Bernstein v. JPMORGAN CHASE BANK, N.A.

Background

Raphael and Jane Bernstein, described in the opinion as an elderly couple, and their sons John and Daniel sued Bank of America and JPMorgan Chase Bank, N.A. The sons held powers of attorney for their parents and were also named as plaintiffs. The plaintiffs alleged that a former part-time personal assistant fraudulently used the Bernsteins’ credit cards, bank accounts, and automated teller machine cards from approximately March 2022 through 2023. They alleged that the assistant made more than $2 million in unauthorized credit-card charges and transferred $2,409,751 from a Bank of America account to Chase and American Express.

The plaintiffs alleged that the banks failed to identify or warn them about transactions that differed sharply from their normal spending. They also relied on Chase and Bank of America statements, advertisements, and account services concerning fraud monitoring and security protection. The plaintiffs alleged that Chase issued and later reversed credits for some transactions, reported a $750,000 chargeback on a card with a $50,000 limit, and froze a $165,000 deposit. They claimed that Bank of America sent statements to their accountant at an old address and did not alert them to unauthorized transfers.

Claims and Motions

The complaint asserted six causes of action: negligent misrepresentation; violations of the Truth in Lending Act; violations of Uniform Commercial Code Articles 4 and 4-A; violations of the Electronic Fund Transfer Act; and violation of New York General Business Law § 349. Bank of America and Chase each moved to dismiss under Rule 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally plausible claim. Claims involving American Express were stayed while arbitration deadlines were completed.

Court’s Analysis

Negligent misrepresentation. The court dismissed the claims against both banks because the plaintiffs did not plausibly allege the special relationship required for a negligent-misrepresentation claim. The court reasoned that the complaint described a typical bank-customer relationship, that private banking services did not establish the required relationship, and that the banks’ advertisements did not create one. Because this required element was missing, the court did not address whether the banks made false statements or whether the plaintiffs relied on them.

Truth in Lending Act. The court dismissed the Truth in Lending Act claim against Chase. The court stated that the statute did not require a bank to investigate fraudulent charges in the way alleged and held that the claim was filed more than one year after the plaintiffs were put on notice of the alleged fraud. The court also declined to apply equitable tolling, a rule that can extend a filing deadline in unusual circumstances, because the plaintiffs did not identify an extraordinary circumstance that prevented them from suing after they learned of the fraud.

Uniform Commercial Code claims. The court dismissed the Uniform Commercial Code claims against Chase because the plaintiffs conceded that the Article 4-A claim should be dismissed, did not address Chase’s argument concerning Article 4, and did not provide enough detail about the transfers to give Chase fair notice of the claims. The court also dismissed the Article 4 claim against Bank of America because the complaint did not identify the checks, their amounts, or their dates with enough specificity. The court found the claim time-barred because the plaintiffs did not allege that they notified Bank of America about fraudulent checks after receiving their statements, and it denied leave to amend that claim. The court dismissed the Article 4-A claim against Bank of America because the identified outgoing automated clearinghouse payments were governed by the Electronic Fund Transfer Act instead.

Electronic Fund Transfer Act. The court dismissed the plaintiffs’ Electronic Fund Transfer Act claim as time-barred. The court concluded that the plaintiffs filed more than one year after the alleged violations and declined to apply equitable tolling. It considered the plaintiffs’ arguments that the banks’ investigations, failure to provide alerts, and the Bernsteins’ limited mental acuity justified tolling, but found that the plaintiffs had not alleged that anything prevented them from filing within the one-year period. The court also noted that the plaintiffs conceded the statute did not apply to the credit-card transactions and argued that it applied only to the Chase checking account.

New York General Business Law § 349. The court denied the motions to dismiss the General Business Law § 349 claim. That statute prohibits deceptive acts or practices affecting consumers. The court found that the plaintiffs plausibly alleged consumer-oriented conduct because the banks publicly marketed fraud monitoring and security features and the alleged conduct could potentially affect similarly situated customers. The court also found that the plaintiffs plausibly alleged that Chase’s representations could mislead a reasonable customer and that the plaintiffs relied on those representations in continuing their banking relationship. The alleged failure to provide the promised fraud protection plausibly caused injury, including losses the plaintiffs allegedly would not have suffered to the same extent if Chase had provided that protection.

Disposition

Judge Jessica G. L. Clarke granted in part and denied in part the defendants’ motions to dismiss. The court granted the motions regarding the negligent-misrepresentation, Truth in Lending Act, Uniform Commercial Code, and Electronic Fund Transfer Act claims, and denied them regarding the General Business Law § 349 claim. The parties were ordered to file a proposed case-management plan and scheduling order by April 21, 2025.