Farms v. JPMorgan Chase Bank

1

JIM PEGRAM FARMS, JAMES PEGRAM, and KATHLEEN PEGRAM PLAINTIFFS v. JPMORGAN CHASE BANK, N.A.; CAPITAL ONE BANK USA, N.A.; NATIONSTAR MORTGAGE LLC d/b/a Mr. Cooper; and XYZ CORPORATIONS DEFENDANTS

No. 3:21-CV-196-DMB-RP

United States District Court, N.D. Mississippi, Oxford Division

September 6, 2022

OPINION AND ORDER

DEBRA M. BROWN, UNITED STATES DISTRICT JUDGE

The plaintiffs commenced this case seeking to recover money paid from their bank account without their authorization to the defendant banks for the debts of a third party individual. The defendants have moved to dismiss on grounds that the plaintiffs fail to state a valid claim against them for conversion, negligence, or unjust enrichment. Because the plaintiffs have failed to show they are entitled to relief on any of the legal theories in their governing complaint dismissal is proper.

I Relevant Procedural History

On August 18, 2021, Jim Pegram Farms, James Pegram, and Kathleen Pegram filed a complaint in the Circuit Court of Tunica County, Mississippi, against Tony Skelton; J.P. Morgan Chase National Corporate Services, Inc.; Capital One, National Association; Nationstar Mortgage LLC d/b/a Mr. Cooper; and “XYZ Corporations.” Doc. #3. The complaint asserted various claims arising from Skelton's alleged unauthorized use of a Jim Pegram Farms' bank account to pay his own debts. Id. at 2-12.

JPMorgan Chase Bank, N.A., alleging it was improperly identified as J.P. Morgan Chase National Corporate Services, Inc.,^[1] and Nationstar removed the case to the United States District Court for the Northern District of Mississippi on September 2, 2021, asserting diversity jurisdiction. Doc. #1. Skelton and Capital One consented to the removal. Docs. #2, #12.

After the plaintiffs voluntarily dismissed their claims against Skelton^[2] and after Nationstar, Chase, and Capital One each filed a motion to dismiss the complaint,^[3] the plaintiffs, with the Court's leave,^[4] filed an amended complaint against Chase Capital One,^[5] and Nationstar on January 19, 2022. Doc #74. Within the time to answer,^[6] each defendant filed a motion to dismiss the amended complaint.^[7] Docs. #83, #85, #93. Because “the amended complaint ... [did] not incorporate the earlier pleading and because Nationstar, Chase, and Capital One . filed motions to dismiss the amended complaint,” the Court denied as moot the motions to dismiss the original complaint. Doc. #113.

II Relevant Standard

A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).

To withstand a motion to dismiss under Rule 12(b)(6), a complaint must present enough facts to state a plausible claim to relief. A plaintiff need not provide exhaustive detail to avoid dismissal, but the pleaded facts must allow a reasonable inference that the plaintiff should prevail. Facts that only conceivably give rise to relief don't suffice.

Smith v. Heap, 31 F.4th 905, 910 (5th Cir. 2022). While the Court must “accept all well-pled facts as true,” it “do[es] not accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions.” White v. U.S. Corr., L.L.C., 996 F.3d 302, 306-07 (5th Cir. 2021). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Firefighters' Ret. Sys. v. Grant Thornton, L.L.P., 894 F.3d 665, 669 (5th Cir. 2018).

III Factual Allegations

“In 1993, James and Kathleen Pegram opened a business bank account for Jim Pegram Farms at the Tunica, Mississippi branch of Citizens Bank & Trust Company.” Doc. #74 at 2. “[T]he account was used in their farming business, and James and Kathleen were the only people authorized to use the account.” Id. at 3. They would write “checks out of the account and never used it for any ACH withdrawals.” Id.

“Sometime in 2016 or before, unbeknownst to James and Kathleen, Tony Skelton deceptively acquired or learned the account number of the Jim Pegram Farms' Citizen Bank & Trust Company.” Id. Skelton^[8] then began to use the account “to pay his own debts to [Chase, Capital One, and Nationstar] by ACH debit transfers by furnishing them with the Jim Pegram Farms account number and Citizens Bank & Trust Company routing number, without knowledge or authorization from James or Kathleen.” Id.

“Between 2018 and 2020, Capital One [and Chase] never verified that Skelton was an authorized user of the Jim Pegram Farms account, and ... requested a total of $243,602.66 [and $203,085.00, respectively] from the ... account via ACH debit transfer and took possession of those funds ... and applied them to satisfy Skelton's debits to [them].” Id. at 3-4. Nationstar engaged in the same conduct “[b]etween 2016 and 2020” and applied $53,296.12 received to Skelton's debts. Id. at 4. Each bank “failed to follow its own internal policies, procedures, and protocols required to verify the authenticity of signatures.” Id. at 6, 8, 10.

The plaintiffs did not discover their funds were being taken until January 2020. Id. at 4.

IV Analysis

The plaintiffs' amended complaint alleges claims of conversion, unjust enrichment, and negligence against each of the defendants and demands compensatory damages, pre- and postjudgment interest, and an award of legal fees and costs. Doc. #74 at 4-12.

A. Nationstar's Motion to Dismiss

Nationstar asserts that “[o]n the face of their pleading, the Plaintiffs' claims against [it] fail as a matter of law.” Doc. #83.

1. Conversion

Nationstar argues that the plaintiffs “do not allege any positive wrongful act by Nationstar” in support of their conversion claim and “the money [they] seek to recoup was not capable of being converted.” Doc. #84 at 3-4. The plaintiffs respond that Nationstar “committed positive wrongful acts [by] request[ing] or order[ing] ACH debit transfers from Citizens Bank & Trust Company;” failing to take “steps to confirm that . Skelton was an unauthorized [sic] user;” and violating “its own established policies.” Doc. #100 at PageID 638. And because they “specifically identify the funds alleged to have been converted to the penny . and further specify the pre-conversion locus of the funds,” the plaintiffs argue they “have asserted an adequately specific and valid claim for conversion.” Id. at PageID 639. Nationstar replies that the plaintiffs “offer no authority to support their conclusory allegations that the alleged debits transfers were some positive wrongful act;” “banks owe no duty of care to non-customers to protect them from their customers;” and its “own policies and procedures ... do not benefit the general public or provide a cause of action to aggrieved third parties.” Doc. #110 at 6. Nationstar further argues that the ability to identify the specific amount that was allegedly taken does not satisfy the requirement of identifying specific funds. Id. at 7.

“Conversion, or civil theft, requires an intent to exercise dominion or control over goods which is inconsistent with the true owner's right.”^[9] McGee v. Comprehensive Radiology Services, PLLC, 340 So.3d 328, 333 (Miss. 2022) (internal quotation marks omitted). “In order to maintain an action for conversion, there must have been, on the part of the defendant, some unlawful assumption of dominion over the personal property of the plaintiff.” Anderson v. Wiggins, 331 So.3d 1, 5 (Miss 2020) (alterations omitted). A claim for conversion “cannot be maintained without proof that the defendant either did some positive wrongful act with the intention to appropriate the property to himself, or to deprive the rightful owner of it.” Cmty. Bank, Ellisville v. Courtney, 884 So.2d 767, 773 (Miss. 2004). Additionally, the plaintiffs' interest in the property must have been “made known and resisted.” Greenline Equip. Co. v. Covington Cnty. Bank, 873 So.2d 950, 955 (Miss. 2002).

Here, the only actions the plaintiffs allege Nationstar took were “request[ing] or order[ing] ACH debit transfers from Citizens Bank . and accept[ing] the funds from [their] bank account as payment of Skelton's debt.”^[10] Doc. #74 at 9. But the plaintiffs fail to allege that Nationstar knew of their ownership-or that the funds belonged to anyone other than Skelton-at the time Nationstar requested and accepted payment. Nor do the plaintiffs allege or provide any argument as to why making the request and accepting funds Nationstar believed belonged to Skelton amounts to conversion. Under these circumstances, the plaintiffs have failed to adequately plead their conversion claim against Nationstar and dismissal is proper.^[11]

2. Negligence

Nationstar argues the plaintiffs' negligence claim fails because it did not owe a duty to them as non-customers and an internal policy does not create a duty such that failure to follow an internal policy would give rise to a negligence claim. Doc. #84 at 4-6. The plaintiffs reply that “Mississippi courts have not conclusively decided the issue of whether a bank owes a duty of care to a non-customer” and this Court should “decline to make an Erie guess.” Doc. #100 at PageID 640. Alternatively, the plaintiffs argue-without citation to case law-that Nationstar had a duty “to not order another bank to transfer funds to [it] without having proper authorization from [the] true bank account owner.” Id. at PageID 641. In reply, Nationstar argues that the plaintiffs “completely ignore the Fifth Circuit's ruling cited by [it] - Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507 (5th Cir. 2018) ... [where] the Fifth Circuit expressly found that Mississippi law ... did not impose a duty of care on banks to protect a third-party non-customer from the actions of bank customers.” Doc. #110 at 2.

In Midwest Feeders, Midwest Feeders, Inc....