WRIGHT v. SUTTON

LACY WRIGHT, JR. et al., Plaintiffs,

v.JAMES M. SUTTON, et al., Defendants.

CIVIL ACTION NO. 1:08-1431

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA

AT BLUEFIELD

Date: March 29, 2011

MEMORANDUM OPINION AND ORDER

Pending before the court is a motion by Crowe Chizek and Company, LLC (hereinafter "Crowe") to dismiss the Amended Complaint. (Doc. #55).¹ For reasons expressed more fully below, that motion is GRANTED.

I. Background

On October 27, 2006, plaintiffs filed this civil action, in the Circuit Court of McDowell County, against various defendants, including Crowe, alleging that defendants engaged in a "freeze-out" of plaintiff Lacy Wright and other John Doe minority shareholders in Ameribank, committed fraud, engaged in civil conspiracy, and were negligent. See Complaint generally. On September 19, 2008, the Office of Thrift Supervision closed Ameribank and appointed the Federal Deposit Insurance Corporation ("FDIC") as Receiver.

On December 17, 2008, the FDIC filed a Motion to Substitute, in the McDowell County Circuit Court, seeking to substitute the FDIC as Receiver for defendant Ameribank. On that same day, the FDIC removed the case to federal court. On September 29, 2010, the court granted the motion to dismiss filed by the FDIC as Receiver for Ameribank for lack of subject matter jurisdiction based on plaintiffs' failure to exhaust administrative remedies.

On July 6, 2010, the court granted Crowe's motion for a more definite statement. In particular, plaintiffs were directed to explain:

1) the nature of each claim for relief they are asserting while providing separate counts for each individual claim, 2) any statute or regulation allegedly violated (if applicable), 3) the facts that support each claim, and 4) the relief he seeks for each claim. The amended complaint must also specifically identify which counts are applicable to which defendants. Furthermore, plaintiffs are reminded of Federal Rule of Civil Procedure 12(f) and directed to omit from their more definite statement any impertinent or scandalous matter such as that contained the last sentences of paragraphs numbered 20 and 21 of the original complaint.

Order of July 6, 2010 at pp. 3-4. Plaintiffs were also warned that failure to comply with the court's Order might result in dismissal of this action without prejudice.

On July 20, 2010, plaintiffs filed a ten-count Amended Complaint. According to the Amended Complaint, Crowe was retained by "American Bankshares, Inc. to provide accounting, auditing, business and consulting services to Ameribank." Amended Complaint ¶ 13. In response to the court's directive that plaintiffs identify the specific defendant against whom each claim was asserted, plaintiffs have alleged that all claims in the Amended Complaint are alleged against Crowe. The allegations specific to Crowe are as follows:

20. That based upon information and belief, the Defendant Crowe Chizek and Company, LLC negligently and carelessly failed to conduct audits in accordance with applicable professional standards breaching a duty to Plaintiff and others proximately causing the Plaintiff and others to sustain harm, injuries and damages and also which resulted in the insolvency and subsequent closure of Defendant, Ameribank, Inc. by the FDIC.

21. That based upon information and belief the Defendant, Crowe Chizek and Company, LLC negligently prepared audit reports or carelessly performed audits, other audit functions and other banking and business documents resulting in false and misleading communications being sent or communicated to the Plaintiff and others proximately causing the Plaintiff and others to sustain harm, injuries, and damages.

33. That the Defendant, "Crowe" and/or other Defendants as aforesaid fraudulently and/or negligently failed to properly and accurately disclose the true financial condition of Defendant American Bankshares, Inc. and Ameribank, Inc.; failed to disclose material information; and assisted in the publication and dissemination of false and misleading information, thereby conspiring and colluding with the other Defendants and breaching a fiduciary duty to the Plaintiff and others.

63. That based upon information and belief the Defendant, Crowe Chizek and Company, LLC and other Defendants as aforesaid caused audit reports, financial reports and other documents to be communicated to the Plaintiff and others that were misleading because the audits and preparation of other banking related documents were negligently performed proximately causing the Plaintiff and others to sustain harm, injuries and damages.

Amended Complaint ¶¶ 20, 21, 33, and 63.

Crowe has moved to dismiss the Amended Complaint as to it on a number of different grounds.

II. Standard of Review

"[A] motion to dismiss for failure to state a claim for relief should not be granted unless it appears to a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proved in support of his claim." Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324, 325 (4th Cir. 1989) (citation omitted) (quoting Conley v. Gibson, 355 U.S. 41, 48 (1957), and Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir. 1969)). "In considering a motion to dismiss, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff." Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993); see also Ibarra v. United States, 120 F.3d 474, 474 (4th Cir. 1997).

In evaluating the sufficiency of a pleading, the recent cases of Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), provide guidance. When reviewing a motion to dismiss, under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief may be granted, a court must determine whether the factual allegations contained in the complaint "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests," and, when accepted as true, "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007)(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004)). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 127 S. Ct. at 1969. As the Fourth Circuit has explained, "[a] complaint attacked by a Rule 12(b)(6) motion to dismiss will survive if it contains 'enough facts to state a claim to relief that is plausible on its face.'" Lainer v. Norfolk S. Corp., 2007 WL 4270847 at *3 (4th Cir. 2007) (quoting Twombly, 127 S. Ct. at 1974).

According to Iqbal and the interpretation given it by our appeals court,

[L]egal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement fail to constitute well-pled facts for Rule 12(b)(6) purposes. See Iqbal, 129 S.Ct. at 1949. We also decline to consider "unwarranted inferences, unreasonable conclusions, or arguments." Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n. 26 (4th Cir. 2009); see also Iqbal, 129 S. Ct. at 1951-52.

Ultimately, a complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S.Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Facial plausibility is established once the factual content of a complaint "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In other words, the complaint's factual allegations must produce an inference of liability strong enough to nudge the plaintiff's claims "'across the line from conceivable to plausible.'" Id. at 1952 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

Satisfying this "context-specific" test does not require "detailed factual allegations." Id. at 1949-50 (quotations omitted). The complaint must, however, plead sufficient facts to allow a court, drawing on "judicial experience and common sense," to infer "more than the mere possibility of misconduct." Id. at 1950. Without such "heft," id. at 1947, the plaintiff's claims cannot establish a valid entitlement to relief, as facts that are "merely consistent with a defendant's liability," id. at 1949, fail to nudge claims "across the line from conceivable to plausible." Id. at 1951 (quotations omitted).

Nemet Chevrolet, LTD v. Consumeraffairs.com, Inc., 591 F.3d 250, 255-56 (4th Cir. 2009).

III. Analysis

A. Counts 1 and 4: Negligence and Negligent Misrepresentation

Counts 1 and 4 appear to state professional negligence claims against Crowe based on the work it did for Ameribank. Plaintiffs also allege, for the first time, that Crowe's negligence led to the bank's closure. Crowe argues that the court should dismiss the professional negligence claims to the extent that they allege new facts, legal theories, and causes of action.

Even were the court inclined to construe plaintiffs' first amended complaint as seeking leave to assert these additional matters, it would be compelled to deny such a motion to amend. Viewing the Amended Complaint through the lens of Twombly and Iqbal, the court finds that the pleading falls far short of what is required to withstand dismissal.

In order to recover on a claim of professional malpractice, the plaintiffs must show: (1) the existence of a legal duty owed by the defendant to the plaintiff, (2) a breach of that duty, and (3) damages proximately caused by the breach. See Sewell v. Gregory, 179 W. Va. 585, 371 S.E.2d 82, 84 (1988). In the case of a client suing a retained professional for negligence, the existence of a duty is established by virtue of the client hiring the professional. See Calvert...