Ramesh C. Dhingra MD SC et al v. PNC FINAN et al

Filing 45

MEMORANDUM Opinion and Order Signed by the Honorable Virginia M. Kendall on 6/20/2011.(tsa, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

DR. RAMESH C. DHINGRA and RAMESH C.
DHINGRA MD SC,
Plaintiffs,
v.
PNC FINANCIAL SERVICES GROUP, INC.
and PNC BANK, NA, as successor in interest to
National City Bank, as Successor in interest to
Mid America Bank,
Defendants.

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Case No. 10 C 7553
Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER
Plaintiffs Dr. Ramesh Dhingra (“Dhingra”) and Ramesh Dhingra MD SC (“Dhingra MD”)
(together “Plaintiffs”) filed suit against PNC Financial Services Group (“PNC Financial”) and PNC
Bank, NA (“PNC”) (together “Defendants”). Plaintiffs alleged, in Counts I-CXVIII, claims of
conversion relating to 118 fraudulently endorsed checks from November 1, 2007 through February
1, 2010. Count CXIX alleged conversion in the alternative, relating to fraudulently endorsed checks
from August 8, 2005 through February 1, 2010, including the 118 aforementioned checks. On April
12, 2011 the Court dismissed PNC Financial from the case with prejudice. PNC now moves to
dismiss Count CXIX. For the following reasons, the Court grants PNC’s Motion to Dismiss Count
CXIX in its entirety.
STATEMENT OF FACTS
The following facts are taken from Plaintiffs’s Complaint and are assumed to be true for
purposes of this Motion to Dismiss. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995).

Dhingra alleges that from August 2005 through February 2010, her employee Shivaun Straub
(“Straub”) fraudulently obtained possession of and deposited checks that were made out either to
Dhingra or Dhingra MD without Dhingra’s knowledge or consent. (Compl. ¶¶ 6-9.) Dhingra claims
that Straub forged Dhingra’s signature on the back of each check and that Dhingra had no knowledge
that the checks were taken from her until January 2010. (Compl. ¶¶ 10, 17.) Straub took the
fraudulently endorsed checks to PNC, which negligently paid the checks to Straub’s personal
account, in violation of the Illinois Uniform Commercial Code. (Compl. ¶ 14.) Straub deposited
only a few checks per month at PNC to avoid raising suspicion, but did so on a regularly monthly
basis. (Compl. ¶ 24.) From August 8, 2005 through January 21, 2010, Straub stole and deposited
at least $539,299.12 into her own personal account. Of that amount, at least $314,943.45 came from
checks deposited between November 1, 2007 and February 12, 2010. (Compl. ¶¶ 21, 32.)
Dhingra learned of the fraud when members of an independent billing department made an
unannounced visit to her office on January 25, 2010. (Compl. ¶ 29.) Straub, “realizing her scheme
to defraud would be detected,” confessed to fraudulently endorsing the checks. (Compl. ¶ 30.)
Plaintiffs filed suit in the Circuit Court of Cook County alleging 118 Counts of conversion
and one Count of conversion in the alternative, claiming that Straub’s actions constituted an ongoing
scheme. (Compl. ¶ 31.) Defendants timely removed. The Court previously dismissed PNC
Financial from the case and now PNC moves to dismiss Count CXIX.
STANDARD OF REVIEW
When considering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all facts
alleged in the complaint and construes all reasonable inferences in favor of the plaintiff. See
Murphy, 51 F.3d at 717. To state a claim upon which relief can be granted, a complaint must contain
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a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.
P. 8(a)(2). “Detailed factual allegations” are not required, but the plaintiff must allege facts that,
when “accepted as true . . . ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
In analyzing whether a complaint has met this standard, the “reviewing court [must] draw on its
judicial experience and common sense.” Iqbal, 129 S. Ct. at 1950. When there are well-pleaded
factual allegations, the Court assumes their veracity and then determines if they plausibly give rise
to an entitlement to relief. Id. A claim has facial plausibility when the pleaded factual content
allows the Court to draw a reasonable inference that the defendant is liable for the misconduct
alleged. See id. at 1949.
DISCUSSION
I.

Count CXIX
Count CXIX alleges conversion in the alternative. Specifically, Plaintiffs allege that they

suffered damages in excess of $539,299.12 as a direct result of PNC’s accepting and depositing
Straub’s forged checks from August 5, 2005 through January 21, 2010.

PNC moves to

dismiss—arguing first that claims relating to checks deposited prior to November 1, 2007 are timebarred and, second, that the remaining claims in Count CXIX are redundant in light of the claims
made in Counts I-CXVIII.
A.

Statute of Limitations

Plaintiffs argue that the conversion of all of the checks from 2005 onwards constituted a
single, continuing wrong and that therefore none of the converted checks is barred by the applicable
three-year statute of limitations. 810 ILCS 5/3-118(g) (“an action for conversion of an instrument,
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for money had and received, or like action based on conversion . . . must be commenced within 3
years after the cause of action accrues.”). The Court disagrees.
As an initial matter, “Illinois courts have held that a cause of action for conversion of
negotiable instruments accrues at the time the check is negotiated.” Rodrigue v. Olin Employees
Credit Union, 406 F.3d 434, 441 (7th Cir. 2005) (applying Illinois law and citing Haddad’s of Ill.,
Inc. v. Credit Union 1 Credit Union, 678 N.E.2d 322, 326 (Ill. App. Ct. 1997). Indeed, in Counts
I-CXVIII, Plaintiffs only seek conversion for those checks that fall within the three-year statute of
limitations. In Count CXIX, however, Plaintiffs seek to apply the “continuing violation rule.”
Pursuant to this rule, Plaintiffs allege that the fraudulently endorsed checks were part of a series of
fraudulent activity similar to an ongoing scheme, plan or conspiracy. Because the negotiation of
each check is part of a continuing wrong, Plaintiffs seek to apply the statute of limitations from the
time that the most recent fraudulently endorsed check was negotiated, thereby bringing all of the
checks deposited since August 2005 within the statute of limitations.
The Seventh Circuit explicitly rejected the application of the “continuing violation rule” to
toll the statute of limitations in a factually similar case regarding a series of fraudulently endorsed
checks. In Rodrigue, which Plaintiffs concede is the “most relevant” case on the matter, the Seventh
Circuit addressed the issue of whether an employee’s fraudulent endorsement of checks over an
eighty-five month period constituted a continuing violation or a series of discrete acts. The court
reversed the district court and held that “the continuing violation rule does not apply to a series of
discrete acts, each of which is independently actionable, even if those acts form an overall pattern
of wrongdoing.” In so holding, the court distinguished causes of action for medical malpractice that
were based on a course of negligent treatment with cumulative effects and causes of action for
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intentional infliction of emotional distress arising from a course of tortious acts considered as a
whole. See id. at 443. The court clarified that a plaintiff may only proceed on a conversion claim
based on those checks that fell within the three-year statute of limitations. See id. at 447.
Given the factual similarity between Rodrigue and the current case—both cases dealt with
a series of checks fraudulently endorsed by an employee of a doctor’s office over a period of
years—the Court finds that the “continuing violation rule” does not apply to Plaintiffs’s conversion
claims. See id. (“The fact that [the employee] managed to negotiate hundreds of checks over an 85month period is irrelevant insofar as [plaintiff’s] right or ability to sue for conversion. Whether [the
employee] had negotiated one or 1000, [plaintiff] had a valid cause of action for conversion; nothing
about the repeated or ongoing nature of [the employee’s] conduct affected the nature or validity of
[plaintiff’s] suit, beyond increasing her damages.”). Moreover, unlike claims that arise from “a
cumulation of wrongful acts, a claim for conversion does not pose undue difficulty for the victim in
identifying the nature, origin, and extent of her injury.” Id. at 443. While Plaintiffs’s failure to
discover the fraudulent activity for five years may make “the application of the ordinary rule seem
harsh[,] . . . [plaintiff’s] belated discovery of her injury has little or nothing to do with the nature of
the claim for conversion.” Id. at 444.
Plaintiffs’s attempts to distinguish Rodrigue are unavailing. Plaintiffs claim that the
procedural posture of Rodrigue—the case was appealed following a bench trial—precludes its
applicability here. But the Seventh Circuit clearly held that, as a matter of law, the “continuing
violation rule” does not apply to claims of conversion relating to a series of fraudulently endorsed
checks that occurred over three years before the plaintiff filed suit. See id. at 440 (reversing the
district court’s “legal determination” that the “continuing violation rule” applied to a case where an
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employee fraudulently endorsed a series of checks). In arguing that the Court is “premature[ly]”1
applying Rodrigue because discovery may reveal that PNC was involved in concealing the fraud,
Plaintiffs are attempting to amend their Complaint through their response brief. (Doc. 34 at 1.)
Plaintiffs’s Complaint only alleges that PNC negligently deposited the checks at issue in Straub’s
account; it does not allege that PNC committed fraud. (Compl. ¶ 14.) Because Plaintiffs may not
amend their Complaint by arguments made in their response brief, the Court does not consider the
argument that PNC fraudulently concealed Straub’s activity. See Harrell v. United States, 13 F.3d
232, 236 (7th Cir. 1993) (party opposing a motion to dismiss may not amend the complaint by way
of arguments made in a brief). The Court also notes that Plaintiffs, in failing to raise allegations of
fraud against PNC in their Complaint, have also failed to plead fraudulent conduct with the
specificity required under Federal Rule of Civil Procedure 9. See DiLeo v. Ernst & Young, 901 F.2d
624, 627 (7th Cir. 1990) (to satisfy the heightened pleading requirements of Rule 9, a plaintiff must
set forth “the who, what, when, where, and how” of the alleged fraud).
Therefore, Plaintiffs may only seek relief on those checks that fall within the three-year
statute of limitations. Plaintiffs’s claims relating to checks deposited before November 1, 2007 are
time-barred.
B.

Discovery Rule

Plaintiffs do not argue that the discovery rule should apply to toll the statute of limitations
in this case, but even if they had, the Court finds the discovery rule inapplicable.
“[T]he discovery rule is an equitable exception to the ordinary rule that the statute of
limitations begins to run with the accrual of the cause of action.” Rodrigue, 406 F.3d at 445.

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Doc. 34 at 2.

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Specifically, the discovery rule “tolls the statute of limitations until such time as the plaintiff knew
or reasonably should have known that she has a cause of action for her injury.” Id. Citing the
commercial policies underlying the Uniform Commercial Code and the fact that the victim of the
conversion is in the best position to easily and quickly detect the loss and take appropriate action,
Illinois appellate courts, along with a majority of other jurisdictions, have found that “the discovery
rule does not apply to causes of action for conversion of negotiable instruments.” Haddad’s, 678
N.E.2d at 326 (collecting cases). While the discovery rule may be applicable in cases where
fraudulent concealment is alleged, here Plaintiffs have not sufficiently pled that PNC attempted to
fraudulently conceal Straub’s activity. See id. at 325 (noting that “the vast majority of authority runs
strongly against applying the discovery rule to an action for conversion of negotiable instruments in
the absence of fraudulent concealment on the part of the defendant.”). As previously stated,
Plaintiffs may not rely on allegations of fraudulent concealment in their response brief to amend their
Complaint and invoke the discovery rule. See Harrell, 13 F.3d at 236.
Therefore, Plaintiffs the discovery rule in inapplicable and does not toll the statute of
limitations. Plaintiffs’s claims relating to checks deposited before November 1, 2007 remain timebarred.
C.

Remaining Claims in Count CXIX

Dhingra advanced Count CXIX as a separate cause of action in order to bring checks within
the statute of limitations that, if pled individually, would be time-barred. Since the Court finds that
the checks deposited prior to November 1, 2007 are time-barred, the only remaining checks referred
to in Count CXIX are those referred to individually in Counts I-CXVIII. As Counts I-CXVIII also
allege separate conversion claims for each check, the remaining conversion claims in Count CXIX
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are redundant, mimicking the claims in Counts I-CXVIII. See Archer Daniels Midland Co. v.
Hartford Fire Ins. Co., 243 F.3d 369 (7th Cir. 2001) (affirming district court's decision to deny leave
to amend a complaint because “[m]uch of the new complaint is just the same claim multiplied, the
sort of redundancy (four reformation theories rather than one) that does little beyond running up
lawyers’ bills”). Therefore, the Court finds that the remaining claims in Count CXIX are redundant
and unnecessary and grants PNC’s Motion to Dismiss Count CXIX in its entirety.
CONCLUSION AND ORDER
The Court grants PNC’s Motion to Dismiss Count CXIX in its entirety because the claims
relating to checks deposited prior to November 1, 2007 are time-barred and the remaining claims in
Count CXIX are redundant and unnecessary given the conversion claims alleged in Counts I-CXVIII.

So ordered.

________________________________________
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: June 20, 2011

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