Marano, M.D. et al v. RBS Citizens Financial Group, Inc. et al

Filing 23

MEMORANDUM AND ORDER adopting 15 Report and Recommendations, and granting the 3 Motion for Partial Judgment on the Pleadings. The 11 Motion to Remand to State Court is denied and the 12 Motion to Voluntarily Dismiss Count IV (the sole federal claim in the Complaint) is granted. So Ordered by Chief Judge Mary M. Lisi on 2/20/2013. (Duhamel, John)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND

ALBERT J. MARANO, M.D., and
ALBERT J. MARANO, M.D., INC.,
Plaintiffs,

v.

C.A. No. 12-639 ML

RBS CITIZENS FINANCIAL GROUP
INC., and STEPHEN MARANO,
Defendants.

MEMORANDUM AND ORDER
This matter is before the Court on Plaintiffs’ objections to a Report and Recommendation
issued by United States Magistrate Judge Patricia Sullivan. Magistrate Judge Sullivan
recommended that Defendant RBS Citizens Financial Group’s (“Citizens”) motion for partial
judgment on the pleadings be granted. For the reasons set forth below, this Court adopts the
recommendation of the Magistrate Judge.
I. Standard of Review
Upon the filing of specific written objections, the Court must conduct a plenary review of
a Report and Recommendation addressing dispositive pretrial matters. See Fed. R. Civ. P. 72(b).
The Court must “determine de novo any part of the [M]agistrate [J]udge’s disposition that has
been properly objected to.” Id. at (3). The Court may “accept, reject, or modify the
recommended disposition; receive further evidence; or return the matter to the [M]agistrate
[J]udge with instructions.” Id.
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II. Objections to the Report and Recommendation
Plaintiffs object to the Magistrate Judge’s findings that, if given the opportunity, the
Rhode Island Supreme Court would hold that the discovery rule and the continuing tort theory do
not apply to a check conversion claim brought under the Rhode Island Uniform Commercial
Code (“U.C.C.”), see generally R.I. Gen. Laws § 6A-3-420, and that the conversion claim
displaced Plaintiffs’ negligence and breach of contract claims. Plaintiffs also fault the Magistrate
Judge for denying their request to certify the question of whether the discovery rule or the
continuing tort theory apply to check conversion claims brought pursuant to the U.C.C.
III. Analysis
A. The Discovery Rule
In Fuscellaro v. Industrial National Corporation, 368 A.2d 1227 (R.I. 1977), the Rhode
Island Supreme Court held that the discovery rule did not apply to actions for conversion under
the U.C.C. Id. In arriving at this conclusion, the Rhode Island Supreme Court found that
in the absence of fraud by those invoking the statute of limitations, a cause of
action in conversion accrues at the time the defendant wrongfully exercises
dominion, regardless of the plaintiff’s ignorance. The finality of transactions
promoted by an ascertainable definite period of limitations is essential to the free
negotiability of instruments on which commercial welfare so heavily depends.
Our law of commercial paper has codified a public policy strongly favoring such
finality.
Id. at 1231. In addition to stressing the significance of finality in commercial transactions and
free negotiability of instruments, the Fuscellaro court found that the law of conversion presumes
that a property owner knows what and where his assets are and is in the best position to monitor
those assets. Id. Thus, in Rhode Island, property owners bear the risk of the failure to monitor
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their assets. Id.
The Rhode Island Supreme Court has, on two occasions, reaffirmed Fuscellaro’s holding.
See O’Coin v. Woonsocket Institution Trust Co., 535 A.2d 1263, 1266 (R.I. 1988) (noting that
“in Fuscellaro . . . we declined to apply the discovery rule in an action against a bank for cashing
checks upon forged endorsements, holding that [t]he finality of transactions promoted by an
ascertainable definite period of liability is essential to the free negotiability of [financial]
instruments”) (internal quotation marks and citation omitted); Lee v. Morin, 469 A.2d 358, 361
(R.I. 1983) (discussing the discovery rule and citing Fuscellaro for the propositions that the law
of negotiable instruments required a finality of transaction and “a cause of action for conversion
accrued at the time of conversion”). Plaintiffs point to no convincing authority suggesting that
the Rhode Island Supreme Court has rejected or departed from Fuscellaro. In fact, just the
opposite is true; the Rhode Island Supreme Court has relied on the holding in Fuscellaro in
O’Coin and Lee. Rhode Island is among the “overwhelming majority of jurisdictions” that
refuses to apply the discovery rule to claims for conversion brought under the U.C.C. Advance
Dental Care, Inc. v. Suntrust Bank, ___ F. Supp. 2d ___, 2012 WL 6019097, at *3 (D. Md. 2012)
(internal quotation marks and citation omitted).
Undaunted by the clear direction of the Rhode Island Supreme Court, Plaintiffs urge this
Court to follow the reasoning in Fine v. Sovereign Bank, No. 06cv11450-NG, 2010 WL 3001194
(D. Mass. July 28, 2010). In Fine, the District Court predicted that the Massachusetts Supreme
Judicial Court would apply the discovery rule to a conversion claim brought under the
Massachusetts U.C.C. Id. at *5. The Fine court concluded that when “the rights of an individual
to obtain redress . . . come into conflict with the interest of the flow of commercial transactions,
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the judiciary should favor the course that protects individual rights.” Id. (internal quotation
marks and citation omitted).
Plaintiffs’ reliance on Fine is unconvincing for several reasons. First, Fine is not binding
authority. Second, the Fine court was writing on a blank slate; the Massachusetts Supreme
Judicial Court had not yet spoken on the question of the application of the discovery rule to
actions for conversion brought under the U.C.C. The legal landscape in Rhode Island is wellchartered on this issue; Fuscellaro rejects the reasoning relied upon by the Fine court.
Furthermore, the Fine court relied upon Massachusetts’ “expansive adoption of the
discovery rule.” Fine, 2010 WL 3001194 at *5. The Rhode Island Supreme Court has not
adopted the same broad application of the discovery rule. See generally Moore V. Rhode Island
Board of Governors for Higher Education, 18 A.3d 541, 544 (R.I. 2011) (“[t]he discovery rule
applies in narrowly circumscribed factual situations. . .”) (internal quotation marks and citation
omitted). In Rhode Island, the discovery rule “serves to protect individuals suffering from latent
or undiscoverable injuries. . . .” Mendes v. Factor 41 A.3d 994, 1006 (R.I. 2012) (internal
quotation marks and citation omitted). Plaintiffs’ injury is certainly not a latent or
undiscoverable injury; Plaintiffs surely were in the best position to monitor their assets and
discover the conversion. See generally Fuscellaro, 368 A.2d at 1231; see also Lee, 469 A.2d at
361 (“it would be much easier for a person to discover a wrongfully converted negotiable
instrument, payable to him, than it would for the owner of a house to discover defects before they
become evident”).
Plaintiffs have failed to convince the Court that the Rhode Island Supreme Court would
abrogate Fuscellaro. Fuscellaro is controlling precedent. Thus this Court concludes that the
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Magistrate Judge did not err in refusing to apply the discovery rule to Plaintiffs’ conversion
claim.
B. The Continuing Tort Theory
Neither party argued a continuing tort theory in their initial memoranda submitted to the
Magistrate Judge. The subject was raised during oral argument by the Magistrate Judge. After
oral argument, the Magistrate Judge requested further briefing on the subject and the parties
submitted letter briefs. Plaintiffs, relying on Bartlett v. Fitts, No. PC 00-2002, 2007 WL
1581475 (R.I. Super. Ct. May 17, 2007), now contend that Rhode Island recognizes the
continuing tort theory and it should be applied in this matter.
The Court has reviewed the Magistrate Judge’s analysis of the continuing tort theory and
Plaintiffs’ objections. In this Court’s judgement, the Magistrate Judge accurately recounted the
record facts and properly applied the pertinent law. Thus, the Court adopts the reasoning and
conclusion of the Magistrate Judge that the Rhode Island Supreme Court would not adopt the
continuing tort theory in a conversion claim brought under the U.C.C.
C. Certification
Plaintiffs next argue that the Magistrate Judge erred by not certifying the questions
concerning whether the Rhode Island Supreme Court would recognize the discovery rule or the
continuing tort theory in a conversion claim brought under the U.C.C.1
Certification to a state Supreme Court is not a recourse to be taken lightly. McGovern

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Plaintiffs did not request that the Magistrate Judge certify the question of whether the continuing tort
theory applies to a conversion claim brought under the U.C.C. As a result, Plaintiff has waived any such argument
before this Court. Paterson-Leitch Co., Inc. v. Massachusetts Municipal Wholesale Electric Co., 840 F.2d 985 (1st
Cir. 1988). Plaintiffs’ waiver, however, is of no moment because as discussed below, even if Plaintiffs had requested
certification, certification is not appropriate in these circumstances.

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Physical Therapy Associate, LLC v. Metropolitan Property & Casualty Insurance Co., 802 F.
Supp. 2d 306 (D. Mass. 2011). “When state law is sufficiently clear . . . to allow a federal court
to predict its course, certification is both inappropriate and an unwarranted burden on the state
court.” In re Citigroup, Inc., 535 F.3d 45, 62 (1st Cir. 2008) (internal quotation marks and
citation omitted).
Fuscellaro is controlling precedent in Rhode Island. The Fuscellaro court found that a
finality of transactions promoted by an ascertainable definite period of liability was essential to
negotiability and the general welfare of the commercial system. Fuscellaro, 368 A.2d at 1231.
Employing the discovery rule or the continuing tort theory would militate against finality and
certainty of obligation which is clearly inconsistent with the Fuscellaro court’s findings. The
Magistrate Judge properly refused to certify the questions.
D. Displacement
In its memorandum in support of its motion for partial judgment on the pleadings,
Citizens argued that Plaintiffs’ conversion action brought under the U.C.C. displaced common
law claims seeking damages for alleged conversion of negotiable instruments. Plaintiffs did not
respond to Citizens’ argument. Plaintiffs, however, now argue that the Magistrate Judge erred in
finding that the conversion claim displaced Plaintiffs’ breach of contract and negligence claims.
Fed. R. Civ. P. 72(b) “does not permit a litigant to present new initiatives to the district
judge. We hold categorically that an unsuccessful party is not entitled as of right to de novo
review by the judge of an argument never seasonably raised before the magistrate.” PatersonLeitch Co., Inc., 840 F.2d at 990-91. The Court finds that because Plaintiffs did not address the
issue before the Magistrate Judge, they have waived any consideration of the Magistrate Judge’s
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recommendation on the displacement issue. Id.
Even if Plaintiffs had not waived the argument, the Court is not convinced that the
Magistrate Judge’s recommendation was erroneous. Plaintiffs argue that the breach of contract
and negligence claims are not displaced by the U.C.C. because the conduct that supports those
claims encompasses more than the “simple forgery” that is the basis of the conversion claim.
Memorandum of Law in Support of Plaintiffs’ Objections to Magistrate Judge’s Report and
Recommendation at 8; Docket # 17-1. Rather, Plaintiffs contend that the negligence claim and
the breach of contract claim are premised on Citizens alleged negligent addition of Plaintiff
Albert Marano’s name to an account which Citizens used to convert Plaintiffs’ funds.
The Rhode Island Supreme Court has not yet addressed the question of whether R.I. Gen.
Laws § 6A-3-420 displaces a negligence or breach of contract action.2 The U.C.C. provides that
[u]nless displaced by the particular provisions of [the UCC], the principles of law
and equity, including the law merchant and the law relative to capacity to contract,
principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake,
bankruptcy, and other validating or invalidating cause supplement its provisions.
R.I. Gen. Laws § 6A-1-103(b). Thus, if a provision of the U.C.C. applies, Plaintiffs cannot rely
on a common law cause of action. Stefano v. First Union National Bank of Virginia, 981 F.
Supp. 417 (E.D. Va. 1997). “[W]hen the Code and common law both provide a means of
recovery, the Code should displace the common law, because variations in the common law
among states destroy the uniformity in commercial transactions sought to be accomplished by the
Uniform Commercial Code.” Equitable Life Assurance Society of the United States v. Okey,
2

In this instance the Court is called upon to make an “informed prophecy” of how the Rhode Island
Supreme Court would decide the issue. Andrew Robinson International, Inc. v. Hartford Fire Insurance Co., 547
F.3d 48, 51 (1st Cir. 2008). In performing this task, the Court may consider “analogous decisions of the state’s
highest court; . . . decisions of the lower courts of [the] state; . . . precedents in other jurisdictions; . . . wisdom found
in learned treatises; and . . . any relevant policy rationales.” Id. at 51-52.

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812 F.2d 906, 909 (4th Cir. 1987); see also Travelers Casualty & Surety Co. of America, Inc. v.
Northwestern Mutual Life Insurance Co., 480 F.3d 499, 505 (7th Cir. 2007) (where a provision
in the U.C.C. “fits the facts of the case to a T, no room is left for recharacterizations intended to
circumvent the statute of limitations applicable to such claims. It is one thing to fill gaps in the
[U.C.C.] and another to contradict it by calling a [U.C.C.] claim something else”); Mackin
Engineering Co. v. American Express Co., 437 Fed. App’x 100 (3d Cir. 2011) (where U.C.C.
provides a comprehensive remedy common law action is barred); see also Ciccone v. Pitassi, No.
Civ.A. PB 97-4180, 2004 WL 2075120 (R.I. Super. Ct. Aug. 13, 2004) (conversion claim under
U.C.C. displaces common law negligence action); Advance Dental Care, Inc., 816 F. Supp. 2d at
271 (in light of “overwhelming case law,” U.C.C. conversion claim displaces common law
negligence action); Jones v. F.D.I.C., No. 5:12-CV-176 (MTT), 2012 WL 6115374 (M.D. Ga.
Dec. 10, 2012) (provisions in the U.C.C. provided a comprehensive remedy to plaintiff thus
displacing common law breach of contract claim).
Plaintiffs seek redress for a singular harm: Stephen Marano’s conversion of various
negotiable instruments made payable to Plaintiffs. Plaintiffs, however, attempt to circumvent the
applicable statute of limitations by recharacterizing their claims against Citizens as something
other than a claim under R.I. Gen. Laws § 6A-3-420. In this matter, on the facts before the
Court, the U.C.C. provides a remedy to Plaintiff, specifically R.I. Gen. Laws § 6A-3-420; thus
Plaintiffs’ negligence and breach of contract claims are displaced. See generally Jones, 2012 WL
6115374 at *7.
IV. Conclusion
For the reasons stated, the Court adopts the recommendation of the Magistrate Judge.
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Citizens’ motion for partial judgment on the pleadings is granted.3

SO ORDERED
/s/ Mary M. Lisi
Mary M. Lisi
Chief United States District Judge
February 20, 2013

3

On December 5, 2012, after the motion for partial judgment on the pleadings had been fully briefed, after
the parties had argued the matter before the Magistrate Judge, and after the parties had filed supplemental letter
briefs, Plaintiffs filed two motions; a motion to voluntarily dismiss (Docket # 12) the sole federal claim in the
complaint (Count IV) and a motion to remand (Docket # 11). Plaintiffs motion to voluntarily dismiss Count IV of
the complaint is granted pursuant to Fed. R. Civ. P. 41(a)(2). A motion to remand is “decided by reference to the
complaint at the time the petition for removal was filed.” Abdelnour v. Bassett Custom Boatworks, Inc., 614 F.
Supp. 2d 123, 126 (D. Mass. 2009). The “dismissal of the only federal claim after removal of an action to federal
court does not by itself deprive the federal court of jurisdiction over the remaining state claims.” Grispino v. New
England Mutual Life Insurance Co., 358 F.3d 16, 19 (1st Cir. 2004). The Court, may however, in its discretion,
decline to exercise supplemental jurisdiction over remaining state law claims. Id. In determining whether to
exercise supplemental jurisdiction, the Court should consider interests of fairness, judicial economy, convenience,
and comity. Camelio v. American Federation, 137 F.3d 666 (1st Cir. 1998). Courts may also consider whether a
plaintiff “has attempted to manipulate the forum” in exercising its discretion. Massachusetts v. V & M,
Management, Inc., 929 F.2d 830, 836 (1st Cir. 1991). The parties and the Court have already invested substantial
resources in litigating this matter. In the interests of judicial economy, the Court denies Plaintiffs’ motion to remand.

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