United States District Court, S.D. Ohio, Eastern Division
OPINION AND ORDER
C. SMITH, JUDGE UNITED STATES DISTRICT COURT.
matter is before the Court upon Defendant Benchmark
Bank's Motion to Dismiss Plaintiff's Amended
Complaint for Lack of Subject-Matter Jurisdiction and Failure
to State a Claim Upon Which Relief Can Be Granted
(“Benchmark's Motion to Dismiss”) (Doc. 12).
The motion is fully briefed and ripe for disposition. For the
following reasons, Benchmark's Motion to Dismiss is
GRANTED IN PART and DENIED IN PART.
Federal Insurance Company (“Federal”) is the
subrogee of two limited partnerships: Mary Harvin Center
Limited Partnership and Boury Lofts Limited Partnership (the
“Limited Partnerships”). (Doc. 11, Am. Compl. ¶
111). The Limited Partnerships are affiliates of non-party
The Woda Group, Inc. and its affiliates (“Woda
Management”). (Id. ¶ 7).
March 28, 2011, Woda Management entered into a Business
Online Access Banking Agreement (the “Banking
Agreement”) providing Woda Management “with
electronic banking access for various commercial accounts
under its control.” (Id. ¶ 8). Woda
Management established various checking accounts at Benchmark
“in the names of separate and distinct corporate
entities, including the Limited Partnerships.”
(Id. ¶ 10).
same date, Woda Management also entered into an ODFI-ACH
Originator Agreement (the “ACH Agreement”) with
Benchmark, allowing Woda Management to initiate online ACH
transfers for specified accounts listed in Schedule C to the
ACH Agreement. (Id. ¶¶ 13, 16). Schedule C
does not include and has never included the accounts of the
Limited Partnerships. (Id. ¶ 16).
March 22, 2016, Woda Management's controller emailed
Benchmark and asked that Donna Ferrell, Woda Construction,
Inc.'s Director of Accounting, be given access to view
and process ACH transfers for Woda Construction, Inc.'s
account with Benchmark. (Id. ¶ 36).
Inconsistent with these instructions, Benchmark erroneously
granted Ferrell ACH access to all of Woda Management's
accounts with Benchmark, including the Limited
Partnerships' accounts and other accounts not listed on
Schedule C of the ACH agreement. (Id. ¶ 38).
Ferrell was never authorized by anyone at Woda Management to
access, view, or process ACH transfers from the Limited
Partnerships' accounts. (Id. ¶ 37).
May 18 and May 25, 2016, unknown third parties used
Ferrell's login credentials to initiate a series of
unauthorized transfers from the Limited Partnerships'
accounts totaling over $600, 000. (Id. ¶ 46).
Federal paid the Limited Partnerships $500, 000 for these
losses pursuant to a policy of insurance. (Id.
¶ 111). Thus, at this point, the Limited Partnerships
remain uncompensated for the over $100, 000 remaining in
the Limited Partnerships filed suit against Benchmark in the
Franklin County Court of Common Pleas on July 7, 2016. (Doc.
12-1, State Court Complaint). The state court complaint
contained claims for breach of contract, violation of the
Ohio Uniform Commercial Code (“UCC”), and
negligence. (Id.). On motion by Benchmark, the state
court dismissed the negligence claim as barred by the
economic loss rule. (Doc. 12-2, State Court Opinion). The
state court also ordered the Limited Partnerships to clarify
their claim for breach of the ACH Agreement, given their
factual allegations suggesting that the Limited Partnerships
are not parties to that agreement. (Id.).
than amend the state court complaint, the Limited
Partnerships dismissed the state court action and re-filed
their case in this Court on February 15, 2017. (Doc. 1,
Compl.). In addition to the breach of contract, UCC, and
negligence claims asserted in the state court action, the
Limited Partnerships also added claims for violation of
various federal statutes and regulations and conversion.
(Id.). The Limited Partnerships sought as damages
the full amount of $600, 904 withdrawn from their accounts in
the unauthorized transactions. (Id.).
moved to dismiss the Complaint, citing lack of either
diversity or federal question subject-matter jurisdiction.
(Doc. 9, Mot. to Dismiss). The Limited Partnerships responded
by filing an Amended Complaint that substituted Federal as
the sole plaintiff to establish diversity jurisdiction and
supplemented the allegations related to various federal
standards. (Doc. 11, Am. Compl.). In the Amended Complaint,
Federal seeks only the $500, 000 insurance payment it made to
the Limited Partnerships.
now moves to dismiss the Amended Complaint, pursuant to both
Rule 12(b)(1) for lack of subject-matter jurisdiction and
Rule 12(b)(6) for failure to state a claim upon which relief
can be granted. (Doc. 12).
LACK OF SUBJECT-MATTER JURISDICTION UNDER RULE
Standard of review
Rule of Civil Procedure 12(b)(1) provides for dismissal when
the court lacks subject-matter jurisdiction. Without
subject-matter jurisdiction, a federal court lacks authority
to hear a case. Thornton v. Southwest Detroit Hosp.,
895 F.2d 1131, 1133 (6th Cir. 1990). Motions to dismiss for
lack of subject-matter jurisdiction fall into two general
categories: facial attacks and factual attacks. United
States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). A
facial attack under Rule 12(b)(1) “questions merely the
sufficiency of the pleading, ” and the trial court
therefore takes the allegations of the complaint as true.
Wayside Church v. Van Buren Cty., 847 F.3d 812, 816
(6th Cir. 2017) (quoting Ohio Nat'l Life Ins. Co. v.
United States, 922 F.2d 320, 325 (6th Cir. 1990)). To
survive a facial attack, the complaint must contain a short
and plain statement of the grounds for jurisdiction. Rote
v. Zel Custom Mfg. LLC, 816 F.3d 383, 387 (6th Cir.
factual attack is a challenge to the factual existence of
subject-matter jurisdiction. No. presumptive truthfulness
applies to the factual allegations. Glob. Tech., Inc. v.
Yubei (XinXiang) Power Steering Sys. Co., 807 F.3d 806,
810 (6th Cir. 2015). When examining a factual attack under
Rule 12(b)(1), “the court can actually weigh evidence
to confirm the existence of the factual predicates for
subject-matter jurisdiction.” Glob. Tech., Inc. v.
Yubei (XinXiang) Power Steering Sys. Co., 807 F.3d 806,
810 (6th Cir. 2015) (quoting Carrier Corp. v. Outokumpu
Oyj, 673 F.3d 430, 440 (6th Cir. 2012)). The plaintiff
has the burden of establishing jurisdiction in order to
survive the motion to dismiss. DLX, Inc. v.
Kentucky, 381 F.3d 511, 516 (6th Cir. 2004); Moir v.
Greater Cleveland Regional Transit Auth., 895 F.2d 266,
269 (6th Cir. 1990).
jurisdiction exists over civil actions where the amount in
controversy exceeds $75, 000 and is between citizens of
different states. 28 U.S.C. § 1332(a)(1). The parties do
not dispute that the amount in controversy exceeds $75, 000
or that Federal is a citizen of Indiana and New Jersey while
Benchmark is a citizen of Ohio. (Doc. 11, Am. Compl.
¶¶ 2-3). Thus, complete diversity exists as between
Federal and Benchmark.
Benchmark contends that the citizenship of the Limited
Partnerships, as subrogors, must also be considered in the
diversity analysis. (Doc. 12, Mot. to Dismiss at 6). As
Federal failed to fully plead the citizenship of the Limited
Partnerships' general and limited partners, Benchmark
contends that Federal has facially failed to establish
complete diversity. (Id. at 7-8); see Carden v.
Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (federal
court must look to citizenship of partnership's limited
partners, as well as its general partners, when determining
diversity). Further, Benchmark has submitted filings by the
Limited Partnerships with various state administrative
agencies wherein they admitted that at least some of their
partners are Ohio citizens. (Doc. 12-3, Alexander Decl. and
attached Annual Reports filed with the Secretaries of State
for Kentucky and West Virginia). Federal has not disputed the
accuracy of these documents and does not suggest that the
Limited Partnerships are not, in fact, Ohio citizens. Thus,
if the Limited Partnerships' citizenship must be
considered, complete diversity will be lacking and the Court
may not exercise subject-matter jurisdiction in this matter
on the basis of diversity.
rests the relevance of the Limited Partnerships'
citizenship on the theory that the Limited Partnerships are
real parties in interest to the damages sought by Federal.
(Doc. 12, Mot. to Dismiss at 5-6). It is true that where an
insured has been only partially compensated by its insurer
for the losses it sustained, only a partial subrogation has
occurred, and both the insured and insurer are real parties
in interest when considering the total amount of damages.
Exec. Jet Aviation, Inc. v. United States, 507 F.2d
508, 514 (6th Cir. 1974). The insurer is the real party in
interest to the extent of its payment to the insured (the
insured loss) and the insured is the real party in interest
to the extent of the remaining damages unreimbursed by the
insurer (the uninsured loss). Id.
result, when there has been a partial subrogation
and when the full amount of loss (both insured and
uninsured) is sought from the defendant, a court properly
examines the citizenship of both the insurer and the insured.
This was the factual background of the cases cited by
Benchmark. Travelers Prop. & Cas. Co. of Am. v.
Stresscrete, Inc., No. 10-2693-CM, 2011 U.S. Dist. LEXIS
47656, at *3 (D. Kan. May 3, 2011); Pepsico do BRASIL,
LTDA v. Oxy-Dry Corp., 534 F.Supp.2d 846, 848 (N.D. Ill.
2008) (“Although total subrogation (which is
absent here) results in focusing solely on the subrogee's
citizenship for diversity purposes, partial
subrogation forces a look at both subrogee and subrogor. . .
contrast, while this case presents an example of partial
subrogation, Federal's Amended Complaint seeks only the
insured loss-the $500, 000 it paid to the Limited
Partnerships under their insurance policy-and does not seek
the remaining $100, 904 in uninsured losses. As a result, the
Limited Partnerships are not real parties in interest to the
damages sought in this action. This case is thus
distinguishable from the Stresscrete and
Pepsico cases that required consideration of both
the insured's and insurer's citizenship. The Court
was unable to locate any authorities requiring consideration
of both the insured's and insurer's citizenship when
only one of the interests was at issue in the action.
Therefore, the only relevant citizenship for diversity
purposes is that of Federal and Benchmark.
also makes a passing reference to the Limited Partnerships
being “indispensable parties” without whom a
“full and fair adjudication of this matter”
cannot be made. (Doc. 15, Reply in Supp. of Mot. to Dismiss
at 2). While the Limited Partnerships may qualify as
“necessary” parties under Federal Rule of Civil
Procedure 19(a), they are not indispensable parties such that
the present action cannot fairly continue in their absence
under Rule 19(b). Baker v. Minnesota Min. & Mfg.
Co., 99 F. App'x 718, 723-24 (6th Cir. 2004)
(partial subrogee is not an indispensable party and may
recover whatever it is owed in a separate action); United
States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 382
& n. 19 (1949) (insurer that is partially subrogated to
the rights of an insured is a necessary, but not
indispensable, party; basic rules on party joinder in the
subrogation setting mean that tortfeasors “may have to
defend two or more actions on the same tort.”).
the only relevant citizenship for diversity purposes is that
of Federal and Benchmark. Because Federal has alleged, and
Benchmark does not dispute, the existence of complete
diversity as between these two parties, the Court can
properly exercise diversity jurisdiction over this matter.
Federal question jurisdiction
one of Federal's claims, Count 4, has any relation to
federal statutes, regulations, or other authorities. Federal
alleges that as an FDIC-regulated bank, Benchmark is subject
to, and in violation of,
the applicable statutes, regulations and supervisory policies
of the FDIC and is required to follow applicable statutes,
regulations and supervisory policies of the FDIC concerning
the safe and sound operation of its online banking
operations, including but not limited to 12 CFR § 337.1,
et seq.; 12 CFR Part 30; Appendix A and B; 12 CFR
§ 364.100, et seq.; 12 CFR § 326, et
seq.; and, 12 CFR § 326.1, et seq.
(Doc. 11, Am. Compl. ¶ 139). Federal also alleges that
Benchmark failed to follow several guidelines issued by the
Federal Financial Institutions Examination Council for
banking security standards. (Id. ¶¶ 29,
31, 33, quoting Supplement to Authentication in an Internet
Banking Environment, June 28, 2011 available at
argues that these allegations are insufficient to create a
federal question to confer jurisdiction under 28 U.S.C.
§ 1331 (granting jurisdiction to district courts over
“all civil actions arising under the Constitution,
laws, or treaties of the United States.”). While the
Court is inclined to agree, it is not necessary to resolve
this issue because the Court has already determined it has
subject-matter jurisdiction on the basis of diversity.
Further, the Court finds these arguments better addressed
under the framework for Rule 12(b)(6) infra for
failure to state a cognizable claim.
to the extent Benchmark seeks dismissal for lack of
subject-matter jurisdiction under Rule 12(b)(1),
Benchmark's motion is DENIED.
FAILURE TO STATE A CLAIM ...