## Facts

- Peterboro Tool Company, Inc. established a non-contributory employee profit-sharing plan and trust (the Plan).
- The Plan maintained a money market account and certificates of deposit at a bank later succeeded by People’s United Bank (the Bank).
- Bernard R. Mullan served as the Plan’s fiduciary and had signatory authority over Plan bank accounts; he also acted as the company’s and Plan’s accountant.
- Over time, Mullan misappropriated Plan assets; the suit focused on approximately $249,900 taken from the Plan’s money market account between October 15, 2007 and November 2, 2009.
- During that period, Mullan made 23 withdrawals (about $1,000 to $40,000), including transactions in which he withdrew Plan funds and deposited substantial portions into his personal account at the Bank while also taking some cash.
- Mullan concealed the misappropriation by falsifying Plan records to reflect transfers to a fictitious external account and fabricated interest entries.
- In November 2009, the Plan replaced Mullan as fiduciary, investigated, and discovered the missing funds.
- The Plan sued the Bank for negligence, breach of fiduciary duty, and breach of a bailment agreement, alleging the Bank should have detected and prevented Mullan’s thefts.

## Issues

1. Whether a bank owes a tort duty to protect a depositor (including an employee benefit plan) from misappropriation by the depositor’s authorized fiduciary based on allegedly suspicious withdrawals, absent a special relationship or actual knowledge of wrongdoing.
2. Whether a bank becomes a fiduciary to a customer-plan merely by providing ordinary depository services while knowing the customer is a plan and another person is the plan’s fiduciary.
3. Whether deposits in ordinary bank accounts create a bailment relationship supporting a claim for breach of a bailment agreement when funds are misused by an authorized signatory.

## Decision

- The court granted the Bank’s Rule 12(b)(6) motion and dismissed all claims.
- The court held the Bank owed no duty to monitor or prevent an authorized fiduciary’s misappropriation based on suspicious transactions alone.
- The court held the Bank did not assume fiduciary status toward the Plan through ordinary banking services.
- The court held the deposit relationship was debtor–creditor, not bailor–bailee, defeating the bailment claim.

## Legal Principles

- A negligence claim requires a cognizable duty; absent a special relationship or actual knowledge of wrongdoing, a bank generally has no duty to protect a customer from theft by the customer’s authorized signatory.
- A bank may rely on the apparent authority of an authorized fiduciary/signatory when honoring withdrawals and transfers in the ordinary course.
- Providing routine depository services—even with knowledge that the depositor is an employee benefit plan and that another individual is its fiduciary—does not, without more, create a fiduciary relationship; fiduciary status generally requires discretionary control or an undertaking to act primarily for the customer’s benefit in the relevant matters.
- Ordinary bank deposits transfer title to the bank and create a debtor–creditor relationship; because the bank must repay an equivalent sum rather than return specific property, such deposits do not constitute a bailment.

## Conclusion

The court dismissed the Plan’s claims because the Bank’s ordinary handling of transactions authorized by the Plan’s fiduciary did not create a tort duty to detect internal fraud, did not make the Bank a fiduciary of the Plan, and did not transform deposit accounts into a bailment relationship.


Peterboro Tool Co., Inc. Profit Sharing Plan & Trust v. People's United Bank, 848 F. Supp. 2d 164 (D.N.H. 2012)