Lee v. Bank of America, N.A.

Background

Howard Lee, representing himself, sued Bank of America, N.A., and Bank of America Corporation. He alleged that Yessica Cai, who he said was a Bank of America vice president, financial adviser, banker, and concierge, suggested that he invest in 14 Seaside Marina lots in Nicaragua. Lee alleged that he and his brothers sent Cai $550,000 in 2006 and $600,000 in 2007, and that Cai told him he owned the lots. He later learned in 2020 that he did not own the properties.

Lee asserted six claims: negligent hiring, retention, and supervision; fraud by omission; breach of fiduciary duty; breach of the covenant of good faith and fair dealing; breach of contract; and negligent misrepresentation. The last five claims were based on respondeat superior, a legal theory that can make an employer responsible for an employee’s conduct within the scope of employment. The defendants removed the case from state court and moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legal claim.

Judicial Notice and Jurisdiction

The court granted the defendants’ request to take judicial notice of seven pleadings filed in federal and state court proceedings involving the transactions. Judicial notice permits a court to consider certain facts or public records whose authenticity and accuracy are not reasonably disputed.

The court held that it had jurisdiction based on the parties’ diverse citizenship and the amount Lee sought. The opinion states that Lee was a Florida resident, that the defendants were incorporated in Delaware and had their principal place of business in North Carolina, and that Lee sought $1,150,000 in damages, along with other amounts.

Statute of Limitations

The court granted the motion to dismiss on statute-of-limitations grounds as to all claims. For the contract claims, the court concluded that the alleged breaches occurred when Lee provided the investment money and did not receive title, in 2006 or 2007. Those claims therefore appeared untimely under California’s two- to four-year limitation periods.

The court acknowledged that the discovery rule might delay the start of the limitations period when a plaintiff could not reasonably discover the injury or wrongdoing earlier. But the court found that Lee did not plead facts showing that it would have been difficult to discover that he lacked ownership of the land. The court relied on allegations and judicially noticeable materials indicating that Lee did not receive deeds, had an agreed closing date in 2008, later put the property up for sale, and invested a significant amount of money. The court concluded that a reasonable person would have investigated ownership well before Lee filed the lawsuit.

The court also held that the limitations periods barred Lee’s fraud and negligence-based claims. Although Lee alleged that he did not learn until 2020 that the deeds were not recorded, the court stated that the relevant question was when he reasonably should have suspected wrongdoing. His general allegations that he relied on Cai’s assurances did not adequately explain why he had no duty to investigate earlier.

The court granted Lee leave to amend to allege facts that could plausibly support tolling the limitations period or applying the discovery rule, if he could do so in good faith.

Respondeat Superior Claims

The court separately concluded that Lee had not adequately alleged that Cai acted within the scope of her employment. The fact that Cai first discussed the investment with Lee at a Bank of America office, and Lee’s belief that she was acting as a Bank of America employee, were not enough by themselves.

The court found that Lee’s allegations that Cai received kickbacks from the Nicaraguan company and that the investment funds were wired to a personal account owned by Cai and her spouse instead supported an inference that Cai acted for personal reasons. The court therefore held that Lee had not stated claims against the bank based on Cai’s alleged fraud by omission, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, breach of contract, or negligent misrepresentation.

Negligent Hiring, Supervision, and Retention

The court dismissed Lee’s negligent hiring, supervision, and retention claims for failure to state a claim. Lee did not allege facts about Cai’s hiring or facts showing that the defendants knew or should have known at the time of hiring that she posed a risk. He also did not provide sufficient facts about how the defendants supervised her or why they would have known that an investigation into her conduct was needed.

Disposition

Judge Corley granted the defendants’ motion to dismiss. The court stated that all of Lee’s claims were barred by the statute of limitations based on the complaint and judicially noticeable facts, and that Lee had not alleged facts stating any viable claim. The court allowed him to file an amended complaint within 30 days. The order disposed of docket entry 7. It did not state that the dismissal was with or without prejudice.