Patel et al v. Zala
ORDER Dismissing 1 Complaint Without Prejudice for Failure to Satisfy Amount in Controversy Requirement. Signed by District Judge Thomas L. Ludington. (Sian, M)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
RAMESH PATEL, et al.,
Case No. 16-cv-13316
Honorable Thomas L. Ludington
ORDER DISMISSING COMPLAINT WITHOUT PREJUDICE FOR FAILURE TO
SATISFY AMOUNT IN CONTROVERSY REQUIREMENT
Plaintiffs Ramesh Patel and Bharati Patel initiated the above-captioned action against
Defendant Kanaksinh Zala on September 13, 2016, asserting diversity jurisdiction pursuant to 28
U.S.C. § 1332. See ECF No. 1. Plaintiffs, residents of Apache County, Arizona, allege that
Defendant, a resident of Los Angeles County, California, contacted Plaintiffs regarding an
opportunity to invest in an entity called Darshana Hospitality, LLC. Darshana Hospitality is an
entity that is responsible for managing certain hotels in the state of Michigan. Plaintiffs further
allege that on or about September 14, 2014 Defendant Zala accepted $52,965.00 in capital
contributions from Plaintiffs in the form of personal checks and salary withholdings. Plaintiff
alleges that although Defendant Zala cashed the checks given to him by Plaintiffs, Zala has not
provided them with any documentation of their membership interest in Darshana Hospitality,
LLC and has refused to refund Plaintiffs’ contribution. Based on this alleged conduct, Plaintiffs’
original complaint asserts three claims: (1) Breach of contract; (2) Fraudulent misrepresentation;
and (3) Innocent misrepresentation. Plaintiffs also request that the Court enter judgment in their
favor in the amount of $158,895.00.
Because Plaintiff’s complaint did not provide any legal explanation for the tripling of
economic damages, Plaintiffs was directed to show cause as to how their allegations satisfy the
$75,000 amount in controversy requirement. In response, Plaintiffs moved to amend their
complaint, seeking to add a conversion claim pursuant to Michigan Compiled Law 600.2919a.
Under that provision, a party may recover triple damages, plus costs and reasonable attorney
fees, where he is damaged as a result of “[a]nother person’s stealing or embezzling property or
converting property to the other person’s own use.” Defendants have filed a reply, arguing that
because the alleged conversion involved checks, Plaintiffs’ proposed conversion claim is
governed by Michigan Compiled Law 440.3420. That provision provides:
The law applicable to conversion of personal property applies to instruments. An
instrument is also converted if it is taken by transfer, other than a negotiation,
from a person not entitled to enforce the instrument or a bank makes or obtains
payment with respect to the instrument for a person not entitled to enforce the
instrument or receive payment. An action for conversion of an instrument may
not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or
endorsee who did not receive delivery of the instrument either directly or through
delivery to an agent or a co-payee.
Id. Defendant thus argues that Plaintiffs’ proposed amendment would be futile.
The parties’ pleadings in this matter present a number of curiosities. First, while Plaintiffs
allege that they made capital contributions to Darshana Hospitality in the form of personal
checks and salary withholdings, Plaintiffs do not plead any facts regarding their employment
relationship with Darshana Hospitality or with Defendants. Second, Plaintiffs have not provided
the Court with copies of the checks forming the basis of the transactions. Defendant, on the
other hand, does provide copies of three checks. Bizarrely however, none of the attached checks
were drawn against an account owned by Plaintiffs, and the attachments do not include the
reverse sides containing the endorsements. Finally, and most damning, Plaintiffs do not allege
that Defendants wrongly forged any endorsement on the checks allegedly converted by
Defendant. All of these facts raise more questions than answers.
For current purposes, the only issue is whether Plaintiffs’ proposed conversion claim
would be futile. Under Federal Rule of Civil Procedure 15, a court should “freely give leave” to
amend “when justice so requires.” FED. R. CIV. P. 15(a)(2). Futility is one factor for Courts to
consider in determining whether a party should be granted leave to amend. Hageman v. Signal
L.P. Gas, Inc., 486 F.2d 479, 484 (6th Cir. 1973). “A proposed amendment is futile if the
amendment could not withstand a Rule 12(b)(6) motion to dismiss.” Riverview Health Inst. LLC
v. Med. Mut. of Ohio, 601 F.3d 505, 512 (6th Cir. 2010) (internal citation and quotation marks
To state a conversion claim against Defendant, Plaintiffs were required to allege that their
checks were “taken by transfer, other than a negotiation, from a person not entitled to enforce the
instrument or a bank [made] or [obtained] payment with respect to the instrument[s] for a person
not entitled to enforce the instrument[s] or receive payment.” Plaintiffs have not done so.
Plaintiffs have not alleged that Defendant forged endorsements, or was not otherwise entitled to
enforce the instrument. As such, Plaintiffs have not met the amount in controversy requirement,
and this Court does not have subject matter jurisdiction over Plaintiffs’ remaining claims. The
complaint will be dismissed without prejudice to Plaintiffs’ ability to refile their breach of
contract, fraudulent misrepresentation, and innocent misrepresentation claims in state court.
Accordingly, it is ORDERED that Plaintiff’s request for leave to file an amended
complaint, ECF No. 6, is DENIED.
It is further ORDERED that Plaintiffs complaint, ECF No. 1, is DISMISSED without
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: February 6, 2017
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on February 6, 2017.
s/Michael A. Sian
MICHAEL A. SIAN, Case Manager
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