SFS Check, LLC v. First Bank of Delaware, et al

Filing 48

OPINION AND ORDER DENYING 45 Plaintiff's Motion for Leave to Amend and DISMISSING Case. Signed by District Judge Terrence G. Berg. (Chubb, A)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
SFS CHECK, LLC,
Plaintiff,

CIV. NO. 12-14607

v.

HON. TERRENCE G. BERG
HON. R. STEVEN WHALEN

FIRST BANK OF DELAWARE,
ET AL.,
Defendants.
/
OPINION AND ORDER DENYING PLAINTIFF’S MOTION
FOR LEAVE TO AMEND (DKT. 45) AND DISMISSING CASE
SFS Check, LLC (“Plaintiff” or “SFS”) brings this action against
First Bank of Delaware (“Defendant” or “FBD”) and nine of FBD’s
directors and officers (the “Individual Defendants”) for negligence and
fraud. Plaintiff now seeks leave to file a Second Amended Complaint;
Defendant has responded, arguing that granting Plaintiff leave to file
its proposed Second Amended Complaint would be futile, since that
pleading fails to state a claim upon which relief can be granted. For the
reasons set out below, Plaintiff’s motion for leave to amend will be
denied, and this case will be dismissed.

Plaintiff is a Michigan company that purportedly provides
financial transaction processing services. In the proposed Second
Amended Complaint, Plaintiff alleges that someone unlawfully opened
a bank account in Plaintiff’s name at FBD and used this fraudulent
bank account to process illegal internet gambling transactions. As a
consequence, Plaintiff claims, its own bank, non-party Fifth Third
Bank, refused to continue to process SFS’s transactions, effectively
putting Plaintiff out of business. Plaintiff was also served with, and
forced to respond to, a Federal Grand Jury Subpoena, issued by this
Court, pertaining to transactions processed through the fraudulent
account at FBD associated with SFS. Plaintiff therefore seeks $
6,000,000 in damages for negligence and $4,000,000 for fraud.
By way of procedural background, Plaintiff’s First Amended
Complaint (Dkt. 8) also asserted two common law claims against
Defendants – negligence and fraud.1 The case is before this Court by
virtue of diversity jurisdiction. Defendants’ moved to dismiss the First

Plaintiff’s negligence claim (Count I) contained four sub-parts, three involving the
alleged conduct or omissions of FBD and one for the alleged gross negligence of the
Individual Defendants. The negligence claims against FBD include: (1) failure to
“Exercise Due Care and Sound Reasonable Business Judgment;” (2) failure to
“Exercise Due Diligence;” and (3) “Respondent [sic] Superior” for failing to
“Supervise its Employees.”

1

2 

Amended Complaint (Dkt. 34), Plaintiff responded (Dkt. 41), and the
Court heard argument on Defendants’ motion to dismiss on May 29,
2013. Defendants’ motion argued that Plaintiff’s case should be
dismissed for two reasons: first, as to the Individual Defendants, this
Court did not have personal jurisdiction over them; second, as to all
Defendants, Plaintiff’s First Amended Complaint failed to state a claim
upon which relief can be granted.
The Court denied Defendants’ motion to dismiss, and authorized
Plaintiff to conduct limited discovery, targeted to the question of
whether there was personal jurisdiction over the Individual Defendants.
After this limited discovery period, Plaintiff was directed to file a
motion for leave to file a Second Amended Complaint (with a proposed
Second Amended Complaint attached – see E.D. Mich. LR 15.1), which
Plaintiff has now done (Dkt. 45). Defendants responded (Dkt. 46) to
Plaintiff’s motion for leave to amend, and the Court held oral argument
on Plaintiff’s motion on October 2, 2013.
For the reasons set forth below, the Court finds that there is no
personal jurisdiction over any of the Individual Defendants; therefore
these claims are DISMISSED WITHOUT PREJUDICE.
3 

Furthermore, Plaintiff’s proposed Second Amended Complaint fails to
state a claim upon which relief can be granted against FBD, therefore
these claims are DISMISSED WITH PREJUDICE.
I. BACKGROUND
The following facts are taken from Plaintiff’s proposed Second
Amended Complaint which, for purposes of this motion, are assumed to
be true and are viewed in a light most favorable to Plaintiff.
Plaintiff alleges that it entered into automated clearing house
(“ACH”) agreements to process electronic fund transfers on behalf of
several non-party entities (Dkt. 45 ¶ 17). Plaintiff further avers that,
after it began processing transactions for these entities, Plaintiff
received notice on or about July 30, 2010 from its own bank – non-party
Fifth Third Bank – that it would no longer process Plaintiff’s ACH
transactions and was terminating its relationship with Plaintiff (Dkt.
45 ¶ 25 [stating that Plaintiff received notice on August 2, 2010]; Ex. 2,
Aff. of Charles Kopko ¶ 2 [stating that Plaintiff received notice on July
30, 2010]).2 Fifth Third Bank’s expressed basis for terminating the

Although not attached to the Complaint, in Plaintiff’s Response to
Defendant’s Motion to Dismiss the First Amended Complaint (Dkt. 41), Plaintiff
attached Exhibit I, which is an e-mail to Charles Kopko of SFS, dated July 30, 2010
at 3:23 p.m. from Douglas M. Sammons of Fifth Third Bank. This e-mail states in
2

4 

relationship was that Plaintiff maintained an account at FBD that was
apparently processing illegal gambling transactions (Dkt. 45 ¶¶ 20, 2426; Ex. 1, Aff. of Douglas Sammons, VP of Fifth Third Bank).
In an Affidavit attached to the proposed Second Amended
Complaint, Plaintiff’s President Charles Kopko states that, after
learning of an alleged FBD account in Plaintiff’s name from Fifth Third
Bank, he contacted FBD on August 2, 2010 (Dkt. 45 ¶ 27-29; Ex. 2 ¶ 4).
Mr. Kopko states that he was informed by Defendant Bastable, who was
FBD’s Vice President for E-Payments, and unidentified “agents” and
“members of [FBD’s] corporate offices” that there was no “SFS” account
at FBD (Dkt. 45; Ex. 2 ¶ 4).
Two months later, in October 2010, Plaintiff allegedly received a
Grand Jury Subpoena, issued by this Court; the Subpoena commanded
production of documents relating to an account “that involved SFS at

its entirety: “Effective 08/02/10, we will no longer be sponsoring you into
MasterCard RPPS and no longer allow you to process ACH transactions through
5/3. Our AML has informed me that you are processing with another bank (FNB of
Delaware) who is processing gaming transactions that are hitting 5/3 accounts.”
Based on the Court’s review of the record in this case, it appears that “AML” refers
to Fifth Third Bank’s Anti-Money Laundering program.

5 

FBD.”3 (Dkt. 45 ¶ 30). Upon receiving this Subpoena, Mr. Kopko states
that he contacted “the office of the [FBD] Bank President” and later
received a return phone call from Defendant Bastable, who allegedly
told Mr. Kopko that FBD “had opened an account for SFS and, in fact,
SFS Novi of Michigan was a customer and they had been processing
ACH transactions through this account” (Dkt. 45 ¶¶ 31-32; Ex. 2 ¶ 7).
Mr. Kopko states that he then told Defendant Bastable that he “was
going to report this action to the [FBD] Board of Directors,” to which
Mr. Kopko was allegedly told that the FBD Board of Directors was
“already aware of it” (Dkt. 45 ¶ 34; Ex. 2 ¶ 8). Plaintiff further alleges
that Defendant Bastable then stated that she could not discuss the
account with Plaintiff further, because Plaintiff was not a signatory on
the account (Dkt. 45 ¶ 33).4

The Grand Jury Subpoena, attached as Exhibit B to Plaintiff’s Opposition to
Defendants’ Motion to Dismiss First Amended Complaint (Dkt. 41-3), does not
include the attachment referenced on the face of the subpoena that would have
described the documents and items being commanded to be produced. Without that
attachment, it is impossible to tell precisely what records, or to what bank account,
the Grand Jury subpoena was directed.
3

In a separate civil action before another Judge of this Court, Plaintiff SFS and
Charles Kopko were defendants. See MAS, Inc. v. NoCheck, LLC et al., E.D. Mich.
Case No. 10-13147 (Murphy, J.). In that lawsuit, SFS, represented by the same
counsel who represents SFS in this matter, filed pleadings alleging that another
company, MAS, Inc (the plaintiff in the prior lawsuit) had “processed illegal
gambling transactions through the First Bank of Delaware using SFS [sic] name
4

6 

Plaintiff alleges in the proposed Second Amended Complaint that
Defendants acted negligently in creating the account in Plaintiff’s
name, engaged in fraud in their communications with Plaintiff
subsequent to the creation of the account and, as a result, caused
Plaintiff to incur damages totaling approximately $10 million (Dkt. 45).

and tax identification number” (No. 10-13147, Dkt. 25, ¶ 84). In another pleading
in that matter, Plaintiff Charles Kopko, then proceeding in pro per, stated in a
response to a motion for summary judgment that MAS had fraudulently opened an
account at First Bank of Delaware in SFS’s name, and that “[a]fter calling [FBD] for
the second time the name on the account was changed to MAS” (No. 10-13147, Dkt.
123 at 16). At this stage of these proceedings, the Court will only consider the
allegations in the Complaint and any incorporated exhibits, but notes that these
material and relevant facts were not included in any of Plaintiff’s pleadings in this
case, or the Affidavit of Mr. Kopko. If Plaintiff believed as of November 2010, when
Mr. Kopko filed that motion in the previous case (and only one month after
receiving the Grand Jury subpoena), that MAS, Inc., fraudulently opened the FBD
account using the name of SFS, it is unclear why these relevant facts were not
included in the allegations in this matter. Reading the allegations in this case, one
is clearly left with the impression that Plaintiff did not know how an account at
FBD was opened in its name. Moreover, the omission of this information seems
calculated to increase the chances that one might hold FBD, rather than MAS, Inc.,
responsible for causing damages to Plaintiff. To these circumstances, the Court
adds the following representations made by counsel at oral argument. During oral
argument, counsel for Plaintiff conceded that after reviewing thousands of records
from FBD during discovery, it found no evidence of any account at FBD in the name
of SFS (Tr. October 2, 2013 at 3-4, 27). Counsel for FBD explained that FBD records
showed that “MAS opened an account at the First Bank of Delaware” (Tr. October 2,
2013 at 31) and that “somehow MAS designated a name on the account of the
account holder as SFS, like in a reference line or E-line. Why they did that, I can’t –
I have no idea.” Id. at 32. Although the ruling on this motion is based only on the
Complaint and any incorporated exhibits, the Court reminds Plaintiff’s counsel that
the truth-finding function of the administration of justice in civil actions is not well
served by the omission of such relevant and material information.
7 

II. ANALYSIS
A.

Motion to Dismiss for Lack of Personal Jurisdiction

On a motion to dismiss for lack of personal jurisdiction pursuant
to Rule 12(b)(2), the plaintiff has the burden of proving the court’s
jurisdiction over the defendant. See Neogen Corp. v. Neo Gen Screening,
Inc., 282 F.3d 883, 887 (6th Cir. 2002); see also Children’s Legal
Services, PLLC v. Shor Levin and Derita, PC, 850 F. Supp. 2d 673, 679
(E.D. Mich. 2012). In ruling upon a motion to dismiss for lack of
personal jurisdiction, the district court has three procedural
alternatives: “[it] may determine the motion on the basis of affidavits
alone; or it may permit discovery in aid of the motion; or it may conduct
an evidentiary hearing on the merits of the motion.” Serras v. First
Tennessee Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989).
“[I]n the face of a properly supported motion for dismissal, the
plaintiff may not stand on his pleadings but must, by affidavit or
otherwise, set forth specific facts showing that the court has
jurisdiction.” Children’s Legal Servs., 850 F. Supp. 2d at 679 (citing
Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). An
evidentiary hearing may be conducted “if the district court concludes
8 

that the written submissions have raised issues of credibility or
disputed issues of fact which require resolution,” in which case the
plaintiff would be required to “show by a preponderance of the evidence
that jurisdiction exists.” American Greetings Corp. v. Cohn, 839 F.2d
1164, 1169 (6th Cir. 1998).
However, where the district court finds no need for an evidentiary
hearing, “the burden of the plaintiff is relatively slight, and the plaintiff
must make only a prima facie showing that personal jurisdiction exists
in order to defeat dismissal.” Children’s Legal Servs., 850 F. Supp. 2d
at 679 (quoting Air Prods. & Controls, Inc. v. Safetech Int’l, Inc., 503
F.3d 544, 549 (6th Cir. 2007) (internal quotations and citations
omitted)); see also Nationwide Mutual Insurance Co. v. Tryg Int’l
Insurance Co., 91 F.3d 790, 792-93 (6th Cir. 1996) (quoting with
approval Conti v. Pneumatic Prods. Corp., 977 F.2d 978, 987 (6th Cir.
1992) (Boggs, J., dissenting) (“[A] showing by a preponderance of the
evidence is not necessary unless the trial court conducts an evidentiary
hearing.”)); Neogen Corp., 282 F.3d at 887.
Likewise, where a “district court rules on a jurisdictional motion
to dismiss made pursuant to Rule 12(b)(2) without conducting an
9 

evidentiary hearing, the court must consider the pleadings and
affidavits in a light most favorable to the plaintiff,” and in order to “‘to
prevent non-resident defendants from regularly avoiding personal
jurisdiction simply by filing an affidavit denying all jurisdictional
facts,’” the court “‘does not weigh the controverting assertions of the
party seeking dismissal.’” CompuServe, Inc. v. Patterson, 89 F.3d 1257,
1262-63 (6th Cir. 1996) (emphasis in original) (quoting Theunissen, 935
F.2d at 1459). “Dismissal in this procedural posture is proper only if all
the specific facts which [the plaintiff] alleges collectively fail to state a
prima facie case for jurisdiction.” Id.
B.
The Individual Defendants are Not Subject to the
Personal Jurisdiction of this Court
In a diversity case, as here, personal jurisdiction over a defendant
is proper only if it comports with the requirements of the state long-arm
statute and federal constitutional due process. See Children’s Legal
Servs., 850 F. Supp. 2d at 679 (E.D. Mich. 2012); see also MCL §§
600.701, 600.705. The Sixth Circuit has held that “[w]here the state
long-arm statute extends to the limits of the due process clause, the two
inquiries are merged and the court need only determine whether
exercising personal jurisdiction violates constitutional due process.”
10 

Children’s Legal Servs., 850 F. Supp. 2d at 679 (quoting Bridgeport
Music, Inc. v. Still N The Water Publ’g, 327 F.3d 472, 477 (6th Cir.
2003)). “The Michigan Supreme Court has construed Michigan’s LongArm Statute to bestow the broadest possible grant of personal
jurisdiction consistent with due process.” Audi AG and Volkswagen of
America, Inc. v. D’Amato, 341 F. Supp. 2d 734, 741 (E.D. Mich. 2004).
In Michigan, personal jurisdiction over individuals may be general, see
MCL § 600.701, or limited, see MCL § 600.705.
General jurisdiction exists independently from the facts of the
action and may be found where the defendant is present in the state at
the time process is served, consents to the state’s jurisdiction, or is
domiciled in the state. See MCL§ 600.701. The Individual Defendants
were not present in Michigan at the time of service of the Summons in
this action, have not consented to the jurisdiction of this Court, and are
not domiciled in Michigan (Dkt. 46; Exs. G-O, Decls. of Individual
Defendants). Accordingly, Plaintiff has alleged no basis for the Court’s
assertion of general personal jurisdiction over any of the Individual
Defendants.
The exercise of limited personal jurisdiction over an out-of-state
11 

defendant is proper where the defendant has “certain minimum
contacts with [the forum] such that maintenance of the suit does not
offend ‘traditional notions of fair play and substantial justice.’” Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v.
Meyer, 311 U.S. 457, 463 (1940)); accord Theunissen v. Matthews, 935
F.2d 1454, 1459-61 (6th Cir. 1991). Minimum-contacts are satisfied
where a defendant has “purposely avail[ed] itself of the privilege of
conducting activities within the forum State.” Hanson v. Denckla, 357
U.S. 235, 253 (1958). “‘Purposeful availment,’ the ‘constitutional
touchstone’ of personal jurisdiction, is present where the defendant’s
contacts with the forum state ‘proximately result from actions by the
defendant himself that create a ‘substantial connection’ with the forum
State.’” Neogen, 282 F.3d at 889 (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475 (1985) (emphasis in original)). The
defendant’s conduct must be such that he should reasonably anticipate
being haled into court. See World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286 (1980).
Under Michigan law, limited personal jurisdiction may be
exercised over an individual if, for example, he or she (a) transacts any
12 

business within the state, (b) does or causes an act to be done, or
consequences to occur, in the state, (c) or owns, uses, or possesses real
or tangible personal property in the state. See MCL § 600.705.
“[J]urisdiction over the individual officers of a corporation cannot be
predicated merely upon jurisdiction over the corporation.” Flagstar
Bank, FSB v. Centerpointe Fin., Inc., 10-14234, 2011 WL 2111984 *3
(E.D. Mich. May 26, 2011) (quoting Balance Dynamics Corp. v. Schmitt
Indus., 204 F.3d 683, 698 (6th Cir. 2000)). The fact that a corporation
does business in Michigan, without more, is insufficient for a court to
assert personal jurisdiction over the directors and officers of that
corporation. See id. Further, the fact that an agent of a company has
an ownership interest or otherwise exercises control over the company
is not a sufficient basis on which to assert limited personal jurisdiction
over that individual in another state in which the company does
business. See Lown Cos., LLC v. Piggy Paint, LLC, 11-911, 2012 WL
3277188 *3 (W.D. Mich. Aug. 9, 2012).
Plaintiff has not pled sufficient facts to subject the Individual
Defendants to this Court’s jurisdiction. The proposed Second Amended
Complaint alleges no specific facts demonstrating that the Individual
13 

Defendants purposely availed themselves of the privilege of acting in
Michigan. Plaintiff avers only that the Court has jurisdiction by virtue
of the fact that the Individual Defendants are “executives” of FBD (Dkt.
45 ¶ 16). The Court granted Plaintiff a period a limited discovery to
gather evidence on the question of the Individual Defendants’
connections to this forum. Despite having had such discovery from
Defendants, Plaintiff fails to offer any new, or materially different
evidence relating to personal jurisdiction, beyond the facts alleged in
the original Complaint (Dkt. 1).
The proposed Second Amended Complaint further alleges that: (1)
the Individual Defendants were collectively negligent in failing to
prevent FBD from permitting the opening of a fraudulent account in
Plaintiff’s name at FBD; (2) each of the Individual Defendants had the
responsibility to manage and provide oversight of FBD; (3) Defendants
Madonna, Silverman, Wildstein, Price, Marshall, Primus, Vandercook,
and Mignogna failed to prevent FBD’s misrepresentation of the
existence of that alleged account; and (4) Defendant Bastable allegedly
misrepresented the existence of the account in Plaintiff’s name at FBD.
Plaintiff does not allege that any of these omissions or acts occurred in
14 

Michigan or that Defendant Bastable – or any of the other Individual
Defendants – had any knowledge that Plaintiff was even located in
Michigan.
Plaintiff has not alleged facts to establish that Defendants
Madonna, Silverman, Wildstein, Price, Marshall, Primus, Vandercook,
and Mignogna ever had any contacts with Michigan, much less contacts
sufficient to allow the assertion of limited personal jurisdiction over any
of them in this matter.5 Plaintiff’s specific allegation that Defendant
Bastable misrepresented the existence of the account in SFS’s name
involved a single telephone call on August 2, 2010, from Plaintiff to
FBD, made from an unknown location, and received in Delaware or
Pennsylvania. Plaintiff also alleges that Defendant Bastable later
returned another call made by Mr. Kopko to FBD, during which she
corrected that alleged misrepresentation. It has been held, however,
that telephone calls are insufficient to establish limited personal
jurisdiction over an out-of-state defendant, especially when those
telephone calls were made by a corporate officer acting in his or her

At oral argument, the Court questioned Plaintiff’s counsel as to whether any
evidence had been uncovered during the limited discovery period that connected any
of these Individual Defendants to Michigan and counsel conceded that there was
none (October 2, 2013 Tr. At 14-15). 
5

15 

official capacity. See Keeley v. Airgas, Inc., 08-111, 2008 WL 5422691
(W.D. Mich. Dec. 29, 2008) (citing Witbeck v. Bill Cody’s Ranch Inn, 411
N.W.2d 439 (Mich. 1987)); AM Diagnostics, Inc. v. Denney, 810 F. Supp.
887, 895-96 (E.D. Mich. 1993); Weller v. Cromwell Oil Co., 504 F.2d 927,
931 (6th Cir. 1974) (finding no personal jurisdiction over officers of outof-state corporation, and holding that “[i]f such suits against officers of
national corporations were ever permitted, the individuals could be
sued in every state of the union whenever they make telephone calls or
write letters to a customer who claims that they constitute
misrepresentations”).
More recently, in Balance Dynamics Corp. v. Schmitt Indus. Inc.,
the Sixth Circuit clarified its holding in Weller, and its position on the
“fiduciary shield doctrine,” by expressing agreement with courts that
exercised personal jurisdiction over corporate officers where the officers
were personal, active participants in allegedly tortious or violative
conduct. See 204 F.3d 683, 697–98 (6th Cir. 2000). In Balance
Dynamics, the Sixth Circuit explained that “where an out-of-state agent
is actively and personally involved in the conduct giving rise to the
claim, the exercise of personal jurisdiction should depend on traditional
16 

notions of fair play and substantial justice; i.e. whether she
purposefully availed herself of the forum and the reasonably foreseeable
consequences of that availment.” Id.
Plaintiff’s allegations concerning Defendant Bastable are
insufficient to permit the Court to assert limited personal jurisdiction
over her. The only arguable connections that Defendant Bastable had
to Michigan were two telephone calls – one on August 2, 2010 from Mr.
Kopko (originating from an unknown location, perhaps in Michigan, but
perhaps not – Plaintiff does not specify) to FBD, wherein Defendant
Bastable allegedly misrepresented the existence of an SFS account at
FBD (Dkt. 45 ¶ 28), and a second in October 2010, wherein Defendant
Bastable returned a call from Mr. Kopko and allegedly “acknowledged”
that there was an SFS account at FBD (Dkt. 45 ¶ 32). There is no
allegation, or evidence presented to the Court, that Defendant Bastable
knew that she was talking on the telephone to individuals in Michigan.
Furthermore, Plaintiff has not established that these two alleged
telephone calls constitute Defendant Bastable’s “active participation” in
the allegedly tortious conduct. The conduct alleged does not
demonstrate that Defendant Bastable had a substantial connection to
17 

Michigan, such that traditional notions of fair play and substantial
justice would lead her to believe that she might be haled into court in
Michigan or that she purposefully availed herself of this forum.
Accordingly, the Court finds that there is no personal jurisdiction over
any of the Individual Defendants, and Plaintiff’s claims against them
are dismissed without prejudice.
C. Standard for Motion for Leave to Amend
Rule 15(a)(2) provides that “a party may amend its pleading only
with the opposing party’s written consent or the court's leave. The court
should freely give leave when justice so requires.” Fed. R. Civ. P.
15(a)(2). However, amendments should not be permitted in instances of
“undue delay in filing, lack of notice to the opposing party, bad faith by
the moving party, repeated failure to cure deficiencies by previous
amendments, undue prejudice to the opposing party, and futility of
amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962). “The test for
futility ... does not depend on whether the proposed amendment could
potentially be dismissed on a motion for summary judgment; instead, a
proposed amendment is futile only if it could not withstand a Rule

18 

12(b)(6) Motion to Dismiss.” Rose v. Hartford Underwriters Ins. Co.,
203 F.3d 417, 421 (6th Cir. 2000).
“Rule 12(b)(6)…allow(s) a defendant to test whether, as a matter
of law, the plaintiff is entitled to legal relief if all the facts and
allegations in the complaint are taken as true.” Rippy ex rel. Rippy v.
Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (citing Mayer v. Mylod, 988
F.2d 635, 638 (6th Cir. 1993)). Under Rule 12(b)(6), the complaint is
viewed in the light most favorable to the plaintiff, the allegations in the
complaint are accepted as true, and all reasonable inferences are drawn
in favor of the plaintiff. See Bassett v. Nat’l Collegiate Athletic Ass’n,
528 F.3d 426, 430 (6th Cir. 2008). “[A] judge may not grant a Rule
12(b)(6) motion based on a disbelief of a complaint’s factual allegations.”
Saglioccolo v. Eagle Ins. Co., 112 F.3d 226, 228–29 (6th Cir. 1997)
(quoting Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th
Cir. 1995)). “However, while liberal, this standard of review does
require more than the bare assertion of legal conclusions.” Tatum, 58
F.3d at 1109; Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478,
488 (6th Cir. 2009).

19 

“To survive a motion to dismiss, [a plaintiff] must plead ‘enough
factual matter’ that, when taken as true, ‘state[s] a claim to relief that
is plausible on its face.’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556,
570, (2007). Plausibility requires showing more than the “sheer
possibility” of relief but less than a ‘probab[le]’ entitlement to relief.
Ashcroft v. Iqbal, [556 U.S. 662, 678] (2009).” Fabian v. Fulmer
Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). “Where a complaint
pleads facts that are ‘merely consistent with’ a defendant’s liability, it
‘stops short of the line between possibility and plausibility of
entitlement to relief.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550
U.S. at 557).
Consideration of a motion to dismiss under Rule 12(b)(6) is
confined to the pleadings. See Jones v. City of Cincinnati, 521 F.3d 555,
562 (6th Cir. 2008). Assessment of the facial sufficiency of the complaint
ordinarily must be undertaken without resort to matters outside the
pleadings. See Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104
(6th Cir. 2010). However, “documents attached to the pleadings become
part of the pleadings and may be considered on a motion to dismiss.”
Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327,
20 

335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)); see also Koubriti v.
Convertino, 593 F.3d 459, 463 n. 1 (6th Cir. 2010). Even if a document
is not attached to a complaint or answer, “when a document is referred
to in the pleadings and is integral to the claims, it may be considered
without converting a motion to dismiss into one for summary
judgment.” Commercial Money Ctr., 508 F.3d at 335–36. If the plaintiff
does not directly refer to a document in the pleadings, but that
document governs the plaintiff’s rights and is necessarily incorporated
by reference, then the motion need not be converted to one for summary
judgment. See Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir.
1997). In addition, “a court may consider matters of public record in
deciding a motion to dismiss without converting the motion to one for
summary judgment.” Northville Downs v. Granholm, 622 F.3d 579 (6th
Cir. 2010) (citing Commercial Money Ctr., Inc., 508 F.3d at 335–36).
D.

Plaintiff’s Proposed Second Amended Complaint Fails
to State a Claim Upon Which Relief Can Be Granted
Against FBD

The proposed Second Amended Complaint raises two claims: (1)
negligence; and (2) fraud. Neither states a claim upon which relief can
be granted.
21 

i) Negligence
Plaintiff’s negligence claim (Count I) contains four parts, three
involving the alleged conduct or omissions of FBD, and one for the
alleged gross negligence of the Individual Defendants. As stated
earlier, the Court has no personal jurisdiction over the Individual
Defendants, thus the discussion below will focus on the alleged
negligence of FBD. The elements of a negligence claim are “duty,
breach of that duty, causation, and damages.” Brown v. Brown, 478
Mich. 545, 552 (2007). Duty is “the legal obligation to conform to a
specific standard of conduct in order to protect others from
unreasonable risks of injury.” Lelito v. Monroe, 273 Mich. App. 416, 419
(2006). “The threshold question in a negligence action is whether the
defendant owed a duty to the plaintiff.” Fultz v. Union–Commerce
Assoc., 470 Mich. 460, 463 (2004). Absent a legal duty, there is no
liability. See Beaty v. Hertzberg & Golden, PC, 456 Mich. 247, 262
(1997) (“It is axiomatic that there can be no tort liability unless
defendants owed a duty to plaintiff”). “Duty is essentially a question of
whether the relationship between the actor and the injured person gives
rise to any legal obligation on the actor’s part for the benefit of the
22 

injured person.” Moning v. Alfono, 400 Mich. 425, 438–39 (1977). This
relationship must be one that “the law or society views as sufficiently
strong” to require action or prohibit inaction by another. Rakowski v.
Sarb, 269 Mich. App. 619, 631 (2006) (quoting Samson v. Saginaw
Professional Bldg., Inc., 393 Mich. 393, 406 (1975)). Duties may be
created by statute, ordinance, contract, common law, or public policy.
Under Michigan law, the existence of a general duty is a question to be
decided by the court. See Simko v. Blake, 448 Mich. 648, 655 (1995).
The paragraphs of the proposed Second Amended Complaint
addressing FBD’s alleged duty include: ¶ 59 (FBD “failed to comply with
the minimum requirements set forth by [the Customer Identification
Program] CIP by not verifying the identity of the principles [sic] of SFS
prior to opening the account pursuant to 31 CFR 103.121(b)(1)”); ¶ 61
(FBD’s failure to verify information violated 31 CFR 103.121(b)(2)(ii)); ¶
65 (SFS was never asked for information for the account in violation of
31 CFR 103.121(b)(2)(1)); ¶ 68 (FBD “had knowledge of its failure to
institute an adequate CIP and safe and sound banking policies and
procedures); and ¶ 80 (FBD “failed to implement proper procedures as
required by CIP of the Bank Secrecy Act.”).
23 

These allegations do not contain facts showing that FBD owed
Plaintiff a legal duty sufficient to give rise to a negligence claim. As for
the federal statute and regulations cited by Plaintiff in the proposed
Second Amended Complaint, “the Bank Secrecy Act does not create a
private right of action.” Nouri v. TCF Bank, 10-12436, 2011 WL 836764
*6 (E.D. Mich. Mar. 9, 2011) (quoting AmSouth Bank v. Dale, 386 F.3d
763, 777 (6th Cir. 2004)); see also El Camino Resources, Ltd. v.
Huntington Nat'l. Bank, 722 F. Supp. 2d 875, 923 (W.D. Mich. 2010);
James v. Heritage Valley Fed. Credit Union, 197 F. App’x 102, 106 (3rd
Cir. 2006) (a “claim under the Bank Secrecy Act, 31 U.S.C. § 5318, does
not authorize a private cause of action against a financial institution or
its employees”). Therefore, under any theory of negligence predicated
on CIP or Bank Secrecy Act compliance, monitoring, or implementation
– whether pleaded as a failure to exercise due care, a failure to exercise
due diligence, a failure to supervise employees, respondeat superior, or
gross negligence – the law does not provide a basis for imposing a duty
of care owed by FBD to Plaintiff.
The Court must next consider if some general duty exists
sufficient to give rise to a negligence claim. The essence of the
24 

Plaintiff’s negligence claim is that FBD carelessly allowed an account to
be opened at FBD in Plaintiff’s name. Plaintiff has alleged that “Fifth
Third indicated the reason for the termination was that SFS had an
account with FBD and that SFS was processing illegal gambling
transactions with some of (sic) Fifth Third customer accounts” (Dkt. 45,
Ex. 1 ¶ 26) (emphasis added). However, as discussed in greater detail
below, the factual allegations of the proposed Second Amended
Complaint – and the attachments thereto – do not support the
allegation that SFS actually had an account at FBD that created a
customer relationship. “[T]he general rule that the court must accept
as true all allegations in the complaint ‘is inapplicable to legal
conclusions,’” which “means that conclusory recitals of the elements of a
claim, including legal conclusions couched as factual allegations ‘do not
suffice.’” Center for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d
365, 369 (6th Cir. 2011) (citing Iqbal, 556 U.S. at 678). “While legal
conclusions can provide the framework of a complaint, they must be
supported by factual allegations.” Iqbal, 556 U.S. at 679.
Plaintiff alleges that it was in fact a “customer” of FBD – albeit
due to a customer relationship that allegedly was fraudulently-created,
25 

without Plaintiff’s knowledge – and that its negligence claim is based
upon an alleged duty owed by FBD to Plaintiff as its customer. Plaintiff
relies on Patrick v. Union State Bank, 681 So. 2d 1364 (Ala. 1996),
which held that a bank owes a duty of reasonable care to the person in
whose name an account is opened to ensure the person opening the
account is not an imposter. Id. at 1371. However, this case does not
support the existence of any duty owed by FBD to Plaintiff.
First, Patrick addressed a question of Alabama state law and is
not binding upon this Court. Second, Patrick “has met with near
universal disapproval,” including in multiple subsequent decisions by
the Alabama Supreme Court. See Smith v. Amsouth Bank, Inc., 892
So.2d 905 (Ala. 2004); Brunson v. Affinity Federal Credit Union, 972
A.2d 1112, 1123-24 (N.J. 2009) (providing a lengthy summary of cases
rejecting or distinguishing Patrick); Greer v. Honda Mfg. of Ala., LLC,
280 Fed. Appx. 808, 813 (11th Cir. 2008) (limiting Patrick to question of
foreseeable harm); Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 226
(4th Cir. 2002) (citing Patrick only as supporting proposition contrary to
main proposition) This Court declines to follow the holding of Patrick.

26 

Moreover, the allegations in the proposed Second Amended
Complaint and the attachments thereto, do not raise a plausible claim
that Plaintiff was in fact a customer of FBD. The proposed Second
Amended Complaint itself alleges that Plaintiff did not intend to
establish, or have any knowledge of, any account in its name with FBD.
The proposed Second Amended Complaint alleges that Plaintiff learned
of an account at FBD in SFS’s name from two sources: Fifth Third
Bank and FBD Vice President Sian Bastable. As to Fifth Third Bank,
Plaintiff relies upon the affidavit of Fifth Third Vice President Douglas
Sammons, attached to the proposed Second Amended Complaint, to
support its allegation that a fraudulent account existed at FBD in
Plaintiff’s name (Dkt. 45, Ex. 1 ¶ 26). However, Sammons’ affidavit
does not state that an account existed at FBD in the name of SFS.
Since this affidavit is central to Plaintiff’s contention that a fraudulent
account was opened at FBD in Plaintiff’s name, the entire affidavit
bears quoting:
Douglas Sammons, being first duly sworn., deposes and says:
1. During the year of 2010, I was employed by Fifth Third
Bank as a Vice President.

27 

2. In addition to my duties as a Vice President of the bank. I
also was the Relationship Manager (RM) for SFS Check, LLC
which was located in Novi, Michigan.
3. While during the exercise of my duties as the RM for SFS
Check, I became aware that First Bank of Delaware (FBD) was
engaged in the processing of ACH payments through the account
of SFS Check.
4. After our investigation, it was determined the ACH
transactions being processed through the account of SFS Check at
Fifth Third Bank were illegal internet gambling transactions.
5. After having made this discovery, on or about July 2010, I
sent an email to SFS Check informing them, effective August,
2010, Fifth Third Bank will no longer be sponsoring SFS Check
into MasterCard RPPS.
6. I also informed SFS Check that Fifth Third Bank will no
longer allow them to process ACH transactions through the Fifth
Third accounts.
7. I further state that our Anti-Money Laundering (AML) at
Fifth Third Bank had informed me that SFS Check was
processing with another Bank (First Bank of Delaware) and they
were processing gambling transactions that were hitting the Fifth
Third accounts.
8. I further state, I did receive a response back from SFS
stating it was not them and it must be some kind of mistake.
9. I responded to SFS’s email concerning the mistake by
stating according to our investigation, SFS Check’s name is
appearing on the ACH transactions originated by FBD.
10. I further stated to SFS that our AML area will not
support any transactions that one of our customers is involved in
whether they know it or not.
28 

11. On or about August, 2010 doing the exercise of my duties
as Fifth Third Bank's Vice President and RM for SFS Check I
informed SFS that Fifth Third Bank had decided that it would no
longer be processing for their company.
12. I informed SFS that Fifth Third Bank would be notifying
MasterCard RPPS that it would no longer be sponsoring their
company, effective August, 2010.
13. I also informed SFS Check that we, Fifth Third Bank,
will also be turning off their capability to initiate ACH
transactions through Fifth Third’s accounts effective August,
2010.
14. I further informed SFS Check that this was a firm
decision by us, Fifth Third Bank, and we would not be making any
adjustments to this plan as a result of the illegal gambling
transactions and their processing with FBD bank.
15.
I further state that Fifth Third Bank did close SFS
Check (sic), account as a result of the activities stated above.
(Dkt. 45, Ex. 3).
Sammons clearly states that the ACH transactions were being
processed through Plaintiff’s account at Fifth Third Bank (Dkt.45, Exh.
1, ¶ 3). It does not say (contrary to what Plaintiff alleges in ¶ 26 of the
proposed Second Amended Complaint; Dkt. 45) that Fifth Third
“indicated the reason for the termination was that SFS had an account
with FBD and SFS was processing illegal gambling transactions . . .”
Sammons’ affidavit is consistent with Plaintiff’s allegations elsewhere
29 

in the proposed Second Amended Complaint: “[a]fter an investigation
SFS discovered that Defendant FBD was processing ACH transactions
through its SFS account held at Fifth Third Bank”) (Dkt. 45 ¶ 24). The
proposed Second Amended Complaint does not make any plausible
claim that Plaintiff learned from Fifth Third Bank that there was “an
account in Plaintiff’s name” at FBD because the affidavit attached to
the proposed Second Amended Complaint from Fifth Third Bank
contradicts this claim.
The proposed Second Amended Complaint also states that
Plaintiff later learned from FBD Vice President Sian Bastable, who had
earlier told Plaintiff that there were no records showing any account in
SFS’s name, that in fact “they had opened and did have an SFS account
at FBD” but that no information could be provided because Plaintiff was
not a signatory on the account (Dkt. 45 ¶ 32, 33). These allegations,
taken as true, do not plausibly allege that SFS was in fact a customer of
FBD to whom FBD owed a duty. If anything, they allege that SFS
learned that an apparently fraudulent account had been opened by
someone using SFS’s name. SFS was not in fact a customer of FBD and
had never established an account at FBD. The allegations in the
30 

proposed Second Amended Complaint claim that an account was
established at FBD in SFS’s name either by fraud or mistake, but that
is not the same as saying that Plaintiff was a customer of FBD; indeed,
it is saying the contrary: the real SFS was never a customer of FBD
and never established an account with FBD. Because Plaintiff has
failed to adequately allege that it was a customer of FBD, it has not
made a plausible claim that FBD owed a duty to Plaintiff sufficient to
support a claim of negligence.
Since Plaintiff has not adequately alleged that it was ever a
customer of FBD, it has not presented a viable negligence claim. A
bank’s duty flows to its customers, and not third parties such as SFS.
See Fremont Reorganizing Group v. Duke, 811 F. Supp. 2d 1323, 1345
(E.D. Mich. 2011) citing El Camino Res., Ltd. v. Huntington Nat’l Bank,
722 F. Supp. 2d 875, 907 (W.D. Mich. 2010) (“Michigan law, in accord
with the universal rule in this country, holds that a bank’s relationship
is with its customer and that the bank owes third parties no duty of
care to monitor a customer’s activities”).

31 

Accordingly, because Plaintiff has failed to allege that FBD
breached a legally cognizable duty, its negligence against FBD fails to
state a claim upon which relief can be granted, and is dismissed.
ii) Fraud
As to Plaintiff’s proposed fraud claim, Plaintiff must plead specific
facts which support each element of fraud. To assert a claim of fraud
under Michigan law:
The general rule is that to constitute actionable fraud it
must appear: (1) [t]hat defendant made a material
representation; (2) that it was false; (3) that when he made it
he knew that it was false, or made it recklessly, without any
knowledge of its truth, and as a positive assertion; (4) that
he made it with the intention that it should be acted upon by
plaintiff; (5) that plaintiff acted in reliance upon it; and (6)
that he thereby suffered injury. Each of these facts must be
proved with a reasonable degree of certainty, and all of them
must be found to exist; the absence of any one of them is
fatal to a recovery.
Hi-Way Motor Co. v. Int’l Harvester Co., 247 N.W.2d 813, 816 (Mich.
1976); see also, Gen. Ret. Sys. of Detroit. v. Onyx Capital Advisors, LLC,
10-11941, 2011 WL 4528304 *9 (E.D. Mich. Sept. 29, 2011).
Plaintiff’s fraud claim is based on the allegation that, on August 2,
2010, Defendant Bastable allegedly told Plaintiff that there was no
account of SFS at FBD (Dkt. 45 ¶¶ 27-29). As discussed above, Plaintiff
32 

alleges that this statement (that there was no SFS account at FDB) was
false. (Dkt. 45 ¶¶ 107-110). Plaintiff alleges that it “did, in fact, rely on
these representations and did so to its detriment” (Dkt. 45 ¶ 111) and,
as a result, sustained “enormous damages” (Dkt. 45 ¶ 224).
However, according to the facts alleged, Fifth Third Bank
terminated its relationship with Plaintiff effective August 2, 2010.
Fifth Third Bank took this action independently of FBD’s allegedly false
statement denying the existence of any SFS account at FBD (Dkt. 45 ¶¶
25-29; Ex. 1). According to Fifth Third Bank, it notified Plaintiff of its
decision to terminate their relationship “in July 2010” (Dkt. 45; Ex. 1 ¶
5); the alleged misrepresentation from Defendant Bastable allegedly
occurred on August 2, 2010 (Dkt. 45 ¶ 108) – after Fifth Third Bank had
decided to terminate its relationship with SFS. Accordingly, the event
that caused SFS’s purported damages – the termination of its banking
activities with Fifth Third Bank and the unidentified lost business
opportunities flowing from that termination – happened before FBD
made any allegedly false statement to Plaintiff.6

6

At oral argument, the Court asked:
THE COURT:

Hadn’t they – hadn’t the harm occurred from the
closing of the Fifth Third Bank account and didn’t
33 

Although the proposed Second Amended Complaint invokes the
formulaic and conclusory language in ¶ 111: “SFS did, in fact, rely on
these representations and did so to its detriment,” the Complaint does
not include any specific factual allegations showing that Plaintiff was
harmed in any way as a result of relying upon FBD’s statement that
there was no SFS account at FBD.7 It is clear that the false statement
could not have caused Fifth Third Bank to sever ties with Plaintiff
because that decision was made before the false statement was
allegedly spoken. Thus, the proposed Second Amended Complaint thus
fails to adequately allege the fifth and sixth elements of fraud, that: (5)
[the] plaintiff acted in reliance upon [the alleged misrepresentation];
and (6) that [the plaintiff] thereby suffered injury.”

that occur before the allegedly false statement was
made by Ms. Bastiable?

MR. BURKETT:

That is correct, Your Honor. But that’s part of the
harm that would occur. The harm was going to
occur anyway because of what – what the Bank of
Delaware was doing.

Tr. October 3, 2013 at 23-24.

7
The Affidavit of Mr. Kopko also fails to specify how the allegedly false
statement caused SFS any damages. Rather, it states that the fraudulent account
opening itself, and the illegal activities run through that account, caused SFS to
incur damages” (Dkt. 45; Ex. 2 ¶ 11).
34 

Moreover, when deciding a motion to dismiss under Rule 9(b) for
failure to plead fraud with particularity, the court “need not accept
claims that consist of no more than mere assertions and unsupported or
unsupportable conclusions.” Travis, 2012 WL 3516548 *4 (quoting
Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 876 (6th Cir.
2006)). “If a complaint fails to show facial plausibility allowing a court
to infer that a defendant maliciously, intentionally, or knowingly
committed fraud, then the claim should be dismissed.” Gen. Ret. Sys.,
2011 WL 4528304, at *9. Plaintiff’s fraud claim fails to satisfy the
requirements of Rule 9(b). Indeed, the proposed Second Amended
Complaint fails to plead fraud with sufficient particularity to allow an
inference that the defendant maliciously, intentionally, or knowingly
committed fraud.
Considering each of the elements that must be pled to make out a
fraud allegation, the proposed Second Amended Complaint: (1) states
that Defendant made a material representation; (2) that it was false; (3)
does not state that when Bastable made the statement, she knew that it
was false, or made it recklessly, without any knowledge of its truth, and
as a positive assertion; (4) does not state that the statement was made
35 

with the intention that it should be acted upon by Plaintiff; (5) contains
no allegations that Plaintiff acted in reliance upon the false statement;
and (6) does not state that Plaintiff suffered injury as a result of relying
on the false statement. The proposed Second Amended Complaint
contains no facts detailing the intent of FBD in making this
representation; the relationships between, and flow of money by and
among, FBD, Plaintiff, and/or Fifth Third Bank in support of any
alleged fraudulent scheme; how Fifth Third Bank customer accounts
were implicated in FBD’s alleged use of an account in Plaintiff’s name;
how FBD allegedly benefitted from its alleged misrepresentation to
Plaintiff about the nonexistence of an account; how FBD’s alleged
misrepresentation regarding the nonexistence of an account caused any
of Plaintiff’s alleged damages; or how Plaintiff arrived at its claimed
damages amount. In sum, the proposed Second Amended Complaint is
completely devoid of the particularity required of fraud claims under
Rule 9(b), and fails as a matter of law.
III. CONCLUSION
For the reasons set forth above, Plaintiff’s motion for leave to
amend (Dkt. 45) is DENIED. Specifically, the Court finds that there is
36 

no personal jurisdiction over any of the Individual Defendants,
therefore any claims against them are DISMISSED WITHOUT
PREJUDICE. The Court further finds that Plaintiff’s proposed Second
Amended Complaint fails to state a claim upon which relief can be
granted against Defendant FBD, therefore Plaintiff’s proposed
amendment is futile and the claims asserted against Defendant FBD
are DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Dated: December 30, 2013

Certificate of Service
I hereby certify that this Order was electronically submitted on
December 30, 2013, using the CM/ECF system, which will send
notification to each party.
s/A. Chubb
Case Manager

37