United States District Court, E.D. Michigan, Southern Division
AKNO 1010 MARKET STREET ST. LOUIS MISSOURI LLC, Plaintiff,
NAHID POURTAGHI, Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO
TERRENCE G. BERG UNITED STATES DISTRICT
Nahid Pourtaghi has moved to dismiss certain claims for fraud
and embezzlement brought by Plaintiff Akno 1010 Market
Street, St. Louis, Missouri, LLC's (“Akno”).
Pourtaghi asserts, first, that Akno's fraud claim was not
pled with the particularly required by Rule 9(b) of the
Federal Rules of Civil Procedure and, second, that the
company's embezzlement claim must be dismissed in
accordance with Rule 12(b)(6) because, under Michigan law,
claims for embezzlement are subsumed by those for statutory
conversion. The Court agrees and will grant Defendant's
motion to dismiss without prejudice.
Akno 1010 Market Street, St. Louis, Missouri, LLC
(“Akno”) is a limited-liability company doing
business in Wayne County, Michigan. ECF No. 1 PageID.2
(Compl.). Defendant Nahid Pourtaghi was formerly designated
as an agent of Akno. ECF No. 1 PageID.3. In her capacity as
an agent, Defendant was granted signatory authority for
Akno's bank account. ECF No. 1 PageID.3. According to
Akno, Defendant understood that her access to that account
was authorized for corporate purposes only. ECF No. 1
PageID.3. But Akno claims to have later discovered that
Defendant had removed $240, 000 from the company's
account and transferred it to a bank in Canada without
Akno's knowledge or permission. ECF No. 1 PageID.3. Akno
alleges only that Defendant made an unauthorized transfer
“to a bank account in Canada” and that she did so
“to her own benefit.” ECF No. 1 PageID.3-4. The
Complaint does not say whether the Canadian account belonged
to Defendant or to anyone operating on her behalf. Upon
learning of the unauthorized transfer, in August 2017 Akno
revoked Defendant's access to the bank account and
notified her that she was no longer an agent of the company.
ECF No. 1 PageID.3. Akno further suggests that Defendant may
have transferred additional funds from its bank account
without authorization but provides no details. ECF No. 1
PageID.3. After Defendant failed to return the funds, Akno
filed the instant litigation on November 9, 2018 asserting
claims for statutory conversion in violation of Mich. Comp.
Laws § 600.2919(a), fraud, breach of fiduciary duty,
embezzlement, and unjust enrichment. See generally
ECF No. 1.
contends that Akno's claim for fraud under Michigan law
fails to meet the particularity requirement of Rule 9(b) of
the Federal Rules of Civil Procedure because it lacks
sufficient detail. This position is well-taken because
Akno's Complaint contains no facts as to when
Defendant made the alleged misrepresentations or unauthorized
transfers of company funds, and no details concerning the
nature of the misrepresentations. Consequently, the Court
will grant this portion of Defendant's motion and dismiss
Akno's claim for fraud without prejudice.
Michigan law, the elements of fraud are: (1) the defendant
made a material misrepresentation; (2) that was false; (3)
defendant made the misrepresentation knowing it was false, or
made it recklessly, without any knowledge of its truth, and
as a positive statement; (4) she made it with the intention
that it should be acted upon by plaintiff; (5) plaintiff
indeed relied upon it; and (6) plaintiff thereby suffered
injury. Harbor Thirteen Mile-20600 LLC v. Emp. Ret. Plan
of Consol. Elec. Distrib., Inc., No. 15-14066, 2016 WL
1665158, *2 (E.D. Mich. Apr. 27, 2016) (citing Hi-Way
Motor Co. v. Int'l Harvester Co., 247 N.W.2d 813,
816 (Mich. 1976)). Even where a plaintiff alleges fraud in
violation of state law only, Rule 9(b)'s particularity
requirement applies if the claims are asserted in federal
court. Bowlers' Alley, Inc. v. Cincinnati Ins.
Co., No. 13-13804, 2015 WL 3541905, at *3 (E.D. Mich.
Apr. 30, 2015).
Rule provides that “[i]n alleging fraud or mistake, a
party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person's mind may be alleged
generally.” Fed.R.Civ.P. 9(b). Courts have interpreted
this language to mean that a claim for fraud typically meets
Rule 9(b)'s requirements if it alleges: “(1) the
time, place, and content of the alleged misrepresentation,
(2) the fraudulent scheme, (3) the defendant's fraudulent
intent, and (4) the resulting injury.” In re FCA
U.S. LLC Monostable Elec. Gearshift Litig., 280
F.Supp.3d 975, 1003 (E.D. Mich. 2017) (internal quotations
omitted) (quoting Wall v. Mich. Rental. 952 F.3d
492, 496 (6th Cir. 2017)). At a minimum, to meet Rule
9(b)'s particularity pleading requirements the Sixth
Circuit requires that a plaintiff “must allege the
time, place and contents of the misrepresentations upon which
they relied.” Frank v. Dana Corp., 547 F.3d
564, 570 (6th Cir. 2008) (citing Bender v. Southland
Corp., 749 F.2d 1205, 1216 (6th Cir. 1984)). Another
court in this district, for example, dismissed a claim for
fraud where the plaintiff identified the time and place of
the alleged misrepresentations, but not their “specific
content.” S.E.C. v. Conaway, No.
2:05-CV-40263, 2009 WL 1606655, *2 (E.D. Mich. June 8, 2009).
Akno alleges generally that, while in the Eastern District of
Michigan, Defendant, an agent of Akno's with signatory
authority on the company's bank account,
“transferred $240, 000 to a bank account in Canada that
was not authorized by Plaintiff.” ECF No. 1 PageID.2-3.
Akno further asserts that “Defendant improperly
transferred additional funds from [Akno's] Account”
and that she knowingly “made [false] representations of
fact to [Akno] that she would not use [Akno] Account funds
for her personal use.” ECF No. 1 PageID.3, 5. Nowhere
in the Complaint does Akno allege where or
when Defendant made these alleged
misrepresentations, nor does Plaintiff specify when the funds
were improperly transferred, or to whom. ECF No. 1 PageID.3.
Further, the Complaint fails to specify whether these alleged
unauthorized transactions took place over a period of time,
or all on the same date. The only general time referenced in
the Complaint is Akno's revocation of Defendant's
status as the company's agent, which occurred in August
2017. ECF No. 1 PageID.3.
the Complaint fails to provide any detail about the contents
or context of Defendant's alleged misrepresentations. The
Sixth Circuit has instructed that, to satisfy Rule 9(b), a
plaintiff must “specify the statements that the
plaintiff contends were fraudulent” and “state
where and when the statements were made” as well as
“explain why the statements were fraudulent.”
Bowlers' Alley, Inc., 2015 WL 3541905 at *3. The
only facts about the alleged misrepresentation described in
the Complaint are that Defendant said “she would not
use 1010 Account funds for her personal use.” ECF No.
1. PageID.5. No. information is provided about the context of
this statement, including when or where Defendant made it.
Likewise, the Complaint contains no allegations about what
specifically Defendant said, or to whom at Akno she addressed
such fraudulent statements. Because the Complaint does not
specify the time or place of the alleged misrepresentations
or the unauthorized transfers and provides only spare
allegations about content of Defendant's claimed
misrepresentations, it falls short of Rule 9(b)'s
as pointed out by Akno, under Michigan law “an action
for fraud must be predicated upon a false statement relating
to a past or existing fact; promises regarding the future are
contractual and do not support a claim for fraud.”
Bennett v. MIS Corp., 607 F.3d 1076, 1100 (6th Cir.
2010) (citing Hi-Way Motor Co., 247 N.W.2d at 815).
Again, the only misrepresentation described in the Complaint
is that Defendant said that “she would not use 1010
Account funds for her personal use.” ECF No. 1.
PageID.5. And, as explained by another court in this
district, “fraud [under Michigan law] cannot be
predicated upon statements promissory in their nature and
relating to future actions, nor upon the mere failure to
perform a promise.” Bye v. Nationwide Mut. Ins.
Co., 733 F.Supp.2d 805, 820 (E.D. Mich. 2010).
Defendant's alleged misrepresentation is indeed a
statement about a promised future action or omission.
Michigan courts, however, have carved out a bad-faith
exception to this prohibition on promissory statements
serving as the basis for fraud liability. Under the
exception, a claim for “fraudulent misrepresentation
may be based upon a promise made in bad faith without
intention of performance.” Travis v. ADT Sec.
Services, Inc., 884 F.Supp.2d 629, 640 (E.D. Mich. 2012)
(quoting Hi-Way Motor Co., 247 N.W.2d at 816). Akno,
in its Complaint, asserted that “Defendant knew that
the representations made to Plaintiff were false when they
were made.” ECF No. 1 PageID.5. Because the absence of
any timeline of Defendant's actions, as well as the
dearth of information about the contents of her alleged
misrepresentations, are themselves sufficient bases for the
Court to find noncompliance with Rule 9(b), the Court at this
time need not decide whether Akno's allegations, in their
current form, pass muster under the bad-faith exception.
Regardless, more detailed allegations would be helpful both
to provide proper notice to the Defendant, and to flesh out
the Court's understanding of Akno's fraud claim.
next moves to dismiss Akno's claim for embezzlement under
Michigan law on the basis that it is duplicative of, and
necessarily subsumed by, Akno's claim for statutory
conversion under Mich. Comp. Laws § 600.2919a. Because
Akno's potential remedy for embezzlement is rooted in the
state's civil remedy for statutory conversion, the Court
will dismiss the embezzlement claim under Rule 12(b)(6) of
the Federal Rules of Civil Procedure.
of a motion to dismiss under Rule 12(b)(6) is confined to the
pleadings. Jones v. City of Cincinnati, 521 F.3d
555, 562 (6th Cir. 2008). In evaluating a motion to dismiss
under Rule 12(b)(6), courts “must construe the
complaint in the light most favorable to the plaintiff,
accept all well-pled factual allegations as true and
determine whether the plaintiff undoubtedly can prove no set
of facts consistent with their allegations that would entitle
them to relief.” League of United Latin Am.
Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007)
(citing Kottmyer v. Maas, 436 F.3d 684, 688 (6th
Cir. 2006)). Though this standard is liberal, it requires a
plaintiff to provide “more than labels and conclusions,
and a formulaic recitation of the elements of a cause of
action” in support of her grounds for entitlement to
relief. Albrecht v. Treon, 617 F.3d 890, 893 (6th
Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 554, 555 (2007)). Under Ashcroft v. Iqbal, the
plaintiff must also plead “factual content that allows
the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.” 556 U.S. 662,
678 (2009) (citation omitted). A plaintiff falls short if she
pleads facts “merely consistent with a defendant's
liability” or if the alleged facts do not “permit
the court to infer more than the mere possibility of
misconduct.” Albrecht, 617 F.3d at 893
(quoting Iqbal, 556 U.S. at 678-679).
Michigan, “[e]mbezzlement is a statutory offense, not
an offense at common law.” Cabala v. Allen,
No. 305250, 2012 WL 4465164, *2 (Mich. Ct. App. Sep. 27,
2012) (citing People v. Bergman, 224 N.W. 375 (Mich.
1929)). The Michigan Court of Appeals, in Cabala v.
Allen, explained that the plain language of
Michigan's embezzlement statute, Mich. Comp. Laws §
750.174(1), “contains no indication that a civil remedy
is available for violation of [the statute].” 2012 WL
4465164 at *2. Instead, the state legislature provided a
method of recovery for civil embezzlement “cloaked in
the conversion statute, ” Mich. Comp. Laws §
600.2919a. Because the remedy for a state-law embezzlement
claim is the same as that for a conversion claim asserted