Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Standing But Otherwise Grants In Part And Denies In Part Defense Motion To Dismiss Class Action Complaint Arising Out Of Unclaimed Property Claims
Plaintiffs filed a putative class action against Choice Point and its subsidiary for violations of the New Jersey Consumer Fraud Act and Uniform Unclaimed Property Act, and for common law claims of tortuous interference, fraud, breach of duty, wrongful exercise of dominion over property and interference with possession of property. Carton v. Choice Point, 450 F.Supp.2d 489, 495 (D. N.J. 2006). Defense attorneys moved to dismiss the class action complaint for lack of standing. The defense also moved to dismiss the class action complaint for failure to state a claim. The federal court held that plaintiffs had standing to pursue the class action, and then granted in part and denied in part the motion to dismiss.
Choice Point is a company that charges a fee to locate and secure the return of unclaimed property. Mellon Investor Services asked Choice Point, with whom it had contract, to track down plaintiffs’ father, James Carton Jr., because he held 1600 shares of stock worth $150,000. Carton had died in January 2000, and Choice Point sent a letter to his surviving sons informing them “that a ‘stock account’ with a ‘current value in excess of $15,000’ was ‘still outstanding with our client.'” Carton, at 493. In response to subsequent inquiries, Choice Point stated only that the value of the asset exceed $15,000. Id., at 494. Choice Point sent plaintiffs a contract in which it “agreed to locate the unspecified ‘asset’ in exchange for a finder’s fee of 35% of the asset’s gross value”; plaintiffs signed the contract, but reduced the fee to one-third of the net recovery. Id. Choice Point notified Mellon that it had a signed contract to recover the Carton account and asked that a “stop” be placed on the account. Mellon complied. Choice Point also sent plaintiffs additional documentation, but plaintiffs refused to sign the Letter of Authorization and Irrevocable Stock Power required by Choice Point to complete the transaction. Instead, plaintiffs sought to recover the stock from Mellon directly, but Mellon refused to turn over the stock certificates because of the stop placed on the account. However, for reasons which are unclear, Mellon sent the stock certificates to Choice Point. Choice Point maintained possession of the stock for three years. Carton, at 494.
Plaintiffs filed a class action complaint against Choice Point alleging “violations of (1) the New Jersey Consumer Fraud Act and (2) Uniform Unclaimed Property Act, and common law claims of (3) tortious interference; (4) fraud; (5) ‘breach of duty;’ (6) ‘exercising dominion over property;’ and (7) ‘interference with possession.'” Carton, at 495. Defense attorneys moved to dismiss the complaint for lack of standing because plaintiffs had not suffered any injury in fact. The defense argued that plaintiffs damages were entirely speculative because it was premised on the theory that plaintiffs “would have sold the stock at the precise moment it reached its zenith in price,” id., at 496; the federal court rejected this claim, however, because Third Circuit decisional law “recognize[s] that loss of an opportunity may be sufficient to satisfy the constitutional minimum for Article III standing,” id. The district court held that “the lost opportunity to sell stock at a higher price is an injury sufficient to satisfy the ‘constitutional minimum’ of standing.” Id., at 497.
Defense attorneys also moved to dismiss the complaint for failure to state a claim, and the district court considered each claim in turn. First, the court held that the state Consumer Fraud Act claim, which was premised on the allegation that Choice Point intentionally misled plaintiffs into believing that the asset was worth “substantially less than [its] actual value,” must be dismissed because “no ascertainable loss resulted from this alleged deception,” Carton, at 498. Second, the court held that the state Unclaimed Property Act claim must be dismissed because the statute only applies if the property has been reported to the State as abandoned, id., at 498-500. No private right of action exists under New Jersey’s Unclaimed Property Act, id., at 499. The district court also dismissed two common law claims. The court held that plaintiffs’ common law fraud claim fails because “Plaintiffs do not allege, nor does the evidence suggest, that they sustained any detriment or harm as a result of Choice Point’s alleged misrepresentations and omissions,” id., at 500, and that the “breach of duty” claim fails because “[t]here is no free-standing general common law duty to ‘accurately and completely identify the nature and value of property,'” id., at 501.
The federal court refused to dismiss the balance of the class action complaint. The court interpreted the “exercising dominion over property” and the “interference with possession” claims as alleging conversion. Carton, at 501. The court acknowledged that plaintiffs breached their contractual agreement to allow only Choice Point to recover the stock certificates, but “[a] non-breaching party to a contract may not resort to self-help upon the other party’s breach” and neither the parties’ agreement nor common law “gave Choice Point the right to take possession of the stock certificates upon Plaintiffs’ breach.” Id. The court also refused to dismiss the intentional interference with prospective economic advantage claim because by maintaining possession of the stock certificates for three years, Choice Point “may have caused damage to Plaintiffs that could be remedied by an award of damages.” Id., at 502.
NOTE: “[T]o avoid duplicity,” the federal court held that the “exercising dominion over property” and the “interference with possession” claims would be treated “as alleging a single count of conversion.” Carton, at 501.