Case No.: 3:20-cv-01366-BEN-RBB
ORDER DENYING MOTION TO DISMISS
[ECF No. 13]
This matter comes before the Court on Defendant Capital One, N.A.'s ("Capital One") Motion to Dismiss the First Amended Complaint ("FAC") filed by Plaintiff Attisha Enterprises, Inc. ("Attisha Enterprises"). As set forth below, the Motion to Dismiss is DENIED. I. BACKGROUND
The following overview of the facts is drawn from the FAC, ECF No. 12, which the Court assumes true in analyzing Capital One's Motion to Dismiss. Erickson v. Pardus, 551 U.S. 89, 94 (2007). The Court is not making factual findings.
On December 7, 2020, the Court issued an Order granting Capital One's Motion to Dismiss Attisha Enterprises' Complaint. See ECF No. 11. However, the Court granted Attisha Enterprises leave to amend its Complaint, and Attisha Enterprises filed its FAC on December 21, 2020. ECF No. 12. The FAC brings only two claims against Capital One: (1) negligence and (2) violation of California Commercial Code section 11207 ("Section 11207").
Attisha Enterprises' allegations stem from an incident of wire fraud. On or about May 14, 2018, Attisha Enterprises entered into a purchase agreement to buy the Sweetwater 24/7 Convenience Store and Chevron Gas Station. FAC, ECF No. 12, ¶ 9. The parties to the purchase agreement opened escrow with TICOR Title Company of California ("TICOR"). Id. As part of the purchase agreement, Attisha Enterprises was to deposit $100,000.00 to be held in escrow by TICOR. Id. at ¶ 10.
On September 27, 2018, Attisha Enterprises received fraudulent wire instructions from the unnamed Defendants, who were fraudsters using the name TICOR Title Company of California and a Capital One account number. FAC, ECF No. 12, ¶ 10. Attisha Enterprises caused $100,000.00 to be wired from its account to the fraudsters' account at Capital One because it did not know these instructions were fraudulent and not from TICOR. Id. at ¶ 11. Capital One accepted the wire transfer. Id. at ¶ 12.
The Court previously cautioned Attisha Enterprises that it would dismiss the Doe Defendants without prejudice if they were not served by January 7, 2021. See Order, ECF No. 11 (citing Keavney v. Cty. of San Diego, No. 19-cv-1947-AJB-BGS, 2020 WL 4192286, at *4-5 (S.D. Cal. Jul. 21, 2020)). As of the date of this Order, the docket does not reflect the Doe defendants have been served. Accordingly, the Doe defendants are dismissed without prejudice. --------
Attisha Enterprises alleges that Capital One negligently ignored its internal procedures and allowed the fraudsters to open an account in TICOR's name. FAC, ECF No. 12, ¶ 15. Capital One requires new customers to provide certain true identity documents when opening an account. Id. at ¶ 6. Nonetheless, Capital One did not follow those procedures and allowed someone unaffiliated with TICOR to open an account in its name. Id. at ¶ 8. Accordingly, Capital One had "actual knowledge" the account holders were not in fact TICOR but nonetheless allowed the account to be created. Id.
Attisha Enterprises further alleges that Capital One violated Section 11207 by paying someone other than TICOR the funds from Attisha Enterprises' wire transfer when Capital One had actual knowledge the account holder was not in fact TICOR. FAC, ECF No. 12, ¶¶ 20-21.
II. LEGAL STANDARD
A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or absence of sufficient alleged facts under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). When considering a Rule 12(b)(6) motion, the Court "accept[s] as true facts alleged and draw[s] inferences from them in the light most favorable to the plaintiff." Stacy v. Rederite Otto Danielsen, 609 F.3d 1033, 1035 (9th Cir. 2010). A plaintiff must not merely allege conceivably unlawful conduct but must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim is facially plausible 'when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
In its FAC, Attisha Enterprises alleges one claim for negligence and another for violation of Section 11207.
Attisha Enterprises' first claim alleges Capital One negligently allowed an entity that was not TICOR to open an account in TICOR's name. FAC, ECF No. 12, ¶ 16. Attisha Enterprises alleges this conduct violated both Capital One's internal procedures and 31 C.F.R. § 1020.220. Id.
In California, the elements of a negligence claim are (1) the existence of a duty to exercise due care; (2) breach of that duty; (3) causation; and (4) damage. See, e.g., Merrill v. Navegar, Inc., 26 Cal. 4th 465, 500 (Cal. 2000). Capital One argues it does not owe a duty of care to non-customers under these circumstances because Attisha Enterprises has failed to allege any facts that should have raised Capital One's suspicions about the validity of the account. Mot., ECF No. 13, 5.
The Court has addressed this claim before but reaches a different conclusion here based on Attisha Enterprises' revised pleadings. In ruling on Capital One's prior Motion to Dismiss, the Court recognized that in California, banks may owe a fiduciary duty of care to a noncustomer in "extraordinary and specific situations." Software Design & Application, Ltd. v. Hoefer & Arnett, Inc., 49 Cal. App. 4th 472, 479 (Cal. Ct. App. 1996). "If the circumstances surrounding the opening of the accounts were suspicious [so] as to trigger a duty to investigate a potentially phony account, such a duty to investigate a suspicious account opening may arise." Order, ECF No. 11, 6. Moreover, "this general proposition of non-liability [articulated in Software Design] is far from a per se rule." Bear Stearns and Co. v. Buehler, 23 Fed. App'x 773, 776 (9th Cir. 2001).
Here, Attisha Enterprises alleges that based on Capital One's internal procedures for opening an account, "Capital One had actual knowledge that the person or entity opening this account was in fact not the entity known as 'TICOR Title Company of California.'" FAC, ECF No. 12, ¶ 8. In support of this allegation, Attisha Enterprises argues that Capital One requires a person opening an account to provide specific documentation to verify the person's relationship to the accountholder, and in this case Capital One nonetheless negligently allowed another entity to open an account in TICOR's name, despite not having provided the requisite documentation. Id. at ¶¶ 8, 15.
While Capital One argues these allegations are conclusory and should be disregarded, the Court disagrees. "The plausibility standard is not akin to a 'probability requirement.'" Iqbal, 556 U.S. at 678 (citations omitted). Viewing the allegations in the light most favorable to Attisha Enterprises, the Court finds the FAC plausibly alleges one of the "extraordinary and specific" situations that would give rise to a bank's duty of care to a non-customer. Software Design, 49 Cal. App. 4th at 479. This is not to say the case is decided, merely that Attisha Enterprises has plausibly alleged Capital One did not follow appropriate procedures for opening this account, which led to Attisha Enterprise's subsequent injury. Attisha Enterprises maintains the burden of proving Capital One had "actual knowledge" the fraudster's account did not belong to TICOR, but the FAC plausibly alleges this claim. Accordingly, Capital One's Motion to Dismiss the negligence claim is denied.
B. Violation of Section 11207
Attisha Enterprises' second claim alleges Capital One violated Section 11207. FAC, ECF No. 12, ¶¶ 19-23. Capital One argues this claim fails as a matter of law because it did not have actual knowledge the account holder was not, in fact, TICOR. Mot., ECF No. 13, 10. Capital One also argues the allegations within the claim are inconsistent. Id. at 11.
Federal Rule of Civil Procedure 8 "allows parties to plead inconsistent factual allegations in the alternative." Wi-LAN Inc. v. LG Electronics, Inc., 382 F. Supp. 3d 1012, 1023 (S.D. Cal. 2019). Here, Attisha Enterprises notes the inconsistency and argues the claims are pleaded on alternative theories of liability. Opp'n, ECF No. 14, 11. Accordingly, this argument does not serve as a basis for granting the Motion to Dismiss.
The Court has also already addressed Capital One's argument that Attisha Enterprises' has not plausibly pleaded it had "actual knowledge" the fraudsters' here were not affiliated with TICOR. The Court concluded that the allegations plausibly allege Capital One had actual knowledge, and if Capital One had actual knowledge the fraudsters were not TICOR, Section 11207 prohibits Capital One from wrongfully accepting and paying the wire transfer. Cal. Comm. Code § 11207(a). Having found that the FAC plausibly alleges a theory of recovery, the Motion to Dismiss the Section 11207 claim is denied.
Defendant's Motion to Dismiss is DENIED.
IT IS SO ORDERED. Dated: February 22, 2021
HON. ROGER T. BENITEZ
United States District Judge