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Johnson Controls, Inc v. Wachovia Bank

October 17, 2011

JOHNSON CONTROLS, INC.,
PLAINTIFF,
v.
WACHOVIA BANK, NA, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Gene E.K. Pratter,j.

MEMORANDUM

This case concerns competing claims to proceeds of a negotiated instrument that allegedly was intended to be used to pay for work performed in the course of a construction project. Certain of the Defendants hope to have the Court dismiss various of the pending claims.

Johnson Controls, Inc., a Wisconsin corporation, brings claims against Defendants Green Building Systems, Inc., a Pennsylvania corporation, and Mr. Ulrick Joseph, a Pennsylvania resident, seeking to recover the full proceeds of a check made payable jointly to Johnson Controls and Green Building. As alleged, Green Building and Mr. Joseph deprived Johnson Controls of its interest in the check's full value by failing both to obtain Johnson Controls' endorsement on the check and to remit the proceeds of the check to Johnson Controls after its negotiation. Johnson Controls also claims that Defendants Wachovia Bank, N.A., Wachovia Corporation, Wells Fargo Bank, NA, and Wells Fargo Corporation (collectively, "Wells Fargo"), by negotiating the check without Johnson Controls' endorsement, deprived Johnson Controls of its interest in the check. Specifically, Johnson Controls asserts separate counts for a claim of conversion against Wells Fargo (Count I), Green Building (Count II), and Mr. Joseph (Count III).

In Count IV, Johnson Controls makes a claim against Defendants to recover attorney fees and costs.

Green Building and Mr. Joseph now move to dismiss Counts III and IV. For the reasons articulated below, the Motion is denied in part and granted in part without prejudice.

I. Factual Background

In June 2006, Barham Group, LLC, a mechanical contracting company, began construction on the Jersey Shore Medical Center, located in Neptune, New Jersey (the "Project"). Compl. ¶ 11. Barham Group sub-contracted a portion of the work on the Project to Green Building, which in turn sub-contracted work to Johnson Controls. Id. ¶¶ 12-13.

A payment arrangement developed over the course of the Project in response to Green Building' alleged failure to pay Johnson Controls for its work. Id. ¶¶ 14-15. Under this arrangement, from December 2008 to September 2009 Barham Group issued to Green Building checks made payable jointly to Green Building and Johnson Controls. Id. ¶ 15. Green Building allegedly would endorse the checks and then remit them to Johnson Controls, which would retain the full proceeds from each check. Id. ¶ 16. Johnson Controls alleges that Barham Group intended the full value of these checks to pay Johnson Controls for the work it performed in connection with the Project. Id. ¶¶ 15, 17-18. Johnson Controls further alleges that the endorsements of both Green Building and Johnson Controls were required before any such check could be negotiated. Id. ¶¶ 15, 20.

The basis for the parties' dispute arises from Check No. 2742, a check dated December 23, 2008, which was issued by Barham Group in the amount of $100,458.83 to Green Building and made payable expressly to "Green Building and Johnson Controls." Id. ¶¶ 17, 20. After Green Building received Check No. 2742 from Barham, Mr. Joseph, the President of Green Building, endorsed the check by signing his name and specifically writing Green Building' bank account number beneath the endorsement. Id. ¶ 21; id. Ex. A. Johnson Controls alleges that Green Building and Mr. Joseph were aware of Johnson Controls' interest in the full value of the check, as well as the fact that the endorsements of both Green Building and Johnson Controls were required to negotiate the check. Id. ¶¶ 24-25.

However, according to the allegations, after Mr. Joseph endorsed Check No. 2742, neither Green Building nor Mr. Joseph presented the check to Johnson Controls for endorsement. Id. ¶¶ 26-27. Johnson Controls never endorsed Check No. 2742 or authorized Green Building or Mr. Joseph to present the check on Johnson Controls' behalf without Johnson Controls' endorsement. Id. ¶¶ 26-27. Instead, according to Johnson Controls, Mr. Joseph or another Green Building representative presented Check No. 2742, without notice to or knowledge of Johnson Controls, to a Philadelphia branch of Wells Fargo, where Green Building maintained a bank account. Id. ¶¶ 22, 28-29. Notwithstanding the absence of Johnson Controls' endorsement, Wells Fargo negotiated Check No. 2742 and credited the full amount of the check to the Green Building account. Id. ¶¶ 30-31.

After the full amount of the check was deposited into the Green Building account, Mr. Joseph and Green Building failed to remit the proceeds of Check No. 2742 to Johnson Controls. Id. ¶ 32. Green Building allegedly currently owes Johnson Controls in excess of $450,000, including the full amount of Check No. 2742. Id. ¶ 34. Johnson Controls alleges it has demanded payment from Green Building and Mr. Joseph, but its demands have been ignored. Id. Additionally, Johnson Controls demanded payment for the full value of Check No. 2742 from the bank on April 10, 2009 and September 23, 2009, and the bank allegedly has not acceded to the demand. Id. ¶ 36. Green Building and Mr. Joseph argue that no cognizable claim has been articulated against them as to Counts III and IV.

II. Legal Standard

A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Although Rule 8 of the Federal Rules of Civil Procedure requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (quoting Conley, 355 U.S. at 47), the plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (citation omitted).

To survive a motion to dismiss, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); see also Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1323 (2011). Specifically, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555(citations omitted). The question is not whether the claimant will ultimately prevail but whether the complaint is "sufficient to cross the federal court's threshold." Skinner v. Switzer, 131 S. Ct. 1289, 1296 (2011) (citation omitted). An assessment of the sufficiency of a complaint is thus "a context-dependent exercise" ...


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