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DC Cir. Rules in Favor of Bank in Deposit Account Loss Claim

The U.S. Court of Appeals for the D.C. Circuit held recently that plaintiffs failed to offer sufficient evidence to create a genuine dispute of fact as to their accounting and fraudulent concealment claims against a bank based on the disappearance of funds from a savings account that was closed 12 years before the lawsuit was filed.

Specifically, the Circuit Court determined that the plaintiffs did not demonstrate the existence of a fiduciary relationship as required for their accounting claim, and they did not establish the detrimental reliance element of their fraudulent concealment claim.

Accordingly, the Circuit Court affirmed the trial court order granting summary judgment in favor of the defendant bank.

A copy of the opinion in Trudel v. SunTrust Bank is available at:  Link to Opinion.

The bank’s customer opened a savings account with the bank in the mid-1990s.  The customer deposited more than $1 million into the account and designated his wife and son as its beneficiaries.

The money disappeared under mysterious circumstances sometime between the deaths of the customer and his wife in 1996, and the bank’s closure of the account in January 2003.

The representative of the decedents’ estates, and the customer’s son (collectively, “plaintiffs”), filed a lawsuit against the bank in 2015 accusing it of stealing the money or allowing others to do so.

The bank maintained that the deposits were likely withdrawn by the customer’s former assistant, through no fault of the bank.  The bank had previously discarded the account records in 2010, which was consistent with its record-retention policies.

The plaintiffs’ second amended complaint asserted 12 counts, but 10 were dismissed for untimeliness or failure to state a claim.  The trial court permitted the claims for an accounting and fraudulent concealment to proceed to discovery.

The trial court subsequently granted the bank’s motion for summary judgment, and denied a series of motions for additional discovery, reconsideration, and leave to amend.  The matter was appealed.

On appeal, the Circuit Court first analyzed the plaintiffs’ claim for an accounting of the funds, which – under Florida law – requires that the plaintiffs show either: (1) a sufficiently complicated transaction and an inadequate remedy at law, or (2) the existence of a fiduciary relationship.

Additionally, under Florida law, “[a] bank and its customers generally deal at arm’s-length as creditor and debtor, and a fiduciary relationship is not presumed.”  Thus, a plaintiff must show “special circumstances” establishing both “some degree of dependency on one side and some degree of undertaking on the other side to advise, counsel, and protect the weaker party.”

The plaintiffs argued that the required special circumstances were present because the customer spoke little or no English.  The Circuit Court disagreed, ruling that “even if that were enough to create a genuine dispute regarding dependency, plaintiffs have produced no evidence tending to show that [the bank] undertook to advise, counsel, and protect [the customer] or his family.”

Additionally, the plaintiffs argued that the disputed transactions were complex enough to warrant an accounting even without a fiduciary relationship, but since these arguments were raised for the first time on appeal, the Circuit Court determined they were forfeited.

Thus, the Circuit Court affirmed the ruling of the trial court on the accounting claim.

The Court next reviewed the trial court’s ruling granting summary judgment to the bank on the plaintiffs’ fraudulent concealment claim.

In their second amended complaint, the plaintiffs alleged that the bank, during the course of the litigation, concealed relationships with contractors who might have records regarding the disputed funds.  However, the trial court granted summary judgment in favor of the bank after discovery because the plaintiffs could not establish the essential element of detrimental reliance after discovery to the contractors failed to yield any relevant records.

On appeal, the plaintiffs did not challenge this aspect of the trial court’s ruling, but instead advanced a different concealment theory – that the bank, in the early 2000s, hid the customer’s unclaimed account in violation of Florida’s escheat laws.

The appellate court noted that the plaintiffs never pleaded this theory, but instead raised it for the first time in response to the bank’s motion for summary judgment, at which point the trial court found it was forfeited.

The Circuit Court determined that the trial court did not abuse its discretion in reaching its ruling, as the plaintiffs’ theory reflected a “fundamental change” from the theory that they pleaded, and they “did not raise their new concealment theory until summary-judgment briefing – after the close of an eight-month, twice-extended discovery period.”

Thus, the Circuit Court affirmed the ruling of the trial court on the fraudulent concealment claim.

Finally, the Circuit Court reviewed the trial court’s rulings on discovery, reconsideration, and leave to amend, and found no abuse of discretion.

With respect to the additional discovery, the Circuit Court determined that “the trial court permissibly denied the plaintiffs’ motions to compel further discovery and to defer ruling on summary judgment,” because “the proposed additional discovery would not have cured the fatal flaws the court identified in the accounting claim (absence of any fiduciary relationship) and the preserved concealment claim (absence of any contractor records).”

The Circuit Court next ruled that the trial court permissibly denied the plaintiffs’ motion to reconsider summary judgment on the concealment claim, because the alleged “new evidence” presented consisted of allegedly false statements made by the bank to the customer’s family or their agents between 2003 and 2013.  The Circuit Court agreed with the trial court that it was “not justifiable that counsel failed to unearth (or at least plead) these additional allegations during three years of litigation.”

Finally, the Circuit Court ruled that the trial court permissibly denied the plaintiffs’ request for leave to file a third amended complaint to expand the concealment claim beyond the alleged misconduct in 2015 and 2016 because “a request for leave to amend must be submitted in the form of a written motion, and . . . must state with particularity the grounds for seeking the order and state the relief sought.”  Because the plaintiffs’ “surfaced the amendment issue in their brief opposing [the bank’s] motion for summary judgment, which purported to reserve the right to amend,” the Circuit Court determined that it was properly denied.

Accordingly, the Circuit Court affirmed the rulings of the trial court in their entirety.

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