United States District Court, S.D. Mississippi, Eastern Division
CAROL W. COHEN and ELLIOT J. SLUTSKY PLAINTIFFS
FIRST BANK DEFENDANT
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S
MOTION  TO DISMISS AND GRANTING PLAINTIFFS' MOTION
 FOR LEAVE TO FILE FIRST AMENDED COMPLAINT
SULEYMAN OZERDEN UNITED STATES DISTRICT JUDGE
THE COURT is the Motion  to Dismiss filed by Defendant
First Bank and the Motion  for Leave to File First
Amended Complaint filed by Plaintiffs Carol W. Cohen and
Elliot J. Slutsky. After the Internal Revenue Service
(“IRS”) issued Plaintiffs a $70, 084.00 tax
refund check, Plaintiffs endorsed the check and mailed it to
their bank for deposit. Plaintiffs claim that someone
intercepted the check and took it to Defendant First Bank,
where First Bank paid the full value of the check in cash to
the thief. Plaintiffs reported the check as stolen to the
IRS, which issued a replacement check in the same amount. But
the IRS subsequently informed Plaintiffs that the second
check was sent in error and demanded that Plaintiffs
reimburse the $70, 084.00, plus $5, 947.64 in interest.
this Court's diversity jurisdiction, Plaintiffs sued
First Bank on June 15, 2017, for conversion and
negligence/gross negligence. First Bank moves to dismiss
Plaintiffs' Complaint on grounds that the Court does not
have subject matter jurisdiction because the amount in
controversy does not exceed $75, 000.00, Plaintiffs failed to
join the IRS and the alleged endorser of the check as
necessary parties, failed to timely file their lawsuit, and
were contributorily negligent by virtue of their unsafe
transfer of the check. Plaintiffs oppose First Bank's
Motion  to Dismiss and have also brought a Motion  for
Leave to File First Amended Complaint seeking to add the
alleged fraudulent endorser of the check as a defendant.
Based upon its review of the record and relevant legal
authority, the Court finds that First Bank's Motion 
should be denied and that Plaintiff's Motion  should
Plaintiffs' Factual Allegations
to the Complaint and attached exhibits, prior to May 11,
2015, Plaintiffs received a tax refund check (“Original
Check”) from the IRS in the amount of $70, 084.00.
Compl.  at ¶ 5. The Original Check appears to have
been issued on October 28, 2014, and states “Void after
one year.” Ex. A to Compl. [1-2]. Plaintiffs endorsed
the Original Check “for deposit only” and mailed
it to their bank. Compl.  at ¶ 5. The Complaint
alleges that unknown persons intercepted the Original Check
while it was in transit, id. at ¶ 6, and that
on May 11, 2015, these unknown persons fraudulently endorsed
the Original Check and took it to First Bank to be cashed,
id. at ¶ 7. Plaintiffs claim that First Bank
accepted the Original Check and paid the full face value in
cash to these unknown persons. Id. at ¶ 8.
reported the Original Check stolen to the IRS, which issued
another check (“Replacement Check”). Id.
at ¶ 9; Ex. B. to Compl. [1-3]. The IRS later notified
Plaintiffs that they were obligated to return the $70, 084.00
for the Replacement Check, plus interest. Compl.  at
¶ 9. According to a letter from the IRS dated
May 11, 2017, the refund check “dated Dec. 26, 2014,
for $70, 084.00” was “sent to [Plaintiffs] in
error.” Ex. B to Compl. [1-3] at 3. The IRS apparently
claims that Plaintiffs owe $70, 084.00, plus $5, 947.64 in
interest to May 11, 2017, for a total of $76, 031.64.
on the facts alleged in the Complaint, Plaintiffs bring
claims against First Bank for conversion and negligence/gross
negligence. Compl.  at 2-3. With respect to their
negligence-based claims, Plaintiffs assert that First Bank
owed them a duty “to observe reasonable and customary
banking procedures in accepting and paying the Check.”
Id. at ¶ 17. First Bank allegedly breached this
duty by “failing to ascertain that the endorsement on
the Check was fraudulent and by paying the full value of the
Check in cash to the fraudulent endorser despite the clear
and unambiguous restriction that the Check was ‘for
deposit only.'” Id. at ¶ 18.
Plaintiffs seek “actual, compensatory, consequential,
and incidental damages for conversion of their personal
property, along with interest, punitive damages,
attorneys' fees, costs of suit and any further relief
this Court may deem proper.” Id. at 4. The
Complaint also claims damages for “the interest that
Plaintiffs are required to pay the IRS.” Id.
at ¶ 14.
First Bank's Motion  to Dismiss
Bank moves to dismiss on several grounds, asserting that this
Court lacks subject matter jurisdiction because Plaintiffs
have not satisfied the amount in controversy requirement for
diversity jurisdiction. Def.'s Mem.  at 2.
Specifically, First Bank contends that Plaintiffs'
remedies in this action are limited to the face value of the
check ($70, 084.00), that the Uniform Commercial Code
(“UCC”) forbids consequential and punitive
damages, and that 28 U.S.C. § 1332 excludes interest
from the calculation of the jurisdictional minimum.
Id. at 4-6. First Bank posits that the IRS and a
fourth party, Crechale Auction and Sales
(“Crechale”), the alleged endorser of the
Original Check, are necessary parties to this action, and
because Plaintiffs have not joined those parties, the case
must be dismissed. Id. at 2-3.
not citing the rule, First Bank also makes several arguments
for dismissal under Federal Rule of Civil Procedure 12(b)(6).
First Bank contends that the IRS is the real party in
interest because Plaintiffs' damages claim of $70, 084.00
is subject to a claim from the IRS, id. at 3, and
that Plaintiffs are barred by the doctrine of laches for
failing to bring their claim within a reasonable time after
they learned of the alleged conversion, id. at 6-7.
The Bank next asserts that this action is time-barred because
it was brought more than one year after the Original Check
was issued, as the check states it is void after one year and
claims for replacement checks must be brought within one year
after the date of issuance of the check. Id. at 7.
First Bank further posits that Plaintiffs may not recover due
to their own contributory negligence by virtue of their
unsafe transfer of the check. Id. at 8-9. Lastly,
First Bank contends that Plaintiffs' claims are barred on
grounds of accord and satisfaction due to the IRS'
payment to them of the Replacement Check. Id. at 9.
respond that recovery of punitive damages and prejudgment
interest in a conversion case is allowed in Mississippi,
satisfying the amount in controversy requirement for
diversity jurisdiction. Pls.' Mem.  at 5-7. With
respect to First Bank's argument regarding the failure to
join necessary parties, Plaintiffs concede that Crechale may
be joined as a necessary party. Id. at 15.
Plaintiffs maintain, however, that the IRS is not a necessary
party because the IRS has a claim against them, not First
Bank, id. at 16-18, and because the IRS has no
substantive right in this conversion claim, id. at
further contend that a three-year statute of limitations
applies to their conversion claim and that they filed their
Complaint within that limitations period, id. at
11-12, that the doctrine of laches is not applicable to their
claim, id. at 12, and that contributory negligence
would not bar their claim because Mississippi applies the
comparative fault doctrine to the UCC, id. at 13-14.
Finally, Plaintiffs deny that there has been an accord and
satisfaction between Plaintiffs and First Bank. Id.
Reply , First Bank argues that Plaintiffs' Complaint
does not plead malice, gross negligence, or conduct evincing
a willful, wanton, or reckless disregard for Plaintiffs as
would be required to establish a claim for punitive damages,
Reply  at 5, and that the IRS is a necessary party
because the IRS could later bring a claim against First Bank
for the refund check, id. at 8-9.
Plaintiffs' Motion  to Amend Complaint
November 14, 2017, Plaintiffs filed a Motion  for Leave
to File First Amended Complaint, seeking to add Crechale as a
defendant. Mot.  at 1. Plaintiffs also seek to add a
claim for civil conspiracy against Crechale and First Bank.
Proposed First Am. Compl. [17-1] at 8-9. Plaintiffs'
proposed First Amended Complaint alleges that the unknown
persons endorsed the Original Check in the name of Crechale
underneath Plaintiffs' written statement “for
deposit only” on the back of the check, id. at
¶ 8, and that First Bank accepted the check without
question and paid the full value of the check in cash to the
unknown persons by allowing the check to be deposited into
Crechale's business account with First Bank, id.
at ¶ 9. Plaintiffs claim that Crechale and First
Bank's Branch Manager had an ongoing relationship during
the time the Original Check was deposited into Crechale's
account at First Bank, id. at ¶ 14, and that
the individuals who stole the check created false Florida
drivers' licenses in Plaintiffs' names and used these
drivers' licenses to purchase a commercial truck and
trailer from Crechale, id. at ¶ 15.
Bank takes the position that the Court lacks jurisdiction to
grant Plaintiffs' Motion to Amend because the amount in
controversy in a diversity action is determined as of the
date of filing of the lawsuit, and the amount claimed in the
original Complaint did not meet the amount in controversy
requirement. Def.'s Mem.  at 1. First Bank further
contends that civil conspiracy must be pled with
particularity, but that Plaintiffs' proposed First
Amended Complaint fails to do so. Id. at 4.
Federal Rule of Civil Procedure 12(b)(1)
Rule of Civil Procedure 12(b)(1) permits a party to challenge
the subject matter jurisdiction of the district court to hear
a case. Ramming v. United States, 281 F.3d 158, 161
(5th Cir. 2001). “A case is properly dismissed for lack
of subject matter jurisdiction when the court lacks the
statutory or constitutional power to adjudicate the
case.” Home Builders Ass'n of Miss., Inc. v.
City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998)
(citation omitted). Subject matter jurisdiction may be
determined on the basis of: “(1) the complaint alone;
(2) the complaint supplemented by undisputed facts evidenced
in the record; or (3) the complaint supplemented by
undisputed facts plus the court's resolution of disputed
facts.” Ramming, 281 F.3d at 161. The burden
of proof on a Rule 12(b)(1) motion rests with the party
seeking to invoke the Court's jurisdiction. Id.
“When a Rule 12(b)(1) motion is filed in conjunction
with other Rule 12 motions, the court should consider the
Rule (12)(b)(1) jurisdictional attack before addressing any
attack on the merits.” Id. (citation omitted).
Federal Rule of Civil Procedure 12(b)(7)
12(b)(7) of the Federal Rules of Civil Procedure provides
that a party may assert, by motion, the defense of
“failure to join a party under Rule 19.” Rule 19
provides for the joinder of all parties whose presence in a
lawsuit is required for the fair and complete resolution of
the dispute and for the dismissal of litigation that should
not proceed in the absence of parties that cannot be joined.
Fed.R.Civ.P. 19(b). “Determining whether an entity is
an indispensable party is a highly-practical, fact-based
endeavor[.]” Hood ex rel. Mississippi v. City of
Memphis, 570 F.3d 625, 628 (5th Cir. 2009). “While
the party advocating joinder has the initial burden of
demonstrating that a missing party is necessary, after
‘an initial appraisal of the facts indicates that a
possibly necessary party is absent, the burden of disputing
this initial appraisal falls on the party who opposes
joinder.'” Id. (quoting
Pulitzer-Polster v. Pulitzer, 784 F.2d 1305, 1309
(5th Cir. 2006)).
Federal Rule of Civil Procedure 12(b)(6)
presented with a motion to dismiss pursuant to Rule 12(b)(6),
a court “must assess whether the complaint contains
sufficient factual matter, accepted as true, to state a claim
for relief that is plausible on its face[.]”
Spitzberg v. Houston Am. Energy Corp., 758 F.3d 676,
683 (5th Cir. 2014) (citing Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). A court must accept all
well-pleaded facts as true and view those facts in the light
most favorable to the plaintiff. Varela v. Gonzales,
773 F.3d 704, 707 (5th Cir. 2014) (citation omitted). This
tenet, however, is inapplicable to legal conclusions.
Id. (citation omitted). “A statute of
limitations may support dismissal under Rule 12(b)(6) where
it is evident from the plaintiff's pleadings that the
action is barred and the pleadings fail to raise some basis
for tolling or the like.” Jones v. Alcoa,
Inc., 339 F.3d 359, 366 (5th Cir. 2003).
Motions to Amend under Federal Rule of Civil Procedure
Federal Rules of Civil Procedure provide that “a party
may amend its pleading only with the opposing party's
written consent or the court's leave. The court should
freely give leave when justice so requires.”
Fed.R.Civ.P. 15(a)(2). “Rule 15(a) evinces a bias in
favor of granting leave to amend.” Chitimacha Tribe
ofLa. v. Harry L. Laws Co., Inc., 690 F.2d
1157, 1162 (5th Cir. 1983). Consequently, “there is a
strong presumption in favor of granting leave to
amend[.]” Ackerson v. Bean Dredging LLC, 589
F.3d 196, 208 (5th Cir. 2009). As this strong presumption
exists, “[t]he district court must have a