On January 10, 2023, Justice Masley of the New York County Commercial Division issued a decision in Q3 Inv. Recovery Veh., LLC v. McEvoy, 2023 NY Slip Op. 30184(U), holding that a bank did not have a duty to protect non-customers from the bank’s customer, explaining:
To state a claim for negligence, a plaintiff must sufficiently allege (1) a duty; (2) a breach of that duty; (3) causation; and (4) actual injury. Because a finding of negligence must be based on the breach of a duty, a threshold question in torts cases is whether the alleged tortfeasor owed a duty of care to the injured party. Thus, a court must first, however, determine whether any legal duty exists.
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Plaintiff alleges that Signature Bank owed the Q3 Investors a duty of ordinary care and fair dealing to prevent Ackerman from using its bank accounts to misappropriate funds belonging to Q3I and the Q3 Investors and that Signature’s knowledge of the fiduciary relationship between Q3I and the Q3 Investors created a foreseeable zone of risk, and Signature Bank had a legal duty of ordinary care to assist the Q3 Investors in avoiding foreseeable harm from the creation of the Q3I accounts such as misappropriation of fiduciary funds.Under New York law, banks do not owe non-customers a duty to protect them from the intentional torts of their customers. Indeed with billions of banking transactions occurring in New York alone, this would be the equivalent of making New York banks liable to the world’s banking public. This principal holds true even where such third-party non-customers have invested in entities that are customers of the bank. The amended complaint does not allege that the Q3 Investors ever held accounts with
Signature or were customers of Signature. Therefore, Signature owed no duty to the Q3 Investors.However, there is a narrow exception where banks do owe a duty to third-party, non-customers-where the third parties are beneficiaries of trust accounts or fiduciary accounts.
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Again, this duty to inquire does not impose upon banks a duty to protect non-customers from a fraud involving depository accounts. The duty is therefore limited to special purpose fiduciary accounts.
Plaintiff alleges that the 031 Account was a trust account or fiduciary account and that Signature was aware of this because the Investment Documents revealed a fiduciary relationship between Q3I and the Q3I Investors. However, plaintiff’s allegations are conclusory. Simply labeling an account a trust account or fiduciary account does not necessarily make it so.
As a general matter, a strong presumption exists under New York law that a deposit account is a general account and not a special purpose account. Whether an account is is a trust or fiduciary account depends on the rights and obligations intended by the bank and the account opener.
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Importantly, the fact that a deposit is made by one in a fiduciary capacity – like an investment fund manager – does not change the character of a depository account into the type of trust or fiduciary account that creates this duty.
In the absence of a bank account agreement specifying that the account is a trust account, plaintiff’s allegations labeling the Q3I Account as a trust or fiduciary are insufficient to make it so.
(Internal quotations and citations omitted).