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Merryman v. J.P. Morgan Chase Bank, N.A.

United States District Court, S.D. New York

May 5, 2017

BENJAMIN MICHAEL MERRYMAN, AMY WHITAKER MERRYMAN TRUST, and B MERRYMAN AND A MERRYMAN 4TH GENERATION REMAINDER TRUST, and CHESTER COUNTY RETIREMENT BOARD, individually and on behalf of all others similarly situated, Plaintiffs,
v.
J.P. MORGAN CHASE BANK, N.A., Defendant.

          MEMORANDUM OPINION & ORDER

          VALERIE CAPRONI, United States District Judge

         Plaintiffs, Benjamin Michael Merryman, Amy Whitaker Merryman Trust, B Berryman and A Merryman 4th Generation Remainder Trust (collectively, “Merryman Plaintiffs”) and Chester County Retirement Board (“Chester County, ” and collectively with Merryman Plaintiffs, “Plaintiffs”), on behalf of themselves and all others similarly situated, have filed an Amended Complaint against J.P. Morgan Chase Bank, N.A. (“JPM”) for breach of contract. Plaintiffs, owners of American Depositary Receipts (“ADRs”) held on deposit by JPM, claim that JPM collected impermissible “fees” when converting foreign currency-denominated cash distributions into U.S. dollars before distributing the cash to Plaintiffs.

         JPM moved to dismiss the Original Complaint, which had as named Plaintiffs only the Merryman Plaintiffs. JPM's motion was granted in part and denied in part (the “September 29 Opinion”). Dkt. 35. The Court assumes the parties' familiarity with the facts of the case and directs readers to the September 29 Opinion. See Merryman v. J.P. Morgan Chase Bank, N.A. (“Merryman I”), No. 15-CV-9188 (VEC), 2016 WL 5477776 (S.D.N.Y. Sept. 29, 2016). In the Original Complaint, the Merryman Plaintiffs, on behalf of a putative class, asserted breach of contract claims arising out of all ADRs held on deposit by JPM, even though the Merryman Plaintiffs owned only twelve of the 107 ADRs held on deposit by JPM. The September 29 Opinion concluded that the Merryman Plaintiffs do not have class standing to represent holders of ADRs that the Merryman Plaintiffs do not own. Id. at *13-15. Subsequently, Plaintiffs filed an Amended Complaint that added as a Plaintiff Chester County, which allegedly owned during the putative class period forty-one ADRs held on deposit by JPM. Dkt. 50.[1] JPM now moves to dismiss the Amended Complaint to the extent Chester County's claims predating November 21, 2012, are barred by the statute of limitations.[2] For the following reasons, JPM's motion is GRANTED.

         DISCUSSION

         “To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a complaint must allege sufficient facts, taken as true, to state a plausible claim for relief.” Johnson v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56, (2007)); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” N.J. Carpenters Health Fund v. Royal Bank of Scot. Grp., PLC, 709 F.3d 109, 120 (2d Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In deciding a motion to dismiss, courts must “accept all allegations in the complaint as true and draw all inferences in the non-moving party's favor.” L.C. v. LeFrak Org., Inc., 987 F.Supp.2d 391, 398 (S.D.N.Y. 2013) (quoting LaFaro v. N.Y. Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009)). “Although the statute of limitations is ordinarily an affirmative defense that must be raised in the answer, a statute of limitations defense may be decided on a Rule 12(b)(6) motion if the defense appears on the face of the complaint.” Ellul v. Congregation of Christian Bros., 774 F.3d 791, 798 n.12 (2d Cir. 2014) (citing Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008)).

         The parties agree that, pursuant to New York's borrowing statute, N.Y. C.P.L.R. § 202, Pennsylvania's four-year statute of limitations for breach of contract, 42 Pa. Stat. and Const. Stat. Ann. § 5525(a), along with any relevant Pennsylvania tolling rules, applies here. Def. Mem. 3-4; Pls. Opp. 1 n.2 (Dkt. 62). The parties dispute, however, whether the limitations period should be calculated from the date of Plaintiffs' Amended Complaint, filed on November 21, 2016, or from the date of Plaintiffs' Original Complaint, filed on November 21, 2015. Plaintiffs seek the earlier date, arguing that: (1) Pennsylvania's class action tolling applies, and (2) Chester County's claims relate back to the date of the Original Complaint pursuant to Federal Rule of Civil Procedure 15(c). JPM disagrees and argues that the limitations period should be calculated as of the date of the Amended Complaint, November 21, 2016.

         I. Class Action Tolling

         Under Pennsylvania law, the statute of limitations is normally tolled for all putative plaintiffs upon the filing of a class action. Cunningham v. Ins. Co. of N. Am., 530 A.2d 407, 408 (1987) (citing Alessandro v. State Farm Mut. Auto. Ins. Co., 409 A.2d 347, 350 n.9 (1979)). But, as explained by the Pennsylvania Supreme Court in Cunningham, the statute of limitations is not tolled for putative plaintiffs in a class action in which the named plaintiff lacks standing, and the lack of standing is apparent on the face of the complaint. Id. at 409, 411.

         In Cunningham, the plaintiffs sued an insurance company on behalf of all of its insureds for breach of contract. Id. at 407. The action was brought after the expiration of the statute of limitations, but the plaintiffs argued that the limitations period had been tolled by a prior class action in which the plaintiffs had been putative class members. Id. at 408. The prior class action named as defendants many insurance companies, one of which was the defendant in Cunningham. Id. In the prior class action, at the preliminary objections stage, the trial court had dismissed the claims against all but one of the defendant insurance companies on the ground that the named plaintiff lacked standing to sue those companies, including the defendant in Cunningham, because the named plaintiff had not been insured by those insurance companies. Id. The Pennsylvania Supreme Court considered whether the lack of standing in the prior class action “negated the tolling effect” that would normally occur upon the filing of a class action. Id. at 409. The Court held that it did, explaining that the lack of standing was “apparent upon the face of the complaint” because the named plaintiff was not insured by the Cunningham insurer, and the complaint contained no allegation that the insurer had injured the named plaintiff. Id. at 409-10.

         Similarly, in its September 29 Opinion, this Court concluded, relying exclusively on the Original Complaint and the ADR contracts referenced therein, that the Merryman Plaintiffs did not have class standing to bring breach of contract claims arising out of ADRs that they never owned. Merryman I, 2016 WL 5477776, at *13-15. Plaintiffs filed an Amended Complaint adding as a named Plaintiff Chester County and adding breach of contract claims related to ADRs owned by Chester County but not by the Merryman Plaintiffs.[3] The Amended Complaint thus seeks to bring claims for which the original named Plaintiffs-the Merryman Plaintiffs- lacked standing. Just as in Cunningham, the statute of limitations is not tolled for Chester County because the original named Plaintiffs lacked standing as to Chester County's claims.

         Plaintiffs attempt to distinguish Cunningham, arguing that the Merryman Plaintiffs' lack of standing as to the unowned ADRs was not “apparent” on the face of the Original Complaint. Pls. Opp. 5-6. Despite Plaintiffs' argument, the fact that the parties litigated class standing does not alter the conclusion that lack of standing was apparent on the face of the Original Complaint-the Court denied class standing based solely on the allegations in the Original Complaint and the ADR contracts incorporated by reference therein. See Merryman I, 2016 WL 5477776, at *13-15. Plaintiffs also argue that lack of standing was not “apparent” because two other courts in this district denied motions to dismiss based on a lack of class standing in cases involving virtually identical allegations regarding ADRs not owned by the named plaintiffs. Pls. Opp. 5-6. That two other courts denied motions to dismiss based on class standing in nearly identical ADR cases does not indicate that lack of standing was not apparent on the face of the Original Complaint.[4] In the prior class action at issue in Cunningham, the trial court denied class standing, the Superior Court reversed, and the Supreme Court reversed again. Cunningham, 530 A.2d at 408. That various courts viewed the issue of class standing differently did not affect the Pennsylvania Supreme Court's determination that lack of standing was apparent on the face of the complaint. Nor does it do so here.

         Plaintiffs also cite various decisions from this district favoring policies that permit class action tolling even when the original plaintiff lacked standing. Pls. Opp. 6. Those cases, however, are inapposite given that the Cunningham decision is dispositive on this issue of Pennsylvania state law. Moreover, the Pennsylvania Supreme Court squarely rejected the policy consideration that has driven the decisions cited by Plaintiffs-namely, that failure to toll putative class members' claims would result in an onslaught of protective filings to preserve claims, see e.g., In re IndyMac Mortgage-Backed Sec. Litig., 793 F.Supp.2d 637, 646 (S.D.N.Y. 2011). The Pennsylvania Supreme Court viewed its holding as discouraging plaintiffs-and their counsel[5]-from filing suits in cases in which the plaintiff obviously lacks standing. Cunningham, 530 A.2d at 410-11. Accordingly, Chester County's claims were not tolled from the date of the Original Complaint.[6]

         II. Federal Rule of Civil Procedure 15(c)

         Plaintiffs alternatively argue that JPM's motion should be denied because, pursuant to Federal Rule of Civil Procedure 15(c), the Amended Complaint relates back to the filing date of the Original Complaint. “Amended pleadings that meet the requirements of Rule 15(c) are considered to ‘relate back' to the date of the original ...


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