Rejuvenating Fertility Center, PLLC v. TD Bank, N.A.

Background

Rejuvenating Fertility Center, PLLC (RFC) maintained accounts at TD Bank and had a business deposit account agreement with the bank. The agreement described security procedures that TD Bank might use to verify funds-transfer requests, including documentation, identification and account verification for in-person requests, and account verification and a callback for certain telephone requests. It also stated that a transfer verified through the security procedure would be effective whether or not it was actually authorized.

RFC alleged that it received an email requesting a $204,000 wire transfer and sent the money on November 1, 2022. More than a week later, RFC discovered a separate fraudulent $204,000 check withdrawal from another TD Bank account. RFC alleged that its sole member, Dr. Zaher Merhi, reported the transactions to a TD Bank branch manager, who allegedly promised that the wire would be reported and recalled. RFC alleged that the manager did not promptly notify TD Bank’s fraud department or issue a recall, and that TD Bank waited two weeks to try to recover the funds. RFC also alleged that TD Bank failed to cooperate with law enforcement.

RFC initially asserted negligence, gross negligence, breach of contract, and a Uniform Commercial Code claim. It withdrew the Uniform Commercial Code claim, and the court dismissed the remaining claims while allowing RFC to amend. RFC’s amended complaint asserted only breach of contract and gross negligence. TD Bank moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), or alternatively to strike portions of it. RFC opposed the motion, sought leave to file a second amended complaint, and moved to compel TD Bank to produce witnesses for depositions.

Breach of Contract

The court dismissed Count I for failure to state a claim. RFC alleged that TD Bank breached the account agreement by failing to follow its security procedure. But RFC did not allege that TD Bank failed to use any of the verification procedures described in that provision. Instead, RFC focused on the bank manager’s alleged failure to notify the fraud department promptly and recall the wire transfer.

The court found that RFC did not identify any provision of the security procedure, or any other provision of the account agreement, requiring TD Bank or its manager to take those actions. RFC’s general reference to unspecified bank “policies and procedures” did not identify a contractual obligation. The court also found that RFC’s statement that TD Bank had “failed to apply the Security Procedure” was conclusory and unsupported by specific facts. The court rejected RFC’s argument that discovery should occur before evaluating the claim because a complaint must allege enough facts to make the alleged wrongdoing plausible before discovery begins.

Gross Negligence

The court dismissed Count II for failure to state a claim. Under New York law, gross negligence requires a duty, a breach, injury, and conduct showing reckless disregard for others’ rights or intentional wrongdoing. The court held that RFC identified no duty separate from TD Bank’s duties under the account agreement. Because RFC’s gross-negligence allegations relied on the same alleged contractual duties, they could not support a separate tort claim.

The court also observed that RFC did not identify damages independent from its alleged contract damages. Separately, the court held that RFC had not pleaded facts showing an extreme departure from ordinary care. According to the court, RFC mainly added words such as “intentionally” and “recklessly” to its descriptions of TD Bank’s conduct without factual support. RFC also did not provide facts about specific law-enforcement requests that TD Bank allegedly refused or authority establishing a duty to cooperate with the Federal Bureau of Investigation.

Leave to Amend

The court denied RFC’s motion for leave to file a second amended complaint. RFC proposed adding a claim under New York General Business Law Section 349, which concerns deceptive business practices, and reasserting negligence. The court found the proposed Section 349 claim futile because RFC did not explain how it would allege that the conduct described in a Department of Justice plea agreement and consent order caused RFC’s losses or involved consumer-oriented deception.

The court found that reasserting negligence would also be futile. It relied on the account agreement’s exculpatory clause, which limited TD Bank’s liability for services under the agreement unless the bank acted with gross negligence, willful misconduct, or bad faith. The court also stated that the Bank Secrecy Act does not create a private cause of action for third parties and therefore does not, by itself, establish a duty of care supporting RFC’s proposed negligence claim. Finally, RFC had already received an opportunity to amend after the court explained deficiencies in its earlier pleading, and RFC did not identify proposed changes that would cure the deficiencies.

Disposition

Judge Rochon granted TD Bank’s Rule 12(b)(6) motion to dismiss and denied RFC’s motion for leave to amend. The court dismissed the amended complaint with prejudice. It denied as moot RFC’s motion to compel and TD Bank’s motion to strike, directed the clerk to terminate the relevant motions, and closed the case.