Lembo v. Marchese, 242 N.J. 477 (2020). Employees of plaintiff, a dentist, forged endorsements on checks payable to plaintiff’s dental practice and deposited those checks into their own accounts at TD Bank. Plaintiff sued (among others) TD Bank, asserting common law claims of negligence and conversion but not presenting any conversion claims under the Uniform Commercial Code.
The Law Division granted the bank’s motion to dismiss, on the ground that the common law claims required a “special relationship” between plaintiff and the bank, but no such relationship was or could have been alleged. That court also rejected plaintiff’s contention that the Uniform Fiduciaries Law, N.J.S.A. 3B:14-52 et seq. (“UFL”), afforded an affirmative right of action against the bank.
Plaintiff appealed, and the Appellate Division reversed, finding that the UFL allowed an affirmative claim against the bank. That court remanded the case to allow plaintiff to amend his complaint to assert a UFL claim.
On further review, however, the Supreme Court reversed and reinstated the dismissal of the case. Writing for a unanimous Court, Justice Albin held that the UFL does not afford any affirmative claim against the bank. The Court also agreed with the Law Division that a special relationship was required to sustain the common law claims, but that such a special relationship was lacking here. “That [the wrongdoing employees] had personal accounts at TD Bank where the forged checks were cashed and deposited did not establish a ‘special relationship’ between TD Bank and [plaintiff].”
Justice Albin stated that “[w]hether the UFL gives rise to an affirmative cause of action against a bank is a matter of statutory interpretation.” That inquiry began with a review of the UFL’s predecessor statute, the Uniform Fiduciaries Act, N.J.S.A. 3A:41-1 et seq. (“UFA”). “The current version of the UFL is substantially similar to its UFA predecessor.” The UFA, Justice Albin explained, “addressed the need to protect banks from lawsuits that would impose on them an unrealistic obligation to oversee fiduciaries.”
Turning to the relevant provisions of the UFL, N.J.S.A. 3B:14-55 and -58, Justice Albin examined their plain language and found no basis for an affirmative claim. “Nothing in the plain language of the UFL suggests that the UFL is itself the basis for an affirmative cause of action. The UFL does not provide for a recovery through a private action or set forth remedies or a statute of limitations– all indicia of a statutory cause of action.”
Justice Albin contrasted that legislative silence with the Legislature’s action in expressly creating a right of action in other statutes such as the New Jersey Consumer Fraud Act. The Legislature knew how to do that but did not do it here. In sum, therefore, as was true of the UFA, “the UFL’s plain language and its legislative history evidence a legislative intent to provide a limited immunity to banks from common law causes of action– not to provide a new affirmative cause of action against a bank.”
“Few jurisdictions have squarely addressed” the issue presented in today’s ruling, Justice Albin said. But those that did supported the Court’s decision. The Court also found nothing in New Jersey’s own prior jurisprudence to support plaintiff’s argument.
In particular, New Jersey Title Ins. Co. v. Caputo, 163 N.J. 143 (2000), plaintiff’s primary authority, “did not indicate that the UFL gave rise to an affirmative claim but rather confirmed that under the UFL ‘a bank would be immune from liability in honoring a fiduciary’s check’ unless it is shown that the bank acted with actual knowledge of the breach of a fiduciary’s obligation or with knowledge of facts establishing that its actions amounted to bad faith” (emphasis by Justice Albin).
The UCC, Justice Albin said, contains a ‘comprehensive framework for allocating and apportioning the risks of handling checks.” Plaintiff was improperly trying to “outflank that comprehensive scheme by bringing back to life a time-barred UCC conversion claim” that, if timely asserted, might have created strict laibility.