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Johnson v. People's United Bank, N.A.

United States District Court, D. New Hampshire

November 10, 2016

Charles M. Johnson, Trustee for the Charles M. Johnson Revocable Intervivos Trust and Charles M. Johnson
v.
People's United Bank, N.A. Opinion No. 2016 DNH 206

          ORDER

          Landya McCafferty United States District Judge

         Between 2013 and 2014, a trusted household employee with debit card access allegedly stole $185,000 from Charles M. Johnson’s checking accounts at People’s United Bank (the “Bank”). Johnson, individually and as trustee for the Charles M. Johnson Revocable Intervivos Trust, brought suit against the Bank in New Hampshire Superior Court, asserting that the Bank should have detected suspicious activity related to his accounts and prevented the unauthorized withdrawals.[1] The Bank removed the case to this court and now moves to dismiss (doc. no. 3). Johnson objects. For the reasons that follow, the Bank’s motion to dismiss is granted.

         Standard of Review

         Under Federal Rule of Civil Procedure 12(b)(6), the court must accept the factual allegations in the complaint as true, construe reasonable inferences in the plaintiff’s favor, and “determine whether the factual allegations in the plaintiff’s complaint set forth a plausible claim upon which relief may be granted.” Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014) (citation omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         Background

         In 2013, Johnson had two checking accounts at the Bank: (1) an account in his capacity as trustee for the Charles M. Johnson Revocable Intervivos Trust (the “Trustee Account”), and (2) a joint account with his father (the “Joint Account”). On April 1, 2014, Johnson’s father died and Johnson became the sole owner of the Joint Account. A Consumer Deposit Account Agreement (the “Agreement”) set forth the terms of these accounts.[2]

         In early 2013, Johnson hired a personal assistant named Alex Devine to help him and his father with household chores and medical appointments. Johnson was 70 years old and his father was 93 years old at the time. Devine “was a trusted member of the household and essentially became a family member.” Doc. no 1-1 at ¶ 17. As part of the employment arrangement, Johnson provided Devine with his Trustee Account debit card so that Devine could shop for him. Johnson also authorized Devine to use the debit card to make purchases of goods and services for herself, but he never gave her permission to make cash withdrawals.

         Throughout 2013 and 2014, Devine and her then-boyfriend, Adam French, made a number of unauthorized withdrawals from the Trustee Account using Johnson’s debit card.[3] The first such withdrawal occurred on March 20, 2013, when the couple withdrew doc. no. 5 at 16. The Bank attached portions of the Agreement to its motion to dismiss (doc. no. 3-3), and Johnson attached the entire Agreement to his objection to the Bank’s motion. Doc. no. 5-1. Because Johnson’s breach of contract claim is dependent on the Agreement, and neither party challenges the document’s authenticity, the court can properly consider the Agreement in evaluating the Bank’s motion to dismiss. See Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16-17 (1st Cir. 1998); see also Clorox Co. P. R. v. Proctor & Gamble Comm. Co., 228 F.3d 24, 32 (1st Cir. 2000). $120 from the Trustee Account without Johnson’s permission. Prior to that withdrawal, the Trustee Account had a balance of $32,548.47. The couple continued making unauthorized withdrawals until the Trustee Account balance was reduced to $1,856.74 in September 2013.

         Then, on September 26, 2013, without Johnson’s permission, the couple electronically accessed the Joint Account and transferred $20,000 from the Joint Account to the Trustee Account. Prior to that transfer, the Joint Account had a balance of $282,701.76. On that same day, the couple withdrew a total of $800 from the Trustee Account. Over the next year, the couple continued this scheme of transferring funds from the Joint Account to the Trustee Account and then withdrawing cash from the Trustee Account with the debit card.

         On August 6, 2014, the couple withdrew $500 from the Trustee Account. On August 7, they transferred $9,500 from the Joint Account to the Trustee Account and then withdrew $500 from the Trustee Account. But on August 8, the Bank froze the Trustee Account because of possible fraudulent activity. On that date, the couple attempted to withdraw money from the Trustee Account but was unable to do so because the account was frozen. French, impersonating Johnson, then called the Bank’s “Call Center” and complained that he was unable to withdraw money using the debit card. Johnson alleges that French sounded much younger than Johnson during the phone conversation. The Bank’s call center representative asked French certain questions to verify whether he was actually Johnson. Despite sounding hesitant, French was able to answer most questions correctly, and the call center representative asked French for a telephone number where she could reach him if they were interrupted. French put the representative on hold for quite some time and then finally gave her a phone number that did not appear in any of the Bank’s records on Johnson. The representative conferred with the Bank’s Fraud Center regarding this discrepancy. She then asked French to confirm the amount of the August 7 funds transfer. French correctly answered the question, and the Bank unfroze the Trustee Account. The couple then continued using the debit card to make unauthorized withdrawals.

         In September 2014, the manager of the Bank’s Stratham branch and a Bank fraud investigator both called Johnson to inform him that the Bank had frozen his accounts because of what appeared to be fraud. Johnson told the Bank that he had not authorized anyone to transfer funds from the Joint Account or make cash withdrawals with the debit card.

         Johnson alleges that between March 2013 and September 2014 the couple wrongfully withdrew approximately $185,000. Johnson had not reviewed any bank account statements during that period because Devine hid them.

         Johnson asserts that, because of his age, the Bank should have been more suspicious of the large electronic transfers and withdrawals. Johnson also alleges that he has a low understanding of financial and banking matters, and that the Bank knew he was an easy target for this type of fraud. Johnson filed this lawsuit in New Hampshire Superior Court, Rockingham County, alleging that the Bank failed to protect his accounts when the couple transferred funds from the Joint Account and withdrew money from the Trustee Account. The Bank removed the case to this court on the basis of diversity jurisdiction.

         Discussion

         Johnson asserts four claims against the Bank: Negligence (Count I); Misrepresentation (Count II); Breach of Contract (Count III); and Failure to Meet Depository Obligations (Count IV). The Bank moves to dismiss all claims.

         A. Count I: Negligence

         Johnson alleges that the Bank is liable for negligence because it allowed the couple to wrongfully withdraw money from the Trustee Account and transfer money from the Joint Account. Johnson alleges that the Bank had a duty to use reasonable care to ensure that such wrongful withdrawals and transfers did not take place.[4] The Bank, relying on Ahrendt v. Granite Bank, 144 N.H. 308 (1999), contends that a bank owes no such duty of care to protect its customers from the fraudulent conduct of third parties. The court agrees.

         To establish negligence under New Hampshire law, the plaintiff must demonstrate that the defendant breached a duty that it owed to the plaintiff, and that the breach proximately caused injury to the plaintiff. England v. Brianas, 166 N.H. 369, 371 (2014). The existence of a duty in a particular case is a question of law. Id. “In New Hampshire, the general rule is that an individual has no duty to protect another from the criminal acts of third parties.” Peterboro Tool Co. v. People’s United Bank,848 F. ...


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