Curry Management Corp. v. JPMorgan Chase Bank, N.A.

Background

Curry Management Corp. and Curry Corporation alleged that Employee Benefit Solutions LLC served as the third-party administrator for their self-funded employee medical plan. Partners Managing General Underwriters issued 23 checks payable to Curry Corporation between September 2018 and March 2019 as reimbursement for employee medical claims. The checks were sent to Employee Benefit Solutions, which allegedly endorsed them “For Deposit Only” and deposited them into its own account at JPMorgan Chase Bank, N.A.

The plaintiffs alleged that Chase processed the checks even though they were payable to Curry Corporation and that Chase did not adequately investigate the deposits. The plaintiffs asserted a New York Uniform Commercial Code claim under section 3-419(1)(c), along with claims for money had and received, unjust enrichment, negligence, and conversion.

Chase moved to dismiss the entire complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legally viable claim. Chase argued that the plaintiffs never possessed the checks, that Chase did not benefit from the deposits, that some claims were untimely, and that Curry Management lacked standing.

Rulings on Curry Management’s Claims

The court granted the motion to dismiss all claims brought by Curry Management Corp. Management was not the payee named on the checks. Because it therefore lacked an interest in the checks and their proceeds, the court held that it had not alleged an injury sufficient to sue. Management did not respond to Chase’s standing argument in its opposition papers.

Curry Corporation’s UCC Claim

The court denied the motion to dismiss Curry Corporation’s claim under New York Uniform Commercial Code section 3-419(1)(c), which provides a conversion claim when an instrument is paid on a forged endorsement. At the motion-to-dismiss stage, the court had to accept the complaint’s factual allegations as true and draw reasonable inferences in Corporation’s favor.

The court held that Corporation plausibly alleged constructive possession of the checks. Constructive possession can exist when checks are physically delivered to an agent of the payee. The agreement between the plaintiffs and Employee Benefit Solutions authorized Employee Benefit Solutions to manage plan checking accounts and forward checks. The court concluded that the complaint plausibly alleged that Employee Benefit Solutions received the checks on Corporation’s behalf. The agreement was also ambiguous about whether Employee Benefit Solutions could forward all checks it received or only checks it prepared.

The court explained that Employee Benefit Solutions could have been authorized to receive the checks for Corporation while still lacking authority to deposit them into its own account. The alleged possession by Employee Benefit Solutions therefore made the case different from cases in which the plaintiff never actually or constructively possessed the checks.

The court did, however, dismiss Corporation’s UCC claim as time barred for checks deposited before September 27, 2018. The applicable limitations period was three years, and an executive order tolled the period for 228 days. Because the lawsuit was filed on May 13, 2022, claims based on checks deposited before September 27, 2018 were untimely. The UCC claim for checks deposited after that date survived.

Curry Corporation’s Common-Law Claims

The court granted the motion to dismiss Corporation’s negligence, money-had-and-received, unjust-enrichment, and common-law conversion claims.

For negligence, the court found that Corporation did not plead facts showing that Chase owed it a duty. The court noted that Corporation did not allege a prior contractual relationship or bank account with Chase, and it found no authority establishing a negligence duty from a depository bank to the payee on these facts.

The money-had-and-received and unjust-enrichment claims failed because Corporation did not adequately allege that Chase benefited from the transaction. The complaint made only conclusory assertions that Chase received or benefited from the money. The court reasoned that the alleged benefit went to Employee Benefit Solutions, while Chase became indebted to the account holder for deposited funds.

The common-law conversion claim failed because money deposited in a bank account is not sufficiently specific and identifiable to support such a claim against a bank. The court stated that the UCC supplied a cause of action in this situation, making the common-law conversion claim duplicative and legally defective.

Disposition

Judge Colleen McMahon granted in part and denied in part Chase’s motion to dismiss. All claims brought by Curry Management Corp. were dismissed. Curry Corporation’s UCC claim was dismissed for checks deposited before September 27, 2018, but the claim survived for checks deposited after that date. Curry Corporation’s common-law claims were dismissed. The opinion does not state that any dismissal was with or without prejudice.