CUMIS Insurance Society, Inc. v. Raines et al

Filing 19

MEMORANDUM OPINION AND ORDER denying Defendants' 8 Motion to Dismiss this action based upon their statute of limitations and Rule 9(b) arguments, but granting the motion with respect to DeAnne Raines and dismissing her from further proceedings in this matter. Signed by Judge Robert C. Chambers on 2/11/2013. (cc: attys; any unrepresented parties) (mkw)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION

CUMIS INSURANCE SOCIETY, INC.,
Plaintiff,
v.

CIVIL ACTION NO. 3:12-6277

JAMES L. RAINES, ALICIA RAINES and
DEANNE RAINES,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is a Motion to Dismiss Plaintiff‟s Complaint for Failure to
State a Cause of Action Against these Defendants or, Alternatively, to Bar Plaintiff‟s Claims
Based upon Laches. ECF No. 8. For the following reasons, the Court DENIES, in part, and
GRANTS, in part, the motion.
I.
FACTS
On October 5, 2012, Plaintiff CUMIS Insurance Society, Inc. filed a Complaint
against Defendants James L. Raines, Alicia Raines, and DeAnne Raines. Plaintiff alleges that,
from approximately 1996 to August 2008, James L. Raines was employed as a manager at the
Huntingtonized Federal Credit Union (hereinafter the Credit Union).1 According to Plaintiff,
“[b]eginning in 2004, James Raines began recording fictitious expenses through the Credit
Union‟s general ledger accounts with a corresponding deposit into family members‟ accounts,
including those belonging to” Defendants. Compl. at ¶ 9, ECF No. 1. Mr. Raines generally made
1

According to Defendants James L. Raines was never employed by the Credit Union.
Rather, it was James L. Raines‟ father, James Raines, who was the employee.

small deposits several times a month into the accounts. Plaintiff asserts that Mr. Raines made
$76,723.94 in fictitious deposits into a joint account between James L. and Alicia Raines, often
when the account was near zero or had a negative balance. He also made $9,490.00 in fictitious
deposits into an account solely owned by James L. Raines, $6,899.00 into an account solely owned
by Alicia Raines, $7,135.00 into accounts solely owned by DeAnne Raines, and deposits into other
accounts of relatives who are not a party to this action. 2 Plaintiff alleges that the fictitious
deposits totaled $102,722.94.

Plaintiff states that it bonded the Credit Union and paid it the $102,722.94 in losses.
Exercising its right to subrogation, Plaintiff then brought this action pursuant to diversity of
jurisdiction to recover those funds deposited into Defendants‟ accounts, in the total amount of
$100,247.94. Defendants collectively now seek to dismiss for failure to state a claim and for
being filed outside of the statute of limitations. DeAnne Raines also moves to dismiss the claim
against her for lack of jurisdiction. The Court will address these issues one at a time
II.
DISCUSISON
A.
Unjust Enrichment
Plaintiff‟s only claim for relief against Defendants is for unjust enrichment.
Plaintiff alleges that “James Raines sought to defraud the Credit Union by placing illegitimate
funds into the accounts of his relatives” and, by his actions, he knowingly made false

2

Plaintiff asserts that $950 was deposited into Isabella Raines‟ account and $1,525 was
deposited into Carolyn Raines‟ account.
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representations to the credit union that the deposits were legitimate. Id. at ¶¶ 17 & 18. In addition,
Plaintiff asserts that, “[b]y the receipt and/or withdrawal of funds from the accounts,” Defendants
“personally benefitted from the fraudulent transfer of money into their respective accounts.” Id. at
¶19.

In their Motion to Dismiss, Defendants‟ first two arguments are that the Court
should treat Plaintiff‟s “unjust enrichment” claim as a fraud claim and find (1) it fails to meet the
requirements of Rule 9(b) of the Federal Rules of Civil Procedure3 and (2) it falls outside the
one-year statute of limitations which governs fraud cases. See W. Va. Code § 55-2-12(c)
(providing, in part: “[e]very personal action for which no limitation is otherwise prescribed shall
be brought . . . (c) within one year next after the right to bring the same shall have accrued if it be
for any other matter of such nature that, in case a party die, it could have been brought at common
law by or against his personal representative”).

However, it is well established that a plaintiff is the master of the complaint, and
there is no requirement that a plaintiff allege every conceivable claim against a defendant in the
complaint. Moreover, this Court will not ascribe to a plaintiff a potential claim for relief which it
has not pled. See United States v. Jones, 125 F.3d 1418, 1428 (11th Cir. 1997) (providing that, as
master of the complaint, “[t]he plaintiff selects the claims that will be alleged”); Samovsky v.

3

Rule 9(b) provides: “In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a
person's mind may be alleged generally.” Fed. R. Civ. P. 9(b).
-3-

Macy’s, No. 12 C 4261, 2013 WL 139880, *3 (N.D. Ill. Jan 10, 2013) (stating that the plaintiff
controls the complaint and selects the claims that will be alleged in the complaint).

Under West Virginia law, “[a] claim of unjust enrichment generally entails the
establishment of three elements: (1) a benefit conferred upon the [defendant], (2) an appreciation
or knowledge by the defendant of such benefit, and (3) the acceptance or retention by the
defendant of the benefit under such circumstances as to make it inequitable for the defendant to
retain the benefit without payment of its value.” Veolia Es Special Services, Inc. v. Techsol Chem.
Co., 2007 WL 4255280, at *9 (S.D. W. Va. Nov. 30, 2007) (citation omitted).4 Often, “unjust
enrichment is a common and uncomplicated legal claim.” Stand Energy Corp. v. Columbia Gas
Trans. Corp., 521 F. Supp.2d 537, 540 (S.D. W. Va. 2007). On the other hand, proving fraud
frequently can be complex and vexing and necessitates proving different elements than an unjust
enrichment claim.5

4

Arguably, the West Virginia Supreme Court further refined the “test for recovery under
unjust enrichment when it stated, „[t]he Court has also indicated that if benefits have been received
and retained under such circumstances that it would be inequitable and unconscionable to permit
the party receiving them to avoid payment therefor, the law requires the party receiving . . . the
benefits to pay their reasonable value.‟” Id. at **9-10 (quoting Realmark Devs., Inc. v. Ranson,
542 S.E.2d 880, 884-85 (W. Va. 2000)).
5

In order to prove fraud under West Virginia law, a plaintiff must demonstrate: “(1) that the
act claimed to be fraudulent was the act of the defendant or induced by him; (2) that it was material
and false; that plaintiff relied upon it and was justified under the circumstances in relying upon it;
and (3) that he was damaged because he relied upon it.” Syl. Pt. 1, Lengyel v. Lint, 280 S.E.2d 66
(W. Va. 1981) (quoting Horton v. Tyree, 139 S.E. 737, 738 (W. Va. 1927)).
-4-

Defendants ask this Court to convert Plaintiff‟s claim into a cause of action for
fraud so that they can assert the one-year statute of limitations defense and allege Plaintiff failed to
meet the heightened pleading requirements for fraud under Rule 9(b). Defendants argue the claim
is really one for fraud based on the allegations and because Plaintiff seeks money damages, rather
than equitable relief. In addition, Defendants assert to allow Plaintiff to bring the claim as an
unjust enrichment claim effectively eviscerates the statute of limitations in fraud cases.

However, as noted above, Plaintiff is the master of its Complaint, and it can choose
what claims it decides to bring, or not to bring, in an action. In this case, Plaintiff has filed the
action as an unjust enrichment case and, ultimately, it will be Plaintiff‟s burden to prove the
elements of its cause of action and the right to recover damages. This Court will not rewrite
Plaintiff‟s Complaint in order to provide Defendants a defense to the allegations. Moreover, the
Court finds no problem with Plaintiff requesting monetary relief as an equitable remedy. As the
district court observed in Patrick Henry Estates Homeowners Ass'n, Inc. v. Miller, 758 F.Supp.2d
331 (N.D. W. Va. 2010), “[g]enerally, money damages are a legal remedy. There are two
exceptions, however. Damages are equitable when they are: (1) restitutionary or (2) incidental to
or intertwined with injunctive relief.” 758 F. Supp.2d at 340 (internal quotation marks and
citations omitted).6 Here, Plaintiff seeks relief and judgment in the exact amount of money it

6

Defendants cite Laurie v. Thomas, 294 S.E.2d 78 (W. Va. 1982), for the proposition that if
a plaintiff seeks damages based upon fraud, laches is not applicable because it only applies in
situations in which the plaintiff asks to rescind a writing or impose a trust or seeks other equitable
relief. However, Laurie provides that, “[w]here a suit based on fraud is not seeking damages but
seeks to rescind a writing or impose a trust or other equitable relief, it is not a common law action
for fraud but is equitable in nature.” 294 S.E.2d at 81. Contrary to Defendants‟ assertion, this
language in Laurie merely describes a situation that is equitable in nature, it does not say that all
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alleges was fictitiously deposited into Defendants‟ accounts, in other words, reimbursement of
those funds.

Clearly, the remedy sought is “restitutionary.”

The fact Plaintiff also seeks

attorneys‟ fees, costs, and expenses does not change this Court‟s conclusion. See id.at 341 (holding
that costs and attorney‟s fees related to equitable claims also are equitable in nature). Therefore,
as the unjust enrichment claim is an equitable claim, the doctrine of laches controls the timeliness
of the action.7 See O'Brien v. Allstate Ins. Co., Civil Action No. 5:10-CV-40, 2010 WL 5204925,
at *5 (N.D. W. Va. Dec. 20, 2010) (stating “[a]n unjust enrichment claim is equitable in nature.
Therefore, the principle of laches, rather than a statute of limitations, governs whether a claim may
be brought[,]” citing Absure, Inc. v. Huffman, 584 S.E.2d 507, 511 (W. Va. 2003)).

In addition, to the extent Rule 9(b)‟s requirement that a plaintiff “must state with
particularity the circumstances constituting fraud” arguably even applies to Plaintiff‟s unjust
enrichment claim, the Court finds the requirements of the Rule are met. To satisfy Rule 9(b), a
plaintiff “must, at a minimum, describe the time, place, and contents of the false representations, as
well as the identity of the person making the misrepresentation and what he obtained thereby.”
United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008)
(citation and internal quotation marks omitted). The Fourth Circuit has stated, however, that “[a]
court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the
claims for damages are otherwise legal claims.
7

“Laches is inexcusable delay in asserting a right, and is an equitable defense, controlled by
equitable considerations. To be a bar, the lapse of time must be so great, and the relation of the
defendant to the right such that it would be inequitable to permit the plaintiff to assert it, where he
has had, for a considerable period, knowledge of the existence, or might have acquainted himself
with it, by the use of reasonable diligence.” Id. (internal quotation marks and citation omitted).
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defendant has been made aware of the particular circumstances for which she will have to prepare
a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts.”
Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999). Here, the
Complaint alleges that Mr. Raines made fictitious deposits into certain accounts. The Complaint
contains the time frame of the transactions, the names on the accounts, the last few digits of the
account numbers at issue, and the total amounts alleged to have been deposited in each account.
Certainly, this information fulfills the purpose of the Rule. See U.S. ex rel. Nathan v. Takeda
Pharms. N. Am., Inc., No. 11-2077, 2013 WL 136030 (4th Cir. Jan. 11, 2013) (stating the purpose
of the Rule includes “providing notice to a defendant of its alleged misconduct, of preventing
frivolous suits, of eliminat[ing] fraud actions in which all the facts are learned after discovery, and
of protect[ing] defendants from harm to their goodwill and reputation” (internal quotation marks
and citation omitted)).8 Thus, the Court rejects Defendants‟ argument under Rule 9(b).
B.
Jurisdiction
Defendants‟ last argument is that the claim against DeAnne Raines must be
dismissed because it falls far below the $75,000 threshold for diversity jurisdiction to exist over
her. See 28 U.S.C. § 1332 (providing, in part, that “[t]he district courts shall have original
jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of
$75,000, exclusive of interests and costs”). The parties do not dispute that this Court has original
diversity jurisdiction over the claims against James L. Raines and Alicia Raines as the Complaint

8

Plaintiff also attached to its Memorandum in Opposition to Defendants‟ Motion to
Dismiss an exhibit which breaks down the alleged fictitious deposits even farther by listing each
specific transaction with the date, time, and precise amount.
-7-

alleges they are jointly and severally liable for $76,723.94.9 In addition, Plaintiff concedes its
claim that DeAnne Raines is individually liable for $7,135.00 does not meet the jurisdictional
threshold. However, Plaintiff argues that this Court should exercise supplemental jurisdiction
over the claim pursuant to 28 U.S.C. § 1367.

When, as here, a district court has original jurisdiction over an action, section
1367(a) provides:
Except as provided in subsections (b) and (c) or as
expressly provided otherwise by Federal statute, in
any civil action of which the district courts have
original jurisdiction, the district courts shall have
supplemental jurisdiction over all other claims that
are so related to claims in the action within such
original jurisdiction that they form part of the same
case or controversy under Article III of the United
States Constitution. Such supplemental jurisdiction
shall include claims that involve the joinder or
intervention of additional parties.
28 U.S.C. § 1367(a), in part. The exception in subsection (b), however, states that:
[i]n any civil action of which the district courts have
original jurisdiction founded solely on section 1332
of this title, the district courts shall not have
supplemental jurisdiction under subsection (a) over
claims by plaintiffs against persons made parties
under Rule 14, 19, 20, or 24 of the Federal Rules of
Civil Procedure, or over claims by persons proposed
to be joined as plaintiffs under Rule 19 of such rules,
or seeking to intervene as plaintiffs under Rule 24 of
such rules, when exercising supplemental
jurisdiction over such claims would be inconsistent
with the jurisdictional requirements of section 1332.
9

As previously mentioned, the Complaint also asserts James L. Raines is individually
liable for $9,490.00 and Alicia Raines is individually liable for $6,899.00.
-8-

28 U.S.C. § 1367(b). In Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005), the
United States Supreme Court explained that, while subsection (a) “is a broad jurisdictional grant,”
that power is significantly curtailed under subsection (b) when the court‟s jurisdiction is based
upon diversity. 545 U.S. at 559-60; see also United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488,
492-93 (4th Cir. 1998) (stating “subsection (b) limitations of supplemental jurisdiction are
designed to prevent plaintiffs from circumventing the requirements of diversity”).

Section

“1367(b) explicitly excludes supplemental jurisdiction over claims against defendants joined
under Rule 20.” Id. at 560. Rule 20 of the Federal Rules of Civil Procedure allows the permissive
joinder of defendants when “any right to relief is asserted against them jointly, severally, or in the
alternative with respect to or arising out of the same transaction, occurrence, or series of
transactions or occurrences; and . . . any question of law or fact common to all defendants will arise
in the action.” Fed. R. Civ. P. 20(a)(2), in part.

Here, Plaintiff has not alleged DeAnne Raines is jointly or severally liable for the
claims against her co-defendants, and this Court does not have original jurisdiction over her.
Instead, Plaintiff argues this Court should exercise supplemental jurisdiction over her because the
claims “involve[] facts common to all defendants, and for the purposes of judicial economy[.]”
Mem. in Opp. to Defs.’ Mot. to Dis., at 4, ECF No. 11. However, § 1367(b) clearly prohibits this
Court from exercising supplemental jurisdiction under the permissive joinder rules. Plaintiff has
not made any other argument as to how this Court could acquire jurisdiction over her. Thus, as

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Plaintiff has failed to meet its burden to demonstrate jurisdiction, the Court GRANTS Defendants‟
motion to the extent it requests DeAnne Raines be dismissed.
III.
CONCLUSION
Accordingly, for the foregoing reasons, the Court DENIES Defendants‟ motion to
dismiss this action based upon their statute of limitations and Rule 9(b) arguments, but GRANTS
the motion with respect to DeAnne Raines and DISMISSES her from further proceedings in this
matter.

The Court DIRECTS the Clerk to send a copy of this Memorandum Opinion and
Order to all counsel of record and any unrepresented parties.

ENTER:

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February 11, 2013