SHTUTMAN et al v. TD BANK, NATIONAL ASSOCIATION et al

Filing 19

OPINION. Signed by Judge Joseph E. Irenas on 4/15/2014. (tf, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
OLEG & ANGELA SHTUTMAN,
Plaintiffs,

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v.
TD BANK, N.A., and MARISSA
MOSER,
Defendants.

Civil No. 14-792 (JEI/AMD)

OPINION

APPEARANCES:
MATTHEW S. WOLF, ESQ., LLC
By: Matthew S. Wolf, Esq.
Melissa A. Schroeder, Esq.
1236 Brace Road, 2nd Floor, Unit B
Cherry Hill, New Jersey 08034
Counsel for Plaintiff
BROWN & CONNERY LLP
By: William M. Tambussi, Esq.
Susan M. Leming, Esq.
Michael J. Miles, Esq.
360 Haddon Avenue
P.O. Box 539
Westmont, New Jersey 08108
and
REED SMITH LLP
By: Seth M. Kean, Esq.
599 Lexington Avenue
New York, New York 10022
Counsel for Defendant TD Bank, N.A.
THOMAS J. GOSSE, ESQ.
126 White Horse Pike
Haddon Heights, New Jersey 08035
Counsel for Defendant Moser

1

IRENAS, Senior United States District Judge:
Plaintiffs, Oleg and Angela Shtutman, husband and wife, bring
this state law negligence suit against Defendants TD Bank, N.A., and
its “senior manager,” Marissa Moser, asserting that Defendants’
negligence caused Plaintiffs to lose approximately $1.5 million in a
Ponzi scheme.
Defendants timely removed the suit to this Court.

Plaintiffs

move to remand the case, asserting that this Court lacks subject
matter jurisdiction pursuant to 28 U.S.C. § 1331. 1

For the reasons

stated herein, the Court holds that the negligence claims do not
“arise under” the Constitution, laws, or treaties of the United
States, as that term is used in the federal question jurisdictional
statute. 2

Accordingly, the Motion to Remand will be granted.

I.
In July, 2013, Everett Miller, the principal of Carr Miller
Capital, LLC, pled guilty in this District to securities fraud and
tax evasion.

The charges allegedly arise out of a “Ponzi scheme”

Miller operated through Carr Miller Capital.

Prior to Miller’s plea,

in 2011, Carr Miller Capital was placed in receivership by the
Attorney General of New Jersey.
1

The Court undisputedly lacks diversity jurisdiction pursuant to 28
U.S.C. § 1332. The parties are not diverse. Plaintiffs are citizens
of New Jersey and so is Defendant Moser.
2

In light of the Court’s jurisdictional holding, Defendants’ pending
Motions to Dismiss will be dismissed as moot.
2

Plaintiffs invested approximately $1.5 million in the Carr
Miller Capital enterprise.

“Investments were achieved by opening a

joint account between Oleg Shtutman and Carr Miller, which TD Bank
knew was completely unsound, inappropriate and criminally suspicious
manner of opening an account.”

(Compl. ¶ 12)

Miller admitted in his

plea colloquy that “investors’ money was commingled and pooled into
one of Carr Miller’s seventy-five related bank accounts,” at TD Bank
and that money was used for purposes other than Carr Miller ventures.
(Id. ¶ 14)
The Complaint alleges that over the course of several years, TD
Bank deliberately or negligently ignored suspicious transactions
involving Carr Miller Capital’s TD Bank accounts, and did so because
its senior manager, Defendant Marissa Moser, was at one point in time
Carr Miller Capital’s “Comptroller/Office Manager.”

(Compl. ¶ 19) 3

According to the Complaint, “TD Bank had actual knowledge that client
funds were being funneled through the TD Bank Carr Miller accounts
but based on the special relationship that Carr Miller had with TD
Bank by virtue of [Marissa Moser], TD Bank did not take actions that
it should have taken.”

(Id. ¶ 25)

Specifically, the Complaint alleges that TD Bank should have
filed with federal law enforcement and the Department of Treasury
“Suspicious Activity Reports” (“SARs”) as required by federal
regulations 12 C.F.R. 21.11(c)(4) and 31 C.F.R. 103.18(a)(2), and the
3

The allegations of the Complaint are not entirely clear as to
whether Moser concurrently worked at both TD Bank and Carr Miller
Capital or whether she left TD Bank to work at Carr Miller Capital.
3

Bank Secrecy Act, 31 U.S.C. §§ 5318(g) and (h)(1); and failed to
properly train its employees concerning these obligations under
federal law.

The Complaint further states, “[a]s a direct and

proximate result of TD Bank’s negligence in failing to train its
employees . . ., failing to issue SARs properly, failing to follow
the guidance of the Bank Secrecy Act / Anti-Money Laundering
Examination Manual of 2007 . . . and TD Bank’s willful indifference
resulting from its special treatment of Carr Miller based on Marissa
Moser’s employment between the two companies, Plaintiffs Oleg and
Angela Shtutman suffered approximately $1.5 million in damages.”
(Compl. ¶ 35)
The Complaint asserts two counts: a negligence claim against TD
Bank and a negligence claim against Marissa Moser.

II.
28 U.S.C. § 1447(c) provides in relevant part, “[i]f at any time
before final judgment it appears that the district court lacks
subject matter jurisdiction, the case shall be remanded.”

Removing

defendants bear the burden of establishing subject matter
jurisdiction.

Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392,

396 (3d Cir. 2004).
Congress has conferred on district courts subject matter
jurisdiction “of all civil actions arising under the Constitution,
laws, or treaties of the United States.”

4

28 U.S.C. § 1331.

III.
The issue is whether a state common law negligence action which
looks to federal statutory and regulatory law for the relevant
standard of care arises under the laws of the United States for
purposes of § 1331.
The parties agree that no federal law creates the causes of
action asserted in this suit-- i.e., it is undisputed that there is
no private right of action under the Bank Secrecy Act or the relevant
regulations.

Moreover, the removing Defendants (the proponents of

federal jurisdiction) do not argue that the Bank Secrecy Act
completely preempts the state law tort claims.
Thus, the Court applies the standard set forth in Grable & Sons
Metal Prods, Inc., v. Darue Engineering & Manufacturing, 545 U.S. 308
(2005), and subsequently applied in Empire HealthChoice Assurance,
Inc. v. McVeigh, 547 U.S. 677 (2006) and Gunn v. Minton, 133 S.Ct.
1059 (2013):

“[F]ederal jurisdiction over a state law claim will lie

if a federal issue is: (1) necessarily raised, (2) actually disputed,
(3) substantial, and (4) capable of resolution in federal court
without disrupting the federal-state balance approved by Congress.”
Gunn, 133 S.Ct. at 1065; see also, Empire HealthChoice, 547 U.S. at
699-701; Grable, 545 U.S. at 314 (“the question is, does a state-law
claim necessarily raise a stated federal issue, actually disputed and
substantial, which a federal forum may entertain without disturbing
any congressionally approved balance of federal and state judicial
responsibilities.”).

The Court discusses each factor in turn.
5

A.
Plaintiffs argue that they can establish TD Bank’s negligence
without reference to federal law.

It appears that under New Jersey

law, violation of the Bank Secrecy Act’s reporting requirements would
not be negligence per se, but rather, only evidence of TD Bank’s
negligence.

See J.S. v. R.T.H., 155 N.J. 330, 349 (1998) (holding

that failure to report child abuse as required by state statute was
evidence of negligence and not negligence per se).

Thus, Plaintiffs

reason that the other evidence they will supply-- particularly
evidence concerning Marissa Moser’s relationship with both TD Bank
and Carr Miller Capital-- can independently establish negligence, and
therefore a federal issue is not necessarily raised in this case.
On the other hand, Plaintiffs specifically plead as an element
of their negligence claim against TD Bank, “[t]he Bank Secrecy Act /
Anti-Money Laundering Examination Manual of 2007 represents a
standard of care in the banking industry which TD Bank breached,”
(Compl. ¶ 31), strongly suggesting that Plaintiffs’ reliance upon TD
Bank’s asserted violations of federal law will be significant, if not
central, to their case.

Indeed, Appendix F of the Bank Secrecy Act /

Anti-Money Laundering Examination Manual of 2007 is attached as
Exhibit B to the Complaint.
In light of the Court’s conclusions as to the other Grable
factors, however, the Court need not decide whether a federal issue
is “necessarily raised” in this case.
6

B.
It does not appear that any federal issue is “actually disputed”
in this case.

TD Bank does not argue that it is not subject to the

Bank Secrecy Act and regulations upon which Plaintiffs rely.

Nor

does TD Bank argue in response to the Motion to Remand that, under
the circumstances of this case, it was not required to file SARs.
The Complaint simply alleges that federal law required TD Bank to
file SARs and TD Bank did not.

Contrary to TD Bank’s conclusory

assertions, nothing about these allegations suggests that the Court
will need to construe or interpret federal law in the course of
adjudicating the parties’ dispute.
Grable itself is a contrasting example.

In Grable, as part of

the state court quiet title action, the disputed federal issue was
whether service by certified mail, as opposed to personal service,
was sufficient notice, under 26 U.S.C. § 6335(a), of the IRS’s
seizure of property.

545 U.S. at 310-11.

It was clear from the

outset of the case that the court would be required to “constru[e]
federal tax law,” because the statute itself did not state the manner
of service, it only “provide[d] that written notice must be ‘given by
the Secretary to the owner of the property [or] left at his usual
place of abode or business.’” 545 U.S. at 311 (quoting § 6335(a)).
The dispute was readily apparent: Grable argued that the statute
required personal service, while its adversary argued that certified
mail sufficed.
7

Gunn is another example.

That case involved a state law legal

malpractice suit where the plaintiff-patent holder alleged that his
former lawyer committed malpractice by not raising the experimental
use exception to the on-sale bar in litigation over the patent’s
validity.

133 S.Ct. at 1062-63.

The lawyer argued he could not be

liable for malpractice because the experimental use exception did not
apply, therefore his failure to raise the issue could not have
changed the outcome of the litigation.

Id. at 1063.

In Gunn, like

Grable, the dispute of federal law was clear at the outset: the
patent holder asserted that the experimental use exception applied,
his former lawyer argued it did not.
This case is very different from Grable and Gunn.

The nature of

the cause of action and the Complaint’s factual allegations do not
present a clear dispute of federal law.

Nothing before the Court

supports a conclusion that the Court will need to make a decision
“respecting [the] validity, construction, or effect” of federal law,
Grable, 545 U.S. at 315, n.3, or that this case will “turn on,” a
decision about federal law.

Id. at 312.

The mere presence of a

“federal element” does not support jurisdiction under § 1331.

Empire

HealthChoice, 547 U.S. at 701.

C.
With respect to the third Grable factor, Chief Justice Roberts,
writing for a unanimous Court in Gunn, explained, “it is not enough
that the federal issue be significant to the particular parties in
8

the immediate suit; that will always be true when the state claim
‘necessarily raise[s]’ a disputed federal issue, as Grable separately
requires.

The substantiality inquiry under Grable looks instead to

the importance of the issue to the federal system as a whole,” 133
S.Ct. at 1066, and asks whether a decision of federal law in this
case will have “broader effects” beyond the parties’ own interests.
Id. at 1068. 4
TD Bank argues that a decision in this case could have broader
effects because TD Bank apparently anticipates a conflict between its
discovery obligations and 12 C.F.R. § 21.11(k)(1)(i), which generally
prohibits a bank from disclosing an SAR or any information that would
reveal the existence of an SAR.

TD Bank seems to suggest that it

might have to disclose an SAR (if, contrary to the Complaint’s
allegations, one does exist) and that would “create a fundamental
conflict between state tort law and the [Bank Secrecy Act].”
(Opposition Brief, p. 8-9)
However, the Court sees no direct conflict in this case.

The

regulation itself obviously contemplates a method for addressing such
situations.

While banks are generally prohibited from disclosing the

existence of SARs, there are exceptions.

The regulation itself

provides that any bank that “is subpoenaed or otherwise requested to

4

Gunn addressed the “arising under” language of 28 U.S.C. § 1338(a),
which grants federal courts exclusive jurisdiction over patent cases.
However, the Court stated that with regard to the “arising under”
language in § 1338(a) and § 1331, “we have interpreted the phrase . .
. in both sections identically, applying our § 1331 and § 1338(a)
precedents interchangeably.” 133 S.Ct. at 1064.
9

disclose a SAR or any information that would reveal the existence of
an SAR” shall notify the “Director, Litigation Division, Office of
the Comptroller of the Currency,” and provide the Director with “the
response” to the request.

12 C.F.R. § 21.11(k)(1)(i)(A).

Thus, it

appears that individual banks cannot make litigation-related
disclosure decisions, but the Comptroller of the Currency can.

TD

Bank has not demonstrated that it, or any other bank, can never
disclose the existence of an SAR in litigation, therefore the
anticipated conflict-- particularly in this case where the related
criminal investigation appears to be over (Carr Miller Capital has
been placed in receivership and Everett Miller has already pleaded
guilty)-- is speculative at best. 5
The Court holds that TD Bank has not sufficiently demonstrated
that a decision of federal law in this case will have consequences
for the federal system extending beyond the bounds of the instant
case.

D.
Last, but certainly not least, the Supreme Court has
specifically observed that exercising federal question jurisdiction
over “garden variety state tort” claims based on “federal violations”
would “herald[] a potentially enormous shift of traditionally state

5

Even if a conflict were to surface, any decision regarding
disclosure would necessarily be fact-specific, and therefore not
broadly applicable to other lawsuits. See Empire HealthChoice, 547
U.S. at 700-01.
10

cases into federal courts.”

Grable, 545 U.S. at 319.

“Merrell Dow

thought it improbable that Congress, having made no provision for a
federal cause of action, would have meant to welcome any state-law
tort case implicating federal law ‘solely because the violation of
the federal statute is said to create a rebuttable presumption of
negligence under state law.’”

Id. at 319.

Merrell Dow Pharmaceuticals, Inc. v. Thompson held that a state
law negligence suit which relied on an asserted violation of the
federal Food, Drug, and Cosmetic Act to establish a rebuttable
presumption of negligence did not arise under federal law.
804 (1986).

It is closely analogous to this case.

478 U.S.

Just as in

Merrell Dow, Congress has not completely preempted state law
negligence claims, nor has it created a private right of action for
violations of the federal law at issue.

Congress’ failure to do so,

the Supreme Court has explained, evidences its decision to keep such
suits out of federal court.

Grable, 545 U.S. at 318-19 (discussing

the significance of Merrell Dow).
Exercising federal question subject matter jurisdiction over
this suit, and all of the run-of-the-mill state law negligence suits
like it 6, would “disrupt[] the federal-state balance approved by
Congress.”

Gunn, 133 S.Ct. at 1065.

Accordingly, the Court holds

that it may not exercise jurisdiction over this suit pursuant to
§ 1331.

6

Contrast Grable, 545 U.S. at 319 (“[I]t is the rare state quiet
title action that involves contested issues of federal law.”).
11

IV.
In conclusion, the Court holds that the federal issue in this
case is not “actually disputed,” not “substantial,” and not “capable
of resolution in federal court without disrupting the federal-state
balance approved by Congress.”

Gunn, 133 S.Ct. at 1065.

Therefore

this Court lacks subject matter jurisdiction pursuant to 28 U.S.C.
Accordingly, Plaintiffs’ Motion to Remand will be granted. 7

§ 1331.

An appropriate Order accompanies this Opinion.

Date:

April 15, 2014

s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J.

7

This result is consistent with Bottom v. Bailey, 2013 WL 431824
(W.D.N.C. Feb. 4, 2013); Whittington v. Morgan Stanley Smith Barney,
2012 U.S. Dist. LEXIS 146284 (W.D.N.C. Oct. 11, 2012); Mirchandani v.
BMO Harris Bank, NA, 2011 U.S. Dist. LEXIS 139917 (D. Ariz. Dec. 5,
2011); and Fornshell v. FirstMerit Bank, NA, 2010 U.S. Dist. LEXIS
124068 (N.D. Ohio Nov. 23, 2010), all of which remanded cases after
applying Grable to state law tort suits predicated on alleged
violations of the Bank Secrecy Act.
12