Behrens et al v. JP Morgan Chase Bank N. A. et al

MEMORANDUM OF LAW in Support re: 113 MOTION to Dismiss . . Document

S.D.N.Y.December 14, 2017

721270991 UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK -------------------------------------------------------------------------X BRUCE BEHRENS, et al., Plaintiffs, -against- JPMORGAN CHASE BANK, N.A., et al., Defendants. -------------------------------------------------------------------------X Case No. 1:16-cv-05508 Judge Vernon S. Broderick Magistrate Judge Andrew J. Peck JPMORGAN CHASE BANK, N.A.’s MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS THE FIRST, SECOND, THIRD, FOURTH, FIFTH, SIXTEENTH, TWENTY-SECOND, TWENTY-THIRD, TWENTY-FOURTH, TWENTY-EIGHTH, TWENTY-NINTH CLAIMS OF THE SECOND AMENDED COMPLAINT Christopher J. Houpt Lisa R. Blank MAYER BROWN LLP 1221 Avenue of the Americas New York, NY 10020 Telephone: (212) 506-2500 Facsimile: (212) 262-1910 Thomas S. Kiriakos Sean T. Scott Tyler R. Ferguson MAYER BROWN LLP 71 S. Wacker Drive Chicago, IL 60606 Telephone: (312) 782-0600 Facsimile: (312) 701-7711 Attorneys for Defendant JPMorgan Chase Bank, N.A. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 1 of 28 TABLE OF CONTENTS Page i PRELIMINARY STATEMENT ................................................................................................... 1 BACKGROUND ........................................................................................................................... 2 ARGUMENT................................................................................................................................. 3 I. EACH CLAIM ASSERTED AGAINST JPMORGAN IS TIME-BARRED................... 3 A. The New York Limitations Periods Apply If They Are Shorter. .......................... 3 B. Plaintiffs’ Fraud Claims Are Time-Barred. ........................................................... 4 C. Plaintiffs’ Breach of Fiduciary Duty and Fiduciary Obligations Act Claims Are Time-Barred. ................................................................................................... 5 D. Plaintiffs’ Unjust Enrichment Claim Is Time-Barred............................................ 5 E. Plaintiffs’ Intentional Infliction of Emotional Distress Claim Is Time- Barred..................................................................................................................... 5 F. Plaintiffs’ RICO Claims Are Time-Barred. ........................................................... 5 G. Plaintiffs’ Commodity Exchange Act Claims Are Time-Barred. .......................... 6 H. No Tolling Doctrine Applies. ................................................................................ 6 II. PLAINTIFFS FAIL TO STATE A CLAIM AGAINST JPMORGAN............................. 8 A. Plaintiffs’ Fraud Claim Should Be Dismissed (Claim 2)....................................... 8 B. Plaintiffs Fail To State A Claim For Violation Of The Illinois Fiduciary Obligations Act (Claim 3).................................................................................... 10 C. Plaintiffs Fail To State A Claim Against JPMorgan For Breach Of Fiduciary Duty (Claim 4)..................................................................................... 12 D. Plaintiffs Fail To State A Claim Under The Commodity Exchange Act (Claims 1, 5, 16)................................................................................................... 13 E. Plaintiffs’ Claim for Unjust Enrichment and Restitution is Without Merit (Claim 22). ........................................................................................................... 14 F. Plaintiffs Fail To State A Claim For Intentional Infliction Of Emotional Distress (Claim 23). ............................................................................................. 15 G. Plaintiffs Fail To State A Punitive Damages Claim (Claim 24).......................... 16 H. Plaintiffs Cannot Establish A RICO Violation (Claim 28).................................. 17 I. Plaintiffs Fail To State A Claim For A RICO Conspiracy (Claim 29). ............... 19 CONCLUSION............................................................................................................................ 20 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 2 of 28 ii TABLE OF AUTHORITIES Page(s) Cases Addison v. Distinctive Homes, Ltd., 836 N.E. 2d 88 (Ill. App. Ct. 2005) ...........................................................................................9 Agency Holding Corp. v. Malley-Duff & Assoc., Inc., 483 U.S. 143 (1987)...................................................................................................................5 Am. Pipe & Const. Co. v. Utah, 414 U.S. 538 (1974)...................................................................................................................7 Andreo v. Friedlander, Gaines, Cohen, Rosenthal & Rosenburg, 660 F. Supp. 1362 (D. Conn. 1987)...................................................................................17, 19 Anschutz Corp v. Merrill Lynch & Co., Inc., 690 F.3d 98 (2d Cir. 2012).......................................................................................................18 Appley v. West, 832 F.2d 1021 (7th Cir. 1987) .................................................................................................11 Ashcroft v. Iqbal, 556 U.S. 662 (2009)...................................................................................................................8 Ashley v. Schneider Nat’l Carriers, Inc., 2015 WL 4550126 (N.D. Ill. 2015) .........................................................................................16 In re Bayou Hedge Funds Inv. Litig., 472 F. Supp. 2d 528 (S.D.N.Y. 2007)......................................................................................15 In re Bear Stearns Co., Inc. Sec., Derivative & ERISA Litig., 995 F. Supp. 2d 291 (S.D.N.Y. 2016)........................................................................................7 Beedie v. Associated Bank, 10-cv-1351, 2011 WL 2460959 (C.D. Ill. June 21, 2011).................................................11, 12 Call v. Ellenville Nat’l Bank, 774 N.Y.S.2d 76 (2nd Dep’t 2004)..........................................................................................13 CFTC v. Heritage Capital Advisory Servs., Ltd., 823 F.2d 171 (7th Cir. 1987) ...................................................................................................10 CNA Int’l, v. Baer, 981 N.E.2d 441 (Ill. App. Ct. 2012) ........................................................................................14 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 3 of 28 TABLE OF AUTHORITIES Page(s) iii Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999)...............................................................................................17, 20 Corp. Trade Inc. v. Golf Channel, 563 Fed. App’x 841 (2d Cir. 2014)............................................................................................7 Corwin v. Conn. Valley Arms, Inc., 74 F. Supp. 3d 883 (N.D. Ill. 2014) .........................................................................................16 Cusimano v. Schnurr, 27 N.Y.S.3d 135 (1st Dep’t 2016) .............................................................................................7 Damato v. Hermanson, 153 F.3d 464 (7th Cir. 1998) .............................................................................................13, 14 Dana v. Oak Park Marina, 660 N.Y.S. 2d 906 (4th Dep’t 1997)..........................................................................................5 Davis v. Conn. Cmty. Bank, N.A., 937 F. Supp. 2d 217 (D. Conn. 2013)......................................................................................15 F.H. Prince & Co., v. Towers Fin. Corp., 656 N.E.2d 142 (Ill. App. Ct. 1995) ........................................................................................15 Fuqua v. Ernst & Young LLP, 2002 WL 535085 (2d Cir. Apr. 10, 2002) .................................................................................3 Geimer v. Bank of Am., 784 F. Supp. 2d 926 (N.D. Ill. 2011) .......................................................................................11 In re Gen. Dev. Corp. Bond Litig., 800 F. Supp. 1128 (S.D.N.Y. 1992)...........................................................................................6 Griffin v. U.S. Bank, N.A., 2016 WL 3671450 (N.D. Ill. July 11, 2016)...................................................................... 15-16 Hegy v. Cmty. Counseling Ctr. of Fox Valley, 158 F. Supp. 2d 892 (N.D. Ill. 2001) .......................................................................................15 Hill v. Simmons, 2017 Ill. App. (1st) 160577-U (1st Dist. 2017)..........................................................................8 Huckabone v. Jamestown, 2014 WL 4146844 (W.D.N.Y. August 19, 2014)......................................................................6 IDT Corp. v. Morgan Stanley Dean Witter & Co., 879 N.Y.S.2d 355 (2009)...........................................................................................................5 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 4 of 28 TABLE OF AUTHORITIES Page(s) iv Indus. Bank of Latvia v. Baltic Fin. Corp., 1994 WL 286162 (S.D.N.Y. June 27, 1994) ...........................................................................19 Johnson v. Edwardsville Nat’l Bank & Trust Co., 594 N.E.2d 342 (Ill. App. Ct. 1992) ........................................................................................13 U.S. ex rel. Kester v. Novartis Pharm. Corp., 2014 WL 4401275 (S.D.N.Y. Sept. 4, 2014)...........................................................................15 LaSalle Nat’l Bank v. Duff & Phelps Credit Rating Co., 951 F. Supp. 1071 (S.D.N.Y. 1996), abrogated on other grounds..........................................18 Lerner v. Fleet Bank, 459 F.3d 273 (2d Cir. 2006).................................................................................................9, 13 Limestone Dev. Corp. v. Village of Lemont, 520 F.3d 797 (7th Cir. 2008) ...................................................................................................20 Matana v. Merkin, 957 F. Supp. 2d 473 (S.D.N.Y. 2013)........................................................................................5 McKay v. Kusper, 624 N.E.2d 1140 (Ill. App. Ct. 1993) ......................................................................................14 Miller v. Am. Nat’l Bank and Trust Co. of Chicago, 4 F.3d 518 (7th Cir. 1993) ................................................................................................. 12-13 MLSMK Inv. Co. v. JP Morgan Chase & Co., 431 F. App’x 17 (2d Cir. 2011) ...............................................................................................20 Moss v. BMO Harris, 2017 WL 2894887 (E.D.N.Y. July 7, 2017)................................................................17, 18, 19 Neade v. Portes, 739 N.E.2d 496 (Ill. 2000) .......................................................................................................12 Paloian v. FDIC, 2011 WL 5325562 (N.D. Ill. Nov. 2, 2011) ............................................................................12 In re Peregrine Fin. Group Customer Litig., 12-cv-05546, Dkt. No.66 (N.D. Ill. 2012) .................................................................................7 Portfolio Recovery Assoc., LLC v. King, 901 N.Y.S.2d 575 (N.Y. 2010) ..................................................................................................3 Price v. Benjamin, 2014 WL 3653440 (E.D.N.Y. July 22, 2014)..........................................................................17 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 5 of 28 TABLE OF AUTHORITIES Page(s) v Radwill v. Romeo, 2013 Ill. App. (1st) 110912-U (1st Dist. 2013)..............................................................9, 10, 13 Reves v. Ernst & Young, 507 U.S. 170 (1993).................................................................................................................18 Rosner v. Bank of China, 528 F. Supp. 2d 419 (S.D.N.Y. 2007)..................................................................................9, 19 Rotella v. Wood, 528 U.S. 549 (2000)...................................................................................................................5 Sargiss v. Magarelli, 881 N.Y.S.2d 651 (N.Y. 2009) ..................................................................................................4 Schneiderman v. Interstate Transit Lines¸ 69 N.E.2d 293 (Ill. 1946) .........................................................................................................14 Shak v. JPMorgan Chase & Co., 156 F. Supp. 3d 462 (S.D.N.Y. 2016)........................................................................................6 Singleton v. Clash, 951 F. Supp. 2d 578 (S.D.N.Y. 2013)........................................................................................4 In re Soybean Futures Litig., 892 F. Supp. 1025 (N.D. Ill. 1995) ..........................................................................................14 Stuart v. Am. Cyanamid Co., 158 F.3d 622 (2d Cir. 1998).......................................................................................................4 Thompson v. Capital One Bank, Inc., 375 F. Supp. 2d 681 (N.D. Ill. 2005) ...................................................................................9, 13 Vincent v. Money Store, 915 F. Supp. 2d 553 (S.D.N.Y. 2013)........................................................................................3 Walker v. Hallmark Bank & Trust, Ltd., 707 F. Supp. 2d 1317 (S.D. Fla. 2010) ....................................................................................19 Weidner v. Karlin, 932 N.E.2d 602 (Ill. App. Ct. 2010) ......................................................................................8, 9 Zumpano v. Quinn, 816 N.Y.S.2d 703 (2006)...........................................................................................................7 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 6 of 28 TABLE OF AUTHORITIES Page(s) vi Statutes 7 U.S.C. § 13..................................................................................................................................13 7 U.S.C. § 25..............................................................................................................................6, 13 18 U.S.C. § 1962......................................................................................................................17, 19 760 Ill. Comp. Stat. 65 .............................................................................................................10, 11 Commodity Exchange Act...................................................................................................6, 13, 14 Fiduciary Obligations Act....................................................................................................5, 10, 11 Other Authorities CPLR 202.........................................................................................................................................3 CPLR 203.........................................................................................................................................3 CPLR 213.........................................................................................................................................4 CPLR 214.........................................................................................................................................5 CPLR 215.........................................................................................................................................5 Fed. R. Civ. P. 12.............................................................................................................................8 Fed. R. Civ. P. 15.............................................................................................................................3 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 7 of 28 Defendant JPMorgan Chase Bank, N.A. (“JPMorgan”) respectfully submits this memorandum of law in support of its motion to dismiss all claims against JPMorgan-namely, the First, Second, Third, Fourth, Fifth, Sixteenth, Twenty-second, Twenty-third, Twenty-fourth, Twenty-eighth, and Twenty-ninth claims-in the Second Amended Complaint (“SAC”) of the prospective class of plaintiffs (“Plaintiffs”), pursuant to Federal Rules of Civil Procedure 8(c) and 12(b)(6). PRELIMINARY STATEMENT The SAC consists of over 900 paragraphs of allegations against thirteen named defendants and various non-parties. The SAC is voluminous and nearly incomprehensible, and its few claims against JPMorgan are time-barred and fail to state a claim upon which relief can be granted. Plaintiffs allege that they lost their money in 2008. This case was not filed until 2016. Each claim has a limitations period of much less than eight years. There is no tolling or discovery rule to salvage the case. Plaintiffs hope to capitalize on the fact that other plaintiffs sued in 2012, but they were not part of that class and consequently cannot rely on the limited type of tolling available to members of a class. Moreover, the SAC even alleges that the named plaintiffs brought an unsuccessful arbitral claim arising from the same conduct all the way back in 2009. Clearly, Plaintiffs’ window to sue closed long ago. Even if Plaintiffs had timely filed their complaint, their convoluted allegations against JPMorgan fail to state a claim upon which relief could be granted. Those claims are all variations on the theme that a bank must uncover fraud carried out by its depositors and report that fraud to parties with whom it has no relationship. No matter how many names Plaintiffs give to that theory, it still requires a duty that the law does not recognize. In addition to being entirely time- barred, Plaintiffs have also failed to state a claim. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 8 of 28 2 BACKGROUND Plaintiffs allege that they invested with Peregrine Financial Group, Inc. (“Peregrine”), a futures commission merchant. See, e.g., SAC ¶ 66. They did not invest with Peregrine on their own. See, e.g., id. ¶¶ 2, 77. Three advisors invested Plaintiffs’ money in an IRA Custodian account (id. ¶ 89), as well as with three separate future commission merchants. Id. ¶ 93. A local broker ultimately brought Plaintiffs’ money to Peregrine. Id. ¶ 860. While over a dozen of alleged wrongdoers are identified in the SAC, the relevant allegations against JPMorgan are sparse: (1) Peregrine maintained a customer segregated account at JPMorgan (id. ¶ 93); (2) at Peregrine’s direction, Plaintiffs sent money to that account (id.); (3) Peregrine instructed JPMorgan to transfer money to an account at U.S. Bank, held out to be segregated (id. ¶ 400); (4) JPMorgan did so (id.); and (5) JPMorgan should have somehow uncovered a massive fraud by Peregrine and come to the rescue (see id. ¶¶ 405-06). Despite the elaborate nature of the alleged scheme, Plaintiffs only concrete claim against JPMorgan is that it honored withdrawal requests from its accountholder and transferred funds to a segregated account at another bank, also at the instruction of its accountholder. From those allegations, Plaintiffs leap to the conclusion that JPMorgan was actively engaged in a massive criminal conspiracy, even though in the next breath Plaintiffs criticize the bank for failing to uncover that same conspiracy. The bulk of the allegations about JPMorgan, however, have nothing to do with Peregrine, Plaintiffs, or anything else in this case. Those allegations are based on allegations that JPMorgan rigged the foreign exchange market and its behavior related to Lehman Brothers. See id. ¶¶ 12, 58, 342. The only conceivable purpose of these allegations is to tarnish and invite prejudice against JPMorgan. They do nothing to bolster the claims. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 9 of 28 3 The Court has already given Plaintiffs over a year to come up with some coherent theory of liability. The SAC should now be dismissed with prejudice. ARGUMENT I. EACH CLAIM ASSERTED AGAINST JPMORGAN IS TIME-BARRED. Affirmative defenses can properly be considered on a motion to dismiss when “the facts needed for determination . . . can be gleaned from the complaint and papers . . . that are integral to the complaint.” Fuqua v. Ernst & Young LLP, 2002 WL 535085, at *3-*4 (2d Cir. Apr. 10, 2002) (internal citation and quotations omitted) (plaintiffs would have uncovered alleged fraud within limitations period if they had undertaken a diligent inquiry). The SAC alleges that Plaintiffs’ accounts “[went] to almost zero by October 8, 2008,” nearly eight years before this case was filed in July 2016. SAC ¶ 508. By that point, Plaintiffs had suffered their alleged injuries and all claims had accrued. The seven-plus years between the latest conceivable accrual date and the filing of the case well exceeds any applicable statute of limitations. Moreover, for the claims that are subject to a discovery rule, the SAC pleads facts that show that Plaintiffs should have discovered their claims long before they filed this case. Finally, although Plaintiffs assert that the claims relate-back to a 2009 arbitration (SAC ¶ 710), that argument, whatever its merits, cannot apply to JPMorgan, which was not a party to the arbitration. See CPLR 203, Fed. R. Civ. P. 15(c)(1). A. The New York Limitations Periods Apply If They Are Shorter. In a diversity case, the court applies the statute of limitations of the forum state. See, e.g., Portfolio Recovery Assoc., LLC v. King, 901 N.Y.S.2d 575, 577 (N.Y. 2010); Vincent v. Money Store, 915 F. Supp. 2d 553, 562 (S.D.N.Y. 2013). New York’s borrowing statute, CPLR 202, provides that, where a cause of action arises outside of the state in favor of a nonresident, the action is subject to the shorter of the New York limitations period and that of the state in which Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 10 of 28 4 the claim arose. See also, e.g., Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d Cir. 1998). Because Plaintiffs’ claims are all time-barred at least under New York law, the case should be dismissed. B. Plaintiffs’ Fraud Claims Are Time-Barred. The New York statute of limitations for fraud (CPLR 213(8)) is the later of six years from the date of injury or two years from when Plaintiffs could have discovered the alleged fraud. See, e.g., Sargiss v. Magarelli, 881 N.Y.S.2d 651, 654 (N.Y. 2009). Plaintiffs allege that they lost their money by October 8, 2008. That means that their claim under the “date of injury” prong expired in 2014. Plaintiffs have admitted that the latest the limitations period could have started to run was when Mr. Wasendorf’s suicide note detailing his fraud was published in July 2012. That date, however, does not improve their position. Plaintiffs still would have to have filed in 2014 in order to preserve any fraud claims they may have had against JPMorgan, making the claim untimely under CPLR’s two-year discovery rule as well.1 The bare allegations added to the SAC that Plaintiffs could not have discovered their claims until the accounts of all other customers were terminated (SAC ¶ 45) and that the “suicide note was part of the on-going fraudulent concealment of the Total Ponzi Scheme” (SAC ¶ 700) is contrary to Plaintiffs’ own prior representation that the suicide note affirmatively disclosed the alleged scheme. In any event, the proper inquiry is when Plaintiffs could have discovered the fraud. If the total loss of their investments and the other alleged misconduct in 2008 somehow did not meet that threshold, then Mr. Wasendorf’s announcement of the scheme in the suicide note surely provided enough information that a reasonable investor would have investigated. 1 A discovery rule is the exception to the standard accrual for a statute of limitations. Singleton v. Clash, 951 F. Supp. 2d 578, 585 (S.D.N.Y. 2013). In this action, there is a discovery rule for the fraud and RICO claims. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 11 of 28 5 C. Plaintiffs’ Breach of Fiduciary Duty and Fiduciary Obligations Act Claims Are Time-Barred. A fiduciary duty claim seeking money damages must be brought within three years from the date of injury. See, e.g., IDT Corp. v. Morgan Stanley Dean Witter & Co., 879 N.Y.S.2d 355, 360 (2009). An action to recover imposed by a statute (here, the Fiduciary Obligations Act) must also be commenced within three years from the date the cause of action accrues. CPLR 214. Because Plaintiffs allege that their injuries occurred in 2008, and they did not file until 2016, the claims are not timely. As with all of the claims other than fraud and RICO, there is no discovery rule that applies to fiduciary duty claims-the period runs from the date of injury. D. Plaintiffs’ Unjust Enrichment Claim Is Time-Barred. An unjust enrichment claim seeking monetary damages must be filed within three years of the alleged wrongful act. CPLR 214; see also, e.g., Matana v. Merkin, 957 F. Supp. 2d 473, 494 (S.D.N.Y. 2013). Here, the last wrongful act that injured Plaintiffs could not have been any later than October 8, 2008, the date of Plaintiffs’ total loss. Moreover, the last transfer from U.S. Bank to Wasendorf alleged in the SAC to have occurred took place in January of 2009. SAC ¶ 340. Even if that transfer somehow enriched JPMorgan, or somehow injured the Plaintiffs, neither of which is alleged, that transfer also was more than six years before the filing. E. Plaintiffs’ Intentional Infliction of Emotional Distress Claim Is Time-Barred. CPLR 215 imposes a one-year time bar on intentional torts, running from the date of the injury. See, e.g., Dana v. Oak Park Marina, 660 N.Y.S. 2d 906, 910 (4th Dep't 1997). There is no allegation that Plaintiffs suffered any injury in the year before the case was filed. F. Plaintiffs’ RICO Claims Are Time-Barred. The statute of limitation for a RICO claim is four years. See Rotella v. Wood, 528 U.S. 549, 553 (2000); Agency Holding Corp. v. Malley-Duff & Assoc., Inc., 483 U.S. 143, 156 (1987); Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 12 of 28 6 Huckabone v. Jamestown, 2014 WL 4146844, at *1 (W.D.N.Y. August 19, 2014). The limitation period begins to run when the plaintiff discovers or should have discovered the RICO injury. Huckabone, 2014 WL 4146844, at *1. Plaintiffs concede that they discovered their injury in 2008. Even if Plaintiffs had not conceded this point, they would have, and therefore should have known by this date simply by paying attention to their account balances. That was seven years before the case was filed, making the RICO claims untimely. G. Plaintiffs’ Commodity Exchange Act Claims Are Time-Barred. Plaintiffs’ Commodity Exchange Act claims are also time-barred. A Commodity Exchange Act claim must be brought “not later than two years after the date the cause of action arises.” 7 U.S.C. § 25(c). The cause of action accrues upon discovery of the injury. Shak v. JPMorgan Chase & Co., 156 F. Supp. 3d 462, 473 (S.D.N.Y. 2016) (limitations period began when plaintiffs’ positions were liquidated and they suffered injury). As noted above, Plaintiffs concede that they discovered their injury in 2008. H. No Tolling Doctrine Applies. Plaintiffs assert that the claims in the SAC are not time-barred because the applicable limitation periods have been equitably tolled based on fraudulent concealment. SAC ¶¶ 698-730. “Equitable tolling . . . applies only where the fraud constituting the basis of a plaintiff’s cause of action is undiscoverable by him during the statutory period because of steps undertaken by the defendant actively to conceal it.” In re Gen. Dev. Corp. Bond Litig., 800 F. Supp. 1128, 1143 (S.D.N.Y. 1992) (emphasis added). Plaintiffs hired a lawyer and sued Peregrine in 2009. SAC ¶¶ 709, 711. Given that Plaintiffs discovered their claim against Peregrine no later than 2009, there is no reason why they could not have discovered the basis of any supposed claims against JPMorgan by then as well. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 13 of 28 7 In addition, it is “fundamental to the application of equitable estoppel for plaintiffs to establish that subsequent and specific actions by defendants somehow kept them from timely bringing suit.” Zumpano v. Quinn, 816 N.Y.S.2d 703, 705-06 (2006) (emphasis added).2 Thus, “[w]here the same alleged wrongdoing that underlines the plaintiffs’ equitable estoppel argument is also the basis of their tort claims, equitable estoppel will not lie.” Cusimano v. Schnurr, 27 N.Y.S.3d 135, 140-41 (1st Dep’t 2016) (“Here, equitable estoppel is inapplicable because the alleged fraudulent concealment forms the basis of both plaintiff's estoppel argument and the underlying claims.”). Plaintiffs have not alleged any attempt by JPMorgan to subsequently conceal the only actions that it is alleged to have taken, namely, to honor requests to transfer funds to the U.S. Bank account. And Peregrine’s fraud itself cannot be the basis for tolling, because the doctrine requires later actions to conceal the facts that form the basis for the claim. Finally, Plaintiffs suggest that class action tolling applies because of a class action filed in Illinois in 2012. SAC ¶¶ 718-19. But American Pipe tolling applies only when the plaintiffs were prospective class members, and it is limited to federal-law claims that were asserted in the prior case. See Am. Pipe & Const. Co. v. Utah, 414 U.S. 538 (1974), In re Bear Stearns Co., Inc. Sec., Derivative & ERISA Litig., 995 F. Supp. 2d 291, 303-04 (S.D.N.Y. 2016) (“American Pipe tolling can only apply where the same cause of action is asserted” and to federal-law claims; New York’s analogue applies only to prior class actions in New York State court). The plaintiffs in the Illinois case stated that they sued on behalf of those who “lost money as a result of the collapse of [Peregrine] in July 2012.” See, e.g., Complaint, In re Peregrine Fin. Group Customer Litig., 12-cv-05546, Dkt. No. 66, at ¶ 1 (N.D. Ill. 2012) (attached hereto as Exhibit A to L. Blank Declaration) (emphasis added); see also id. at ¶¶ 2, 89-93; 108, 202. By contrast, the claims here 2 New York applies the same analysis to equitable tolling and equitable estoppel and does not differentiate the doctrines. Corp. Trade Inc. v. Golf Channel, 563 Fed. App’x 841, 841-42 (2d Cir. 2014). Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 14 of 28 8 are based on Plaintiffs’ trading losses ending no later than 2008-these plaintiffs were plainly not included in that class. Plaintiffs’ references to a Plan of Allocation and Proof of Claim forms in the Illinois Class Action (SAC ¶¶ 226-29) do nothing to save their claims, because the forms do not amend the class definition. See id. Moreover, the SAC affirmatively alleges that the claims here are different from those in the Illinois case. SAC ¶ 225. II. PLAINTIFFS FAIL TO STATE A CLAIM AGAINST JPMORGAN. The Court should dismiss a complaint where it does not “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted); Fed. R. Civ. P. 12(b)(6). Only a complaint containing factual content that supports a “plausible claim for relief” can survive a motion to dismiss; this entails showing “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft, 556 U.S. at 678-79. A. Plaintiffs’ Fraud Claim Should Be Dismissed (Claim 2). To state a claim for fraud by omission, Plaintiffs must allege: (1) an omission of material fact by JPMorgan; (2) knowledge or belief by JPMorgan that the omission made another statement false; (3) an intention to induce Plaintiffs to act; (4) action by Plaintiffs in reliance on the truth of that statement; and (5) damage resulting from that reliance. See Weidner v. Karlin, 932 N.E.2d 602, 605 (Ill. App. Ct. 2010). “In addition to these elements, in order to prove fraud by the omission of a material fact, it is necessary to show the existence of a special or fiduciary relationship, which would raise a duty to speak.” Id. (internal citations omitted); Hill v. Simmons, 2017 Ill. App. (1st) 160577-U (1st Dist. 2017) (dismissing fraud claim). To begin with, the SAC does not identify any alleged omissions with specificity, referring to the failure to disclose “all of the facts known to the Bank Defendants as set forth above [in the SAC].” SAC ¶ 717. The facts that it does set forth are either facts that would not Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 15 of 28 9 have led Plaintiffs to change their behavior, or facts that JPMorgan itself is not alleged to have known about. The first and third alleged omissions-that “[Peregrine] was holding the 1845 Account [at U.S. Bank] out to be a customer segregated account” and that “[Peregrine] was using the 1845 Account as a customer segregated account to draw customer funds into the 1845 Account [sic]”-do not suggest any misconduct by Peregrine, much less by JPMorgan. Id. The complaint agrees that the U.S. Bank account was supposed to be segregated, and there is no allegation that Plaintiffs relied on some contrary belief. As for the second and fourth alleged omissions-that “the 1845 Account was not actually treated by US Bank as a customer segregated account” and that “[Peregrine] was misappropriating the customer funds in the 1845 Account” (id. (emphasis added))-the SAC does not allege that JPMorgan knew, or possibly could have known, how U.S. Bank and Peregrine supposedly were treating the account at U.S. Bank. An allegation of knowledge requires that the defendant had awareness of the falsity of the statement or omission at the time of concealment; mere ignorance is insufficient. See Weidner, 932 N.E.2d at 605; Addison v. Distinctive Homes, Ltd., 836 N.E. 2d 88, 92-95 (Ill. App. Ct. 2005) (vague assertions of facts insufficient to support defendants’ knowing omission); see also Rosner v. Bank of China, 528 F. Supp. 2d 419, 431 (S.D.N.Y. 2007) (withdrawal of large amounts of cash are insufficient to sustain an allegation of actual knowledge of an underlying fraud). Nor do Plaintiffs allege any special or fiduciary relationship, much less one that would raise a duty on JPMorgan to speak. “Banks do not owe non-customers a duty to protect them from the intentional torts of their customers.” Lerner v. Fleet Bank, 459 F.3d 273, 286 (2d Cir. 2006) (internal citations omitted); Radwill v. Romeo, 2013 Ill. App. (1st) 110912-U, at *9 (1st Dist. 2013); see also, e.g., Thompson v. Capital One Bank, Inc., 375 F. Supp. 2d 681, 683-84 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 16 of 28 10 (N.D. Ill. 2005) (“Without a duty, there can be no [tort].”). In Radwill v. Romeo, plaintiff alleged that defendant bank was negligent when it made a disbursement pursuant to a properly executed affidavit and did not independently investigate and confirm facts in that affidavit. Radwill, 2013 Ill. App. (1st) 110912-U at *7. The court disagreed and granted the bank’s motion to dismiss, because “plaintiff ma[de] no allegation that she was the owner of the accounts at [the bank] or that she was otherwise a depositor at the bank . . . . [A]s she was not a customer of the bank, we conclude that [it] did not owe a duty to plaintiff. Without a duty, plaintiff cannot set forth a cause of action.” Id. at *9. The same result is required here. Plaintiffs were not customers of JPMorgan at all-the only relevant account at JPMorgan is conceded to have been held by Peregrine. Plaintiffs try to allege that JPMorgan had a better chance of uncovering Peregrine’s fraud than Plaintiffs themselves did (SAC ¶ 718), but, even if that could be called “superior knowledge,” it cannot by itself create a duty to disclose. “A confidential or fiduciary relationship arises where one party possesses superior knowledge and influence over the other party, and occupies a position of special trust.” CFTC v. Heritage Capital Advisory Servs., Ltd., 823 F.2d 171, 173 (7th Cir. 1987) (emphasis added). Plaintiffs assert only that they “had trust and had confidence in banks like U.S. Bank and JPMC.” SAC ¶ 718. A generalized trust in the American banking system, or in a particular banking institution like JPMorgan, is not enough to put JPMorgan in a position of special trust with these Plaintiffs. B. Plaintiffs Fail To State A Claim For Violation Of The Illinois Fiduciary Obligations Act (Claim 3). Claim 3 fails to state a claim against JPMorgan for violation of the Fiduciary Obligations Act. A plaintiff can recover under the Fiduciary Obligations Act only when (1) the bank has actual knowledge of a fiduciary’s misappropriation of the principal’s funds; or (2) the bank had knowledge of sufficient facts that its action in paying the funds amounted to bad faith. 760 Ill. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 17 of 28 11 Comp. Stat. 65/9; see, e.g., Geimer v. Bank of Am., 784 F. Supp. 2d 926, 932 (N.D. Ill. 2011) (Fiduciary Obligations Act “shields a bank from liability . . . so long as the bank acts without bad faith or actual knowledge of the fiduciary’s breach.”). To begin with, the statute does not create a new cause of action, but instead is a safe harbor for a defendant. As the Seventh Circuit has explained, “[t]he UFA3 did not create the cause of action. Rather, the UFA is a defense to such an action unless the bank has actual knowledge that the fiduciary is breaching his fiduciary obligations or the bank acts with bad faith.” Appley v. West, 832 F.2d 1021, 1031 (7th Cir. 1987). The statute provides that “[a] person who in good faith . . . transfers to a fiduciary any money . . . which the fiduciary as such is authorized to receive, is not responsible for the proper application thereof . . .” 760 Ill. Comp. Stat. 65/2 (emphasis added). Thus, the Fiduciary Obligations Act cannot serve as a standalone basis for liability where a plaintiff cannot otherwise state a claim; it is an additional hurdle that the plaintiff must clear before it can allege a breach of fiduciary duty. Plaintiffs cannot clear that hurdle here (and so certainly cannot assert an affirmative claim under the statute) because they have pled neither actual knowledge nor bad faith as to JPMorgan. Actual knowledge is defined by Illinois courts as a bank’s “awareness at the moment of the transaction that [the] fiduciary is defrauding the principal and as having express factual information that funds are being used for private purposes that violate the fiduciary relationship.” Beedie v. Associated Bank, 2011 WL 2460959, at *4 (C.D. Ill. June 21, 2011) (internal citations and quotations omitted). Here, at most, Plaintiffs allege that certain transfers were suspicious; they do not allege that JPMorgan had “express factual information” about the use of the funds. “Mere suspicious circumstances,” such as “odd checking practices[,]” “are not enough to require the bank to inquire into fiduciary’s actions.” Id. (internal citations and quotations omitted) 3 The Illinois Fiduciary Obligations Act is Illinois’ codification of the Uniform Fiduciaries Act. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 18 of 28 12 (allegations of moving large sums of money from one account to another are insufficient to show actual knowledge); Paloian v. FDIC, 2011 WL 5325562, at *7 (N.D. Ill. Nov. 2, 2011). Specifically, Plaintiffs allege that because the transfers were round numbers, JPMorgan should have known that they were for non-customer purposes. SAC ¶ 341. A round number transfer, without more, however, does not “give rise to the inference that a bank had actual knowledge” of wrongdoing. Beedie, 2011 WL 2460959, at *4. Plaintiffs also do not allege bad faith. Bad faith “includes situations where the bank suspects the fiduciary is acting improperly and deliberately refrains from investigating in order that the bank may avoid knowledge that the fiduciary is acting improperly.” Id. at *5 (internal citation and quotations omitted). Plaintiffs have not pled any facts that suggest that JPMorgan refrained from investigating for the specific purpose of avoiding knowledge of impropriety by Peregrine, or what JPMorgan’s motivation would be to intentionally decline to investigate, nor do they allege what JPMorgan could have discovered or how it could have discovered it. Id. (“should have or could have known” allegations are insufficient to establish bad faith); Paloian, 2011 WL 5325562, at *7 (bad faith requires allegations of “obvious circumstances”). C. Plaintiffs Fail To State A Claim Against JPMorgan For Breach Of Fiduciary Duty (Claim 4). A claim for breach of fiduciary duty under Illinois law has three elements: (1) the existence of a fiduciary relationship; (2) knowing breach of a duty that relationship imposes; and (3) damages proximately caused by the breach of duty. Neade v. Portes, 739 N.E.2d 496, 502 (Ill. 2000). Plaintiffs have not established the necessary elements for a breach of fiduciary duty claim here. JPMorgan is not subject to any common-law fiduciary duty. Even with respect to their own customers, banks generally are not fiduciaries. See Miller v. Am. Nat’l Bank and Trust Co. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 19 of 28 13 of Chicago, 4 F.3d 518, 520 (7th Cir. 1993) (under Illinois law, “a bank generally owes no fiduciary duty to its depositors”); Call v. Ellenville Nat’l Bank, 774 N.Y.S.2d 76, 78 (2nd Dep’t 2004) (“In general, the relationship between a bank and customer is that of debtor and creditor and, without more, is not a fiduciary relationship, even if the parties are familiar or friendly.”). Plaintiffs do not (nor could they) allege facts to support the only recognized exception to this general rule, which is that the customer was “subject to domination and influence on the part of the bank.” See Johnson v. Edwardsville Nat’l Bank & Trust Co., 594 N.E.2d 342, 345 (Ill. App. Ct. 1992). Because JPMorgan owed no fiduciary duty to Peregrine, a fortiori, it could not owe any such duty to Plaintiffs, whose only connection with JPMorgan was that they were Peregrine’s customers. See Lerner, 459 F.3d at 286; Radwill, 2013 Ill. App. (1st) 110912-U at *9; Thompson, 375 F. Supp. 2d at 683-84. D. Plaintiffs Fail To State A Claim Under The Commodity Exchange Act (Claims 1, 5, 16). Claims 1, 5 and 16 of the SAC must be dismissed because JPMorgan owed no duty to Plaintiffs under federal law or regulatory requirements. Plaintiffs base these claims on alleged obligations of JPMorgan under the Commodity Exchange Act and related Commodity Futures Trading Commission (“CFTC”) rules. The Commodity Exchange Act’s private right of action is limited to actual damages resulting from specified “actionable transactions” involving the purchase or sale of commodities futures, none of which JPMorgan is alleged to have engaged in. See 7 U.S.C. § 25(a). A claim of aiding and abetting violations of the Commodity Exchange Act, meanwhile, would require willful assistance by the alleged aider and abettor. 7 U.S.C. § 13(c)(A); see Damato v. Hermanson, 153 F.3d 464, 473 (7th Cir. 1998). “[A] plaintiff seeking to state a cause of action for aiding and abetting liability under [] the CEA must allege that the aider and abettor Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 20 of 28 14 acted knowingly. This is clearly required by the plain wording of the statute . . . any person ‘who willfully aids, abets . . .’” Damato, 153 F. 3d at 472 (plaintiff must allege that defendant had knowledge of principal’s intent to violate CEA). Further, willful actions are defined under Illinois common law as intentional actions or reckless behavior. See Schneiderman v. Interstate Transit Lines¸ 69 N.E.2d 293 (Ill. 1946). While, the SAC concludes that each defendant “knowingly” aided and abetted violations of the CEA, it does not contain any specific facts about JPMorgan’s knowledge of alleged violations by Peregrine, let alone facts suggesting intentional or reckless behavior in furtherance of any alleged fraud. In fact, the SAC alleges that JPMorgan violated a purported duty to investigate the account that U.S. Bank held out as segregated, thereby admitting that JPMorgan did not actually have the requisite knowledge of Wasendorf’s intent. See SAC ¶¶ 330, 340, 447. If Plaintiffs intend to allege that JPMorgan violated CFTC rules or regulations, as opposed to the statute, the Commodity Exchange Act does not “authorize private enforcement of CFTC regulations, nor have the courts been willing to recognize such a claim.” In re Soybean Futures Litig., 892 F. Supp. 1025, 1042 (N.D. Ill. 1995). E. Plaintiffs’ Claim for Unjust Enrichment and Restitution is Without Merit (Claim 22). To state a claim for unjust enrichment, Plaintiffs must allege that JPMorgan “retained a benefit to the plaintiff[s]’ detriment and that [JPMorgan]’s retention of the benefit violates the fundamental principles of justice, equity, and good conscience.” CNA Int’l, v. Baer, 981 N.E.2d 441, 452 (Ill. App. Ct. 2012) (granting motion to dismiss); see also McKay v. Kusper, 624 N.E.2d 1140, 1150 (Ill. App. Ct. 1993) (“[A] bank does not become unjustly enriched where proper payment is made to the depositor and a simple debtor-creditor relationship exists between the parties.”). As best we can tell, Plaintiffs’ only allegation here is that JPMorgan received Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 21 of 28 15 standard fees for services that it actually provided to Peregrine. SAC ¶ 63. Receiving a fee for services, however, is not unjust enrichment. See In re Bayou Hedge Funds Inv. Litig., 472 F. Supp. 2d 528, 531-32 (S.D.N.Y. 2007) (dismissing allegations that legal fees constitute unjust enrichment); Davis v. Conn. Cmty. Bank, N.A., 937 F. Supp. 2d 217, 242 (D. Conn. 2013) (plaintiffs did not produce evidence that the bank did not earn the fees or that the bank wrongfully retained possession of fees). Moreover, restitution is merely a remedy for unjust enrichment and not a separate cause of action. See, e.g., F.H. Prince & Co., v. Towers Fin. Corp., 656 N.E.2d 142, 151 (Ill. App. Ct. 1995) (dismissing counterclaim seeking restitution); U.S. ex rel. Kester v. Novartis Pharm. Corp., 2014 WL 4401275, at *11, *13 (S.D.N.Y. Sept. 4, 2014). F. Plaintiffs Fail To State A Claim For Intentional Infliction Of Emotional Distress (Claim 23). To state a claim for intentional infliction of emotional distress, Plaintiffs must allege (1) extreme and outrageous conduct by the defendant; (2) the defendant’s intent or expectation that his conduct inflict severe emotional distress; and (3) causation of severe emotional distress. Hegy v. Cmty. Counseling Ctr. of Fox Valley, 158 F. Supp. 2d 892, 897 (N.D. Ill. 2001) (granting defendants’ motion to dismiss intentional infliction of emotional distress claim). For conduct to be deemed outrageous under Illinois law, “it must go beyond all bounds of human decency.” Id. (internal citations and quotations omitted). First, Plaintiffs do not allege anything approaching extreme and outrageous conduct by JPMorgan. The only allegation is that JPMorgan transferred money from Peregrine’s account to an account at U.S. Bank that “outward[ly] appear[ed]” to be segregated and that JPMorgan failed to verify that the account was segregated. SAC ¶ 447. Transferring funds in the normal course of business is not the kind of outrageous conduct that supports a claim. Compare Griffin v. U.S. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 22 of 28 16 Bank, N.A., 2016 WL 3671450, at *5 (N.D. Ill. July 11, 2016) (failing to review loan modification before starting foreclosure and charging unauthorized fees is not extreme and outrageous conduct). Second, Plaintiffs plead no facts suggesting that JPMorgan intended to cause severe emotional distress. Plaintiffs state that all defendants purposefully set Plaintiffs up to lose their savings. SAC ¶ 843. Yet, the only specific allegation about JPMorgan is that it transferred funds to U.S. Bank’s account. The pleadings do not assert that JPMorgan and Plaintiffs had any contact. Without more, Plaintiffs cannot meet the second element of this claim. Third, Plaintiffs do not establish that JPMorgan’s transfer of funds was the proximate cause of Plaintiffs’ emotional distress. In fact, Plaintiffs’ own allegations make clear that JPMorgan’s transfer of funds was not a direct cause of any emotional distress suffered by Plaintiffs-instead, as Plaintiffs allege, it was Wasendorf’s scheme and related actions that allegedly caused Plaintiffs’ distress. Consequently, JPMorgan’s actions could not be a cause of Plaintiffs’ loss, let alone the legally-required proximate cause of the loss. G. Plaintiffs Fail To State A Punitive Damages Claim (Claim 24). “[A] prayer for punitive damages is not, itself, a cause of action, but instead is a type of remedy.” Corwin v. Conn. Valley Arms, Inc., 74 F. Supp. 3d 883, 893 (N.D. Ill. 2014) (internal citation and quotations omitted); See also Ashley v. Schneider Nat’l Carriers, Inc., 2015 WL 4550126, n.5 (N.D. Ill. 2015) (Illinois does not recognize a cause of action for punitive damages). Thus, if all of the tort claims are dismissed, the demand for punitive damages should be stricken, and, in any event, the Court should dismiss the standalone claim for punitive damages. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 23 of 28 17 H. Plaintiffs Cannot Establish A RICO Violation (Claim 28). “Courts have described civil RICO as an unusually potent weapon.” Moss v. BMO Harris, 2017 WL 2894887, at *5 (E.D.N.Y. July 7, 2017) (internal citations and quotations omitted). “Because the mere assertion of a RICO claim . . . has an almost inevitable stigmatizing effect on . . . defendants, . . . courts should strive to flush out frivolous RICO allegations at an early stage of the litigation.” Id. A claim of a RICO violation under 18 U.S.C. § 1962(c) requires that the plaintiff allege (1) that an enterprise existed and defendants “conducted or participated” in conducting its affairs; (2) that defendants had knowledge of the unlawful conduct; (3) the underlying predicate acts, here, wire fraud; and (4) injury caused by defendants. Id; Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 241 (2d Cir. 1999); Andreo v. Friedlander, Gaines, Cohen, Rosenthal & Rosenburg, 660 F. Supp. 1362, 1370-71 (D. Conn. 1987). The claim here is not adequately pleaded. First, the SAC does not plead an association-in-fact enterprise. A RICO enterprise is “a group of persons associated together for a common purpose of engaging in a course of conduct, proven by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” Price v. Benjamin, 2014 WL 3653440, at *5 (E.D.N.Y. July 22, 2014) (internal citation and quotations omitted) (plaintiff “provides no facts indicating that Defendants associated together for a common purpose of engaging in a course of conduct.”). “[A]n association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Moss, 2017 WL 2894887 at *6. Courts analyze “hierarchy, organization, and activities of the association to determine whether . . . the members functioned as a unit.” Id. Here, the SAC only makes the conclusory allegation that the purported enterprise “had a structure and organization” and “common purpose . . . work[ing] Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 24 of 28 18 with Wasendorf . . . to . . .divert the monies to the benefit of the Wasendorfs.” SAC ¶¶ 878-79. Yet Plaintiffs allege no specific facts about JPMorgan’s purported purpose in making the transfers, or its alleged relationship with U.S. Bank or Wasendorf. These bald allegations are insufficient to show an association-in-fact enterprise. What Plaintiffs do specifically allege about JPMorgan-that it held Peregrine customer monies in segregated accounts and executed requests to transfer this money to U.S. Bank (SAC ¶ 330)-neither suggests that JPMorgan acted in concert with any other party, or that these parties shared any wrongful intent. In fact, Plaintiffs even admit that JPMorgan transferred the money “to the 1845 U.S. Bank customer segregated account,” and the 1845 account “should have been treated as such.” SAC ¶¶ 330, 332, 340, 447. In other words, JPMorgan’s depositor instructed JPMorgan to transfer customer funds to a customer segregated account at another bank. That does not raise any inference that JPMorgan even knew of any wrongdoing, let alone that it deliberately acted as part of a criminal enterprise. Second, even when an enterprise is adequately alleged, a RICO defendant must have “participated in the operation or management of the enterprise” and “must have [had] some part in directing those affairs.” Reves v. Ernst & Young, 507 U.S. 170, 179, 183 (1993). This “operation and management test . . . is a very difficult test to satisfy.” LaSalle Nat’l Bank v. Duff & Phelps Credit Rating Co., 951 F. Supp. 1071, 1090 (S.D.N.Y. 1996), abrogated on other grounds, as recognized by Anschutz Corp v. Merrill Lynch & Co., Inc., 690 F.3d 98, 115 (2d Cir. 2012) (internal citation and quotations omitted). Plaintiffs allege that JPMorgan “knowingly directed the transfer” of customer monies to U.S. Bank, who in turn caused the money to be diverted for Wasendorf’s private use. SAC ¶ 880. Merely providing commercial services to members of an alleged enterprise is insufficient. See, e.g., Moss, 2017 WL 2894887 at *13 Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 25 of 28 19 (dismissing RICO claim and collecting cases); Indus. Bank of Latvia v. Baltic Fin. Corp., 1994 WL 286162, at *3 (S.D.N.Y. June 27, 1994) (dismissing RICO claim because providing “banking services-even with knowledge of the fraud-is not enough to state a claim under § 1962(c)”); Walker v. Hallmark Bank & Trust , Ltd., 707 F. Supp. 2d 1317, 1321 (S.D. Fla. 2010) (processing payments that benefited Ponzi scheme was not sufficient to show that defendant participated in the operation or management of the enterprise). Plaintiffs argue that the purported fraud could not have occurred without those services. SAC ¶ 327. But “[r]egardless of how indispensable or essential such services may have been, rendering a professional service by itself does not qualify as participation in a RICO enterprise.” Rosner, 528 F. Supp. 2d at 431 (granting motion to dismiss § 1962(c) claim when plaintiff alleged that defendant provided banking services that aided in the perpetration of the fraudulent scheme). Plaintiffs’ allegations that JPMorgan failed to investigate whether the U.S. Bank account was in fact a customer segregated account, also fails to state a claim under § 1962(c). See Andreo, 660 F. Supp. at 1370-71 (RICO participant must have “at least a general awareness or knowledge of the activity one ‘conducts’ or in which one ‘participates’”). A failure to act-and especially a failure to figure out what the other parties are up to-is the antithesis of actively participating in a RICO enterprise. See Moss, 2017 WL 2894887 at *13-*14. I. Plaintiffs Fail To State A Claim For A RICO Conspiracy (Claim 29). Plaintiffs also fail to state a claim under 18 U.S.C. § 1962(d). This section provides that “[i]t shall be unlawful for any person to conspire to violate any of the provisions” of the other subsections of 18 U.S.C. § 1962. “In the absence of any viable underlying 18 U.S.C. § 1962 (c) claim, plaintiff’s RICO conspiracy claims . . . must also fail.” Moss, 2017 WL 2894887, at *15. Moreover, even if Plaintiffs had stated a colorable 1962(c) claim, to state an additional claim for a RICO conspiracy, Plaintiffs must allege the “existence of an agreement to violate Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 26 of 28 20 RICO’s substantive provisions.” Cofacredit, 187 F.3d at 245 (internal citation and quotations omitted). “A plaintiff alleging a RICO conspiracy based on predicate acts of mail or wire fraud must allege knowledge, in the form of the defendants’ knowing participation in a scheme to defraud.” MLSMK Inv. Co. v. JP Morgan Chase & Co., 431 F. App’x 17, 19 (2d Cir. 2011). Here, the SAC alleges that JPMorgan’s contribution was its ignorance of the alleged scheme to defraud: Plaintiffs assert that “JPMorgan failed to contact U.S. Bank to verify that the 1845 Account was in fact a customer segregated account.” SAC ¶ 447 (emphasis added). As with the 1962(c) claim, these allegations are the opposite of what a conspiracy requires. CONCLUSION As the Seventh Circuit held in the wake of Twombly, “a defendant should not be forced to undergo costly discovery unless the complaint contains enough detail, factual or argumentative, to indicate that the plaintiff has a substantial case.” Limestone Dev. Corp. v. Village of Lemont, 520 F.3d 797, 802-03 (7th Cir. 2008). Far from meeting this basic pleading requirement, the SAC is wholly devoid of factual support for any of the counts directed at JPMorgan. Moreover, and independent of such pleading deficiencies, each claim is time-barred under the applicable statutes of limitations. As a result, and for all the reasons set forth herein, JPMorgan respectfully requests that the Court dismiss the First, Second, Third, Fourth, Fifth, Sixteenth, Twenty-Second, Twenty-Third, Twenty-Fourth, Twenty-Eighth, and Twenty-Ninth counts of the SAC with prejudice. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 27 of 28 21 Dated: December 14, 2017 New York, New York Respectfully submitted, By: /s/ Christopher J. Houpt Christopher J. Houpt Lisa R. Blank MAYER BROWN LLP 1221 Avenue of the Americas New York, NY 10020 Telephone: (212) 506-2500 Facsimile: (212) 262-1910 Thomas S. Kiriakos Sean T. Scott Tyler R. Ferguson MAYER BROWN LLP 71 S. Wacker Drive Chicago, IL 60606 Telephone: (312) 782-0600 Facsimile: (312) 701-7711 Attorneys for Defendant JPMorgan Chase Bank, N.A. Case 1:16-cv-05508-VSB Document 115 Filed 12/14/17 Page 28 of 28