Citibank, NA v. Municipal Employees' Officers' and Officials' Annuity and Benefit Fund of Chicago et al
Filing
25
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 7/26/2016: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court denies defendant's motion to dismiss [dkt. no. 12]; directs plaintiff to a dd the Fund's board of trustees as a defendant via the filing of an amended complaint by no later than August 3, 2016; and directs defendants to answer the amended complaint by no later than August 24, 2016. The case set for a status hearing on August 12, 2016 at 9:30 a.m., at which the Court will set a discovery and pretrial schedule and will discuss with the parties the possibility of settlement. Counsel are directed to confer prior to that date to attempt to agree on a schedule to propose to the Court. Plaintiff's counsel should be prepared to address at that time the status of defendants Frank Galvin and James Galvin. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CITIBANK, N.A.,
Plaintiff,
vs.
MUNICIPAL EMPLOYEES',
OFFICERS' and OFFICIALS'
ANNUITY AND BENEFIT FUND
OF CHICAGO; FRANK M.
GALVIN; and JAMES P. GALVIN,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 16 C 2599
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge
Citibank, N.A. has sued the Municipal Employee’s Officer’s and Official’s Annuity
and Benefit Fund of Chicago (the Fund), Frank Galvin, and James Galvin. The Court
has jurisdiction based on diversity of citizenship. In 2012, the Fund directed Northern
Trust Bank to debit the Citibank account of William Galvin, a deceased pensioner, for a
little over $200,000 and to transfer that money to the Fund's account at Northern Trust.
The $200,000 is claimed to represent amounts that the Fund had erroneously paid to
Galvin after his death, though neither the Fund nor Northern Trust advised Citibank of
this at the time. Citibank transferred a little over $95,000 and then stopped.
Citibank contends that the Fund acted improperly in causing the transfer of the
$95,000 and wants the money back. Citibank has also sued the pensioner's sons,
Frank and James Galvin, saying that they improperly received the benefit of the money
that was transferred. Citibank has asserted claims of unjust enrichment against the
Fund and Galvin's sons. It has also asserted claims against the Fund for money had
and received and for conversion.
The Fund has moved to dismiss Citibank’s claims for lack of subject matter
jurisdiction, failure to state a claim, and failure to join a necessary party. For the
reasons stated below, the Court denies the Fund's motion.
Background
The Court takes the following facts from the allegations in Citibank’s complaint
(except where otherwise noted), accepting those allegations as true for present
purposes and drawing reasonable inferences in Citibank's favor. See Bonnstetter v.
City of Chicago, 811 F.3d 969, 973 (7th Cir. 2016).
In 1996, William Galvin and his wife opened an account at Citibank. Galvin was
an employee of the City of Chicago and a participant in the Fund, which administers
pension benefits for retired city employees. After Galvin retired, the Fund, through
Northern Trust, began depositing Galvin's pension benefit payments into his account at
Citibank. Galvin died in October 2004. Despite this, the Fund continued to direct
Northern Trust to deposit pension payments into Galvin's account. Citibank alleges that
payments totaling $203,293.83 were deposited into the account between November 1,
2004 and July 30, 2010.
The Fund says in its motion to dismiss and in a separate state court lawsuit that it
has filed against Galvin's sons Frank Galvin and James Galvin that it did not learn of
William’s death until September 2012. The Fund also says that in 2008, it sent a form
to William Galvin (who by then had been dead for four years) to verify his status, and it
2
received back a signed and notarized form verifying his signature.
Citibank alleges that in September 2012, the Fund learned that William Galvin
had died in 2004 and that it had been making benefit payments to Galvin after his
death. In an effort to recoup the amounts paid to Galvin after his death, the Fund
allegedly instructed Northern Trust to process a series of automated clearing house
(ACH) transactions with Citibank directing it to debit Galvin's Citibank account in various
amounts and transfer the proceeds to Northern Trust. At that point, Citibank alleges,
Galvin's account had a balance of only $3.18, the rest having allegedly been withdrawn
by or at the behest of Galvin's sons. Citibank "electronically processed" the debit
requests and paid $95,632.93 of its own funds to Northern Trust before discovering that
Galvin's account was empty. This represented the amount that the Fund, via Northern
Trust, had paid to William Galvin from November 1, 2004 through December 31, 2007.
Citibank alleges that it did not owe the Fund any of the money it had paid out and
that the Fund wrongfully received $95,629.75, that is, $95,632.93 less the $3.18 that
was in William Galvin's account. Citibank alleges that the Fund violated the agreedupon rules governing ACH transactions by initiating the transactions without
authorization from the account holder (William Galvin) and by giving an implied but false
warranty that the debits were properly authorized under the applicable rules.
As indicated above, in July 2015, the Fund filed suit in state court against Frank
and James Galvin seeking to recover $162,277.90 based on their alleged fraud and
unjust enrichment, arising from their receipt of monies that the Funds had caused to be
paid to William Galvin's account after his death. The amount requested by the Fund in
the state court lawsuit includes the $107,660.90 that the Fund was not able to get from
3
Citibank, plus $54,617.00 in federal tax withholding and health insurance premiums and
subsidies that the Fund paid on William Galvin’s behalf after his death.
As indicated earlier, Citibank has sued the Fund and Galvin's sons, seeking
return of the $95,629.75 that it transferred at the Fund's direction. Citibank asserts
claims against the Fund for unjust enrichment (count one), conversion (count two), and
money had and received (count three). It also asserts a claim against Frank and James
Galvin for unjust enrichment (count four). The Fund has moved to dismiss counts one,
two, and three, arguing lack of subject matter jurisdiction, failure to state a claim as to
counts one and three, and failure to join a necessary party, namely, Northern Trust.
Discussion
1.
Proper defendants; exhaustion of remedies
The Fund seeks dismissal of all of Citibank's claims under Federal Rule of Civil
Procedure 12(b)(1) for lack of subject matter jurisdiction. The Fund contends that it is
not a suable entity and that Citibank should have sued its board of trustees, and that
before filing suit, Citibank was required to present its claim to the board.
These issues do not appear to the Court to implicate its subject matter
jurisdiction, which involves "the courts' statutory or constitutional power to adjudicate [a]
case." United States v. Cotton, 535 U.S. 625, 630 (2002) (internal quotation marks
omitted). Rather, the Fund's arguments appear to concern non-jurisdictional issues
involving who is the proper defendant and what are the prerequisites to suit. On the
latter point, exhaustion of administrative remedies is, in these circumstances, a nonjurisdictional affirmative defense under Illinois law. The Fund's contention is not that a
court can never adjudicate Citibank's claim, but that the Fund has to address the claim
4
administratively before Citibank can take it to court. See Def.'s Mem. in Support of Mot.
to Dismiss at 6 ("[A] plaintiff cannot proceed directly to the courts without first
exhausting a statutorily mandated administrative review procedure."). See generally
Vill. of Bedford Park v. Expedia, Inc. (WA), 12 C 5633, 2015 WL 3528232, at *2-3 (N.D.
Ill. June 4, 2015) (Kennelly, J.).
One way or another, however, the Fund's arguments do not provide a basis for
dismissal. First of all, though the Fund has made a good case that the board of trustees
can and perhaps should be sued in a case like this, it has not argued persuasively that
the Fund itself cannot sue or be sued. Indeed, the state court lawsuit against William
Galvin's sons is brought in the Fund's own name, not on behalf of the board of
trustees—and that lawsuit was filed by the same law firm that represents the Fund in
this case. The Court agrees that the board of trustees should be added as a defendant,
see Fed. R. Civ. P. 21 ("On motion or on its own, the court may at any time, on just
terms, add or drop a party."), but it declines at this time to dismiss the Fund as a
defendant.
On the question of exhaustion, the Fund relies on an Illinois statute that says that
"the board shall have exclusive original jurisdiction in all matters relating to the fund,
including, in addition to all other matters, all claims for annuities, pensions, benefits, or
refunds." 40 ILCS 5/8-203. Citibank contends that this does not require a third party
claimant—that is, a person or entity that is not a beneficiary of the fund—to submit its
claims to the fund's trustees. The Court need not adjudicate that issue, however,
because Citibank has adequately shown that exhaustion would be futile.
Exhaustion is excused "where the agency cannot provide an adequate remedy or
5
where it is patently futile to seek relief from the agency." Castaneda v. Illinois Human
Rights Comm'n, 132 Ill. 2d 304, 309, 547 N.E.2d 437, 439 (1989). "Futility is
demonstrated by showing that it is certain a plaintiff's claim will be denied by the plan
administrator," such as if the record indicates that the administrator has opposed a
claim "at every step." Ruttenberg v. U.S. Life Ins. Co. in City of N.Y., 413 F.3d 652,
662, 663 (7th Cir. 2005). Citibank alleges in its complaint that it demanded return of the
funds at issue and that "[o]n February 8, 2016, the Pension Fund, through its attorney,
refused to return the $95,629.75 to Citibank." Compl. ¶¶ 39, 40. Citibank has attached
the Fund's lawyer's communication to its response to the motion to dismiss, and a court
may consider "facts alleged by a plaintiff in a brief in opposition to a motion to dismiss .
. . when evaluating the sufficiency of a complaint so long as they are consistent with the
allegations in the complaint," Smith v. Dart, 803 F.3d 304, 311 (7th Cir. 2015) (internal
quotation marks omitted), which is the case here.
Citibank's demand to the Fund as described in paragraph 39 of the complaint
may constitute sufficient exhaustion of internal plan remedies, but even if not, the
Fund's response demonstrates that further attempts to exhaust would be futile. The
letter by the Fund's counsel rejecting Citibank's demand for return of the money is
strong and unequivocal. Counsel—who was, of course, acting as the Fund's agent—
states that the Fund "categorically denies" Citibank's claim. Pl.'s Resp. to Def.'s Mot. to
Dismiss, Ex. B at 1. The Fund's counsel states that the amounts deposited into Galvin's
account "were never the property" of Galvin "and remained at all times the property of
[the Fund]." Id. Counsel concludes the letter by stating that "[t]he Board of Trustees,
we believe, would vigorously defend itself against any of the charges" asserted in
6
Citibank's demand letter. Id. at 2. This rejection of Citibank's demand for return of the
money, in the Court's view, demonstrates that any further attempt by Citibank to pursue
relief directly with the Fund or its board of trustees would be futile.
2.
Failure to state a claim
As indicated earlier, the Fund has moved to dismiss Citibank's claims for unjust
enrichment and for money had and received for failure to state a claim. When
considering a motion to dismiss for failure to state a claim, the Court accepts the facts
alleged in the complaint as true and draws reasonable inferences in favor of the plaintiff.
See, e.g., Bonnstetter v. City of Chicago, 811 F.3d 969, 973 (7th Cir. 2016). To state a
viable claim, a plaintiff must provide "enough facts to state a claim to relief that is
plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is
plausible on its face if "the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
To state a claim for unjust enrichment under Illinois law, Citibank must allege that
the Fund "has unjustly retained a benefit" to Citibank's detriment and that the Fund's
retention of the benefit "violates the fundamental principles of justice, equity, and good
conscience." HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 131 Ill. 2d 145,
160, 545 N.E.2d 672, 679 (1989). The Fund argues that Citibank has failed to allege
facts sufficient to sustain a contention that the Fund unjustly retained a benefit of that its
retention of a benefit would violate principles of justice, equity, and good conscience.
The Court disagrees. Citibank alleges that the Fund procured the ACH transfers
through directions that contravened the agreed-upon rules governing ACH transactions,
7
which are referred to as the NACHA Operating Rules & Guidelines. See Compl. ¶ 23.
(NACHA is an acronym for the National Automated Clearing House Association.) This
allegation is sufficient to support a contention that the Fund procured the money
wrongfully and that its retention of money that it obtained wrongfully is unjust.
To state a claim for money had and received under Illinois law, Citibank must
plausibly allege that the Fund "received money which in equity and good conscience
belongs to the plaintiff." Kaiser v. Fleming, 315 Ill. App. 3d 921, 925, 735 N.E.2d 144,
147 (2000). Citibank's allegations that the Fund issued unauthorized and therefore
inappropriate ACH transfer requests and that Citibank mistakenly paid the Fund based
on these requests are sufficient to state a claim. Contrary to the Fund's contention,
Illinois law does not require a plaintiff, to sustain a money had and received claim, to
prove that it was compelled to pay the defendant. Id.
3.
Northern Trust as a necessary party
The Fund argues that full relief cannot be afforded without joining Northern Trust
as a party because that bank is in possession of the money at issue in the case. The
Court disagrees. Though the money was transferred to an account at Northern Trust,
the account is controlled by the Fund. An order directing the Fund to transfer the
money to Citibank can be carried out without making the Northern Trust a party to the
case.
Conclusion
For the reasons stated above, the Court denies defendant's motion to dismiss
[dkt. no. 12]; directs plaintiff to add the Fund's board of trustees as a defendant via the
filing of an amended complaint by no later than August 3, 2016; and directs defendants
8
to answer the amended complaint by no later than August 24, 2016. The case set for a
status hearing on August 12, 2016 at 9:00 a.m., at which the Court will set a discovery
and pretrial schedule and will discuss with the parties the possibility of settlement.
Counsel are directed to confer prior to that date to attempt to agree on a schedule to
propose to the Court. Plaintiff's counsel should be prepared to address at that time the
status of defendants Frank Galvin and James Galvin.
Date: July 26, 2016
________________________________
MATTHEW F. KENNELLY
United States District Judge
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?