677 F.3d 54 (1st Cir. 2012), 11-2257, Aresty Intern. Law Firm, P.C. v. Citibank, N.A.

Docket Nº:11-2257.
Citation:677 F.3d 54
Opinion Judge:THOMPSON, Circuit Judge.
Party Name:ARESTY INTERNATIONAL LAW FIRM, P.C., Plaintiff, Appellant, v. CITIBANK, N.A., Defendant, Appellee.
Attorney:James T. Hargrove, with whom Deutsch, Williams, Brooks, DeRensis & Holland, P.C., were on brief, for appellant. John A. Houlihan, with whom Elizabeth H. Kelly and Edwards Wildman Palmer LLP were on brief, for appellee.
Judge Panel:Before BOUDIN, Circuit Judge, SOUTER, Associate Justice,[*] and THOMPSON, Circuit Judge.
Case Date:April 27, 2012
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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677 F.3d 54 (1st Cir. 2012)

ARESTY INTERNATIONAL LAW FIRM, P.C., Plaintiff, Appellant,

v.

CITIBANK, N.A., Defendant, Appellee.

No. 11-2257.

United States Court of Appeals, First Circuit.

April 27, 2012

Heard March 5, 2012.

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[Copyrighted Material Omitted]

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James T. Hargrove, with whom Deutsch, Williams, Brooks, DeRensis & Holland, P.C., were on brief, for appellant.

John A. Houlihan, with whom Elizabeth H. Kelly and Edwards Wildman Palmer LLP were on brief, for appellee.

Before BOUDIN, Circuit Judge, SOUTER, Associate Justice,[*] and THOMPSON, Circuit Judge.

THOMPSON, Circuit Judge.

Aresty International Law Firm deposited a check for $197,750.00 from a Citibank 1— held account into a Citizens Bank 2— held account, received clearance to transfer the funds from Citizens soon after, and instructed Citizens to wire the funds from the account. Citizens did so, only to find later that the check had been fraudulent. Citizens sued Aresty and ended up with a judgment for a bit less than the amount of the check. Aresty now looks to hold Citibank liable for the lost funds because of its alleged failure to abide by certain provisions of federal and state law. Agreeing with the district judge that Aresty's federal claim came too late and cannot benefit from equitable tolling, and that its state claim is preempted by federal law, we affirm the judge's dismissal of the complaint.

Because this case comes to us on appeal from a dismissal under Rule 12(b)(6), we present the facts as alleged in the complaint.

Aresty, a Massachusetts law firm and professional corporation, received a check purportedly from Irwin International Global Trade & Logistics, which Aresty thought was a customer of one of its clients. The check apparently authorized the withdrawal of $197,750.00 from a Citibank account.

On " 30, 2007" — apparently October 30, 2007— Aresty deposited the check in an Interest-on-Lawyers-Trust-Account (commonly called an IOLTA account) it maintained with Citizens. Citizens presented the check to Citibank, which received it " no later than November 1, 2007." On November 2, 2007, Aresty was " assured" by Citizens that it " could wire the funds" from the check " without liability for dishonor or loss of any nature" and therefore " instructed Citizens to wire the funds."

Citibank, however, " elected not to pay the check," instead returning it to Citizens unpaid and marked with the words " Sent Wrong."

Having wired the funds represented by the check, Citizens went after Aresty for the missing money. It charged back the amount of the check to Aresty's accounts and, on January 26, 2009, filed suit in U.S. District Court in Massachusetts.

Over a year and a half later, on October 29, 2010, Aresty filed this suit against Citibank.3 Aresty claimed first that Citibank had violated 12 C.F.R. § 229.33 (part of " Regulation CC," which we will refer to using that shorthand from now on) by failing to notify Citizens in a timely manner

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that it would not honor the check, and second that Citibank had negligently breached a duty it owed Aresty under Regulation CC.4 Citibank responded with a motion to dismiss the complaint, alleging that the entire complaint was time-barred and that the negligence claim was preempted by federal law and barred by the economic loss doctrine. Aresty fought the preemption and economic-loss arguments on legal grounds, among other things trying to spin the negligence claim as one under the Uniform Commercial Code (" UCC" ),5 but acknowledged the applicable deadlines and asked that they be equitably tolled.

None of this went well for Aresty. In the present case, the district judge granted Citibank's dismissal motion on September 29, 2011. The judge said that Aresty plainly knew the check had been dishonored within days of its deposit and well before Aresty filed suit against Citibank, and therefore that Aresty had not been sufficiently diligent to warrant tolling. The judge then rejected Aresty's negligence claim on the grounds that Regulation CC does not impose any duty for state-tort-law purposes, that any duty it does impose is to a bank on the receiving end of check funds but not to that bank's customers, and, finally, that any state law claim is preempted by federal law. As for the separate suit by Citizens against Aresty, on November 16, 2011, it ended in an agreed-upon judgment against Aresty for $192,334.91.

Aresty has appealed the dismissal of its case against Citibank, reprising its arguments that the limitations period should be equitably tolled and that the negligence claim— now definitively labeled as one under the UCC— survives Citibank's various legal assaults. We will address the arguments, sticking mostly to the material in the complaint but occasionally noting facts argued by the parties (none of which we rely on in the end).

Equitable Tolling

The first hurdle Aresty must overcome is the seemingly time-barred nature of its federal claim. Summed up briefly, Aresty's claim is that Citibank is liable for the amount lost in the wire transfer because Regulation CC required Citibank to notify Citizens within two business days that it would not honor the fraudulent check. Had Citibank complied with Regulation CC, Aresty claims, Citizens could have halted the wire transfer. But suits under Regulation CC " shall be brought within one year after the date of the occurrence of the violation involved," 12 C.F.R. § 229.38(g), and Aresty did not meet this deadline. Nevertheless, Aresty argues that the district court should have equitably tolled its claim because the one-year filing period had already passed before Aresty discovered that Citizens would hold it liable for the lost funds.

To begin, we review a district court's decision to grant or deny equitable relief only for abuse of discretion. Ortega Candelaria v. Orthobiologics, LLC, 661 F.3d 675, 678 (1st Cir.2011). This deferential standard applies even if the district

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court granted or denied relief when ruling on a motion that would otherwise warrant de novo review. See id. Tolling is a form of equitable relief that temporarily suspends a statute of limitations for a period in which the plaintiff demonstrates that, " ‘ in the exercise of reasonable diligence, [he] could not have discovered information essential to [his claim].’ " 6 Ramirez-Carlo v. United States, 496 F.3d 41, 48 n. 3 (1st Cir.2007) (quoting Gonzalez v. United States, 284 F.3d 281, 291 (1st Cir.2002)). " We apply equitable tolling on a case-by-case basis, avoiding mechanical rules and favoring flexibility." Ortega Candelaria, 661 F.3d at 680. However, we invoke tolling sparingly; only particularly extraordinary circumstances beyond the plaintiff's control can justify ignoring an otherwise clear time limitation. See Irwin v. Dep't of Vets. Affairs, 498 U.S. 89, 96, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990) (" Federal courts have typically extended equitable relief only sparingly." ); Ortega Candelaria, 661 F.3d at 680 ...

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