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Cumis Insurance Society, Inc. v. Clark

United States District Court, District of Columbia

July 19, 2018

CUMIS INSURANCE SOCIETY, INC., Plaintiff,
v.
REGINALD CLARK, et al ., Defendants.

          OPINION

          PAUL L. FRIEDMAN UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on plaintiff CUMIS Insurance Society, Inc.'s motion for summary judgment, originally filed on November 8, 2007, and supplemented on May 26, 2017, and defendant Reginald Clark's motion to dismiss, originally filed on September 18, 2009, and supplemented on May 30, 2017. For the following reasons, the Court will deny both motions.[1] The Court will deny the motion for summary judgment without prejudice.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         This case has a long history, with two lengthy stays in the litigation due to related criminal proceedings. As a result, the Court is only now tasked with resolving the parties' first substantive dispositive motions in the case. Because it has not had prior occasion to do so, the Court briefly summarizes here the factual and procedural background.

         Between April 2001 and July 2003, defendant Reginald Clark was employed as an accountant for Hoya Federal Credit Union (“Hoya”) at its Georgetown University branch in Washington, D.C. See Am. Compl. at ¶¶ 8-9; Answer at ¶¶ 8-9.[2] CUMIS alleges that during the course of Mr. Clark's employment, he engaged in fraudulent conduct that caused financial damages to Hoya. As Hoya's insurer, CUMIS seeks to recover the funds it disbursed to Hoya pursuant to its fidelity bond.

         More specifically, CUMIS alleges that Mr. Clark engaged in several types of fraudulent conduct or schemes. First, CUMIS alleges that Mr. Clark “often volunteered” to bring the daily deposits to Hoya's bank, but then “took the deposit bag to his residence, removed the cash from the deposits, created new deposit slips without a reference to a cash deposit, and then deposited the checks the following business day.” See Am. Compl. at ¶ 12. Second, CUMIS alleges that Mr. Clark participated in “stop payment” schemes with checks written from his own account and the accounts of other Hoya members. See id. at ¶¶ 13-14. Essentially, by placing “stop payment” s on checks written from these accounts and subsequently deleting the records of the “stop payment” orders, as well as the drafts themselves, Hoya's bank would pay out the check amounts, but the funds would not be debited from the accounts. See id. Finally, CUMIS alleges that Mr. Clark arranged fraudulent wire transfers on at least three occasions, processing the largest two “when Hoya's manager was out of the office” and asserting to another employee that he “had instructions from Hoya's manager to carry out the transactions, ” thereby “cloaking himself in false authority.” See id. at ¶¶ 15-16, 23. CUMIS alleges that this conduct caused Hoya to suffer losses “in excess of $540, 196.14.” See id. at ¶ 17. And as Hoya's insurer, CUMIS compensated Hoya in the amount of $540, 196.14 and now is subrogated to Hoya's rights in that same amount. See id. at ¶ 18.

         On June 28, 2005, CUMIS brought suit against Mr. Clark alleging fraud, breach of fiduciary duty, and unjust enrichment. See Am. Compl. at ¶¶ 19-34.[3] Mr. Clark filed his answer on February 13, 2006, denying liability on all counts and including his demand for a jury trial.[4] On July 14, 2006, Mr. Clark moved to stay the case, invoking his Fifth Amendment privilege against self-incrimination in light of a parallel criminal investigation and grand jury proceedings. See Mot. to Stay at 1-2. In his motion to stay, Mr. Clark also asserted that the criminal investigation was interfering with his discovery rights in the instant case. See id. at 4; Reply to Mot. to Stay at 1-2. CUMIS opposed the motion to stay. See Opp'n to Mot. to Stay. On August 22, 2006, the Court granted Mr. Clark's motion and entered the first of two stays in the case. See Order [Dkt. No. 44] (Aug. 22, 2006). On June 27, 2007, CUMIS moved to lift the stay in light of the fact that no criminal charges had been brought and all requested discovery materials had been made available to Mr. Clark. See Mot. to Lift; Reply to Mot. to Lift. On July 18, 2007, the Court issued a minute order granting this motion and lifting the stay. Thereafter, on November 8, 2007, CUMIS filed a motion for summary judgment, and on September 18, 2009, Mr. Clark filed a motion to dismiss.[5] The parties thereafter filed responsive briefs opposing and supporting their respective motions.

         On December 15, 2009, Mr. Clark again moved to stay the proceedings. In light of an ongoing grand jury investigation, the Court issued a minute order on January 25, 2010, granting the motion to stay. Mr. Clark was subsequently indicted and then convicted of three counts of bank fraud (in violation of 18 U.S.C. § 1344), two counts of wire fraud (in violation of 18 U.S.C. § 1343), and two counts of creating a false entry in federal credit institution records (in violation of 18 U.S.C. § 1006). See Suppl. Mot. for Summ. J. Ex. E; Suppl. Mot. for Summ. J. Ex. F. Following Mr. Clark's conviction, Judge Reggie B. Walton sentenced him to sixty-three months of imprisonment, to be followed by a term of supervised release, and required him to pay restitution in the amounts of $140, 000 to Hoya and $79, 286.41 to CUMIS, a total of $219, 286.41. See Suppl. Mot. for Summ. J. Ex. F. Mr. Clark appealed his conviction and sentence, and the United States Court of Appeals for the District of Columbia Circuit affirmed his conviction and restitution obligation, but remanded the case for resentencing. See United States v. Clark, 747 F.3d 890, 897 (D.C. Cir. 2014). On remand, Judge Walton reduced Mr. Clark's term of imprisonment, but the restitution amounts remained unchanged. See Suppl. Mot. for Summ. J. Ex. G. There are no longer any pending appeals in the criminal case, and that judgment is final.

         On February 1, 2017, CUMIS filed a motion to lift the stay. After a status conference, the Court issued a minute order on April 3, 2017, granting CUMIS's motion to lift the stay. The Court also issued a separate order permitting the parties to supplement their unresolved dispositive motions. See Order [Dkt. No. 162] (Mar. 23, 2017). On May 26, 2017, CUMIS filed a revised memorandum in support of its motion for summary judgment, and on May 30, 2017, Mr. Clark filed a supplemental motion to dismiss. The parties thereafter filed responsive briefs opposing and supporting their respective motions.

         II. MOTION TO DISMISS

         In his motion to dismiss, Mr. Clark asks the Court to dismiss CUMIS's complaint on grounds that the Court lacks subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure. He also asserts that CUMIS has failed to state a claim upon which relief can be granted and failed to plead fraud with the requisite particularity, warranting dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Finally, Mr. Clark requests dismissal as a discovery sanction.

         A. Dismissal for Lack of Subject Matter Jurisdiction Under Rule 12(b)(1)

         1. Legal Standard

         Federal courts are courts of limited jurisdiction, possessing only those powers authorized by the Constitution and an act of Congress. See, e.g., Janko v. Gates, 741 F.3d 136, 139 (D.C. Cir. 2014); Beethoven.com LLC v. Librarian of Cong., 394 F.3d 939, 945 (D.C. Cir. 2005); Abulhawa v. U.S. Dep't of the Treasury, 239 F.Supp.3d 24, 30 (D.D.C. 2017). On a motion to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of establishing that the Court has jurisdiction. See Walen v. United States, 246 F.Supp.3d 449, 452 (D.D.C. 2017); Tabman v. FBI, 718 F.Supp.2d 98, 100 (D.D.C. 2010). In determining whether to grant a motion to dismiss, however, the Court must construe the complaint in the plaintiff's favor and treat all well-pleaded factual allegations as true. See Attias v. Carefirst, Inc., 865 F.3d 620, 627 (D.C. Cir. 2017); Walen v. United States, 246 F.Supp.3d at 452-53. And in determining whether a plaintiff has met the burden of establishing jurisdiction, this Court may consider materials beyond the pleadings where appropriate. See Walen v. United States, 246 F.Supp.3d at 453 (citing Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011)); Tabman v. FBI, 718 F.Supp.2d at 100 (citing Scolaro v. D.C. Bd. of Elections & Ethics, 104 F.Supp.2d 18, 22 (D.D.C. 2000)).

         Under 28 U.S.C. § 1332, this Court has subject matter jurisdiction over a dispute between citizens of different states where the amount in controversy exceeds $75, 000, computed without regard to any setoff or counterclaim to which the defendant may be adjudged to be entitled and exclusive of interest and costs. When the court considers whether a claim exceeds the $75, 000 amount-in-controversy requirement, “the plaintiff's amount-in-controversy allegation is accepted if made in good faith.” See Dart Cherokee Basin Operating Co. v. Owens, 135 S.Ct. 547, 553 (2014). Dismissal is justified only if it “appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount.” See Bronner v. Duggan, 249 F.Supp.3d 27, 37 (D.D.C. 2017) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)). In short, “the Supreme Court's yardstick demands that courts be very confident that a party cannot recover the jurisdictional amount before dismissing the case for want of jurisdiction.” See Rosenboro v. Kim, 994 F.2d 13, 17 (D.C. Cir. 1993).

         2. Analysis

         Mr. Clark argues that CUMIS has failed to satisfy the requisite $75, 000 amount in controversy to establish diversity jurisdiction. See Suppl. Mot. to Dismiss at 4. Mr. Clark acknowledges that the amount stated in the complaint controls if made in good faith, but he asserts that this is “[n]ot the case here.” See id. at 4. Although Mr. Clark does not offer any evidence affirmatively indicating bad faith, he argues that CUMIS has not provided sufficient factual support for its asserted demand. See id. at 2-3. And CUMIS is not entitled to recover the amount claimed, Mr. Clark argues, because “CUMIS is now seeking [what] has already been awarded to the plaintiff in a criminal Restitution Order . . . .” See id. at 4.

         It appears to the Court that, although Mr. Clark challenges the total damages amount alleged by CUMIS, he has not proffered any reason to think the amount in controversy is less than $75, 000. While it is not clear from the amended complaint precisely how CUMIS calculated the exact amount of damages now sought, this is a matter to be proven by a preponderance of the evidence at trial. At the motion to dismiss stage, even a “cursory” allegation of the amount in controversy can be sufficient. See Bronner v. Duggan, 249 F.Supp.3d at 37 (citations omitted). CUMIS has alleged damages totaling $540, 196.14, an amount well-above the jurisdictional amount of $75, 000. This total amount, CUMIS asserts, encompasses those harms accounted for in the criminal restitution order, as well as additional harms stemming from Mr. Clark's fraudulent conduct. See Opp'n to Suppl. Mot. to Dismiss at 2-3. And the criminal restitution order does not categorically bar CUMIS from seeking civil damages. See Kiwanuka v. Bakilana, 844 F.Supp.2d 107, 116 (D.D.C. 2012) (“It is well established that an order of restitution does not bar subsequent civil suits; at most, it may offset any future recovery of compensatory damages for the same loss.”); cf. 18 U.S.C. § 3664(j)(2) (“Any amount paid to a victim under an order of restitution shall be reduced by any amount later recovered as compensatory damages for the same loss by the victim.”).

         Although CUMIS has not definitively demonstrated its entitlement to the $540, 196.14 amount in civil damages it seeks, see infra Part III, CUMIS is not required to do so in order to survive a motion to dismiss. Because the amount in controversy alleged by CUMIS is well above the jurisdictional requirement and does not appear to have been asserted in bad faith, the Court will deny Mr. Clark's motion to dismiss the amended complaint for lack of subject matter jurisdiction under Rule 12(b)(1). See Rosenboro v. Kim, 994 F.2d at 17; Bronner v. Duggan, 249 F.Supp.3d at 38.

         B. Dismissal for Failure to State a Claim Under Rule 12(b)(6)

         1. Legal Standard

         Rule 12(b)(6) of the Federal Rules of Civil Procedure allows dismissal of a complaint if a plaintiff fails “to state a claim upon which relief can be granted.” See Fed.R.Civ.P. 12(b)(6). Generally, under Rule 8 of the Federal Rules of Civil Procedure, a plaintiff need only provide “a short and plain statement of the claim showing that the pleader is entitled to relief” that “give[s] the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” SeeBell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6) motion to dismiss, the complaint “must contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.'” SeeAshcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 555, 570); see also Henok v. Kessler, 78 F.Supp.3d 452, 457 (D.D.C. 2015). “A claim has facial plausibility ...


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