Chasman v. JPMorgan Chase Bank, N.A.

Background

David Chasman and Haim Seth Chasman, whom the opinion identifies as Rose Ann Chasman’s sons and beneficiaries, claimed that a certificate of deposit opened by Rose Ann Chasman in 1983 could be renewed indefinitely at 12% annual interest. After her death, the plaintiffs transferred their portions of the account into separate beneficiary individual-retirement-account certificates of deposit with the defendant. The defendant renewed those accounts at 12% in 2009, but automatically renewed them at 0.35% on January 30, 2012, after notifying the plaintiffs that the standard interest rate would apply.

The plaintiffs previously filed a related action, which they voluntarily dismissed without prejudice after they could not locate a contract governing the original account. They then filed a similar complaint in New York state court, which the defendant removed to federal court. The complaint asserted breach of contract and breach of fiduciary duty. The plaintiffs moved for leave to amend, and the defendant cross-moved for judgment on the pleadings.

Judgment on the Pleadings

A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) uses the same standard as a motion to dismiss for failure to state a claim. The court concluded that the breach-of-contract claim failed because the plaintiffs did not identify a contractual provision requiring the beneficiary accounts to renew at 12% interest. The Deposit Account Agreement instead provided that automatically renewable certificates would renew at the interest rate in effect on the renewal date. The court therefore dismissed the breach-of-contract claim.

The court also dismissed the breach-of-fiduciary-duty claim. The Custodial Agreement stated that nothing in the agreement created a fiduciary status for the defendant. The court found that this disclaimer was sufficiently clear to eliminate any fiduciary relationship. It also rejected the plaintiffs’ argument that the Internal Revenue Code’s treatment of individual retirement accounts as trusts imposed fiduciary duties on the account custodian.

Leave to Amend

The court denied the plaintiffs’ request to add three causes of action because they withdrew that request in their briefing. It also found that the remaining proposed amendments would be futile, meaning they would not cure the complaint’s defects or state a viable claim.

The proposed amended complaint relied on a 1991 letter promising a 12% rate for future renewals, but the court found that the letter did not show that the promise applied to the beneficiary accounts. The plaintiffs also relied on addenda stating that they expected a 12% rate “or so.” The court found those statements too indefinite to modify the parties’ agreement. Finally, the court rejected proposed allegations that fiduciary duties could not be waived or that the disclaimer was invalid as part of a non-negotiated contract.

Disposition

The court granted the defendant’s motion for judgment on the pleadings and denied the plaintiffs’ motion for leave to amend. The complaint was dismissed with prejudice, and the case was closed.