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Grimm v. First National Bank of Pennsylvania

September 16, 2008

JOSEPHINE GRIMM AND LESTER GRIMM, PLAINTIFFS,
v.
FIRST NATIONAL BANK OF PENNSYLVANIA, DEFENDANT.
JOSEPHINE GRIMM AND LESTER GRIMM, PLAINTIFFS,
v.
CHASE BANK USA, NA, DEFENDANT.



The opinion of the court was delivered by: Judge Nora Barry Fischer

MEMORANDUM OPINION

I. INTRODUCTION

Plaintiffs Josephine Grimm and Lester Grimm (hereinafter "Plaintiffs") filed the first styled civil action against Defendant First National Bank of Pennsylvania (hereinafter "FNB"), alleging nine causes of action arising out of alleged fraudulent activity associated with checking accounts Plaintiffs held with FNB. Specifically, Plaintiffs allege: (1) breach of contract; (2) negligence; (3) fraudulent misrepresentation; (4) negligent misrepresentation; (5) breach of fiduciary duty; (6) violation of the Pennsylvania Unfair Trade Practices/Consumer Protection Law ("UTP/CPL"); (7) violation of the Uniform Commercial Code ("UCC"); (8) violation of Electronic Funds Transfer Act; and (9) negligence per se. Pending before the Court is Defendant's Motion to Compel Arbitration or, in the alternative, Partial Motion to Dismiss Plaintiffs' Amended Complaint [7] at Civil Action No. 08-785.

Similarly, Plaintiffs filed the related lawsuit at Civil Action No. 08-816 against Defendant Chase Bank USA, NA*fn1 (hereinafter "Chase"), alleging eight causes of action arising out of alleged fraudulent activity associated with credit card accounts Plaintiffs held with Defendant. Specifically, Plaintiffs allege: (1) breach of implied contract; (2) negligence; (3) fraudulent misrepresentation; (4) negligent misrepresentation; (5) breach of fiduciary duty; (6) violations of the Pennsylvania Unfair Trade Practices/Consumer Protection Law ("UTP/CPL"); (7) violation of the Truth in Lending Act ("TILA") and Consumer Credit Protection Act ("CCPA"); and (8) negligence per se. Pending before the Court is Defendant Chase's Motion to Dismiss Plaintiffs' Amended Complaint [3] at Civil Action No. 08-816.

As said pending Motions are strikingly similar in their factual nature and the relief requested, the Court will address these Motions simultaneously.

II. FACTUAL BACKGROUND

A. Plaintiffs v. FNB (08-785)

During the relevant time period, between October 2005 and April 2006, Plaintiffs allege that they held "at least" two checking accounts with FNB.*fn2 (Civil Action No. 08-785, Docket No. 1, Exhibit A at ¶5).*fn3 During this time period, Plaintiffs allege that these checking accounts were defrauded in an amount in excess of $131,952.00. (Id. at ¶6). Specifically, Plaintiffs allege that FNB failed to notify them of repeated withdrawals from their accounts, namely 25 withdrawals made over three days by the same entity, "OceanViewSA."*fn4 (Id. at ¶¶7-8). In addition, Plaintiffs allege that they were disabled while the fraudulent activity occurred, and were thus unable to immediately detect the fraudulent charges. (Id. at ¶9). According to letters from their treating physicians attached to the Amended Complaint, Mr. Grimm suffers from severe cardiac problems, including the sequelae of three cerebral vascular accidents ("CVA"),*fn5 while Mrs. Grimm suffers from fourth stage Lyme disease,*fn6 depression, and neurological problems. (Id. at Exhibits 1-2).

After detecting the alleged fraudulent activity, Plaintiffs notified FNB and the Secret Service of same. (Id. at ¶¶10-11). A special agent with the Secret Service conducted an investigation into the fraudulent activity associated with Plaintiffs' account with Defendant, as well as their accounts with other credit lending institutions. In a letter addressed to Plaintiffs' counsel dated December 11, 2006, the Secret Service agent stated that the Plaintiffs were defrauded by unknown individuals in an amount in excess of $600,000.00. (See Id., Exhibit 4). The agent further stated that it appeared that Plaintiffs were defrauded through the use of hidden computer software, known as spyware, associated with a company believed to be RiverBelleCasino.com,*fn7 a subsidiary of Belle Rock Entertainment, an online gambling website. Id. During the course of the Secret Service's investigation, Mrs. Grimm stated that she voluntarily submitted personal information to RiverBelleCasino.com in order to download online gambling software. Id. In the months after submitting this information, numerous individual credit cards were obtained by unidentified third parties in Mrs. Grimm's name, and these credit cards accumulated large amounts of unauthorized charges. Id.

Plaintiffs allege that FNB was obligated to provide fraud protection on their checking accounts and failed to satisfy this obligation by overlooking the fraudulent activity and refusing to compensate Plaintiffs for the fraudulent withdrawals. (Docket No. 1 at ¶¶14-15).

B. Plaintiffs v. Chase (08-816)

Plaintiffs allege that between October 2005 and July 2006, they held "at least" five credit card accounts with Chase.*fn8 (Civil Action No. 08-816, Docket No. 1, Exhibit C at ¶5).*fn9 During this time period, Plaintiffs allege that there were fraudulent charges made to their credit cards with Chase in an amount in excess of $170,000.00. (Id. at ¶6). Plaintiffs also allege that Chase failed to notify them that unusually large amounts were being charged to their credit cards. (Id. at ¶7). For example, Plaintiffs allege that Chase failed to notify them that one entity, "Flightserv,"*fn10 made eight transactions in two days involving the Plaintiffs' accounts, totaling approximately $5,800.00. (Id. at ¶8). As detailed above, Plaintiffs allege that they were disabled while the fraudulent activity associated with their credit card accounts occurred and were thus unable to detect the fraud until August of 2006. (Id. at ¶¶7-8).

After detecting the alleged fraudulent activity, Plaintiffs notified Chase and the Secret Service of the fraudulent charges. (Id. at ¶¶8-9). As noted, a special agent with the Secret Service conducted an investigation into the fraudulent activity associated with Plaintiffs' Chase accounts. Plaintiffs further allege that Chase was obligated to provide fraud protection on their credit cards and failed to satisfy this obligation by overlooking the fraudulent activity and only reimbursing the Grimms for approximately $112,000.00 of the fraudulent charges. (Id at ¶¶13-14).*fn11

III. PROCEDURAL HISTORY

A. Plaintiffs v. FNB (08-785)

Plaintiffs filed an Amended Complaint on May 16, 2008 in the Court of Common Pleas of Westmoreland County, Pennsylvania.*fn12 (Civil Action No. 08-785, Docket No. 1 at ¶ 3). On June 6, 2008, FNB timely removed the action to federal court based on this Court's federal question jurisdiction pursuant to 28 U.S.C. § 1331 in that Plaintiffs' claims assert a violation of the Electronic Funds Transfer Act, a law of the United States. (Civil Action No. 08-785, Docket No. 1). At that time, this case was assigned to Judge David S. Cercone. Thereafter, FNB filed its Motion to Compel Arbitration or, in the Alternative, Partial Motion to Dismiss Plaintiffs' Amended Complaint on June 17, 2008. (Civil Action No. 08-785, Docket No. 7). On July 21, 2008, Plaintiffs filed a Response to FNB's Motion to Compel Arbitration or, in the Alternative, Partial Motion to Dismiss Plaintiffs' Amended Complaint along with a Motion to Strike. (Civil Action No. 08-785, Docket Nos. 13 and 15). On July 23, 2008, Judge Cercone denied Plaintiffs' Motion to Strike. (Civil Action No. 08-785, Docket No. 17). On August 1, 2008, FNB filed a Reply to Plaintiffs' Response. (Civil Action No. 08-785, Docket No. 19). Subsequently, this case was reassigned to Judge Nora Barry Fischer on August 5, 2008. (Civil Action No. 08-785, Docket No. 21).*fn13 On September 3, 2008, Kevin M. Miller entered his appearance as the Plaintiffs' lead attorney. (Civil Action No. 08-785, Docket No. 27). The Court conducted a Case Management Conference and heard argument on any pending Motions in the related cases on September 4, 2008. (Civil Action No. 08-785, Docket No. 28). On September 5, 2008, FNB filed its Notice to Court as to Plaintiffs' Accounts at FNB. (Civil Action No. 08-785, Docket No. 29). Subsequently, on September 5, 2008, Justin Lewis, Esquire filed a Motion to Withdraw as Counsel for Plaintiffs, which the Court granted. (Civil Action No. 08-785, Docket Nos. 30 and 31). On September 15, 2008, FNB filed a Notice to Court Regarding Preemption of Plaintiffs' Claims. (Civil Action No. 08-785, Docket No. 33).

B. Plaintiffs v. Chase (08-816)

With respect to Civil Action No. 08-816, Plaintiffs filed an Original Complaint in the Court of Common Pleas of Westmoreland County on July 30, 2007, naming sixteen (16) defendants, including Chase. See Lester Grimm, et. al. v. Advanta Bank Corp., et. al., No. 07-CI-05923 (C.P. Westmoreland County Jul. 30, 2008). The state court dismissed the Original Complaint and granted Plaintiffs leave to amend. Id. On May 15, 2008, Plaintiffs filed an Amended Complaint in the Court of Common Pleas of Westmoreland County, Pennsylvania. (Civil Action No. 08-816, Docket No. 1, Exhibit 5). On June 13, 2008, Chase timely removed the action to federal court based on this Court's original jurisdiction. (Civil Action No. 08-816, Docket No. 1). At that time, this case was assigned to Judge Joy Flowers Conti. Thereafter, Chase filed a Motion to Dismiss Plaintiffs' Amended Complaint on June 20, 2008. (Civil Action No. 08-816, Docket No. 3). In response, on July 9, 2008, Plaintiffs filed a Motion to Strike Defendant's Motion to Dismiss Plaintiffs' Amended Complaint along with a Response to Defendant's Motion to Dismiss Plaintiffs' Amended Complaint. (Civil Action No. 08-816, Docket Nos. 5, 7). On August 6, 2008, this case was reassigned to Judge Nora Barry Fischer.*fn14 (Civil Action No. 08-816, Docket No. 14). On that same day, the Court ordered Plaintiffs to file a supplemental brief addressing the United States Court of Appeals for the Third Circuit's recent decision in Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162, (3d Cir. Jul. 16, 2008). (Civil Action No. 08-816, Docket Nos. 14 and 17). Chase's Response to Plaintiffs' Motion to Strike was filed on August 11, 2008, and the Court denied said Motion as moot on August 13, 2008. The pending Motion to Dismiss was fully briefed on August 19, 2008 when Plaintiffs filed their Supplement to Plaintiffs' Brief in Opposition to Defendant's Motion to Dismiss. (Civil Action No. 08-816, Docket No. 19). On September 3, 2008, Kevin M. Miller entered his appearance as the Plaintiffs' lead attorney. (Civil Action No. 08-816, Docket No. 25). The Court conducted a Case Management Conference and heard argument on any pending Motions in the related cases on September 4, 2008. (Civil Action No. 08-816, Docket No. 26). In addition, on that same day, the parties filed a Stipulation to Amend Caption to correctly identify the Defendant as Chase Bank USA, NA, which the Court granted. (Civil Action No. 08-816, Docket Nos. 27 and 28).

On September 5, 2008, Justin Lewis, Esquire filed a Motion to Withdraw as Counsel for Plaintiffs, which the Court granted. (Civil Action No. 08-816, Docket Nos. 29 and 30). On September 15, 2008, Plaintiffs filed a Supplement to Plaintiffs' Brief in Opposition to Defendant's Motion to Dismiss. (Civil Action No. 08-816, Docket No. 31).

IV. LEGAL STANDARD

The Federal Arbitration Act, 9 U.S.C. § 1, et seq. ("FAA"), provides in pertinent part that "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA also provides that "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States District Court ... for an Order directing that such arbitration proceed in the manner provided in the agreement." 9 U.S.C. § 4. The FAA further provides that if a court is satisfied that the issue before it is referable to arbitration, upon application of one of the parties, a court shall stay its proceedings until such arbitration has been had in accordance with the terms of the agreement.

9 U.S.C. § 3. When a party requests a stay of proceedings as part of a motion to compel arbitration, a District Court is obligated to grant the stay if it decides to compel arbitration. Lloyd v. Hovensa, LLC, 369 F.3d 263, 269 (3d Cir. 2004). In addition to granting a stay and compelling arbitration where required by the FAA, the court in its discretion may also dismiss the action instead of staying the case "[if] all the claims involved in an action are arbitrable." Berkery v. Cross Country Bank, 256 F. Supp. 2d 359, 364 (E.D. Pa. 2003)(citing Seus v. John Nuveen & Co., Inc., 146 F.3d 175, 179 (3d Cir. 1998)).

The United States Court of Appeals for the Third Circuit has explained that "if ... a court deems a controverted arbitration clause a valid and enforceable agreement, it must refer questions regarding the enforceability of the terms of the underlying contract to an arbitrator." Harris v. Green Tree Financial Corp., 183 F.3d 173, 179-80 (3d Cir.1999). "In conducting this inquiry the district court decides only whether there was an agreement to arbitrate, and if so, whether the agreement is valid." Great Western Mort. Corp. v. Peacock, 110 F.3d 222, 228 (3d Cir.1997). "The FAA makes agreements to arbitrate enforceable to the same extent as other contracts." Harris, supra, 183 F.3d at 178. Thus, "federal law presumptively favors the enforcement of arbitration agreements." Id.

To this end, "[t]he Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or the like defense to arbitrability." ...


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