4. Claims That Will Require Plaintiff to Prove Knowledge and Participation
DIB also seeks to add claims for participation in breach of fiduciary duty, aiding and abetting fraud and commercial bad faith. DIB alleges the claims for aiding and abetting fraud and commercial bad faith for the first time in the PAC — it has alleged participation in breach of fiduciary duty before.
In the Mar. 8, 2002 Order, the Court refused DIB's first attempt to amend its complaint to add a claim for participation in breach of fiduciary duty. In its first attempt, DIB's twelve paragraph participation in breach of fiduciary duty claim for relief included only a general allegation that DIB officers owed a fiduciary duty and general allegations that Citibank participated in the breach. The Court denied the motion to amend, explaining that the allegations failed to apprise Citibank who breached the duty and how and when it was breached, (Mar 8, 2002 Order, at 6-7), and reasoning that "[a]t this relatively advanced stage of the proceedings, Plaintiff can be expected readily to be able to put Defendant on clearer notice of the elements of its claim." (Id. at 4.) In contrast, the PAC goes further and alleges, among other things, that between Aug. 1995 and Mar. 1998, two DIB employees, Ayyoub and El Refaie, owed and breached their fiduciary duties to DIB by participating in the alleged money-laundering scheme. (PAC ¶¶ 1, 123(b), 286-88.) The PAC alleges (somewhat ambiguously) that "Citibankers, including Ms. Searles and Ms. Hurst, knew that DIB's officers or employees (Ayyoub and El Refaie), were breaching their fiduciary duties to DIB when they enabled and covered up the transfers at DIB," (PAC ¶ 292), and that "Citibankers, including Ms. Searles, Ms. Hurst and Ms. Christensen, knew that the transfer requests caused to be made by Sissoko, Ayyoub and others under their direction, were for transfers to be made to accounts that were under watch for suspicious activity." (PAC ¶ 294.)
Common to the claims for participation in breach of fiduciary duty, aiding and abetting fraud and commercial bad faith are the requirements that Citibank had knowledge of and participated in the underlying scheme. See S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 847-48 (2d Cir. 1987)(participation in breach of fiduciary duty); AIA Holdings, S.A. v. Lehman Bros., Inc., 97 CIV. 4978, 2002 WL 88226, at *12 (S.D.N.Y. Jan.23, 2002)(aiding and abetting fraud); Renner v. Chase Manhattan Bank, 98 CIV. 926, 2000 WL 781081, at *17 (S.D.N.Y. June 16, 2000)(commercial bad faith).
Some disagreement exists as to whether these claims require actual or constructive knowledge. Compare AIA Holdings, 2002 WL 88226, at *12, with Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 283 (2d Cir. 1992). DIB alleges both in the PAC.
Allegations that Citibank only suspected fraudulent activity would not satisfy the actual knowledge requirement. See Ryan v. Hunton & Williams, 99-CV-5938, 2000 WL 1375265, at *9 (E.D.N.Y. Sept. 20, 2000). The PAC bases the three claims (participation in breach of fiduciary duty, aiding and abetting fraud and commercial bad faith) again principally on the conduct of Citibank employees Hurst, Searles and Christensen. (See PAC ¶¶ 289-94, 32931.) DIB alleges that these Citibank employees, in the course of their employment, assisted an alleged money-laundering scheme and that they knew that DIB employees Ayyoub and El Refaie also participated. (PAC ¶¶ 291-92.) Under the laws of agency, Citibank (potentially) may be held liable for the acts of its employees. Renner, 2000 WL 781081, at *11-*12. "[T]he general rule is that a bank is liable for the fraudulent acts or representations of an officer or employee acting within the course and apparent scope of his employment or authority." Id. (quoting 9 N.Y. Jur.2d Banks and Financial Institutions § 165 (1999)). For example, DIB alleges that
"While acting within the scope of their employment,
Citibankers including Ms. Searles and Ms. Hurst
altered checks at the request of the fraudsters and
in furtherance of the scheme." (PAC ¶ 90(a));
"While acting in the scope of their employment,
Citibankers like Ms. Christensen provided reference
letters for Mr. Comminges [an alleged associate of
Sissoko] on Citibank letterhead after Mr. Comminges'
account had been closed under suspicion." (PAC