Williams v. J.P. Morgan Chase Bank, N.A.

Background

Michael Williams alleged that his former office manager, Lylee Kazem, took advantage of Williams’s vulnerable condition during a 2019 hospitalization and persuaded him to transfer $154,000 to what was presented as a corporate account for Immunogenetics.com, Inc. Williams alleged that he ordered the money sent to a Bank of America account Kazem had opened, but that the money instead reached an account Kazem had opened at J.P. Morgan Chase Bank, N.A. Williams further alleged that, after he contacted Chase, Chase employees told him the funds were “frozen” while the dispute was resolved. He said he later learned that Chase had paid the account balance to Kazem.

The complaint asserted claims against Chase for violations of federal banking law, violations of the California Commercial Code and common law, civil conspiracy, violation of California’s Unfair Competition Law, fraud, and intentional infliction of emotional distress.

Legal standards

Chase moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court explained that a complaint must include enough factual allegations to make relief plausible, rather than merely possible. For fraud claims, Rule 9(b) requires the circumstances of the alleged fraud to be stated with particularity, including the who, what, when, where, and how.

The court rejected Chase’s argument that Rule 9(b) applied to all of the claims. It explained that the banking-law and California Commercial Code claims were based on Chase’s alleged failure to follow verification obligations, not on fraudulent representations.

Claims based on banking law and regulations

The court dismissed the first and second claims with leave to amend. It found that the complaint did not clearly identify the specific federal and state laws Chase allegedly violated or the specific conduct supporting those alleged violations. The court noted that some cited authorities were outdated, nonexistent, or apparently unrelated to the claims. It stated that neither the court nor Chase should have to guess which laws and regulations plaintiffs relied on or how Chase’s conduct violated them. The court also directed plaintiffs to consider whether the federal banking laws they might rely on provide a private right of action.

Civil conspiracy

The court dismissed the civil conspiracy claim with leave to amend. Under California law, conspiracy is not an independent cause of action; it is a theory that can impose liability when people share a plan to commit an underlying tort. Plaintiffs identified conversion as the underlying tort and alleged that Chase conspired with Kazem to take their money. But the court found that plaintiffs had not plausibly alleged that Chase and Kazem agreed to a common plan to convert the funds. Allegations that Chase acted with disregard for its verification obligations did not establish an express or implied agreement with Kazem.

Fraud and Unfair Competition Law claims

The court dismissed the fraud claim with leave to amend. It found that the complaint did not allege that Chase or its employees intended to induce Williams to rely on a misrepresentation. Although the complaint said Williams relied by refraining from taking various actions, the court found that the nature of that reliance needed to be explained in greater detail.

The court also dismissed the Unfair Competition Law claim with leave to amend. Plaintiffs relied on their dismissed claims to support the statute’s “unlawful” and “fraudulent” categories, and the complaint was vague about how Chase’s conduct was “unfair.” Plaintiffs also had not provided case law or statutory analysis explaining how the unfairness category applied to the alleged facts.

Intentional infliction of emotional distress

The court dismissed Williams’s intentional infliction of emotional distress claim with leave to amend. The court considered whether the complaint plausibly alleged extreme and outrageous conduct, intent or reckless disregard regarding emotional distress, severe emotional distress, and causation. It found that the complaint did not adequately allege that anyone at Chase knew or had reason to know about Williams’s vulnerable condition. The court also noted an inconsistency between the complaint and Williams’s later description of when his severe emotional distress occurred.

Disposition

The court dismissed the complaint with leave to amend. Plaintiffs could file an amended complaint consistent with the order by June 9, 2023. The court stated that no new claims or parties could be added without prior approval. It further stated that failure to meet the deadline would result in dismissal with prejudice under Federal Rule of Civil Procedure 41(b).