Cruz v. TD Bank, N.A.

Decision Date27 March 2013
Docket NumberDocket Nos. 12–1200–cv, 12–1342–cv.
Citation711 F.3d 261
PartiesGary CRUZ and Claude Pain, individually and on behalf of all others similarly situated, Plaintiffs–Appellants, v. TD BANK, N.A., Defendant–Appellee. Geraldo F. Martinez and Joseph Cummings, individually and on behalf of all others similarly situated, Plaintiffs–Appellants, v. Capital One Bank, N.A., Defendant–Appellee.
CourtU.S. Court of Appeals — Second Circuit

OPINION TEXT STARTS HERE

G. Oliver Koppel (Daniel F. Schreck, on the brief), Law Offices of G. Oliver Koppell & Associates, New York, NY, for Gary Cruz, Claude Pain, Geraldo F. Martinez, Joseph Cummings.

Alexander D. Bono, Ryan E. Borneman, Duane Morris, LLP, Philadelphia, PA, for TD Bank, N.A.

Robert Plotkin, Kurt E. Wolfe, Matthew A. Fitzgerald, McGuire Woods LLP, New York, NY, Washington, D.C., and Richmond, VA, for Capital One Bank, N.A.

Gina M. Calabrese, St. Vincent de Paul Legal Program, Inc., Elder Law Clinic, St. John's University School of Law, Jamaica, NY, and Claudia E. Wilner, Neighborhood Economic Development Advocacy Project Inc., New York, NY, for Amici Curiae AARP, District Council 37 Municipal Employees Legal Services, The Legal Aid Society, Lincoln Square Legal Services, Inc., MFY Legal Services, Neighborhood Economic Development Advocacy Project, Inc., St. Vincent de Paul Legal Program, Inc., The Urban Justice Center.

CHIN, Circuit Judge:

These appeals, heard in tandem, challenge two separate judgments entered in the United States District Court for the Southern District of New York (Castel, J., and Sullivan, J.), in favor of defendants-appellees TD Bank, N.A. (TD Bank) and Capital One Bank, N.A. (Capital One), respectively, dismissing plaintiffs' claims that the banks violated (1) Article 52 of the New York Civil Practice Law and Rules (“CPLR”), as amended by the Exempt Income Protection Act (“EIPA”), 2008 N.Y. Laws Ch. 575 (codified as amended at CPLR 5205, 5222, 5222–a, 5230, 5231, and 5232), and (2) New York common law.

In both cases, the plaintiff judgment debtors maintained accounts with the defendant banks. The banks notified plaintiffs that their accounts were frozen pursuant to restraints served by third-party creditors. Plaintiffs allege, however, that the banks failed to provide them with certain required notices and forms, restrained their accounts, and assessed them fees, all in violation of EIPA.

The district courts dismissed the complaints pursuant to Federal Rule of Civil Procedure 12(b)(6), concluding that judgment debtors do not have a private right of action against their banks for the banks' violations of EIPA's procedural requirements.See Cruz v. TD Bank, N.A., 855 F.Supp.2d 157 (S.D.N.Y.2012); Martinez v. Capital One, N.A., 863 F.Supp.2d 256 (S.D.N.Y.2012).

These appeals present unresolved questions of New York law:

first, whether judgment debtors have a private right of action for money damages and injunctive relief against banks that violate EIPA's procedural requirements; and

second, whether judgment debtors can seek money damages and injunctive relief against banks that violate EIPA in special proceedings prescribed by Article 52 of the CPLR and, if so, whether those special proceedings are the exclusive mechanism for such relief or whether judgment debtors may also seek relief in a plenary action.

Because these unresolved questions implicate significant New York state interests and are determinative of these appeals, we reserve decision and certify them to the New York State Court of Appeals.

BACKGROUND

For purposes of these appeals, we assume the facts alleged in the complaints to be true and draw all reasonable inferences in plaintiffs' favor. See Mortimer Off Shore Servs., Ltd. v. Fed. Rep. of Germ., 615 F.3d 97, 113–14 (2d Cir.2010).

A. CPLR Article 52 and EIPA

CPLR Article 52 governs the enforcement and collection of money judgments in New York State courts. SeeCPLR 5201–5252. In 2008, the New York State legislature amended Article 52 by enacting EIPA, which created a procedure for the execution of money judgments such that judgment debtors would retain access to certain exempt funds deposited in their bank accounts. These exempt funds included, for example, a certain minimum amount regardless of the source, as well as a minimum amount received from social security benefits, public assistance, unemployment insurance, and pensions. See N.Y. State Senate Introducer's Mem. in Supp., Bill No. S6203, at 3–4 [hereinafter Sponsors Memo].1 The stated purpose of EIPA was to protect a baseline amount of every person's income [t]o ensure that money judgments do not render working New Yorkers unable to care for their or their families' most basic needs.” Id. at 3.

As relevant to these cases, EIPA prohibits the restraint of a minimum amount of funds in a judgment debtor's account, regardless of the source of the funds. SeeCPLR 5222(i).2 Further, pursuant to EIPA's new procedures, judgment debtors must be notified of the available exemptions and how to claim them. Accordingly, to restrain a debtor's bank account, a judgment creditor must serve the debtor's bank with two copies of the restraining notice, an exemption notice, and two exemption claim forms, in a prescribed format. CPLR 5222–a(b)(1), (4). If the creditor fails to serve these notices and forms on the bank, the bank cannot restrain the debtor's account and any restraint on the account is void. Id.

EIPA also requires the debtor's bank to serve the notices and forms on the debtor within two days after receiving them from the creditor. Id. 5222–a(b)(3). Banks are prohibited from charging fees to debtors whose accounts are exempt from restraint or restrained “in violation of” EIPA. Id. 5222(j). Nevertheless, under CPLR 5222–a (b)(3), [t]he inadvertent failure by a depository institution to provide the notice required by this subdivision shall not give rise to liability on the part of the depository institution.” Id. 5222–a (b)(3).

Article 52 prescribes certain procedures to resolve disputes that arise in connection with the enforcement and collection of money judgments. CPLR 5239, entitled [p]roceeding to determine adverse claims,” provides:

Prior to the application of property or debt by a sheriff or receiver to the satisfaction of a judgment, any interested person may commence a special proceeding against the judgment creditor or other person with whom a dispute exists to determine rights in the property or debt.

Id. 5239. The presiding court “may vacate the execution or order, void the levy, direct the disposition of the property or debt, or direct that damages be awarded.” Id. In addition, CPLR 5240 empowers a court “at any time, on its own initiative or the motion of any interested person, ... [to] make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure.” Id. 5240. The New York State Court of Appeals has explained that CPLR 5240 “grants the courts broad discretionary power to control and regulate the enforcement of a money judgment under article 52 to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts.” Guardian Loan Co. v. Early, 47 N.Y.2d 515, 519, 419 N.Y.S.2d 56, 392 N.E.2d 1240 (1979) (citations and internal quotation marks omitted).

Finally, CPLR 5222–a(h), entitled [r]ights of judgment debtor,” provides that [n]othing in this section shall in any way restrict the rights and remedies otherwise available to a judgment debtor, including but not limited to, rights to property exemptions under federal and state law.” CPLR 5222–a (h).

B. Cruz v. TD Bank, N.A., No. 12–1200–cv

Named plaintiffs Gary Cruz and Claude Pain (together, the Cruz plaintiffs) are residents of New York who maintained bank accounts at TD Bank, a national bank with branches in several states, including New York. In August 2009, TD Bank notified Cruz that his checking account and savings account, containing a total of approximately$3,020 received from wages, had been frozen pursuant to a restraining notice served by Cruz's third-party creditors. On December 31, 2010, TD Bank notified Pain that his checking account, containing approximately $340 received from wages, had been frozen pursuant to a restraining notice served by Pain's third-party creditors.

TD Bank subsequently charged the Cruz plaintiffs administrative fees associated with restraining their accounts and overdraft fees due to checks that bounced after their accounts were frozen. Further, the Cruz plaintiffs allege that TD Bank did not provide them with copies of the restraining notices that the third-party creditors served on TD Bank, disclosures concerning property that was exempt from restraint, or forms advising them how to claim an exemption, as required by EIPA.

On October 21, 2010, Cruz filed this putative class action seeking damages and injunctive relief pursuant to EIPA and New York common law, principally alleging that TD Bank failed to provide him with the required notices and forms as required by CPLR 5222–a(b)(3), restrained his entire account in violation of CPLR 5222(i), and assessed him fees in violation of CPLR 5222(j). 3 On March 14, 2010, Cruz filed an amended complaint that added Pain as a named plaintiff.

On March 2, 2012, the district court (Castel, J.) granted TD Bank's motion to dismiss the Cruz plaintiffs' claims.4See Cruz, 855 F.Supp.2d at 164. The court concluded that EIPA did not create a private right of action for money damages and that plaintiffs' common law claims failed as a matter of law.5See id. at 168, 174.

C. Martinez v. Capital One Bank, N.A., No. 12–1342–cv

Named plaintiffs Geraldo Martinez and Joseph Cummings (together, the Martinez plaintiffs) are residents of New York who maintained bank accounts at Capital One, a national bank with branches in several states, including New York. On January 15, 2010, Capital One notified Cummings, who maintained one...

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