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Ludlow Essex Partners LLC v. Wells Fargo Bank, N.A.

United States District Court, S.D. New York

July 11, 2017

WELLS FARGO BANK, N.A., Defendant.

          For the Plaintiffs: Christopher R. Clarke Goldberg Weprin Finkel Goldstein LLP

          For the Defendant: Noreen A. Kelly McGuire Woods LLP Graham H. Claybrook McGuire Woods LLP


          DENISE COTE United States District Judge.

         Plaintiffs Ludlow Essex Partners LLC (“Ludlow”), and two of its members -- Nathan Halegua (“Halegua”) and Martin D. Newman (“Newman”) -- bring this action against the defendant Wells Fargo Bank, N.A. (“Wells Fargo”), alleging that Wells Fargo was negligent in allowing JGM Global Ventures Inc. (“JGM”) to open a “fraudulent” Wells Fargo account, and that this same activity violates New York's General Business Law § 349. The defendant has moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, the defendant's motion is granted.


         The following facts are drawn from the complaint and are construed in favor of the plaintiffs. See Keiler v. Harlequin Enters. Ltd., 751 F.3d 64, 68 (2d Cir. 2014). Ludlow is a New York limited liability company. In November 2015, Ludlow decided to make distributions to its members, including a $250, 000 distribution to member David Levy (“Levy”). Levy maintains an email account (“Levy Email Account”).

         On December 1, 2015, at 9:46 a.m., Ludlow's controller received an email from the Levy Email Account instructing Ludlow to wire transfer Levy's distribution to a bank account maintained by Signature Bank. At 10:02 a.m., Ludlow's controller received another email from that same account (the “phishing email”) informing him that the earlier referenced bank account could not accept wires due to an audit, and to instead wire Levy's distribution to the JGM Global Ventures Inc. bank account at Wells Fargo. On December 14, 2015, Ludlow wired the distribution to the JGM account at Wells Fargo. Levy never received the distribution.

         Upon learning that Levy had not received his distribution, Halegua contacted a Wells Fargo employee who confirmed that the distribution had been paid to the JGM account, and that $159, 247.55 had been withdrawn on December 16, 2015. Wells Fargo returned the remaining $90, 752.45 to Ludlow, which Ludlow in turn paid to Levy. Halegua and Newman personally paid Levy the remaining $159, 247.55 owed to him as part of his distribution. Ludlow was reimbursed a net total of $52, 500 by its insurance company. While Levy was paid the entire amount he was owed, Halegua and Newman are owed $106, 747.55.

         The plaintiffs filed this action in New York state court on February 22, 2017. Wells Fargo removed the case to this Court pursuant to 28 U.S.C. § 1332 on March 21. The defendant filed a motion to dismiss pursuant to Rule 12(b)(6) on April 4.[1] On April 5, an Order provided the plaintiffs with the option of opposing the motion or filing an amended complaint by April 25. The Order noted that it is “unlikely that plaintiffs will have a further opportunity to amend.” No amended complaint was filed. The motion to dismiss became fully submitted on May 19.


         When deciding a motion to dismiss, a court must “accept all allegations as true and draw all inferences in the non-moving party's favor.” LaFaro v. New York Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009) (citation omitted). “To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege sufficient facts which, taken as true, state a plausible claim for relief.” Keiler, 751 F.3d at 68; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“[A] complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” (citation omitted)). A claim has facial plausibility when “the factual content” of the complaint “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Tongue v. Sanofi, 816 F.3d 199, 209 (2d Cir. 2016) (citation omitted). “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678 (citation omitted). In sum, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted).

         I. Negligence

         To establish a prima facie case of negligence under New York law, a plaintiff must show: “(1) the existence of a duty on defendant's part as to plaintiff; (2) a breach of this duty, and (3) injury to the plaintiff as a result thereof.” In re World Trade Ctr. Lower Manhattan Disaster Site Litig., 758 F.3d 202, 210 (2d Cir. 2014) (citation omitted). “Because a finding of negligence must be based on the breach of a duty, a threshold question in tort cases is whether the alleged tortfeasor owed a duty of care to the injured party.” Aegis Ins. Servs., Inc. v. 7 World Trade Co., L.P., 737 F.3d 166, 177 (2d Cir. 2013) (citation omitted). “The existence and scope of an alleged tortfeasor's duty is, in the first instance, a legal question for determination by the courts.” Id. (citation omitted).

         “[A]s a general matter under New York law, banks and other financial institutions do not owe non-customers a duty to protect them from the intentional torts of their customers.” In re Terrorist Attacks on Sept. 11, 2001, 714 F.3d 118, 126 (2d Cir. 2013) (citation omitted).[2] The plaintiffs nevertheless maintain that Wells Fargo owes a general duty of care in opening bank accounts to ensure that such accounts are used only for legitimate purposes. The plaintiffs have summoned no authority to support the existence of ...

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