SFS Check, LLC v. First Bank
990 F. Supp. 2d 762
E.D. Mich.2013Background
- SFS Check, LLC (Plaintiff) alleges someone fraudulently opened a First Bank of Delaware (FBD) account in SFS’s name that processed illegal online gambling ACH transactions, leading SFS’s bank (Fifth Third) to stop processing SFS’s transactions and damaging SFS’s business.
- SFS received a federal grand‑jury subpoena about transactions processed through the alleged FBD account and sought $10 million (negligence and fraud).
- After the Court allowed limited jurisdictional discovery, SFS moved for leave to file a Second Amended Complaint adding factual allegations and Individual Defendants (FBD officers).
- Defendants moved to dismiss for lack of personal jurisdiction over Individual Defendants and for failure to state claims against FBD. The Court held oral argument and considered affidavits and exhibits attached to the proposed pleading.
- The Court found no prima facie personal jurisdictional contacts between any Individual Defendant and Michigan (only limited phone calls by a corporate officer), and held SFS failed to plausibly allege that it was FBD’s customer or that statutory/regulatory provisions created a private duty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Individual Defendants | Individual Defendants (as FBD executives) directed or participated in acts that connected them to Michigan and thus are amenable to suit | Individual Defendants lacked sufficient contacts with Michigan; limited discovery produced no evidence of contacts | No personal jurisdiction; claims against Individual Defendants dismissed without prejudice |
| Duty for negligence claim against FBD | FBD breached duties by failing to follow CIP/Bank Secrecy Act procedures and allowing a fraudulent account in SFS’s name, causing SFS’s damages | Bank regulations cited do not create a private right of action; SFS was not plausibly a customer of FBD so no duty owed | Negligence claim fails for lack of legally cognizable duty; dismissed with prejudice as to FBD |
| Causation/reliance for fraud claim | Bastable’s misrepresentation that no SFS account existed induced SFS to rely and caused damages | Fifth Third’s decision to terminate SFS preceded Bastable’s alleged misstatement; SFS fails to plead reliance and causation with particularity | Fraud claim fails for lack of plausible reliance/causation and for failure to plead fraud with Rule 9(b) particularity; dismissed with prejudice as to FBD |
| Leave to amend (futility) | Proposed Second Amended Complaint remedies prior pleading deficiencies | Amendment would be futile because claims cannot survive Rule 12(b)(6) and jurisdictional defects persist | Leave to amend denied as futile; case dismissed (individuals without prejudice; FBD with prejudice) |
Key Cases Cited
- Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883 (6th Cir. 2002) (plaintiff bears burden to show personal jurisdiction)
- Serras v. First Tennessee Bank Nat’l Ass’n, 875 F.2d 1212 (6th Cir. 1989) (procedural options for jurisdictional motions)
- CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996) (prima facie standard for jurisdictional facts when no evidentiary hearing)
- International Shoe Co. v. Washington, 326 U.S. 310 (U.S. 1945) (minimum contacts and due process)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (purposeful availment and foreseeability)
- World‑Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (U.S. 1980) (foreseeability standard)
- Balance Dynamics Corp. v. Schmitt Indus., 204 F.3d 683 (6th Cir. 2000) (officer’s personal involvement can support jurisdiction)
- Weller v. Cromwell Oil Co., 504 F.2d 927 (6th Cir. 1974) (telephone calls by corporate officers insufficient for jurisdiction)
- Foman v. Davis, 371 U.S. 178 (U.S. 1962) (factors for leave to amend)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard under Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (legal conclusions insufficient; plausibility required)
- Hi‑Way Motor Co. v. Int’l Harvester Co., 398 Mich. 330 (Mich. 1976) (elements of fraud under Michigan law)