State ex rel. Elder v. JPMorgan Chase Bank
| Docket Number | 21 C 85 |
| Decision Date | 30 August 2022 |
| Parties | STATE OF ILLINOIS EX REL. KEN ELDER, Plaintiff-relator v. JPMORGAN CHASE BANK, N.A., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Plaintiff-relator Ken Elder (“Elder”), troubled that defendant had escheated to the State of Ohio intangible property that he believes was subject to escheat in Illinois, filed in the Circuit Court of Cook County a complaint asserting claims under the Illinois False Claims Act. Defendant removed the case, after which relator filed a third amended complaint. Before the Court is defendant's motion to dismiss. For the reasons set forth below, the motion is granted.
In this case, relator takes issue with the way defendant JPMorgan Chase Bank, N.A. (“JPMC”) escheats uncashed cashier's checks. Escheat is the “ancient” procedure “whereby a sovereign may acquire title to abandoned property if after a number of years no rightful owner appears.” Texas v. New Jersey, 379 U.S 674, 675 (1965). Relator asserts that certain cashier's checks were subject to escheat in Illinois but that, instead, JPMC treated those cashier's checks as being subject to escheat in Ohio.
Relator alleges that JPMC, at its branch locations, allows customers to purchase cashier's checks. When a customer purchases a cashier's check, JPMC keeps a record of the identity of the purchaser and the branch location. Because JPMC sells cashier's checks only to account holders, it also possesses a last-known address for those purchasers. Relator alleges that, to the extent the purchaser bought the cashier's check for his or her own benefit, JPMC has the last known address of the owner.
Relator alleges that defendant's escheatment practices violated two sections of the Illinois Revised Uniform Unclaimed Property Act. Specifically, relator alleges defendant “knowingly failed to comply with both UPA § 306 and § 302(1).” (3rd Am. Complt. ¶ 19). Relator further alleges that the “provisions of the UPA pertaining to escheatment of cashier's checks are fully consistent with federal law, which governs the escheatment priorities for intangible property among the States.” (3rd Am. Complt. ¶ 18). Relator alleges that “[p]ursuant to federal statutory law, as established by 12 U.S.C. § 2501, et seq., a State is authorized to escheat cashier's checks when the holder's records show that the abandoned check was purchased in that State.” (3rd Am. Complt. ¶ 18 at p. 5).
Relator alleges that JPMC has, since 2014, taken the position that all of its uncashed cashier's checks, no matter where they were purchased, are subject to Ohio's escheatment rules. Relator believes that JPMC prefers Ohio law, because: (1) Ohio requires that only 10% of the value of the property be escheated to Ohio, such that JPMC can keep the remainder; and (2) Ohio does not consider cashier's checks to be abandoned until five years have passed.
Relator alleges that, as of June 30, 2018, JPMC was liable on 1,933 cashier's checks, with a value of more than $3.2 million, that had remained uncashed for five years. Relator alleges that, as of June 30, 2020, JPMC was liable on 1,999 cashier's checks with a value of more than $4.5 million, that had remained uncashed for five years. Relator alleges that defendant JPMC was required to pay the amounts owing on these checks” to Illinois, “along with a report identifying all such checks.” (3rd Am. Complt. ¶ 29). Relator alleges JPMC failed to send the money to Illinois and “filed one or more false reports with the Treasurer.” (3rd Am. Complt. ¶¶ 30, 33). Relator further alleges defendant engaged in similar conduct for the years 2014-2019. Relator believes that JPMC failed to deliver to Illinois “at least $20 million” over that five-year period. (3rd Am. Complt. ¶ 4).
Based on these allegations, relator seeks relief under the Illinois False Claims Act. In Count I, relator asserts that defendant violated 740 ILCS § 175/3(a)(1)(D) by “knowingly maintain[ing] wrongful possession and the benefit of money used or to be used by the state government and knowingly deliver[ing] less than all of that money or property to the State of Illinois.” (3rd Am. Complt. ¶¶ 3, 66). In Count II, relator asserts that defendant violated 740 ILCS § 175/3(a)(1)(G) by: (a) “knowingly ma[king], us[ing], or caus[ing] to be made or used, false reports to the State of Illinois” with respect to defendant's “obligation to pay or transmit money to the state government” (3rd Am. Complt. ¶¶ 3, 70); and (b) “knowingly concealing” and “improperly avoid[ing] or decreas[ing] its obligation to pay or transmit money to the state government” (3rd Am. Complt. ¶¶ 3, 70).
The Court may dismiss a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure if the plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Under the notice-pleading requirements of the Federal Rules of Civil Procedure, a complaint must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint need not provide detailed factual allegations, but mere conclusions and a “formulaic recitation of the elements of a cause of action” will not suffice. Twombly, 550 U.S. at 555. To survive a motion to dismiss, a claim must be plausible. Ashcroft v. Iqbal, 556 U.S. 662 (2009). Allegations that are as consistent with lawful conduct as they are with unlawful conduct are not sufficient; rather, plaintiffs must include allegations that “nudg[e] their claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570.
In considering a motion to dismiss, the Court accepts as true the factual allegations in the complaint and draws permissible inferences in favor of the plaintiff. Boucher v. Finance Syst. of Green Bay, Inc., 880 F.3d 362, 365 (7th Cir. 2018). Conclusory allegations “are not entitled to be assumed true,” nor are legal conclusions. Iqbal, 556 U.S. at 680 & 681 ( that a “legal conclusion” was “not entitled to the assumption of truth[;]” and rejecting, as conclusory, allegations that “‘petitioners ‘knew of, condoned, and willfully and maliciously agreed to subject [him]' to harsh conditions of confinement”). The notice-pleading rule “does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Iqbal, 556 U.S. at 678-679.
Pursuant to Rule 9(b) of the Federal Rules of Civil Procedure, the “circumstances constituting fraud” must be alleged with particularity. Fed.R.Civ.P. 9(b). “[C]laims [that] arise under the [False Claims Act], an anti-fraud statute, . . . are subject to the heightened pleading requirements of Rule 9(b),” which requires a plaintiff to describe the “‘who, what, when, where, and how' of the fraud-‘the first paragraph of any newspaper story.'” United States ex rel. Berkowitz v. Automation Aids, Inc., 896 F.3d 834, 839 (7th Cir. 2018) (quoting United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009)). The “more rigorous pleading standard guards against ‘the stigmatic injury that potentially results from allegations of fraud.'” United States ex rel. Mamalakis v. Anesthetix Mgt., LLC, 20 F.4th 295, 301 (7th Cir. 2021). It also “‘forces the plaintiff to conduct a careful pretrial investigation' to minimize the risk of damage associated with a baseless claim.” Berkowitz, 896 F.3d at 840. The difficulty a relator might have in accurately alleging “what occurs inside” a separate company, “does not relieve [a relator] of his obligation to adequately plead all of the elements of an FCA claim or to fully investigate his claim before filing a complaint.” Berkowitz, 896 F.3d at 843.
Every federal court has an obligation to ensure that it has jurisdiction over the cases before it. Scott Air Force Base Prop., LLC v. County of St. Clair Ill., 548 F.3d 516, 520 (7th Cir. 2008). Defendant removed this case on the basis of federal-question jurisdiction. Relator moved for remand, and this Court denied the motion. In so doing, the Court, applying Gunn v. Minton, 568 U.S. 251, 258 (2013), concluded that relator's case arose under federal law, because a federal issue was: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.
After this Court denied the motion for remand, relator filed a third amended complaint in which he declined to include most of his prior mentions of federal law. Relator's complaint still alleges:
The provisions of the [Illinois Revised Uniform Unclaimed Property Act] pertaining to escheatment of cashier's checks are fully consistent with federal law, which governs the escheatment priorities for intangible property among the states.
(3rd Am. Complt. ¶ 18 at p. 5) (emphasis added).0F[1] The admission that federal law governs is probably enough to establish that a federal issue is necessarily raised by the Third Amended Complaint. The Illinois statute on which relator bases his claims confirms it. Relator asserts that defendant violated section 15-306 of the Illinois Revised Uniform Unclaimed Property Act, which states that Illinois “may take custody of sums payable on a traveler's check, money order, or similar instrument presumed abandoned to the extent permissible under 12 U.S.C. Sections 2501 through 2503, as amended.” 765 ILCS 1026/15-306 (emphasis added). One cannot determine whether section 15-306 is violated without reference to federal law, namely 12 U.S.C. §...
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