Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_19-cv-05608/USCOURTS-cand-4_19-cv-05608-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 28:1332 Diversity-Negotiable Instrument

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MECHANICS BANK,

Plaintiff,

v.

CITIBANK DELAWARE,

Defendants.

Case No. 4:19-cv-5608-KAW

ORDER GRANTING DEFENDANT’S 

MOTION TO DISMISS WITH 

PREJUDICE

Re: Dkt. No. 10

On September 5, 2019, Plaintiff Mechanics Bank filed the instant action against Defendant 

Citibank Delaware, asserting a single cause of action under California Commercial Code § 4302. 

(Compl. ¶¶ 14-20, Dkt. No. 1.) Pending before the Court is Defendant’s motion to dismiss. 

(Def.’s Mot. to Dismiss, Dkt. No. 10.) The Court finds the matter suitable for disposition without 

hearing pursuant to Civil Local Rule 7-1(b), and VACATES the hearing. Having considered the 

parties’ filings and the relevant legal authorities, the Court GRANTS Defendant’s motion to 

dismiss with prejudice.

I. BACKGROUND

On February 11, 2019, Malcom Leader-Picone brought a Citibank cashier’s check in the 

amount of $195,720 to Plaintiff’s Oakland branch. (Compl. ¶ 10.) On February 12, 2019,

Plaintiff presented the check to Defendant. (Compl. ¶ 11.) On February 13, 2019 at 5:13 p.m., 

after Plaintiff was closed, Defendant issued a notice of dishonor with respect to the check via the 

Electronic Advance Return Notification System (“EARNS notice”). (Compl. ¶ 12.) On February 

15, 2019, Plaintiff received the check back, which was marked as counterfeit. (Compl. ¶13.)

Plaintiff then filed this case against Defendant, alleging that Defendant was strictly liable 

to Plaintiff for the amount of the check per California Commercial Code § 4302. (Compl. ¶¶ 14-

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20.) On October 10, 2019, Defendant filed the instant motion to dismiss. On October 24, 2019, 

Plaintiff filed its opposition. (Pl.’s Opp’n, Dkt. No. 17.) On October 31, 2019, Defendant filed its 

reply. (Def.’s Reply, Dkt. No. 18.)

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a party may file a motion to dismiss based 

on the failure to state a claim upon which relief may be granted. A motion to dismiss under Rule 

12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Block, 250

F.3d 729, 732 (9th Cir. 2001).

In considering such a motion, a court must “accept as true all of the factual allegations 

contained in the complaint,” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation 

omitted), and may dismiss the case or a claim “only where there is no cognizable legal theory” or 

there is an absence of “sufficient factual matter to state a facially plausible claim to relief.” 

Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing 

Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro, 250 F.3d at 732) (internal quotation 

marks omitted).

A claim is plausible on its face when a plaintiff “pleads factual content that allows the 

court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 

Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must demonstrate 

“more than labels and conclusions, and a formulaic recitation of the elements of a cause of action 

will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

“Threadbare recitals of the elements of a cause of action” and “conclusory statements” are 

inadequate. Iqbal, 556 U.S. at 678; see also Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th 

Cir. 1996) (“[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat 

a motion to dismiss for failure to state a claim.”). “The plausibility standard is not akin to a 

probability requirement, but it asks for more than a sheer possibility that a defendant has acted 

unlawfully . . . . When a complaint pleads facts that are merely consistent with a defendant's 

liability, it stops short of the line between possibility and plausibility of entitlement to relief.” 

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557) (internal citations omitted).

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If the court grants a motion to dismiss, it should grant leave to amend even if no request to 

amend is made “unless it determines that the pleading could not possibly be cured by the 

allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (citations omitted).

III. DISCUSSION

Plaintiff asserts Defendant is liable per California Commercial Code § 4302. Per § 

4302(a):

If an item is presented to and received by a payor bank, the bank is 

accountable for the amount of either: (1) a demand item, other than a 

documentary draft, whether properly payable or not, if the bank . . . 

retains the item beyond midnight of the banking day of receipt 

without settling for it or . . . does not pay or return the item or send 

notice of dishonor until after its midnight deadline.

As defined by California Commercial Code § 4104(a)(10), the “midnight deadline” is “midnight 

on its next banking day following the banking day on which it receives the relevant item . . . .” 

(emphasis added).

Here, there is no dispute that the notice of dishonor was received before midnight of the 

day following Defendant’s receipt of the check. Plaintiff, however, alleges that Defendant 

violated § 4302(a) because it did not provide the notice of dishonor during Plaintiff’s regular 

banking hours. (Compl. ¶ 19.) In support, Plaintiff relies on California Commercial Code § 

3503(b), which states that a “[n]otice of dishonor . . . may be given by any commercially 

reasonable means, including an oral, written, or electronic communication. . . .” (Compl. ¶ 17.) 

Thus, Plaintiff argues that “commercially reasonable means” could require that Defendant provide 

the notice of dishonor during Plaintiff’s regular banking hours under § 4302, despite § 4302’s 

clear statutory language imposing a midnight deadline.

The Court finds Plaintiff’s interpretation of sections 3503 and 4302 is untenable. First, 

it is not clear § 3503(b)’s “commercially reasonable means” language refers to the timing of the 

notice of dishonor in the first place. In giving examples of “commercially reasonable means,” § 

3503(b) describes different ways of providing notice, such as by an oral, written, or electronic 

communication. Thus, the meaning of the term “commercially reasonable means” is “narrowed 

by the commonsense canon of noscitur a sociis—which counsels that a word is given more precise 

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content by the neighboring words with which it is associated.” United States v. Williams, 553 U.S. 

285, 294 (2008); see also Yates v. United States, 574 U.S. 528, 543 (2015) (“we rely on the 

principle of noscitur a sociis—a word is known by the company it keeps—to avoid ascribing to 

one word a meaning so broad that it is inconsistent with its accompanying words, thus giving 

unintended breadth . . . .”).1 Indeed, Plaintiff cites no authority that § 3503(b)’s “commercially 

reasonable means” language refers to timing.

Second, even if § 3503(b)’s “commercially reasonable means” language did refer to 

timing, to read it as requiring that a notice of dishonor be given during regular banking hours 

would obviate § 4302’s “midnight deadline” language. (See Def.’s Mot. to Dismiss at 5.) Basic 

principles of statutory interpretation require that a statute “be construed so that effect is given to 

all its provisions, so that no part will be inoperative or superfluous, void, or insignificant.” Hibbs 

v. Winn, 542 U.S. 88, 101 (2004) (emphasis added); see also Cooper Indus., Inc. v. Aviall Servs., 

Inc., 543 U.S. 157, 166 (2004) (“Aviall’s reading would render part of the statute entirely 

superfluous, something we are loath to do.”).

Finally, “[s]pecific terms prevail over the general in the same or another statute which 

otherwise might be controlling.” D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 208 (1932). 

Here, § 4302 imposes a specific deadline by which a notice of dishonor must be sent, whereas § 

3503 contains only general language regarding “commercially reasonable means.” These specific 

references to timing control over § 3503’s general language, even if § 3503 could be read to refer 

to timing.

Thus, the Court finds that Plaintiff cannot allege any claim under § 4302 because there is 

no dispute that Defendant provided Plaintiff with the notice of dishonor before the midnight 

deadline, as required by the statute. Accordingly, dismissal with prejudice is warranted.

IV. CONCLUSION

For the reasons stated above, the Court GRANTS Defendant’s motion to dismiss with 

 

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In contrast, California Commercial Code § 3502(b)(1) does refer to timing, finding that a check 

is dishonored if the payor bank “sends timely notice of dishonor or nonpayment under . . . Section 

4302.” Given that § 3502(b)(1) refers specifically to timing, this further suggests that § 3503’s 

“commercially reasonable means” does not impose any timing requirement. 

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prejudice.

IT IS SO ORDERED.

Dated: December 6, 2019

__________________________________

KANDIS A. WESTMORE

United States Magistrate Judge

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