An individual and several corporations that he owned (collectively “the depositors”) were customers of the bank. The depositors claimed that an employee misappropriated company funds by writing checks to vendors, failing to deliver them, and instead depositing them at the bank. Because of this, the depositors sued the bank for negligence and breach of warranty under Rule 9 of the Electronic Check Clearing House Organization and U.C.C. § 4-207(a)(2). The bank filed Fed. R. Civ. Pro. 12(b)(5) and 12(b)(6) motions to dismiss. Thereafter, the court addressed (1) whether the bank received proper service; and (2) whether the depositors asserted a plausible claim subject to relief.
In Null v. Bank of Am., N.A., 734 F. Supp 3d. 269 (S.D.N.Y. 2024), the court denied the bank’s Fed. R. Civ. Pro. 12(b)(5) motion to dismiss and granted the bank’s Fed. R. Civ. Pro. 12(b)(6) motion. First, the bank argued that the depositors had incorrectly served the complaint by serving the wrong defendant, and the depositors had not served the bank with the amended complaint. However, counsel for the bank had represented that the bank would waive service. The court found that the bank’s letter contained language that a reasonable attorney would interpret as a waiver of service for the first amended complaint. Second, with respect to the Rule 12(b)(6) motion, the court held that the New York common law defense for depository banks applied, which eliminated the cause of action for taking falsely indorsed checks. “Under the common-law rule,” the court explained, “the drawer of a check 'does not have a direct cause of action against a depositary bank for collecting an improperly indorsed check. Lesser v. TD Bank, N.A., 463 F. Supp. 3d 438, 447 (S.D.N.Y. 2020) (cleaned up) (quoting Horovitz v. Roadworks of Great Neck, Inc., 76 N.Y.2d 975, 976, 565 N.E.2d 484, 563 N.Y.S.2d 735 (1990)).” The court explained that the bank must warrant the genuine nature of checks to subsequent transferees, not to the drawer. N.Y. U.C.C. § 4-207(2)(b). Moreover, the court rejected the drawer’s negligence claim as an attempt to avoid application of the U.C.C. Therefore, the court found no plausible claims eligible for relief, so it granted the bank’s Rule 12(b)(6) motion to dismiss the complaint.
By Taylor O’Brien [email protected]
Edited By Hayden Mariott [email protected]
Edited By Ashley Boyce [email protected]