Opinion
1:23-CV-10883 (GHW) (JLC)
06-26-2024
TODD L. JOHNSON a/k/a LYFELIN, Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.
TO THE HONORABLE GREGORY H. WOODS, UNITED STATES DISTRICT JUDGE
JAMES L. COTT UNITED STATES MAGISTRATE JUDGE
Plaintiff Todd L. Johnson a/k/a Lyfelin, who is proceeding pro se, brings this action against defendant Wells Fargo Bank, N.A. (“Wells Fargo”), alleging violations of his 14th Amendment due process rights, Regulation E (“Reg. E”) of the Electronic Fund Transfer Act (“EFTA”), and New York Banking Law § 9-G. Wells Fargo has moved to dismiss the complaint with prejudice pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the grounds that it fails to state a claim upon which relief can be granted, or alternatively for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the following reasons, the motion should be granted.
I. BACKGROUND
A. Factual Background
On October 11, 2022, Johnson deposited a check for $50,000.00 (the “Check”) into his Wells Fargo account ending in 8215 (the “Account”) via ATM. Complaint (“Compl.”) at 1, Dkt. No. 1-1; Declaration of Kanza Fizazi in Support of Wells Fargo Bank, N.A.'s Motion for Dismissal with Prejudice or, Alternatively, for Summary Judgment dated February 16, 2024 (“Fizazi Decl.”) ¶ 6, Dkt. No. 16; Check to Law Office of Philip Akakwani & Todd Johnson dated September 29, 2022, Dkt. No. 161; Account Statement dated October 26, 2022 (“Acct. Stmt.”), Dkt. No. 16-2. As is reflected on its face, the Check was made payable to both Johnson and the Law Office of Phillip Akakwani, not in the alternative. Notably, when Johnson deposited the Check, only he indorsed it. Due to an existing overdraft of $1,532.25, Johnson's new balance became $48,472.75. Acct. Stmt. at 2. All but $25.00 of the deposit (i.e., $49,975.00) were subject to delayed availability until October 17, 2022, due to Johnson's “[r]epeated overdrafts in the past 6 months[.]” Fizazi Decl. ¶ 7 (citing ATM Receipt dated October 11, 2022 (“ATM Receipt”), Dkt. No. 16-3). Later in the day on October 11, 2022, “Wells Fargo placed a further hold on the Check because the Check was not indorsed by both payees.” Rule 56.1 Statement dated February 23, 2024 (“Rule 56.1 Stmt.”) ¶ 5, Dkt. No. 14.
On October 13, 2022, Wells Fargo mailed a notification letter to Johnson to inform him that the Check was returned unpaid. Fizazi Decl. ¶ 8; Letter from Wells Fargo to Johnson dated October 13, 2022 (“10/13/22 Ltr.”), Dkt. No. 16-4. Following the reversal of the earlier credit of $50,000.00, the balance on Johnson's account reverted to the original overdraft sum of $1,532.25. Acct. Stmt. at 2. Johnson cured the overdraft on October 14, 2022, by making ATM deposits and initiating inbound transfers of $5,915.55. Id. In a letter to Johnson almost a year later, on October 5, 2023, Wells Fargo stated:
On October 24, 2022, the decision was made to freeze your accounts to prepare them for closure because of the above referenced account activity. When we observe activity, such as returned items that pose a potential risk to the funds of our customers, we will typically close the account and any related accounts.
Letter from Wells Fargo to Johnson dated October 5, 2023 (“10/5/23 Ltr.”) at 1, Dkt. No. 16-5. Both Johnson and Wells Fargo held the right to close the Account at any time according to the Deposit Account Agreement. Id. at 2; Deposit Account Agreement (“Deposit Acct. Agrmt.”) at 33, Dkt. No. 16-6. The Deposit Account Agreement serves as the contract between Wells Fargo and all owners and authorized signers on each account, applying to all consumer and business accounts. Deposit Acct. Agrmt. at 5. The Agreement states: “[w]hen you sign an account application or use your account, including any account service, you and anyone else identified as an owner or authorized signer on your account consent to the terms of this Agreement.” Id. at 2.
The notice issued for account closure stated that the account was expected to be closed by November 7, 2022; the account was officially closed as of November 14, 2022. 10/5/23 Ltr. at 2. In his complaint, Johnson alleges Wells Fargo opened an investigation during which it denied him access to the Check's funds and later closed his Account and removed funds from his savings account without his consent. Compl. at 1. Johnson claims that in doing so, Wells Fargo violated the 14th Amendment; Reg. E, a regulation issued pursuant to the EFTA, 15 U.S.C. §§ 1693, et seq.; and New York Banking Law § 9-G. Id. at 2-3. He seeks damages of $48,474.75. Id. at 2.
B. Procedural History
On November 9, 2023, Johnson commenced this civil action in the Supreme Court of the State of New York, County of New York. Compl., Dkt. No. 1-1. Wells Fargo was served with Johnson's complaint on November 17, 2023, and timely removed this action on December 15, 2023. Notice of Removal dated December 15, 2023 (“Notice of Removal”) at 1-2, Dkt. No. 1; see 28 U.S.C. § 1446(b)(1). Johnson asserts claims under the 14th Amendment and the EFTA, a federal statute, thus providing the Court with subject matter jurisdiction. Notice of Removal ¶ 9 (citing 28 U.S.C. § 1331); Compl. at 2. The case was referred to me on January 6, 2024, for general pretrial supervision and any dispositive motions. Dkt. No. 6.
Wells Fargo filed a motion to dismiss with prejudice or, alternatively, for summary judgment on February 23, 2024. Dkt. No. 13. In support, it submitted a Rule 56.1 statement; a memorandum of law in support of its motion to dismiss with prejudice, or alternatively, for summary judgment; and the declaration of Kanza Fizazi, an employee of Wells Fargo. Rule 56.1 Stmt.; Memorandum of Law in Support of Wells Fargo Bank N.A.'s Motion for Dismissal with Prejudice or, Alternatively, for Summary Judgment dated February 23, 2024 (“Def. Mem.”), Dkt. No. 15; Fizazi Decl. On April 11, 2024, Johnson filed a letter requesting to move forward and “be heard on record.” Dkt. No. 18. The Court construes this letter as Johnson's opposition to Wells Fargo's motion. Dkt. No. 20.
The Court issued an order on April 15, 2024, observing that Wells Fargo had not “complied with Local Civil Rule 12.1 and Local Civil Rule 56.2” in providing Johnson with “unequivocal notice of the meaning and consequences of conversion to summary judgment.” Id. (citation omitted). Wells Fargo was “directed to serve the appropriate notice(s) on [Johnson] by April 22” and “[Johnson would] have until May 6 to file any further response to the motion[.]” Id. On April 16, 2024, Wells Fargo filed a certificate of service indicating that it had served Johnson with these notices via email, certified mail, and Federal Express. Certificate of Service dated April 16, 2024 (“4/16/24 Certificate of Service”); Dkt. No. 21. Johnson has not made any further submissions.
II. DISCUSSION
A. Legal Standards
1. Motion to Dismiss Standard
A party may move to dismiss a complaint for “failure to state a claim upon which relief can be granted[.]” Fed.R.Civ.P. 12(b)(6). To rule on a 12(b)(6) motion, “a court accepts all factual allegations in the complaint as true and draws all reasonable inferences in the plaintiff's favor.” Norman v. Experian Info. Sols., Inc., No. 23-CV-9245 (GHW) (JLC), 2024 WL 861195, at *2 (S.D.N.Y. Feb. 29, 2024), adopted by 2024 WL 1175201 (Mar. 19, 2024). This applies only to factual allegations, with “no effect to legal conclusions couched as factual allegations.” Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007) (citation omitted). In order to survive a motion to dismiss, a plaintiff must provide “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). The Court will dismiss a complaint if the plaintiff has not “nudged [his] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. A plaintiff's factual allegations must “raise a reasonable expectation that discovery will reveal evidence of illegal [conduct].” Id. at 556.
2. Summary Judgment Standard
To prevail on a motion for summary judgment, the movant must “show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A court views the evidence “in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party's favor.” Pennington v. D'Ippolito, 855 Fed.Appx. 779, 781 (2d Cir. 2021) (citation omitted). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party” and material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242, 248 (1986). To survive a motion for summary judgment, a plaintiff must “come forth with evidence sufficient to allow a reasonable jury to find in [his] favor.” Cuffee v. City of New York, No. 15-CV-8916 (PGG) (DF), 2018 WL 1136923, at *4 (S.D.N.Y. Mar. 1, 2018) (quoting Brown v. Henderson, 257 F.3d 246, 252 (2d Cir. 2001)). Reliance on “mere speculation or conjecture as to the true nature of the facts” is not enough to overcome a summary judgment motion. Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010). The non-moving party “must offer some hard evidence showing that its version of the events is not wholly fanciful.” D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998).
3. Conversion of a Motion to Dismiss to a Motion for Summary Judgment
In granting a motion to dismiss for failure to state a claim under Rule 12(b)(6), “a district court generally must confine itself to the four corners of the complaint and look only to the allegations contained therein.” Drew v. City of New York, No. 18-CV-10714 (ER), 2019 WL 3714932, at *2 (S.D.N.Y. Aug. 6, 2019) (citing Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007)).
That said, the Check and related documents are properly considered on a 12(b)(6) motion under Rule 10(c), which provides that “[a] copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). In the context of a Rule 12(b)(6) motion, courts “may permissibly consider documents other than the complaint,” including “[d]ocuments that are attached to the complaint or incorporated in it by reference.” Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). Plainly, the Check, the Account Statement, and the October 5, 2023, letter from Wells Fargo to Johnson are properly considered to be incorporated by reference into the Complaint, and their consideration, without more, would not necessitate a conversion of the motion to dismiss as one for summary judgment.
Rule 12(d) of the Federal Rules of Civil Procedure states that “[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d).
A court may decide either to “exclude the additional material and decide the motion on the complaint alone or convert the motion to one for summary judgment under Fed.R.Civ.P. 56.” Girardi v. Ferrari Express, Inc., No. 20-CV-4298 (VSB), 2023 WL 2744027, at *3 (S.D.N.Y. Mar. 31, 2023) (quoting Friedl v. City of New York, 210 F.3d 79, 83 (2d Cir. 2000) (internal quotation marks omitted). If the Court does not exclude material from outside the pleadings, “the motion must be treated as one for summary judgment” and “[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.” Fed.R.Civ.P. 12(d). A motion to dismiss can be converted to a motion for summary judgment if the plaintiff had “unequivocal notice of the meaning and consequences of conversion.” Cuffee, 2018 WL 1136923, at *5 (cleaned up). In the case of pro se litigants, formal notice is “particularly important;” they “must have unequivocal notice of the meaning and consequences of conversion to summary judgment” because pro se parties “may be unaware of the consequences of his failure to offer evidence bearing on triable issues.” Hernandez v. Coffey, 582 F.3d 303, 307-08 (2d Cir. 2009) (quoting Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 767 (2d Cir. 1983)).
4. Standards for Pro Se Plaintiffs
Submissions filed by plaintiffs who are proceeding pro se are held “‘to less stringent standards than formal pleadings drafted by lawyers.'” Hughes v. Rowe, 449 U.S. 5, 9 (1980) (quoting Haines v. Kerner, 404 U.S. 519, 520 (1972)). Pro se submissions are construed liberally and should be read “to raise the strongest arguments they suggest.” Collins v. Figura, No. 23-109, 2024 WL 1739084, at *1 (2d Cir. Apr. 23, 2024) (quoting Publicola v. Lomenzo, 54 F.4th 108, 111 (2d Cir. 2022) (per curiam)). A pro se plaintiff's complaint “must contain factual allegations that sufficiently ‘raise a right to relief above the speculative level.'” Oles v. Sauer, No. 19-CV-8865 (NSR), 2022 WL 1204862, at *3 (S.D.N.Y. Apr. 22, 2022) (quoting Jackson v. N.Y.S. Dep't of Labor, 709 F.Supp.2d 218, 224 (S.D.N.Y. 2010)). A pro se plaintiff's complaint should be dismissed “‘if the complaint lacks an allegation regarding an element necessary to obtain relief.'” Obergh v. Bldg. Maint. Servs., LLC, No. 21-CV-5053 (VEC) (JLC), 2022 WL 2733770, at *5 (S.D.N.Y. July 14, 2022) (quoting Geldzahler v. N.Y. Med. Coll., 663 F.Supp.2d 379, 387 (S.D.N.Y. 2009)), adopted by 2022 WL 3359710 (Aug. 14, 2022).
B. Analysis
1. The Court Should Resolve These Claims on Wells Fargo's Motion to Dismiss Without Converting the Motion to One for Summary Judgment
In addition to moving to dismiss Johnson's complaint, Wells Fargo requests summary judgment in the alternative on Johnson's EFTA claim. Def. Mem. at 7. To support its motion for summary judgment, Wells Fargo submitted additional materials. Dkt. No. 16. However, as discussed further below, each of Johnson's claims, including the EFTA claim, can and should be resolved on the “four corners” of the complaint, as well as those documents properly incorporated by reference. Drew, 2019 WL 3714932, at *2. Thus, Wells Fargo's motion for summary judgment in the alternative need not be reached.
2. Johnson's 14th Amendment Claim Should be Dismissed with Prejudice
Johnson seeks relief for an alleged violation of his 14th Amendment due process rights. Johnson claims Wells Fargo violated these rights when it failed to provide him with credit when it was investigating his claim, took his money, and closed his account without his consent. Compl. at 1-2.
The 14th Amendment of the United States Constitution provides in part that “[n]o State shall . . . deprive any person of life, liberty, or property, without due process of law.” U.S. CONST. amend. XIV, § 1. The 14th Amendment's due process clause provides “no shield against merely private conduct, however discriminatory or wrongful.” Lurch v. City of New York, No. 19-CV-11253 (AJN), 2021 WL 1226927, at *3 (S.D.N.Y. Mar. 31, 2021) (quoting Shelley v. Kraemer, 334 U.S. 1, 13 (1948)). The 14th Amendment applies only to state actors, not private actors. Id. Because Wells Fargo is a private business corporation and not a government actor, there is no form of state action alleged, and the 14th Amendment “is clearly not applicable here since a cause of action under that amendment requires some form of state action and none is alleged.” Gideon Mins. U.S.A., Inc. v. JP Morgan Chase Bank, No. 02-CV-10140 (JSM), 2003 WL 21804850, at *1 (S.D.N.Y. Aug. 6, 2003); see also Secard v. Wells Fargo Bank, N.A., No. CV 15-499 (JS) (ARL), 2015 WL 6442563, at *3 (E.D.N.Y. Sept. 9, 2015) (“Wells Fargo . . . [is a] private actor[].”), adopted by 2015 WL 6442346 (Oct. 23, 2015).
In a pro se case like this one where Johnson has filed a complaint and this is the first time his allegations are being evaluated, “[i]t is the usual practice upon granting a motion to dismiss to allow leave to replead.” Norman v. Experian Info. Sols., Inc., No. 23-CV-9245 (GHW), 2024 WL 1175201, at *2 (S.D.N.Y. Mar. 19, 2024) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991)). Although “[d]istrict courts generally grant . . . pro se plaintiff[s] an opportunity to amend a complaint to cure its defects[ ],” “leave to amend is not required where it would be futile.” Holland v. Lions Gate Ent. & Films, No. 21-CV-2944 (AT) (JLC), 2024 WL 1925424, at *22 (S.D.N.Y. May 2, 2024) (quoting Gilot v. Act Blue, No. 19-CV-11256 (CM), 2020 WL 247960, at *2 (S.D.N.Y. Jan. 16, 2020)). Here, Johnson's 14th Amendment claim is inherently implausible, as no amendment to his complaint could enable the 14th Amendment to apply to a private actor, such as Wells Fargo. Accordingly, Johnson's 14th Amendment claim should be dismissed with prejudice.
3. Johnson's EFTA Claim Should be Dismissed with Prejudice
Johnson alleges Wells Fargo violated the EFTA by failing to provide him with notice of the error of the incomplete indorsed check and by denying him access to the Check's funds during the investigation. Compl. at 2-3. The EFTA governs “any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account.” 15 U.S.C. § 1693a(7). Reg. E, promulgated under the authority of the EFTA by the Consumer Financial Protection Bureau, 12 C.F.R § 1005.1, “explicitly excludes from the coverage of the EFTA transfers of funds made through checks and wire transfers.” Fischer & Mandell LLP v. Citibank, N.A, No. 09-CV-1160 (RJS), 2009 WL 1767621, at *4 (S.D.N.Y. June 22, 2009). An automated teller machine falls within the scope of the definition of “electronic terminal.” 15 U.S.C. § 1693a(8).
Johnson's fund transfer stemmed from the deposit of the Check into an ATM. Compl. at 1. Since Johnson's claim does not concern an electronic fund transfer, Reg. E does not apply here, and Johnson's claim falls outside the scope of the EFTA.
Wells Fargo argues separately that Johnson's Reg. E claim is time-barred. Def. Mem. at 6. “A plaintiff must bring an EFTA claim ‘within one year from the . . . violation.'” Zarate v. Chase Bank, No. 22-CV-1178 (AMD) (LB), 2023 WL 5956334, at *4 (E.D.N.Y. Sept. 13, 2023) (citing 15 U.S.C. § 1693m(g)). Johnson deposited the Check on October 11, 2022, and Wells Fargo deducted the funds on October 13, 2022. 10/5/23 Ltr. Johnson's complaint was notarized on November 8, 2023, and filed on December 15, 2023. Compl., Dkt. No. 1-1. Thus, Johnson's Reg. E claim should also be dismissed because it is barred by the EFTA's one-year statute of limitations. 15 U.S.C. § 1693m(g). It would be futile to amend the complaint given that facts already pled by Johnson rule out the applicability of Reg. E and Johnson's EFTA claim is time-barred. Accordingly, the motion to dismiss Johnson's Reg. E claim with prejudice should be granted.
Wells Fargo sets forth a third basis for the dismissal of Johnson's EFTA claim, rooted in Article 3 of New York's Uniform Commercial Code. See Def. Mem. at 7 n.1. The Court agrees that this is yet another basis for the dismissal of the EFTA claim.
4. Johnson's Section 9-G Claim Should be Dismissed without Prejudice
Finally, Johnson refers to Section 9-G of the New York Banking Law as part of his claim that Wells Fargo did not follow proper procedures in reversing the credit from his improperly indorsed check. Compl. at 3. Section 9-G of the New York Banking Law concerns the “right of set off,” restricting the ability of banking institutions to use set off against certain types of accounts. N.Y. Banking L. § 9-G.A set off refers to a bank's right to offset or deduct funds from a depositor's account to cover a debt or obligation that the depositor owes the bank. See Fenton v. Ives, 222 A.D.2d 776, 777, 634 N.Y.S.2d 833, 834 (3d Dep't 1995).
Section 9-G(2), the section of the statute that Johnson presumably invokes, provides: “No banking institution shall assert, claim, or exercise any right of set off against any other deposit account held by such banking institution unless, prior to or on the same business day of such action, notice of the set off together with the reasons for the set off are mailed to the depositor.”
Johnson fails to plead any facts indicating that Wells Fargo's reversal of the $50,000 credit from his account constitutes a debt or obligation that Johnson owes Wells Fargo. Compl. at 3. While he is not required to plead “detailed factual allegations,” Johnson does not provide any facts supporting this claim and fails to allege any set of facts that demonstrates he is entitled to relief. Johnson's mere “unadorned, the-defendant-unlawfully-harmed-me accusation” is not “enough to raise a right to relief above the speculative level.” Def. Mem. at 8 (citing Twombly, 550 U.S. at 555; Iqbal, 556 U.S. at 678). Even applying the standard of liberal construction for a pro se litigant, Johnson's Section 9-G claim states no plausible grounds for relief. However, unlike his other claims, the “pleading deficiencies” of Johnson's Section 9-G claim “may be corrected,” for example, by providing facts to support his claim, “so amendment is not necessarily futile.” Norman, 2024 WL 1175201, at *3. Therefore, Johnson's Section 9-G claim should be dismissed without prejudice and he should be given the right to file an amended complaint on this claim only.
Alternatively, since only the Section 9-G claim would remain, the Court could choose not to exercise supplemental jurisdiction and dismiss this claim without prejudice to renewal in state court. See, e.g., Fitzgerald v. We Company, No. 20-CV-5260 (AT), 2022 WL 952963, at *10 (S.D.N.Y. Mar. 30, 2022) (“where all federal-law claims are eliminated before trial, ‘the balance of factors to be considered under the pendent jurisdiction doctrine . . . point toward [a federal court] declining to exercise jurisdiction over the remaining state [and city] law claims.'”) (quotation omitted).
III. CONCLUSION
For the foregoing reasons, I recommend that defendant's motion to dismiss be granted, Johnson's 14th Amendment and EFTA claims be dismissed with prejudice, and Johnson's Section 9-G claim be dismissed without prejudice.
IV. PROCEDURE FOR FILING OBJECTIONS
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to such objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Gregory H. Woods, United States Courthouse, 500 Pearl Street, New York, NY 10007. Any requests for an extension of time for filing objections must be directed to Judge Woods.
FAILURE TO FILE OBJECTIONS WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).