Foundation Title & Escrow Company, LLC V. Regions Bank, N.A.

Filing 30

RULING and ORDER : The 8 Motion to Dismiss for Failure to State a Claim is hereby GRANTED. Plaintiffs claims be and are hereby DISMISSED WITH PREJUDICE.Judgment shall be entered separately. Signed by Judge Brian A. Jackson on 09/24/2024. (ELW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
FOUNDATION TITLE & ESCROW CIVIL ACTION
COMPANY, LLC
VERSUS
REGIONS BANK NO. 24-00005-BAJ-SDJ

RULING AND ORDER
In this action, Plaintiff seeks to recover approximately $200,000 from
Defendant for its alleged mishandling of a fraudulent check. Now before the Court is
Defendant's 12(b)(6) M:otion To Dismiss (Doc. 8, the "Motion"). The Motion is
opposed. (Doc. 11). For reasons provided herein, Defendant s Motion will be granted,

and Plaintiffs claims will be dismissed with prejudice.

I. BACKGROUND
The facts of this matter are essentially undisputed. Plaintiff Foundation Title
& Escrow Company, LLC held an account with Defendant Regions Bank. (Doc. 1-1 at
p. 2). The account was governed by a Deposit Agreement. {Id. at p. 5). The Deposit
Agreement obligates Defendant to a duty of ordinary care when receiving an item for
deposit or collection. (Id. at p. 24). The Deposit Agreement also provides that:

in the event another financial institution notifies [Defendant] of or
makes a claim with respect to an Item Irregularity or otherwise

indicates that an item you have deposited will not be paid due to any
Item Irregularity, we shall have an immediate claim against you and a

right (without limitation or preclusion of any other rights or remedies
available to us) to place a hold on or charge your account for the amount
of any item in question without notice to you.

(Doc. 8-2 at p. 13).1 Plaintiff agreed in the Deposit Agreement that Defendant could
"release or remit such amount as [Defendant] deem[s] appropriate or as required by
law for the resolution of the Item Irregularity without notice to you." (Id.). The
Deposit Agreement is governed by Louisiana law. (See Docs. 1-1 at p. 2, 8-2 at p. 36).
Plaintiff regularly used its account with Defendant to store and transfer client funds.
(Doc. 1-1 at p. 2).

On November 15, 2022, Plaintiff was retained to handle the purchase of
surgical equipment by Nathan Harris of Greenfield Commercial Loans." (Id.).

Nathan Harris and Greenfield Commercial Loans appear to be fictitious entities. (See
id.). An officer of Plaintiff, Dwight Poirrier, attempted to enter into an attorney-client
relationship with Harris. (Id. at pp. 13-14). The purpose of this relationship was to
represent Harris in the contemplated purchase of surgical equipment. (Id.).
In connection with this purchase, on November 29, 2022, Plaintiff received a

cashier's check from Phillip Paulson in the amount of $196,000. (Id. at p. 3). It is not
clear from the Complaint what the nature ofPaulson's relationship with Harris was.
However, both sides agree that the check furnished in his name was counterfeit.
(Docs. 1-1 at p. 4,8-1 at p. 2).

Upon receipt of Paulson s check, Plaintiff deposited the sums into its account
with Defendant. (Doc. 1-1 at p. 3). From November 29 through the morning of

December 1, 2022, Plaintiffs online account with Defendant showed that the check
funds had cleared and were available for transfer. (Id.). Upon directions from Harris,

1 Plaintiff contests the introduction of the entire Deposit Agreement. This contention is
without merit, as discussed below.

Plaintiff transferred $143,000 of those funds to an account with Deutsche Bank Trust
Company ("Deutsche Bank") on December 1, 2022. (Id.).
The next day, Plaintiff accessed its online account with Defendant and saw
that Paulsons check had been dishonored as counterfeit. {Id. at p. 4). Additionally,

Plaintiff discovered that Defendant had debited its account for the dishonored check
sum. (Id.). Plaintiff alleges that the information posted to its online account was the
only notice it ever received regarding the dishonoring of the check. (Id.). Plaintiff
requested that the wire to Deutsche Bank be recalled or retrieved. (Id.). Fifteen days

later, Defendant notified Plaintiff that the wire could not be recalled, as the princely
sums had been routed to Nigeria. (Id.).

On December 1, 2023, Plaintiff filed suit in Louisiana state court, alleging that
Defendant breached its contractual and statutory duties of ordinary care in its
handling of the counterfeit check. (Id. at pp. 4-7).

Defendant removed Plaintiffs action to this Court on January 5, 2024, on the
basis of diversity jurisdiction. (Doc. 1 at p. 3). Defendant filed the IVlotion presently
before the Court one month later. (Doc. 8). Defendant s Motion is opposed. (Doc. 11).

II. STATEMENT OF LAW
A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint against
the legal standard set forth in Rule 8, which requires "a short and plain statement of
the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "To
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, 556 U.S. 662, 678 (2009) (quoting Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570

(2007)). "Determining whether a complaint states a plausible claim for relief [is] . . .
a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense." Id. at 679. "[F]acial plausibility" exists "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. at 678 (citing Twombly,
550 U.S. at 556). When conducting its inquiry, the Court must "acceptQ all
well-pleaded facts as true and viewQ those facts in the light most favorable to the
plaintiff." Bustos v. Martini Club Inc., 599 F.3d 458, 461 (5th Cir. 2010) (quotation
marks omitted). Conclusory allegations or legal conclusions are insufficient defenses
to a well-pled motion to dismiss. Turner v. Lieutenant Driver, 848 F. 3d 678, 685 (5th

Cir. 2017).
When determining whether a plaintiffs claims survive a Rule 12(b)(6) motion
to dismiss, a court's inquiry is limited to "(I) the facts set forth in the complaint, (2)
documents attached to or incorporated by reference in the complaint, and (3) matters
of which judicial notice may be taken under Federal Rule of Evidence 201." Spearsv.
Nanaki, L.L.C., No. 22-30460, 2023 WL 2493741, at *1 (5th Cir. Mar. 14, 2023).
Moreover, "[djocuments that a defendant attaches to a motion to dismiss are

considered part of the pleadings if they are referred to in the plaintiffs complaint and
are central to [its] claim." Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288

(5th Cir. 2004). Here, the Deposit Agreement was referred to and attached in part to
Plaintiffs Complaint, and is central to its claims. (See Doc. 1-1). The Court will
therefore consider the complete copy of the Deposit Agreement attached to

Defendant's Motion to Dismiss, (Doc. 8-2), in its Rule 12(b)(6) inquiry.

III. ANALYSIS
A. Breach of Duty of Ordinary Care
At its core, Plaintiffs Complaint alleges that Defendant owed contractual and
statutory duties of ordinary care in receiving and managing items for deposit or

collection, that Defendant breached these duties, and that Plaintiff suffered as a
result. (Doc. 1-1 at p. 5).

As an initial matter, the Court agrees with Defendant that the Deposit
Agreement controls in this matter. Plaintiff has not alleged that the Deposit
Agreement was unlawfully established or contains unlawful provisions, and so "it is
the law between the parties." Groue v. Cap. One, 2010-0476 (La. App. 1 Cir. 9/10/10),

47 So. 3d 1038, 1041.
The Deposit Agreement does not define ordinary care. (See Doc. 8-2). It does,
however, contain a provision that appears to squarely cover, and preclude, Plaintiffs
claims. As stated above, the Deposit Agreement contains a provision effectively
stating that upon notice from another financial institution that a check is counterfeit,

Defendant may debit Plaintiffs account by the check sum without notice. (Id. at p. 9).
Defendant argues that this is precisely what happened here, and that Defendant
debited the check sum after being notified by another financial institution, The
Toronto-Dominion Bank, that the check was counterfeit on December 2, 2022. (Doc.
8-1 at p. 5). The Court has no reason to dispute the veracity of Defendant's account,
and this sequence of events appears to be in harmony with the factual allegations
located in Plaintiffs Complaint. (See Doc. 1-1). However, the Court may not rely on
factual assertions located in Defendant's Motion to Dismiss when assessing Plaintiffs

Complaint for sufficiency under Rule 12(b)(6). See Toth Enterprises II, P.A. v. Forage,
707 F. Supp. 3d 697, 704 (W.D. Tex. 2023) (courts "may not consider new factual
allegations outside the complaint. ).2 Were Defendant's same argument to be brought
with evidentiary support on a motion for summary judgment, it is entirely possible

that some or all of Plaintiffs claims would be subject to dismissal. Nevertheless,
Plaintiffs Complaint suffers from other infirmities, outlined below, that prove
decisive.
While the Deposit Agreement does not define ordinary care, Louisiana law
does, and the Deposit Agreement expressly provides that Louisiana law governs its
terms. (See Docs. 1-1 at p. 2, 8-2 at p. 35). La. Stat. Ann. § 10:3-103 defines ordinary
care as, "in the case of a person engaged in business," "observance of reasonable

commercial standards, prevailing in the area in which the person is located, with
respect to the business in which the person is engaged." Louisiana law also places a
duty of ordinary care on collecting banks when sending notice of dishonor or
nonpayment of an item "after learning that the item has not been paid or accepted."

La. Stat. Ann. § 10:4-202(a)(2). A bank is a collecting bank when it handles an item
for collection. La. Stat. Ann. § 10:4-105. Defendant was a collecting bank for purposes
of the counterfeit check. (»S'ee Doc. 8-2 at p. 13). A collecting bank discharges its duty

of ordinary care by "taking proper action before its midnight deadline following
receipt of an item, notice, or settlement." La. Stat. Ann. § 10:4-202(b). The midnight

deadline is defined in La. Stat. Ann. § 10:4-104(10) as midnight on the "next banking

2 For this same reason, the Court will not consider the additional factual allegations made in
Plaintiffs IVIemorandum in Opposition to Defendant's ]V[otion to Dismiss. (Doc. 11).

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day following the banking day on which [the bank] receives the relevant item or notice
or from which the time for taking action commences to run, whichever is later.
What s more, La. Stat. Ann. § 10:4-214 provides that a bank that has "made
provisional settlement with its customer for an item and fails by reason of dishonor.
. . may revoke the settlement given by it, charge back the amount of any credit given
for the item to its customer s account, or obtain refund from its customer. In order to
do so, a requesting bank needs to request this refund or provide notice to the customer

"by its midnight deadline or within a longer reasonable time after it learns the facts."
La. Stat. Ann. § 10:4-214 (emphasis added). The Deposit Agreement states that all
deposited items are provisionally credited subject to final payment. (Doc. 8-2 at p. 14).

In sum, Louisiana law provides that a collecting bank satisfies its duty of
ordinary care to a customer that has deposited a fraudulent check by providing notice
to the customer of the related dishonor within one business day, or within a longer
period of time so long as the period is reasonable, after the bank learns that the check

is fraudulent. See La. Stat. Ann. §§ 10:3-103, 10:4-104(10), 10:4-202(a)(2)-(b). Within
this same period of time, a bank may charge the customer any credit given for the
dishonored item. La. Stat. Ann. § 10:4-214.

The Court finds that the Louisiana law described above, incorporated into the
Deposit Agreement by its choice of law provision, covers and precludes Plaintiffs
claims regarding Defendant's duties of ordinary care. Plaintiff has failed to make any

factual allegations that Defendant exceeded the deadlines provided by Louisiana law
when it posted notice to Plaintiffs account of the dishonored check on December 2,
2022. (See Doc. 1-1 at p. 4). Plaintiffs only allegation to this point was that Defendant

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had "purported knowledge or suspicion of the fraudulent and/or fictitious nature of

the cashier's check," which would trigger the start of the midnight deadline to take
corrective action, but Plaintiff does not allege that this knowledge or suspicion
developed so far prior to the dishonoring of the check that the midnight deadline had
elapsed. (Id.).

Plaintiff further complains that, despite the December 2, 2022, notification
posted to its account that the Paulson check was dishonored, Defendant did not

satisfy its statutory duties to provide notice. (Id.). Plaintiff does not provide any
cogent argument in support of its position on this issue, and no case law. To the
contrary, La. Stat. Ann. § 10:3-503 states that "[njotice of dishonor may be given by
any person; may be given by any commercially reasonable means, including an oral,
written, or electronic communication; and is sufficient if it reasonably identifies the
instrument and indicates that the instrument has been dishonored." Plaintiffs own

Complaint alleges that on December 2, 2022, an "indication" existed within Plaintiffs
online account with Defendant that identified the counterfeit check and stated that
the check had been dishonored. (Doc. 1-1 at p. 4). This indication was evidently

sufficient for Plaintiff to identify the instrument at issue and to determine that the
instrument had been dishonored, since Plaintiff contacted Defendant that same day
to report fraud and request the recall of the related $143,000 wire transfer to
Deutsche Bank. (Id.).

Therefore, based on the above, the Court likewise finds that Plaintiff fails to
make the factual allegations necessary to allow the Court to draw a reasonable

inference that Defendant breached its statutory or contractual duties of ordinary care

with its notice to Plaintiff of the dishonored check.
Plaintiff further alleges that Defendant breached its duty of ordinary care in
crediting its account with the Paulson check from November 29, 2022, through
December 1, 2022. {Id. at p. 5). In addition to Plaintiffs failure to make factual
allegations supporting that Defendant's actions violated reasonable and prevailing
commercial standards in the banking industry, (see id.), this allegation has no
contractual basis. As Defendant notes, the Deposit Agreement states that "[a]ll items
are credited subject to final payment and our receipt of cash or its equivalent." (Doc.
8-2 at p. 14).
Nor are Plaintiffs claims supported by state or federal law. In terms of federal
law, Plaintiff has failed to provide any persuasive support of its position.3 Meanwhile,

Defendant has cited to the Expedited Funds Availability Act as support for its
position on the lawfulness of making funds provisionally available. (Doc. 13 at p. 5).

The Expedited Funds Availability Act sets forth various deadlines for banks to make
funds available upon deposit, while also noting that its terms affect neither a bank's
right to revoke any provisional settlement with respect to a deposited check, nor a

bank's right to claim a refund of such provisional credit. 12 U.S.C. §§ 4002, 4006. This

3 Plaintiff cites to the case of O'Brien & Wolf, LLP v. Associated Banc-Corp, No. ll-CV-1253
SER, 2013 WL 1104641 (D. Minn. Mar. 18, 2013), as support for its position that Defendant
breached its duty of ordinary care in making the Paulson check provisionally available, and
as support for its related negligent misrepresentation claim. (Doc. 11 at p. 8). This case is

largely irrelevant to the present dispute, because, in addition to being based on a
substantially different fact pattern, O'Brien & Wolf, LLP applied Minnesota law, not
Louisiana law. 2013 WL 1104641 at *6.

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language indicates that the provisions of the Deposit Agreement, which expressly
allow Defendant to take the actions alleged, (see Doc. 8-2 at p. 14), are not contrary
to federal law and are therefore enforceable.
B. Negligent Mjisrepresentation
Under Louisiana law, negligent misrepresentation claims are limited to
situations where contractual or fiduciary relationships exist. Daye v. Gen. Motors

Corp., 97-1653 (La. 9/9/98), 720 So. 2d 654, 659. Plaintiff and Defendant had a
contractual relationship, but the terms of the Deposit Agreement still preclude
Plaintiffs negligent misrepresentation claim. That is because La. Stat. Ann. § 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.' "
California First Nat'l Bank v. Boh Bros. Constr. Co., LLC, No. CV 16-2699, 2018 WL
321709, at *3 (E.D. La. Jan. 8, 2018) (quoting Priola Const. Corp. v. ProfastDev. Grp.,

Inc., 2009-342 (La. App. 3 Cir. 10/7/09), 21 So. 3d 456, 462, writ denied, 2009-2403
(La. 1/22/10), 25 So. 3d 142). Here, the Deposit Agreement explicitly disavows any
fiduciary obligations on the part of Defendant. (Doc. 8-2 at p. 7). Plaintiffs negligent
misrepresentation claims therefore fail as a matter of law.

C. Miscellaneous Claims
Plaintiffs remaining claims are similarly subject to dismissal, as they are
either conclusory or fail to state a claim. See Conner v. Orleans Par. Sheriffs Off., No.

CV 19-561, 2019 WL 4393137, at *5 (E.D. La. Sept. 13, 2019) (claims based on "wholly
conclusory allegations will be dismissed upon a Rule 12(b)(6) motion). Plaintiff

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alleges that Defendant did not receive confirmation from Deutsche Bank that the
wired funds had been rerouted to Nigeria, and were therefore impossible to recover,

until fifteen days after Plaintiff alerted Defendant to fraud. (Doc. 1-1 at p. 4). During
these fifteen days, Plaintiff asserts that Defendant "failed to exercise its due diligence
to identify where exactly the wired funds were being held, failed to properly instruct
Deutsche Bank Trust Company to return or pull back the funds and further failed to
exercise ordinary care in any attempt to retrieve the funds." (Id.). Plaintiff reiterates
these claims later in its Complaint. (Id. at p. 6). These are conclusory, legal
allegations that do not withstand a well-pled motion to dismiss. See Turner, 848 F.3d
at 685.

Plaintiff also alleges that Defendant "violated its customary policies and/or
procedures" by provisionally debiting the check sums and by wiring these sums upon

direction from Plaintiff. (Id. at p. 5). Plaintiff further contests that Defendant did not,
in accordance with its own policies and procedures, adequately monitor foreign wire
transfers, "investigate fraudulent activity and or dishonored deposits," or retrieve
fraudulent transfers. (Id. at p. 5). These allegations are again conclusory, and
therefore do not withstand Defendant's motion to dismiss. See Turner, 848 F. 3d at
685. Moreover, Plaintiff has failed to provide any case law supporting its argument

that failure to abide by internal policies constitutes a breach of the duty of ordinary
care in these circumstances or comprises a standalone claim. (See Docs. 1-1, 11).

Finally, the remaining unaddressed allegations found at the end of Plaintiffs
Complaint are likewise conclusory and fail to state a claim. (See Doc. 1-1 at p. 6
(Defendant is liable for "failing to exercise prudent and ordinary care" when

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supervising Plaintiffs account, "negligently and improperly allowing funds to be
transferred without proper authentication," and in "breaching its duty to Petitioner.
. . to safe-keep Petitioner s funds )). Such claims are therefore subject to dismissal.

IV. CONCLUSION
Accordingly, and for the reasons provided above,

IT IS ORDERED that Defendant's 12(b)(6) Motion To Dismiss (Doc. 8) be
and is hereby GRANTED. Plaintiffs claims be and are hereby DISMISSED WITH

PREJUDICE.
Judgment shall be entered separately.
Baton Rouge, Louisiana, this^"*l day of September, 2024

-^
JUDGE BRIAN A. </AC^:SON
UNITED STATES 018TRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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