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Harris v. U.S. BankCorp.

United States District Court, W.D. Washington, Seattle

October 25, 2019

U.S. BANKCORP, BANK OF AMERICA, N.A., & KEYCORP, national banking associations, Defendants.




         Eighteen individual plaintiffs ("Plaintiffs") have brought this action against three bank defendants, U.S. BankCorp, Bank of America, and KeyCorp ("Defendants"), asserting that Defendants wrongfully refused to honor Plaintiffs' bonds, issued between 1980 and 1987. In their amended complaint, Plaintiffs assert five claims: (1) breach of contract, (2) violation of the Washington Consumer Protection Act, (3) conversion, (4) negligence, and (5) restitution for unjust enrichment. Currently before the Court are (1) KeyCorp's Motion to Dismiss all claims on various grounds; and (2) Plaintiffs Motion to Amend Complaint. Having reviewed the pleadings, the record of this case, and the relevant legal authorities, the Court hereby grants the Motion to Amend, and grants in part and denies in part the Motion to Dismiss, as set forth below.


         The following is a summary of Plaintiffs' factual allegations, which the Court accepts as true for purposes of this motion. Plaintiffs are owners of bonds that were issued between 1980 and 1987 by Seattle-First National Banks, American Savings Bank of Tacoma, and Rainier National Banks. Am. Compl. ¶¶ 13-30, Dkt. No. 11-1. Between 1983 and 1992, through multiple mergers and acquisitions, Bank of America acquired these three banks, including obligations on bonds issued by these banks. Id. ¶¶ 6-12. Sometime after 1992, U.S. BankCorp and KeyCorp each purchased several Rainier National Bank branches from Bank of America, including deposits and obligations on bonds issued by those branches. Id.

         Six out of eighteen Plaintiffs, Mihovilich, Weise, Johnson, Miller, Doyon, and Bast, have asserted claims against KeyCorp. Id. ¶¶ 13-29. They are registered owners, or heirs of owners, of bank bonds or time deposits, all issued by Rainier Bank. Id. ¶ 30. According to Plaintiffs, Rainier Bank, Bank of America, and KeyCorp never notified Plaintiffs that they were not renewing Plaintiffs' bonds. Id. ¶ 34. When Plaintiffs recently attempted to redeem their bonds, KeyCorp refused to honor the bonds. Id. ¶ 42. KeyCorp told Plaintiffs that the bonds were worthless because the bonds had already been redeemed or escheated to the State of Washington. Id. ¶ 43.

         Plaintiffs filed the original complaint on February 28, 2019. KeyCorp moved to dismiss all claims on April 1, 2019. Plaintiffs filed a motion for leave to amend their complaint on April 11, 2019. As noted below, the Court grants Plaintiffs leave to amend their complaint, and thus considers KeyCorp's motion to dismiss as applied to Plaintiffs amended complaint, as requested by the parties.


         A Rule 12(b)(6) motion tests the legal sufficiency of claims asserted in a complaint. To survive such a motion, a plaintiff must plead "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is "facially plausible" when the plaintiff pleads sufficient facts for a court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. In determining whether a complaint "states a plausible claim for relief," the reviewing court must "draw on its judicial experience and common sense." Id. at 679.

         When considering a motion to dismiss, a court must accept all factual allegations pleaded in the complaint as true and draw all reasonable inferences from those allegations in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The court need not, however, accept as true unreasonable inferences or conclusory legal assertions cast in the form of factual allegations. See Twombly, 550 U.S. at 553-56.


         A. Plaintiffs' Motion to Amend the Complaint

         Federal Rule of Civil Procedure 15(a) directs courts to freely give a party leave to amend its pleading when justice so requires. Fed.R.Civ.P. 15(a). A court should give leave to amend "in the absence of any apparent or declared reason -- such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc." Foman v. Davis, 371 U.S. 178, 182 (1962) ("[O]utright refusal to grant the leave without any justifying reason appearing for the denial is not an exercise of discretion; it is merely abuse of that discretion and inconsistent with the spirit of the Federal Rules."); see Howey v. United States, 481 F.2d 1187, 1190 (9th Cir. 1973) (noting that a court considers several factors such as undue delay, bad faith, futility of amendment, and prejudice to the opposing party when determining the propriety of a motion for leave to amend). In determining the propriety of a motion for leave to amend, the crucial factor is the resulting prejudice to the opposing party. Howey, 481 F.2d at 1190 (holding that the trial court's denial of leave to amend was abuse of discretion even with five-year delay because there was no showing of prejudice to the opposing party).

         Here, Plaintiffs filed a motion for leave to amend their complaint just a few weeks after they filed the original complaint. As discussed more fully below, the amended complaint is not futile because Plaintiffs clarify their allegations that Defendants assumed liability for the bonds during the mergers and acquisitions. Am. Compl. ¶¶ 6-11. Moreover, because this case is still in the early stages and little discovery has taken place, there is no undue prejudice to KeyCorp. Therefore, the Court grants Plaintiffs leave to amend their complaint. See Howey, 481 F.2d at 1190. The Court considers KeyCorp's motion to dismiss as applied to Plaintiffs' amended complaint.

         B. The Relevant Statutes of Limitations and Laches Do Not Bar Plaintiffs' Claims

         KeyCorp first moves to dismiss all claims based on the grounds of the statute of limitations and laches. As discussed below, based on the facts alleged, the Court rejects KeyCorp's argument that Plaintiffs' legal injuries occurred sometime before February 28, 2013 because Plaintiffs knew or should have known about KeyCorp's intention not to honor their bonds.

         The parties do not dispute that the applicable statute of limitations periods are six years for breach of contract, four years for violation of Washington Consumer Protection Act, and three years for negligence, conversion and unjust enrichment claims. See RCW 4.16.040(1); RCW 19.86.120; RCW 4.16.080(2); RCW 4.16.080. The parties, however, dispute when Plaintiffs' causes of action began to accrue. Plaintiffs assert that the causes of action accrued only recently when KeyCorp declined to honor the terms of the bonds and advised Plaintiffs that their bonds had no value. Pis.' Resp. 9, Dkt. No. 13. KeyCorp contends that the cause of action began to accrue much earlier because KeyCorp (and other Defendants) did not communicate with Plaintiffs about their bonds for over 20 years. Mot. Dismiss 9, Dkt. No. 10. KeyCorp argues that lack of communication for more than 20 years was sufficient to have placed Plaintiffs on notice about its intention not to honor their bonds. Id. KeyCorp does not say when, precisely, Plaintiffs were on actual or constructive notice, except to imply that it was earlier than February 28, 2013-six years before Plaintiffs filed their original complaint. Id.

         A cause of action accrues when the party "has the right to apply to a court for relief and "can establish each element of the action." Deegan v. Windermere Real Estate/Center-Isle, Inc.,391 P.3d 582, 591 (Wash.Ct.App. 2017). Generally, this occurs when the plaintiff suffers some form of injury or damage. Crisman v. Crisman,931 P.2d 163, 165 (Wash.Ct.App. 1997). But the discovery rule may apply where "injured parties do not, or cannot, know they have been injured." Deegan, 391 P.3d at 591. Under the discovery rule, "a cause of action accrues when the plaintiff, through the exercise of due diligence, knew or should have known the basis for the cause of action." Id.; see Crisman, 931 P.2d at 165 (holding that the court may apply the discovery rule as long as the delay between the injury and the plaintiffs discovery of it was not caused by the plaintiff sleeping on his rights). With or without the discovery rule, the defendant asserting a statute of limitations defense bears the burden of proof. See Wm. Dickson Co. v. Pierce Cty.,116 P.3d 409, 414 (Wash.Ct.App. 2005) (party asserting the time bar bears the ...

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