Silver v. Wells Fargo Bank, N.A. et al

Filing 66

MEMORANDUM AND ORDER granting 56 Wells Fargo Bank, N.A.'s Motion for Reconsideration; denying 57 PNC Bank, National Association's Motion for Reconsideration; vacating the Court's Order 53 as to Count III; and directing Counsel to provide a post settlement conference status report without revealing any settlement positions. Signed by Judge Marvin J. Garbis on 8/22/2017. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
JEFFREY J. SILVER

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Plaintiff

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vs.

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WELLS FARGO BANK, N.A., et al.
Defendants
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CIVIL ACTION NO. MJG-16-382

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MEMORANDUM AND ORDER RE: RECONSIDERATION MOTIONS
The Court has before it Wells Fargo Bank, N.A.’s Motion for
Reconsideration With Respect to Count III [ECF No. 56], PNC
Bank, National Association’s Motion for Reconsideration With
Respect to Count III [ECF No. 57], and the materials submitted
relating thereto.
I.

The Court finds a hearing unnecessary.

BACKGROUND
This case arises from a check fraud scheme perpetrated by

Plaintiff Jeffrey J. Silver’s employee.

In the course of the

scheme, the employee stole, forged, and negotiated checks drawn
on Silver’s checking account at PNC Bank, National Association
(“PNC”) and deposited the proceeds into her own account at Wells
Fargo Bank, National Association (“Wells Fargo”), where Silver
also maintained accounts.1

1

The check fraud scheme went

For a full factual background, as alleged in the Amended
Complaint, see the Court’s June 30th Order [ECF No. 53].

undetected for many years, and Silver now attempts to hold PNC
and Wells Fargo (collectively, “Defendants”) responsible for his
losses.
In his Amended Complaint [ECF No. 35], Silver asserted
Maryland Uniform Commercial Code2 and common law claims against
Defendants in ten counts.

On June 30, 2017, the Court granted

in part and denied in part Defendants’ Motions to Dismiss the
Amended Complaint [ECF Nos. 40 & 43] pursuant to Rule3 12(b)(6)
of the Federal Rules of Civil Procedure. See Mem. & Order Re:
Amended Compl. [ECF No. 53].4

The Court dismissed Silver’s

claims in Count II (UCC § 3-417 & § 4-208), Counts IV and V
(common law negligence), Count VI (UCC § 4-401), Count VII
(negligent hiring and supervision), Count VIII (constructive
fraud), Count IX (civil conspiracy), and Count X (UCC § 3-420).
The Court allowed Count I (UCC § 3-404 & § 3-405 — lack of
ordinary care) and Count III (common law breach of contract) to
remain pending.
By the instant Motions, Defendants request the Court to
reconsider its ruling concerning Count III.

2

Md. Code Ann., Com. Law § 1-101 et seq. Hereinafter
referred to as “UCC” or “Maryland UCC.”
3
All “Rule” references herein are to the Federal Rules of
Civil Procedure.
4
Hereinafter, “Order.”
2

II.

LEGAL STANDARDS
Defendant Wells Fargo did not specify upon what procedural

grounds it was making its Motion for Reconsideration, but
Defendant PNC labeled its Motion as one pursuant to Rule 59(e)
of the Federal Rules of Civil Procedure and Rule 105.10 of the
Rules of the United States District Court for the District of
Maryland (“Local Rules”).
Rule 59(e) provides that “[a] motion to alter or amend a
judgment must be filed no later than 28 days after the entry of
the judgment.”

The Court’s Order granting in part and denying

in part Defendants’ Motions to Dismiss the Amended Complaint was
not a “judgment” because it was not “a decree and any order from
which an appeal lies.” Fed. R. Civ. P. 54(a).

The Order

adjudicated fewer than all of the claims presented in the
Amended Complaint, so it was not final.

Therefore, Rule 59(e)

does not provide an appropriate basis for a motion to
reconsider.

See Fayetteville Inv’rs v. Commercial Builders,

Inc., 936 F.2d 1462, 1472 (4th Cir. 1991) (“Fayetteville’s
motion for reconsideration could not be treated under Rules 60
or 59, as these rules apply only to final judgments . . . .”).
However, the Court shall treat the instant motions as
motions to revise the Court’s Order pursuant to Rule 54(b). See
id. at 1465 (doing the same); Lopez v. United States, No. PWG14-2156, 2016 WL 915621, at *1 (D. Md. Mar. 10, 2016)(same).
3

A. Rule 54(b)
Rule 54(b) of the Federal Rules of Civil Procedure provides, in
relevant part,
[A]ny
order
or
other
decision,
however
designated, that adjudicates fewer than all the
claims or the rights and liabilities of fewer
than all the parties does not end the action as
to any of the claims or parties and may be
revised at any time before the entry of a
judgment adjudicating all the claims and all the
parties’ rights and liabilities.
Fed. R. Civ. P. 54.
“[A] district court retains the power to reconsider and
modify its interlocutory

judgments, . . .

at any time prior to

final judgment when such is warranted.” Am. Canoe Ass’n v.
Murphy Farms, Inc., 326 F.3d 505, 514–15 (4th Cir. 2003).

“The

power to reconsider an order is ‘committed to the discretion of
the district court.’ In exercising this discretion, courts must
be sensitive to ‘concerns of finality and judicial economy.’
However, the ‘ultimate responsibility of the federal courts, at
all levels, is to reach the correct judgment under law.’” Asher
& Simons, P.A. v. j2 Glob. Canada, Inc., 977 F. Supp. 2d 544,
546–47 (D. Md. 2013)(internal citations omitted)(quoting Am.
Canoe Ass’n, 326 F.3d at 515).
The Fourth Circuit has not stated a specific standard to
guide reconsideration of an interlocutory order, but the
standards applicable to Rule 59(e) and Rule 60 can provide

4

guidance even if not binding.

See Lopez v. United States, No.

PWG-14-2156, 2016 WL 915621, at *2 (D. Md. Mar. 10, 2016)(citing
Fayetteville Investors, 936 F.2d at 1472 and Am. Canoe Ass’n,
326 F.3d at 514); see also Cezair v. JPMorgan Chase Bank, N.A.,
No. CIV.A. DKC 13-2928, 2014 WL 4955535, at *1 (D. Md. Sept. 30,
2014)(applying Rule 59(e) standard).
A court considers a motion to alter or amend when: “(1)
there has been an intervening change in controlling law; (2)
there is additional evidence that was not previously available;
or (3) the prior decision was based on clear error or would work
manifest injustice.” Cezair, 2014 WL 4955535, at *1.

Although

not expressly articulated as such, the grounds of Defendants’
Motions are that the Court made an error with respect to Count
III.
The Local Rules for the District of Maryland state: “Except
as otherwise provided in Fed.R.Civ.P. 50, 52, 59, or 60, any
motion to reconsider any order issued by the Court shall be
filed with the Clerk not later than fourteen (14) days after
entry of the order.” D. Md. Ct. Local R. 105.10.

Wells Fargo’s

and PNC’s Motions for Reconsideration were filed on July 10,
2017 and July 13, 2017, respectively — within the fourteen-day
period.

5

B. Rule 12(b)(6)
A motion to dismiss filed pursuant to Rule 12(b)(6) tests
the legal sufficiency of a complaint.

A complaint need only

contain “‘a short and plain statement of the claim showing that
the pleader is entitled to relief,’ in order to ‘give the
defendant fair notice of what the . . . claim is and the grounds
upon which it rests.’”

Bell Atl. Corp. v. Twombly, 550 U.S.

544, 555 (2007)(alteration in original)(citations omitted).
When evaluating a 12(b)(6) motion to dismiss, a plaintiff’s
well-pleaded allegations are accepted as true and the complaint
is viewed in the light most favorable to the plaintiff.
However, conclusory statements or “a formulaic recitation of the
elements of a cause of action will not [suffice].”

Id.

A

complaint must allege sufficient facts “to cross ‘the line
between possibility and plausibility of entitlement to relief.’”
Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009)
(quoting Twombly, 550 U.S. at 557).

III. DISCUSSION
In Count III of the Amended Complaint, Silver asserted a
breach of contract claim against both Defendants for failing to
verify the signatures on the fraudulent checks, and against PNC
for failing to credit Silver for his losses and make warranty
claims against Wells Fargo.

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In its Order, the Court held that Silver had alleged a
plausible claim that both Defendants breached an implied in fact
contract under which the Defendants owed a duty to exercise
ordinary care, as codified in the UCC. See Schultz v. Bank of
Am., N.A., 990 A.2d 1078, 1092-93 (Md. 2010); Taylor v.
Equitable Trust Co., 304 A.2d 838, 842–43 (Md. 1973)(“[T]he UCC
codifies the underlying contract implied between the bank and
its customer that the bank will charge any item which is
‘otherwise properly payable’ against the depositor’s account
only on the order of the depositor.”).
The Court also held that Silver adequately alleged that PNC
breached the terms of its Rules and Regulations for Deposit
Accounts because it honored checks that were not signed by
Silver and did not rely on the Signature Card to verify his
signature.
Defendants seek reconsideration of both holdings.

A. Breach of Implied Contract
Defendants contend that a common law claim for breach of
the implied contract to exercise ordinary care is displaced by
the UCC.

Defendants did not make this argument in their

previous Motions to Dismiss. However, Defendants did make an
almost identical argument that Silver’s common law negligence
claim was displaced by the UCC.

The Court agreed and dismissed

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Silver’s negligence claim.

In its Order, the Court stated:

[T]he UCC provides an adequate remedy against
both Defendants in §§ 3-404, 3-405, and/or 4-401.
See 6C Anderson U.C.C. § 4-401:10 (3d. ed.) (“UCC
§ 4-401 displaces any common-law action for
negligence against a bank paying a check on which
the drawer’s signature is forged”); see also Gina
Chin & Assocs., Inc. v. First Union Bank, 500
S.E.2d 516, 518 (Va. 1998)(holding that a victim
of double forgery can bring a causes of action
against a depositary bank pursuant to UCC § 3-404
and § 3-405).
Unlike other cases where Maryland courts
have allowed negligence suits for violation of
the UCC’s duty of care,5 Silver’s common law
negligence claim has no independent significance
apart from his UCC claims.
The instant case
involves forged checks that were not properly
payable under the UCC, and thus the claims fall
under the UCC’s purview. In contrast, in Chicago
Title Ins. Co. v. Allfirst Bank, 905 A.2d 366,
376-77 (Md. 2006), the Maryland Court of Appeals
determined that a common law negligence cause of
action was appropriate because the check at issue
contained no forgery or improper indorsement and
was thus properly payable under the UCC.
Silver implicitly recognizes the adequacy of
the UCC remedies by bringing claims under those
provisions. See Great Lakes Higher Educ. Corp. v.
Austin Bank of Chicago, 837 F. Supp. 892, 896
(N.D.
Ill.
1993)(“[Plaintiffs]
have
other
remedies
under
the
UCC
which
they
have
alternatively plead in their complaint, thus
showing that a common law action for negligence
is unnecessary and may not be alleged here.”).
Order [ECF No. 53] at 25-26.

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[Footnote in Original] See, e.g., Schultz, 990 A.2d at 1086
(allowing negligence suit in case arising from addition of a
third party’s name on bank customer’s checking account); Novara
v. Manufacturers & Traders Trust Co., No. CIV.A. ELH-11-736,
2011 WL 3841538, at *9 (D. Md. Aug. 26, 2011)(involving
collection of payments in satisfaction of notes).
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Silver’s breach of implied contract claim in Count III is
based upon the same duty of care and same allegedly wrongful
conduct that formed the basis of his common law negligence
claim.

Therefore, for the same reasons that his common law

negligence claim is displaced by his UCC claims in Count I, so
too, should the UCC displace his Count III breach of implied
contract claim.

Plaintiff provided no response or objection to

Defendants’ argument on this point.

See Pl.’s Opp. [ECF Nos. 63

& 64].
Other courts have concluded that the UCC displaces common
law breach of contract claims. See, e.g., Marano v. RBS Citizens
Fin. Grp. Inc., No. CA 12-639ML, 2012 WL 7170421, at *10 (D.R.I.
Dec. 27, 2012), report and recommendation adopted, No. CA 12-639
ML, 2013 WL 639155 (D.R.I. Feb. 20, 2013)(holding that UCC
displaced contract claim in a similar check forgery case); Jones
v. F.D.I.C., No. 5:12-CV-176 MTT, 2012 WL 6115374, at *7 (M.D.
Ga. Dec. 10, 2012)(holding that UCC displaces common law breach
of contract claim based on payment of checks bearing
unauthorized signatures); Mackin Eng’g Co. v. Am. Exp. Co., No.
10CV1041, 2010 WL 9013002, at *4 (W.D. Pa. Oct. 12, 2010),
aff’d, 437 F. App’x 100 (3d Cir. 2011)(similar); Gallagher v.
Santa Fe Fed. Employees Fed. Credit Union, 52 P.3d 412, 416
(deciding that the UCC’s statute of limitations applies to
common law breach of implied contract claims based upon a duty
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not to pay checks with forged indorsements).
It would be inconsistent to bar Plaintiff’s common law
negligence claim and not his breach of contract claim when they
are both based on the same breach of the implied duty of
ordinary care. “When a provision of the UCC applies to a
commercial transaction, a litigant cannot avoid the UCC’s effect
simply by relying on non-UCC theories as alternative causes of
action; this ‘displacement’ principle assures that the
uniformity that is at the core of the UCC is not undermined.”
Marano, 2012 WL 7170421, at *10.

As the UCC was enacted to

promote uniformity and predictability in the area of commercial
law, “it should be applied whenever possible.”

Mark D. Dean,

P.S.C. v. Commonwealth Bank & Tr. Co., 434 S.W.3d 489, 506 (Ky.
2014).
The Court concludes, upon the facts alleged, that the UCC
and its statute of limitations displaces Silver’s common law
claim of breach of implied contract.

The Court determines that

this is the correct decision under the law and will facilitate
judicial economy as it can prevent needless discovery.
Accordingly, Silver’s breach of implied contract claims
against PNC and Wells Fargo shall be dismissed.

B. Breach of Express Contract
In its Motion for Reconsideration, PNC contends that the

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provisions of its Account Agreement with Plaintiff preclude him
from asserting any breach of contract claims based upon
unauthorized signature or fraud 90 days from the date when PNC
made Silver’s bank statement available to him.

PNC originally

attached purported copies of its Account Agreement as exhibits
to its Motion to Dismiss the Amended Complaint. See PNC’s Mot.
to Dismiss [ECF No. 43, Exs. 2-14]. The Court will not consider
these extrinsic documents at this time.
Generally, when a defendant moves to dismiss a
complaint under Rule 12(b)(6), courts are limited
to considering the sufficiency of allegations set
forth in the complaint and the “documents
attached or incorporated into the complaint.”
E.I. du Pont de Nemours & Co. v. Kolon Indus.,
Inc., 637 F.3d 435, 448 (4th Cir. 2011); see
Clatterbuck v. City of Charlottesville, 708 F.3d
549, 557 (4th Cir. 2013). Consideration of
extrinsic documents by a court during the
pleading stage of litigation improperly converts
the motion to dismiss into a motion for summary
judgment. E.I. du Pont de Nemours & Co., 637 F.3d
at 448. This conversion is not appropriate when
the parties have not had an opportunity to
conduct
reasonable
discovery.
Id.;
see
Fed.R.Civ.P. 12(b), 12(d), and 56.
Zak v. Chelsea Therapeutics Int’l, Ltd., 780 F.3d 597, 606 (4th
Cir. 2015).
PNC’s affirmative defense based upon the 90-day claim
period is dependent upon facts outside the Amended Complaint
that are not appropriate to consider under a Rule 12(b)(6)
motion.

The Account Agreement was not attached to or

incorporated into the Amended Complaint. See Clatterbuck, 708
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F.3d at 557 (“Ordinarily, a court may not consider any documents
that are outside of the complaint, or not expressly incorporated
therein, on a motion to dismiss.”).

Whether Plaintiff’s breach

of express contract claims are precluded depends on the dates
upon which Plaintiff received bank statements from PNC, the
dates upon which the forged checks were honored by PNC, and the
authenticity and applicability of the Account Agreements, which
are not pleaded by Plaintiff and may present factual issues.
See Pl.’s Opp. [ECF No. 63-1] at 3.
Therefore, Plaintiff’s breach of express contract claim
against PNC in Count III shall not be dismissed although it may
not survive a Motion for Summary Judgment.

IV.

CONCLUSION
For the foregoing reasons:
1. Wells Fargo Bank, N.A.’s Motion for Reconsideration With
Respect to Count III [ECF No. 56] is GRANTED.
2. PNC Bank, National Association’s Motion for
Reconsideration With Respect to Count III [ECF No. 57] is
DENIED.
3. The Court’s Order [ECF No. 53] as to Count III is
VACATED.
a. All claims against Wells Fargo in Count III are
DISMISSED.
b. Plaintiff’s breach of implied contract claim against
PNC in Count III is DISMISSED.

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4. The following Counts remain pending:
a. The Count I (Lack of Ordinary Care) claims
against both PNC and Wells Fargo;6 and
b. The Count III (Breach of Express Contract) claim
against PNC only.
5. By October 27, 2017, Plaintiff shall provide a post
settlement conference status report without revealing any
settlement positions.

SO ORDERED, this Tuesday, August 22, 2017.

/s/__________
Marvin J. Garbis
United States District Judge

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Only as to any claims that accrued on or after November 23,

2012.
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