Newman v. JPMorgan Chase Bank, N.A.

Background

Sari E. Newman had a savings account with JP Morgan Chase Bank, N.A. Twenty-five automated clearing house transfers moved $46,975 from that account to an account in Newman’s name at Aspiration Financial, LLC, between January 19 and April 18, 2022. Newman contacted Chase Bank on April 27, 2022, and reported the transfers as fraudulent.

Chase Bank provisionally credited Newman $38,975 but did not provisionally credit $8,000 because transfers totaling that amount occurred more than 60 days before Newman reported them. During its investigation, Chase Bank initially determined that it could not prove Newman authorized the transfers. It changed course after receiving an electronic authorization form from Aspiration bearing Newman’s electronic signature. Chase Bank later credited Newman $14,000 and denied the remaining $24,975.

Newman filed this action on August 15, 2022. Chase Bank later reimbursed Newman $24,975 plus $3.14 in interest and then reimbursed the remaining $8,000 plus $1.21 in interest. The parties agreed that Chase Bank had reimbursed Newman for the entire $46,975.

Claims and arguments

Newman claimed that Chase Bank violated the Electronic Fund Transfer Act by failing to conduct a good-faith investigation and by lacking a reasonable basis to deny her claim. She sought actual damages, statutory damages, treble damages, attorney’s fees, and costs.

Chase Bank moved for summary judgment under Rule 56, arguing that there was no genuine dispute of material fact and that the Act’s bona fide-error defense protected it from liability. That defense applies when a violation was not intentional, resulted from a genuine mistake, and occurred despite procedures reasonably designed to prevent the error.

Court’s analysis

The court ruled that Newman’s claim for actual damages was moot because Chase Bank had reimbursed the entire transferred amount. The court did not treat the entire case as moot because Newman also sought statutory damages, treble damages, attorney’s fees, and costs.

The court deemed Newman’s claims concerning the $8,000 in transfers abandoned because she did not respond to Chase Bank’s argument that those claims were untimely. The court added that those claims would fail as a matter of law because Newman did not notify the bank about those transfers within the applicable 60-day period.

The court then held that Chase Bank was entitled to summary judgment on all of Newman’s claims based on the bona fide-error defense, while assuming without deciding that Chase Bank had violated the Electronic Fund Transfer Act. The court found no genuine dispute that Chase Bank maintained procedures reasonably adapted to prevent errors. Those procedures assigned a specialist to investigate disputed transfers, required the specialist to follow a written guide based on the Act and related regulations, required investigation notes, and directed the specialist to consider information such as the authorizing person’s name, contact information, identifying details, and signature.

The court rejected Newman’s argument that the procedures were inadequate because they did not require a telephone call to the customer or provide fixed criteria for weighing each piece of information. The court stated that telephone calls were not the only reasonable precaution, and that the Act and regulations did not require a bank to assign a particular weight to each factor. The procedures did not have to eliminate every possible error.

The court also found that any violation was unintentional and resulted from a genuine mistake. The investigator followed the applicable written procedure and kept notes. Chase Bank initially intended to credit Newman’s account, but changed its decision after receiving the electronic authorization form. The court characterized the bank’s failure to obtain additional documents and its reliance on the electronic signature as errors in judgment rather than intentional or contrived mistakes.

Disposition

Judge Jesse M. Furman granted Chase Bank’s motion for summary judgment. The court did not decide whether Chase Bank actually violated the Electronic Fund Transfer Act because it held that the bona fide-error defense would shield the bank from liability even if a violation occurred. The Clerk was directed to enter judgment for Chase Bank and close the case.

The court also ordered Chase Bank, within two weeks, to show cause in writing and on a document-by-document basis why materials filed under seal should remain sealed or redacted. Proposed redactions were required to be narrowly tailored.