ARMENIAN MISSIONARY ASSOCIATION OF AMERICA, INC v. TD BANK, N.A. et al
OPINION. Signed by Judge Susan D. Wigenton on 9/11/2015. (nr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ASSOCIATION OF AMERICA, INC.,
TD BANK, N.A. and JPMORGAN
CHASE BANK, N.A.,
Civil Action No. 15-cv-03328-SDW-SCM
September 11, 2015
WIGENTON, District Judge.
Before the Court are two motions to dismiss Plaintiff Armenian Missionary Association of
America, Inc.’s (“Plaintiff” or “AMAA”) Complaint. Defendants TD Bank, N.A. and JPMorgan
Chase Bank, N.A. (collectively “Defendants”) seek dismissal for failure to state a claim upon
which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). 1 (ECF Nos. 9,
10.) This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332. Venue is proper
pursuant to 28 U.S.C. § 1391. This opinion is issued without oral argument pursuant to Federal
Rule of Civil Procedure 78. For the reasons set forth below, this Court GRANTS Defendants’
Motions to Dismiss.
As the arguments advanced by the Defendants are virtually identical, and the relief sought is the same, this Court
will address both motions in this opinion.
Plaintiff is a non-profit organization that relies on donations to provide aid and assistance
to Armenians throughout the world. (Amend. Compl. ¶ 1.) Plaintiff seeks relief against Defendants
for failure to conduct proper due diligence under N.J.S.A. 12A:3-420(a) (Count I), failure to
exercise good faith and/or ordinary care under N.J.S.A. § 12A-405(b) (Count II), and seeks
damages for breach of a duty of care under common law negligence (Count III). (Id. ¶¶ 22-32.)
Plaintiff’s claims stem from a series of alleged thefts by its former employee, Tigran Melkonyan
(“Melkonyan”), of over $800,000 in donations. (Id. ¶ 11.)
Melkonyan is alleged to have commenced this scheme in 2006 by opening an account at
TD Bank in the name of “Armenian Mission Association of America” and depositing donation
checks made payable to, for example, the “Armenian Missionary Association of America,” or the
“Armenian Missionary Assoc. /America” or, in the vast majority, simply “AMAA.” 2 (Id. ¶¶ 11,
12.) AMAA claims that it “believes” donation checks were also deposited into a Chase Bank
account opened by Melkonyan under the same name. (Id. ¶¶ 18, 20.) AMAA does not, however,
identify or attach a single check belonging to AMAA that was deposited into the Chase account.
(Id. ¶ 20.)
AMAA employed Melkonyan from August 1999 until his resignation in April 2014. (Id.
¶¶ 5-6.) Melkonyan’s job duties centered on AMAA’s child sponsorship and child education
programs, but did not include responsibility for processing, recording, or depositing AMAA’s
donation checks. (Id. ¶ 6.) However, Plaintiff admits that “on a very rare occasion, Melkonyan was
According to AMAA, Melkonyan deposited at least one donation check in the amount of $295,000 that was explicitly
made payable to “Armenian Missionary Association of America”, and not the “Armenian Mission Association of
America”, into Melkonyan fraudulent TD bank account. (Amend. Compl. ¶ 12.)
asked to go to the bank to deposit donation checks when the person responsible for depositing
checks was unavailable.” (Id.)
In February of 2015 AMAA demanded documents relating to Melkonyan’s account from
Defendants, in which deposits of donation checks made payable to AMAA were discovered. (Id.
Based on the Melkonyan’s conduct, AMAA asserts the following claims against
Defendants: 1) Relief under N.J.S.A. § 12A:3-420(a) (Count I), alleging that Defendants are liable
for failing to conduct proper due diligence when Melkonyan opened the bank accounts under the
name of “Armenian Mission Association of America” (Id. ¶¶ 22-24.); 2) Relief under N.J.S.A. §
12A:3-405(b) (Count II), alleging that Defendants failed to exercise good faith and/or ordinary
care by accepting the deposits, especially if at least some checks were made payable to the
“Armenian Missionary Association of America” – a facially different payee than the entity
assigned to the TD account (Id. ¶¶ 25-28.); 3) Common law negligence (Count III), on the grounds
that Defendants’ actions substantially contributed to the loss that resulted from the fraud, in breach
of a duty owed to Plaintiff. (Id. ¶¶ 29-32.)
Defendants now move to dismiss the complaint pursuant to Federal Rule of Civil Procedure
12(b)(6). (ECF No. 9.)
An adequate complaint must be “a short and plain statement of the claim showing that the
pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). This Rule “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual
allegations must be enough to raise a right to relief above the speculative level[.]” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted); see also Phillips v.
County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (stating that Rule 8 “requires a ‘showing,’
rather than a blanket assertion, of an entitlement to relief”).
In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the
Court must “accept all factual allegations as true, construe the complaint in the light most favorable
to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff
may be entitled to relief.” Phillips, 515 F.3d at 231 (external citation omitted). However, “the
tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable
to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Determining
whether the allegations in a complaint are “plausible” is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. If
the “well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct,” the complaint should be dismissed for failing to “show that the pleader is entitled
to relief” as required by Rule 8(a)(2). Id.
Defendants seek dismissal on three grounds: 1) the statute of limitations under the New
Jersey Uniform Commercial Code (“NJ UCC”) bars recovery on Plaintiff’s claims that accrued
prior to April 2, 2012; 2) the NJ UCC precludes Plaintiff’s statutory claims; and 3) Plaintiff’s
claims are unduly speculative and do not satisfy the Twombly pleading standard. (Def.’s R. Br. ¶
Plaintiff’s NJ UCC claims
The NJ UCC provides a three-year statute of limitations on negotiable instruments.
N.J.S.A. § 12A:3-118(g) (applying a three-year statute of limitations to chapter 3 of the NJ UCC
for checks containing a forged or blank endorsement). New Jersey courts have held that an action
involving negotiable instruments accrues at the time the item or check is negotiated. New Jersey
Lawyers’ Fund for Client Protection v. Pace, 374 N.J. Super. 57, 67 (App. Div. 2005), aff’d per
curiam, 186 N.J. 123 (2006); Psak, Graziano, Piasecki & Whitelaw v. Fleet Nat’l Bank, 390 N.J.
Super. 199, 204 (App. Div. 2007).
Plaintiff commenced this action on April 2, 2015. (Amend. Compl. ¶ 1.) Pursuant to NJ
UCC’s three-year statute of limitations, Plaintiff’s claims regarding checks that were negotiated
prior to April 2, 2012 are time barred. N.J.S.A. § 12A:3-118(g). Plaintiff concedes that the NJ
UCC imposes a three-year statute of limitations, but asserts that, “to the extent that the AMAA is
able to establish a common law claim outside of the UCC, the three year statute of limitations will
not apply at all.” (Amend. Compl. ¶ 17.) In essence, Plaintiff seeks to apply the so-called “time of
discovery rule” which provides that in an appropriate case, the accrual of a claim may be tolled
“until the injured party discovers, or by an exercise of reasonable diligence and intelligence should
have discovered that he may have a basis for an actionable claim.” Lopez v. Swyer, 62 N.J. 267
This Court rejects Plaintiff’s invocation of the time of discovery rule here because the New
Jersey Supreme Court has held, and the Third Circuit agrees, that the time of discovery rule
impedes uniform applicability of the NJ UCC’s across commercial transactions and thus will “not
apply to actions against banks for conversions of negotiable instruments where there was no
assertion of fraudulent concealment by the bank.” Pace, 374 N.J. Super. at 65; Psak, Graziano,
Piasecki & Whitelaw, 390 N.J. Super. at 204-205; Menichini v. Grant, 995 F.2d 1224, 1229-31
(3d Cir. 1993) (“vigorous application of the statute of limitations is a reasonable means of
achieving certainty in commercial transactions.”). Here, Plaintiff has not alleged that Defendants
colluded with Melkonyan or were complicit in his scheme to misappropriate his employer’s funds.
Therefore, the NJ UCC’s three-year statute of limitations apply.
Under N.J.S.A. § 12A:3-420(a), a depositary bank is liable for conversion only where there
is a forged indorsement. See § 12A:3-420, cmt. 1 (explaining that this provision “covers cases in
which a depositary bank or payor bank takes an instrument bearing a forged indorsement.”).
However, a “deposit in a depositary bank in an account in a name substantially similar to that of
Employer is the equivalent of an indorsement in the name of the Employer” and does not constitute
a forged signature. See N.J.S.A. § 12A:3-405(c), cmt. 3.
Here, Plaintiff’s allegation is insufficient to establish a claim for conversion because there
is no proof of forgery. Melkonyan created a fake company (“Armenian Mission Association of
America”) that was very similar in name to the named payee indicated on the checks at issue
(compare “Armenian Missionary Association of America” and “Armenian Missionary Assoc.
/America”). (Amend. Compl. ¶ 12.) The NJ UCC deems a substantially similar payee to be the
same as the intended payee, and not a forgery. See N.J.S.A. § 12A:3-405(c). Therefore, Plaintiff
is not entitled to relief under its theory for conversion.
Ordinarily, a bank will “bear the risk of loss when it makes or obtains payment on a
fraudulently indorsed check.” Schrier Bros. v. Golub, 123 Fed. Appx. 484, 487 (3d Cir. 2005).
However, N.J.S.A. § 12A:3-405(b) provides that the burden of loss shifts to the named payee
where a “bank has acted in good faith and the indorsement is made by an employee of the payee
entrusted with ‘responsibility’ for the check.” § 12A:3-405(b).
There is no dispute that Melkonyan was partially responsible for depositing checks on his
employer’s behalf. Furthermore, Plaintiff’s complaint is devoid of factual allegations that suggest
that Defendants did not act in good faith in depositing the checks in the accounts associated with
the similarly named payees. Plaintiff’s allegations that Defendants “failed to exercise good faith
and/or ordinary care by accepting the deposits, especially when at least some checks were made
payable to the ‘Armenian Missionary Association of America’ – a different payee than the entity
to the  bank account” can only be described as conclusory at best. (Amend. Compl. ¶ 16.) As
such, Plaintiff’s statutory claims will be dismissed.
Plaintiff’s Common Law claims
It is well settled New Jersey law that a bank does not owe a general duty of care to noncustomers. Brunson v. Affinity Fed. Credit Union, 199 N.J. 381, 400 (2009) (“[I]n the unique
context of whether a bank owes a duty to a non-customer, it is clear that ‘[a]bsent a special
relationship, courts will typically bar claims of non-customers against banks’.”) (internal citations
omitted); Pennsylvania Nat’l Turf Club, Inc. v. Bank of West Jersey, 158 N.J. Super. 196, 203
(App. Div. 1978) (holding that “bank owed no general duty to [non-constomer] Turf Club” for the
bad checks of its customer). Here, Plaintiff’s concedes that there is no banking relationship
between Plaintiff and Defendants. (Amend. Compl. ¶ 9.) Plaintiff does not identify or submit to
this Court any “agreement, undertaking or contract” creating a special duty owed to it by
Defendants. Further, the NJ “UCC displaces common law claims where reliance on the common
law would thwart the purposes of the UCC”. See Psak, Graziano, Piasecki & Whitelaw, 390 N.J.
Super. at 204-205.
The UCC “shall be liberally construed and applied to promote its
underlying purposes and policies[,]” N.J.S.A. 12A:1-102(1) which
are “to simplify, clarify and modernize the law governing
commercial transactions”, and “to make uniform the law among the
various jurisdictions.” N.J.S.A. 12A:1-102(2)(a). Thus, the UCC’s
limitations period applies broadly to actions to enforce “an
obligation, duty, or right arising under [Article 4],” N.J.S.A. 12A:4111, and Article 4 generally “defines the rights between the parties
with respect to bank deposits and collections.” N.J.S.A. 12A:4-101,
Official Comment 3. Necessarily then, the existence of such a
comprehensive remedy to address plaintiff's claim of improper
payment in this case precludes a common-law negligence claim
against either party. “Only in very rare instances should a court upset
the legislative scheme of loss allocation and permit a common-law
cause of action.” Bank Polska Kasa Opieki v. Pamrapo Savings
Bank, 909 F. Supp. 948, 956 (D.N.J.1995); see also Girard Bank v.
Mount Holly State Bank, 474 F. Supp. 1225, 1239 (D.N.J.1979)
(noting that “[c]ourts should be hesitant to improvise new remedies
outside the already intricate scheme of Articles 3 and 4.”); see also
New Jersey Bank, N.A. v. Bradford Securities Operations, Inc., 690
F.2d 339, 345 (3d Cir. 1982) (a common-law tort action is barred
where Article 8 provides a “comprehensive remedy”).
Id. at 205.
By Plaintiff’s own admission, the NJ UCC displaces its common law negligence claims. (Amend.
Compl. ¶ 16.) Therefore, Plaintiff’s common law negligence claims will be dismissed.
For the reasons discussed herein, Defendants’ motions to dismiss all counts of the
complaint are GRANTED. An appropriate order follows.
s/ Susan D. Wigenton
SUSAN D. WIGENTON
UNITED STATES DISTRICT JUDGE
Magistrate Judge Steven C. Mannion
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