Lee et al v. JPMorgan Chase Bank, N.A.

Filing 20

MEMORANDUM AND OPINION by Senior Judge Charles R. Simpson, III on 10/30/2015: The Court will deny Lee's motion for leave to amend the complaint. The Court will grant Chase's motion for judgment on the pleadings in full. The Court will dismiss all claims against Chase, without prejudice. The Court will enter an order in accordance with this opinion this date. cc:counsel (JBM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
JOHN LEE and
ACCELIRIS, LLC

PLAINTIFFS

CIVIL ACTION NO. 3:15-CV-00021-CRS

v.

JP MORGAN CHASE BANK, N.A.

DEFENDANT

MEMORANDUM OPINION
I.

Introduction
JP Morgan Chase Bank (“Chase”) moves this Court for judgment on the pleadings.

Acceliris, LLC (“Acceliris”) and John Lee (together, the “Plaintiffs”) oppose judgment on the
pleadings. Additionally, Lee moves this Court for leave to amend the complaint.
For the reasons below, the Court will deny Lee leave to amend the complaint. The Court
will grant Chase’s motion for judgment on the pleadings in full.
II.

Whether the Court Should Grant Lee Leave to Amend the Complaint
A. Legal Standard
Lee moves for leave to amend the complaint under Federal Rule of Civil Procedure

15(a)(2). Pl.’s Mot. Am. Compl. 1, ECF No. 17.
Under Rule 15(a)(2), the plaintiff may amend the complaint only if the Court grants leave
to amend or if the opposing party consents. This Court “should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2).
However, if a proposed amendment would be futile, the Court should not grant leave to
amend. SFS Check, LLC v. First Bank of Del., 774 F.3d 351, 355 (6th Cir. 2014). A proposed
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amendment is futile when it would not survive a motion to dismiss for failure to state a claim.
Id. (citing Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 512 (6th Cir. 2010)).
In evaluating a motion to dismiss for failure to state a claim, the Court determines
whether the complaint alleges “only enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This Court assumes the veracity of
well-pleaded factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The complaint
“does not need detailed factual allegations,” but a “formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550 U.S. at 555.
Thus, the dispositive question is whether Lee’s proposed amended complaint “contains
‘sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’”
Williams v. City of Cleveland, 771 F.3d 945, 949 (6th Cir. 2014) (citing D’Ambrosio v. Marino,
747 F.3d 378, 383 (6th Cir. 2014)).
B. Count III
In the proposed amended complaint, the Plaintiffs adopt and incorporate by reference the
original complaint. Pl.’s Proposed Am. Compl. ¶ 1, ECF No. 17-1. Lee adds “Count III” which
alleges that Chase, “acting with reckless indifference, wrongfully seized funds from Lee’s
limited liability company, Acceliris, LLC, of which Lee is the sole and managing member.” Id.
¶ 2. The proposed amended complaint does not explicitly state a cause of action for Count III.
The Court assumes that Count III asserts a cause of action under Kentucky law for the
tort of outrage (also known as intentional infliction of emotional distress). Under Kentucky law,
the tort of outrage requires that the plaintiff show that the defendant’s conduct was “intentional
or reckless;” that the defendant’s “conduct was so outrageous and intolerable that it offends
generally accepted standards of decency and morality;” and that the conduct “caused the victim’s

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severe emotional distress.” Watts v. Lyon Cnty. Ambulance Serv., 23 F. Supp. 3d 792, 814 (W.D.
Ky. 2014) (internal quotations omitted); see also, Craft v. Rice, 671 S.W.2d 247, 251 (Ky. 1984)
(recognizing the tort of outrage).
The Court bases the assumption that Count III alleges the tort of outrage on the proposed
amended complaint’s language. The proposed amended complaint says, “Defendant’s conduct
was undertaken in reckless disregard for Plaintiff’s physical and mental health.” Id. ¶ 7. It also
says, “Defendant’s conduct did in fact cause Plaintiff John Lee to suffer severe emotional
distress.” Id. ¶ 8. Finally, it says, “The conduct of Defendant, acting through its employees,
exceeded the bounds of common decency as would be observed in any civilized community.”
Id. ¶ 9.
C. Standing
Chase asks this Court to deny Lee leave to amend the complaint. Def.’s Resp. Opp. Pl.’s
Mot. Am. Compl. 1, ECF No. 19. Chase argues that the proposed amended complaint would be
futile because Lee, as the sole member of the LLC, lacks standing to bring an outrage claim
against Chase. Id. at 6.
Under Kentucky law, “limited liability companies are creatures of statute controlled by
Kentucky Revised Statutes Chapter 275. KRS 275.010(2) states unequivocally that a limited
liability company is an entity distinct from its members.” Turner v. Andrew, 413 S.W.3d 272,
275 (Ky. 2013) (internal quotations omitted). Chapter 275 also provides:
A member of a limited liability company shall not be a proper party to a
proceeding by or against a limited liability company, solely by reason of being a
member of the limited liability company, except if the object of the proceeding is
to enforce a member’s right against or liability to the limited liability company or
as otherwise provided in an operating agreement.
Ky. Rev. Stat. § 275.155; Turner, 413 S.W.3d at 275 – 76.

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In Turner, the Kentucky Supreme Court addressed whether the sole owner of an LLC
could bring a claim in his own name for lost income after the truck owned by his LLC was in an
accident. 413 S.W.3d at 274 – 75. The court held that the plaintiff did not have standing as a
sole owner of the LLC to bring a claim for damages in his own name. Id. at 277 – 78. The
Kentucky Supreme Court added, “Moreover, an LLC is not a legal coat that one slips on to
protect the owner from liability but then discards or ignores altogether when it is time to pursue a
damage claim.” Id. at 276; see also, Pannell v. Shannon, 425 S.W.3d 58, 67 (Ky. 2014) (holding
that the sole owner of limited liability company cannot be personally liable by reason of her
member status).
D. Futility
The Court agrees with Chase that Lee’s proposed amendment would be futile. Lee is the
sole owner of Acceliris. Compl. ¶ 6, ECF No. 1-1. Lee, as the sole owner of Acceliris, does not
have standing to bring an outrage claim in his own name against Chase. See Turner, 413 S.W.3d
at 277 – 78. Additionally, Count III cannot be read to allege an outrage claim on behalf of
Accerliris because Lee’s motion to amend says that the “Amendment in this case will present a
separate cause of action for Mr. Lee only.” Pl.’s Mot. Am. Compl. 1.
Given that Lee lacks standing to bring an outrage claim against Chase in his individual
capacity, Count III fails to state sufficient facts to assert a claim to relief that is plausible on its
face. See Twombly, 550 U.S. at 555. Thus, as Count III fails to survive the motion to dismiss
standard, the Court will deny Lee leave to amend because the proposed amendment would be
futile.
The Court will deny Lee’s motion to amend the complaint.
III.

Judgment on the Pleadings

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A. Legal Standard
In evaluating a motion for judgment on the pleadings, this Court takes all well-pleaded
material allegations of the opposing party’s pleadings as true. JPMorgan Chase Bank, N.A. v.
Winget, 510 F.3d 577, 581 (6th Cir. 2007). This Court may grant judgment on the pleadings
“only if the moving party is nevertheless clearly entitled to judgment.” Id.
B. Count I: Wrongful Seizure and Detention of Funds
Count I of the complaint alleges “wrongful seizure and detention of funds.” Compl. at 5.
The Plaintiffs argue that Count I raises a statutory claim for wrongful distress or attachment
under Ky. Rev. Stat. § 411.080. Pl.’s Resp. Def.’s Mot. J. Pldgs. 4, ECF No. 16. The statute
says, “If property is distrained or attached without good cause, the owner may, in an action
against the party suing out the distress or attachment, recover damages for the wrongful
seizure.” Ky. Rev. Stat. § 411.080 (emphasis added).
The Kentucky Court of Appeals has said, “KRS 411.080 delineates a cause of action for
wrongful garnishment. Additionally, a wrongful garnishment can be the foundation for a
common law cause of action for malicious prosecution.” Ky. Farm. Bur. Mut. Ins. Co. v. Burton,
922 S.W.2d 385 (Ky. Ct. App. 1996); see also, Ky. Prac. Civ. P. Forms § 30:20 (form for a
wrongful garnishment action under Ky. Rev. Stat. § 411.080); accord, Brooks v. LexingtonFayette Urb. Cnty. Hous. Auth., 332 S.W.3d 85, 90 (Ky. 2009) (citing § 411.080 as basis for
recovering attorney’s fees in wrongful garnishment or wrongful attachment suits).
Count I is not a claim for wrongful garnishment or malicious prosecution. Pl.’s Resp. 6.
Instead, the Plaintiffs argue:
Finally, a statutory claim under KRS 411.080 may entail all that is defined
therein. For instance, a wrongful attachment could consist of a post-judgment
wrongful garnishment or a pre-judgment wrongful attachment. Furthermore, a

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distraint, as previously defined herein, could be brought for any detention of
funds, lawful or unlawful, for any purpose.
Pl.’s Resp. 7. They cite no case to support this proposition.
Chase asks this Court for judgment on the pleadings because “Plaintiffs cannot state a
claim for wrongful seizure against Chase.” Def.’s Mem. Supp. Mot. J. Pldgs. 5, ECF No. 15-1.
1. Whether Acceliris can state a claim for wrongful seizure against Chase
Chase argues that Acceliris cannot state a claim for wrongful seizure against Chase
because § 411.080 provides a cause of action only “against the party suing out the distress or
attachment.” Def.’s Mem. Supp. Mot. J. Pldgs. 5 (citing Ky. Rev. Stat. § 411.080).
An action under § 411.080 may only be brought “against the party suing out the distress
or attachment.” Ky. Rev. Stat. § 411.080; see also, Burton, 922 S.W.2d at 387 (upholding
wrongful garnishment judgment against issuer of garnishment); Mengedoht v. Nationwide Ins.
Co., 2006 WL 3715908 (W.D. Ky. 2006) (holding that § 411.080 only permits a suit against the
suing party, dismissing claim against an attorney who garnished a bank account on behalf of
Nationwide, and keeping a claim against issuer of wrongful garnishment).
The Court agrees with Chase that Acceliris may only bring a claim against the party
suing out the distress or attachment. See Ky. Rev. Stat. § 411.080. The complaint makes no
allegation that Chase issued the garnishment. Instead, by the complaint’s own terms, the party
“suing out the distress or attachment” is either Jill Stanley, or her attorney, Steve Snow, who
issued the garnishment:
Chase received an Order of Non-Wage Garnishment issued by Jill Stanley
through her attorney, Steve Snow, on October 2, 2012, together with Mr. Snow’s
affidavit, which identified John Lee as the judgment debtor. Chase forwarded the
amount it held for John Lee ($4,846.54) to Mr. Snow, and filed its Affidavit and
Answer on October 18, 2012.
Compl. ¶ 8 (emphasis added).
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Chase is clearly entitled to judgment on Acceliris’s claim in Count I for “wrongful
seizure and detention of funds” because the complaint alleges no facts to suggest that Chase
issued the garnishment and thus could be liable under § 411.080.
Thus, the Court will grant judgment to Chase on Acceliris’s claim for wrongful seizure
and detention of funds as alleged in Count I.
2. Whether Lee can State a Claim for Wrongful Seizure Against Chase
For the same reason, Chase is clearly entitled to judgment on Lee’s claim in Count I for
“wrongful seizure and detention of funds” because the complaint alleges no facts to suggest that
Chase issued the garnishment and thus could be liable under § 411.080. See discussion supra
Part III(B)(1).
Even if the complaint alleged that Chase issued the garnishment, Lee lacks standing to
bring a claim against Chase in his own name for wrongful seizure and detention of funds. Lee
lacks standing as the sole member of the LLC to bring a claim against Chase for the tort of
outrage. See discussion supra Parts II(C) and (D). For the same reason, Lee lacks standing as
the sole member of the LLC to bring a claim against Chase for wrongful seizure and detention of
funds. See Turner, 413 S.W.3d at 277 – 78.1
Thus, the Court will grant judgment to Chase on Lee’s claim for wrongful seizure and
detention of funds as alleged in Count I.
C. Count II: Punitive Damages
Count II of the complaint alleges “Punitive Damages.” Compl. at 6. The Plaintiffs argue
that Count II alleges “a claim for punitive damages.” Pl.’s Resp. 4.
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Chase also argues that Lee waived his claim because Lee did not respond to Chase’s
argument that he lacked standing to bring the claim in his individual capacity. Def.’s Reply 7,
ECF No. 18. As the Court will grant judgment to Chase on all claims, the Court need not
address whether Lee waived any objection.
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Punitive damages are a remedy, not a cause of action. Bosch v. Bayer Healthcare
Pharm., Inc., 13 F. Supp. 3d 730, 751 (W.D. Ky. 2014); Dalton v. Animas Corp., 913 F. Supp.
2d 370, 378 – 79 (W.D. Ky. 2012).
Thus, the Court will grant judgment to Chase on Count II.
IV.

Conclusion
The Court will deny Lee’s motion for leave to amend the complaint.
The Court will grant Chase’s motion for judgment on the pleadings in full. The Court

will dismiss all claims against Chase, without prejudice.
The Court will enter an order in accordance with this opinion this date.

October 30, 2015

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