Liberty West Regional Center LLC v. Carpanzano et al

Filing 50

ORDER denying 32 Motion to Dismiss for Failure to State a Claim. Signed by Judge David G Campbell on 2/18/2014.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Liberty West Regional Center LLC,
Plaintiff,

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ORDER

v.

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No. CV-13-02021-PHX-DGC

Salvatore Carpanzano, et al.,

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Defendants.

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Defendant JP Morgan Chase Bank, N.A. (“JP Morgan”) has filed a motion to

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dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil

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Procedure. Doc. 32. The motion is fully briefed. For the reasons that follow, the Court

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will deny the motion.1

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I.

Background.

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On July 22, 2011, Plaintiff deposited $2,700,000 into an escrow account with JP

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Morgan, pursuant to an escrow agreement. Doc. 1, ¶¶ 14-15. The following year, JP

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Morgan notified Plaintiff that it was planning to “get out of the business” of providing

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escrow services. Id., ¶ 17. Plaintiff was subsequently introduced to Defendant Samba

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Financial Group Escrow & Consulting Services U.S.A. LLC (“Samba”), and its

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representative, Defendant Salvatore Carpanzano. Id., ¶ 18; Doc. 37 at 3. Carpanzano

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The request for oral argument is denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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allegedly represented that Samba would place Plaintiff’s funds “in an account at Citibank

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at its branch office in Scarsdale, New York,” and further represented that Samba was a

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subsidiary of Samba Financial Group. Doc. 1, ¶ 19, 20. Plaintiff alleges that during the

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course of its investigation of Samba and Carpanzano, it contacted Gregory Shea, an

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employee of JP Morgan, and “inquired if he had ever heard of [Carpanzano or Samba].”

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Id., ¶ 23. Mr. Shea apparently said he had heard of both, but provided Plaintiff with no

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additional information.

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$2,700,000 in Plaintiff’s account to Citibank. Id., ¶ 26. Carpanzano is alleged to have

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converted Plaintiff’s funds for his own personal benefit. Id., ¶ 33.

Id., ¶ 24.

On December 10, 2012, JP Morgan wired the

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Prior to this transaction, JP Morgan was involved in litigation commenced on

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December 20, 2011, by a man named Rick Scott in Texas state court (the “Texas

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Action”). Id., ¶ 28. That action was removed to the United States District Court for the

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Northern District of Texas. Id. The action centered around a claim by Scott that a

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company called American National Trust, represented by Carpanzano, had absconded

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with $2,000,000 he had deposited with JP Morgan in order to secure financing for a

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Bahamian resort. Doc. 37 at 3-4. Plaintiff alleges that, as a result of the Texas Action, JP

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Morgan “knew or had reason to know that Defendant Carpanzano was not trustworthy,

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had perpetrated other fraudulent and otherwise dishonest schemes using escrow

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arrangements, and was likely to abscond with or otherwise purloin any funds in escrow,”

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and that it accordingly had a duty to warn Plaintiff of these facts. Doc. 1, ¶ 30.

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JP Morgan claims that although it and one of its employees were named as

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defendants in the Texas Action, it was dismissed when the plaintiff filed his first

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amended complaint, only added back briefly as a “relief defendant,” and then ultimately

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dismissed in May 2012. Doc. 32 at 3-4. JP Morgan claims that at the time of its final

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dismissal, “there had been no finding that Carpanzano in fact controlled American

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National Trust or that he had otherwise been involved in converting Scott’s funds.” Id. at

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4. JP Morgan argues it was not in possession of any information that would have

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triggered a duty to Plaintiff. Id. at 6.

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II.

Legal Standard.

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When analyzing a complaint for failure to state a claim to relief under

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Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light

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most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th

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Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the

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assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are

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insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec.

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Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the

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complaint must plead enough facts to state a claim to relief that is plausible on its face.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not

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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

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defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at

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556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere

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possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the

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pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

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III.

Analysis.

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Under Arizona law, there is generally “no duty to disclose information received by

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an escrow agent unless such a duty is required by the terms of the agreement[.]” Berry v.

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McLeod, 604 P.2d 610, 616 (Ariz. 1979). There is, however, an exception to this rule

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“when the escrow agent knows that a fraud is being committed on a party to an escrow

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and the failure of the escrow agent to disclose the information of the fraud will assist in

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accomplishing the fraud[.]” Id. “[U]nder such conditions the escrow agent has a duty to

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disclose the facts actually known.” Id. The Arizona Supreme Court has clarified that

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although Berry “does not require [an] escrow agent to investigate and search for fraud,” it

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also “does not permit [an] escrow agent to close its eyes in the face of known facts and

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console itself with the thought that no one has yet confessed fraud.” Burkons v. Ticor

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Title Ins. Co. of Cal., 813 P.2d 710, 718 (Ariz. 1991). Put another way, “if the facts

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actually known to the escrow agent present substantial evidence of fraud, there is a duty

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to disclose.” Id. at 720 (emphasis in original).

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JP Morgan argues that “Plaintiff’s theory of liability fails to meet the ‘plausibility’

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test necessary to state a claim for relief” under Iqbal, 556 U.S. at 678. Doc. 32 at 2. JP

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Morgan asserts that “Plaintiff cannot plausibly demonstrate that [JP Morgan] had

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sufficient (or even any) evidence that Carpanzano, as an alleged representative of Samba,

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might abscond with Plaintiff’s funds[.]” Id. at 6. Additionally, it contends, neither

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Carpanzano nor Samba was a party to the transaction it was overseeing and it was

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therefore under no duty to disclose any allegations against them in the Texas Action. Id.

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JP Morgan further asserts that Plaintiff has not pleaded any facts showing that “Mr. Shea,

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their assigned escrow officer, had any knowledge regarding the allegations made against

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Carpanzano in the Texas Litigation.” Id. at 7.

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Plaintiff counters that an escrow agent is not required to have actual evidence of

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fraud, but rather “what a ‘reasonable escrow agent would perceive as evidence of fraud.’”

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Doc. 37 at 9 (citing Burkons, 813 P.2d at 718). Plaintiff further contends that it has

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alleged sufficient facts to “trigger” JP Morgan’s duty to disclose because it has alleged

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that Mr. Shea stated that he had heard of Carpanzano and Samba. Id. at 11.

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Plaintiff has pleaded that JP Morgan was party to litigation involving allegations

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of fraud against Carpanzano, namely that he absconded with funds placed in escrow, and

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that JP Morgan was thus aware of those allegations. Plaintiff has also pleaded that an

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employee of JP Morgan, when asked in connection with Plaintiff’s escrow transaction,

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acknowledged that he had heard of both Samba and Carpanzano.

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allegations as true, as the Court must at the motion to dismiss stage, the Court concludes

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that Plaintiff has stated a claim for relief. Plaintiff could plausibly prove that the facts

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actually known to JP Morgan would be perceived by a reasonable escrow agent as

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“evidence of fraud.” See Burkons, 813 P.2d at 718. The Court cannot decide what facts

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were actually known to JP Morgan in the context of a motion to dismiss. The Court will

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therefore deny JP Morgan’s motion.

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Accepting these

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IT IS ORDERED that JP Morgan’s motion to dismiss (Doc. 32) is denied.

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Dated this 18th day of February, 2014.

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