Watson v. Conduent State & Local Sols.
| Decision Date | 25 March 2020 |
| Docket Number | Case No. 1:19cv355 |
| Parties | Melvia Watson, et al., Plaintiffs, v. Conduent State & Local Solutions, Inc., originally named as Direct Express Payment Processing Services, et al., Defendants |
| Court | U.S. District Court — Northern District of Ohio |
MEMORANDUM OPINION AND ORDER
Currently pending is Defendants' Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. No. 18.) Plaintiffs filed a Brief in Opposition, to which Defendants responded. (Doc. Nos. 21, 22.) For the following reasons, Defendants' Motion is GRANTED IN PART and DENIED IN PART, as follows. Defendants' Motion is granted with respect to Count V. Defendants' Motion is denied with respect to Counts I, II, III, and IV.
On February 16, 2019, Plaintiffs Melvia and Cleophus Watson filed a Complaint in this Court against Defendants Direct Express Payment Processing Services and Comerica Bank, asserting a claim for gross negligence. (Doc. No. 1.) On June 10, 2019, Defendants Conduent State & Local Solutions, Inc.1 and Comerica Bank filed a Motion to Dismiss for Failure to State a Claim pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. No. 10.)
Plaintiffs thereafter filed a Motion for Leave to file an Amended Complaint (Doc. No. 11), which was granted on June 28, 2019. Plaintiffs filed a First Amended Complaint against the same Defendants on August 15, 2019. (Doc. No. 17.) Therein, Plaintiffs asserted claims for (1) breach of contract; (2) breach of the duty of good faith and fair dealing; (3) promissory estoppel; (4) violations of the Electronic Funds Transfer Act, 15 U.S.C. 1693f, et al.; and (5) gross negligence. (Id.)
The next day, Defendants filed a Motion to Dismiss each of Plaintiffs' claims pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. No. 18.) Plaintiffs filed a Brief in Opposition, to which Plaintiffs responded. (Doc. Nos. 21, 22.)
The First Amended Complaint contains the following factual allegations. Plaintiff Melvia Watson is a recipient of federal retirement benefit payments. (Doc. No. 17 at ¶ 7.) Melvia has been diagnosed with Alzheimer's disease. (Id. at ¶ 8.) Plaintiff Cleophus Watson is the holder of a duly executed Power of Attorney to conduct Melvia's affairs on her behalf, as well as a Federal Payee Designation with respect her federal retirement benefits. (Id.)
On July 1, 2016, Melvia was enrolled in the Direct Express Debit Card Program. (Id. at ¶ 9.) Thereafter, her retirement benefits payments were deposited into an account administered by Defendants and disbursed through a debit card issued by Defendants. (Id. at ¶ 10.) Melvia was the primary card holder on the account and Cleophus was empowered by virtue of the Power of Attorneyand Federal Payee Designation to take any action with respect to the account. (Id. at ¶ 11.) No other individuals, however, were authorized by Melvia to so act on her behalf with respect to this account. (Id. at ¶ 12.) Plaintiffs used the debit cards at issue to pay for their essential living expenses, including food, housing, monthly bills, and utilities. (Id. at ¶ 13.)
During the time period of July 2017 through March 2018, Defendants "unlawfully permitted one or more unauthorized third parties to access and withdraw funds from the account in the total amount of $60,000." (Id. at ¶ 15.) In November 2017, Plaintiffs learned of the unauthorized use of the account and notified Defendants of the fraudulent transactions that had taken place. (Id. at ¶ 16.) Plaintiffs allege that "such notice complied in all respects with the terms and conditions to which the account was subject."2 (Id. at ¶ 17.)
Defendants, however, "failed to satisfy [their obligations under] said terms and conditions" upon receipt of Plaintiffs' notice of unauthorized account activity. (Id. at ¶ 18.) Specifically, Plaintiffs claim that Defendants failed to properly investigate Plaintiffs' contentions as to the disputed transactions or to respond to Plaintiffs' requests for information regarding the account. (Id. at ¶ 19.) Additionally, Plaintiffs allege that Defendants denied them access to the account, despite the fact thatDefendants "unlawfully allowed an unauthorized third party to change the account number and issue[d] new debit cards without Plaintiffs' knowledge or consent." (Id. at ¶ 20.) Plaintiffs claim that "Defendants' wrongful conduct directly and proximately permitted unauthorized and fraudulent transactions under new account and card numbers that Defendants permitted to be created without Plaintiffs' knowledge or consent and without following contractual and legal obligations." (Id. at ¶ 21.) Plaintiffs also claim that Defendants wrongfully refused to take action regarding the account on the grounds that Plaintiffs were unable to provide the new (unauthorized) account and card numbers. (Id. at ¶ 22.)
Plaintiffs allege that Defendants represented that they would conduct further investigation regarding the dispute if Plaintiffs provided a copy of a police report demonstrating that the alleged theft of account funds had been duly reported to law enforcement, "as well as completing and submitting a number of other forms not required by the dispute resolution procedures set forth in the terms and conditions." (Id. at ¶ 23.) Although Plaintiffs satisfied Defendants' request, "Defendants continued to take no action and to refuse to engage with Plaintiffs in any meaningful way." (Id. at ¶ 24.) Plaintiffs allege that "Defendants' wrongful refusal to address the situation permitted continued misappropriation of funds belonging to Plaintiffs within accounts held and processed by Defendants." (Id. at ¶ 25.)
Plaintiffs claim Defendants persisted in their wrongful refusal to address the situation until March 2018, by which time $60,000 had been misappropriated from Plaintiffs' account. (Id. at ¶ 26.)
Under Fed. R. Civ. P. 12(b)(6), the Court accepts the plaintiff's factual allegations as true and construes the Complaint in the light most favorable to the plaintiff. See Gunasekara v. Irwin, 551F.3d 461, 466 (6th Cir. 2009). In order to survive a motion to dismiss under this Rule, "a complaint must contain (1) 'enough facts to state a claim to relief that is plausible,' (2) more than 'formulaic recitation of a cause of action's elements,' and (3) allegations that suggest a 'right to relief above a speculative level.'" Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (quoting in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-556 (2007)).
The measure of a Rule 12(b)(6) challenge — whether the Complaint raises a right to relief above the speculative level — "does not 'require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.'" Bassett v. National Collegiate Athletic Ass'n., 528 F.3d 426, 430 (6th Cir.2008) (quoting in part Twombly, 550 U.S. at 555-556). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Deciding whether a complaint states a claim for relief that is plausible is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.
Consequently, examination of a complaint for a plausible claim for relief is undertaken in conjunction with the Gunasekera, 551 F.3d at 466 (quoting in part Erickson v. Pardus, 551 U.S. 89 (2007)) (quoting Twombly, 127 S.Ct. at 1964). Nonetheless, while "Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era ... itdoes not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 556 U.S. at 679.
As noted above, Plaintiffs assert the following five claims for relief: (1) breach of contract; (2) breach of the duty of good faith and fair dealing; (3) promissory estoppel; (4) violations of the Electronic Funds Transfer Act, 15 U.S.C. 1693f, et al.; and (5) gross negligence. (Doc. No. 17.) Defendants move to dismiss each of these claims for failure to state a claim upon which relief may be granted. (Doc. No. 18.)
In Counts I, II and III of the First Amended Complaint, Plaintiffs assert claims for breach of contract, breach of the duty of good faith and fair dealing, and promissory estoppel. (Doc. No. 17 at ¶¶ 27-48.)
Defendants move to dismiss each of these counts on the basis that Plaintiffs fail to sufficiently plead the elements of the respective claims. (Doc. No. 18-1 at pp. 4-7; Doc. No. 22 at pp. 2-4.) In making these arguments, Defendants rely entirely on Ohio law. (Id.) Specifically, for each claim, Defendants recite the elements of that claim as set forth by Ohio courts (and federal courts applying Ohio case law) and argue that the First Amended Complaint fails to adequately plead each such element. (Id.) Throughout, Defendants rely solely and exclusively on the Ohio courts' formulations of the claims of breach of contract, breach of the duty of good faith and fair dealing, and promissory estoppel. (Id.)
The Court notes, however, that the "Terms of Use" agreement governing the Plaintiffs' debit card account has a choice of law provision that identifies Michigan law as the governing law. Specifically, Paragraph 1 of Section XIV provides as follows:
Governing Law. The funds in your Card Account are deemed held in the State of Michigan. Unless...
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