Synod of Bishops of the Russian Orthodox Church Outside of Russia v. JPMorgan…

Background

The Synod of Bishops of the Russian Orthodox Church Outside of Russia and The Fund for Assistance to the Russian Orthodox Church Outside of Russia maintained at least five accounts with JPMorgan Chase Bank, N.A. Nicholas Ohotin, the plaintiffs’ communications director, was an authorized signatory on at least three accounts.

The plaintiffs alleged that a person using the name “Nevis Resala,” whom they believed was using an alias, posed as a Chase fraud-prevention employee. After several account-access problems and suspicious internal transfers, Resala instructed Ohotin to send money from the plaintiffs’ accounts to two individuals and one company. The plaintiffs alleged that Chase branch employees reassured Ohotin that Resala was connected to Chase and that he should follow Resala’s instructions. Ohotin then made five transfers totaling nearly $330,000. Chase later recovered approximately $56,000.

The plaintiffs’ Second Amended Complaint asserted negligence, negligent misrepresentation, and breach of contract. Chase moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally plausible claim.

Court’s analysis

The court dismissed the negligence claim for several independent reasons. The complaint did not provide basic details about the alleged assurances by Chase employees, including when and where the interactions occurred, which employees were involved, or what was specifically said. The court also concluded that Ohotin’s reliance was unreasonable as pleaded, given that he transferred hundreds of thousands of dollars to unfamiliar recipients based on instructions from an unknown person. In addition, the alleged Chase assurances about Resala’s identity were too remote from the transfers to establish that Chase’s conduct proximately caused the plaintiffs’ losses; Resala’s specific instructions were an additional causal factor.

The court stated that the negligent misrepresentation claim was duplicative of the negligence claim and could be dismissed or combined with it. The court nevertheless analyzed the claim separately. Under New York law, negligent misrepresentation requires, among other things, a special relationship creating a duty to provide accurate information and reasonable reliance on a false representation. The court held that the ordinary relationship between a bank and its customer generally is not a special relationship, and the plaintiffs had not alleged facts supporting a heightened duty. The court also noted that the complaint did not adequately allege a false representation or reasonable reliance.

The court rejected the breach-of-contract claim on the merits. The plaintiffs alleged that Chase failed to provide heightened security, review the recipients, and conduct an internal review of the transfers. The court held that the heightened-security provision cited by the plaintiffs governed online wire transfers, while the challenged transfers were made in person. The customer contracts required Chase to verify the transferor’s identity and signature, and the plaintiffs’ own allegations showed that Chase verified Ohotin’s identity and signature. The record also indicated that Chase used a two-step approval process in which one employee initiated the wire and another reviewed and approved it. The court therefore found no indication that Chase failed to perform its contractual obligations.

The court offered an initial view that the New York Uniform Commercial Code’s Article 4-A provisions likely preempted the plaintiffs’ common-law claims because those claims concerned the same conduct covered by the statute. However, the court stated that Chase’s briefing did not sufficiently develop that issue for a full analysis. The dismissal instead rested on the deficiencies discussed above.

Disposition

Judge Naomi Reice Buchwald granted Chase’s motion in full and dismissed the plaintiffs’ Second Amended Complaint with prejudice. The clerk was directed to terminate the pending motion and close the case.