ADS Associates Group, Inc. v. Oritani Savings Bank

This case arose from a business venture that was established by plaintiff Brendan Allen and defendant Asnel Diaz Sanchez. The venture was operated through plaintiff ADS Associates, Inc. (ADS), a corporation fully owned by Sanchez. Allen and Sanchez opened a business checking account in the name of ADS at a branch of Oritani Savings Bank where ADS had preexisting accounts. By agreement between ADS and Oritani, the new ADS account required the signatures of both Allen and Sanchez to appear on each check drawn on the account. Despite that limitation, Sanchez linked the new ADS account to other ADS accounts within his control and, through a series of internet transactions, transferred a substantial sum of money from the ADS account he had established with Allen to his other ADS accounts. After learning of these transfers, Allen sued Oritani and Sanchez. Although it dismissed Allen’s claims, the trial court permitted Allen to assert claims on ADS’s behalf against Oritani, notwithstanding Sanchez’s issuance of a resolution denying Allen the authority to maintain an action on ADS’s behalf. A jury returned a verdict in favor of ADS. The trial court, however, entered a judgment notwithstanding the verdict in favor of Oritani premised on an indemnification provision in the agreement governing ADS’s account with Oritani. An Appellate Division panel reversed the trial court’s determination. It found that the ADS resolution signed by Sanchez deprived Allen of authority to assert a claim on behalf of ADS. The panel held, however, that Allen could assert a common law negligence claim against Oritani despite the fact that he was not Oritani’s banking customer. It concluded that Allen had a “special relationship” with Oritani, and that Oritani had a duty to advise Allen of its internet banking policies when he and Sanchez opened the ADS account. The Supreme Court agreed with the trial court that Article 4A of the Uniform Commercial Code (UCC) governed the wire transfers at the center of this case, and that Allen could not assert a claim under Article 4A against Oritani because he did not meet the statutory definition of a bank “customer.” Furthermore, the Court held that Allen could not assert a negligence claim based upon an alleged special relationship with Oritani. Accordingly, the Appellate Division was reversed and the trial court's judgment was reinstated. View "ADS Associates Group, Inc. v. Oritani Savings Bank" on Justia Law