Attisha Enterprises Inc. v. Capital One Bank

Opinion

| PILEQ 2 | [ FEB 9 9 mo | 4 Tenner nen EP UT Y ; 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 || ATTISHA ENTERPRISES, INC., a Case No.: 3:20-cv-01366-BEN-RBB 11 || Corporation, Plaintiff, OiSMIGS MOTION TO

13 14 || CAPITAL ONE, N.A., [ECE No. 13] 15 Defendant. 16 This matter comes before the Court on Defendant Capital One, N.A.’s (“Capital 17 || One”) Motion to Dismiss the First Amended Complaint (“FAC”) filed by Plaintiff 18 || Attisha Enterprises, Inc. (“Attisha Enterprises”). As set forth below, the Motion to 19 || Dismiss is DENIED. 20 BACKGROUND! 21 On December 7, 2020, the Court issued an Order granting Capital One’s Motion to 22 Dismiss Attisha Enterprises’ Complaint. See ECF No. 11. However, the Court granted 23 || Attisha Enterprises leave to amend its Complaint, and Attisha Enterprises filed its FAC 24 ||on December 21, 2020. ECF No. 12. The FAC brings only two claims against Capital 25

97 ||! The following overview of the facts is drawn from the FAC, ECF No. 12, which rg the Court assumes true in analyzing Capital One’s Motion to Dismiss. Erickson v. Pardus, 351 U.S. 89, 94 (2007). The Court is not making factual findings. 3:20-cv-01366-BEN-RBB

1 || One: (1) negligence and (2) violation of California Commercial Code section 11207 2 (“Section 11207”). 3 Attisha Enterprises’ allegations stem from an incident of wire fraud. On or about 4 ||May 14, 2018, Attisha Enterprises entered into a purchase agreement to buy the 5 Sweetwater 24/7 Convenience Store and Chevron Gas Station. FAC, ECF No. 12, 49. 6 || The parties to the purchase agreement opened escrow with TICOR Title Company of 7 || California “‘TICOR”). Jd. As part of the purchase agreement, Attisha Enterprises was to 8 || deposit $100,000.00 to be held in escrow by TICOR. Id. at J 10. 9 On September 27, 2018, Attisha Enterprises received fraudulent wire instructions 10 || from the unnamed Defendants,” who were fraudsters using the name TICOR Title 11 ||}Company of California and a Capital One account number. FAC, ECF No. 12, 7 10. 12 || Attisha Enterprises caused $100,000.00 to be wired from its account to the fraudsters’ 13 ||account at Capital One because it did not know these instructions were fraudulent and not 14 from TICOR. Jd. at {11. Capital One accepted the wire transfer. Jd. at { 12. 15 Attisha Enterprises alleges that Capital One negligently ignored its internal 16 procedures and allowed the fraudsters to open an account in TICOR’s name. FAC, ECF 17 12, 4 15. Capital One requires new customers to provide certain true identity 18 ||documents when opening an account. Jd. at 16. Nonetheless, Capital One did not follow 19 ||those procedures and allowed someone unaffiliated with TICOR to open an account in its 20 |jname. Jd. at 8. Accordingly, Capital One had “actual knowledge” the account holders 21 |} were not in fact TICOR but nonetheless allowed the account to be created. Jd. 22 Attisha Enterprises further alleges that Capital One violated Section 11207 by 23 ||paying someone other than TICOR the funds from Attisha Enterprises’ wire transfer 24 || ——____.__ 29 The Court previously cautioned Attisha Enterprises that it would dismiss the Doe 26 || Defendants without prejudice if they were not served by January 7, 2021. See Order, ECF No. 11 (citing Keavney v. Cty. af San Diego, No. 19-cv-1947-AJB-BGS, 2020 WL 27 ||4192286, at *4-5 (S.D. Cal. Jul. 21, 2020)). As of the date of this Order, the docket does a8 reflect the Doe defendants have been served. Accordingly, the Doe defendants are dismissed without prejudice. 3:20-cv-01366-BEN-RBB

! || when Capital One had actual knowledge the account holder was not in fact TICOR. 2 ||FAC, ECF No. 12, 20-21. 3 Tl. LEGAL STANDARD 4 A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal 5 ||theory or absence of sufficient alleged facts under a cognizable legal theory. Johnson v. 6 || Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 7 || F.3d 729, 732 (9th Cir. 2001). When considering a Rule 12(b)(6) motion, the Court 8 ||“accept[s] as true facts alleged and draw[s] inferences from them in the light most 9 || favorable to the plaintiff.” Stacy v. Rederite Otto Danielsen, 609 F.3d 1033, 1035 (9th 10 |/Cir. 2010). A plaintiff must not merely allege conceivably unlawful conduct but must 11 allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. 12 ||v. Twombly, 550 U.S. 544, 570 (2007). “A claim is facially plausible ‘when the plaintiff 13 || pleads factual content that allows the court to draw the reasonable inference that the 14 || defendant is liable for the misconduct alleged.’” Zixiang Li v. Kerry, 710 F.3d 995, 999 15 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). 16 ANALYSIS 17 In its FAC, Attisha Enterprises alleges one claim for negligence and another for 18 || violation of Section 11207. 19 A. Negligence 20 Attisha Enterprises’ first claim alleges Capital One negligently allowed an entity 21 |)that was not TICOR to open an account in TICOR’s name. FAC, ECF No. 12, 16. 22 || Attisha Enterprises alleges this conduct violated both Capital One’s internal procedures 23 |jand 31 C.F.R. § 1020.220. Jd. 24 In California, the elements of a negligence claim are (1) the existence ofa duty to 25 || exercise due care; (2) breach of that duty; (3) causation; and (4) damage. See, e.g., 26 || Merrill v. Navegar, Inc., 26 Cal. 4th 465, 500 (Cal. 2000). Capital One argues it does not 27 |)owe a duty of care to non-customers under these circumstances because Attisha 28 Enterprises has failed to allege any facts that should have raised Capital One’s suspicions 3:20-cv-01366-BEN-RBB

1 || about the validity of the account. Mot., ECF No. 13, 5. 2 The Court has addressed this claim before but reaches a different conclusion here 3 || based on Attisha Enterprises’ revised pleadings. In ruling on Capital One’s prior Motion 4 ||to Dismiss, the Court recognized that in California, banks may owe a fiduciary duty of 5 ||care to a noncustomer in “extraordinary and specific situations.” Software Design & 6 || Application, Ltd. v. Hoefer & Arnett, Inc., 49 Cal. App. 4th 472, 479 (Cal. Ct. App. 7 || 1996). “Ifthe circumstances surrounding the opening of the accounts were suspicious 8 as to trigger a duty to investigate a potentially phony account, such a duty to 9 || investigate a suspicious account opening may arise.” Order, ECF No. 11, 6. Moreover, 10 “this general proposition of non-liability [articulated in Software Design] is far from a per 1] rule.” Bear Stearns and Co. v. Buehler, 23 Fed. App’x 773, 776 (9th Cir. 2001). 12 Here, Attisha Enterprises alleges that based on Capital One’s internal procedures 13 || for opening an account, “Capital One had actual knowledge that the person or entity 14 opening this account was in fact not the entity known as ‘TICOR Title Company of 15 || California.” FAC, ECF No. 12, 78. In support of this allegation, Attisha Enterprises 16 || argues that Capital One requires a person opening an account to provide specific 17 ||documentation to verify the person’s relationship to the accountholder, and in this case 18 || Capital One nonetheless negligently allowed another entity to open an account in 19 || TICOR’s name, despite not having provided the requisite documentation. /d. at 97 8, 15. 20 While Capital One argues these allegations are conclusory and should be 21 disregarded, the Court disagrees. “The plausibility standard is not akin to a ‘probability 22 ||requirement.’” Jgbal, 556 U.S. at 678 (citations omitted). Viewing the allegations in the 23 || light most favorable to Attisha Enterprises, the Court finds the FAC plausibly alleges one 24 || of the “extraordinary and specific” situations that would give rise to a bank’s duty of care 25 anon-customer. Software Design, 49 Cal. App. 4th at 479. This is not to say the case 26 |/is decided, merely that Attisha Enterprises has plausibly alleged Capital One did not 27 follow appropriate procedures for opening this account, which led to Attisha Enterprise’s 28 |/subsequent injury. Attisha Enterprises maintains the burden of proving Capital One had 3:20-cv-01366-BEN-RBB

1 ||“actual knowledge” the fraudster’s account did not belong to TICOR, but the FAC 2 || plausibly alleges this claim. Accordingly, Capital One’s Motion to Dismiss the 3 ||negligence claim is denied. 4 B. Violation of Section 11207 5 Attisha Enterprises’ second claim alleges Capital One violated Section 11207. 6 || FAC, ECF No. 12, Jf 19-23. Capital One argues this claim fails as a matter of law 7 || because it did not have actual knowledge the account holder was not, in fact, TICOR. 8 || Mot., ECF No. 13, 10. Capital One also argues the allegations within the claim are 9 |linconsistent. Jd. at 11. 10 Federal Rule of Civil Procedure 8 “allows parties to plead inconsistent factual 11 allegations in the alternative.” Wi-LAN Inc. v. LG Electronics, Inc., 382 F. Supp. 3d 12 1012, 1023 (S.D. Cal. 2019). Here, Attisha Enterprises notes the inconsistency and 13 ||argues the claims are pleaded on alternative theories of liability. Opp’n, ECF No. 14, 11. 14 || Accordingly, this argument does not serve as a basis for granting the Motion to Dismiss. 15 The Court has also already addressed Capital One’s argument that Attisha 16 || Enterprises’ has not plausibly pleaded it had “actual knowledge” the fraudsters’ here 17 || were not affiliated with TICOR. The Court concluded that the allegations plausibly 18 || allege Capital One had actual knowledge, and if Capital One had actual knowledge the 19 || fraudsters were not TICOR, Section 11207 prohibits Capital One from wrongfully 20 || accepting and paying the wire transfer. Cal. Comm. Code § 11207(a). Having found that 21 ||the FAC plausibly alleges a theory of recovery, the Motion to Dismiss the Section 11207 22 ||claim is denied. . 23 CONCLUSION 24 Defendant’s Motion to Dismiss is DENIED. 25 IT IS SO ORDERED. 26 || Dated: February p£202 1 77 HON’ R RT. BENITE Urfited States District Judg 28 □ 3:20-cv-01366-BEN-RBB