Opinion
C. A. 6:20-CV-01039-ADA-JCM
01-25-2022
PRISCILLA A. ELLIS-ERKKILA, Plaintiff, v. CITIBANK, J.P. MORGAN CHASE, BB&T BANK, REGIONS BANK, CAPITAL ONE, and UNITED STATES OF AMERICA FDIC, Defendants.
TO: THE HONORABLE ALAN D ALBRIGHT, UNITED STATES DISTRICT JUDGE.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
JEFFREY C. MANSKE, UNITED STATES MAGISTRATE JUDGE.
This Report and Recommendation is submitted to the Court pursuant to 28 U.S.C. § 636(b)(1)(C), Fed.R.Civ.P. 72(b), and Rules 1(f) and 4(b) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas, Local Rules for the Assignment of Duties to United States Magistrate Judges. Before the Court is Defendant Capital One's Motion to Dismiss (ECF No. 13). For the following reasons, the Court RECOMMENDS that Capital One's Motion be GRANTED.
I. BACKGROUND
This action arises from Plaintiff Priscilla Ellis-Erkkila's (“Plaintiff”) pro se complaint to recover $7,083.08 from Defendant Capital One, N.A. (“Capital One”). Pl.'s Compl. at 1, ECF No. 1. Capital One released the funds from an account ending with digits 6950 (“Account 6950”) to the United States Government (“United States”). App. Ex. B at 002, ECF No. 14. Account 6950 belonged to Plaintiff's daughter, Kenietta R. Johnson (“Johnson”). Pl.'s Compl. at 1.
On September 24, 2015, the United States charged both Plaintiff and Johnson with Conspiracy to Commit Wire and Mail Fraud, in violation of 18 U.S.C. § 1349, and Conspiracy to Commit Money Laundering, in violation of 18 U.S.C. § 1956(h). App. Ex. C at 003. On October 9, 2015, the United States executed a seizure warrant and seized $7,083.08 from Account 6950. App. Ex. B at 002. The Middle District of Florida heard the case, and a jury found Johnson and Plaintiff guilty on both counts. App. Ex. C at 012. The court then issued a forfeiture money judgment for $9,288,241.36, including $7,083.08 from Account 6950. App. Ex. C at 012. On January 18, 2018, Capital One released the seized funds to the United States. App. Ex. B at 002.
Plaintiff alleges, however, that Capital One disbursed the funds on November 13, 2015. Pl.'s Compl. at 1.
On November 9, 2020, Plaintiff filed suit against Citibank, J.P. Morgan Chase, BB&T Bank, Regions Bank, Capital One, and United States FDIC. Pl.'s Compl. at 1. Plaintiff pleads that Capital One's release of these funds: (1) violates the Fourth Amendment; (2) violates the Due Process Clause of the Fifth and Fourteenth Amendments; (3) constitutes a breach of contract; (4) violates §§ 3.401 and 4.401 of the Texas Business and Commerce Code; and (5) breaches a fiduciary duty. Pl.'s Compl. at 3-4. On February 19, 2021, Capital One filed the Motion to Dismiss, arguing that Plaintiff does not have standing and, alternatively, that Plaintiff does not state a claim for which the Court can grant relief pursuant to Federal Rules of Civil Procedure 12(b)(6).
II. LEGAL STANDARD
A. Standing
The burden of establishing standing, which rests on the party invoking federal court jurisdiction, varies depending upon the stage at which standing becomes an issue. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). At the pleading stage, the court looks only to the sufficiency of the allegations. Id. The party invoking federal court jurisdiction must allege facts demonstrating each element of standing. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). The party invoking federal court jurisdiction must also demonstrate standing separately for each claim and form of relief sought. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006).
Standing traditionally consists of three elements: first, the plaintiff must have suffered an injury in fact-an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical. Lujan, 504 U.S. at 560. Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be fairly traceable to the defendant's challenged action and not the result of the independent action of some third party not before the court. Id. Third, it must be likely, as opposed to merely speculative, that a favorable decision will redress the injury. Id. at 561.
B. Federal Rule of Civil Procedure 12(b)(6)
Upon motion or sua sponte, a court may dismiss an action that fails to state a claim upon which a court can grant relief. Fed.R.Civ.P. 12(b)(6). In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court accepts all well-pleaded facts as true, viewing them in the light most favorable to the nonmovant. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). However, a court need not blindly accept every allegation of fact; properly pleaded allegations of fact amount to more than just conclusory allegations or legal conclusions “masquerading as factual conclusions.” Taylor v. Books A. Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 652, 678 (2009).
To survive the motion to dismiss, a nonmovant must plead enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570. The court determines whether the plaintiff has stated a legally cognizable and plausible claim; the court should not evaluate the plaintiff's likelihood of success. Lone Star Fund V. (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). Based upon the assumption that all the allegations in the complaint are true, the factual allegations must be enough to raise a right to relief above the speculative level. Twombly, 550 U.S. at 555.
When the nonmovant pleads factual content that allows the court to reasonably infer that the movant is liable for the alleged misconduct, then the claim is plausible on its face. Iqbal, 556 U.S. at 678. Unlike the “probability requirement,” the plausibility standard requires more than a sheer possibility that a defendant acted unlawfully. Id. The pleading standard Rule 8(a)(2) does not require detailed factual allegations but demands greater specificity than an unadorned, “the-defendant-unlawfully-harmed-me accusation.” Fed.R.Civ.P. 8(a)(2); Iqbal, 556 U.S. at 678. A pleading offering “labels and conclusions” or “a formulaic recitation of the elements of a cause of action” will not suffice. Twombly, 550 U.S. at 555. Nor does a complaint comply with the standard if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id. at 557. Evaluating the plausibility of a claim is a context-specific process that requires a court to draw on its experience and common sense. Iqbal, 556 U.S. at 663-64. Finally, a court should grant a motion to dismiss “only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Cornish v. Correctional Services Corp., 402 F.3d 545, 549 (5th Cir. 2005).
III. DISCUSSION
A. Plaintiff has standing because she has a facially colorable interest in the seized funds.
First, Capital One asserts that Plaintiff does not have standing to bring her claims. Def.'s Mot. at 3. Capital One reasons that Plaintiff does not have an injury in fact because she is not a party to Account 6950, and the seizure of funds does not impact her. Def.'s Mot. at 3. Capital One further claims that, because there is no injury in fact, Plaintiff will not be able to show a causal connection between Capital One's actions and her injuries, and a court order will not redress her supposed injuries. Def.'s Mot. at 3.
Here, the Court finds case law on forfeiture instructive. The standing requirements to challenge forfeiture are forgiving. United States v. Preston, 123 F.Supp.3d 117, 123 (D. D.C. 2015). The claimant must show a colorable interest in the property sufficient to create a case or controversy. In re Frik Corp., 971 F.2d 974, 985 (3rd Cir. 1992). Colorable interests can range from actual possession, control, or a financial stake. United States v. Premises Known as 7725 Unity Ave. N., Brooklyn Park, Minn., 294 F.3d 954, 956 (8th Cir. 2002). A colorable interest becomes sufficient if returning the property redresses the claimed injury. Preston, 123 F.Supp.3d at 123. The claimant must merely show a facially colorable interest and allege that he or she “has an ownership or other interest in the forfeited property” but need not definitively prove his or her interest. United States v. Real Prop. Located at 475 Martin Lane, Cal., 545 F.3d 1134, 1140 (9th Cir. 2008).
Although Account 6950 is under Johnson's name, Plaintiff has standing to assert her claims. Plaintiff has a facially colorable interest in the seized funds. Plaintiff claims that she is a signer to Account 6950. Pl.'s Compl. at 18. Further, she claims that she and her husband deposited money into the account to aid Johnson in obtaining a higher education. Pl.'s Compl. at 3. While the complaint fails to provide more details concerning Plaintiff's role or use of Account 6950, these facts illustrate that Plaintiff had control over and a financial stake in the funds. See Preston, 123 F.Supp.3d at 123-24. Furthermore, the United States' seizure of these funds causes the inability of Plaintiff to use those funds and is traceable to Capital One's release of the funds. See Lujan, 504 U.S. at 560. Additionally, the claimed injury is redressable by returning the funds. See Preston, 123 F.Supp.3d at 124. Therefore, Plaintiff has a colorable interest and standing for her various claims.
B. Plaintiff fails to assert claims on which the Court may grant relief.
Alternatively, Capital One argues that the Court should dismiss Plaintiff's claims because she has not stated a claim for which the Court can grant relief. Def.'s Mot. at 4. Capital One argues that Plaintiff fails to plead any facts that show misconduct by Capital One and instead merely asserts that Capital One's compliance with the seizure warrant caused these harms to occur. Def.'s Mot. at 4. The Court agrees with Capital One.
Plaintiff alleges that Capital One violated several constitutional rights guaranteed to her while also violating § 3.401 of the Texas Business and Commerce Code. Pl.'s Compl. at 3-4. The Court will liberally construe complaints and pleadings by a pro se plaintiff and not hold a pro se plaintiff to the same stringent standards of a trained attorney. Mendoza-Tarango v. Flores, 982 F.3d 395, 399 (5th Cir. 2020). Nevertheless, a pro se plaintiff must state facts within the complaint for which a court can grant relief. Johnson v. Atkins, 999 F.2d 99, 100 (5th Cir. 1993).
Here, Plaintiff fails to assert enough facts to state a plausible claim for relief for her constitutional and § 3.401 claims. See Twombly, 550 U.S. at 570. Plaintiff's constitutional claims fail because Capital One is not a state actor. Moreover, her § 3.401 claim fails because the deposit agreement is not a negotiable instrument.
i. Plaintiff's constitutional claims fail because Capital One is not a state actor.
Plaintiff claims that Capital One “totally ignored their own client/banking agreement and the laws under the Fourth, Fifth, and Fourteenth Amendments of the United States constitution.” Pl.'s Compl. at 6. Essentially, Plaintiff claims Capital One's reliance on a “barebones” warrant without giving Johnson notice and a hearing is a violation of due process and constitutes an unreasonable search. Pl.'s Compl. at 10. Plaintiff elaborates that:
[Capital One] should not be allowed to physically remove a person's funds from their accounts without a hearing, without Due Process, without a written Notice or regard for facts or client/bank agreement violating [Johnson's] 4th Amendment, 14th Amendment of the U.S. Constitution and causing grave irreversible injuries, the United States Government along with [Capital One] caused [Johnson] the injuries knowingly and collusively, and should be held jointly liable violating 4th, 5th, and 14th Amendments of the United States Constitution.Pl.'s Compl. at 10. The Court, however, need not decide whether Capital One's actions were a violation of due process or an unreasonable search because Plaintiff fails to allege that Capital One acted under the color of state authority. Therefore, the Court recommends the dismissal of Plaintiff's constitutional claims.
Section 1983 of Title 42 provides a remedy for deprivation of constitutional rights. Lugar v. Edmondson Oil Co., 457 U.S. 922, 924 (1982). The deprivation of such rights must take place “under color of any statute, ordinance, regulation, custom, or usage of any State or Territory.” 42 U.S.C. § 1983 . The color of state law requirement excludes “merely private conduct, no matter how discriminatory or wrongful.” Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50 (1999) (quoting Blum v. Yaretsky, 457 U.S. 991, 1002 (1982)). The Fourteenth Amendment contains a similar state action requirement and depends upon a private actor acting under color of state authority. Id. Furthermore, the Fifth Amendment only applies to violations of constitutional rights by the United States or another federal actor. See Jones v. City of Jackson, 203 F.3d 875, 880 (5th Cir. 2000).
A private party can act under color of state law in a few instances. See Burton v. Wilmington Parking Authority, 365 U.S. 715, 724 (1961). A private party acts under color of state authority by performing a public function, which is a traditional and exclusive governmental responsibility. See Marsh v. State of Alabama, 326 U.S. 501, 508-09 (1945) (holding that a corporation-owned town functioned as a municipality and cannot deprive one of his or her First Amendment guarantees). Additionally, a private party acts under color of state authority when a government entity and the behavior of that private actor become so entangled and facilitate private conduct that would otherwise violate the Constitution. See Burton, 365 U.S. at 725 (“The State has so far insinuated itself into a position of interdependence with Eagle that it must be recognized as a joint participant in the challenged activity, which, on that account, cannot be considered to have been so ‘purely private' as to fall without the scope of the Fourteenth Amendment.”).
In this case, Plaintiff asserts that Capital One violated her Fourth, Fifth, and Fourteenth Amendment rights by adhering to a seizure warrant. Pl.'s Compl. at 6. For relief of alleged constitutional violations, Capital One must have acted under color of state authority. See Lugar, 457 U.S. at 924. Capital One, however, is a private actor. Plaintiff has not alleged that Capital One is a federal actor. Further, Plaintiff has not alleged that Capital One performed a public function. While Plaintiff appears to allege some entanglement of Capital One's and the United States' behavior, Fourth Amendment restrictions do not apply to a private party, even if that private party wrongfully conducts a search or seizure of another's property. Walter v. United States, 447 U.S. 649, 656 (1980). Therefore, Plaintiff has failed to assert that Capital One is a state actor and fails to allege it was acting under color of state authority. Accordingly, the Court recommends dismissing Plaintiff's claims of constitutional violations because she fails to state a claim for the Court to grant relief.
ii. Plaintiff fails to state a claim under § 3.401 because the deposit agreement is a contract and not a negotiable instrument.
Plaintiff contends that Capital One violated § 3.401 of the Texas Business and Commerce Code because “when a bank lacks a valid withdrawal signature, then no item from Client's account is payable.” Pl.'s Compl. at 13. In other words, Plaintiff alleges that because neither Johnson nor any other party to the account gave a valid withdrawal signature, Capital One's release of funds was unlawful. Pl.'s Compl. at 14. Plaintiff's allegation is inaccurate, however, because § 3.401 pertains to negotiable instruments and not contracts. See Tex. Bus. & Com. Code § 3.104.
Under Texas law, deposit agreements are contracts. See Am. Airlines Employees Fed. Credit Union v. Martin, 29 S.W.3d 86, 96 (Tex. 2000). A negotiable instrument, on the other hand, is not a contract but an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order. Tex. Bus. & Com. Code § 3.104(a). Examples of negotiable instruments include checks and certificates of deposit. Tex. Bus. & Com. Code § 3.104.
Here, the deposit agreement merely governs the relationship between the bank and the account owners and does not promise to pay a fixed amount of money. See Am. Airlines Employees Fed. Credit Union, 29 S.W.3d at 96; App. Ex. D-1 at 022. The deposit agreement does not create an unconditional promise to pay a fixed amount. The deposit agreement, therefore, is a contract and not a negotiable instrument. The Court recommends the dismissal of Plaintiff's § 3.401 claim because she does not claim facts that warrant relief.
C. The statute of limitations bars recovery for the remainder of Plaintiff's claims.
The applicable statute of limitations bars Plaintiff's claims for breach of contract, breach of fiduciary duty, and violation of § 4.401 of the Texas Business and Commerce Code. The date of the legal injury for all of Plaintiff's claims is October 9, 2015, when the seizure occurred. Plaintiff did not file suit until November 9, 2020, over five years after the alleged injury had taken place. She fails to assert why the Court should toll the applicable statute of limitations. Pl.'s Compl. at 1.
Federal courts apply state statutes of limitations for state causes of action. Citigroup Inc. v. Federal Ins. Co., 649 F.3d 367, 373 (5th Cir. 2011). A defendant may raise the accrual of the statute of limitations as an affirmative defense that precludes recovery. United Transp. Union v. Fla. Easy Coast Ry. Co., 586 F.2d 520, 527 (5th Cir. 1978). A party must expressly raise the statute of limitations defense; otherwise, the party waives the defense. See Tex.R.Civ.P. 94. When successfully asserted, the statute of limitations defense denies the right to recovery. TMIRS Enters., Ltd. v. Godaddy.com, Inc., C. A. No. H-09-2858, 2010 WL 3063659, at *7 (S.D. Tex. Aug. 03, 2010).
The statute of limitations begins to run with the accrual of the cause of action. Am. StarEnergy & Minerals Corp. v. Stowers, 457 S.W.3d 427, 430 (Tex. 2015). A cause of action accrues when a legal injury occurs. Provident Life and Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003). A legal injury happens when a wrong produces an injury, or one party injures another, even if the injured party does not discover their injuries until after the statute of limitations accrues. Id. The plaintiff may plead and prove facts that suspend the running of the statute of limitations. See KMPG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). On the other hand, if the plaintiff fails to make such pleadings, the statute of limitations begins to run on the date the legal injury occurred. Id.
The statute of limitations for Plaintiff's remaining claims has accrued. The statute of limitations for claims of breach of contract and fiduciary duty in Texas is four years. Tex. Civ. Prac. & Rem. Code § 16.004. The statute of limitations for a Chapter Four claim is three years. Tex. Bus. & Com. Code § 4.111. Considering that the legal injury occurred on October 9, 2015, more than five years before Plaintiff filed suit, and the latest statute of limitations is four years, the time for Plaintiff to bring her claims has already elapsed. Additionally, Plaintiff fails to plead any facts that would prevent the Court from suspending any statute of limitations accrual. Accordingly, the Court recommends the dismissal of Plaintiff's remaining claims and does not reach the merits of these claims.
IV. RECOMMENDATION
For the reasons discussed above, the Court RECOMMENDS that Defendant Capital One's Motion to Dismiss be GRANTED.
V. OBJECTIONS
The parties may wish to file objections to this Report and Recommendation. Parties filing objections must specifically identify those findings or recommendations to which they object. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report. See 28 U.S.C. § 636(b)(1)(C); Thomas v Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc).
Except upon grounds of plain error, failing to object shall further bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas, 474 U.S. at 150-53; Douglass, 79 F.3d at 1415.