A professional limited liability company’s sole member (the “customer”) held an account at a bank, which it formed by signing a Business Deposit Account Agreement (“the Agreement”). The Agreement contained a Security Procedure provision (the “Security Provision”) which specified three procedures that the bank “may” use in verifying fund transfer authorizations. After receiving an email request, the customer sent a wire transfer for a settlement payment. In the following week, the customer identified a fraudulent check withdrawal from its account equal to the settlement payment amount. This prompted the customer to report both the wire transfer and the check as fraud to a branch manager of the bank. Despite the manager’s promise, he failed to report the incidents to the bank’s fraud department and allegedly did not attempt to recall the funds until two weeks later. The customer filed a complaint with the Internet Crime Complaint Center run by the FBI, and the bank allegedly refused to cooperate with the FBI. As a result, the customer sued the bank with claims of negligence, gross negligence, New York Uniform Commercial Code (UCC) violations, and breach of contract. In response to the bank’s Federal Rule of Civil Procedure 12(b)(6) motion, the customer withdrew its UCC claim, and the court granted the motion to dismiss but allowed the customer to amend its complaint. The customer’s amended complaint reasserted its gross negligence and breach of contract claims with a more limited inclusion of facts. It also omitted the negligence claim. The bank again moved to dismiss or to strike certain allegations in the alternative. To counter, the customer moved to compel the bank to furnish witnesses and for leave to amend its amended complaint.
In Rejuvenating Fertility Ctr., PLLC v. TD Bank, N.A., No. 1:23-cv-05973 (JLR), 2025 WL 588570, 2025 U.S. Dist. LEXIS 32860 (S.D.N.Y. Feb. 24, 2025) (unpublished opinion), the court granted the bank’s motion to dismiss, dismissed the customer’s claims with prejudice, denied the customer leave to amend, and dismissed the bank’s motion to strike and the customer’s motion to compel discovery as moot. The court first concluded that the customer failed to state a claim for breach of the Security Provision in the Agreement because the customer did not allege that the bank failed to use any of the three verification procedures in the two transactions. The court concluded the allegation that the bank breached the Security Provision by not alerting the Fraud Department was “conclusory.” The court held that for a breach of contract claim in New York, the customer needed to identify a specific provision in the contract that created a duty and show sufficient facts to “raise a reasonable expectation” that discovery will prove a breach. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). Regarding the gross negligence claim, the court agreed with the bank that the customer failed to allege a duty distinct from the bank’s contractual duties; accordingly, the court ruled that the allegations were insufficient to state a claim. Additionally, the court concluded that the customer did not claim damages outside of contractual damages or intentional or reckless conduct extreme enough to plausibly indicate gross negligence. The court held that the use of the term “intentional” or “reckless” without facts in support constituted conclusory assertions. After dismissing the customer’s claims, the court denied the customer leave to amend, reasoning that “the proposed amendments are futile.” The court explained that the rule to grant leave to amend “when justice so requires” leaves courts discretion to deny the motion, specifically when proposed amendments would still fail to state a claim. Additionally, the court had previously allowed the customer to amend its complaint, and the customer had not cured the detailed deficiencies. Therefore, the court denied the bank’s motion to strike and the customer’s motion to compel because its prior rulings rendered the motions moot.
By Taylor O’Brien [email protected]
Edited By Olivia Lewis [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]