An apple orchard farm (the “customer”) maintained accounts with the bank, including a checking account and a profit-sharing account, under a Cash Management Services Agreement (CMSA). The CMSA outlined fraud prevention measures and procedures for reversing unauthorized transactions. Unauthorized transfers moved significant funds from the customer’s profit-sharing account to its checking account, followed by wire transfers to accounts at three other banks. The customer discovered the fraud after a recipient bank alerted it, and the customer immediately notified its bank and law enforcement. While two banks returned most of the funds, the third bank refused to return the money it received despite requests by the customer’s bank. The customer sued its bank for breach of contract and negligence in failing to prevent or reverse the transfers. Further, the customer brought deceptive practices claims under New York law against both banks and alleged unjust enrichment of the third receiving bank.
In Forrence Orchards, Inc. v. TD Bank, No. 8:24-cv-525 (BKS/PJE), 2025 WL 472665, 2025 U.S. Dist. LEXIS 25056 (N.D.N.Y. Feb. 12, 2025) (opinion not yet released for publication), the court granted the bank’s motions to dismiss and dismissed all the customer’s claims. First, Article 4-A of the New York UCC, which the court reasoned exclusively governs unauthorized wire transfers, preempted the customer’s common law claims against the bank. Though the customer argued that the bank failed to act before or after the fraud, the court ruled that the claims focused on the transfers themselves—a matter fully addressed by Article 4-A. The deceptive practices claim failed because the alleged misconduct of refusing to return funds only targeted the customer, not the public, as required under New York law. Finally, the court dismissed the unjust enrichment claim against the receiving bank because holding misdirected funds in a customer account did not unjustly enrich the bank—it merely created a debt. Therefore, the court dismissed the complaint in full.
By Audrey Spotts [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Ashley Boyce [email protected]
Edited By Hayden Mariott [email protected]