Zachman v. Wells Fargo N.A.

Filing 43

ORDER: (1) Granting Defendants' 23 Motion to Dismiss; (2) Denying 26 Motion to Amend; and (3) Denying Plaintiff's 38 Motion for Approval of Supplemental Pleadings. Plaintiff may file a Second Amended Complaint on or before December 28, 2016. Signed by Judge Roger T. Benitez on 12/5/2016. (All non-registered users served via U.S. Mail Service)(knb)

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1 FILED 2 iOEC -7 PM 1* 5$ 3 4 MU Blf*HT Y ■ ?m 5 6 7 8 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA 9 10 11 JAMES A. ZACHMAN, Case No.: 3:15-cv-02909-BEN-JMA Plaintiff, 12 13 v. 14 ORDER: WELLS FARGO N.A., 15 (1) GRANTING DEFENDANTS’ MOTION TO DISMISS; Defendant. (2) DENYING PLAINTIFF’S MOTION TO AMEND; 16 17 (3) DENYING PLAINTIFF’S MOTION FOR APPROVAL OF SUPPLEMENTAL PLEADINGS 18 19 20 [DOCKET NOS. 23,26, 38] 21 22 Pending before the Court are: 1) Defendant’s Motion to Dismiss Plaintiffs First 23 Amended Complaint (Docket No. 23), 2) Plaintiffs Motion to Amend Complaint 24 (Docket No. 26); and 3) Plaintiffs Motion for Approval of Supplemental Pleading 25 (Docket No. 38). Each motion has been fully briefed. The Court finds the Motions 26 suitable for determination on the papers without oral argument, pursuant to Civil Local 27 Rule 7.1.d.l. For the reasons set for below, Defendant’s motion is GRANTED with 28 leave to amend, and Plaintiffs’ motions are DENIED as moot. l V1 S-p.v-n?Qnq-RF.N-TMA BACKGROUND1 1 2 Plaintiff James A. Zachman, proceeding pro se, filed his initial Complaint against 3 Defendant Wells Fargo Bank N.A. (“Wells Fargo”) on December 28, 2015. (Docket No. 4 1.) The Complaint alleged California state law claims for negligence, breach of contract, 5 and “aiding and abetting a breach of fiduciary duty.” (Id.) 6 Plaintiff filed his First Amended Complaint (“FAC”) on May 16,2016. (Docket 7 No. 20.) The operative facts of the FAC are similar to the initial Complaint. Plaintiff re­ 8 alleges his previous California state law claims for negligence and “aiding and abetting a 9 breach of fiduciary duty.” (Id. ) The FAC alleges three new state law claims for violation 10 of California’s Unfair Competition Act, aiding and abetting fraud, and aiding and 11 abetting conversion, and one federal claim for violation of the Racketeer Influenced 12 Corrupt Organizations Act. (Id.) Plaintiffs claims arise out of an alleged unlawful 13 creation of a Wells Fargo limited liability company bank account and subsequent 14 unlawful transfers of funds to a third-party account by a third-party individual. (Id. ) 15 16 Real Time Data Services LLC ("Data Services") is organized under the laws of Delaware. (Compl. f 15.) Since March 27, 2008, Data Services is comprised, in relevant 17 part, of two members, two Co-Presidents, and one manager. (Compl. Ex. A.) Plaintiff is 18 Co-President, member and sole manager of Data Services. (Id.) CBS Accounting 19 Services, in New Delhi, Inda, is the remaining member, and is represented by Ms. 20 Sangeeta Chhabra. (Id.) Ms. Chhabra is also Co-President. (Id.) Plaintiff and CBS 21 Accounting each own a fifty percent interest in Data Services. (Id.) 22 As the sole manager, Plaintiff was in charge of all of Data Services' U.S. banking 23 and financial activities. (Compl. 17.) In January 2009, Plaintiff created a bank account 24 for Data Services at Wells Fargo (the "9809 account"). (Compl. 118.) In May 2012, a 25 26 27 28 i Unless otherwise noted, the Court is not making any factual findings, but rather summarizing the relevant allegations of Plaintiff s First Amended Complaint for purposes of evaluating Defendant's Motion to Dismiss. 2 V1 S-rv-09QnQ-RF>J-TMA 1 dispute arose between Plaintiff and Ms. Chhabra, resulting in Ms. Chhabra "locking] the 2 Plaintiff out of the operations of Data Services by commandeering the computer servers." 3 (Compl. f 19.) Plaintiff then shut Ms. Chhabra out of the 9809 account until the dispute 4 could be resolved. (Compl. f 14.) On June 18, 2012, Ms. Chhabra created a Wells Fargo 5 account (the "9039 account") for a company called "My Real Data Services LLC" at the 6 Fairfax branch in Lewes, Delaware. (Compl. $ 22.) Ms. Chhabra created the account 7 using Indian passports, a Delaware registering agent’s address, and Data Services' 8 Employer Identification Number, Delaware business file number, and Entity Member 9 10 document. (Compl. 22-23.) According to Plaintiff, Wells Fargo contacted the State of Delaware to verify the 11 file number and found no record of the company My Real Data Services, yet created the 12 account anyway. (Compl. 13 the company name on the 9039 account changed from "My Real Data Services LLC" to 14 "Real Time Data Services LLC". (Compl. 15 Chhabra used the Wells Fargo 9039 account to transfer over $350,000 to an account in 16 India. (Compl. 25-26.) Then, sometime between June 18 and July 1, 2012, 27.) Over the next few months, Ms. 32-34.) The 9039 account allowed Ms. Chhabra to “carry out her 17 scheme to unlawfully cut [Plaintiff] out the LLC’s management and ownership [sic].” 18 (Compl. 34.) Ms. Chhabra’s plans included taking control of Data Services’ finances by 19 “moving the LLC’s bank account to her own Data Services Wells Fargo account.” (Id.) 20 Wells Fargo has an obligation to comply with the obligations set forth in the 21 Banking Secrecy Act (“BSA”) and the Patriot Act. (Compl. 37.) Plaintiff alleges Wells 22 Fargo knew Ms. Chhabra provided a false business name, “chose to ignore the false 23 24 25 information,” and provided Ms. Chhabra with banking services. (Compl. 43, 48.) PROCEDURAL HISTORY Plaintiff filed his initial Complaint on December 28, 2015. (Docket No. 1.) On 26 February 9, 2016, Defendant filed a Motion to Dismiss the Complaint for lack of 27 jurisdiction and for failure to state a claim pursuant to Federal Rule of Civil Procedure 28 12(b)(1) and (b)(6). (Docket No. 8.) On April 20, 2016, after taking the matter on 3 3-1 S-r.v-O^qnq-RFN-TMA I 1 submission, the Court granted Defendant’s Motion to Dismiss on the grounds that the 2 allegations in Plaintiffs Complaint failed to establish subject matter jurisdiction or 3 standing to bring the claims for relief. Plaintiff was granted leave to file an amended 4 complaint by May 23, 2016. (Docket No. 19.) Plaintiff filed his First Amended 5 Complaint (“FAC”) on May 16, 2016. (Docket No. 20.) 6 On June 6, 2016, Defendant filed a Motion to Dismiss the FAC. (Docket No. 23.) ! 7 On July 12, 2016, Plaintiff filed a Motion to Amend Complaint. (Docket No. 26.) On 8 July 21, 2016, the Court took Defendant’s Motion to Dismiss the FAC under submission. 9 (Docket No. 31.) On September 2, 2016, the Court took Plaintiffs Motion to Amend 10 under submission. (Docket No. 33.) On October 6, 2016, Plaintiff filed a Motion for 11 Approval of Supplemental Pleading, which the Court also took under submission. 12 (Docket Nos. 38, 41.) 13 LEGAL STANDARD 14 A challenge to the existence of subject-matter jurisdiction under Federal Rule of 15 Civil Procedure 12(b)(1) may be either facial or factual in nature. Wolfe v. Strankman, 16 392 F.3d 358, 362 (9th Cir. 2004). A facial 12(b)(1) motion involves a limited inquiry 17 into the allegations of the complaint. Id. In doing so, courts must assume all material 18 allegations in the complaint to be true and determine whether a lack of federal 19 jurisdiction appears from the complaint itself. Thornhill Publ 'g Co. v. Gen. Tel. Elec., 20 21 22 2 594 F.2d 730, 733 (9th Cir. 1979). DISCUSSION Wells Fargo moves to dismiss the FAC for failure to cure the deficiencies in the 23 Complaint regarding the lack of subject-matter jurisdiction and standing under Rule 24 12(b)(1). Wells Fargo further argues that Plaintiffs federal claim and five state law 25 claims should be dismissed for failure to state a claim pursuant to Rule 12(b)(6). The 26 Court need not perform the Rule 12(b)(1) analysis of Defendant’s subject-matter 27 jurisdiction challenge or Rule 12(b)(6) analysis of Plaintiff s claims because Plaintiff 28 failed to establish standing in the FAC. 4 3 • 1 S-rv-fPQflQ-RF.N-TM A 4^- 1 As discussed in the Court’s April 20, 2016 Order (Docket No. 19), a plaintiff 2 bringing an action in the federal court has the burden to show that Article III standing 3 exists. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); Snake River Farmers ’ 4 Ass ’n, Inc. v. Dep’t of Lab., 9 F.3d 792, 795 (9th Cir. 1993). Specifically, the plaintiff 5 must show (1) an injury in fact; (2) traceable to the challenged action of the defendant; 6 and (3) likely to be redressed by a favorable decision. Lujan, 504 U.S. at 560. 7 In California, a limited liability company is governed by the “law of the state or 8 other jurisdiction under which [it] is formed.” Cal. Corp. Code § 17708.01. Data 9 Services was organized under Delaware law. Accordingly, the Court looks to Delaware 10 11 law to determine whether Plaintiff has any individual right to Data Services’ assets. Delaware courts have held that case law governing corporate derivative suits is 12 applicable to derivative suits brought on behalf of an LLC. See Kelly v. Blum, No. 4516- 13 VCP, 2010 WL 629850, at *9 (Del. Ch. Feb. 24, 2010); VGS, Inc. v. Castiel, No. 17995, 14 2003 WL 723285, at *11 (Del. Ch. Feb. 28, 2003); Gotham Partners, L.P. v. Hailwood 15 Realty Partners, L.P., No. 15754, 1998 WL 832631, at *5 (Del. Ch. Nov. 10, 1998). In 16 determining whether a claim is derivative or direct, “[a] court should look to the nature of 17 the wrong and to whom the relief should go.” Tooley v. Donaldson, Lufkin & Jenrette, 18 845 A.2d 1031,1039 (Del. 2004). A direct lawsuit is proper where the plaintiff is 19 directly injured by the defendant’s conduct. See VGS, Inc., 2003 WL 723285, at *11. In 20 other words, a suit to recover damages to an LLC must be brought in that LLC’s name. 21 28 U.S.C. § 1654 sets forth the general rule “establishing the right of an individual 22 to represent oneself m all federal courts of the United States.” Simon v. Hartford Life, 23 Inc., 546 F.3d 661, 664 (9th Cir. 2008) (emphasis added). “Section 1654 is intended to 24 provide individuals with equal access to the courts by permitting individuals to represent 25 themselves.” Id. (emphasis added). Additionally, “it is well established that the privilege 26 to represent oneselfpro se provided by § 1654 is personal to the litigant and does not 27 extend to other parties or entities.” Id., citing McShane v. United States, 366 F.2d 286, 28 288 (9th Cir. 1966) (citation omitted) (emphasis added). 5 ^ • 1 ^-r.v-0?Q0Q-RF.N-TM A Here, Plaintiffs FAC suffers from the same pleading deficiencies regarding 1 2 standing as in his initial Complaint. Plaintiff brought this action in his individual 3 capacity, claiming that money, of which he had a fifty percent interest as a member of 4 Data Services, was unlawfully or fraudulently transferred out of a Data Services’ bank 5 account (which was serviced by Wells Fargo), to another bank account in India, which he 6 cannot access. (Compl. ffl[32-34, 45.) Taking the relevant allegations of Plaintiff s FAC 7 as true, Plaintiff has not established that he has suffered harm in his individual capacity. 8 As alleged, Plaintiffs FAC suggests that Data Services, a non-individual entity, was 9 directly harmed. As such, Plaintiff has not shown he has suffered an injury in fact in his 10 individual capacity and therefore lacks standing. The Court therefore GRANTS Defendant’s motion for lack of standing. 11 CONCLUSION 12 The Court GRANTS Defendant’s Motion to Dismiss. The Complaint is 13 14 DISMISSED with leave to amend. As a result, Plaintiffs Motion to Amend and 15 Motion for Approval or Supplemental Pleadings are DENIED as moot. Plaintiff may 16 file a Second Amended Complaint on or before December 28.2016. If Plaintiff does not 17 file an amended complaint, the Clerk shall close this case without further order of the 18 Court. 19 IT IS SO ORDERED. 20 21 22 DATED: December^/, 2016 H(^J©GERT. BENITEZ United States District Judge 23 24 25 26 27 28 6 VI 5-r.v-n?QnQ-RF.N-TMA

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