Deutsche Bank Trust Co. Americas v. Doral Financial Corp.

Citations: 841 F. Supp. 2d 593; 2012 U.S. Dist. LEXIS 9569; 2012 WL 234667Docket: Civil No. 11-1344 (SEC)

Court: District Court, D. Puerto Rico; January 25, 2012; Federal District Court

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Defendants’ motion to dismiss under Fed. R. Civ. P. 12(b)(6) has been partially granted and partially denied by the court. The case involves a dispute over the mishandling of a $658,874 check involving Deutsche Bank Trust Company Americas (Deutsche) and Doral Financial Corporation with its subsidiary Doral Bank (collectively, Defendants). The check, drawn on a Bank of America account, was sent to Deutsche for collection from a non-U.S. customer. After processing the check, Deutsche erroneously credited the customer’s account due to a mistaken identification by the Federal Reserve, which sent the check to Defendants.

Defendants held the check for several weeks before submitting a "Not Our Item" claim to the Federal Reserve, which was denied due to a missed 20-day filing deadline. Subsequently, Defendants notified Deutsche of the situation, seeking reimbursement, which Deutsche refused. The Federal Reserve eventually reimbursed Defendants and debited Deutsche's account for the check amount. Following this, Deutsche attempted to resolve the issue with Defendants through multiple communications but received no payment. 

Deutsche filed a lawsuit in 2010 against Doral under the Uniform Commercial Code and tort law, which was dismissed without prejudice. This current lawsuit was initiated three months later, asserting that if Defendants had properly handled the check, it would have been returned timely, allowing Deutsche to charge its customer. Defendants argue that Deutsche’s complaint does not meet the pleading standards set by Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal.

Defendants assert that all claims are barred by the statute of limitations, to which Deutsche timely responded. Under Rule 12(b)(6), for a complaint to withstand dismissal, it must present sufficient well-pleaded facts that suggest entitlement to relief. Courts must accept these facts as true and draw reasonable inferences in favor of the plaintiff. Dismissal is warranted if the complaint lacks factual allegations necessary to support a valid legal theory. Courts can consider documents attached to the complaint or those subject to judicial notice while distinguishing between well-pleaded facts and mere assertions or legal conclusions that lack support. Plaintiffs cannot rely solely on conclusions or legal interpretations, as these will be disregarded. Even under the liberal pleading standards of Federal Rule of Civil Procedure 8, a complaint must assert a plausible entitlement to relief, which is more than a mere possibility of unlawful conduct. The Supreme Court's decisions in Twombly and Iqbal emphasize that conclusory allegations are not entitled to a presumption of truth and that allegations must be sufficiently detailed to establish a plausible claim for relief without merely restating the elements of the cause of action.

A claim possesses facial plausibility when the alleged facts enable the court to reasonably infer the defendant's liability for the misconduct claimed. Such inferences must exceed mere possibility and be as plausible as any alternative explanation. Determining plausibility is context-specific and relies on the court's judicial experience and common sense. A complaint must provide enough detail to give the defendant fair notice of the claim and its basis, adhering to the requirements of Federal Rule of Civil Procedure 8(a)(2). While a plaintiff's claim must be plausible under the standards established by Twombly and Iqbal, they are not required to prove their case in the pleadings. Dismissal under Rule 12(b)(6) is inappropriate if the complaint meets the Rule 8(a)(2) standard of a short and plain statement. However, a different standard applies when dismissal is sought based on an affirmative defense like the statute of limitations; dismissal may be warranted if the facts establishing the defense are evident from the complaint or judicially noticeable materials. 

In the present case, Defendants assert that Deutsche's use of "and/or" to reference them interchangeably lacks the specificity required by Twombly and Iqbal. Nevertheless, Deutsche's approach aligns with Rule 20(a)(2)(A), which permits the joinder of defendants when relief is sought against them in the alternative stemming from the same circumstances. Defendants argue that Deutsche must provide specific reasons for the application of Rule 20 and clearly state the uncertainties regarding each defendant's liability. However, the cases cited by Defendants, which predate Twombly and Iqbal, do not support their position and are irrelevant to the current legal standards.

In Koch v. I-Flow Corp., the court addressed the issue of pleading sufficiency when multiple defendants are involved. It emphasized that insisting on repetitive claims for each defendant would prioritize form over substance, contrary to the Federal Rules’ liberal pleading standards. The court noted that the crucial consideration under the Twombly and Iqbal standards is whether the complaint provides adequate notice of the actionable facts to each defendant, which Deutsche’s complaint accomplished by detailing the mishandling of a check, its consequences, and the relationship among the defendants. Although Deutsche must further substantiate its claims in later stages, the defendants are not uninformed about the factual issues at play, leading to the denial of their motion to dismiss.

Concerning Deutsche’s federal-law claims grounded in 12 C.F.R. 229.32(c), the regulation requires banks to act appropriately upon receiving a returned check. Violations can result in liability under 12 C.F.R. 229.38, which mandates banks to exercise ordinary care and act in good faith. However, any claims must be brought within one year of the violation, and Deutsche's complaint indicated that the incident occurred over three years prior, with no tolling provision available. The silence on the statute of limitations in Deutsche’s opposition was deemed significant, confirming that the one-year limit applied. Consequently, the court granted the defendants' motion to dismiss Deutsche's federal-law claim based on the statute of limitations.

Deutsche's first state-law claim is based on Puerto Rico's Law of Negotiable Instruments, specifically P.R. Laws Ann. tit. 19, § 852, which mandates that collecting banks exercise ordinary care in handling notices of dishonor or nonpayment. The claim must be initiated within three years of its accrual as per P.R. Laws Ann. tit. 19, § 811. The Court must determine when this claim accrued, but no specific guidelines exist in the statute. The parties suggest using Article 1873 of the Puerto Rico Civil Code, which states that a cause of action accrues upon constructive notice of the grievance and its perpetrator. However, Article 1869 provides that the prescription period starts when an action could be initiated, requiring a detailed case-by-case analysis. At the motion to dismiss stage, the focus is on the allegations in the complaint. Deutsche claims it only became aware of the mishandling of a check through a communication from the Federal Reserve on May 5, 2008. Consequently, the three-year period for filing under § 852 expired on May 5, 2011, and Deutsche filed its complaint on April 15, 2011, making the claim timely. Thus, the motion to dismiss this claim is denied.

In regard to Deutsche's second state-law claim under Puerto Rico’s general tort statute, P.R. Laws Ann. tit. 31, § 5141, which has a one-year statute of limitations, the crucial issue is whether any extrajudicial actions have tolled this limitation. Tolling can occur through judicial or extrajudicial claims, or an acknowledgment of debt, as stated in P.R. Laws Ann. tit. 31, § 5303. The parties dispute whether their interactions constituted tolling, noting that Puerto Rico law allows for informal tolling through both written and verbal communications.

Courts in this jurisdiction adopt a liberal stance towards extrajudicial tolling, emphasizing the preservation of rights. For an extrajudicial claim to effectively toll the statute of limitations, it must clearly indicate a party's intention to preserve their rights, rather than merely serve as a reminder. The defendants argue that Deutsche’s extrajudicial communications should be dismissed as insufficient follow-ups lacking the necessary specificity to toll the limitations period under Puerto Rico law. In contrast, Deutsche cites multiple communications with Doral prior to filing the suit, starting with a July 2008 demand for payment related to a check mishandled by Doral Bank. Subsequent communications included follow-ups from Deutsche’s counsel and a May 2010 letter indicating intent to file a lawsuit if payment was not received. These communications explicitly expressed Deutsche's claims and intentions, countering the defendants' characterization of them as mere reminders. The correspondence from Doral acknowledging its position further supports the assertion that tolling occurred, effectively restarting the one-year limitations period under Article 1802. Deutsche filed the suit well within this period, and additionally, a prior lawsuit against Doral in New York tolled the limitations period while pending. This suit was dismissed without prejudice in January 2011, restarting the one-year limitation period, which Deutsche's April 2011 filing also fell within. Consequently, Deutsche’s claim against Doral remains active, leading to a denial of the defendants' motion to dismiss on this basis. However, Deutsche's claims against DFC differ, as none of the aforementioned communications were directed to DFC.

Deutsche's complaint did not include DFC as a party, which prevents Deutsche from using related events to counter the statute of limitations arguments regarding DFC. Deutsche attempts to invoke the identity of interest doctrine and a 'share attorney method' to argue that DFC was aware of its claims since communications were directed solely to Doral. However, established legal principles dictate that an extrajudicial claim only tolls the statute of limitations if addressed to the actual debtor, not a third party. Consequently, the court grants the dismissal of Deutsche’s Article 1802 claim against DFC.

Regarding Deutsche's state-law claim under Puerto Rico’s Law of Negotiable Instruments, the defendants argue it is time-barred but do not cite the relevant statute of limitations. Deutsche contends that no specific limitation applies, citing a 15-year period under P.R. Laws Ann. tit. 31, § 5294. The court agrees, noting that the filing date of April 15, 2011, is well within this timeframe, thus denying the motion to dismiss this claim.

In summary, Deutsche’s federal law claims and Article 1802 claim against DFC are dismissed with prejudice, while the motion to dismiss the remaining claims is denied. Deutsche's pleading strategy of referring to defendants collectively is permissible, and the court can consider undisputed documents pertinent to the claims. Finally, Deutsche has reached a settlement with Bank of America for $175,000, but details on collection efforts regarding the Ghazis or Vista Real Estate, Ltd. are lacking. The court notes that the defendants may revisit their arguments at the summary judgment stage with supporting evidence.