Blanchard et al v. Lee et al

Filing 119

ORDER AND REASONS granting 91 MOTION to Dismiss First Amended Complaint (without oral argument) filed by Bank of America NA, and 87 MOTION to Dismiss for Failure to State a Claim filed by Wells Fargo Bank, N.A.; plaintiffs' claims against defendant banks are DISMISSED WITHOUT PREJUDICE. Signed by Judge Lance M Africk on 8/8/2013.(blg)

Blanchard et al v. Lee et al

Doc. 119

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DENNIS BLANCHARD ET AL.

CIVIL ACTION

VERSUS

No. 13-220

SALVADOR LEE ET AL.

SECTION “I”
ORDER AND REASONS

Before the Court are motions1 filed by defendants Bank of America, N.A. and Wells
Fargo Bank, N.A. (collectively, “defendant banks”) to dismiss the first amended complaint
(“complaint”) filed by plaintiffs, Dennis Blanchard et al.2 Plaintiffs oppose the motions.3 For the
following reasons, the motions to dismiss are GRANTED.
Background
The allegations in the complaint are as follows. Plaintiffs are twelve Louisiana residents
who invested their savings with various brokers, who are also defendants in this matter.4 These
brokers gave plaintiffs financial advice and managed their savings.5 The brokers led plaintiffs to
invest in certain investment funds by falsely representing that these funds were partnered with a

1

R. Doc. No. 87; R. Doc. No. 91.
R. Doc. No. 83, at 1.
3
R. Doc. No. 99; R. Doc. No. 100.
4
R. Doc. No. 83, at 2-3, 5-6. The Court notes that the vagueness of plaintiffs’ complaint makes
the relationships among the defendants and the underlying financial transactions somewhat
unascertainable. See R. Doc. No. 83, at 13 (“Defendants E*Trade, Bank of America, and Wells
Fargo acted as a type of back office and clearing brokerage servicer for Defendants Rick
Reynolds and Lori Reynolds by maintaining books and records, issuing account statements and
confirmations, executed transactions, deposited and disbursed wrongfully received investor
money that had been solicited from investments made to the Ponzi scheme when it knew or
should have known that these transactions were suspicious and reportable.”).
5
R. Doc. No. 83, at 6.
2

Dockets.Justia.com

legitimate gold mining project.6 The brokers also caused plaintiffs to make certain other
investments “that were not appropriate” for plaintiffs.7 The brokers received undisclosed
commissions for these investments.8
Richard Reynolds and Lori Reynolds, who are co-defendants in this matter, wired
$725,500 of the investors’ funds into a brokerage account with defendant E*Trade Securities,
LLC (“E*Trade”).9 After the Reynolds lost $314,015 in “speculative penny stock trading, they
transferred $230,750 from the E*Trade account to a Bank of America joint checking account.”10
They used this money for “a variety of personal purposes,” including purchasing a home.11 The
Reynolds also wrote checks from the E*Trade account to purchase personal vehicles.12
Plaintiffs’ allegations as to defendant banks are murky, at best. Plaintiffs broadly assert
that defendant banks “received millions of dollars from hundreds of investors ‘purchasing’ nonexistent investments” by “intercept[ing]” the investment funds.13 The banks “knowingly and
improperly” cashed checks and accepted wire transfers that were written for specific investments
into the Reynolds’ personal and corporate accounts, none of which was actually a legitimate
investment account.14 Defendant banks knew that Richard Reynolds was a fiduciary to the

6

Id. at 6-7, 11.
Id. at at 6.
8
Id. at 9. The facts as to the brokers are simplified for purposes of the pending motions.
9
Id. at 13. Not all of the investors are parties to the current lawsuit. Consequently, this figure
may reflect funds that did not belong to the plaintiffs.
10
Id.
11
Id.
12
Richard Reynolds’ actions apparently gave rise to numerous felony charges in Montana. Id. at
1, 6.
13
Id. at 15.
14
Id .at 17-18.
7

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plaintiffs, and defendant banks deposited money into his personal accounts knowing that the
funds were not intended for his personal expenses.15
On February 4, 2013, plaintiffs filed a lawsuit in the 22nd Judicial District of St.
Tammany Parish.16 The case was removed on February 6, 2013.17 Several defendants filed
motions to dismiss and motions for a more definite statement,18 which presented arguments
overlapping those currently before the Court. In response, after obtaining leave of Court,
plaintiffs filed an amended complaint. With respect to defendant banks, plaintiffs allege breach
of contract, negligence, violations of the Louisiana Uniform Fiduciaries Law, aiding and abetting
breach of fiduciary duty, violations of the Louisiana Racketeering Act, conspiracy, negligent
misrepresentations, and detrimental reliance claims.19 Defendant banks filed separate motions to
dismiss that will be addressed here jointly.20 Plaintiffs oppose these motions.21
Law and Analysis
I. Federal Rule of Civil Procedure 12(b)(6)
A district court may dismiss a complaint, or any part of it, for failure to state a claim upon
which relief can be granted if the plaintiff has not set forth a factual allegation in support of his
claim that would entitle him to relief. Fed. R. Civ. Proc. 12(b)(6); Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007); Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007). As the U.S. Court of
Appeals for the Fifth Circuit explained in Gonzalez v. Kay:
“Factual allegations must be enough to raise a right to relief above
the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,

15

Id. at 20, 25.
R. Doc. No. 1
17
Id.
18
E.g., R. Doc. No. 25.
19
R. Doc. No. 83, at 16-18, 20-25.
20
R. Doc. No. 87-1; R. Doc. No. 91-1.
21
R. Doc. No. 99; R. Doc. No. 100.
16

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555, 127 S.Ct. 1955, 167 L. Ed.2d 929 (2007). The Supreme Court
recently expounded upon the Twombly standard, explaining that
“[t]o survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, ---U.S. ----, 129
S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550
U.S. at 570, 127 S.Ct. 1955, 167 L.Ed.2d 929). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. It follows that “where the wellpleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged-but it has not
‘show[n]'-‘that the pleader is entitled to relief.’” Id. at 1950
(quoting Fed. R. Civ. P. 8(a)(2)).
577 F.3d 600, 603 (5th Cir. 2009).
This Court will not look beyond the factual allegations in the pleadings to determine
whether relief should be granted. See Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999);
Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In assessing the complaint, a court must
accept all well-pleaded facts as true and liberally construe all factual allegations in the light most
favorable to the plaintiff. Spivey, 197 F.3d at 774; Lowrey v. Tex. A & M Univ. Sys., 117 F.3d
242, 247 (5th Cir. 1997). Further, in Iqbal, the Supreme Court stated that, “a pleading that offers
labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.
Nor does a complaint suffice if it tenders naked assertions devoid of further factual
enhancement.” 556 U.S. at 678 (citing Twombly, 550 U.S. 544, 555 (2007)).
Defendant banks correctly assert in their reply briefs that plaintiffs predicate their
argument on the incorrect legal standard.22 Twombly makes it clear that the “no set of facts”
standard has “earned its retirement” and is “best forgotten,” 550 U.S. at 563, while the facially
plausible standard has prevailed. Id. at 569.

22

R. Doc. No. 102, at 2; R. Doc. No. 103, at 1-3.

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II. Existence of a Fiduciary Duty
Although plaintiffs do not allege breach of fiduciary duty as a cause of action against
defendant banks,23 much of the analysis of their other causes of actions as to the banks relies on
the existence of such a duty.
Defendant banks argue that Louisiana law makes it clear that “banks ordinarily owe no
duty, fiduciary or otherwise,” to third parties.24 Eubanks v. FDIC, 977 F.2d 166, 170 n.3 (5th Cir.
1992); see also Guidry v. Bank of LaPlace, 740 F. Supp. 1208, 1219 (5th Cir. 1990); Autin v.
Martin, 576 So.2d 72, 75 (La. Ct. App. 5th 1991). They specifically cite Louisiana’s “No implied
fiduciary obligations statute,” which generally states that no financial institution will have a
fiduciary duty to a third party unless there is a written agency or trust agreement stating that the
financial institution agrees to take on such a duty.25 La. Rev. Stat. 6:1124.
As discussed below, plaintiffs do not plausibly allege that any contract creates a fiduciary
duty to them. Nonetheless, plaintiffs identify two cases that, they contend, protect them from the
no fiduciary obligations statute.
Plaintiffs identify In re Succession of McKnight, 768 So. 2d 794, 798 (La. App. 2d Cir.
2000), as a case supporting the presence of a duty in the absence of a contract with a bank.26 In
McKnight, the Louisiana Court of Appeals held: “Generally, a bank is not deemed to act as a
fiduciary to its customers or third parties. However, in some instances a party’s assumption of a
contractual duty may create a corollary tort duty in favor of a third person.” Here, however,
plaintiffs have not alleged facts suggesting that they were customers of defendant banks, that

23

See R. Doc. No. 83, at 18-19 (alleging breach of fiduciary duty as to “Defendant Brokers and
Corporations”).
24
E.g., Rec. Doc. 101-2, at 3.
25
R. Doc. No. 101-2, at 4.
26
E.g., R. Doc. No. 100, at 4.

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plaintiffs were the third-party beneficiaries of a contract to which defendant banks were parties,
that any other contractual duties were assumed by defendant banks, or that this case is otherwise
factually analogous to McKnight. See also D & J Tire, Inc. v. Bank One, La. Nat’l Ass’n, No. 020935, 838 So. 2d 112, 114-15 (La. App. 3d Cir. 2003). The other case cited by plaintiffs, Oakes
v. Countrywide Home Loans, Inc., is similarly distinguishable. No. 07-9743, 2012 WL 2327920
(E.D. La. June 1, 2012). Unlike in the present case, the bank in Oakes was a loan servicer for the
plaintiff. Id. at *6. This distinction is critical because the Oakes court identified the loanservicing relationship as the source of the duty between the parties. Id.
Plaintiffs further argue that defendant banks have a duty to plaintiffs through the Bank
Secrecy Act,27 but the Bank Secrecy Act does not create a private right of action or give rise to a
duty.28
For these reasons, plaintiffs have not alleged a fiduciary duty that is plausible on its face.
II. Causes of Action
A. Breach of Contract
Plaintiffs contend that they have “amended their complaint to plead the contract” with
defendant banks,29 presumably in response to the defendant banks’ previous arguments that the
breach of contract claim was “rife with shortcomings,” including conclusory allegations relative
to the existence of any contract.30 But the conclusory language in the complaint remains
essentially unchanged. Plaintiffs allege:
A written or oral agreement existed between Plaintiffs and Defendant Banks.
Defendant Banks were obligated to process the funds into the Tenas Lake

27

R. Doc. No. 99, at 5-6; R. Doc. No. 100, at 5-6.
E.g., Marlin v. Moody Nat’l Bank, N.A., No. 04-4443, 2006 WL 2382325, at *7 (S.D. Tex.
Aug. 16, 2006), aff’d 248 F. App’x 534 (5th Cir. 2007).
29
E.g., R. Doc. No. 100, at 8.
30
E.g., R. Doc. No. 35-1, at 5.
28

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Mining Project. . . . Defendant Banks breached those duties by failing to cash
the check as directed by the instrument and instead allowing the check to be
deposited into personal accounts of Defendant Richard and Lori Reynolds.31
“[T]he tenet that a court must accept as true all of the allegations contained in a complaint
is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements do not suffice.”32 Iqbal, 556 U.S. at 678. The mere
allegation that there might be a “written or oral agreement” between the parties without at least
some factual allegations supporting its existence is farfetched speculation at best. In Twombly,
the U.S. Supreme Court quoted the U.S. Court of Appeals for the Seventh Circuit: “terms like
‘conspiracy’ or even ‘agreement’” may be sufficient to state a claim with other “more specific
allegations” such as presenting evidence of a written agreement or facts that would point to an
oral agreement. 550 U.S. at 557 (quoting DM Research, Inc. v. College of Am. Pathologists, 170
F.3d 53, 56 (1st Cir. 1999)). Where, as here, such specific allegations are lacking, “a court is not
required to accept such terms as a sufficient basis for a complaint.” Id. (quoting DM Research,
Inc., 170 F.3d at 56).
As to the statement in which plaintiffs refer to defendant banks cashing a check, no one
contends that defendant banks entered into a contract with plaintiffs by cashing or depositing a
check made out to a customer of defendant banks. Compare Pierre v. Bank, 801 So. 2d 1213,
1216 (La. App. 4th Cir. 2001); Slaughter v. Arco Chem. Co., 931 So. 2d 387, 394 (La. App. 4th
Cir. 2006).

31
32

R. Doc. No. 83, at 18; R. Doc. No. 1-3, at 13-14.
R. Doc. No. 101-2, at 12.

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Without further factual allegations, it is not facially plausible that there is a contract
between plaintiffs and defendant banks. Accordingly, the motions to dismiss are GRANTED
with respect to the breach of contract claims.
B. Negligence
In a Louisiana negligence action under article 2315, plaintiffs bear the burden of proving
duty, breach, causation, and damages. Wainwright v. Fontenot, 774 So. 2d 70, 74 (La. 2000)
(citing Buckley v. Exxon Corp., 390 So. 2d 512, 514 (La. 1980)). Plaintiffs contend that
defendant banks have a duty of care to the plaintiffs with respect to the receipt of wired funds.33
They further allege that they breached this duty by “knowingly and improperly cashing checks
and accepting wires written for specific investments.”34
In Priola Construction Corp., the Louisiana Court of Appeals for the Third Circuit
observed: “[B]efore a bank can be found liable utilizing the duty-risk analysis under La. Civ.
Code art. 2315, ‘it must first be determined that the bank owed a fiduciary duty to the plaintiff.’”
Priola Const. Corp. v. Profast Dev. Group, Inc., 21 So. 3d 456, 461 (La. Ct. App. 3rd. 2009)
(quotation omitted).35 Plaintiffs have failed to identify any plausible fiduciary duty, and therefore
their negligence claim fails on its face. The motions to dismiss are GRANTED with respect to
the negligence claims.
C. Negligent Misrepresentation
Under Louisiana law, in order to prevail on a claim for negligent misrepresentation, a
plaintiff must establish the following elements: (1) the defendant, in the course of its business or

33

R. Doc. No. 83, at 17.
Id.
35
The Louisiana Supreme Court denied a writ in Priola, 21 So. 3d 456, and plaintiffs have not
identified any authority suggesting that the Louisiana Supreme Court would disagree with
Priola.
34

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other matters in which it had a pecuniary interest, supplied false information; (2) the defendant
had a legal duty to supply correct information to the plaintiff; (3) the defendant breached its duty,
which can be breached by omission as well as by affirmative misrepresentation; and (4) the
plaintiff suffered damages or pecuniary loss as a result of its justifiable reliance upon the
omission or affirmative misrepresentation. See Hardy v. Hartford Ins. Co., 236 F.3d 287, 292
(5th Cir. 2001).
In Priola, the Louisiana Court of Appeals held: “La.R.S. 6:1124 [forecloses] the
possibility of a lawsuit against a bank for negligent misrepresentation unless there was a contract
or a written agreement that the financial institution had a fiduciary obligation to the person
claiming negligent misrepresentation.” 21 So. 3d at 462;  see also Mose v. Keybank Nat’l Ass’n,
464 F. App’x 260, 262-63 (5th Cir. 2012). Plaintiffs have not alleged that a facially plausible
contract

or

written

agreement

with

defendant

banks

created

a

fiduciary

duty.

Accordingly, the motions to dismiss are GRANTED with respect to the negligent
misrepresentation claims.
D. Uniform Fiduciaries Law
The Uniform Fiduciaries law addresses the obligations of a bank with respect to a
fiduciary who is breaching his duties. Plaintiffs expressly rely on La. Rev. Stat. Section 3806,
“Check upon Principal’s Account; Liability of Bank Paying, which provides:

If a check or other bill of exchange is drawn by a fiduciary as such,
or in the name of his principal by a fiduciary empowered to draw
such instrument in the name of his principal, payable to the
fiduciary personally, or payable to a third person and by him
transferred to the fiduciary, and is thereafter transferred by the
fiduciary, whether in payment of a personal debt of the fiduciary or
otherwise, the transferee is not bound to inquire whether the
fiduciary is committing a breach of his obligation as fiduciary in
transferring the instrument and is not chargeable with notice that

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the fiduciary is committing a breach of his obligation as fiduciary,
unless he takes the instrument with actual knowledge of such
breach, or with the knowledge of such facts that his action in
taking the instrument amounts to bad faith.
(emphasis added). The Court notes, however, that plaintiffs’ allegations as to defendant banks
also overlap with La. Rev. Stat. Section 3809, “Deposit by Fiduciary to his Personal Credit;
Duties and Liabilities of Bank,” which similarly provides:
If a fiduciary makes a deposit in a bank to his personal credit of
checks drawn by him upon an account in his own name as
fiduciary or of checks payable to him as fiduciary, or of checks
drawn by him upon an account in the name of his principal if he is
empowered to draw checks thereon, or of checks payable to his
principal and endorsed by him, if he is empowered to endorse such
checks, or if he otherwise makes a deposit of funds held by him as
fiduciary, the bank receiving such deposit is not bound to inquire
whether the fiduciary is committing thereby a breach of his
obligation as fiduciary; and the bank is authorized to pay the
amount of the deposit or any part thereof upon the personal check
of the fiduciary without being liable to the principal, unless, the
bank receives the deposit or pays the check with actual knowledge
that the fiduciary is committing a breach of his obligation as
fiduciary in making such deposit or in drawing such check, or with
knowledge of such facts that its action in receiving the deposit or
paying the checks amounts to bad faith.

(emphasis added).
Plaintiffs allege that defendant banks “knowingly allowed checks and/or wire transfers to
be wrongfully deposited for the personal benefit of Rick Reynolds who was a fiduciary to the
Plaintiffs as he was acting as their broker in order to receive the deposits and transfers for
specific investments.”36 But, pursuant to the Uniform Fiduciaries Law, it is not enough to allege
that the fiduciary drew a check in his capacity as a fiduciary and deposited it into a personal
account. “Louisiana law specifically provides that even when a bank has actual knowledge that a

36

R. Doc. No. 83, at 20.

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person is withdrawing money from a fiduciary account and depositing it into his own personal
account, it has no duty to inquire whether the fiduciary is thereby committing a breach of his
obligation as fiduciary.” In re Succession of Wardlaw, No. 94-2026, 1994 WL 577442, at *7 (E.
D. La. Oct. 17, 1994) (Clement, J.). Plaintiffs have not alleged specific facts plausibly suggesting
that defendant banks had knowledge of the breach of a fiduciary duty.
For these reasons, defendant banks’ motions to dismiss are GRANTED with respect to
plaintiffs’ Uniform Fiduciary Act claims.
E. Aiding and Abetting Breach of Fiduciary Duty
Defendant banks argue that there is no separate cause of action under Louisiana law for
aiding and abetting the breach of fiduciary duty.37 Plaintiffs copy,38 without citation, language
from a journal article39 discussing the eighteen states that have recognized this cause of action,
but these states do not include Louisiana. Moreover, plaintiffs do not identify any authority
supporting the existence of such a cause of action in Louisiana.
In any case, as described above, defendant banks did not have a duty to inquire into the
transactions at issue. “It can hardly be argued that [defendant banks were] manifesting” the
“shared criminal intent” required for aiding and abetting liability “by not investigating something
that [they are] explicitly not required to investigate.” Wardlaw, 1994 WL 577442, at *7.
Plaintiffs argue that defendant banks used atypical banking procedures that give rise to an
inference of knowledge of misconduct, and plaintiffs cite as supporting authority Neilson v.
Union Bank of California, N.A., 290 F. Supp. 2d 1101, 1120 (C.D. Cal. 2003). In that case,
however, plaintiffs alleged that defendants “alter[ed] their normal ways of doing business” to

37

R. Doc. No. 101-2, at 11.
See R. Doc. No 100, at 11 & n. 1.
39
See Richard Mason, Civil Liability for Aiding and Abetting, 61 Bus. Law. 1135, 1149, 1159 &
n. 161 (2006).
38

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“accommodate” a Ponzi scheme. Id. Here, plaintiffs make no such allegation. Instead they
contend that defendant banks generally used “lax money-laundering programs.”40 Plaintiffs have
not, however, identified authority supporting the assertion that the uniform laxity of such
programs supports aiding and abetting liability. See also Wiand v. Wells Fargo Bank, N.A., No.
12-557, 2013 WL 1401414, at *5 (M.D. Fla. Apr. 5, 2013) (“Cases addressing the liability of
banks for Ponzi schemes consistently hold that ‘red flags’ arising from suspicious activity giving
rise to the presumption that the bank should have known about the Ponzi scheme are insufficient
to allege aiding-and-abetting liability.”).
The motions to dismiss are GRANTED with respect to the aiding and abetting a breach
of fiduciary duty claims.
F. Louisiana Racketeering Act
Plaintiffs allege that defendant banks violated the Louisiana Racketeering Act, La. R.S.
15:1351, et seq. “Although these statutes are part of the Code of Criminal Procedure, they
provide for a civil cause of action similar to the federal RICO statute.” Thomas v. N. 40 Land
Dev., Inc., 894 So. 2d 1160, 1175 (La. Ct. App. 4th 2005).
The Louisiana Racketeering Act states:
(a) It shall be unlawful for any person who has knowingly received
any income derived, directly or indirectly, from a pattern to use or
invest, whether directly or indirectly, any part of such proceeds, or
the proceeds derived from the investment or use thereof, in
acquisition of any title to, or any right, interest, or equity in
immovable property or in the establishment or operation of any
enterprise.
(b) It is unlawful for any person, through a pattern of racketeering
activity, knowingly to acquire or maintain, directly or indirectly,
any interest in or control of any enterprise or immovable property.

40

R. Doc. No. 83, at 14.

‐12‐ 

(c) It is unlawful for any person employed by, or associated with,
any enterprise knowingly to conduct or participate, in directly or
indirectly, such enterprise through a pattern of racketeering
activity.
(d) It shall be unlawful for any person to conspire to violate any of
the provisions of subsection (a), (b), or (c) of this section.
Plaintiffs assert in the complaint that defendant banks knowingly violated Louisiana
Racketeering laws by participating in the predicate acts of violating the Louisiana Securities Law
and committing theft.41 Defendant banks argue that plaintiffs’ assertions are vague and, much
like their claims for negligent misrepresentation and detrimental reliance, are recitations of the
elements without facially plausible facts. Defendant banks further argue that theft cannot serve as
racketeering predicate offense.42
Plaintiffs’ complaint does not contain facially plausible allegations that the banks knew
of the alleged criminal nature of the Ponzi scheme activities.43 See Reyes v. Zion First Nat’l
Bank, No. 10-345, 2012 WL 947139, at *10 (D. Penn. Mar. 21, 2012). Nor does it contain
facially plausible facts connecting the defendant banks with the alleged RICO activity, beyond
the provision of “ordinary banking services.” Id. Read in full, the complaint suggests that
defendant banks were accepting funds from Richard and Lisa Reynolds (not from the plaintiffs)
in the ordinary manner in which they normally provide services to customers and not operating
an enterprise in violation of the statute.

41

R. Doc. No. 83, at 22.
E.g., R. Doc. No. 102-2, at 15; The Fifth Circuit has recognized that it is “far from certain that
[theft] can serve as RICO predicate acts since [it] is not one of the enumerated state law offenses
that constitute racketeering activity” in 18 U.S. C. 1961(1)(A). Dennis v. Gen. Imaging, Inc., 918
F.2d 496, 512 (5th Cir.). The Louisiana Racketeering Act similarly does not enumerate theft as a
predicate offense.
43
R. Doc. No. 83, at 15.
42

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For these reasons, the motions to dismiss are GRANTED with respect to violations of
the Louisiana Racketeering Act.
G. Conspiracy
Louisiana Civil Code art. 2324 provides, in pertinent part: “He who conspires with
another person to commit an intentional or willful act is answerable, in solido, with that person,
for the damage caused by such act.” La. Civ. Code art. 2324 (2006). Louisiana does not
recognize an independent tort of civil conspiracy. Rhyce v. Martin, 173 F. Supp. 2d 521, 535
(E.D. La. 2001). “The actionable element under article 2324 is the intentional tort the
conspirators agreed to commit and committed in whole or in part causing plaintiff's injury.”
Rhyce, 173 F. Supp. 2d at 535.
“To recover under a civil conspiracy theory of liability, the plaintiff must prove that an
agreement existed to commit an illegal or tortious act which resulted in plaintiff’s injury.”
Sullivan v. Wallace, 859 So. 2d 245, 248 (La. Ct. App. 2d 2003). Ultimately, “[t]he plaintiff must
. . . prove an unlawful act and assistance or encouragement that amounts to a conspiracy. This
assistance or encouragement must be of such quality and character that a jury would be permitted
to infer from it an underlying agreement and act that is the essence of the conspiracy.” Chrysler
Credit Corp. v. Whitney Nat’l Bank, 51 F.3d 553, 557 (5th Cir. 1995).
With respect to defendant banks, plaintiffs allege: “Defendant Banks also conspired to
launder money into personal accounts when it knew that the funds were not intended for personal
expenses of Defendant Reynolds. Defendant Banks failed to file suspicious activity reports even
after being confronted with suspicious transactions and knowingly failed to act upon them.”44

44

Id. at 25.

‐14‐ 

Plaintiffs fail to state facts that would lead the Court to find a facially plausible
agreement between the defendant banks or between the defendant banks and other members of
the alleged conspiracy, a tortious act, or a manner in which the defendant banks provided
assistance or encouragement to the other alleged conspirators. Plaintiffs restate in their
opposition the conclusory facts that they allege in their complaint, but these facts do not reach
the requisite level of facial plausibility. As stated above, Twombly confirms that “terms like
‘conspiracy’ or even ‘agreement’” may be sufficient to state a claim with other “more specific
allegations,” but such terms generally are too conclusory on their own. 550 U.S. at 557 (quoting
DM Research, Inc., 170 F.3d at 56).
The motions to dismiss are GRANTED with respect to the conspiracy claim.
H. Detrimental Reliance
In order to establish detrimental reliance under Louisiana law, a party
must prove:
(1) a representation by conduct or word; (2) justifiable reliance; and (3) a
change in position to one’s detriment because of the reliance. Lakeland
Anesthesia, Inc. v. United Healthcare of La., Inc., 871 So. 2d 380, 393
(La. Ct. App. 4th 2004), writ denied, 876 So. 2d 834 (La. June 25, 2004);
Babkow v. Morris Bart, P.L.C., 726 So. 2d 423, 427 (1998). Significantly,
to prevail on a detrimental reliance claim, Louisiana law does not require
proof of a formal, valid, and enforceable contract. Babkow, 726 So. 2d at
429 (citing Morris v. People’s Bank & Trust Co., 580 So. 2d 1029 (La. Ct.
App. 3rd 1991), writ denied, 588 So. 2d 102 (La. 1991)).
Priola Constr. Corp., 21 So. 3d at 462.
With respect to the first element, plaintiffs allege that defendant banks “converted
investor funds into the [P]onzi scheme through the use of its banking operations when they knew
the transactions were suspicious without informing plaintiffs.”45 With respect to the second and
third elements, plaintiffs allege “Plaintiffs justifiably relied on these representations and/or

45

Id. at 21.

‐15‐ 

conduct and changed their position to their detriment. Defendants’ actions have caused damages
to the Plaintiffs in the amount to be shown at the trial of this matter.”46
Plaintiffs’ detrimental reliance allegations fail to meet the threshold of plausibility. The
claim includes a “formulaic recitation of the elements of the cause of action” that is plainly
insufficient. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). It is for these reasons
that the motions to dismiss are GRANTED with respect to the detrimental reliance claim.
Conclusion
Plaintiffs’ claims against defendant banks are facially implausible and lack sufficient
specificity even under the most generous reading of the complaint.
IT IS ORDERED that the motions to dismiss the plaintiffs’ claims against defendant
banks in the above-caption matter are GRANTED and that plaintiffs’ claims against defendant
banks are DISMISSED WITHOUT PREJUDICE.

New Orleans, Louisiana, August 8, 2013.

____________________________________
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE

46

Id.

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