King v. Crossland Sav. Bank

• Decision Date: 07 April 1997
• Docket Number: D,No. 648,648
• Citation: 111 F.3d 251
• Parties: Percy KING and George Russell, Plaintiffs-Appellants, v. CROSSLAND SAVINGS BANK and American Express Company, Defendants-Appellees. ocket 96-7468.
• Court: U.S. Court of Appeals — Second Circuit

Page 251

111 F.3d 251

Percy KING and George Russell, Plaintiffs-Appellants, v. CROSSLAND SAVINGS BANK and American Express Company Defendants-Appellees.

No. 648, Docket 96-7468.

United States Court of Appeals Second Circuit.

Argued Dec. 19, 1996.

Decided April 7, 1997.

Ivan L. Van Leer, Van Leer & Greenberg, New York City, for Plaintiffs-Appellants Percy K. King and George Russell.

Harold S. King, Stern, King, Hoey, Toker & Eustace, New York City, for Defendant-Appellee Crossland Savings Bank.

Edwin M. Reiskind, Friend & Reiskind, New York City, for Defendant-Appellee American Express Company.

Before: KEARSE and CABRANES, Circuit Judges, and KELLEHER, District Judge. ^*

KELLEHER, District Judge:

Plaintiffs, Percy King and George Russell (collectively referred to as "plaintiffs"), appeal from the district court's issuance of an order granting defendants', Crossland Savings Bank and American Express Company ("Crossland" and "American Express," respectively, and collectively referred to as "defendants"), motions for summary judgment. Plaintiffs are two individuals, one of whom attempted to open an account at Crossland. When presented with nine third-party (i.e., not made out to either of the plaintiffs) American Express Travelers' Cheques, Crossland telephoned American Express, which erroneously reported the checks as lost or stolen. Crossland then called the New York Police Department ("NYPD"), officers of which came to the bank and arrested King and Russell. The two men were not released until fourteen hours later, after American Express finally was able to communicate to the NYPD that the information provided was in error.

Before the district court, King and Russell claimed that American Express and Crossland should be liable for false imprisonment. Because neither American Express nor Crossland procured or instigated the arrest, however, the district court found for the defendants. King and Russell next asserted a claim for negligent misrepresentation against American Express. The district court again found for American Express because King and Russell, as plaintiffs, had not acted in reliance on the representations of American Express. Lastly, King and Russell had alleged that Crossland should be liable for negligence. The district court ruled in favor of Crossland because undisputed facts established that, as a matter of law, Crossland had not acted unreasonably. For the reasons that follow, we affirm the district court's grant of summary judgment.

I. BACKGROUND

A. Factual History

On December 6, 1985, Plaintiffs-Appellants Percy King ("King") and George Russell ("Russell") visited Crossland, with the purpose of having King open a Certificate of Deposit in the amount of one hundred thousand dollars ($100,000). Russell, who apparently frequented Crossland, referred King to a teller, then temporarily left the bank. While attempting to open the account, King produced seventy-seven negotiable instruments--nine of which were American Express Travelers' Cheques having a total value of five hundred seventy dollars ($570).

As Crossland reports to be customary procedure when dealing with third-party checks, the teller, or another employee at the bank, contacted American Express to confirm the status of the checks (i.e., whether they had been reported lost or stolen). American Express advised Crossland that the travelers' checks had been reported lost or stolen. A Crossland employee then contacted the NYPD. The police arrived at the scene and arrested both King and Russell, the latter having returned to the bank shortly after the police had arrived. King and Russell were then detained at the 63rd Police Precinct of the NYPD.

Later that day, American Express became aware that erroneous information had been provided to Crossland and that the checks, in fact, had not been reported lost or stolen. At that time, American Express dispatched an agent to effect the release of King and Russell from detention by the NYPD. The agent went to the 63rd Police Precinct but was told that King and Russell could not be released until the booking process had been completed. The agent eventually was able to persuade the police to drop the criminal charges against King and Russell, who were consequently released. The NYPD had taken King and Russell into custody at around 11:00 a.m.; they were released from the 63rd Police Precinct fourteen hours later, at around 1:00 a.m.

B. The District Court Decision

When the district court was presented with the defendants' motions for summary judgment, two causes of action against each defendant remained from those originally included in a complaint removed from the Supreme Court of New York, County of New York, on April 27, 1992. As against each defendant, King and Russell alleged both false imprisonment and negligence. In ruling on the summary judgment motion, the district court, in line with New York state law and based on the recommendation of a magistrate judge, construed plaintiffs' general negligence claim against American Express as one of negligent misrepresentation. ¹ Notably, though King and Russell did contest the magistrate court's characterization of the claim as one of negligent misrepresentation when arguing before the district court, King and Russell do not expressly argue on appeal that the district court erred in similarly so doing. ² Having so construed the plaintiffs' case, the district court then granted the defendants' motions for summary judgment as to each of the false imprisonment, negligent misrepresentation, and negligence claims.

First, as to false imprisonment, New York courts require a plaintiff to show: (1) that the defendant intended to confine the plaintiff, (2) that the plaintiff was aware of the confinement, (3) that the plaintiff did not consent to the confinement, and (4) that the confinement was not otherwise privileged. Broughton v. State, 37 N.Y.2d 451, 456-57, 373 N.Y.S.2d 87, 93, 335 N.E.2d 310, 314, cert. denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975). The key element of the test as it pertains to both defendant American Express and defendant Crossland is the intent requirement. To prove intent, a plaintiff must show that the defendant either: (a) confined or intended to confine the plaintiff or (b) affirmatively procured or instigated the plaintiffs' arrest. Carrington v. City of New York, 201 A.D.2d 525, 526-27, 607 N.Y.S.2d 721, 722 (2d Dep't 1994); Williams, 90 A.D.2d at 862, 456 N.Y.S.2d at 493. As against American Express, the district court ruled that far from intending to confine King and Russell or affirmatively instigating their arrest, American Express did nothing more than pass on information to Crossland. Carrington, 201 A.D.2d at 526-27, 607 N.Y.S.2d at 722 (noting that a defendant must confine, attempt to confine, or, in the context of police arrests, attempt to instigate the arrest). Similarly, with regard to defendant Crossland, because Crossland identified but did not direct the arrest of King and Russell, the district court again found that the "intent" requirement of false imprisonment could not be met.

Second, as to the negligent misrepresentation claim against American Express, under New York law a plaintiff must first establish that the defendant had a duty to give correct information. International Products Co. v. Erie R. Co., 244 N.Y. 331, 338, 155 N.E. 662, 664, cert. denied, 275 U.S. 527, 48 S.Ct. 20, 72 L.Ed. 408 (1927). A plaintiff must then show that the defendant knew: (1) that the information was desired by plaintiff for a serious purpose, (2) that the plaintiff intended to rely and act upon it, and (3) that, if false or erroneous, he or she would because of it be injured in person or property. Id., 155 N.E. at 664; see also Eiseman v. State of New York, 70 N.Y.2d 175, 187, 518 N.Y.S.2d 608, 614, 511 N.E.2d 1128, 1135 (1987). The district court ruled in favor of American Express, finding that King and Russell did not rely directly on any negligently provided information.

Third, as to the negligence claim against Crossland, the district court noted that New York courts require a plaintiff to show: (1) that the defendant owed the plaintiff a cognizable duty of care, (2) that the defendant breached that duty, and (3) that the plaintiff suffered damages as a proximate result of that breach. Stagl v. Delta Airlines, Inc., 52 F.3d 463, 467 (2d Cir.1995); Solomon v. City of New York, 66 N.Y.2d 1026, 1027, 499 N.Y.S.2d 392, 392-93, 489 N.E.2d 1294, 1294-95 (1985). The district court held that although banks do owe a duty of care to their customers, by calling American Express to inquire whether the checks were stolen and by relying on the statements of American Express, Crossland, as a matter of law, can not be deemed to have acted unreasonably. For the following reasons the district court judgment is affirmed.

II. DISCUSSION

A. Jurisdiction

This action originally commenced in the Supreme Court of the State of New York County of New York. After the Federal Deposit Insurance Corporation ("FDIC") declared defendant Crossland insolvent on January 24, 1992, Crossland went into receivership. Upon Crossland's motion, this, and other related matters, were then removed to the district court on April 27, 1992. Crossland affirms that through the district court proceedings as well as on appeal, its status in receivership has remained unchanged. Such removal and the continuing jurisdiction of this Court to hear these purely state law causes of action is thus grounded in 12 U.S.C. § 1819(b)(2)(A)-(B) and 28 U.S.C. § 1331.

Though purely state law causes of action against a bank in receivership "[do] not implicate principles of conservatorship or receivership under state or federal law, and raise[ ] no federal issue of any kind," we have recently held that 12 U.S.C. § 1819(b)(2) "is part of a comprehensive scheme enacted by Congress to serve and promote incontestably federal goals on a comprehensive basis."...