Plastic Specialties, Inc. v. JPMorgan Chase Bank, N.A.
| Decision Date | 05 August 2020 |
| Docket Number | Case No. 1:18-CV-0874-SH |
| Citation | 476 F.Supp.3d 523 |
| Parties | PLASTIC SPECIALTIES, INC., Plaintiff v. JPMORGAN CHASE BANK, N.A. and John Doe Teller, Defendants |
| Court | U.S. District Court — Western District of Texas |
Michael L. Navarre, Beatty Navarre Strama, PC, Austin, TX, for Plaintiff.
Jacquelyn Diane McAnelly, M. H. Cersonsky, Rachel Rodriguez Rosen, Cersonsky, Rosen & Garcia, P.C., Houston, TX, for Defendants.
Before the Court are Defendant JPMorgan Chase Bank, N.A.’s ("Chase") Motion to Dismiss, filed April 13, 2020 (Dkt. 44); Plaintiff's Response, filed April 27, 2020 (Dkt. 45); and Chase's Reply, filed May 1, 2020 (Dkt. 46).1
Plastic Specialties, Inc. ("PSI") alleges that on February 5, 2018, a third-party customer deposited a check for $116,200 into PSI's bank account at Chase Bank as payment for an outstanding invoice. The routing number on the check was invalid. The bank teller accepted the check and altered the routing number, using an "internal generic routing number" to complete the deposit. Dkt. 43 ¶ 12. Chase credited $116,200 to PSI's account.
PSI determined that the $116,200 deposit included an overpayment of $100,400 because the amount invoiced to its customer was only $15,800. The customer requested a refund for the overpayment. PSI alleges that it contacted Chase about the deposit on February 8, 2018, and confirmed that the check was processed. PSI claims that it was not notified about the incorrect routing number or the potential for a delay in processing the check. Dkt. 43 ¶ 15.
PSI alleges that it wired $100,400 to the customer on February 12, 2018. Chase had not informed PSI at that time about the invalid routing number. Dkt. 43 ¶ 16. On February 16, 2018, Chase notified PSI that the $116,200 check was returned by the depositor bank. Id. ¶ 17. Chase charged back the $116,200 deposit and removed the funds from PSI's account. Because the funds were no longer in its account, PSI unsuccessfully attempted to recall the $100,400 refund it had wired to its customer. PSI contends that its loss of $100,400 is a result of Chase's misrepresentation of facts, fraud, and violations of the Texas Business and Commerce Code.
On September 17, 2018, PSI filed this lawsuit against Chase in Texas state court, alleging violations of the Texas Business and Commerce Code, misrepresentation, and fraud by omission. Plastic Specialties, Inc. v. JPMorgan Chase Bank, N.A. , No. D-1-GN-18-5693, 2018 WL 4775700 (353rd Dist. Ct., Travis County, Tex. Sept. 17, 2018) ; Dkt. 1-2. On October 12, 2018, Chase removed the case on the basis of diversity jurisdiction, pursuant to 28 U.S.C. § 1332. Dkt. 1. Chase now seeks dismissal of all of PSI's claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), or alternatively, judgment on the pleadings under Federal Rule of Civil Procedure 12(c).
Rule 12(b)(6) allows a party to move to dismiss an action for failure to state a claim on which relief can be granted. In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court accepts "all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." In re Katrina Canal Breaches Litig. , 495 F.3d 191, 205 (5th Cir. 2007). The Supreme Court has explained that a complaint must contain sufficient factual matter "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (cleaned up). The court's review is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced in the complaint. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC , 594 F.3d 383, 387 (5th Cir. 2010).
Rule 12(c) allows a party to move for judgment on the pleadings. The standard for deciding a Rule 12(c) motion is the same as for a Rule 12(b)(6) motion to dismiss. Guidry v. Am. Pub. Life Ins. Co. , 512 F.3d 177, 180 (5th Cir. 2007). "The court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Id. (internal quotation marks omitted). "The central issue is whether, in the light most favorable to the plaintiff, the complaint states a valid claim for relief." Doe v. MySpace, Inc. , 528 F.3d 413, 418 (5th Cir. 2008). To state a valid claim for relief, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Twombly , 550 U.S. at 570, 127 S.Ct. 1955.
Chase contends that PSI's claims for fraud by omission, misrepresentation, and breach of the duty of good faith should be dismissed because PSI has not alleged sufficient facts to satisfy the heightened pleading standard of Federal Rule of Civil Procedure 9(b). Chase contends that PSI's factual allegations of fraud and misrepresentation are so intertwined that both are subject to the heightened pleading requirements of Rule 9(b), and PSI concedes that its misrepresentation claim is subject to that standard. Dkt. 44 at 6; Dkt. 45 at 7. In addition, Chase argues that PSI's Texas Business and Commerce Code claims (also referred to as "UCC claims") fail as a matter of law because there is no independent cause of action for breach of the duty of good faith, and because PSI's damages are insufficient to support a claim for breach of ordinary care.
PSI responds that its UCC claims are not subject to the heightened pleading standard, but nonetheless, it has pled sufficient facts to satisfy Rule 9(b) as to all its claims by identifying the who, what, when, where, and how of the fraud. PSI further argues that it may recover for its breach of ordinary care claim because the UCC supports recovery for damages that "arise from the affirmative actions and omissions that caused Plaintiff to send $100,400 to a third party." Dkt. 45 at 17. In its Response, PSI also moved for leave to file an amended complaint should the Court find dismissal proper.
PSI's allegations of fraud by omission and misrepresentation arise from its claim that Chase failed to inform it of the inaccurate routing number and misrepresented that the funds were in PSI's account when the depositor's bank had not yet processed the check. Rule 9(b) requires that claims of fraud be pled with particularity. Matter of Life Partners Holdings, Inc. , 926 F.3d 103, 116-17 (5th Cir. 2019). To satisfy the Rule 9(b) requirements, "the complaint must contain factual allegations stating the ‘time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what that person obtained thereby.’ " Id. at 117 (quoting Tuchman v. DSC Commc'ns Corp. , 14 F.3d 1061, 1068 (5th Cir. 1994) ). The Fifth Circuit "interprets Rule 9(b) strictly, requiring a plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent." Herrmann Holdings Ltd. v. Lucent Techs. Inc. , 302 F.3d 552, 564-65 (5th Cir. 2002) (internal quotation marks omitted). In cases concerning fraudulent misrepresentation and omission of facts, Rule 9(b) "typically requires the claimant to plead the type of facts omitted, the place in which the omissions should have appeared, and the way in which the omitted facts made the representations misleading." United States ex rel. Riley v. St. Luke's Episcopal Hosp. , 355 F.3d 370, 381 (5th Cir. 2004).
Because fraud and misrepresentation arise from state tort law, Texas law governs those claims. "To state a claim of fraud by misrepresentation under Texas law, a plaintiff must allege (1) a misrepresentation that (2) the speaker knew to be false or made recklessly (3) with the intention to induce the plaintiff's reliance, followed by (4) actual and justifiable reliance (5) causing injury." Rio Grande Royalty Co. v. Energy Transfer Partners, L.P. , 620 F.3d 465, 468 (5th Cir. 2010) (citing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co. , 51 S.W.3d 573, 577 (Tex. 2001) ). To state a fraud by omission claim, the plaintiff must show that the defendant had a duty to speak and deliberately remained silent. Id. There is generally no such duty absent a confidential or fiduciary relationship. Id. A duty may arise "when one makes a partial disclosure and conveys a false impression." Id. Additionally, a duty to speak arises between non-fiduciaries when "one party learns later that his previous affirmative statement was false or misleading." Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter , 607 F.3d 1029, 1035 (5th Cir. 2010).
Chase argues that PSI has failed to plead with particularity sufficient facts related to fraud and misrepresentation. Chase contends that PSI has failed to state what the fraudulent misrepresentation was, how the representation was false, and what information Chase exclusively retained. Dkt. 44 at 7. Chase further argues that PSI's...
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