Alzheimer's Foundation of America v. Alzheimer's Disease and Related Disorders Association, Inc. et al

Filing 200

OPINION: Based upon the facts and conclusions of law set forth above, Plaintiff's request for relief from the judgment dismissing Count IX of the FAC is denied. IT IS SO ORDERED. (Signed by Judge Robert W. Sweet on 8/22/2014) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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ALZHEIMER'S FOUNDATION OF AMERICA,
INC., d/b/a ALZHEIMER'S FOUNDATION,
Plaintiff,
10 Civ. 3314

(RWS)

- against OPINION
ALZHEIMER'S DISEASE AND RELATED
DISORDERS ASSOCIATION, INC. and
NORTHERN TRUST COMPANY,
Defendants.

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A P P E A R A N C E S:

Attorneys for the Plaintiff
MILLER & WRUBEL P.C.
570 Lexington Avenue
New York, NY 10022
By:
Martin D. Edel, Esq.
Kerrin T. Klein, Esq.
THE INGBER LAW FIRM
374 Millburn Avenue, Suite 301
Millburn, NJ 07041
Mark J. Ingber, Esq.
By:

Attorneys for the Defendants
BAKER & MCKENZIE LLP
452 Fifth Avenue
New York, NY 10018
By:
John Basinger, Esq.

usDCSDNY

DOCUMENT
ELECTRONICALLY FILED
DOC#:
46 I
11
171
DATE FILED:
,
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0

Sweet, D.J.

Plaintiff Alzheimer's Foundation of America, Inc.
("Plaintiff" or the "Foundation") has moved for reconsideration
of this Court's March 14, 2014 Decision and Order (the "March 14
Opinion") and relief from the judgment dismissing Count IX of
the Fourth Amended Complaint ("FAC")

for lack of standing in

favor of defendant and counterclaim plaintiff Alzheimer's
Disease and Related Disorders Association, Inc.

("Defendant" or

the "Association").

Upon reconsideration of the application of Barclays
Bank to a claim by a purported named payee against a non-payee
depositor of the funds in question, the Plaintiff's motion for
reconsideration is granted.

Based on the conclusions set forth

below, Plaintiff's request for relief from the judgment of
dismissal is denied.

Background and Prior Proceedings

The facts and prior proceedings in this action are set
forth in two prior decisions and orders of this Court dated
May 25, 2011 and March 14, 2014, familiarity with which is

1

assumed.

(See Dkt. Nos. 33, 170)

The Court's March 14 Opinion

held that the Foundation lacked standing to assert Count IX of
the FAC which stated a claim for "money had and received"
because the Foundation was never in possession of the checks at
issue.

The instant motion was filed on April 4, 2014 and was
marked fully submitted on May 14, 2014.

Applicable Standard

A court may grant reconsideration where the moving
party demonstrates an "intervening change in controlling law,
the availability of new evidence, or the need to correct a clear
error or prevent manifest injustice."

Henderson v. Metro. Bank

& Trust Co., 502 F. Supp. 2d 372, 375-76 (S.D.N.Y. 2007)
(quotation marks and citations omitted); See also Parrish v.
Sollecito, 253 F. Supp. 2d 713, 715 (S.D.N.Y. 2003).

However,

reconsideration of a court's prior order is an "extraordinary
remedy to be employed sparingly in the interests of finality and
conservation of scarce judicial resources."

Sikhs for Justice

v. Nath, 893 F. Supp. 2d 598, 605 (S.D.N.Y. 2012)
omitted).

(citations

Accordingly, the standard of review applicable to

such a motion is "strict."

Shrader v. CSX Transp., Inc., 70

2

F.3d 255, 257

(2d Cir. 1995).

Motions for reconsideration "are not vehicles for
taking a second bite at the apple

If

288 Fed. App'x. 768, 769 (2d Cir. 2008)
marks omitted).

Rafter v. Liddle,

(citation and quotation

The purpose behind confining reconsideration to

matters that were "overlooked" is to "ensure the finality of
decisions and to prevent the practice of a losing party
examining a decision and then plugging the gaps of a lost motion
with additional matters."

Polsby v. St. Martin's Press, Inc.,

No. 97-CV-690, 2000 WL 98057, at *1 (S.D.N.Y. Jan. 18, 2000)
(citation and quotation marks omitted).

Discussion

1.

The Motion To Reconsider Is Granted

Plaintiff asserts that the Court overlooked that the
claim in Barclays Bank involved a claim against a depositary
bank, that it overlooked New York law permitting claims for
money had and received by a plaintiff alleging superior title to
funds over that of a mistaken or wrongful depositor, and that it
overlooked New York law that allows creation of a property
interest by Court-imposed trust.

Plaintiff additionally asserts

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that to apply Barclays Bank would result in manifest injustice,
a separate ground upon which to grant reargument or
reconsideration.

Because the March 14 Opinion did not fully consider
whether Barclays Bank's holding is limited to cases concerning
claims against depositary banks or whether related New York law
concerning superior title and creation of a property interest
via a Court imposed trust would allow Plaintiff to sustain a
claim for money had and received against the Defendant.

As

such, the Court reconsideration is granted.

2.

On Reconsideration The Motion To Dismiss Is Granted

Plaintiff's assertions that Barclays Bank's holding is
limited to claims against depositary banks and that New York law
regarding superior title and property interests created by
Court-imposed trust allow Plaintiff to adequately plead a claim
for money had and received are unpersuasive.

Upon

reconsideration, the application of Barclays Bank to the instant
action remains unchanged.

a. Barclays Bank Requires Actual Or Constructive Possession Of
A Negotiable Instrument In Order To Have Standing To Assert
A Claim For Money Had And Received

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Plaintiff asserts that the Court overlooked that the
claims in Barclays Bank were against a depositary bank, and not
against the mistaken or wrongful depositor of the funds at
issue.

(Pl.'s Mem. Supp. Recon. 7.)

Specifically, the

Foundation argues that the New York Court of Appeals did not
address the rights that the correct payee of a check may have
against a forger in Barclays Bank and that there is, in fact, no
common law rule that precludes the named payee from suing the
entity that mistakenly or wrongfully deposited funds that belong
to the named payee.

Id.

In its FAC, the Foundation pleaded a claim for money
had and received against both the Association and the depositary
bank and now the Foundation seeks to have the Court sustain
Count IX against the Association only.

In general, an action for money had and received is a
contract implied in law.

Fernbach, LLC v. Capital & Guarantee

Inc., No. 08-CV-1265, 2009 WL 2474691, *5 (S.D.N.Y. Aug. 12,
2009).

In order to establish a claim for money had and

received, a party must demonstrate "that

(1)

defendant received money belonging to plaintiff;

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(2)

defendant benefited from the money; and

(3)

under principles of equity and good conscience,
defendant should not keep the money."

Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, N.A.,
731 F.2d 112, 125 (2d Cir. 1984)
N.Y. 400, 407

(1916)).

(citing Miller v. Schloss, 218

An action for money had and received

"depends upon equitable principles in the sense that broad
considerations of right,

justice and morality apply to it."

Parsa v. State, 64 N.Y.2d 143, 148 (1984).

The remedy is

generally available "if one man has obtained money from another,
through the medium of oppression, imposition, extortion, or
deceit, or by the commission of a trespass."

Id.

(citations

omitted).

Barclays Bank indisputably addresses claims brought
against a depositary bank, and much of its policy analysis stems
from a consideration of the intentions and risk allocation
scheme of the UCC with respect to such institutions.

However,

Barclays Bank also stands for broader principles and the
requirement that a check must come into the actual or
constructive possession of a plaintiff in order for him to have
standing against a defendant in Barclays Bank is one which
applies.

The fact that New York courts have not yet applied it

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in a case factually similar to the instant action is not in and
of itself dispositive.

Plaintiff points to Barclays Bank's citation of Allen
v. M. Mendelsohn & Son, 207 Ala. 527

(Sup. Ct. 1922) to support

its claim that an action for money had and received can be made
against an entity that mistakenly or wrongfully deposited funds
that belong to a plaintiff.

(Pl.'s Mem. Supp. Recon. 8-9.)

1

The

Barclays Bank opinion does, indeed, state that the Allen
decision was "not in point" and that "the suit was not against
the depositary bank."

However, when Barclays Bank's brief

acknowledgment of Allen is read in conjunction with the body of
the Barclays Bank opinion, the thrust of the Court of Appeals'
decision is that a plaintiff must have received physical or
constructive possession of a check to have standing to assert a
money had and received claim, rather than whether a plaintiff is
a depositary bank.

Barclays Bank cites to and relies on broad principles

1

In Allen, the Illinois Central Railroad Company (the "Railroad") prepared a
check for the plaintiff.
The check was sent to the Railroad's disbursing
agent in Birmingham, Alabama where it was subsequently stolen by an unknown
imposter.
The imposter forged the plaintiff's indorsement and used the check
to pay for merchandise purchased from the defendants.
The defendants
collected the money via the forged indorsement.
The plaintiff sued the
defendants and the court was left to decide whether "the fact that the check
failed to reach the hands of plaintiff is fatal to his recovery." Allen, 207
Ala. at 528.

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---------------···

of negotiable instruments law, noting that "[i]t has long been
held that a check has no valid inception until delivery" and
that "a payee must have actual or constructive possession of a
negotiable instrument in order to attain the status of a
holder."

Barclays Bank, 76 N.Y.2d at 536-37.

It is on these

principles, and not simply the status of the defendant as a
depositary bank, which Barclays Bank bases its holding:
"[p]ermitting a payee who has never had possession to maintain
an action against the depositary bank would be inconsistent with
these principles.
that do not exist."
added).

It would have the effect of enforcing rights
Barclays Bank, 76 N.Y.2d at 537

(emphasis

In the face of such language, one footnote dismissing a

non-controlling case cannot shift the import and emphasis of the
central observations of the Barclays Bank court's opinion. 2

Additionally, it is likely that the New York Court of Appeals would find
Allen more dissimilar to the instant case than similar.
Barclays notes that
Allen involved a "dispute over the proceeds of a stolen check." Barclays, 76
N.Y.2d at 541 n. 5.
In Allen, the court determined that:
2

. if plaintiff is allowed to recover from defendants, his
election will put an end to the matter, for the drawer of the
check intended it for plaintiff, and defendants, however
innocently, received the money as upon plaintiff's indorsement,
and, but for their intermeddling, however, innocently, it would
have reached plaintiff.
Therefore defendants do not appear to be
in a position to deny plaintiff's ownership.
Allen, 207 Ala. at 528 (internal citations omitted and emphasis added).
Allen involves a different set of circumstances than those present in the
instant case.
The fact that the check would have reached the plaintiff were
it not for the fact that the check had been stolen by an unknown interloper
appears to have been dispositive for the Alabama court, presumably satisfying
the court as to the drawer's intent.
In the instant case, the drawer's
intent has not been adequately established and Defendant is, in fact, in a
position to deny Plaintiff's interest in the checks as the checks were sent
directly to the Association, and not fraudulently intercepted in transit

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Plaintiffs further argument that Barclays Bank's
holding relies on the fact that the payee was "not left without
a remedy" because he or she could sue on the "underlying
obligation," but that in the instant case the Foundation has no
right to sue the donors - and thus should be allowed to sue the
Association - is unpersuasive.

Indeed, it may just as easily be

said that precisely because the Plaintiff may not sue the donor,
common sense would dictate that the Plaintiff should not then be
granted a separate and independent right to sue the recipient of
the donor's funds.

Barclays Bank clearly counsels, as a

practical consideration, that a payee who never possesses a
check is not well situated to litigate over the actions of the
drawer.

Barclays Bank, 76 N.Y.2d at 537

("Where a payee has

never possessed the check, it is more likely that the forged
indorsement resulted from the drawer's negligence, an issue
which could not be readily contested in an action between the
payee and depositary bank.")

(citations omitted) .

To grant such

a right to litigate would fly in the face of the broad,
practical considerations articulated in Barclays Bank.

b. The Foundation Has Not Established A Superior Title To The
Funds Deposited By The Association

before they made their way to the Foundation.

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Plaintiff next argues that New York law as to money
had and received does not preclude a claim by one alleging a
superior interest in the funds against the entity that took the
funds.

(Pl.'s Mem. Supp. Recon. 7.)

The Foundation argues that

the Court overlooked that the New York doctrine of "money had
and received" requires either an ownership interest or a
superior right to the proceeds and that it does not require only
(Pl.' s

the holding, possession, or acquisition of the checks.
Mem. Supp. Recon. 9.)

Plaintiff states that the Foundation has alleged it
has a superior title to that of the Association to the funds
because it was the named payee on over five thousand checks
totally more than $1.5 million that the Association deposited
into its own account, despite knowing the Foundation was the
named payee.

(Pl.'s Mem. Supp. Recon. 10.)

In fact,

Plaintiff

alleges, the Association endorsed checks that were on their face
made payable to the Foundation, without attempting to verify
whether the intent of the payor was to make a "gift" to the
Association instead of the Foundation.

Id.

As a result, the

Foundation asserts, under New York law, title could not pass to
the Association and the Association could have no property
interest in the checks or their proceeds and that these

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allegations are sufficient for the Foundation to meet its
standing and pleading burdens.

Id.

Barclays Bank makes no mention of establishing
superior title over funds but rather focuses on whether a
plaintiff has the requisite interest, or the right, to assert a
claim.

The cases cited to by Plaintiff do not adequately assist

it in making its argument for superior title.

In re Ames Dep't

Stores reinforces the notion that a plaintiff must establish
ownership interest or superior title, but discusses the notion
of superior title in the context of bankruptcy proceedings and
considering whether the plaintiff's claims were estopped and so
it bears little in common with the facts in the instant case.
In re Ames Dep't Stores, Inc, 06-CV-5394, 2008 WL 7542200, *9
(S.D.N.Y. June 4, 2008)

(finding that the plaintiff could not

pursue a claim for money had and received merely because it was
owed a debt by the defendant).

Carnegie Trust addresses the

very particular situation of a debtor-creditor relationship.
Carnegie Trust Co. v. Battery Place Realty Co.,
453 (1910)

67 Misc. 452,

("where the relation of debtor and creditor exists,

if the debtor pays the debt to one not having title to the
claim, the creditor may ratify such payment and sue the
recipient of the money in an action for money had and

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received")

3

In Dechen v. Dechen, an action was maintained against
an improper recipient of funds by the person in whose favor the
deposit had been made. 59 A.O. 166, 68 N.Y.S. 1043 (2d Dep't
1901) .

The evidence established that the uncle intended that

the nephew benefit from the deposit and that, as such, at the
time the deposit was made the monies "inured to the benefit of
plaintiff and vested in him the right to demand and receive the
same."

In instant case, the donors did not deposit their

donations directly into the bank for the benefit of the
Plaintiff; instead, they sent their checks directly to the
Defendant.

Had the donors deposited the funds directly into the

bank, that deposit might have "vested" Plaintiff with the right
to demand and receive the same.

Such, however, is not case at

hand.

Plaintiff has not established superior title.

As

stated in this Court's previous opinion, the Foundation does not

3

The general holding in Carnegie Trust centers around a creditor-debtor
relationship, or other possessory interest: "where there are not two
independent claims to the money owed, but simply two parties claiming to be
the owners of the same debt or chose in action, the party having the superior
title may maintain an action for money had and received against the wrong
claimant, if he received the money." Carnegie Trust, 67 Misc. at 454. A
"chose in action" refers to the right to bring an action to "recover a debt,
money, or thing" or recover under a contract, and implies in it a possessory
interest.
See Chose Definition, BLACK'S LAW DICTIONARY (9th ed. 2009), available
at WestlawNext.

12

make any factual allegation that any of the donors in question
actually intended that their donations go to the Foundation
rather than the Association or one of the 'scores' of other
Alzheimer's charities.

(March 14 Op. 33.)

c. Plaintiff Has Failed To Establish A Basis To Impose A Trust
On Defendant For the Benefit Of The Foundation

Plaintiff further argues that the Court overlooked the
fact that, even if Barclays Bank decision applies, New York law
creates a property interest for the Foundation by impressing a
trust on the Association for the benefit of the Foundation.
(Pl.'s Mem. Supp. Recon. 7.)

The Foundation argues that New

York law allows a plaintiff to recover money that "come[s] into
the hands of the defendant" by "impress[ing] with a species of
trust" on the defendant.

(Pl.'s Mem. Supp. Recon. 10 (citing

Board of Educ. of Cold Springs Harbor Cent. School Dist. v.
Rettaliata, 78 N.Y.2d 128, 138 (1991).)

Plaintiff further

asserts that New York courts' imposition of a "species of trust"
on the defendant satisfies for the named payee any "possessory
interest," in other words, filling any "gap" in standing or
pleading.

(Pl.'s Mem. Supp. Recon. 11.)

Plaintiff's assertion that the Court overlooked New

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-~·-~------·~----

York law that allows a court to impose a trust on a defendant to
allow plaintiff to recover money which comes into the hands of
the defendant fails.

In finding that Barclays Bank should

indeed apply to the instant litigation, Plaintiff has failed to
establish a possessory interest in the funds in dispute and,
consequently, cannot claim the privilege of a trust.
the 'species of trust'

Indeed,

referred to by Plaintiff appears to be

just another articulation of the nature of the money had and
received cause of action; in other words, a description of the
obligation of a wrongful recipient of funds that belong to
another.

(See Pl.'s Mem. Supp. Recon. 10-11.)

Plaintiff may

not rely on such language to create for themselves a possessory
interest where there is none.

d. Plaintiff Has Failed To Establish Manifest Injustice

Plaintiff argues, in the alternative, that it would be
"manifestly unjust for this Court to extend the Barclays Bank
decision to preclude standing by a charity claiming a superior
right to the proceeds of checks deposited by another charity."
(Pl.'s Mem. Supp. Recon. 11.)

The Foundation puts forward five

separate arguments to support its manifest injustice claim:

(1)

assuming the donor is the only party with standing, he or she
will in most cases never know that its charitable donations were

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kept by the wrong charity and, thus, the intended recipient of
the donation would in most cases be deprived of the donation;
(2) due to the usually modest amounts of donations, most donors
have little to no incentive to pursue a claim against the
charity that mistakenly or wrongfully deposited their checks;
(3) the Foundation has an interest in receiving all funds it was
intended to receive so it may realize its objectives on behalf
of its beneficiaries;

(4) the Court's reading frustrates the

public policy guidelines promoted by the New York and Illinois
Attorneys General for charitable organizations; and (5) to
dismiss the Plaintiff's claims for lack of standing would
deprive charitable organizations of "enhanced judicial
protection" to "ensur[e] their contributions to charitable
organizations are received by the correct charity."

( P 1. 's Mem.

Supp. Recon. 12-13.)

There is no question that it is a lamentable state of
affairs if one charitable entity benefits from funds meant for
another philanthropic organization.

However, the New York Court

of Appeals in Barclays Bank has clearly stated that, on balance,
the preservation of a transactional chain for guiding litigation
takes precedence.

Moreover, when drawer or, as in this case,

donor intent has not been sufficiently established, it would be
inappropriate for the Court to provide to a plaintiff who

15

believes, but has not sufficiently established, that it has a
right to the funds in question, a short-cut to litigating
against the purported wrongful depositor.

To be sure, there are drawbacks to imposing an
"orderly process" on a civil action that follows the order of
the "transactional chain."

Barclays Bank, 76 N.Y.2d at 538.

Barclays Bank, however, determined that the imposition of such a
process was a dominant policy consideration and would promote
judicial economy by preventing unnecessary litigation.
Bank, 76 N.Y.2d at 538-39.

Barclays

Plaintiff's policy and practical

considerations regarding donors' incentives are not without
merit.

It is, indeed, questionable what level of motivation

donors might have in pursuing a wrongful deposit of a very small
sum when one of the principal benefits of making the donation the receipt of a charitable deduction - is achieved no matter
which organization deposits a donor's check.

As frustrating as

this might be, however, Barclays Bank counsels against allowing
a plaintiff, who makes a claim solely on its status as named
payee and intended beneficiary, to circumvent the transactional
chain.

4

It in fact counsels even more so in this case where the

4

In the instant case, perhaps even more than in Barclays Bank, it is crucial
to follow an orderly process where there exists no underlying obligation and
potential ambiguity as to the donors intent due to the similarity of the
Plaintiff's and Defendant's names.
Id. ("Plaintiff maintains, however .
that, based solely on its status as named payee and intended beneficiary of

16

Plaintiff has failed to establish donors' intent that it was
even meant to receive the checks in question. 5

the checks, it has a sufficient interest to bring .
. a common-law action
for money and received.
We believe such a rule would be contrary to the
underlying theory of the UCC .
.").
5

Plaintiff claims also that, by dismissing the Foundations claim for lack of
standing, the donors' intent will be frustrated.
Without establishing
donors' intent, however, it cannot be determined whether intentions are, in
fact, frustrated.
Plaintiff's further claim that it would be manifestly
unjust to dismiss Plaintiff's claim for lack of standing because it would
unfairly deprive charitable organizations of "enhanced judicial protection"
does not counsel a different result.

17

Conclusion

Based upon the facts and conclusions of law set forth
above, Plaintiff's request for relief from the judgment
dismissing Count IX of the FAC is denied.

It is so ordered.

Dated:

New York, New York
August L--V2014

I

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