12-1200-cv, 12-1342-cv
Cruz v. TD Bank, N.A., Martinez v. Capital One Bank, N.A.


                             UNITED STATES COURT OF APPEALS
                                 FOR THE SECOND CIRCUIT


                                       August Term 2012

             (Argued: December 12, 2012               Decided: December 18, 2013)

                            Docket Nos. 12-1200-cv, 12-1342-cv
                               ________________________

                     GARY CRUZ and CLAUDE PAIN, individually and
                       on behalf of all others similarly situated,
                                                       Plaintiffs-Appellants,

                                                 v.

                                         TD BANK, N.A.,
                                                     Defendant-Appellee.
                                 ________________________

           GERALDO F. MARTINEZ and JOSEPH CUMMINGS, individually and
                     on behalf of all others similarly situated,
                                                     Plaintiffs-Appellants,

                                                 v.

                                  CAPITAL ONE BANK, N.A.,
                                                     Defendant-Appellee.
                                 ________________________

Before:
                         POOLER, HALL, and CHIN, Circuit Judges.
             Appeals heard in tandem from judgments of the United States

District Court for the Southern District of New York (Castel, J., and Sullivan, J.)

dismissing plaintiffs-appellants' claims under Article 52 of the New York Civil

Practice Law and Rules, as amended by the Exempt Income Protection Act, 2008

N.Y. Laws ch. 575, and under New York common law.

           AFFIRMED and REMANDED to permit plaintiffs to move for leave
to amend their complaints.

                                G. OLIVER KOPPELL (Daniel F. Schreck, on the
                                      brief), Law Offices of G. Oliver Koppell &
                                      Associates, New York, New York, for Gary
                                      Cruz, Claude Pain, Geraldo F. Martinez, Joseph
                                      Cummings.

                                Alexander D. Bono, Ryan E. Borneman, Duane
                                     Morris, LLP, Philadelphia, Pennsylvania,
                                     for TD Bank, N.A.

                                Robert Plotkin, Kurt E. Wolfe, Matthew A.
                                     Fitzgerald, McGuire Woods LLP, New
                                     York, New York, Washington, D.C., and
                                     Richmond, Virginia, for Capital One Bank,
                                     N.A.

                                Gina M. Calabrese, St. Vincent de Paul Legal
                                     Program, Inc., Elder Law Clinic, St. John's
                                     University School of Law, Jamaica, New
                                     York, and Claudia E. Wilner, Neighborhood
                                     Economic Development Advocacy Project
                                     Inc., New York, New York, for Amici Curiae
                                     AARP, District Council 37 Municipal



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                                        Employees Legal Services, The Legal Aid
                                        Society, Lincoln Square Legal Services, Inc.,
                                        MFY Legal Services, Neighborhood Economic
                                        Development Advocacy Project, Inc., St.
                                        Vincent de Paul Legal Program, Inc., The
                                        Urban Justice Center.

PER CURIAM:

             These appeals, heard in tandem, challenge two separate judgments

entered in the United States District Court for the Southern District of New York

(Castel, J., and Sullivan, J.), in favor of defendants-appellees TD Bank, N.A. ("TD

Bank") and Capital One Bank, N.A. ("Capital One"), respectively, dismissing

plaintiffs' claims that the banks violated (1) Article 52 of the New York Civil

Practice Law and Rules ("CPLR"), as amended by the Exempt Income Protection

Act (the "EIPA"), 2008 N.Y. Laws Ch. 575 (codified as amended at CPLR 5205,

5222, 5222-a, 5230, 5231, and 5232), and (2) their rights under New York common

law.

             The facts are set forth in detail in our opinion filed in this case on

March 27, 2013. See Cruz v. TD Bank, N.A., 711 F.3d 261, 264-67 (2d Cir. 2013).

We assume familiarity with our prior opinion.

             In both cases, the plaintiff judgment debtors maintained accounts

with the defendant banks. The banks notified plaintiffs that their accounts were



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frozen pursuant to restraints served by third-party creditors. Plaintiffs allege,

however, that the banks failed to provide them with certain required notices and

forms, restrained their accounts, and assessed them fees, all in violation of the

EIPA.

             The district courts dismissed the complaints pursuant to Federal

Rule of Civil Procedure 12(b)(6), concluding that judgment debtors do not have a

private right of action against their banks for the banks' violations of the EIPA's

procedural requirements. See Cruz v. TD Bank, N.A., 855 F. Supp. 2d 157, 170-74

(S.D.N.Y. 2012); Martinez v. Capital One, N.A., 863 F. Supp. 2d 256, 262-66

(S.D.N.Y. 2012).

             In our prior opinion, we certified the following questions to the New

York Court of Appeals:

             first, whether judgment debtors have a private right of action for

money damages and injunctive relief against banks that violate EIPA's

procedural requirements; and

             second, whether judgment debtors can seek money damages and

injunctive relief against banks that violate EIPA in special proceedings

prescribed by Article 52 of the CPLR and, if so, whether those special




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proceedings are the exclusive mechanism for such relief or whether judgment

debtors may also seek relief in a plenary action.

             In an opinion filed November 21, 2013, the Court of Appeals

answered the certified questions. Cruz v. TD Bank, N.A., No. 191 (N.Y. Nov. 21,

2013), available at 2013 WL 6096124. It answered the first question in the negative,

holding that "a private right to bring a plenary action for injunctive relief and

money damages cannot be implied from the EIPA." Id., slip op. at 23. As for the

second question, the Court held that "a judgment debtor can secure relief from a

bank arising from a violation of the EIPA in a CPLR Article 52 special

proceeding" and that the special proceedings set forth in Article 52 are the

"exclusive" mechanisms for relief. Id.

             The rulings of the Court of Appeals resolve the principal claims

before us. The district courts correctly dismissed plaintiffs' claims to the extent

they sought to assert a private right of action under the EIPA. Plaintiffs'

exclusive mechanism for seeking relief for alleged violations of the EIPA's

procedural requirements is a special proceeding under Article 52 of the CPLR.

             Plaintiffs also asserted -- and the district courts dismissed -- common

law claims for conversion, breach of fiduciary duty, fraud, negligence, and unjust




                                         - 5-
enrichment based on defendants' alleged violations of the EIPA. See Cruz, 855 F.

Supp. 2d at 174-79; Martinez, 863 F. Supp. 2d at 266-68. We affirm the dismissal

of the common law claims substantially for the reasons stated by the district

courts in their thorough opinions. Plaintiffs' common law claims are based on

defendants' alleged violations of Article 52 of the CPLR, and but for the EIPA's

requirements, the banks had no obligation to provide plaintiffs with the omitted

notices or to refrain from assessing the disputed fees. Hence, as Article 52

provides plaintiffs' exclusive remedies, they may not seek to circumvent Article

52 by relying on separate common law causes of action. See Assured Guar. (UK)

Ltd. v. J.P. Morgan Inv. Mgmt. Inc., 18 N.Y.3d 341, 353 (N.Y. 2011); Kerusa Co. LLC

v. W10Z/515 Real Estate Ltd. P'ship, 12 N.Y.3d 236, 247 (N.Y. 2009).

             We therefore find the district courts properly granted the motions to

dismiss. Plaintiffs have, however, requested an opportunity to replead their

claims in a manner consistent with the decision by the Court of Appeals. A party

may amend its pleading once as a matter of right before a responsive pleading

has been served and otherwise by leave of the court. Fed. R. Civ. P. 15(a). The

"court should freely give leave when justice so requires," id., and it is the usual

practice upon granting a motion to dismiss to allow leave to replead, Cortec




                                         - 6-
Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 50 (2d Cir. 1991). Nevertheless, we

leave it to the district courts to decide in the first instance whether to grant

plaintiffs leave to amend. We thus hold that the district courts correctly

dismissed the complaints, but we remand the cases to the district courts, with

instructions to permit plaintiffs to move for leave to amend their complaints.

             AFFIRMED and REMANDED.




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