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Mansor v. JPMorgan Chase Bank, N.A.

United States District Court, D. Massachusetts

September 18, 2017

EDMUND J. MANSOR and ROBERTA M. MANSOR, Plaintiffs,
v.
JPMORGAN CHASE BANK, N.A., Defendant.

          MEMORANDUM OF DECISION AND ORDER ON PLAINTIFFS' MOTION FOR LEAVE TO FILE THIRD AMENDED VERIFIED COMPLAINT

          Judith Gail Dein United States Magistrate Judge.

         I. INTRODUCTION

         The plaintiffs, Edmund J. Mansor and Roberta M. Mansor, were investors in what turned out to be a 150 million dollar Ponzi scheme. The scheme was perpetrated by an entity known as Millennium Bank and its principal, William Wise (“Wise”), and was implemented using accounts that had been opened at Washington Mutual Bank (“WaMu”). On September 25, 2008, the United States Office of Thrift Supervision seized WaMu and placed it into receivership with the Federal Deposit Insurance Corporation (“FDIC”). On that same day, the FDIC sold certain of WaMu's assets to the defendant, JPMorgan Chase Bank, N.A. (“JPMorgan” or “Bank”). Those assets included the Millennium-related bank accounts and two WaMu branches where Wise and two of his associates, Jacqueline and Kristi Hoegel (the “Hoegels”), had allegedly been carrying out their fraudulent banking activities with the assistance of WaMu's employees. In this putative class action, which has been pending since 2012, the Mansors are seeking to hold JPMorgan liable for knowingly assisting Wise and the Hoegels in carrying out their unlawful scheme, and for failing to alert law enforcement and shut down the Millennium-related accounts before the perpetrators could transfer and abscond with additional investor deposits. By their Second Amended Verified Complaint, which is the operative complaint in this action, the Mansors have stated a claim against JPMorgan, on behalf of themselves and all others similarly situated, for aiding and abetting the alleged fraud.

         The matter is presently before the court on the “Plaintiffs' Motion for Leave to File Third Amended Verified Complaint.” (Docket No. 398). By their motion, the Mansors are seeking leave to amend their complaint, pursuant to Fed.R.Civ.P. 15(a), in order to add a claim against JPMorgan for civil conspiracy. The defendant argues that the motion should be denied on the grounds that the proposed amendment is untimely and fails to state a viable claim for relief. It also argues that the motion should be denied because it seeks to hold JPMorgan liable for conduct that occurred prior to its acquisition of WaMu, and amounts to little more than an attempted “end-run” around the jurisdictional limitations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1821(d)(13)(D)(ii) (“FIRREA”). As this court previously ruled in connection with JPMorgan's motions to dismiss the prior and existing complaints, FIRREA deprives this court of subject matter jurisdiction over any claim that relates to the acts or omissions of WaMu rather than the independent, post-acquisition activities of JPMorgan and its employees. Because this court finds that the proposed amendment constitutes strategic pleading that improperly aims to undermine FIRREA's jurisdictional bar, and is untimely in any event, the plaintiffs' motion for leave to amend is DENIED.

         II. FACTUAL AND PROCEDURAL BACKGROUND

         This action was filed against JPMorgan on March 23, 2012. Originally, the named plaintiffs included Geoffrey A. Hollis and Sharon R. Hollis as well as the Mansors. By their initial complaint, the plaintiffs claimed that JPMorgan knowingly aided and abetted the Millennium Bank fraud, aided and abetted the conversion of investor funds by Wise and his associates, and breached fiduciary duties owed to the plaintiffs and members of the putative class. (Docket No. 1 at Counts I-III). The Bank filed a motion to dismiss. (Docket No. 18). However, while that motion was pending, the plaintiffs obtained new information regarding JPMorgan's investigation into and knowledge of activity in the Millennium accounts. This development gave rise to extensive litigation concerning whether the new information was privileged under the Annunzio-Wylie Anti-Money Laundering provisions of the Bank Secrecy Act, and the extent to which the plaintiffs could rely on the new information in connection with this action. It also altered the factual bases for the plaintiffs' claims against JPMorgan. Consequently, this court granted the plaintiffs permission to file an amended complaint, and the Bank agreed to withdraw its motion to dismiss with the understanding that it would have an opportunity to challenge any newly amended complaint on the merits. (See Docket Nos. 32 & 81).

         Dismissal of the First Amended Complaint

         The plaintiffs filed a First Amended Verified Class Action Complaint (“First Amended Complaint”) on January 24, 2014. (Docket No. 203). Therein, the Hollises and the Mansors asserted claims against JPMorgan, on behalf of themselves and all others similarly situated, for aiding and abetting common law fraud, aiding and abetting conversion, deceit and violation of the California Business and Professions Code §§ 17200, et seq. (Id.). The Bank responded by filing a motion to dismiss and to strike. (Docket No. 210). By its motion, JPMorgan sought to dismiss the First Amended Complaint for lack of subject matter jurisdiction under FIRREA, for failure to comply with the heightened pleading standard established by Fed.R.Civ.P. 9(b), and for failure to state a claim under Fed.R.Civ.P. 12(b)(6). (See Docket Nos. 210 & 214). It also sought to strike the Hollises as class representatives, and to modify the class period in order to exclude any conduct that occurred prior to JPMorgan's acquisition of WaMu. (See id.).

         Thereafter, the parties engaged in various disputes relating to discovery and issues of privilege under the Bank Secrecy Act, and on December 10, 2014, this court issued a Memorandum of Decision and Order on Defendant's Motion to Dismiss and to Strike (“2014 Order”). (Docket No. 328). As detailed therein, this court determined that FIRREA deprives courts of subject matter jurisdiction over claims that relate to the acts or omissions of a failed banking institution, but have not been exhausted through the FDIC's administrative claims process. (Id. at 6-7). Because it is undisputed that the plaintiffs in this case did not present any of their claims to the FDIC, and did not exhaust their claims through the FDIC's administrative process, this court ruled that it lacked subject matter jurisdiction over any claims that were based on the actions of WaMu before it was placed into receivership with the FDIC. (Id. at 7). Accordingly, it held that to the extent the First Amended Complaint purported to state a claim based on the pre-purchase activities of WaMu rather than the independent, post-acquisition activities of JPMorgan and its employees, any such claim was subject to FIRREA's jurisdictional bar and would be dismissed. (Id. at 7-9). In connection with its opposition to the present motion to amend, JPMorgan argues that this ruling constitutes the law of the case, and that the “[p]laintiffs' request to add a conspiracy claim against [the Bank] is little more than an attempted end-run around this Court's prior orders barring claims ‘relating to' the actions of WaMu[.]” (Def. Supp. Mem. (Docket No. 417) at 1). For the reasons detailed below, this court finds that FIRREA bars the proposed claim for conspiracy and renders that claim futile.

         As part of its ruling on JPMorgan's motion to dismiss the First Amended Complaint, this court found that FIRREA precluded all of the Hollises' claims because there were no allegations indicating that those plaintiffs had funds remaining in any of the Millennium Bank accounts at the time of JPMorgan's acquisition of WaMu, and no allegations suggesting that JPMorgan's conduct, as opposed to WaMu's actions, may have caused any of the losses sustained by the Hollises as a result of the Millennium Bank fraud. (Docket No. 328 at 9-12). However, in light of allegations that the Mansors had invested funds in Millennium Bank after JPMorgan's acquisition, this court found that FIRREA would not bar those plaintiffs from pursuing claims against the defendant. (Id. at 9). This court also determined that the proposed class period set forth in the First Amended Complaint was too extensive because it would encompass individuals and entities that would not be able to show that they were harmed by the conduct of JPMorgan. (Id. at 12). Accordingly, this court ruled in relevant part:

In light of FIRREA, any class period must include only those individuals and entities who invested in the [Ponzi scheme] or had money remaining in the Millennium accounts on or after September 25, 2008, the date of JPMorgan's acquisition of WaMu. Additionally, the class period should not extend beyond the date when the Millennium-related accounts were frozen or shut down, and investments in the Ponzi scheme ceased. Any amended complaint filed by the plaintiffs should so limit the class period.

(Id. at 12-13). As described below, this court finds that the plaintiffs' proposed conspiracy claim would result in an expansion of the class well beyond the scope of these limitations, and would include investors, such as the Hollises, who had no funds remaining in the Millennium accounts at the time of JPMorgan's acquisition.

         Although this court determined that FIRREA's jurisdictional limitations would not preclude claims based solely on JPMorgan's alleged post-purchase misconduct, and that the First Amended Complaint alleged conduct that occurred after JPMorgan's acquisition of WaMu, this court found that those allegations were nevertheless inadequate to state a claim under any Count of the Complaint. (See id. at 13-33). As a result, this court allowed JPMorgan's motion to dismiss the First Amended Complaint in its entirety. However, because this court determined that “the plaintiffs should be given a final opportunity to amend their pleading[, ]” the dismissal of the First Amended Complaint was without prejudice to the plaintiffs' ability to file an amended complaint within 30 days of the date of the 2014 Order. (Id. at 33-35).

         JPMorgan's Motion to Dismiss the Second Amended Complaint

         The deadline for filing an amended complaint was extended to March 13, 2015 at the plaintiffs' request. (See Docket Nos. 330, 332, 338, 339). On that date, the Mansors filed a Second Amended Verified Complaint (“Second Amended Complaint”) in which they asserted claims against JPMorgan, on behalf of themselves and all others similarly situated, for aiding and abetting common law fraud and for negligence with knowledge of fiduciary relationship. (Docket No. 340). The Hollises were no longer named as plaintiffs in the case, and did not purport to assert any claims against the defendant. (See id.). Additionally, the Mansors limited the proposed class to “[a]ll persons or entities in the United States who, between September 25, 2008 and March 25, 2009 purchased or otherwise acquired a purported Certificate of Deposit from or through Millennium” or one of its related entities. (Id. ¶ 57). Thus, they did not purport to include as members of the putative class any individuals or entities who invested in Millennium Bank prior to the date of JPMorgan's acquisition of WaMu.

         JPMorgan filed a motion to dismiss the Second Amended Complaint. (See Docket No. 345). As in the case of its motion to dismiss the First Amended Complaint, JPMorgan argued that the Second Amended Complaint should be dismissed for lack of subject matter jurisdiction under FIRREA, for failure to comply with the heightened pleading requirements of Fed.R.Civ.P. 9(b), and for failure to state a claim under Fed.R.Civ.P. 12(b)(6). (See Docket No. 346). It also requested, as an alternative to dismissal, that the court enter an order further limiting the scope of ...


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