## Facts

- Plaintiffs were two law firms and a related payment-processing corporation that handled firm revenues and vendor payments.
- Plaintiffs hired employee Molly Moore in 2017; her duties included depositing revenues, paying vendors, and recording vendor-check transactions in the processor’s accounting system.
- From February 15, 2018 to March 19, 2020, Moore issued over 175 checks from the payment processor payable to “Bounds Contracting/M.L. Bounds,” endorsed them, and remotely deposited them into her personal TD Bank checking account held solely in her name.
- The fraudulent checks totaled $130,725.39.
- Plaintiffs sued TD Bank, N.A. and two related TD holding entities, alleging the bank’s acceptance of the remote deposits failed to meet “ordinary care” under Pennsylvania’s enactment of UCC § 3-404(b) and substantially contributed to the loss.
- After removal to federal court and an earlier dismissal without prejudice, Plaintiffs filed a Second Amended Complaint; defendants moved to dismiss under Rule 12(b)(6), raised a statute-of-limitations defense for older checks, and sought dismissal of the holding-company defendants.

## Issues

1. Whether Plaintiffs plausibly alleged that TD Bank failed to exercise “ordinary care” under Pennsylvania Commercial Code § 3404(b) by accepting remote deposits of checks payable to third parties into Moore’s personal account, and that such failure substantially contributed to the loss.
2. Whether the applicable three-year limitations period barred recovery for checks drawn and dated before March 3, 2018.
3. Whether the complaint alleged facts sufficient to maintain claims against TD Bank US Holding Company and TD Group US Holdings LLC.

## Decision

- The court denied dismissal of the Pennsylvania Commercial Code § 3404(b) comparative-negligence claim against TD Bank, N.A. at the pleading stage, except to the extent limited by the statute of limitations.
- The court granted the motion to preclude recovery for checks drawn and dated prior to March 3, 2018.
- The court dismissed TD Bank US Holding Company and TD Group US Holdings LLC for lack of factual allegations connecting them to the complained-of conduct.

## Legal Principles

- Under Pennsylvania Commercial Code § 3404(b) (UCC § 3-404), loss from an employee’s fraudulent instruments may be allocated by comparative fault; a depositary bank’s failure to exercise “ordinary care” may support apportionment against the bank.
- “Ordinary care” is measured by reasonable commercial standards for the banking business; at the pleading stage, allegations that a bank accepted remote deposits of checks payable to a different payee name into a personal account may plausibly allege a failure of ordinary care.
- A complaint must plead defendant-specific facts; naming affiliated holding companies without allegations tying them to the transactions is insufficient under Rule 12(b)(6).
- Claims seeking recovery on negotiable instruments are subject to a three-year limitations period; instruments outside the period are not recoverable.

## Conclusion

The court permitted Plaintiffs to proceed against TD Bank, N.A. on a comparative-negligence theory under Pennsylvania Commercial Code § 3404(b) based on alleged lack of ordinary care in remote-deposit practices, but limited the case to checks dated on or after March 3, 2018 and dismissed two TD holding-company entities for lack of pleaded involvement.


H.G. Silverman Litigation Grp., P.C. v. TD Bank, N.A., 622 F. Supp. 3d 15 (E.D. Pa. 2022)