Shelton v. Comerica Bank

Background

Joan Shelton sued Comerica Bank and Conduent Business Services, LLC, alleging that they failed to properly investigate and respond to identity theft and fraud involving her Direct Express account. The opinion states that the account was used to access disability benefits provided by the Social Security Administration. The claims arise under the Electronic Funds Transfer Act, California Business and Professional Code Section 17200, and California Civil Code Section 1798.2.

After the case was removed from state court, Shelton asked for permission to file a second amended complaint adding Conduent State & Local Solutions, Inc. and Conduent, Inc. The proposed complaint alleged that the defendants, collectively, allowed an identity thief to make an unauthorized electronic transaction, transacted business in California, failed to properly investigate, possessed money belonging to Shelton, and violated federal law by failing to provide a prompt written explanation.

Reasons for the ruling

Federal Rule of Civil Procedure 15 generally favors allowing amendments when justice requires. Courts consider bad faith, undue delay, prejudice to the opposing party, whether the amendment would be futile, and whether earlier amendments failed to cure deficiencies.

The defendants argued that adding Conduent, Inc. would be futile because the proposed complaint did not specifically allege enough facts to establish personal jurisdiction over that company and relied on its ownership of subsidiaries. The court disagreed. Although the proposed complaint did not state next to Conduent, Inc. that it was authorized to do business in California, it made group allegations that included Conduent, Inc., including that the defendants transacted business in California and had significant and substantial contacts with the state. The court stated that Conduent, Inc. could later challenge personal jurisdiction through a properly noticed motion before answering the amended complaint.

The defendants also argued that Shelton had waited too long and that the amendment would leave the new defendants only a few months to respond to discovery. The court found that the motion was filed before the amendment deadline, the new defendants had already received notice of the action, and the defendants had not shown enough prejudice to justify denial. The court also found that the amendment was unlikely to greatly expand discovery because existing discovery responses overlapped. It declined to resolve the parties’ factual dispute about when Shelton learned enough about the corporate structure to identify the proposed defendants.

Order

Judge William Alsup granted Shelton’s motion for leave to file a second amended complaint. The court ordered Shelton to file the proposed complaint by Tuesday, January 23, 2024, at noon, and to serve the amended complaint and summons within 14 days. The new defendants were given 14 calendar days from service to answer or otherwise respond. The order addressed permission to amend the pleadings; it did not decide the underlying fraud, identity-theft, or statutory claims.