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Travelers Casualty and Surety Co. v. Washington Trust Bank

United States District Court, E.D. Washington

March 13, 2014

TRAVELERS CASUALTY AND SURETY COMPANY, Plaintiff,
v.
WASHINGTON TRUST BANK, Defendant.

ORDER RE: MOTION TO DISMISS

JUSTIN L. QUACKENBUSH, Senior District Judge.

BEFORE THE COURT is the Motion to Dismiss (ECF No. 12) filed by Defendant Washington Trust Bank (the "Bank"). The Motion seeks to dismiss all claims asserted in the First Amended Complaint by Plaintiff Travelers Casualty and Surety Company as the assignee and subrogee of Skils'Kin (hereafter "Travelers"). The court heard telephonic oral argument on the Motion on March 12, 2014. Mark E. Wilson argued for Travelers. Leslie Weatherhead participated on behalf of the Bank. Prior to the hearing, the court allowed additional briefing concerning subject matter jurisdiction. The court has reviewed those briefs.

I. Standard for Motion to Dismiss

A motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) tests the sufficiency of the pleading. Under Fed.R.Civ.P. 8, a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief. This standard "does not require detailed factual allegations, but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In order to survive a motion to dismiss, a pleading must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 679.

II. Factual Allegations - First Amended Complaint

On a motion to dismiss, the court accepts as true well-pleaded factual allegations. Therefore, for the purposes of this Motion, the facts are as pled in the First Amended Complaint ("FAC" at ECF No. 5). Plaintiff Travelers, as the assignee and subrogee of Skils'Kin, alleges that Skils'Kin is a community-based non-profit agency which provides services to developmentally disabled adults. Travelers alleges that Skils'Kin had an account at the Bank where it transacted checks for its disabled clients, and that the Bank, in violation of reasonable commercial standards and without exercising ordinary care, cashed checks for Shannon Patterson even though she was not a named payee, when those checks were payable to various third-party payees, including Skils'Kin disabled clients. (FAC ¶¶ 5-7). Travelers claims the checks were not "properly payable" under RCW 62A.4-401(a). Travelers further alleges that the checks which were improperly cashed bore no unauthorized signatures, alterations, or indorsements. (FAC ¶ 11). Travelers admits that Patterson signed the back of the checks, but alleges this was not an indorsement, but rather was to acknowledge receipt of cash. ( Id. ). Skils'Kin allegedly had no way of discovering the improper payments because the monthly statements generated by the Bank did not contain copies of the backs of the checks. (FAC ¶ 12).

Travelers alleges that it issued an insurance policy to Skils'Kin, that Skils'Kin made a claim, and that Travelers paid the claim. (FAC ¶¶ 15-17). The FAC specifically describes only one check that was improperly payable in the amount of $5, 500. However, Travelers alleges there were "many" checks at issue and that the $5, 500 check is just an "example", and further pleads that the total loss was $577, 919.74.

III. Discussion

A. Jurisdiction - The central focus of Bank's Motion to Dismiss (ECF No. 12) is that Travelers has failed to plead facts sufficient to state a claim. The Bank also briefly argues that Travelers has not pled facts necessary to establish the $75, 000 amount in controversy requirement for diversity of citizenship jurisdiction under 28 U.S.C. § 1332 (ECF No. 12, p. 3-4). At the Scheduling Conference in this matter on February 27, 2014, the court raised the issue of whether there was complete diversity of citizenship because Skils'Kin appeared to be a citizen of Washington. The court directed the parties to Allstate Ins. Co. v. Hughes, 358 F.3d 1089 (9th Cir. 2004) in which the Ninth Circuit held that under Washington law, in a subrogation action, the insured remains the real party in interest and must be named. The result in Hughes, was that inclusion of the insured in the action as a named party destroyed diversity of citizenship jurisdiction and required dismissal for lack of jurisdiction.

Subsequent to Hughes, in Absher Const. Co. v. North Pacific Ins. Co., 2012 WL 13707 (W.D. Wash. 2012), the court distinguished between assignment and subrogation. The court stated that under Washington law, "an assignee prosecutes an assigned cause of action under its own name as the real party in interest." Id. at 4 citing RCW 4.08.080. The District Court in Absher Const. Co. additionally cited favorably to Couch on Insurance for the proposition that "while subrogation is a designation of proceeds recovered from a wrongdoer, an assignment transfers the entire cause of action to the insurer." Id. at 5 citing 16 Couch on Insurance § 222:53 (3rd ed. Nov. 2011). Travelers has pled that Skils'Kin assigned claims to it, and also that Travelers is the assignee and subrogee. (FAC ¶¶ 16-17). Further, as an exhibit to its supplemental brief (ECF No. 24-1), Travelers has filed the assignment document. The assignment document further states that is in consideration of $696, 208.00 paid to Skils'Kin by Travelers under the insurance policy.

The court is satisfied both as to diversity of citizenship and the amount in controversy and finds that it has jurisdiction.

B. Failure to State a Claim

The Bank complains generally that the allegations in the FAC are not detailed enough. See for example (ECF No. 12, p. 2)("...Travelers does not provide specifics as to the dates, amounts, or payees of the items..."). The Bank acknowledges that this sort of deficiency would not merit dismissal of the action. See Bank's Reply at ECF No. 17, p. 2, stating, "the Bank agrees that if Travelers does have a claim...it is entitled to try to re-plead it". The concluding paragraph of the Bank's Reply Brief calls Travelers claims "vague and indefinite" and argues that Travelers should be required to plead more facts. (ECF No. 17, p. 14). Federal Rule of Civil Procedure 8(a)(2), of course, requires only a "short and plain statement of the claim showing that the pleader is entitled to relief". The Bank's concerns regarding the amount in controversy, the dates the checks were cashed, etc., could have been appropriately addressed with a Motion for More Definite Statement under Fed.R.Civ.P. 12(e).

Similarly, the Bank argues with some of Travelers' allegations, and effectively asks the court to view the factual allegations as untrue. For example, Travelers alleges that the bank account statements did not return canceled checks to Skils'Kin, only included copies of the front of the check, and "contained no telephone number identified as one that Skils'Kin could call to request the canceled checks". (FAC, ¶ 12). Travelers alleges that without a copy of the back of the check, which could have contained a signature or indorsement, Skils'Kin could not discover that the check was improperly paid. The Bank argues that this is an insufficient allegation that the bank statements provided to Skils'Kin failed to provide required information. The Bank claims that it is "artful" pleading by Travelers that the phone number was not "identified as one that Skils'Kin could call" and that this is different from an allegation that there was no phone number. The court disagrees that the allegation is insufficient. Although the court finds it doubtful that a bank statement did not contain a phone number, in today's electronic age it is not implausible that perhaps instead of a phone number that statement contained only a customer service e-mail or a website address. The disputed factual content of the bank statements is not an issue to be determined via a motion to dismiss. The court does note that the Bank has provided a copy of one monthly statement, from August 2012. That ...


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