Tabman v. FBI, 718 F.Supp.2d 98, 100 (D.D.C. 2010). In determining whether to grant a motion to dismiss, however, the Court must construe the complaint in the plaintiff's favor and treat all well-pleaded factual allegations as true. See Attias v. Carefirst, Inc., 865 F.3d 620, 627 (D.C. Cir. 2017) ; Walen v. United States, 246 F.Supp.3d at 452-53. And in determining whether a plaintiff has met the burden of establishing jurisdiction, this Court may consider materials beyond the pleadings where appropriate. See Walen v. United States, 246 F.Supp.3d at 453 (citing Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) ); Tabman v. FBI, 718 F.Supp.2d at 100 (citing Scolaro v. D.C. Bd. of Elections & Ethics, 104 F.Supp.2d 18, 22 (D.D.C. 2000) ).

Under 28 U.S.C. § 1332, this Court has subject matter jurisdiction over a dispute between citizens of different states where the amount in controversy exceeds $75,000, computed without regard to any setoff or counterclaim to which the defendant may be adjudged to be entitled and exclusive of interest and costs. When the court considers whether a claim exceeds the $75,000 amount-in-controversy requirement, "the plaintiff's amount-in-controversy allegation is accepted if made in good faith." See Dart Cherokee Basin Operating Co. v....