Sullivan Surveying Company, LLC v. TD Bank, N.A.

Filing 16

Judge Richard G. Stearns: ORDER entered granting in part and denying in part 5 Motion to Dismiss for Failure to State a Claim. TD Banks motion to dismiss Counts I, III, and IV is ALLOWED. TD Banks motion to exclude from Count II forged checks dr awn on Sullivans account that appear on a bank statement made available to Sullivan prior to October 22, 2013, is ALLOWED. TD Banks motion to exclude from Count II forged checks drawn on Sullivans account thirty days or more after TD Bank made available the first account statement is DENIED. Count V is DISMISSED without prejudice. The court will grant Sullivan the requested twenty-one (21) days to file an amended Count V of its Complaint. (Zierk, Marsha)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 15-11819-RGS
SULLIVAN SURVEYING COMPANY, LLC
v.
TD BANK, N.A.
MEMORANDUM AND ORDER ON DEFENDANT’S
MOTION TO DISMISS
July 10, 2015
STEARNS, D.J.
Plaintiff Sullivan Surveying Company, LLC, brought this suit on April
3, 2015 in Middlesex Superior Court against TD Bank, N.A., alleging
conversion (Count I), negligence (Count III), and money had and received
(Count IV), as well as statutory violations of Mass. Gen. Laws ch. 106 (Count
II) and Mass Gen. Laws ch. 93A, §§ 2, 11 (Count V). TD Bank removed the
case on diversity grounds to the federal district court. Now before the court
is TD Bank’s motion to dismiss.1

1 TD Bank is principally based in Delaware.

Limited Liability Company composed
stakeholders. Def.’s Response at 1-2.
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Sullivan is a Massachusetts
entirely of Massachusetts

BACKGROUND
The facts viewed in the light most favorable to Sullivan as the
nonmoving party are as follows.

Sullivan, a land surveying and civil

engineering business, maintains a commercial checking account with TD
Bank. Compl. ¶¶ 3, 5. Sullivan employed Theresa Zimmerley as its full-time
office manager and bookkeeper. Id. ¶ 4. From on or about September 1, 2013
to October 22, 2014, Zimmerley executed a “check-cashing scheme” whereby
she “prepar[ed] checks drawn on plaintiff’s depository account . . . in varying
amounts, forg[ed] the authorized signature on each check, and then
present[ed] each check in person daily or every other day at TD Bank, which
cashed each check and paid proceeds thereof to Zimmerley.” Id. ¶ 5. In total,
Zimmerley cashed at least 138 forged checks and embezzled at least $133,953
from Sullivan. Id. ¶ 6. In an attempt to cover up her scheme, Zimmerley
“recorded the names of ‘fictitious payees’” for each forged check in Sullivan’s
internal checkbook register. Id. ¶ 5.
Sullivan further alleges that TD Bank “failed to conduct any reasonable
inquiry or question the appropriateness of Zimmerley’s actions” and “knew,
or should have known, that the checks” were forged. Id. ¶¶ 11-12. During the
thirteen-month period from September 2013 to October 2014, TD Bank
provided Sullivan with periodic bank statements. Def.’s Mem. at 2. After
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discovering Zimmerley’s check forgery scheme on or about October 22, 2014,
Sullivan fired Zimmerley and notified TD Bank of the embezzlement. Pl.’s
Opp’n Mem. at 4.
DISCUSSION
To survive a motion to dismiss, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). Two basic principles guide the
court’s analysis. “First, the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.”
Iqbal, 556 U.S. at 678. “Second, only a complaint that states a plausible claim
for relief survives a motion to dismiss.” Id. at 679. A claim is facially
plausible if its factual content “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. at 678.
“If the factual allegations in the complaint are too meager, vague, or
conclusory to remove the possibility of relief from the realm of mere
conjecture, the complaint is open to dismissal.” S.E.C. v. Tambone, 597 F.3d
436, 442 (1st Cir. 2010). A complaint will also be dismissed where the statute
of limitations bars its claims. See Fed. R. Civ. P. 12(b)(6).

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The Mass. Gen. Laws ch. 106 Claim
Under the Uniform Commercial Code (UCC), as incorporated under
Massachusetts law, banks are required to provide customers with bank
statements that contain the “item number, amount, and date of payment” for
each charge. Mass. Gen. Laws ch. 106, § 4-406(a). In turn, “a banking
customer has a duty to discover and report any unauthorized signatures or
endorsements to the bank within one year.” Callahan v. Wells Fargo & Co.,
747 F. Supp. 2d 247, 252 (D. Mass. 2010), citing Mass. Gen. Laws ch. 106, §
4-406(f). Banking customers also have a duty to “exercise reasonable care
and promptness” in reviewing their bank statements and to notify the bank
of any unauthorized transactions because the customers are “in the best
position to discover and report forgeries.” Id. at § 4-406(c); Grassi Design
Grp., Inc. v. Bank of Am., N.A., 74 Mass. App. Ct. 456, 458 (2009). “If the
customer fails to report the first forged check within thirty days, the
customer is precluded from recovery for any additional checks forged by the
same wrongdoer and paid in good faith before the bank has received notice
from the customer.” Id., citing Mass. Gen. Laws ch. 106, § 4-406(d)(2). As
an exception, comparative fault applies where “the customer proves that the
bank failed to exercise ordinary care in paying the item and that the failure
substantially contributed to loss.” Id. at § 4-406(c). Ordinary care is defined
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as the exercise of “reasonable commercial standards.” Grassi, 74 Mass. App.
Ct. at 458, citing Mass. Gen. Laws ch. 106, § 3-103(a)(7).
As TD Bank argues, Sullivan is barred by the statute of limitations and
thus precluded from recovering for any forged checks that appear on a bank
statement made available to Sullivan before October 22, 2014, that is, one
year prior to its notice to TD Bank. See Callahan, 747 F. Supp. at 252. (While
the September 2013 bank statement became available to Sullivan in the first
week of October 2013, Sullivan did not notify TD Bank of the fraud until
October 22, 2014.). TD Bank also asserts that since Zimmerley forged all 138
checks beginning on or about September 1, 2013, Sullivan was required to
notify it of the forgeries within thirty days of receipt of the September 2013
bank statement. This statement disclosed that Zimmerley made the first
unauthorized withdrawal from Sullivan’s account on September 10, 2013.
Def.’s Mem. at 7; see Jennifer Mikels Aff., Exs. A, B. 2 TD Bank contends that
it follows that Sullivan is precluded from recovering for the checks forged by

It is appropriate to consider these exhibits in analyzing TD Bank’s
dispositive motion because they are central to Sullivan’s Complaint. See
Curran v. Cousins, 509 F.3d 36, 44 (1st Cir. 2007), quoting Watterson v.
Page, 987 F.2d 1, 3 (1st Cir. 1993) (noting that a court may “consider
‘documents the authenticity of which are not disputed by the parties’” as well
as “‘documents central to the plaintiff[’s] claim’” and “‘documents
sufficiently referred to in the complaint’”).
2

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Zimmerley made more than thirty days after the September 2013 monthly
statement became available (in early October of 2013).
TD Bank argues that the exception for comparative fault does not apply
because Sullivan does not to allege unreasonable conduct on its part. See
Govoni & Sons Const. Co. v. Mechanics Bank, 51 Mass. App. Ct. 35, 45 (2001)
(providing examples of unreasonable bank conduct, including “payment of
checks with missing indorsements . . . , failure to inquire into the authority
to sign of one purporting to be an agent . . . , payment of checks bearing
irregular or incorrect indorsements and honoring a check on which the name
of the payee has been visibly altered.”). 3 The UCC however stipulates that
comparative fault applies if the customer proves that the bank failed to follow
reasonable commercial standards. See Mass. Gen. Laws ch. 106, § 4-406(c).
Here, at the pleading stage (in the absence of evidence that TD Bank did or
did not follow general commercial banking practices), the court cannot
determine whether TD Bank exercised ordinary care; such a determination
is ordinarily a question of fact to be resolved by the jury. See Govoni & Sons

3 In response, Sullivan makes the generic assertion that “TD Bank acted

negligently, without good faith, and not in observance of reasonable
commercial standards.” Pl.’s Opp’n Mem. at 8. Sullivan further contends
that TD Bank failed in its “duty to examine the checks which were presented
for cash, to verify the signature, confirm the identity of the person presenting
the check, [and] to record identification of the presenter.” Id. at 8-9.
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Const. Co. v. Mechanics Bank, 1995 WL 809827, at *1-4 (Mass. Super. Mar.
3, 1995) aff’d as modified, 51 Mass. App. Ct. 35 (2001) (finding no negligence
on the part of the bank only after hearing oral testimony and examining the
parties’ exhibits).
Common-Law Claims
Sullivan’s Complaint also asserts three common-law claims:
conversion (Count I), negligence (Count III), and money had and received
(Count IV). Sullivan has waived Counts I and IV. Pl.’s Opp’n Mem. at 8-9.
Sullivan’s common-law claim for negligence (Count III) is barred because the
UCC supplants the common law with respect to banking matters. See
Gossels v. Fleet Nat’l Bank, 453 Mass. 366, 370 (2009) (“Where a UCC
provision specifically defines parties’ rights and remedies, it displaces
analogous common-law theories of liability.”); see also Reading Co-Op.
Bank v. Suffolk Constr. Co., 464 Mass. 543, 549 (2013) (“[T]he UCC provides
a comprehensive scheme for enforcement of rights and allocation of losses
that would be effectively undermined by application of conflicting commonlaw principles.”).
Chapter 93A Claim
In Count V, Sullivan alleges that TD Bank “engaged in unfair and
deceptive practices” in violation of Mass. Gen. Laws ch. 93A. Compl. ¶ 34.
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To prevail on a Chapter 93A claim, a plaintiff must show that a defendant
engaged in “[u]nfair methods of competition and unfair or deceptive acts or
practices in business transactions.” Mass. Gen. Laws. ch. 93A, § 2. Practices
are deceptive in the context of Chapter 93A if they could reasonably be found
to have “‘caused a person to act differently from the way he [or she] otherwise
would have acted.’” Aspinall v. Philip Morris Cos., Inc., 442 Mass. 381, 394
(2004), quoting Purity Supreme, Inc. v. Attorney Gen., 380 Mass. 762, 777
(1980). A Chapter 93A plaintiff must also prove that a defendant’s deceptive
conduct caused him some appreciable loss or injury. See Hershenow v.
Enters. Rent-A-Car Co. of Boston, Inc., 445 Mass. 790, 799-800 (2006).
Here, Sullivan cannot rely on its conclusory allegation that TD Bank
“engaged in unfair and deceptive practices” to satisfy its pleading burden.
See Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.”).
ORDER
For the foregoing reasons, TD Bank’s motion to dismiss Counts I, III,
and IV is ALLOWED. TD Bank’s motion to exclude from Count II forged
checks drawn on Sullivan’s account that appear on a bank statement made
available to Sullivan prior to October 22, 2013, is ALLOWED. TD Bank’s
motion to exclude from Count II forged checks drawn on Sullivan’s account
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thirty days or more after TD Bank made available the first account statement
is DENIED. Count V is DISMISSED without prejudice. The court will grant
Sullivan the requested twenty-one (21) days to file an amended Count V of
its Complaint.
SO ORDERED.
/s/ Richard G. Stearns
UNITED STATES DISTRICT JUDGE

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