An elderly couple (the “depositors”) held accounts in two banks (“Bank 1” and “Bank 2”). In February 2023, the depositors discovered that their personal assistant had fraudulently used their accounts to obtain nearly three million dollars. Bank 1 had first alerted the depositors to the assistant’s suspicious activity in January 2021; however, at that time, the depositors had found no irregular transactions. During a call with Bank 2 in February 2023, Bank 2 and the depositors identified fraudulent transactions totaling nearly $700,000. Later in February 2023, the depositors contacted Bank 2 requesting a fraud check. Bank 1 reviewed the depositors’ accounts and informed them that “no suspicious activity had been found.” Three days later, after several requests from the depositors, Bank 1 provided the depositors with twelve months of their account statements. These statements revealed that Bank 1 had been mailing the depositors’ statements to an old, invalid address, which explained why the depositors had been unaware of the transactions. Additionally, these statements showed that approximately $2.4 million had been transferred to various accounts without authorization, and the depositors had never received a fraud alert. The depositors sued both banks, alleging fraudulent misrepresentation and violations of the Uniform Commercial Code (UCC), the Truth in Lending Act (TILA), and the Electronic Funds Transfer Act (EFTA) based on the banks’ failure to alert the depositors to the fraud. The depositors also alleged a violation of the New York State General Business Law § 349 (GBL § 349).
In Bernstein v. JPMorgan Chase Bank, N.A., 775 F. Supp. 3d 701 (S.D.N.Y. 2025), the court dismissed all claims except the GBL § 349 claim. For the fraudulent misrepresentation claim, the first element is “(1) the defendant had a duty, as a result of a special relationship, to give correct information.” Hydro Investors, Inc. v. Trafalgar Power Inc., 227 F.3d 8, 20 (2d Cir. 2000). The court found that the depositors failed on the first element, reasoning that special relationships typically exist in scientific or technical contexts. The court further explained that a long-term lender-borrower relationship in private banking does not create a special relationship. The court dismissed the claims for violations of UCC Articles 4-406 and 4-A, finding that those articles do not apply to credit card transactions. Article 4-406 relates to bank deposits, while Article 4-A relates to commercial electronic transfers. For similar reasons, the court dismissed the UCC Article 4 claim against Bank 1. Moreover, the UCC Article 4 claim failed to provide adequate notice to the banks because the depositors did not allege which checks and transactions the claim referred to, nor did the depositors provide dates or dollar amounts. Lastly, the court ruled the UCC Article 4 claim and the EFTA claim were time-barred. The court found equitable tolling unwarranted, specifically because the depositors had always possessed the ability to seek legal recourse yet did not pursue it. Additionally, the depositors attempted to excuse the delay due to their mental capacity. However, the depositors’ sons’ power of attorney over the depositors eliminated the need for equitable tolling of the timeframe. The court held, however, that the GBL § 349 claim adequately pled an injury. The court found that both banks ran marketing campaigns advertising extensive fraud protections and monitoring for clients and ruled that the banks’ primary conduct was consumer-related. The court found that the campaigns could plausibly mislead consumers. To plead a GBL § 349 claim, the plaintiff must see the advertisements before entering into a banking relationship. The court inferred that the depositors had continued their banking relationship because they believed the banks had protected their accounts from fraud.
By Will Strum [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]