Adam Askari D.D.S. Corp. v. U.S. Bancorp

Background

Adam Askari D.D.S. Corp. sued U.S. Bancorp, U.S. Bancorp Asset Management, Inc., Bancorp, and U.S. Bancorp Community Investment Corporation. The opinion refers collectively to these defendants as "Defendants." The case concerns two loans under the federal Paycheck Protection Program, which was funded and administered by the Small Business Administration and processed through local banks.

The complaint alleged that Dr. Adam Askari, acting for the plaintiff, applied for a Paycheck Protection Program loan through U.S. Bank in May 2020. The application allegedly contained an incorrect tax-identification number, but the plaintiff received an $88,000 loan. When Dr. Askari applied for a second loan in early February 2021, U.S. Bank allegedly said the Small Business Administration had no record of the earlier loan. After Dr. Askari reported the tax-identification-number error, U.S. Bank allegedly said it would correct the problem but did not do so. The complaint alleged that, by the time Dr. Askari learned that no correction had been made, the program was no longer accepting loans. The plaintiff claimed it lost a second $88,000 loan, related benefits such as loan forgiveness or low interest rates, and the ability to seek a loan from another financial institution.

The complaint asserted negligence and breach of fiduciary duty. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which allows dismissal for lack of subject-matter jurisdiction, and Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Standing and negligence

Article III standing requires a plaintiff to allege an actual injury, a connection between that injury and the defendant’s conduct, and a likelihood that a court decision can remedy the injury. The court explained that the complaint, viewed in the plaintiff’s favor, alleged a connection between the defendants’ conduct and the claimed loss: the defendants allegedly promised to correct the application error, failed to act, and thereby contributed to the plaintiff’s inability to obtain another loan.

The defendants nevertheless made a factual challenge to jurisdiction and submitted an April 9, 2021 letter stating that U.S. Bank could not extend credit because the application had been "Withdrawn." The court said the letter suggested that the plaintiff might have withdrawn the application, which could mean that the defendants’ conduct did not cause the claimed loss. Because the letter was dated more than a month before the program ended, it also suggested that the plaintiff might have been able to apply again.

The plaintiff did not submit affidavits or other evidence responding to that factual challenge and instead requested permission to amend. The court concluded that the unclear letter meant the jurisdictional problem might be corrected through amendment. It therefore granted leave to amend the negligence claim. The court declined to address the defendants’ other legal challenges to that claim at that time because the plaintiff had not established standing.

Breach of fiduciary duty and disposition

The plaintiff did not respond to several of the defendants’ arguments. The court treated that failure as a concession and dismissed the breach-of-fiduciary-duty claim with prejudice. The opinion does not state that the negligence claim was dismissed with prejudice; instead, the order granted leave to amend that claim.

The court’s conclusion states that the defendants’ motion to dismiss was granted, with leave to amend only the negligence claim. The plaintiff could file an amended complaint by July 14, 2022. Judge Edward J. Davila signed the order on June 15, 2022.