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Chasman v. JP Morgan Chase Bank, NA

United States District Court, S.D. New York

January 13, 2020

David Chasman, Haim Seth Chasman, Plaintiffs,
v.
JP Morgan Chase Bank, NA Chase Bank, and related subsidiaries, Successor by merger of First National Bank of Chicago, Defendants.

          MEMORANDUM & ORDER

          NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE.

         David Chasman and Haim Seth Chasman (together, “plaintiffs”) move for leave to amend their complaint against JP Morgan Chase Bank, N.A. (“defendant”). Defendant cross-moves for judgment on the pleadings. The Court grants defendant's motion and denies plaintiffs' motion for the reasons stated herein.

         BACKGROUND

         In 1983, Rose Ann Chasman invested $3, 000 in an individual retirement account certificate of deposit (the “IRA CD”) with First National Bank of Chicago (“First National”). Compl. ¶ 8. Plaintiffs allege that the IRA CD had an initial three-year term at an interest rate of 12% per annum, and that it was renewable in perpetuity for three-year terms at the 12% interest rate. Compl. ¶ 8.

         The complaint alleges that Ms. Chasman thereafter renewed the IRA CD with First National, and, after First National merged into Bank One, completed a new IRA application and agreement and, in so doing, asserted an entitlement to the perpetual 12% interest rate. Compl. ¶ 9-10; Answer (“Ans.”) ¶ 10. Defendant later acquired Bank One. Compl. ¶ 6.

         Ms. Chasman passed away in August 2007. After her death, plaintiffs -- Ms. Chasman's sons and the beneficiaries of her IRA CD -- each executed with defendant a form titled “Traditional IRA Election of Payment by Beneficiary” (the “Beneficiary Form”) pursuant to which they “request[ed] a withdrawal” from Ms. Chasman's IRA due to her death. See Declaration of Richard Farmer (“Farmer Decl.”), Exs. 1 & 2 at 1. In the section of the Beneficiary Forms titled “Beneficiary Acknowledgement, ” each plaintiff “authorized and directed [defendant] to distribute from my share of the deceased's IRA in the manner requested above, ” and “agree[d] to the terms that govern my share as contained in the IRA Custodial Agreement and Disclosure Statement [(the ‘Custodial Agreement')] and Account Rules and Regulations.” Farmer Decl., Exs. 1 & 2 at 3 (emphasis deleted).

         The Account Rules and Regulations in effect when plaintiffs opened their Beneficiary IRA CDs included the Deposit Account Agreement, which provided that “[f]or automatically renewable CDs, your CD will automatically renew for the same time period as the initial term, and thereafter for successive like periods of time, with an interest rate then in effect on the renewal date for like term CD to be applicable during such time period.” Declaration of Laura L. Deck (“Deck Decl.”), Exs. 1 & 2 at 11. Meanwhile, under the Custodial Agreement, plaintiffs “acknowledge[d] and agree[d] that nothing shall be construed as conferring fiduciary status upon [defendant].” Farmer Decl., Exs. 9 & 10 at 3.

         Pursuant to the Beneficiary Forms, defendant transferred plaintiffs' respective portions of the balance of funds in Ms. Chasman's IRA CD to separate Traditional Beneficiary IRA Certificate of Deposit accounts (the “Beneficiary IRA CDs”). See Compl. ¶¶ 13-14; Ans. ¶ 2. In 2009, defendant renewed each plaintiff's Beneficiary IRA CD at an interest rate of 12% per annum. Compl. ¶ 15; Ans. ¶ 15.

         On January 13, 2012, defendant provided plaintiffs with notices that their Beneficiary IRA CDs were due to mature and automatically renew on January 30, 2012. Farmer Decl., Exs. 3 & 4. The notices stated the terms and conditions that would apply to the automatically renewed CDs, including that (1) the CDs would renew “at the standard (non-special) interest rate in effect on the renewal date”; (2) that the standard interest rate in effect on January 13, 2012 was 0.35% APY; and, consistent with the Deposit Account Agreement, that (3) the CDs would “automatically renew for the same time period as the initial term, and thereafter for successive like periods of time, with an interest rate then in effect on the renewal date for like term CDs to be applicable during such time period.” Farmer Decl., Exs. 3 & 4 at 1-2. Each plaintiff's Beneficiary IRA CD automatically renewed on January 30, 2012 at the standard interest rate of 0.35% per annum. Farmer Decl., Exs. 6 & 8.

         On February 16, 2017, plaintiffs filed in this Court a complaint against defendant, which they amended on March 2, 2017. See No. 17 Civ. 1210, ECF Nos. 1 & 8. The amended complaint alleged that the IRA CD's alleged perpetual renewability at the 12% interest rate survived Ms. Chasman's death as well as the disbursement of the IRA CD's funds to plaintiffs, and that it therefore also applied to the Beneficiary IRA CDs. Based on this contention, the amended complaint asserted claims for breach of contract and breach of fiduciary duty for defendant's failure to renew the Beneficiary IRA CDs at an interest rate of 12% per annum on January 30, 2012. However, on July 17, 2017, plaintiffs voluntarily dismissed their amended complaint without prejudice because they could not locate any contract governing the IRA CD. See id., ECF No. 21.

         Then, on March 12, 2018, plaintiffs filed a virtually identical complaint in the Supreme Court of the State of New York, County of New York, which defendant removed to this Court on July 25, 2018. Defendant answered plaintiff's complaint on August 1, 2018, and contended that it had no obligation, contractual or otherwise, to renew the Beneficiary IRA CDs at an interest rate of 12% per annum. Ans. ¶¶ 15-16. Plaintiffs conceded at an initial pretrial conference that they had still failed to locate any contract governing the IRA CD. Before the Court is plaintiffs' motion for leave to amend their complaint and defendant's cross-motion for judgment on the pleadings.

         DISCUSSION

         A. Judgment on the Pleadings

         1. ...


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