Opinion
CIVIL 6:22-CV-01112-ADA-JCM
04-11-2023
JERRY L. MALESOVAS Plaintiff, v. STEVE PEAK, et al, Defendants.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
JEFFREY C. MANSKE UNITED STATES MAGISTRATE JUDGE
TO: THE HONORABLE ALAN D ALBRIGHT, UNITED STATES DISTRICT 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 Defendants' Motion to Dismiss Plaintiff's Complaint (ECF No. 6), Plaintiff's Response to Defendants' Motion to Dismiss (ECF No. 8), and Defendants' Reply (ECF No. 9). For the following reasons, the undersigned RECOMMENDS Defendants' Motions be GRANTED.
I. BACKGROUND
Plaintiff Jerry Malesovas sued Defendants Roger Hochschild, Steve Peak, Discover Bank, and Discover Financial Services for allegedly misappropriating a Certificate of Deposit (“CD”) issued to Plaintiff by Discover Bank. Pl.'s Compl. (ECF No. 1) at 2-3. Plaintiff alleges that this Court has federal question jurisdiction over this claim because the case involves the interpretation of a CD insured by the Federal Deposit Insurance Corporation. Id. at 2.
Plaintiff's statement of the facts is one paragraph long. Id. at 3. Plaintiff alleges that Discover Bank issued a CD to Plaintiff for $209,000. Id. Plaintiff claims that he wrote a letter to Hochschild, directing Discover Bank to not renew the CD and to deliver the funds to Plaintiff. Id. Plaintiff further alleges that Discover Bank received the letter and renewed the CD anyway. Id. Plaintiff is now seeking the “amount he was damaged by being deprived of the use of the funds” or, alternatively, the amount he was “damaged by the defendants' misappropriation of his funds and using those funds for their own benefit.” Id.
Plaintiff also attached a number of exhibits to his Complaint, including a statement regarding his CD Account. Pl.'s Compl., Ex. 1. That statement provides that “The Account will automatically renew at maturity, at the end of the Grace Period. The ‘Grace Period' consists of the nine (9) days immediately following the maturity date. If no action is taken, the CD or IRA CD will automatically renew on the tenth day after the maturity date.” Id. at 6.
Plaintiff also attached letters sent between Plaintiff, Hochschild, and Justin (an Associate in Discover Bank's Executive Office of Customer Advocacy). Pl.'s Compl., Ex. 2 at 4. One of those letters contains a detailed account of the communications sent between Plaintiff and Defendants regarding the renewal of Plaintiff's CD account. Pl.'s Compl., Ex. 3 at 5. On September 10, 2020, Discover sent a letter to Plaintiff advising him that his CD account would automatically renew on October 19, 2020, if Plaintiff made no changes to his account. Id. Plaintiff responded with instructions to close the account, contingent on the CD rates offered on the CD's maturity date. Id. Discover responded on October 3 with the rates then available. Id. On October 12, Plaintiff “sent a secure message with instruction to close [his] account and move the funds to [his] money market account.” Id. Discover responded, advising Plaintiff that he did not have a money market account with Discover and asked Plaintiff to clarify which of his savings accounts Plaintiff would like the money sent to. Id. On October 14, 2020, Plaintiff requested that Discover move the funds to his emergency fund account. Id. Discover requested that Plaintiff confirm the last four digits of the account he wanted the funds moved to. Id. Plaintiff never provided that information. Id. After Plaintiff's CD account automatically renewed, Discover waived the early withdrawal penalty and sent Plaintiff a check for the amount of his CD.
Defendants filed a Motion to Dismiss arguing that Plaintiff has failed to plausibly allege that Defendants misappropriated Plaintiff's funds, Plaintiff's conversion claim fails as a matter of law, and the Court lacks personal jurisdiction over Hochschild and Peak. Def.'s Mot. at 6, 8, 10. Plaintiff, proceeding pro se, responded requesting that the Court delay considering the Motion until March 1, 2023, and arguing that he satisfied his burden at the pleading stage and that the Court has personal jurisdiction over Hochschild and Peak. Pl.'s Resp.
II. LEGAL STANDARDS
Upon motion or sua sponte, a court may dismiss an action that fails to state a claim upon which relief may be granted. FED. R. CIV. P. 12(b)(6); Carroll v. Fort James Corp., 470 F.3d 1171, 1177 (5th Cir. 2006). To survive Rule 8, a nonmovant must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “The court's task is to determine whether the plaintiff has stated a legally cognizable claim that is plausible, not to 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). The court begins by identifying which allegations are well-pleaded facts and which are legal conclusions or elemental recitations, accepting as true the former and rejecting the latter. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 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). The court then determines whether the accepted allegations state a plausible claim to relief. Id. at 379.
“Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555. “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) (quotation marks omitted). “A claim has facial plausibility when the [nonmovant] pleads factual content that allows the court to draw the reasonable inference that the [movant] is liable for the misconduct alleged.” Ashcroft, 556 U.S. at 678. “The plausibility standard . . . asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. For purposes of Rule 12(b)(6), “pleadings” include the complaint, its attachments, and documents referred to in the complaint and central to a plaintiff's claims. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-499 (5th Cir. 2000).
III. DISCUSSION
Plaintiff sued Defendants, alleging that they misappropriated his CD funds by automatically renewing the CD when Plaintiff instructed Discover not to renew it. Pl.'s Compl. at 3. In his response, Plaintiff clarified that he alleges that “most if not all CD funds held by Discover Bank at a very low rate of interest through the selling of CDs were used to finance Discover Card loans which earned a high rate of interest for Discover Bank and Plaintiff believes Discover Bank wanted to hang on [sic] those CD funds.” Pl.'s Resp. at 2. The Court, however, is not permitted to look past the allegations in the complaint and does not consider Plaintiff's additional allegations in his response. Jaraba v. Blinken, 568 F.Supp.3d 720, 727 (W.D. Tex. 2021) (citations omitted). Even if the Court were to consider this allegation, however, it would amount to no more than mere speculation about Defendant's motives which does not satisfy the pleading standard.
Defendants argue that Plaintiff's Complaint and the exhibits attached thereto conclusively establish that there was no misappropriation. Def.'s Mot. at 6. Defendants assert that the timeline found in the June 4, 2021, letter provides a clear timeline of the events leading up to this case. Id. at 7. This timeline, Defendants argue, clearly shows that “Plaintiff's delay and non-responsiveness-not Discover's-caused the CD account to renew.” Id. at 7.
The timeline articulated above does not state a plausible claim that the funds from Plaintiff's CD account were misappropriated. The facts, as alleged by Plaintiff, cannot be interpreted in a way that pleads a possible, let alone plausible claim for relief. Plaintiff pled facts showing that Plaintiff failed to provide clear instructions on how he would like to receive the funds in his CD account until after the account automatically renewed. Even after the account automatically renewed, Defendants delivered the funds to Plaintiff without charging him the early withdrawal fee. Plaintiff has not alleged that Defendants used these funds inappropriately and refused to deliver them to him. Thus, the Court should grant Defendant's Motion to Dismiss.
Defendants also argue that Plaintiff's Complaint should be dismissed to the extent to which it asserts a conversion claim. Id. at 8. In Texas, money can be converted only if it is specifically identified and held in trust. GE Cap. Com., Inc. v. Wright & Wright, Inc., No. CIV A 309-CV-572-L, 2009 WL 5173954, at *8 (N.D. Tex. Dec. 31, 2009) citing Chu v. Hong, 249 S.W.3d 441, 444 (Tex. 2008). To establish a conversion of money claim, a plaintiff must prove that money is delivered for safekeeping; intended to be kept segregated; substantially in the form in which it is received or an intact fund; and not the subject of a title claim by the keeper. Id. citing In re TXNB Internal Case, 483 F.3d 292, 308 (5th Cir. 2007). In Texas, a plaintiff generally may not sue in conversion to recover his deposit. Upper Valley Aviation v. Mercantile Nat'l Bank, 656 S.W.2d 952, 955 (Tex. Civ. App. 1983).
Here, Plaintiff has failed to allege that he delivered the money for the CD account for safekeeping and intended for it to be kept segregated. Further, Plaintiff admits that Defendants returned the funds for the account to Plaintiff. For those reasons, Plaintiff's claims for conversion should be dismissed for failure to state a claim.
Plaintiff argues that Delaware law should apply rather than Texas law under the terms of the CD account. Pl.'s Resp. at 3. Plaintiff asserts that Defendants' Motion should be denied because of this error. Delaware law is even less friendly to Plaintiff's claims. “Delaware does not recognize a cause of action for the conversion of money.” Curto v. Dixon, No. CPU4-19-001955, 2020 WL 5579331, at *2 (Del. Com. Pl. Sept. 17, 2020) citing DeFranco v. Pordham, No. CV 15C-01-158-JRJ, 2015 WL 4751217, at *2 (Del Super. Aug. 11, 2015). Thus, Plaintiff's claim fails as a matter of law under Delaware law.
The individual defendants also argue that this claim should be dismissed against them for lack of personal jurisdiction. Defs.' Mot. at 10. As the Court should grant Defendants' Motion and dismiss the entire claim, Hochschild and Peak's Motion on personal jurisdiction is moot. A request for relief is moot when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome. Los Angeles Cty. v. Davis, 440 U.S. 625, 631 (1979) (citing Powell v. McCormack, 395 U.S. 486, 496 (1969)). Plaintiff will have no claims against the individual defendants after the Court grants Defendants' Motion under Rule 12(b)(6). Accordingly, the Court need not address the personal jurisdiction argument.
IV. CONCLUSION
For the foregoing reasons, the undersigned RECOMMENDS Defendant's Motion to Dismiss (ECF No. 6) be GRANTED consistent with the discussion above and that Plaintiff's Complaint be dismissed with prejudice against filing the same.
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.