Opinion
Case No. 15 C 11335
05-02-2016
Janes A. Zachman, Plaintiff, v. Citibank, N.A., et al., Defendants.
James A. Zachman, Laquinta, CA, pro se. Todd A. Rowden, Emily Louise Peel, Thompson Coburn LLP, Chicago, IL, David Michael Mangian, Thompson Coburn LLP, St. Louis, MO, for Defendants.
James A. Zachman, Laquinta, CA, pro se.
Todd A. Rowden, Emily Louise Peel, Thompson Coburn LLP, Chicago, IL, David Michael Mangian, Thompson Coburn LLP, St. Louis, MO, for Defendants.
ORDER
Harry D. Leinenweber, Judge, United States District Court
Defendant Citibank, N.A.'s ("Citibank") Motion to Dismiss [ECF No. 8] is granted. Counts I, II, and III of Plaintiff's Complaint are dismissed with prejudice.
STATEMENT
In July 2005, Plaintiff James Zachman ("Plaintiff") went into business with Sangeeta Chhabra ("Chhabra"), a citizen of India. Together they formed Data Services, an application hosting service company, formed pursuant to the laws of Delaware, and entered into an LLC Operating Agreement (the "Agreement") in March 2006. The terms of the Agreement gave each party equal voting rights, an equal share of the profits, and equal access to records of the company. Plaintiff was named the manager. In May 2012, a dispute arose between Plaintiff and Chhabra related to the operation of Data Services. Chhabra then "locked" Plaintiff out of the operations of Data Services by "commandeering the computer servers." Plaintiff retaliated by shutting "Chhabra out of all U.S. banking accounts until the dispute between the two could be settled."
On June 11, 2012, Citibank opened an account in the name of Data Services ending in 6100. The account was opened by Rishi Vohra ("Vohra"), a Chicago attorney, pursuant to a Special Power of Attorney signed by Chhabra. At the time the account was opened, Vohra presented Citibank with: (1) Special Power of Attorney; (2) Data Services Membership Meeting minutes from May 21, 2012, and (3) a Certificate of Formation for Data Services dated July 26, 2005, "giving Vohra the authority to act on behalf of [Data Services]." Tellingly, none of the documents mentioned Plaintiff or referred to him or any interest he might have in Data Services in any way.
One June 16, 2012, Vohra opened an account ending in 5694 with Citibank in the name of Cloud Services. Apparently documents virtually identical to those used in establishing the Data Services account were used to set up the Cloud Services account. This latter account was apparently used to transfer funds owned by Data Services to Cloud Services and then into Chhabra's pocket.
Based on the foregoing, Plaintiff has brought suit against Citibank, N.A. and Citicorp (collectively, "Citibank") alleging the following claims against Citibank: (1) Count I, Negligence; (2) Count II, Breach of Contract Third Party Beneficiary; and (3) Count III, Aiding and Abetting Breach of Fiduciary Duty. Citibank has moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), alleging that the negligence claim (Count I) fails because Citibank does not owe Plaintiff, a non-customer, a duty of care under Illinois law and, in addition, the claim is time-barred. It further alleges that the breach of contract claim (Count II) fails because because there the Complaint is based on the charge that the account (the contract) was entered into specifically to defraud Plaintiff and not to benefit him. Finally, the aiding and abetting claim (Count III) is deficient because Plaintiff does not allege that Citibank was aware of and knowingly assisted anyone in allegedly breaking a fiduciary obligation to Plaintiff.
Plaintiff's response argues that there were many indices of fraud that should have alerted Citibank to the foreseeable risk that the accounts would be used to defraud Plaintiff. The problem with this argument is that it flies in the face of Illinois law regarding the duties that a bank owes. See , Radwill v. Romeo, No. 1–11–0912, 2013 WL 1289072 at *9 (Ill.App. 1st Dist., March 26, 2013) ("Under Illinois law, a bank does not owe a common law duty of a care to a non-customer."). Neither the Patriot Act nor the Bank Secrecy Act creates any duty of care particularly, as Plaintiff acknowledges, neither creates a cause of action. Plaintiff instead argues that these acts together with Citibank's internal policies create a duty of care. However, making this argument, Plaintiff fails to differentiate between a duty of care and a standard of care. The latter only applies to a situation where there is a duty of care to begin with. Rhodes v. Ill. Central Gulf Railroad, 172 Ill.2d 213, 238, 216 Ill.Dec. 703, 665 N.E.2d 1260 (Ill.1996).
Finally, the negligence claim fails due to the statute of limitations. The statute of limitations for negligence claims is two years. 735 ILCS 5/13–202. The two accounts were opened on June 11, 2012 (6100 Account) and June 16, 2012 (5694 Account). The Complaint was filed on November 23, 2015, more than two years later. Plaintiff claims he is able to toll the statute of limitations because he did not find out about Citibank's inactions due to "the concealment of these accounts by Chhabra." However, this does not help Plaintiff because under Illinois law, the concealment to provide tolling must be done by the defendant. Here it was by a third party, his partner. See , 735 ILCS 5/13–215. Therefore, Count I must be dismissed with prejudice.
With regard to Count II, breach of contract, Plaintiff cannot explain how he was an intended beneficiary of the account application, assuming that it would constitute a contract. A third party can only be a beneficiary of the contract if the parties to the contract so intended. Cahill v. Eastern Benefit Systems, Inc., 236 Ill.App.3d 517, 520, 177 Ill.Dec. 718, 603 N.E.2d 788 (1st Dist.1992). Here, there was no intent on the part of Chhabra to benefit Plaintiff: according the Complaint, her intent was to defraud him. If Chhabra did not intend to benefit Plaintiff the neither would Citibank. Count II must be dismissed.
Count III alleges that Citibank "aided and abetted" Chhabra in her raiding of the accounts. He relies upon Freed v. JPMorgan Chase Bank, 2012 WL 6193964 (N.D.Ill., Dec. 12, 2012) in support. In that case, according the complaint, a Chase employee, after assisting Freed's partner in opening bank accounts, after notice by Freed that the accounts should be frozen, contacted the partner and encouraged him to move the funds before they could be frozen. The difference between the Freed case and the one of Plaintiff is that Chase had actual knowledge of the dispute and despite this knowledge actively assisted in the diversion of the funds. Here Plaintiff does not allege that Citibank had actual knowledge of the scheme. This is fatal to the aiding and abetting claim. Therefore, Count III must be dismissed.
In summary, the Motion to Dismiss Counts I, II, and III [ECF No. 8] is granted. Counts I, II, and III of Plaintiff's Complaint are dismissed with prejudice.