Thayer v. BMO Bank

Background

Plaintiffs Benjemin Allen Thayer and Emily Hay, acting without lawyers (pro se), sued BMO Bank, N.A. over a hold the bank placed on a check Hay deposited into her BMO account on May 16, 2025. The check, in the amount of $87,835.66, was issued by the "Donna Marie Hay Estate, Courtney Stephens, Personal Representative" from a Regions Bank account in Hoover, Alabama. It was made payable solely to Hay and endorsed solely by Hay.

On the day of the deposit, BMO issued a notice stating it was withholding all but $5,525.00 of the deposit for seven business days because of the "Large Deposit" amount. The next day, BMO issued a second notice withholding the entire deposit for seven business days, citing "confidential information" suggesting the check might not be paid. BMO ultimately released the hold on May 23, 2025 — five business days after the deposit. Plaintiffs allege the hold caused them to receive a default judgment in Minnesota state court for nonpayment of rent on May 22, 2025, and to be evicted on June 17, 2025. They sought $2,500,000 in damages.

Claims Alleged

Plaintiffs asserted: (1) violations of the Expedited Funds Availability Act (EFAA) and its implementing rules, known as Regulation CC (found at 12 C.F.R. Part 229); (2) violations of the Minnesota Unfair and Deceptive Trade Practices Act; (3) common law conversion; (4) civil theft; (5) fraud; and (6) negligence. They also sought to represent a class of similarly situated plaintiffs.

In responding to BMO's motion to dismiss, plaintiffs expressly abandoned their class allegations and their Minnesota Unfair and Deceptive Trade Practices Act, conversion, and civil theft claims. They did not respond to BMO's arguments on their fraud and negligence claims. The court found that by failing to defend those claims, plaintiffs forfeited them. Only the EFAA claim remained live.

Motion to Disqualify Counsel — Denied

Plaintiffs moved to disqualify BMO's law firm (Stinson LLP) and its lead attorney (Keith Moheban) from representing BMO. The court applied a strict scrutiny standard to the motion, noting that disqualification is an extreme remedy and that the party seeking it bears the burden of showing it is warranted.

The court rejected each of plaintiffs' arguments:

- Conflict of interest: Only clients or former clients generally have standing to seek disqualification based on a conflict of interest. Plaintiffs never alleged they were clients of Stinson, so they had no standing to raise this ground. - Necessary witness (non-appearing attorney): Plaintiffs argued that a Stinson attorney not involved in this case would be a necessary witness regarding a trademark transfer and UCC filing issues from unrelated cases. The court found that blanket allegations of relevance are insufficient and that plaintiffs made no attempt to show the testimony was strictly necessary to any claim in this case. - Necessary witness (Moheban): Plaintiffs accused Moheban of bad faith because his meet-and-confer emails went to plaintiffs' spam folders. The court found Moheban's conduct neither in bad faith nor a violation of the applicable local rule, and noted it is not counsel's responsibility to ensure plaintiffs monitor their email, especially since plaintiffs had consented to electronic service. Plaintiffs also made no attempt to show Moheban's testimony would be necessary at trial. - Conspiracy allegations: Plaintiffs made unsupported accusations about the Minnesota Office of Lawyers Professional Responsibility's supposed inability to regulate Stinson, citing dismissal of ethics complaints against unrelated Stinson attorneys and changes to a third-party website. The court found these allegations irrelevant to the issues in the case.

The court denied the disqualification motion in its entirety, including plaintiffs' alternative request for appointment of a special master.

Motion to Dismiss — Granted

Thayer's EFAA Claim: Dismissed Without Prejudice for Lack of Standing

To have standing (the legal right to bring a federal lawsuit), a plaintiff must show: (1) a concrete injury in fact; (2) that the injury is fairly traceable to the defendant's conduct; and (3) that a favorable ruling would likely redress the injury.

The court found that Thayer lacked standing because he had no legally protected interest in Hay's bank account or the deposited funds. The check was payable solely to Hay, endorsed solely by Hay, and deposited into Hay's account. The hold notices were addressed solely to Hay. Nothing in the complaint suggested Thayer was an intended payee, had a BMO account, or had any legal interest in the funds. The fact that Hay authorized Thayer's participation or that he was present during the deposit did not establish a legally protected interest. Plaintiffs could not assert Hay's legal rights on Thayer's behalf. The court also found that the exception allowing a party to assert a third person's rights did not apply because Hay is a party in the case and is not hindered from protecting her own interests.

Because the dismissal was for lack of standing (a jurisdictional ground), the court dismissed Thayer's EFAA claim without prejudice, consistent with Eighth Circuit precedent requiring that remedy when a plaintiff lacks standing.

Hay's EFAA Claim: Dismissed With Prejudice for Failure to State a Claim

Hay alleged three EFAA violations: (1) BMO failed to make at least $5,525 available by the next business day, as supposedly required for a qualifying cashier's check; (2) BMO imposed an extended hold without reasonable, individualized cause; and (3) BMO failed to provide timely, specific written notice.

The court rejected all three arguments:

Not a cashier's check. Regulation CC defines a cashier's check as one drawn on a bank, signed by a bank officer or employee on the bank's behalf, constituting a direct obligation of the bank, and provided to or acquired from a bank for remittance. The check Hay deposited was drawn on the Estate's non-BMO bank account in Alabama, not on a bank itself, and was not signed by a bank officer. The court held it was a personal check — specifically a "local check" under Regulation CC — not a cashier's check. The cashier's check next-business-day availability requirement therefore did not apply.

Large deposit exception applied. For local checks, funds generally must be available by the second business day. But Regulation CC allows a bank to extend that hold for a "reasonable period" of up to five additional business days for deposits in excess of $6,725 (the "large deposit" exception) or when the bank has reasonable cause to believe the check is uncollectible. Here, the deposit was $87,835.66 — well above the threshold. BMO was permitted to extend the hold.

Proper notice was given. When a bank invokes an exception, it must notify the depositor in writing of the amount delayed, the reason, and when the funds will be available — either at the time of deposit or as soon as practicable if the relevant facts are discovered after deposit. BMO sent a written notice to Hay on May 16, 2025 (the day of deposit) citing the large-deposit exception and specifying availability by the 7th business day. It sent a second notice on May 17, 2025, citing information suggesting the check may not be paid. The court held BMO fully complied with Regulation CC's notice requirements.

Funds released within permitted period. BMO released the full deposit on May 23, 2025, five business days after the deposit — within the "reasonable period" permitted by Regulation CC.

Because BMO complied with Regulation CC as a matter of law, and because no additional facts could cure this deficiency, the court dismissed Hay's EFAA claim with prejudice (barring refiling), finding that amendment would be futile. The court also noted that plaintiffs had previously had the opportunity to amend their complaint — which they used to add seven new defendants and entirely new claims — but that amended complaint was struck for noncompliance with procedural rules, and plaintiffs then chose to proceed on their original complaint rather than file a proper amended version.

State-Law Claims: Dismissed Without Prejudice for Failure to Prosecute

Because plaintiffs forfeited their Minnesota state-law claims by failing to defend them, those claims were dismissed without prejudice under Federal Rule of Civil Procedure 41(b). Because the court did not reach the merits of those claims, they were not treated as an adjudication on the merits.

Disposition

1. Plaintiffs' motion to disqualify counsel: DENIED 2. BMO's motion to dismiss: GRANTED as follows: - Hay's EFAA/Regulation CC claim: DISMISSED WITH PREJUDICE under Rule 12(b)(6) - Thayer's EFAA/Regulation CC claim: DISMISSED WITHOUT PREJUDICE under Rule 12(b)(1) - Plaintiffs' Minnesota state-law claims: DISMISSED WITHOUT PREJUDICE under Rule 41(b)

Judgment is to be entered accordingly.