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PLAINTIFF, UNDER NEW JERSEY LAW, SUFFICIENTLY PLED A SPECIAL RELATIONSHIP WITH DEFENDANT BANK GIVING RISE TO A DUTY TO ENFORCE ITS ANTI-FRAUD PROCEDURES; PLAINTIFF WIRED $300,000 TO AN ACCOUNT WHICH HAD BEEN SET UP TO DEFRAUD PLAINTIFF (FIRST DEPT).

The First Department, over a comprehensive dissent, determined defendant JPMorgan Chase Bank owed a duty to plaintiff based upon its anti-fraud polices advertised on the bank’s website. Defendant David Tate opened an account at a New Jersey Chase bank in the name of his business, Alchemy. Tate did not provide any personal identification or any corporate documentation to the bank. Plaintiff, thinking she was investing in Alchemy, wired $300,000 to the Alchemy account which was appropriated by Tate:

Under New Jersey law, a bank and its depositor have an arm’s-length, debtor-creditor relationship … . Banks do not have a duty to protect depositors from the wrongful conduct of third parties with whom the bank has done business .. .

Nonetheless, a bank may have a duty of care “where a special relationship has been established from which a duty can be deemed to flow” … . A special relationship may be formed “by agreement, undertaking or contact” … . As pertinent here, an “undertaking” is “the willing assumption of an obligation by one party with respect to another or a pledge to take or refrain from taking particular action” … .

Crediting plaintiff’s factual allegations, construing the complaint liberally, and according it the benefit of every possible favorable inference …, we find that the complaint adequately pleaded that Chase assumed a duty to abide by the anti-fraud procedures that it publicized.

… [P]laintiff has adequately pleaded the existence of a special relationship with Chase, giving rise to a duty to plaintiff to enforce its anti-fraud procedures … . Plaintiff has likewise stated a claim against Chase in negligence, based on its alleged failure to abide by these safeguards when Tate opened Alchemy’s account with Chase … . Ben-Dor v Alchemy Consultant LLC, 2024 NY Slip Op 03797, Second Dept 7-11-24

Practice Point: In New Jersey, to sue a bank for the wrongful conduct of a third party, here the use of a bank account to defraud plaintiff, the bank must owe plaintiff a special duty. The majority held the anti-fraud policies on the bank’s website may be the basis for such a special duty. There was an extensive and comprehensive dissent.

 

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