IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

JOSEPH J. BLASKOVITZ, JR., by and
through his attorney-in-fact, : C.A. No. Kl 6C-l 0-017 WLW
DACE BLASKOVITZ and the Estate of : Kent County
DOTTIE C. BLASKOVITZ, by and '
through its executor, DACE BLASKOVITZ

Plaintiffs,

v.

DOVER FEDERAL CREDIT UNION,

Defendants.

Submitted: May 25, 2017
Decided: June 15, 2017
ORDER
Upon Defendant’s Motion to Dismiss.

Granted in Part,' Denied in Part.

Jason C. Powell, Esquire of The Powell Firm, LLC, Wilmington, Delaware; attorney

for the Plaintiffs.

Michael C. Heyden, Esquire of The LaW Offlces of Michael C. Heyden, Wilmington,
Delaware; attorney for the Defendant.

WITHAM, R.J.

Joseph J. Blaskovitz, Jr., et al. v. DFCU
C.A. No. K16C-10-017 WLW
June 15, 2017

Before the Court are a Motion to Dismiss filed by Defendant Dover Federal
Credit Union (the “Credit Union”) and the Plaintiffs’ response in opposition. The
parties presented oral argument on May 25 , 2017. The motion raises two issues for
the Court’s decision: (l) Whether the Complaint’s allegations of common-law
negligence and breach of contract are displaced by DelaWare’s enactment of the
Uniform Commercial Code (UCC) and, if not, (2) Whether the Complaint’s
allegations are so vague as to Warrant dismissal Because the Court holds that the
negligence claim is displaced but the breach of contract claim is not, the Motion to
Dismiss Will be GRANTED IN PART and DENIED IN PART.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case centers around three members of the Blaskovitz family: Joseph and
the late Dottie Blaskovitz, husband and Wife, and their only son, Dace (collectively,
the “Plaintiffs”).‘ The Complaint alleges as follows:

Joseph and Dottie Were lifelong DelaWareans Who retired to Florida. Their
assets consisted principally of accounts at the Credit Union and a mobile home park.
While in Florida, Joseph and Dottie’s health began to decline. Both Would eventually
develop dementia and, as a result of their declining health, the two moved back to
DelaWare in the fall of 2014.

Joseph is a longtime customer of the Credit Union. In 1963, he became

customer number “007.”

 

1 Because all three Plaintiffs share the same surname, the Court Will, for the moment, set
aside its ordinary preference for formality and refer to each by his or her first name.

2

Joseph J. Blaskovitz, Jr., et al. v. DFCU
C.A. No. K16C-10-017 WLW
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After Joseph and Dottie moved back to Delaware, their son Dace (who was and
is their power of attomey) began making arrangements to protect the couple’s assets.
Among those arrangements was a June 2015 meeting with representatives of the
Credit Union, including President and ChiefExecutive Officer Glen Daniels, to notify
the Credit Union of the pair’s declining health and potential susceptibility to fraud.
In response, the Credit Union declined to list Dace as one of the owners on the
account. But the Credit Union, at Dace’s urging, promised to provide “additional
protection and oversight” of his parents’ accounts. Based on those promises, Dace
began to focus on other matters on his parents’ behalf. But the Credit Union did
nothing to investigate or alert the Blaskovitzes when third parties (apparently
residents of the Blaskovitzes’ mobile home park) “were absconding with thousands
of dollars” from the parents’ accounts.

lt was not until over a year later, in February 2016, that Dace got access to
account information for his parents’ accounts at the Credit Union. What he found
dismayed him: the account balances were significantly lower than he expected and
included a “wrongful decrease” of at least $334,445.00. As power of attorney for his
parents, Dace notified the Credit Union, filed a claim, and provided an Affidavit of
Forgery for the sixty days before February 18, 2016. The Credit Union told him that
he could only recover losses going back sixty days, and in the end only returned
$18,100 to Joseph and Dottie’s accounts.

On behalf of his father and his mother’ s estate,2 Dace sued the Credit Union for

 

2 Dottie passed away in August of 2016.
3

Joseph J. Blaskovitz, Jr., et al. v. DFCU
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negligence and breach of contract.

The negligence claim was based on a few separate alleged duties. The first was
the Credit Union’s duty to safeguard its customers’ funds, which the Plaintiffs say
was breached when the Credit Union “wrongfully honor[ed]” forged checks and
failed to put a policy or process in place to review the authenticity of signatures on
checks. The second and third duties arose under Delaware’s enactment of the
Uniform Commercial Code and the Credit Union’s promise to the Plaintiffs after
learning of the parents’ incapacity. The Credit Union breached these duties, the
Plaintiffs say, when they continued to pay forged checks, The final source of duties
is unclear. The Plaintiffs allege that there were a number of procedures and protocols
that are “customary or should be implemented . . . to combat . . . financial exploitation
of the elderly.”

The breach of contract claim was based on “a Joint Share Account Agreement,
among others” into which the parties entered. The agreements, the Plaintiffs allege,
required sight review of checks, which the Credit Union failed to perform. The
Plaintiffs also appear to allege that the agreements required full reimbursement of the
forged payments under the circumstances described in the Complaint. Finally, the
Plaintiffs allege that their damages are a result of the Credit Union’s failure to follow
through on its promises to Dace.

The Credit Union filed a Motion to Dismiss, which the Plaintiffs oppose. This

is the Court’s ruling on the Credit Union’s Motion to Dismiss,

Joseph J. Blaskovitz, Jr., et al. v. DFCU
C.A. No. K16C-10-017 WLW
June 15, 2017

THE PARTIES’ CONTENTIONS

The Credit Union argues that bank customers may not assert common-law
negligence and breach-of-contract claims against their bank when the bank pays on
forged checks, The Credit Union contends that such claims are displaced by the
Uniform Commercial Code. To the extent that there are any legally viable claims, the
Credit Union argues, they are not alleged with sufficient specificity to survive a
motion to dismiss,

The Plaintiffs argue that both negligence and breach-of-contract claims are
viable when a bank pays on forged checks, and are only displaced when the
circumstances and duties fall within the scope of the UCC. The representations made
by the Credit Union, the Plaintiffs contend, bring the claims outside the scope of the
UCC. The Plaintiffs also argue that to the extent that the Complaint could be made
more specific, a motion to dismiss is not the appropriate remedy.

STANDARD OF REVIEW

“Delaware is a notice pleading jurisdiction. Thus, for a complaint to survive
a motion to dismiss, it need only give general notice of the claim asserted.”3 When
deciding a motion to dismiss under Superior Court Rule of Civil Procedure 12(b)(6),
(hereafter “Rule 12(b)(6)”) all well-pleaded allegations in the complaint must be
accepted as true.4 The test for sufficiency is a broad one: the complaint will survive

the motion to dismiss so long as “a plaintiff may recover under any reasonably

 

3 Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005) (internal citations omitted).
4 Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).

5

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conceivable set of circumstances susceptible of proof under the complaint.”5

However, the Court “will not accept conclusory allegations unsupported by specific
facts or [] draw unreasonable inferences in favor of the non-moving party.”6 Stated
differently, a complaint will not be dismissed unless it clearly lacks factual or legal
merit.7
DISCUSSION

The Complaint fails to state a claim as to the negligence count, but the breach-
of-contract count is legally sufficient and not displaced by the UCC. The lack of
specific details regarding the allegedly fraudulent checks does not entitle the Credit
Union to dismissal.

I. Whether the Complaint States a Claim

The duties alleged to have been breached in the negligence claim are displaced
by the UCC. The breach of contract claim, however, is not displaced because the
UCC specifically permits the parties to modify the UCC by agreement

The provisions of the UCC do not necessarily displace the common law.8
Stated differently, “the UCC does not displace the common law remedies except

. . . insofar as their reliance on the common law would thwart the purposes of the

 

5 Id. (citing Klein v. Sunbeam Corp, 94 A.2d 385 (Del. 1952)).

6 Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011) (quoting Clim‘on v.
Enterprise Rem‘-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).

7 Diamond State Tel. C0. v. Univ. ofDel., 269 A.2d 52, 58 (Del. 1970).
8 6Del. C. § 1-103.

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code.”9 The Superior Court has previously held that “[t]he Code preempts common
law duties; an action in negligence or breach of contract cannot stand” between a
payor bank and its customer.10
A. The Negligence Claims are Precluded by the Uniform Commercz`al Code

As to the negligence claim made by the Plaintiffs, the duties alleged are entirely
displaced by the Uniform Commercial Code, which imposes strict liability against a
financial institution for the payment of an unauthorized item.

The UCC displaces the single negligence allegation that invokes 6 Del. C. § 4-
405. Section 4-405 requires that the customer be adjudicated incompetent before its
obligations are triggered If Dottie and Joseph were both adjudicated incompetent,
that fact Was left out of the Complaint or at least not adequately pleaded. Even if the
Plaintiffs had alleged such a breach, the proper action to remedy any such error would
be an action under the UCC’s provisions, not common-law negligence.

The other duties allegedly breached by the Credit Union are a duty “to protect
the funds” that the Plaintiffs maintained with it, to conduct a sight review, and to have
a “commercially reasonable policy” for verifying si gnatures. These and other duties,

including a customer’s duty to “discover and report unauthorized signature[s],” are

 

9 Mahajjj) &Assocs., Inc. v. Long, No. 01C-06-235, 2003 WL 22351271, at *6 (Del. Super.
Sept. 29, 2003) (citing N.J. Bank, N.A. v. Bradford Sec. Operations, Inc., 690 F.2d 339, 346 (3d Cir.
1982)).

10 Ia'.

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entirely controlled by the provisions of the UCC, and thus displaced.ll The only
cases the Plaintiffs cite to the contrary are from outside this jurisdiction, and the
Court finds them unpersuasive

In displacing the common-law duties of a financial institution to its customer,
the UCC does not leave customers without a potent remedy. The general rule is that
a financial institution is strictly liable for paying an unauthorized item and must re-
credit its customer’s account.12 While the UCC remedy may subject a claim to a
number of defenses otherwise unavailable at common law, those defenses cannot be
avoided by simply pleading an alternate cause of action. This is especially so where,
as here, the common-law cause of action is entirely displaced by the UCC’s strict
liability provision.

The negligence count thus fails to state a claim upon which relief may be
granted and is dismissed.

B. The Breach of Contract Claim is Not Displaced by the UCC

As to the breach-of-contract claim, the rule in Maha]jj/ &Associates should not

 

“ 6 Del. C. § 4-406; 6 Del. C. § 4-401(a) (imposing strict liability as the basic rule when a
bank charges an unauthorized item against a customer’s account); 6 Del. C. § 3-103(a)(7)
(“‘Ordinary care’ in the case of a person engaged in business means observance of reasonable
commercial standards, prevailing in the area in which the person is located, with respect to the
business in which the person is engaged In the case of a bank that takes an instrument for . . .
payment by automated means, reasonable commercial standards do not require the bank to examine
the instrument if the failure to examine does not violate the bank’s prescribed procedures and the
bank’s procedures do not vary unreasonably from general banking usage not disapproved by this
Article or Article 4.”); see also Associated Home & RVSales, Inc. v. Bank ofBelen, 294 P.3d 1276,
1280-81 (N.M. 2012).

12 6 Del. C. § 4-401(a).

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be viewed as requiring displacement of all potential contract claims between a bank
and its customer. Under 6 Del. C. § 4-103(a), a bank and its customers may vary the
provisions of Article 4 by agreement. lt follows that such an agreement, including
(at least potentially) subsequent representations made by the bank, would be
enforceable at law.13 Under the UCC’s general displacement principles, there is no
reason to believe that breach of contract claims are displaced Neither the UCC nor
this Court will interfere with the parties’ freedom to contract within the limits of the
law.

The breach of contract claim is not displaced by the UCC. To the extent the
parties’ agreement left the UCC untouched, however, the UCC would remain the
controlling authority and the sole available cause of action.

II. Whether the Claim is Suffz`ciently Specific to Survive a Motion to Dismiss

Additionally, the breach of contract count is sufficiently specific to survive a
motion to dismiss.

The Plaintiffs have a duty to provide a more definite statement, upon motion,
when they submit pleadings that are “so vague or ambiguous that a party cannot
reasonably be required to frame a responsive pleading.”14

The Credit Union cites to a pre-Twombly/Iqbal U.S. district court decision for

the proposition that contractual claims must allege (l) the agreements at issue, (2)

 

13 See 6 Del. C. § 1-103(a)(2) (noting that the UCC “must be liberally construed and applied
to promote its underlying purposes and policies, which [include] . . . [t]o permit the continued
expansion of commercial practices through . . . agreement of the parties”).

14 Super. Ct. Civ. R. 12(e).

Joseph J. Blaskovitz, Jr., et al. v. DFCU
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which representations within that agreement are at issue, and (3) “the manner in
which” the agreements “were allegedly breached.”15 The court in that case ordered
a more definite statement.16

Further, the Credit Union argues based on two superannuated cases involving
now-abolished17 causes of action, the Plaintiffs must allege “when and where”
wrongful acts occur.18 But in Weiner v. Markel, the Superior Court held that where
a cause of action (in this case, alienation of affections) “would necessarily consist of
a series of isolated acts . . . the pleader should not be required to specify the dates
with any particularity. A motion for a more definite statement will afford ample
opportunity to obtain full information containing the times and places when and
where the alleged acts occurred.”19 And in both cases, the court ordered a more
definite statement, not the dismissal the Credit Union now seeks.20

Finally, the Credit Union cites the decision of a federal district court sitting in
a neighboring state for the proposition that a plaintiffs complaint risks dismissal if
it fails to identify the “amounts of the checks, the appearance of the signatures, the

circumstances about the [fraudulent depositor]’s account and her depositing habits,

 

15 New Shah, Inc. v. Shah, No. Civ. A. 99-461, 2000 WL 1728251, at *6 (D. Del. June 20,
2000)

16 Id.
17 See 10 Del. C. § 3924.

18 See Weiner v. Markel, 92 A.2d 706, 707 (Del. Super. 1952); Bullock v. Maag, 94 A.2d 382,
384 (Del. Super. 1952).

19 Weiner, 92 A.2d at 707.
20 Id.; BullOC/C, 94 A.2d at 384.

10

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or to whom the checks were made.”21 But the federal district courts apply a pleading
standard under Bell Atlantic Corp v. Twombly22 and Ashcroft v. Iqbal23 that is “more

Cf.

rigorous than DelaWare’s counterpart pleading standard.”24 In Delaware, a

complaint will survive a motion to dismiss if it states a cognizable claim under any
‘reasonably conceivable’ set of circumstances inferable from the alleged facts.”25

The Court agrees that under Rule l2(e) the Plaintiffs would have been
obligated, upon motion by the Credit Union, to identify the allegedly breached
agreements and what checks were fraudulent (including, at least, the date and item
number of the check). Otherwise, it would be difficult for the Credit Union to frame
a responsive pleading.

But the Credit Union’s position that dismissal is the appropriate remedy at this
stage is entirely unpersuasive Nothing in the cases they have cited from within this
jurisdiction suggests that dismissal is appropriate when a complaint states a claim but
does so vaguely. The Credit Union could have moved, in the alternative, for a more
definite statement The Court will not provide relief that the Credit Union has not

requested and, indeed, was obligated to request in the same motion under Rule 12(g).

The Credit Union will have to rely on our discovery procedures, including carefully

 

21Silverv. Wells Fargo Bank, N.A., No. MJG-l6-382, 2016 WL 6962862, at *3 (D. Md. Nov.
29, 2016).

22 550 U.s. 544 (2007).

23 556 U.s. 662 (2009).

24 Winshall v. Viacom Int’l lnc., 76 A.3d 808, 813 n.l2 (Del. 2013).
25 Id.

ll

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crafted interrogatories, to narrow the scope of the litigation going forward
CONCLUSION
The Credit Union’s Motion to Dismiss is GRANTED IN PART. Count 1 of
the Complaint is DISMISSED WITHOUT PREJUDICE. The Credit Union must
answer the remainder of the Complaint.

IT IS SO ORDERED.

/s/ William L. Witham. Jr.
Resident Judge

WLW/dmh

12

