Opinion

REGIONAL PRODUCE COOPERATIVE CORPORATION v. TD BANK, N.A.

Court: District Court, E.D. Pennsylvania
Filed: Dec 12, 2022
Cited by: 0 cases
Authority: More cited than 28.9%

same under District of Columbia law

How later courts described this case

same under District of Columbia law
“Pennsylvania courts impose a general duty of good faith performance on each party in general commercial contracts.”
finding possibility of bad faith where plaintiff alleged that the bank was on notice that the wrongdoer was acting in breach of her fiduciary duties to the plaintiff and given the number of years and the numerous transactions alleged by the plaintiff
noting that “a bank’s mere failure to follow commercially reasonable banking procedures or to comply with its own policies may not constitute bad faith”

Written by the judges who cited it.

The opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

____________________________________________

REGIONAL PRODUCE COOPERATIVE : CIVIL ACTION

CORPORATION, :

Plaintiff, :

v. : NO. 19-1883

TD BANK, N.A. :

Defendant. :

____________________________________________:

Goldberg, J. December 12, 2022

MEMORANDUM OPINION

This case involves the extent to which a bank is responsible for the embezzlement of funds

by a bank customer’s Chief Executive Officer. Plaintiff, Regional Produce Cooperative

Corporation (“RPCC”), was the victim of an extensive, multi-million dollar embezzlement scheme

by its former President and CEO, Sonny “Caesar” DiCrecchio. RPCC’s complaint, originally filed

in state court, alleged that T.D. Bank, N.A. (“TD Bank”) permitted and facilitated this scheme.

That complaint set forth allegations of common law negligence, negligence under the Pennsylvania

Commercial Code, conversion under the Pennsylvania Commercial Code, and common law aiding

and abetting conversion. On May 1, 2019, TD Bank removed the case to federal court.

TD Bank now moves for summary judgment on all of RPCC’s claims. For the following

reasons, I will grant judgment in favor of TD Bank on all claims except for the statutory negligence

claim relating to transactions appearing on bank statements after August 16, 2017.

I. STATEMENT OF FACTS

For general background purposes, the following facts are derived from the evidence

submitted by the parties and the parties’ statements of facts. Where there is conflicting evidence

about a particular fact, Federal Rule of Civil Procedure 56 requires that I view those facts and

evidence in the light most favorable to RPCC. Facts recited by the parties but not pertinent to the

issues at hand are not included.1

A. General Background

RPCC is a Pennsylvania non-profit cooperative corporation that operates the Philadelphia

Wholesale Produce Market (“the Market”), the world’s largest fully-refrigerated wholesale

produce market. The Market is open to the public and gathers dozens of wholesale produce

merchants in a central location to supply fresh produce to the greater Philadelphia region. Those

merchants are also shareholders of RPCC and eligible to serve as volunteer, unpaid members its

Board of Directors (the “Board”). (PSUF ¶ 1; DR ¶ 1.)

Prior to the creation of RPCC, its predecessor, the Philadelphia Fresh Food Terminal

Corporation (“PFFTC”), operated a smaller wholesale produce market at a different location in

Philadelphia. On July 14, 2008, in anticipation of forming the current and larger market, PFFTC

created RPCC as a Pennsylvania non-profit corporation. (PSUF ¶ 2; DR ¶ 2.) After the Market

opened in 2011, RPCC took over its operations, and, following a brief period of co-mingled

operations, PFFTC ceased operating. (PSUF ¶ 3; DR ¶ 3.) At all relevant times, Caesar “Sonny”

1 Where facts are undisputed, I will reference the parties’ pleadings as follows: Defendant’s

Statement of Undisputed Facts (“DSUF”); Plaintiffs’ Response (“PR”), Plaintiffs’ Statement of

Undisputed Facts (“PSUF”), and Defendant’s Response (“DR”). If a statement is disputed and the

dispute can be easily resolved by reference to the exhibits, I will cite the supporting exhibits. If a

statement is disputed, but the dispute cannot be resolved by reference to the exhibits, I will note the

dispute without resolving it. I will not rely on any statement of fact that is unsupported by reference

to a specific exhibit.

DiCrecchio was the President and Chief Executive Officer of PFFTC and then RPCC. (PSUF ¶

5; DR ¶ 5.) Patricia Pumphrey was PFFTC’s accounts payable clerk and bookkeeper and assumed

those same roles for RPCC. (PSUF ¶ 6; DR ¶ 6.)

B. The Banking Relationship Between RPCC and TD Bank

In 1998, PFFTC commenced a banking relationship with TD Bank by opening a Business

Statement Savings Account, with the account number ending in -5470. (DSUF ¶ 2; PR ¶ 2.) On

May 25, 2000, DiCrecchio opened a new account for PFFTC, with an account number ending in

-3085. (DSUF ¶ 4; PR ¶ 4.) The “Temporary Signature Card” for that account (-3085) indicated

that DiCrecchio was the only authorized signer and that only one signature was required for checks

drawn on the account. (Def.’s Ex. 3.) PFFTC’s Board members knew that DiCrecchio was an

authorized signer on the -3085 account but believed that there were other signers on the account.

(Dep. of George Binck (“Binck Dep.”), 207:9–21; Dep. of George Manos (“Manos Dep.”), 76:24–

77:5.)

In 2009, PFFTC was the victim of a check-counterfeiting ring unrelated to the

embezzlement at issue here. (DSUF ¶ 8; PR ¶ 8.) Following discovery of this fraud, TD Bank

offered PFFTC several options, one of which was closing the compromised account and opening

a new one. (Def.’s Ex. 88.)

On July 31, 2009, TD Bank, through DiCrecchio, issued PFFTC a new account, with the

account number ending in -5031 (the “-5031 Account”). (Def.’s Ex. 2.) At the time DiCrecchio

opened the -5031 Account, the new Market was not yet operational, and, as such, the -5031

Account was opened in PFFTC’s name, not RPCC’s name. (Def.’s Ex. 2; DSUF ¶ 22; PR ¶ 22.)

The -5031 Account was created as a single-signer account, with DiCrecchio as the sole signer.

(DSUF ¶¶ 11–12; PR ¶¶ 11–12.) PFFTC and, subsequently, RPCC’s Board members still believed

that two signers were required on every check. (Dep. of Louis Penza (“Penza Dep.”) 99:23–

100:19; Dep. of John Vena (“Vena Dep.”) 32:10–17); Dep. of John DeFeliciantonio

(“DeFeliciantonio Dep.”) 57:5–20) Binck Dep. 209:16–209:20; Dep. of Thomas Fleming

(“Fleming Dep.”) 66:12–68:17.)

DiCrecchio had opened two prior accounts with TD Bank on PFFTC’s behalf. Thus, when

signing the Business Signature Card for the -5031 Account, DiCrecchio confirmed that he again

had the required authority to act with respect to the -5031 Account and that TD Bank had “no

responsibility or duty to assure or verify that [DiCrecchio] ha[d] or [was] acting within the

authority given [him] by the authorizing document or that such authorizing document [was]

genuine or valid.” (Def.’s Ex. 2.) DiCrecchio’s signatory authority on checks was permitted under

Section 17.1 of RPCC’s Bylaws, which stated that, “[t]he Board shall designate the

President/CEO, and, if so desired, one or more other officers or other persons who shall sign all

checks or demands for money and notes of the Corporation.” (Def.’s Exs. 4, 6.) The Bylaws,

however, also provided that “[a]ll sums received by the Corporation shall be deposited in its name

in such bank as may be designated by the board of Directors.” (Def.’s Ex. 4 § 10.10.) PFFTC and

RPCC Board Member Louis Penza testified that he could not recall any meeting by the Board

authorizing the opening of the -5031 account. (Penza Dep. 10:17–11:18; 196:11–197:24.)

When DiCrecchio opened the -5031 Account, TD Bank required him to complete two

forms: (1) a “For Profit Banking Resolution,” and (2) a “Business Signature Card.” (Def.’s Exs.

2, 9; PSUF ¶ 13; DR ¶ 13.) The For Profit Banking Resolution provided a space for the “Secretary

of the Corporation” to certify (a) the correct name and address of the Corporation, and (b) that the

Corporation, via a meeting of the Board of Directors of the Corporation, adopted a resolution

making TD Bank the Corporation’s financial institution. (Def.’s Ex. 9.) The only signature on the

Resolution was that of DiCrecchio, who was neither a member of the Board nor the Corporate

Secretary. (Def.’s Ex. 9.) According to TD Bank, its policies did not require that all the

information on these forms be filled in. (Dep. of Joseph Robinson (“Robinson Dep.”) 126:7–

127:13; Dep. of Danielle McMahon (“McMahon Dep.”) 104:17–105:18.)

The Business Signature Card designated individuals who were “authori[zed] to act with

respect to th[e] account,” stating:

The Authorized Individual(s) signing agree(s), jointly and severally

if multiple signers, to the terms set forth in the Deposit Account

Rules and Disclosure, as amended by “Bank” from time to time.

Each of the Authorized Individual(s) signing also acknowledge that

“Bank” provided at least one copy of these deposit account

documents.

(PSUF ¶ 17; DR ¶ 17, Def.’s Ex. 2.) The Business Signature Card also had spaces for the following

information to be filled in: “Account Purpose”; “Account Type”; “Date Opened”; and “Special

Instructions.” (Def.’s Ex. 2.) On the Business Signature Card for the -5031 Account, only the

“Date Opened” and “Account Type” fields were completed. (Id.) DiCrecchio signed the Business

Signature Card indicating that he agreed to the terms of TD Bank’s Deposit Account Rules and

Disclosure (“Account Agreement”) and had received a copy of the Account Agreement. (Id.)

TD Bank’s representative testified that the bank always provided a copy of its Account

Agreement to every customer. (Robinson Dep. 92:3–8; 148:11–23.) The Account Agreement

contained the following relevant language:

No Two-Signer Accounts. We do not offer accounts on which two

or more signatures are required for a check or other withdrawal.

Notwithstanding any provisions to the contrary on any signature

card or other agreement you have with us, you agree that if any

Account purports to require two or more signers on items drawn on

the Account, such provision is solely for your internal control

purposes and is not binding on us. If more than one person is

authorized to write checks or draw items on your Account, you agree

that we can honor checks signed by any Authorized Signer, even if

there are two or more lines on the items for your signature and two

signatures are required.

. . .

ACCOUNT STATEMENT. You are responsible for promptly

examining your statement each statement period and reporting any

irregularities to us. The periodic statement will not be considered

correct for all purposes and we will not be liable for any payment

made and charged to your Account unless you notify us in writing

within certain time limits after the statement and checks are made

available to you. We will not be liable for any check that is altered

or any signature that is forged unless you notify us within a

reasonable period of time, not to exceed thirty (30) calendar days

after the statement and the altered or forged item(s) are made

available. Also, we will not be liable for any subsequent items paid,

in good faith, containing an unauthorized signature or alternation by

the same wrongdoer unless you notify us within Thirty (30) calendar

days after the statement and first altered or forged items were made

available. . . .

. . .

Business Accounts. If the Account is not owned by a natural person

(a corporation, partnership, limited liability company, sole

proprietorship, unincorporated associations, etc.) then the Account

Holder must provide evidence to our satisfaction of the authority of

the individuals who sign the signature card to act on behalf of the

Account Holder. On any transactions involving the Account, we

may act on the instructions of the person(s) authorized in the

resolutions, banking agreement, or certificate of authority to act on

behalf of the Account Holder. You agree to notify us in writing of

any changes in the person(s) authorized or the form of ownership

. . . .

(Def.’s Ex. 67.)

DiCrecchio testified at his deposition that—as indicated by his signature of the Bank

Signature Card—he had no reason to doubt that he received a copy of the Account Agreement at

the time of the -5031 Account opening. (Dep. of Caesar DiCrecchio (“DiCrecchio Dep.”), 177:13-

178:1.) No one at TD Bank, however, could specifically confirm that they had given the Account

Agreement to DiCrecchio, and RPCC contends that the record is devoid of evidence that

DiCrecchio, PFFTC, or RPCC ever received a copy of this document. (Id. at 92:3–93:16; PR

¶ 18.)

C. RPCC is Formed

On July 14, 2008, PFFTC created RPCC as a new non-profit cooperation for the purpose

of entering into contracts to build a newer and more up-to-date building for the Market. (DSUF

¶ 21; PR ¶ 21.) This building opened on June 5, 2011, and PFFTC’s business was transitioned to

and conducted by RPCC around that time. (DSUF ¶ 22; PR ¶ 22.) Even though the -5031 Account

was opened in PFFTC’s name, both PFFTC and RPCC’s funds passed through that Account.

(DSUF ¶ 23; PR ¶ 23.)

The parties dispute whether or not either PFFTC or RPCC informed TD Bank about

PFFTC’s name change or the change in the -5031 Account’s ownership prior to October 2012.

(DSUF ¶ 24; PR ¶ 24; Pl.’s Ex. 48.) Emails from October March 2011, September 2012, and

October 2012 reflect internal RPCC discussions between PFFTC’s and RPCC’s bookkeeper/office

manager Patricia Pumphrey and DiCrecchio regarding the documentation required to effectuate a

name change. (Def.’s Ex. 44 (March 21, 2011 email); Def.’s Ex. 45 (September 28, 2012 email);

Def.’s Ex. 46 (Oct. 5, 2012 email); Def.’s Ex. 47 (Oct. 12, 2012 email).) Around this same time,

RPCC requested that additional signers, along with DiCrecchio, be added by TD Bank to the

-5031 Account as individuals authorized to transact on behalf of RPCC. (DSUF ¶¶ 27–28; PR

¶¶ 27–28; PSUF ¶¶ 44–45; DR ¶¶ 44–45.) On Thursday, October 11, 2012, Pumphrey emailed

Stephanie Talotti of TD Bank, attaching information on four new signers and requesting that TD

Bank personnel come by that afternoon to complete paperwork. (Pl’s Ex. 48.) Talotti responded

the next day indicating that she had been out but would get back in touch with Pumphrey the

following Monday. (Pl.’s Ex. 49.) Ultimately, TD Bank employees and Pumphrey/DiCrecchio

agreed to meet on October 18, 2012 to complete the organization’s name change. (Pl.’s Ex. 50.)

For reasons unexplained in the record, the name change/change of account ownership was never

completed at that time. (PSUF ¶ 49; DR ¶ 49.) The record contains only one other email from

Pumphrey to TD Bank, dated November 30, 2016, wherein Pumphrey asked Cecilia Zepp of TD

Bank to “Please remind Sonny [DiCrecchio] to have the name changed when is thru with the wire

transfer.” (Def.’s Ex. 54.) There is no evidence regarding what happened with that request.

Although PFFTC, and later RPCC, ordered checks with two signature lines for the -5031

Account, those checks were not ordered through TD Bank, but rather through a third-party vendor,

Orbis Solutions. (DSUF ¶ 33; PR ¶ 33.) The parties agree that RPCC Board members were aware

of the -5031 Account but dispute whether the Board was aware that the account was still only in

PFFTC’s name. (DSUF ¶ 35; PR ¶ 35; see also Penza Dep. 234:1–9; DiFeliciantonio Dep. 68:20–

24.)) Nonetheless, it is undisputed that RPCC Board members repeatedly signed off on checks for

the -5031 Account. (Manos Dep. 235:19–237:21; DiFeliciantonio Dep. 151:16–153:22; Penza

Dep. 43:16–44:19; Binck Dep. 22:24–25:22.)

D. DiCrecchio’s Embezzlement Scheme

DiCrecchio’s embezzlement started in 2006 and lasted until he confessed to RPCC’s Board

on August 14, 2018. (DSUF ¶ 29; PR ¶ 29.) From 2011 to 2018, DiCrecchio used only the -5031

Account to embezzle funds from RPCC. (Id.) On August 16, 2018, RPCC notified TD Bank that

DiCrecchio had been terminated. (DSUF ¶ 30; PR ¶ 30.) Although DiCrecchio admitted to

embezzling a total of $8,686,300.63, only $5,493,707 passed through the -5031 Account. (DSUF

¶ 31; PR ¶ 31; Pl.’s Ex. B.)

DiCrecchio’s scheme was carefully constructed. For legitimate business expenses,

DiCrecchio would direct Patricia Pumphrey to sign his name and to obtain a Board member’s

signature on checks. (DSUF ¶ 34; PR ¶ 34.) Board member Louis Penza explained that when

presented with checks for a second signature, he would verify the related bills provided to him.

(Penza Dep. 142:1–9.) For fraudulent expenses, DiCrecchio would have Pumphrey obtain only

one signature on a check—that of DiCrecchio—without obtaining a second signature. (DSUF

¶ 36; PR ¶ 36; Pumphrey Dep. 172:7–17.) To hide his fraud, DiCrecchio directed Pumphrey to

record all fraudulent payments as legitimate business expenditures, for example as maintenance,

snow removal, insurance legal fees, and other false codes. (DSUF ¶ 37; PR ¶ 37.) Importantly,

no one from RPCC ever reported any unauthorized transaction to TD Bank until after DiCrecchio’s

confession in August 2018. (DSUF ¶ 38; PR ¶ 38.)

Pumphrey testified that she suspected that many of the transactions were fraudulent over a

period of years but never raised this concern with anyone on the boards of PFFTC or RPCC.

(Pumphrey Dep. 25:7–26:23.) She also testified that for each of the months that she was the

accounts payable clerk, she would receive the monthly bank statement for the -5031 Account and

either the actual checks or check images. (Pumphrey Dep. 44:2–9.)

E. DiCrecchio’s Use of Embezzled Funds

Beginning in 2006, DiCrecchio began embezzling funds to pay for the rent and

maintenance of a $2.25 million dollar home in Stone Harbor, New Jersey. (DSUF ¶ 42; PR ¶ 42.)

DiCrecchio directed Pumphrey to write monthly checks payable to “Jonathan Advisors” for rent

on the Stone Harbor house. (Pumphrey Dep. 57:1–59:14; DiCrecchio Dep. 25:11–26:4.) The

parties agree that, beginning in 2009, the embezzled funds came from PFFTC. (DSUF ¶¶ 42–43;

PR ¶¶ 42–43.) Beginning in 2014, DiCrecchio ceased writing checks directly to Jonathan Advisors

and, instead, directed Pumphrey to write monthly checks to two other fictitious companies. (DSUF

¶ 44; PR ¶ 44.) DiCrecchio would cash these checks at United Check Cashing and convert them

to money orders used for paying rent on the Stone Harbor house. (DSUF ¶ 45; PR ¶ 45.) Sometime

in 2017, United Check Cashing started demanding documentation showing DiCrecchio’s

affiliation with the companies to which the checks were written. (DiCrecchio Dep. 129:22–

131:18.)

DiCrecchio then started directing Pumphrey to make checks payable to “Ferguson

Dechert,” the subsequent property manager of the Stone Harbor house. (DSUF ¶ 48; PR ¶ 48.)

DiCrecchio directed Pumphrey to designate these payments in QuickBooks as “Trash and

Recycling.” (DSUF ¶ 49; PR ¶ 49.)

In a similar pattern, DiCrecchio embezzled from the Market by directing Pumphrey to write

checks payable to DiCrecchio or to a fictitious entity, which would be cashed at United Check

Cashing, to pay millions of dollars to friends, relatives, and organizations unrelated to the Market’s

operations, to make contributions to various charities and local organizations such as string bands,

and to pay to Market co-workers excess compensation not approved by the Board. (DSUF ¶ 51;

PR ¶ 51.) Additionally, DiCrecchio embezzled cash from RPCC by diverting incoming checks

intended for the Market for pallet sales, and skimming cash from the Market’s pay gate, which

was then distributed to numerous Market employees as additional cash compensation. (DSUF ¶

53; PR ¶ 53.)

In 2014, DiCrecchio made an unauthorized $180,000 loan to John DiFeliciantonio, an

RPCC Board member and Board Secretary. (DSUF ¶ 40; PR ¶ 40.) DiFeliciantonio testified that,

“[a]s far as [he] knew, [the loan] was from Caesar DiCrecchio, not the RPCC.” (DiFeliciantonio

Dep. 171:20–172:2.) He stated that he did not know the funds came from an RPCC account until

later. (Id. at 172:4–8.)

F. RPCC’s Receipt of Bank Statements

TD Bank sent monthly bank statements for the -5031 Account to “PFFTC” at the address

of 6700 Essington Avenue, which was the same address used by RPCC when it took over the

Market. (Def.’s Ex. 31–38, 77, 264; DSUF ¶ 55; PR ¶ 55.) Pumphrey and DiCrecchio were

responsible for reviewing monthly account statements for RPCC. (Binck Dep. 119:24–21;

Pumphrey Dep. 40:12–41:24, 43:6–45:20.) The monthly account statements showed that hundreds

of checks written from the -5031 Account only had DiCrecchio’s signature and that regular

payments were made to Jonathan Advisors. (DSUF ¶ 58; PR ¶ 58; Def.’s Ex. 263.) It is undisputed

that Pumphrey and DiCrecchio were the only individuals who ever reviewed PFFC or RPCC bank

statements prior to DiCrecchio’s confession; no one else at RPCC was designated to review

monthly account statements. Board members did not raise concerns about not receiving bank

statements. (Binck Dep. 18:3–21:13; Penza Dep. 31:14–33:7, 37:1–13, DiCrecchio Dep. 56:4–13;

Dep. of Mark Levin (“Levin Dep.”) 78:5–14; Vena Dep. 71:15–72:11.) Several RPCC Board

members admitted that if they had looked at the statements, they would have seen that DiCrecchio

was signing checks with only one signature. (Penza Dep. 45:5–20, Binck Dep. 68:23–69:12,

233:6–241:21.)

Notes from the July 2018 Board Meeting indicate that George Manos stated that he had

become “concerned about the bank balances [RPCC] maintain[s] and proposed each Board

member receives the balances and account activity for each account on the 1st, 15th, and 30th of

each month.” (Def.’s Ex. 91.) Manos “reiterated that these requests were to satisfy the Board’s

responsibility to know what is happening with RPCC’s financials.” (Id.) RPCC contends that it,

acting through its Board, was unaware of any unauthorized transactions until after DiCrecchio’s

confession. (DSUF ¶ 64; PR ¶ 64.) RPCC further posits that prior to DiCrecchio’s confession, it

believed that additional signers were required. (DSUF ¶ 65; PR ¶ 65; Vena Dep. 32:6–18; Penza

Dep. 190:6–191:1.)

RPCC ultimately closed the -5031 Account following DiCrecchio’s confession. (PSUF ¶

50; DR ¶ 50.)

G. Procedural History

On April 11, 2019, RPCC brought suit against TD Bank for (a) common law negligence,

(b) negligence under the Pennsylvania Uniform Commercial Code (“UCC”), 13 Pa.C.S. §§ 3405

and 3406, (c) conversion of instruments under the Pennsylvania UCC, 13 Pa.C.S. § 3420, and (d)

aiding and abetting conversion. After TD Bank filed a Federal Rule of Civil Procedure 12(b)(6)

motion, I dismissed both the common law negligence claim to the extent it was based on the Bank

Secrecy Act and the claim for aiding and abetting conversion.

TD Bank has now filed the current Motion for Summary Judgment seeking judgment on

all remaining claims.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 56 states, in pertinent part:

A party may move for summary judgment, identifying each claim

or defense—or the part of each claim or defense—on which

summary judgment is sought. The court shall grant summary

judgment if the movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter

of law. The court should state on the record the reasons for granting

or denying the motion.

Fed. R. Civ. P. 56(a). “Through summary adjudication, the court may dispose of those claims that

do not present a ‘genuine dispute as to any material fact’ and for which a jury trial would be an

empty and unnecessary formality.” Capitol Presort Servs., LLC v. XL Health Corp., 175 F. Supp.

3d 430, 433 (M.D. Pa. 2016). A factual dispute is “material” if it might affect the outcome of the

suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An

issue is “genuine” only if there is a sufficient evidentiary basis to allow a reasonable fact-finder to

return a verdict for the non-moving party. Id.

The initial burden is on the moving party to adduce evidence illustrating a lack of genuine,

triable issues. Hugh v. Butler Cnty. Family YMCA, 418 F.3d 265, 267 (3d Cir. 2005). Once the

moving party satisfies its burden, the non-moving party must, in rebuttal, present sufficient

evidence of a genuine issue. Santini v. Fuentes, 795 F.3d 410, 416 (3d Cir. 2015). The court must

then resolve all doubts as to the existence of a genuine issue of material fact in favor of the non-

moving party. Saldana v. Kmart Corp, 260 F.3d 228, 232 (3d Cir. 2001). Unsubstantiated

arguments made in briefs are not considered evidence of asserted facts. Versarge v. Twp. of

Clinton, 984 F.2d 1359, 1370 (3d Cir. 1993).

III. DISCUSSION

A. Statutory Negligence Claim (Count II)

TD Bank first seeks summary judgment regarding RPCC’s UCC negligence claim under

13 Pa.C.S. § 3406, which pertains to assertions of “[n]egligence contributing to forged signatures

or alteration of instruments.” TD Bank contends that this claim is barred by the limitations set

forth in the companion provision of 13 Pa.C.S. § 4406.

Any claim brought under the UCC is, as a general rule, subject to a three-year statute of

limitations. 13 Pa. Cons. Stat. § 4111. For certain actions between a payor bank and its customer,

that limitations period is further modified by 13 Pa.C.S. § 4406, which describes a customer’s

obligation to report unauthorized signatures or alterations upon receipt of a bank statement:

Duty of customer to discover and report unauthorized signature

or alteration

(a) Statement of account.–-A bank that sends or makes

available to a customer a statement of account showing payment of

items for the account shall either return or make available to the

customer the items paid or provide information in the statement of

account sufficient to allow the customer reasonably to identify the

items paid. The statement of account provides sufficient information

if the item is described by item number, amount and date of

payment.

(b) Retention of items.–-If the items are not returned to the

customer, the person retaining the items shall either retain the items

or, if the items are destroyed, maintain the capacity to furnish legible

copies of the items until the expiration of seven years after receipt

of the items. A customer may request an item from the bank that

paid the item, and that bank must provide in a reasonable time either

the item or, if the item has been destroyed or is not otherwise

obtainable, a legible copy of the item.

statement of account or items pursuant to subsection (a), the

customer must exercise reasonable promptness in examining the

statement or the items to determine whether any payment was not

authorized because of an alteration of an item or because a purported

signature by or on behalf of the customer was not authorized. If,

based on the statement or items provided, the customer should

reasonably have discovered the unauthorized payment, the customer

must promptly notify the bank of the relevant facts.

(d) Effect of failure to report unauthorized signature or

alteration.—If the bank proves that the customer failed, with

respect to an item, to comply with the duties imposed on the

customer by subsection (c), the customer is precluded from asserting

against the bank:

(1) the customer’s unauthorized signature or any alteration

on the item if the bank also proves that it suffered a loss by

reason of the failure; and

(2) the customer’s unauthorized signature or alteration by the

same wrongdoer on any other item paid in good faith by the

bank if the payment was made before the bank received

notice from the customer of the unauthorized signature or

alteration and after the customer had been afforded a

reasonable period of time, not exceeding 30 days, in which

to examine the item or statement of account and notify the

bank.

(e) Allocation of loss.—If subsection (d) applies and the

customer proves that the bank failed to exercise ordinary care in

paying the item and that the failure substantially contributed to loss,

the loss is allocated between the customer precluded and the bank

asserting the preclusion according to the extent to which the failure

of the customer to comply with subsection (c) and the failure of the

bank to exercise ordinary care contributed to the loss. If the

customer proves that the bank did not pay the item in good faith, the

preclusion under subsection (d) does not apply.

(f) Statutes of limitations applicable to customer.--Without

regard to care or lack of care of either the customer or the bank, a

customer who does not within one year after the statement or items

are made available to the customer (subsection (a)) discover and

report the customer’s unauthorized signature on or any alteration on

the item is precluded from asserting against the bank the

unauthorized signature or alteration.

13 Pa. Const. Stat. § 4406.

Two portions of this provision are particularly relevant to the issues before me. First, it is

a general principle that if the customer notifies the bank within one year of discovering an

unauthorized signature or alteration, the customer retains his/her right to bring suit within the

general three-year statute of limitations period of § 4111. Bucci d/b/a Envt’l Equip. & Serv. Co.

v. Wachovia Bank, N.A., 591 F. Supp. 2d 773, 785 (E.D. Pa. 2008). But, under § 4406(b), if the

customer fails to notify the bank of an unauthorized signature within one year of receiving a

statement “sufficient to allow the customer reasonably to identify the items paid,” the customer

“loses his or her right to bring suit on those claims regardless of the otherwise applicable statute

of limitations.” Id. Often referred to as the statute of repose, “subsection (f) is a powerful weapon

for banks because it places the risk of loss squarely on customers after one year has passed.” Envt’l

Equip. & Serv. Co. v. Wachovia Bank, N.A., 741 F. Supp. 2d 705, 715 (E.D. Pa. 2010). “[S]ection

4406(f) is not a statute of limitations per se, but rather ‘a precedent to an action which, unlike a

statute of limitations, cannot be tolled.’” Bucci, 591 F. Supp. 2d at 785 n.9 (quotation omitted).

The limitations period for bringing a cause of action against a bank is further narrowed by

§ 4406(d). Under this section, if, upon receipt of a statement, a bank customer fails to comply

with his burden of notifying the bank of an unauthorized signature or altered item within a

reasonable period of time, not exceeding thirty days, the customer is precluded from asserting

claims related to unauthorized signatures or alterations by the same wrongdoer on any other item

paid in good faith by the bank before any notice is received. 13 Pa. Cons. Stat. § 4406(d). This

principle is known as the “Repeater Rule” or the “Same Wrongdoer” rule. See Grodner & Assoc.

v. Regions Bank, 766 F. App’x 12, 14 (5th Cir. 2019) (noting that this rule imposes on the customer

the risk of loss on all subsequent forgeries by the same wrongdoer after the customer had a

reasonable time to detect an initial forgery if the bank has honored subsequent forgeries prior to

notice).

The potential interplay between these two rules is nuanced and perhaps can be explained

through a hypothetical. Under § 4406(f) (the statute of repose), if the account holder receives

statements on May 1, 2022, June 1, 2022, and July 1, 2022, each reporting a fraudulent check

written by different wrongdoers, the account holder has one year from each statement—i.e. until

May 1, 2023, June 1, 2023, and July 1, 2023 respectively—to report that fraud to the bank. If,

however, the fraudulent checks shown on each statement are written by the same wrongdoer,

§ 4406(d) (repeater rule) comes into play. In order to bring claims regarding the fraudulent checks

written by the same wrongdoer noted on the June 1, 2022 and July 1, 2022 statements, the account

holder would have to report the fraud within thirty days of the May 1, 2022 statement. If the

account holder does not do so, they are precluded from bringing any claims against the bank

regarding those checks in the June 1, 2002 and July 1, 2022 statements, but may still maintain a

cause of action against the bank on the check appearing on the May 1, 2022 statement, so long as

the fraud is reported to the bank by May 1, 2023.

Relying on § 4406(f) and (d), TD Bank argues that RPCC is precluded, as a matter of law,

from asserting any claims for unauthorized payments by DiCrecchio. TD Bank points out that the

evidence is undisputed that TD Bank sent monthly account statements to RPCC’s address showing

all monthly activity on the -5031 Account—from September 2009 to August 2018. (Def.’s Exs.

31–38.) TD Bank also notes that RPCC’s and PFFTC’s agent, Patricia Pumphrey, confirmed that

she received and reviewed the statements for the -5031 Account every month since the -5031

Account was opened in July 2009. (Pumphrey Dep. 38:17–45:20.) TD Bank also stresses that

DiCrecchio’s unauthorized transactions appeared on those account statements, including, for

example, the September 2009 account statement, showing check images with only DiCrecchio’s

signature and the May 2011 account statement showing a check to Jonathan Advisors for $20,000.

Importantly, RPCC concedes that none of its Board members or employees ever reported any

unauthorized transactions to TD Bank until after DiCrecchio’s confession in August 2018.

Because RPCC did not file suit until April 11, 2019, TD Bank urges that, pursuant to the statute

of repose in § 4406(f) and the Repeater Rule of § 4406(d), RPCC is precluded from recovery for

any unauthorized transactions in this case.

RPCC responds raising five arguments regarding the application of these statutory

provisions: (1) both provisions require that a bank act in good faith; (2) TD Bank’s failure to

exercise ordinary care under § 4406(e) requires that it bear liability for some of the loss; (3) neither

provision applies unless the bank sends or makes available to a customer a statement of account

showing payment of items for the account; (4) for either the Repeater Rule or the statute of repose

to apply, the customer must have failed to discover the unauthorized payment in a situation in

which it was reasonable for the customer to do so; and (5) a bank’s fraudulent concealment of the

embezzlement precludes reliance on the limitations set out in § 4406(f) and (d). I address each of

these arguments below.

1. Whether TD Bank Was Required to Act in Good Faith

RPCC first argues that TD Bank is barred from relying on either the one-year statute of

repose of § 4406(f) or the Repeater Rule of § 4406(d) because TD Bank failed to act in good faith.

The Pennsylvania UCC imposes a general duty of good faith on parties to a commercial contract.

See 13 Pa. Cons. Stat. § 1304 (providing that “[e]very contract or duty within this title imposes an

obligation of good faith in its performance and enforcement.”); John B. Conomos, Inc. v. Sun Co.,

Inc., 831 A.2d 696, 706 (Pa. Super. Ct. 2003) (“Pennsylvania courts impose a general duty of good

faith performance on each party in general commercial contracts.”). Here, the question is whether

this duty of good faith is automatically imported into § 4406 and limits a defendant bank’s ability

to rely on the limitations in that provision. Because the good faith analysis is different for the one-

year statute of repose in § 4406(f) and the Repeater Rule in § 4406(d), each must be addressed

separately.

a. Good Faith—The Statute of Repose in § 4406(f)

Section 4406(f) explicitly states that it applies “[w]ithout regard to care or lack of care of

either the customer or the bank.” 13 Pa. Cons. Stat. § 4406(f). The import of this language was

addressed in Environmental Equipment & Service Co. v. Wachovia Bank, N.A., 741 F. Supp. 2d

705 (E.D. Pa. 2010) (Brody, J.). That case arose out of a scheme by plaintiff’s bookkeeper wherein

the bookkeeper embezzled nearly $1 million from plaintiff through fraudulent banking practices

undertaken in an account at Wachovia Bank. Id. at 708–09. Plaintiff sought to recoup its loses

from Wachovia, alleging that it should have been suspicious of the bookkeeper’s unusual banking

activity over the course of nine years, during which she fraudulently indorsed checks made to

vendors, altered checks by making them out to “Cash,” or changed the amounts on checks. Id. at

709–11. Each month Wachovia sent the plaintiff an account statement, along with the cancelled

checks, but the bookkeeper would intercept the statements and returned checks and alter them. Id.

at 710–11. When Wachovia asserted a defense under § 4406(f) because the plaintiff had not

provided notice about unauthorized checks within the one-year time period, the plaintiff responded

that § 4406(f) did not apply due to the bank’s bad faith Id. at 717–18.

The court first recognized that pre-1992, § 4406 required a bank to act in good faith before

the limitations period would apply. Id. at 719. When the statute was amended in 1992, the

legislature deliberately omitted any mention of “good faith” in § 4406(f), despite expressly

including it in §§ 4406(d) and 4406(e). The court thus found that such affirmative omission

suggested that a bank’s defense under § 4406(f) was not intended to be cabined by any good faith

requirement. Id. at 719. Ultimately, the court refused to incorporate the UCC’s general “good

faith” requirement into the more specific § 4406(f) framework, reasoning that when one statute

“speaks to a subject in a general way and another deals with a part of the same subject in a more

specific manner, where they conflict, the latter prevails.” Id. (quoting Halifax Corp. v. First Union

Nat’l Bank, 546 S.E.2d 696, 703 (Va. 2001)).

This interpretation of § 4406(f) has been espoused by the majority of courts in states that

have adopted the UCC. See Columbia Metal Prods. Co. v. First Nat’l Bank of Pawnee, No. 17-

453, 2018 WL 4328261, at *7–8 (N.D. Okla. July 26, 2018) (finding no good faith requirement in

Oklahoma’s version of § 4-406(f)); Slate v. Byrd, 09-cv-852, 2013 WL 1103275, at *22 (M.D.N.C.

Mar. 15, 2013) (same under North Carolina law); Pinigis v. Regions Bank, 977 So.2d 446, 450–

57 (Ala. 2007) (same under Alabama law); Am Fed. Teachers, AFL-CIO v. Bullock, 605 F. Supp.

2d 251, 259 (D.D.C. 2009) (same under District of Columbia law); Chester Twp. Bd. Trs. v. Bank

One, N.A., No. 2005-G-2660, 2007 WL 1881311, at *7–8 (Ohio Ct. App. June 29, 2007) (same

under Ohio law); Halifax, 546 S.E.2d at 703 (same under Virginia law).2

Based on the plain language of § 4406(f), together with the wealth of case law interpreting

this statute, I find that § 4406(f) does not have a good faith requirement. As RPCC concedes that

it did not report any of DiCrecchio’s fraudulent transactions to TD Bank until August 16, 2018, I

find any alleged bad faith by TD Bank would not allow RPCC to escape the statue of repose’s bar,

under § 4406(f), as to fraudulent transactions appearing on bank statements prior to August 16,

2017.

b. Good Faith—The Repeater Rule of § 4406(d)

With respect to the repeater rule in § 4406(d), the question of good faith is more

complicated. I again set forth this provision for context:

d) Effect of failure to report unauthorized signature or

alteration.—If the bank proves that the customer failed, with

respect to an item, to comply with the duties imposed on the

customer by subsection (c), the customer is precluded from asserting

against the bank:

2 In an effort to argue that the statute of repose in § 4406(f) is tempered by a duty of good faith,

RPCC also cites to several Pennsylvania cases that it claims have found that “bad faith” prevents

operation of the statute of repose. None of the cases cited by RPCC, however, stand for this proposition

or have facts analogous to those before me. For example, in Pavex, Inc. v. York Federal Savings &

Loan Association, 716 A.2d 640, 646 (Pa. Super. Ct. 1998), the Pennsylvania Superior Court did not

address § 4406 at all. Rather, it considered whether a different defense—the fictitious payee defense

under 13 Pa.C.S. § 3405(a)(3)—constitutes an absolute defense or whether the bank must have acted

in good faith to assert the defense. Id. at 641.

RPCC also cites to Lichtenstein v. Kidder, Peabody & Co., Inc., 777 F. Supp. 423 (W.D. Pa.

1991) in which the plaintiff sued her brokerage firm attempting to recover money that was withdrawn

from her checking account by her former husband using forged checks. Id. at 415. The bank argued

that the one-year statute of repose for reporting forged checks to bank barred claims involving any

checks honored more than one year prior to time the plaintiff notified the firm of the forgeries. Id. at

416. The court held that although a bank is not bound to a particular standard of care in order to benefit

from the statute of limitations, “a bank which has engaged in fraudulent conduct should not be afforded

the protection of section 4406.” Id. at 426. Lichtenstein is distinguishable, however, because, as noted

by the Court in Environmental Equipment, “Lichtenstein was based on UCC § 4-406 as it was prior to

the 1992 amendments,” which expressly stripped § 4406(f) of its “good faith” requirement. Envt’l

Equip., 741 F. Supp. 2d at 718 n.16.

(1) the customer’s unauthorized signature or any alteration

on the item if the bank also proves that it suffered a loss by

reason of the failure; and

(2) the customer’s unauthorized signature or alteration by the

same wrongdoer on any other item paid in good faith by the

bank if the payment was made before the bank received

notice from the customer of the unauthorized signature or

alteration and after the customer had been afforded a

reasonable period of time, not exceeding 30 days, in which

to examine the item or statement of account and notify the

bank.

13 Pa. Cons. Stat. § 4406(d) (emphasis added). Subsection (e) goes on to explicitly state that “[i]f

the customer proves that the bank did not pay the item in good faith, the preclusion under

subsection (d) does not apply.” Id. § 4406(e). As such, unlike § 4406(f), the Repeater Rule of

§ 4406(d) explicitly requires that the bank have paid the item in good faith.

The duty of “good faith” has been defined as “[h]onesty in fact and the observance of

reasonable commercial standards of fair dealing.” 13 Pa. Cons. Stat. § 1201(b)(20). “The

connotation of this standard is fairness and not absence of negligence.” UCC Text Appendix Q

§ 4-406

Consistent with these definitions, cases recognizing a bank’s duty of good faith have

emphasized that a bank’s mere negligent actions are insufficient to constitute bad faith. Rather,

the bank must have acted with knowledge and/or malicious intent. Pavex, Inc. v. York Federal

Savings & Loan Association, 716 A.2d 640, 645 (Pa. Super. Ct. 1998) (noting that “a bank’s mere

failure to follow commercially reasonable banking procedures or to comply with its own policies

may not constitute bad faith”); Lichtenstein v. Kidder, Peabody & Co., Inc., 777 F. Supp. 423 (W.D.

Pa. 1991) (recognizing that a bank must have engaged in actual fraudulent conduct with intent to

have acted in bad faith); see also New Props., Inc. v. Newpower, No. 259932, 2006 WL 2632310,

at *7 (Mich. App. Sept. 14, 2006) (finding potential bad faith where bank employee had actual

knowledge of embezzlement and that embezzler was using embezzled funds to pay personal debts

owed by embezzler to bank employee); Falk v. N. Trust Co., 763 N.E.2d 380, 387–88 (Ill. App.

2001) (finding possibility of bad faith where plaintiff alleged that the bank was on notice that the

wrongdoer was acting in breach of her fiduciary duties to the plaintiff and given the number of

years and the numerous transactions alleged by the plaintiff).

Where, however, there is no evidence that a bank had notice or knowledge of the

wrongdoing, that there was any concerted action of the bank and the wrongdoer, that the bank had

any clear warning, or that the bank or its officers had personal benefit or gain, courts have declined

to find bad faith. See Estate of Clark ex rel. Clark v. Toronto Dominion Bank, No. 12-cv-6259,

2013 WL 1159014, at *9 (E.D. Pa. Mar. 21, 2013) (absent evidence of fraudulent concealment by

the bank, claims not brought within one year are time-barred under § 4406); see also Kaplan v.

JPMorgan Chase Bank, N.A., No. 14-cv-5720, 2015 WL 2358240, at *8 (N.D. Ill. 2015) (rejecting

plaintiff’s contention that bank acted in bad faith by accepting two forged signature cards adding

signatories to plaintiff’s account without even checking with plaintiff where plaintiff failed to

provide any evidence that bank knew the signature cards were forged, that wrongdoer had no

authority to add himself as a signatory, that bank knew plaintiff was not receiving her monthly

account statements, or that bank failed to observe reasonable commercial standards of fair dealing).

Synthesis of this case law reveals that the term “bad faith” means more than a bank’s

negligence or mere failure to comply with banking standards or its own internal procedures.

Rather, it requires affirmative action or a deliberate failure to act despite knowledge of the

fraudulent transactions. My review of the record reflects that the evidence produced by RPCC is

insufficient to allow a reasonable jury to find that TD Bank acted in bad faith. This evidence

includes:

• TD Bank’s own forms and banking industry standards required TD Bank to verify

DiCrecchio’s authority to open and transact on the Account. According to RPCC’s expert,

standard industry practice required TD Bank to identify and contact PFFTC’s Board with

respect to the opening of the account. TD Bank did not do so.

• One of TD Bank’s opening forms is called a “Corporate Banking Resolution,” the only

possible purpose of which could be to determine whether a corporation has resolved to take

action. Therefore, according to RPCC’s banking expert, TD Bank had reason to open the

account “properly, carefully and with suspicion from the start” and to give it close

monitoring for a year. (Pl.’s Resp. Opp’n Summ. J. 10.) Yet, TD Bank failed to complete

crucial portions of its opening forms and did not typically do anything else to verify an

individual’s authority to open a corporate account.

• TD Bank’s actions regarding maintenance of the account violated industry standards.

RPCC’s banking expert Hansen opined that “[w]hen [TD Bank] learned that RPCC checks

were passing through the PFFTC Account, it could and should have closed the PFFTC

account and insisted on the reopening of an account in the name of RPCC.” (Expert Report

of Peggy A. Hansen, Feb. 3, 2002 (“Hansen Report”) 11.)

• When RPCC sought to add itself as a co-owner to the Account and began depositing checks

into the Account, TD Bank failed to inform RPCC of its option to close the Account and

open a new one or that there were compliance risks in depositing checks into an account

RPCC did not own. TD Bank let this continue for six years despite large wire transfer

requests being made from the Account to a different account. On one occasion Pumphrey

renewed her request for change of ownership of the Account in conjunction with a request

for an immediate wire of approximately $465,000 to another account. TD Bank honored

the wire request, but never added RPCC’s name to the account. (PASF ¶ 71; Def.’s Ex.

54.)

Even viewed in the light most favorable to RPCC, this evidence does nothing more than

suggest that TD Bank acted negligently in its compliance with its own banking policies or general

banking standards. Wholly lacking is any showing that TD Bank had notice or knowledge of the

wrongdoing, that there was any concerted action between TD Bank and DiCrecchio, that TD Bank

had any clear warning, or that TD Bank had personal benefit or gain. Nor does this evidence

indicate that there were obvious red flags that TD Bank willfully disregarded. Accordingly, RPCC

has not created a genuine issue of fact as to whether TD Bank acted in bad faith.

2. Whether TD Bank Failed to Exercise Ordinary Care

Although RPCC has not produced evidence of bad faith, it contends that § 4406 includes a

separate standard of care for a bank seeking to rely on the Repeater Rule. Specifically, RPCC

notes that under § 4406(e), “[i]f subsection (d) [the Repeater Rule] applies and the customer proves

that the bank failed to exercise ordinary care in paying the item and that the failure substantially

contributed to the loss, the loss is allocated between the customer precluded and the bank asserting

the preclusion according to the extent to which the failure of the customer to comply with

subsection (c) and the failure of the bank to exercise ordinary care contributed to the loss.” 13 Pa.

Cons. Stat. § 4406(e) (emphasis added).

Under the UCC, “ordinary care” means “observance of reasonable commercial standards.”

13 Pa. Cons. Stat. § 3103. The Official Comment to § 3-405 provides that “[f]ailure to exercise

ordinary care is to be determined in the context of all the facts relating to the bank’s conduct with

respect to the bank’s collection of the check,” including the names on the account, amount of

check, circumstances of account opening, and actions of account holder. UCC § 3-405, Official

Comment 4; see also Dominion Const., Inc. v. First Nat’l. Bank of Maryland, 315 A.2d 69, 75

(Md. 1974) (“[W]hat constitutes a breach of ‘reasonable commercial standards’ must be decided

in the context of a specific set of facts.”); Lundgren v. Bank of Am., N.A., No. 11-cv-758, 2011

WL 4592801, at *5 (N.D. Cal. 2011) (holding that preclusion under section 4406(d) may be

avoided “by establishing that the bank failed to exercise ordinary care in paying the item and that

the failure contributed to the loss.” (internal quotations marks omitted)).

RPCC points to evidence sufficient to create a genuine issue of material fact as to whether

TD Bank failed to exercise ordinary care in paying on checks written by DiCrecchio. Taken as

true, this evidence could establish that TD Bank did not follow its own procedures or other

commercially reasonable standards in opening and maintaining the -5031 Account. In turn, a

reasonable juror could find that TD Bank bears some liability for RPCC’s loss. Accordingly,

although RPCC is barred under the statute of repose from recovering on fraudulent transactions

appearing on bank statements prior to August 16, 2017 (one year prior to RPCC’s reporting of the

fraud), I find that for fraudulent transactions appearing on bank statements after that time, RPCC

could establish that some or all of the loss was a result of TD Bank’s failure to exercise ordinary

care.

3. Whether Statements Were “Made Available” to “a Customer”

In an alternative argument, RPCC contends that the defenses of § 4406 require that a bank

“send[] or make[] available to a customer a statement of account showing payment of items for

the account . . . [that is] sufficient to allow the customer reasonably to identify the items paid.” 13

Pa. Cons. Stat. § 4406(a) (emphasis added). RPCC asserts that the -5031 Account was only in

PFFTC’s name and, in turn, statements for the Account were never made available to RPCC. As

TD Bank never formally recognized RPCC as a customer, RPCC presses that TD Bank could not

have sent statements to RPCC.

This argument is meritless in two respects. Primarily, if accepted, RPCC’s claim that it

was not a “customer” of TD Bank would render its UCC and common law negligence claims

invalid. It is well established that banks do not owe any duty of care to noncustomers and/or third

parties. Chemalloy Co., LLC v. Citibank, N.A., No. 22-1143, 2022 WL 2356776, at *5 (E.D. Pa.

2022) (citing Adkins v. Sogliuzzo, 625 F. App’x 565, 569 (3d Cir. 2015) (“Absent a special

relationship, courts will typically bar claims of non-customers against banks.”); Fragale v. Wells

Fargo Bank, N.A., 480 F. Supp. 3d 653, 661 (E.D. Pa. 2020) (“[D]ecisions across the country,

including within Pennsylvania, have held that banks do not owe any duty of care to noncustomers

and/or third parties.”).

Moreover, the undisputed evidence reflects that RPCC was, in fact, the owner of the

Account and that the name on the account was nothing more than mere formality. PFFTC was the

predecessor of RPCC and, once the new Market was fully operational, PFFTC ceased to exist.

RPCC then conducted the same business as PFTCC (operation of the Market), had the same board

of directors and officers, and existed at the same address. The evidence also indicates that RPCC

used the -5031 Account over a period of multiple years, with checks signed by RPCC’s Board

members, to conduct its legitimate business of running the Market. (Def.’s Exs. 31–38, 77, 264.)

RPCC has already conceded that TD Bank sent or made available bank statements for the -5031

Account showing amounts paid to the joint address used by both companies. (DSUF ¶ 55; PR

¶ 55.) Pumphrey and DiCrecchio—both of whom worked for PFFTC and subsequently RPCC—

were responsible for reviewing monthly account statements for PFFTC and RPCC. (Binck Dep.

119:24–21; Pumphrey Dep. 40:12–41:24, 43:6–45:20.) The monthly account statements for the

-5031 Account reflected that hundreds of checks written from the -5031 Account had PFFTC’s

name on them. (DSUF ¶ 58; PR ¶ 58; Def.’s Ex. 263.) RPCC Board members never raised

concerns about not receiving bank statements or receiving statements only in PFFTC’s name.

(Binck Dep. 18:3–21:13; Penza Dep. 31:14–33:7, 37:1–13; DiCrecchio Dep. 56:4–13; Dep. of

Mark Levin (“Levin Dep.”) 78:5–14; Dep. of John Vena (“Vena Dep.”) 71:15–72:11.)

Given the undisputed evidence, I find no issue of fact as to whether RPCC was TD Bank’s

customer and the owner of the -5031 Account. This evidence shows that RPCC received bank

statements, thereby triggering the availability of the defenses in § 4406.

4. Whether It Was Reasonable for RPCC, Acting Through Pumphrey, to Have

Discovered the Unauthorized Transactions

RPCC next argues that both the Repeater Rule and the statute of repose require that a

customer be able to have “reasonably” discovered the unauthorized payment. Although TD Bank

presses that Pumphrey was RPCC’s agent for the purpose of receiving and reviewing RPCC’s

statements, RPCC responds that TD Bank opened the Account without ever engaging with the

appropriate decisionmakers, i.e., the Board acting through the Corporate Secretary. Citing to the

laws of agency, RPCC asserts that TD Bank’s provision of bank statements to Pumphrey, who was

a rogue employee and therefore not an agent of RPCC, was misplaced and bars TD Bank from

relying on § 4406.

This argument disregards the well-established principle that the discovery rule does not

apply to toll the limitations period for a UCC negligence claim. In Menichini v. Grant, 995 F.2d

1225 (3d Cir. 1993), the United States Court of Appeals for the Third Circuit confronted the issue

of “whether, in a case involving conversion of negotiable instruments, the ‘discovery rule’ applies

when a party not engaged in fraudulent concealment invokes the statute of limitations.” Id. at

1228. There, the bookkeeper of the plaintiff’s company was discovered to have been embezzling

company funds over a period of two years by forging the plaintiff’s signature and depositing

checks made payable to him into her personal account. Id. at 1227–28. The Court observed that

the Code drafters “sought quick and inexpensive resolution of commercial disputes.” Id. at 1231.

As such, the Court predicted that, “under Pennsylvania law, in the absence of fraud by those

invoking the statute of limitations, a cause of action for conversion of negotiable instruments

accrues when, irrespective of the plaintiff’s ignorance, the defendant wrongfully exercises

dominion.” Id.

Subsequently, in Estate of Hollywood v. First Nat’l Bank of Palmerton, 859 A.2d 472 (Pa.

Super. Ct. 2004), the Pennsylvania Superior Court rejected application of the discovery rule to toll

the statute of limitations for UCC claims of conversion of negotiable instruments and unauthorized

payment of checks, holding that:

[L]ike claims for conversion, those for unauthorized payment

accrue, and the limitation period prescribed by section 4-406 begins

to run, when the instrument is negotiated . . . . The limitations period

applies mechanically and, in the absence of evidence of fraudulent

concealment by the defendant, claims not brought within one year

are time-barred . . . .”

Id. at 483.

Judge J. Curtis Joyner addressed the same issue in Estate of Clark ex rel. Clark v. Toronto

Dominion Bank, No. 12-cv-6259, 2013 WL 1159014 (E.D. Pa. Mar. 21, 2013). There, the

plaintiff’s estate alleged that there were a series of unauthorized withdrawals from the plaintiff’s

account that were used to pay outstanding balances owed by numerous unidentified customers of

the various retail defendants. Id. at *1. The plaintiff’s estate asserted that the UCC limitations

period in section 4-406 should be tolled because the plaintiff had become mentally incompetent

due to Parkinson’s Disease and, therefore, was unable to provide the required notice. Id. at *5.

Judge Joyner disagreed, finding that the discovery rule was not appliable to toll any limitations

period. Id. *9; see also Deutsch v. Wells Fargo Bank, N.A., No. 13-cv-3914, 2015 WL 3833226,

at *7 n.8 (E.D. Pa. June 22, 2015) (“The Court looks to Defendant’s actions, not Plaintiff’s

awareness” to toll the UCC limitations period (emphasis in original)).

Applying these principles, Pumphrey’s alleged “rogue” actions have no relevance here. It

is undisputed that TD Bank sent monthly bank statements for the -5031 Account to PFFTC at the

address of 6700 Essington Avenue Avenue, which was also RPCC’s address. (Def.’s Exs. 31–38,

77, 264; DSUF ¶ 55; PR ¶ 55.) RPCC’s Board had designated Pumphrey and DiCrecchio as

responsible for reviewing monthly account statements for RPCC. (Binck Dep. 119:24–21;

Pumphrey Dep. 40:12–41:24, 43:6–45:20.) The monthly account statements showed that hundreds

of checks written from the -5031 Account only had DiCrecchio’s signature and revealed regular

payments to Jonathan Advisors. (DSUF ¶ 58; PR ¶ 58; Def.’s Ex. 263.) Pumphrey was the only

individual who ever reviewed PFFC or RPCC bank statements prior to DiCrecchio’s confession.

No one else at RPCC was designated to review monthly account statements, and Board members

did not raise concerns about not receiving bank statements. (Binck Dep. 18:3–21:13; Penza Dep.

31:14–33:7, 37:1–13, DiCrecchio Dep. 56:4–13; Levin Dep. 78:5–14; Vena Dep. 71:15–72:11.)

TD Bank bears no responsibility for RPCC’s decision as to which of their employees to trust.

Given that TD Bank provided the requisite statements, the discovery rule does not apply to protect

RPCC from Pumphrey’s decisions to hide DiCrecchio’s fraud.

5. Whether TD Bank Fraudulently Concealed DiCrecchio’s Embezzlement

Lastly, RPCC argues that sufficient evidence exists to establish that TD Bank fraudulently

concealed DiCrecchio’s embezzlement from RPCC. RPCC posits that TD Bank engaged in

“unintentional deception” by (a) providing Opening Forms which implied that dual-signature

accounts were offered by TD Bank; (b) engaging in a pattern of noncompliance with its own forms;

operations had moved to RPCC.

Fraudulent concealment can constitute a limitation on the otherwise mechanical operation

of the statute of repose. See Estate of Hollywood, 859 A.2d at 483 (noting that the limitations

period of § 4406 “applies mechanically and, in the absence of fraudulent concealment by the

defendant, claims not brought within one year are time-barred.” (emphasis added)). Repeatedly,

courts within this Circuit have found that fraudulent concealment by a bank can toll the limitations

period of § 4406. See, e.g., Envt’l Equip., 741 F. Supp. 2d at 728 (noting that “the statute of

limitations in commercial transactions [under § 4406(f)] may be tolled if the defendant is found to

be guilty of fraudulent concealment.”); Deutsch, 2015 WL 3833226, at *7 n.8 (“[A]bsent

fraudulent concealment, the statute of limitations runs from the date of Defendant’s compliance

with Section 4401(a) as to this disputed transaction.”); Estate of Clark, 2013 WL 1159014, at *8–

9 (E.D. Pa. Mar. 24, 2013) (acknowledging that fraudulent concealment could act to toll the time

in § 4406(f)).

Equitable tolling based on fraudulent concealment requires a plaintiff to prove “three

necessary elements: (1) that the defendant actively misled the plaintiff; (2) which prevented the

plaintiff from recognizing the validity of her claim within the limitations period; and (3) where the

plaintiff’s ignorance is not attributable to her lack of reasonable diligence in attempting to uncover

the relevant facts.” Cetel v. Kirwan Fin. Grp., 460 F.3d 494, 509 (3d Cir. 2006).

The first of these factors requires a plaintiff to establish that the defendant engaged in an

“affirmative independent act of concealment upon which the plaintiff [] justifiably relied.” Bucci,

591 F. Supp. 2d at 787 (quoting Kingston Coal Co. v. Felton Min. Co., Inc., 690 A.2d 284 (Pa.

Super. 1997)); see also Glaziers and Glass Workers Union Local No. 252 Annuity Fund v. Janney

Montgomery Scott, Inc., 155 F.R.D. 97, 101 (E.D. Pa. 1994) (applying statute of limitations where

plaintiffs failed to allege an affirmative act of concealment that would have misled or diverted

plaintiffs from discovering the alleged fraud). The Third Circuit has stressed that a “plaintiff must

show active misleading by the defendant.” Forbes v. Eagleson, 228 F.3d 471, 486 (3d Cir. 2000)

(emphasis in original). Fraudulent concealment may occur in situations of unintentional deception,

i.e “where a deception, albeit unintentional, results in the concealment of a plaintiff’s claim such

that an action is not brought within the generally applicable statute of limitations.” Conneen v.

Amatek. 238 F. Supp. 3d 652, 658 (E.D. Pa. 2017) (citing Fine v. Checchio, 870 A.2d 850, at 860

(Pa. 2005)). Nonetheless, “[w]hile fraud and constructive fraud may be established by omission,

‘silence in the absence of a duty of a duty speak’ cannot suffice to prove fraudulent concealment.”

Bucci, 591 F. Supp. 2d at 787 (quotation omitted). As such, an allegation that a bank has failed to

disclose a wrongdoer’s banking activities does not constitute affirmative conduct on the part of the

bank that would demonstrate the required act of concealment. Bucci, 591 F. Supp. 2d at 787.

The party asserting fraudulent concealment has the “burden of proving such fraud or

concealment, by evidence which is clear, precise and convincing.” Molineux v. Reed, 532 A.2d

792, 794 (Pa. 1987). Thus “when plaintiffs seek to demonstrate a case for equitable tolling, and

defendants seek summary judgment on the issue, a court must determine (1) whether there is

sufficient evidence to support a finding that defendants engaged in affirmative acts of concealment

designed to mislead the plaintiffs regarding facts supporting their . . . claim, (2) whether there is

sufficient evidence to support a finding that plaintiffs exercise reasonable diligence, and (3)

whether there is sufficient evidence to support a finding that plaintiffs were not aware, nor should

they have been aware, of the facts supporting their claim within the limitations period measured

backwards from when the plaintiffs filed their complaint.” Forbes, 228 F.3d at 487 (emphasis

added). “Absent evidence to support these findings there is no genuine issue of material fact on

the issue and the defendants are entitled to summary judgment.” 3 Id.

3 Plaintiff relies heavily on my ruling on Defendant’s Rule 12(b)(6) motion wherein I found that

Plaintiff had plausibly alleged fraudulent concealment by asserting that Defendant misrepresented the

Account’s single signer status and failed to require evidence of a Board resolution to open the Account.

That ruling, however, was premised on my obligation to accept the allegations of the Complaint as true

and to draw all reasonable inferences therefrom in the light most favorable to Plaintiff. At the summary

judgment stage, the burden falls on Plaintiff to bring forth evidence creating a genuine issue of material

fact on whether Defendant engaged in fraudulent concealment.

Here, none of RPCC’s evidence, even taken as true, raises any specter of fraudulent

2 2

concealment. First, RPCC posits that TD Bank provided “customer-facing” documents—i.e.,

documents provided directly to and signed by RPCC about RPCC’s accounts—which implied that

dual signature accounts were offered by the bank and justified RPCC’s expectations of a two-

signer account. A review of these documents belies any notion that RPCC had a justified

expectation that its account would have two signers.

The Business Signature Card appeared as follows:

BUSINESS SIGNATURE CARD

OOLINT =| □

TO. Bank, WA. [Bank*} ° a = of

Stare: Ett Scone! Tye

WO honey “easiness Chacking,

Account Holder Names: = 5 SOOT

Addeese Tea payee CATE OF EMeD: =“ = S03 - og

== es j ca 3 hho, □ r. 2, ALTOS

we Piri len A ae iomatT 25h.

<tr:

□ “2As - Seatla- B2o03, Humber af Signatures Reeuired: \

Sas of the guinerthes inchatuad{a) Sertty that ne squiirecd put inumel wah meee scares

agree 10 inderenfy and roi! Bark” harrcees trom ancl agains! laa Gasrane meatig me nD an, ately ate meena,

caren or Seal mich nemeeneang ante nett Scuak'S} avs @ are acing wAtin the aulhonty given thar by the dstiortzing

Tre sorties ned wdevetus in} signin inpeetal juin aa senea a □ 7 Rac toe ees auch neces =

seersedey “han” tema ie Ea of nes Pe aE ee Maca Ran conn,

= Meestrepa Lele? Bust for FIGS itcorance purainnl, mecisur epee ger nol eaparately ituined Prrersaary other iapcads tiey ieey ere al

liportant: Veeder penotigs of ll chad vane _

{inter tama penon ining sik tesare oan tod anionocrsoerasion aa eee

arm Mal auibieet io bechyp withholding, becmvee | ar emecot from Eackuo wei tobe a

IRS th r 4 1) Beech his Se 1 Gr becouse Bhan nod bee aified

notte eal sae tre lnnqer suchen hey aie 1 caper ab inberee! er didends, or becomes: Nem ISS tie

C] lam subpeS bo baci whieh ding

Siprature of Authorized indedual Fis:

Sr Sar LS, ee leer □□□ Reettiue Sewing Fern W0-9 thot igi available at ihe financial nedivies

Lo 7

————

oo Facial Lee |

My 2 ei hs 7 Gel bees ]

C4toad- oF, Mvetecedh □□

Pind Mare

= Ane

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fon. fee mc =

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(iota Cees *

(Def.’s Ex. 2.)

The For Profit Banking Resolution showed the following:

Bank f S@3/

a2) fll a Sb 51 ss

FOR PROFIT CORPORATE BANKING RESOLUTION Mh 3,

(For Deposit Accounts) tg

Depositor Orn, ladkel pia Cress Faoad Financial TD Bank, N.A.

{Name of VTerrmanol Occ. institution: 11000 Atrium Way

Corporation) : Mt. Laurel, NJ 08054

1, the undersigned Secretary of the Corporation named above, HEREBY CERTIFY that the Corporation is

organized and existing under and by virtue of the laws of the state of

Bs 2 Gorporation for profit, with its principal office at_=330) SS Gallomay SF Unit ose

and that —$

is the complete and correct name of the Corporation. /

| FURTHER CERTIFY that at a meeting of the Board of Directors of the Corporation, duly and regularly called

and held on ; at which a quorum was present

and voting, the following resolutions were adopted:

RESOLVED, that the Financial institution named above, at any one or more of its offices or branches, be and it

hereby is designated as the Financial Institution of and depository for the funds of this Corporation, which may

be withdrawn on checks, drafts, advices of debit, notes or other orders for the payment of monies bearing the

following appropriate number of signatures: any i of the following panel officers or employees of this

(Number)

Corporation (“Agents”), whose ual signatures are shown below:

4 SH Aimee_x.

Signature Title

La SAA wv. De CAL£6 4.43

Print Name

Signature Title

Bint Name

Signature Fle

Print Name :

Signature □□

Brin? Name

ang that the Financial institution shall be and is authorized to honor and Pay the same whether or not they are

payable to bearer or to the individual order of any Agent or Agents signing the same.

(Def.’s Ex. 9.)

. > ”

While both of these documents—which ask about the “number of signatures required” or

include extra signature lines—suggest a possibility that more than one signer could be required,

nothing in these documents could establish “active misleading” or create a reasonable belief that

the accounts would be two-signer accounts. And any such belief by the Board that the Account

required more than one signature for checks is rendered unreasonable by other evidence. TD

. : ”° 1 .

Bank’s Deposit Account Rules and Regulations (“Account Agreement”) expressly provided that: