Harry Kuskin 2008 Irrevocable Tr. v. PNC Fin. Grp.
| Docket Number | A-1937-21 |
| Decision Date | 24 July 2023 |
| Parties | HARRY KUSKIN 2008 IRREVOCABLE TRUST by SUSAN DWORKIN, TRUSTEE, ANNA KUSKIN 2008 IRREVOCABLE TRUST by SUSAN DWORKIN, TRUSTEE, and RICHARD KUSKIN, GRANTOR, Plaintiffs-Appellants, v. PNC FINANCIAL GROUP, INC., PNC BANK, PNC WEALTH MANAGEMENT, and STEVEN DWORKIN, Defendants-Respondents, and PNC BANK, N.A., Third-Party Plaintiff, v. SUSAN DWORKIN, Third-Party Defendant. |
| Court | New Jersey Superior Court — Appellate Division |
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Argued April 19, 2023
On appeal from the Superior Court of New Jersey, Law Division Union County, Docket No. L-0383-17.
Lawrence N. Lavigne argued the cause for appellants (Lawrence N. Lavigne, Esq., LLC, attorney; Lawrence N. Lavigne, of counsel and on the briefs; Jignesh J. Shah, on the briefs).
John O. Lukanski argued the cause for respondents PNC Financial Group, Inc., PNC Bank, N.A., and PNC Wealth Management (Reed Smith LLP, attorneys; John O. Lukanski, David G. Murphy, and Brian A. Sutherland (Reed Smith LLP) of the California and the New York bars, admitted pro hac vice, of counsel and on the brief).
Before Judges Vernoia, Firko and Natali.
Plaintiffs Harry Kuskin 2008 Irrevocable Trust (HKIT) and Anna Kuskin 2008 Irrevocable Trust (AKIT), through their trustee, Susan Dworkin (Susan), [1]Richard Kuskin (Richard), and Susan individually, challenge two Law Division orders granting summary judgment to defendants PNC Financial Group, Inc. PNC Bank, and PNC Wealth Management (collectively PNC) and dismissing their motion for partial summary judgment. Before us, plaintiffs contend the court erred in determining PNC was immune under the Uniform Fiduciaries Law (UFL), N.J.S.A. 3B:14-52 to -61, from liability arising out of Steven Dworkin's (Steven) fiduciary misconduct while serving as trustee to the HKIT and AKIT. They also argue PNC breached a duty of care it owed to the trusts as its customers and aided and abetted Steven's misappropriation of the trust funds. Finally, they maintain that if the matter is reversed and remanded, their motion for partial summary judgment should be reinstated and deemed granted with respect to certain of PNC's third-party claims against Susan.
PNC maintains it is immune from liability for Steven's fiduciary misconduct and plaintiffs' tort claims fail in any event because those claims are barred by the economic loss doctrine and plaintiffs failed to establish PNC owed them a duty of care. Alternatively, they contend plaintiffs' claims should be dismissed as preempted by the Uniform Commercial Code (U.C.C.) and time-barred and because Susan, as replacement trustee for Steven, failed to mitigate the trusts' losses.
We have carefully considered the parties' contentions and conclude plaintiffs' claims sounding in negligence and breach of fiduciary duty necessarily fail as a matter of law, as the competent evidence in the record does not establish PNC owed them a duty to monitor the trust accounts, investigate Steven's transactions, and disclose suspicious activity. In addition, we reject plaintiffs' aiding and abetting claim. Although that could end our appellate review, we nevertheless address PNC's immunity under the UFL and conclude that even if PNC was not entitled to summary judgment as a matter of law with respect to plaintiffs' substantive claims, it is immune from liability under the UFL. We accordingly affirm.
We derive the following facts from the summary judgment record and view them in the light most favorable to plaintiffs. See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). In 2008, Richard established the HKIT and AKIT for the benefit of his two children, Harry and Anna, and named Steven, his brother-in-law, as trustee. The trust agreements granted Steven, as trustee, broad authority and management discretion, specifically authorizing him to borrow money "upon terms and for periods [he] deem[ed] advisable" and "[t]o make any loans on commercially reasonable terms." The agreements also provided, "loans to any person having an interest in the income or principal of the property held by the Trustee may, in the Trustee's discretion, be made on whatever terms the Trustee deems advisable."
Pursuant to this authority, Steven opened a deposit account for each trust with PNC and executed "account agreement[s] for personal checking, savings and money market accounts" (account agreements). The account agreements required the trusts to monitor "each transaction" as they received notice of it and to "independently maintain[] accurate records of" the accounts' activity. The agreements also included the following language:
From July 2012 to July 2014, in his capacity as trustee, Steven made four withdrawals from each of the trusts' deposit accounts for loans to Foreign Tire Sales (FTS), a company wholly owned by Richard and the trusts. The loans totaled $5.7 million and were repaid with interest, with the exception of loans made in June 2014, which were repaid without interest.
In April 2014, at Richard's direction, Steven opened an investment management account for each trust, also with PNC, and transferred approximately $5.5 million from each of the trusts' deposit accounts into the investment management accounts. Steven almost immediately thereafter transferred approximately $800,000 back to the deposit accounts- approximately $400,000 to each deposit account. Additionally, shortly after establishing the investment management accounts, Steven approached PNC's wealth management team, which consisted of an investment advisor, relationship manager, fiduciary specialist, and senior banking advisor, and requested a $2.5 million line of credit using the trusts' assets as collateral. Steven intended to use the line of credit for the benefit of Auto Toy Store (ATS), a company in which he was a partner.[2] Unlike FTS, the trusts did not have an ownership interest in ATS.
Steven represented to PNC's wealth management team that he sought a "line of credit because he was looking to either supplement or replace dealer floor plans he was currently using for his business, [ATS]." According to Melinda Smith, the senior banking advisor on PNC's wealth management team, Steven informed the wealth management team that his current dealer floor plan, which served as a financing source for him to purchase and sell "exotic cars," had an "exorbitant interest rate."[3] Steven further explained:
[I]t was a win/win, meaning he would not have to pay as much from the dealer floor plan; he could pay the trust the interest, a payable, receivable situation, so the trust would be receiving the benefit of the interest paid for the money that was borrowed and he wouldn't have to pay whatever rate he was paying from the floor plan.
PNC's wealth management team hosted a "whiteboarding session" to consider Steven's request, which it also sent to PNC's legal department for review. Through its investigation, PNC discovered Steven had a prior felony conviction,[4] and it therefore declined to receive or review a formal loan application on his request. Upon PNC's denial to entertain his request, Steven began transferring funds from the trusts' deposit accounts to ATS, which was also a PNC customer, withdrawing over $2.2 million between April 2014 and June 2015.
Specifically, from April through October 2014, Steven issued ten checks totaling $740,000 either payable to ATS (nine checks) or cash (one check).
Some, but not all, of the deposit tickets used to deposit these checks into ATS's account described the transaction as a "loan." Notably, these transactions were contemporaneous with the trusts' loans to FTS in June 2014.
From January through February 2015, Steven withdrew $575,000 and deposited those funds into ATS's account via cash transfers. Some of the deposit tickets used to deposit these funds into ATS's account again described them as "loan[s]." From March through June 2015, Steven withdrew $961,000 via online transfers to ATS. In total, ATS repaid $1,165,000, leaving an outstanding balance of $1,111,000.
Eleven days after Steven's first withdrawal from the deposit accounts, in April 2014, Chris White, PNC Wealth Management's Senior Vice President, Market Trust Director, emailed Nancy Stroud, the Vice President Anti-Money Laundering Compliance Manager, with the subject line "Steven Dworkin." In reference to the trusts' investment management accounts, he stated: ...
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