Wu v. JP Morgan Chase Bank, N.A.

Background

Shuang You Wu alleged that she maintained a bank account at a Chase branch in Manhattan. Two unauthorized withdrawals, for $10,000 and $2,000, occurred in February and June 2022, and Chase reimbursed her after she reported them. From June 6 through August 31, 2022, 33 additional unauthorized withdrawals occurred. Those withdrawals totaled $84,377.54, and Chase refused to reimburse her for them.

Wu sued Chase in New York state court, asserting breach of contract—particularly breach of the implied covenant of good faith and fair dealing—and negligence. Chase removed the case to federal court based on diversity jurisdiction and moved to dismiss both claims under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim.

Breach of Contract

Chase argued that Wu had not identified a specific contract or contractual term that Chase breached. The court rejected that argument. Applying New York law, it explained that the implied covenant of good faith and fair dealing is part of every contract and requires each party not to undermine the other party’s justified contractual expectations. A plaintiff need not identify an express contract term when the claim is based on conduct that allegedly violates that implied covenant, as long as the implied covenant does not contradict an express term or create an independent contractual right.

The court held that Wu plausibly alleged a breach of the implied covenant. A reasonable bank customer could expect the bank to safeguard funds in the account, and protecting those funds is central to the purpose of opening a bank account. The court therefore denied Chase’s motion to dismiss Wu’s breach-of-contract claim.

Negligence

Wu alleged that Chase negligently allowed the unauthorized withdrawals. Chase argued that New York law barred the claim because it was based only on the contractual bank-account relationship and did not involve a separate duty of care. Wu agreed that her negligence claim was likely barred and did not oppose dismissal. The court concluded that Wu had abandoned the claim and dismissed her second cause of action.

Disposition

The court granted in part and denied in part Chase’s motion to dismiss. Wu’s negligence claim was dismissed, while her breach-of-contract claim based on the implied covenant of good faith and fair dealing survived dismissal. The court also ordered the parties to appear for an initial pretrial conference and directed the Clerk of Court to close the pending motion.