1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JOAQUIN RITCHIE, Case No.: 23-cv-1715-JO-BGS
12 Plaintiff,
13 v. ORDER DISMISSING COMPLAINT AND DENYING MOTION TO 14 LISA CHAN AND WHEELHOUSE COMPEL ARBITRATION AS MOOT CREDIT UNION, 15 Defendants. 16 17
18 19 On September 18, 2023, pro se Plaintiff Joaquin Ritchie (“Plaintiff”) filed a 20 complaint alleging that Defendants Wheelhouse Credit Union and Lisa Chan 21 (“Defendants”) breached their contract, violating their fiduciary duty to Plaintiff under the 22 Federal Reserve Act. Dkt. 1 (“Compl.”). In response, Defendants moved to compel 23 arbitration. Dkt. 4. For the reasons discussed below, the Court DISMISSES Plaintiff’s 24 complaint for lack of subject matter jurisdiction and DENIES Defendants’ motion to 25 compel as moot. 26 I. BACKGROUND 27 On October 15, 2020, Plaintiff Joaquin Richie became a member of Wheelhouse 28 Credit Union, a member-owned, non-for-profit cooperative that provides account and loan 1 services to its members. Dkt. 4 at 6-7. By becoming a member, Plaintiff entered into a 2 contract with the credit union that required Plaintiff to “pay [his] debt” and the credit union 3 to “apply the payment to the account.” Compl. at 4. Defendants Wheelhouse Credit Union 4 and its Vice President and Chief Financial Officer, Lisa Chan (“Chan”), allegedly breached 5 this contract and thereby violated their fiduciary duties when they refused to apply a 6 payment that Plaintiff made to his account. Id. 7 Based on these facts, on September 18, 2023, Plaintiff filed a complaint against 8 Defendants Wheelhouse Credit Union and Chan requesting that the Court order Defendants 9 to pay a civil money penalty of $24,000,000 for breach of their fiduciary duties set forth 10 by the Federal Reserve Act. Id. In invoking the Federal Reserve Act, Plaintiff pleaded 11 that this Court had federal question jurisdiction pursuant to 28 U.S.C. § 1331.1 Id. at 6. 12 Shortly after, on October 10, 2023, Defendants filed a motion to compel arbitration. Dkt. 13 4. 14 While Plaintiff invoked a federal statute as the basis of federal question jurisdiction, 15 he failed to explain how his claim, which appeared to be a simple breach of contract issue, 16 raised a question under the Federal Reserve Act. See Compl. at 4. The Court therefore 17 ordered Plaintiff to show cause why this action should not be dismissed for lack of federal 18 question jurisdiction. Dkt. 6. In addition, the Court stayed Defendants’ motion to compel 19 pending resolution of the threshold jurisdictional question. Id. On November 8, 2023, 20 Plaintiff filed an amended response to the Court’s Order to Show Cause, asserting that his 21 claims do indeed raise federal questions because they arise under Sections 16 and 29 of the 22 Federal Reserve Act. Dkt. 9. 23 / / / 24 / / / 25
26 1 Plaintiff does not plead diversity jurisdiction and, even if he did, he cannot not meet the 27 requirements for complete diversity because he alleged that he is a citizen of California and that Defendants Wheelhouse Credit Union and Lisa Chan are both citizens of California. Compl. at 3; see 28 28 1 II. LEGAL STANDARD 2 Because federal courts are courts of limited jurisdiction, they can only adjudicate 3 cases authorized by the Constitution and Congress: those involving diversity of citizenship, 4 a federal question, or to which the United States is a party. See Finley v. United States, 5 490 U.S. 545 (1989). Before reaching the merits of any dispute, a federal court must 6 confirm that it retains subject matter jurisdiction to adjudicate the issues presented. See 7 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998). And whenever a doubt 8 arises, federal courts are “obliged to inquire sua sponte as to” whether subject matter 9 jurisdiction “exist[s].” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 10 278 (1977) (internal citation omitted); see Fed. R. Civ. P. 12(h)(3) (“If the court determines 11 at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.”). 12 When a plaintiff raises federal question jurisdiction under § 1331, a federal court 13 must ensure that the plaintiff has pled “a colorable claim arising under the Constitution or 14 laws of the United States.” Arbaugh v. Y&H Corp., 546 U.S. 500, 513 (2006) (internal 15 citation and quotation marks omitted); see Caterpillar Inc. v. Williams, 482 U.S. 386, 392 16 (1987) (“The presence or absence of federal-question jurisdiction is governed by the ‘well- 17 pleaded complaint rule,’ which provides that federal jurisdiction exists only when a federal 18 question is presented on the face of the plaintiff’s properly pleaded complaint.”). In 19 assessing the sufficiency of the complaint, all material factual allegations of the complaint 20 are accepted as true, as well as all reasonable inferences to be drawn from them. Cahill v. 21 Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). A court, however, need not 22 accept all conclusory allegations as true. Rather, it must “examine whether conclusory 23 allegations follow from the description of facts as alleged by the plaintiff.” Holden v. 24 Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (internal citation and quotation marks 25 omitted). If a plaintiff’s complaint fails to contain “enough facts to state a claim to relief 26 that is plausible on its face,” the plaintiff has failed to state a claim. Bell Atl. Corp. v. 27 Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff 28 pleads factual content that allows the court to draw the reasonable inference that the 1 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 2 (citing id. at 556). Pro se complaints are construed “liberally” and may be dismissed for 3 failure to state a claim only “if it appears beyond doubt that the plaintiff can prove no set 4 of facts in support of his claim which would entitle him to relief.” Wilhelm v. Rotman, 680 5 F.3d 1113, 1121 (9th Cir. 2012) (internal citation and quotation marks omitted). 6 III. DISCUSSION 7 The Court sua sponte examines whether it has subject matter jurisdiction over this 8 case. Because Plaintiff asserts federal question jurisdiction as the basis for the Court’s 9 jurisdiction, the Court must determine whether Plaintiff’s purported federal claim is legally 10 cognizable. Plaintiff argues that he has stated a federal claim for violations of 12 U.S.C. 11 § 412 (“Section 16”) or 12 U.S.C. § 504 (“Section 29”) of the Federal Reserve Act. Dkt. 12 9. After reviewing his complaint, the Court disagrees.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JOAQUIN RITCHIE, Case No.: 23-cv-1715-JO-BGS
12 Plaintiff,
13 v. ORDER DISMISSING COMPLAINT AND DENYING MOTION TO 14 LISA CHAN AND WHEELHOUSE COMPEL ARBITRATION AS MOOT CREDIT UNION, 15 Defendants. 16 17
18 19 On September 18, 2023, pro se Plaintiff Joaquin Ritchie (“Plaintiff”) filed a 20 complaint alleging that Defendants Wheelhouse Credit Union and Lisa Chan 21 (“Defendants”) breached their contract, violating their fiduciary duty to Plaintiff under the 22 Federal Reserve Act. Dkt. 1 (“Compl.”). In response, Defendants moved to compel 23 arbitration. Dkt. 4. For the reasons discussed below, the Court DISMISSES Plaintiff’s 24 complaint for lack of subject matter jurisdiction and DENIES Defendants’ motion to 25 compel as moot. 26 I. BACKGROUND 27 On October 15, 2020, Plaintiff Joaquin Richie became a member of Wheelhouse 28 Credit Union, a member-owned, non-for-profit cooperative that provides account and loan 1 services to its members. Dkt. 4 at 6-7. By becoming a member, Plaintiff entered into a 2 contract with the credit union that required Plaintiff to “pay [his] debt” and the credit union 3 to “apply the payment to the account.” Compl. at 4. Defendants Wheelhouse Credit Union 4 and its Vice President and Chief Financial Officer, Lisa Chan (“Chan”), allegedly breached 5 this contract and thereby violated their fiduciary duties when they refused to apply a 6 payment that Plaintiff made to his account. Id. 7 Based on these facts, on September 18, 2023, Plaintiff filed a complaint against 8 Defendants Wheelhouse Credit Union and Chan requesting that the Court order Defendants 9 to pay a civil money penalty of $24,000,000 for breach of their fiduciary duties set forth 10 by the Federal Reserve Act. Id. In invoking the Federal Reserve Act, Plaintiff pleaded 11 that this Court had federal question jurisdiction pursuant to 28 U.S.C. § 1331.1 Id. at 6. 12 Shortly after, on October 10, 2023, Defendants filed a motion to compel arbitration. Dkt. 13 4. 14 While Plaintiff invoked a federal statute as the basis of federal question jurisdiction, 15 he failed to explain how his claim, which appeared to be a simple breach of contract issue, 16 raised a question under the Federal Reserve Act. See Compl. at 4. The Court therefore 17 ordered Plaintiff to show cause why this action should not be dismissed for lack of federal 18 question jurisdiction. Dkt. 6. In addition, the Court stayed Defendants’ motion to compel 19 pending resolution of the threshold jurisdictional question. Id. On November 8, 2023, 20 Plaintiff filed an amended response to the Court’s Order to Show Cause, asserting that his 21 claims do indeed raise federal questions because they arise under Sections 16 and 29 of the 22 Federal Reserve Act. Dkt. 9. 23 / / / 24 / / / 25
26 1 Plaintiff does not plead diversity jurisdiction and, even if he did, he cannot not meet the 27 requirements for complete diversity because he alleged that he is a citizen of California and that Defendants Wheelhouse Credit Union and Lisa Chan are both citizens of California. Compl. at 3; see 28 28 1 II. LEGAL STANDARD 2 Because federal courts are courts of limited jurisdiction, they can only adjudicate 3 cases authorized by the Constitution and Congress: those involving diversity of citizenship, 4 a federal question, or to which the United States is a party. See Finley v. United States, 5 490 U.S. 545 (1989). Before reaching the merits of any dispute, a federal court must 6 confirm that it retains subject matter jurisdiction to adjudicate the issues presented. See 7 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998). And whenever a doubt 8 arises, federal courts are “obliged to inquire sua sponte as to” whether subject matter 9 jurisdiction “exist[s].” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 10 278 (1977) (internal citation omitted); see Fed. R. Civ. P. 12(h)(3) (“If the court determines 11 at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.”). 12 When a plaintiff raises federal question jurisdiction under § 1331, a federal court 13 must ensure that the plaintiff has pled “a colorable claim arising under the Constitution or 14 laws of the United States.” Arbaugh v. Y&H Corp., 546 U.S. 500, 513 (2006) (internal 15 citation and quotation marks omitted); see Caterpillar Inc. v. Williams, 482 U.S. 386, 392 16 (1987) (“The presence or absence of federal-question jurisdiction is governed by the ‘well- 17 pleaded complaint rule,’ which provides that federal jurisdiction exists only when a federal 18 question is presented on the face of the plaintiff’s properly pleaded complaint.”). In 19 assessing the sufficiency of the complaint, all material factual allegations of the complaint 20 are accepted as true, as well as all reasonable inferences to be drawn from them. Cahill v. 21 Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). A court, however, need not 22 accept all conclusory allegations as true. Rather, it must “examine whether conclusory 23 allegations follow from the description of facts as alleged by the plaintiff.” Holden v. 24 Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (internal citation and quotation marks 25 omitted). If a plaintiff’s complaint fails to contain “enough facts to state a claim to relief 26 that is plausible on its face,” the plaintiff has failed to state a claim. Bell Atl. Corp. v. 27 Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff 28 pleads factual content that allows the court to draw the reasonable inference that the 1 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 2 (citing id. at 556). Pro se complaints are construed “liberally” and may be dismissed for 3 failure to state a claim only “if it appears beyond doubt that the plaintiff can prove no set 4 of facts in support of his claim which would entitle him to relief.” Wilhelm v. Rotman, 680 5 F.3d 1113, 1121 (9th Cir. 2012) (internal citation and quotation marks omitted). 6 III. DISCUSSION 7 The Court sua sponte examines whether it has subject matter jurisdiction over this 8 case. Because Plaintiff asserts federal question jurisdiction as the basis for the Court’s 9 jurisdiction, the Court must determine whether Plaintiff’s purported federal claim is legally 10 cognizable. Plaintiff argues that he has stated a federal claim for violations of 12 U.S.C. 11 § 412 (“Section 16”) or 12 U.S.C. § 504 (“Section 29”) of the Federal Reserve Act. Dkt. 12 9. After reviewing his complaint, the Court disagrees. 13 Congress created the Federal Reserve Act “to provide for the establishment of 14 Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting 15 commercial paper, to establish a more effective supervision of banking in the United States, 16 and for other purposes.” Federal Reserve Act, 12 U.S.C.A. Ch. 3, Official Title. The 17 Federal Reserve Act is “entirely unrelated to consumer finance and does not provide any 18 rights to a private citizen.” Brown v. Home State Bank, No. 23-CV-1620-BHL, 2023 WL 19 8436322, at *2 (E.D. Wis. Dec. 5, 2023). Accordingly, neither Section 16, which enables 20 Federal Reserve banks to provide collateral in exchange for Federal Reserve notes, nor 21 Section 29, which allows the government to collect civil penalties from banks for violating 22 the Federal Reserve Act, contain a private right of action for citizens to bring suit. See 12 23 §§ U.S.C. 412, 504; Murphy v. Cap. One, No. 4:23-cv-1120-HEA, 2023 WL 5929340, at 24 *3 (E.D. Mo. Sept. 12, 2023) (“Section 16 of the Federal Reserve Act, 12 U.S.C. §§ 411- 25 21, ... governs the issuance and redemption of Federal Reserve notes [and] Section 29 of 26 the Federal Reserve Act, 12 U.S.C. § 504, ... imposes penalties on banks for an array of 27 misconduct.”); White v. Lake Union Ga Partners LLC, C/A, No. 1:23-02852-VMC, 2023 28 WL 6036842, at *2 (N.D. Ga. July 14, 2023) (remarking that “courts across the country 1 have held that [Section 16] does not provide plaintiffs with a private right of action and 2 therefore does not establish federal question jurisdiction”); Harp v. Police & Fire Fed. 3 Credit Union, 2023 WL 5152625, at *4 (E.D. Pa. Aug. 10, 2023) (“Section 29 of the 4 Federal Reserve Act ... imposes penalties on banks for an array of misconduct[,] [b]ut the 5 imposition of civil penalties under Section 29 is carried out by federal officials, and private 6 individuals do not have a private right of action to enforce Section 29 of the Federal 7 Reserve Act.”). 8 Here, Plaintiff has not stated a claim for relief under the Federal Reserve Act because 9 this statutory scheme does not contain a private right of action. In claiming that Defendants 10 failed to apply payment to his account, Plaintiff invokes his individual consumer finance 11 rights and asserts that Defendants violated their fiduciary duty to him as a customer of 12 Wheelhouse Credit Union. Compl. at 4. The Federal Reserve Act, however, only permits 13 federal officials to bring actions against banks for misconduct and does not provide private 14 citizens with a remedy for consumer finance violations. See Murphy, 2023 WL 5929340, 15 at *3. Accordingly, Plaintiff cannot bring his consumer finance claims under this Act, and 16 thereby, cannot establish federal question jurisdiction by invoking these statutes. 17 Plaintiff’s argument that he brings these actions “as a Federal Reserve bank,” not as 18 a private citizen, does not salvage his claims. Dkt. 9 at 2. Plaintiff asserts that because the 19 Cestui Que Vie Act empowers him to act as a Federal Reserve bank, Defendant Chan, as a 20 “Federal Reserve agent,” must give him the “Federal Reserve notes” he is owed. Id. 21 However, the Cestui Que Vie Act, a seventeenth century act of the English Parliament, is 22 not applicable law in the United States and cannot confer upon Plaintiff the status and the 23 rights to sue enjoyed by Federal Reserve banks.2 See Cestui Que Vie Act, 1666, 18 & 19 24
25 26 2 Moreover, even if the Court was to find that Plaintiff is a Federal Reserve Bank, Plaintiff still may not bring a claim under 12 § U.S.C. 412 or 12 U.S.C. § 504. 12 § U.S.C. 412 only establishes the 27 application process to obtain Federal Reserve notes and does not provide an enforcement mechanism. See 12 § U.S.C. 412 (“Any Federal Reserve bank may make application to the local Federal Reserve agent for 28 1 || Car. 2, c.11 (text available at https://www.legislation.gov.uk/aep/Cha2/18-19/11 (accessed 2 || January 22, 2024)). Because Plaintiff has no right to sue as “a Federal Reserve bank” or 3 || as a private citizen, his claims under the Federal Reserve Act fail.? 4 The Court dismisses Plaintiff's claims for violation of the Federal Reserve Act with 5 prejudice because no additional facts could cure the fundamental deficiency of this 6 || complaint—that Plaintiff does not have the right to sue under this statute. See Compl. at 7 ||4. Given that the Federal Reserve Act does not provide private citizens with a right of 8 action to bring consumer finance claims, further amendment consistent with the original 9 allegations would be futile. Chaset v. Fleer/Skybox Int’l, LP, 300 F.3d 1083, 1088 (9th 10 || Cir. 2002) (finding leave to amend futile where “plaintiffs cannot cure the basic flaw in 11 |/their pleading”). Accordingly, Plaintiff's alleged federal claims are dismissed with 12 || prejudice. 13 IV. CONCLUSION 14 For the reasons set out above, the Court DISMISSES Plaintiff's entire complaint 15 || with prejudice [Dkt. 1]. Because the Court dismisses Plaintiffs’ complaint with prejudice, 16 Court DENIES as moot Defendants’ motion to compel arbitration [Dkt. 4]. The Clerk 17 || of the Court is instructed to close the case. 18 || SO ORDERED. 19 || Dated: January 23, 2024 20 21 Honorable Jinsook Ohta” United States District Judge 23 24
26 cannot seek civil penalties under for a 12 U.S.C. § 504 violation of Section 16 because the statute 97 || only provides a remedy for violations of Sections 22, 23A, or 23B of the Federal Reserve Act,
28 3 However, to the extent Plaintiff wishes to allege that Defendants Wheelhouse and Chan breached their contract with Plaintiff, he may bring this state law action in state court.