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Adams v. Martinsville Dupont Credit Union

August 29, 2008


The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge


Plaintiff John Robert Adams commenced this action against the Martinsville Dupont Credit Union ("Martinsville" or "Credit Union") to recoup funds that were withdrawn from his checking account as a result of the Credit Union honoring stolen checks. Plaintiff also seeks additional relief for other damages he allegedly suffered. Pending before the Court is defendant's Motion for Summary Judgment, and plaintiff's cross Motion for Summary Judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. Upon consideration of the motions, the responses and replies thereto, and the applicable law, the defendant's motion is GRANTED in part and DENIED in part, and plaintiff's cross motion is also GRANTED in part and DENIED in part.

I. Background

Martinsville is a financial institution headquartered in Martinsville, Virginia. The Credit Union is federally insured by the National Credit Union Association, and has annual audits conducted by an independent accounting firm, as well as a surety bond to insure against robbery, forgery and dishonesty.

Plaintiff was a resident of the District of Columbia from approximately February 2001 through October 2005, and a member of the Credit Union during the relevant time period. Plaintiff signed a Share Draft Agreement with Martinsville, in which he acknowledged that any objection to the monthly statement would be waived unless made in writing to the Credit Union within thirty days of when the statement was mailed. Plaintiff, however, alleges that bank statements he received monthly amended the Share Draft Agreement, in that it provided that customers had up to sixty days to report inaccuracies on their bank statements.*fn1

On Friday, February 15, 2002, plaintiff's automobile was vandalized and several items were stolen from his vehicle, including his checkbook containing check numbers 1305-1330. Plaintiff notified the Credit Union of the theft on Saturday, February 16, 2002. Plaintiff contacted the Credit Union again on Tuesday, February 19, 2002, which was the next regular business day, and spoke with Terry Hammond, the Controller of the Credit Union. Plaintiff alleges that Hammond told him that he would not be held responsible for the stolen checks and that the checks would be flagged so that they would not be paid. Pl.'s Opp'n 7. Martinsville denies that Hammond made either of those statements to the plaintiff. Def.'s Rep. 3.

On or about February 21, 2002, four checks from the stolen checkbook, check numbers 1306-1309, were written at Giant Food, and on or about March 1, 2002, plaintiff was contacted by Giant Food regarding those checks. On or about March 3, 2002, plaintiff contacted the Credit Union to report the fraud on check numbers 1306-1309. In response, the Credit Union sent plaintiff an affidavit of forgery to complete, as well as a stop payment order, for check numbers 1305 through 1330.*fn2 The stop payment order expired by its own terms six months later, on September 15, 2002, and was not renewed by plaintiff. The Credit Union alleges that plaintiff was given the option to close his checking account. See Def.'s Mot. for Summ. J. 8. Plaintiff, however, denies that he was presented with that option, and alleges that the Credit Union actually advised him against freezing his account. See Pl.'s Opp'n 5.

Between July 25 and July 27, 2003, eight checks from the stolen checkbook were written on plaintiff's account (check numbers 1313-1320), in the amount of $5,926.19. These checks will be referred to as the "July 2003 checks." The Credit Union honored the July 2003 checks and debited them from plaintiff's account. The statements reflecting the July 2003 checks were mailed to plaintiff on or around August 5, 2003 and September 5, 2003.*fn3 On or about October 15 and 16, 2003, two more checks were forged on plaintiff's account (check numbers 1325 and 1327) in the amount of $1,053.28. The statement reflecting the October 2003 checks was mailed to plaintiff on or around November 5, 2003. On December 5, 2003, plaintiff reported the October 2003 checks to the Credit Union, and in January 2004, plaintiff reported the July 2003 checks. The total value of the checks in dispute is $6,979.47.

On April 21, 2004, plaintiff wrote a letter to Hammond directing the Credit Union to contact a series of check verification companies, including ChexSystems, and report the theft of the checks from his Share Draft Account. On April 23, 2004, plaintiff wrote another letter to Hammond directing the Credit Union to notify the check verification companies referenced in the previous letter that, as a result of his stolen checks, plaintiff's "checking account had been closed due to theft and fraud."

On April 23, 2004, Minniear, a Martinsville employee, wrote a letter to plaintiff advising him that the Credit Union had reported his account as closed to two of the companies referenced, ChexSystems and Equifax, and further advising him that reporting the information as he requested would likely not lead to his desired result. Based on plaintiff's request in his letter of April 23, 2004, Sharon Clark, the Credit Union's Member Services Manager, wrote a letter to ChexSystems on April 27, 2004, requesting that ChexSystems flag plaintiff's account as "closed due to fraud."

In September 2005, the Credit Union accessed plaintiff's ChexSystems report. The Credit Union contends that it accessed the report in response to a complaint by plaintiff's counsel that ChexSystems was reporting inaccurate information, as relayed by the Credit Union. Def.'s Mot. for Summ. J. 11-12. According to the Credit Union, it accessed plaintiff's report to confirm whether ChexSystems was accurately reporting the information the Credit Union had provided in April 2004, namely that plaintiff's account was closed by plaintiff because of fraudulent activity (i.e., the presentment of fraudulent checks). Id. Plaintiff contends, however, that the Credit Union's justification for checking his ChexSystem report is factually inaccurate. Plaintiff alleges that he did not become aware that inaccurate information appeared on his ChexSystem report until October 5, 2005, one week after the Credit Union accessed his report. Pl.'s Opp'n 6-7. According to plaintiff, his counsel did not inform the Credit Union that false information appeared on Adam's ChexSystems report until October 11, 2005, more than two weeks after the report had been accessed. Id.

II. Standard of Review

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment should be granted only if the moving party has shown that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986); Waterhouse v. Dist. of Columbia, 298 F.3d 989, 991 (D.C. Cir. 2002). In determining whether a genuine issue of material fact exists, the Court must view all facts in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

III. Analysis

On July 13, 2006, plaintiff filed a Second Amended Complaint asserting the following claims against Martinsville: (1) violations of the Uniform Commercial Code ("U.C.C."); (2) Negligence; (3) Conversion; (4) Breach of Contract; (5) Breach of Fiduciary Duty; (6) Deceptive Advertising; (7) Unlawful Trade Practices; (8) Negligent Misrepresentation, Deceit, Fraud, and Constructive Fraud; (9) Bad Faith; (10) Covenant of Good Faith and Fair Dealing; (11) Defamation; (12) Emotional Distress; (13) another count of Defamation; (14) Violations of the Fair Credit Report Act ("FCRA"); and (15) Invasion of Privacy. Compl. ¶¶ 32-65. Plaintiff seeks restitution in the amount of $6,979.47 for the fraudulent checks honored by Martinsville, as well as consequential, punitive, and treble damages in excess of $600,000. Compl. at 13.

Martinsville maintains that it is entitled to partial summary judgment on Count I of plaintiff's second amended complaint on the grounds that plaintiff did not satisfy his reporting requirement under the U.C.C. and the Share Draft Agreement for the eight checks written in July 2003. Martinsville also seeks summary judgment on Counts II through XV for the following reasons: (1) plaintiff's common law claims for negligence and conversion are preempted by Virginia's adoption of the U.C.C.; (2) plaintiff's claims for breach of contract, breach of fiduciary duty, deceptive advertising, unlawful trade practices, and defamation lack factual and legal support; (3) plaintiff's claims for negligent misrepresentation, bad faith, breach of covenant of good faith and fair dealing, emotional distress are not recognized as independent causes of action under Virginia law; (4) plaintiff's additional claim for defamation, and well as his claim for invasion of privacy, should be dismissed because they are preempted by the FCRA; and (5) plaintiff's claims for violations of the FCRA fail because the Credit Union had a permissible purpose for accessing plaintiff's ChexSystem report. See Def. Mot. for Summ. J. 1.

Plaintiff moves for summary judgment on Count I of the Second Amended Complaint arguing that he satisfied his reporting obligations under the U.C.C., and thus the Credit Union is liable for honoring the stolen checks. See Pl.'s Mot. for Summ. J. 1.

A. Diversity Jurisdiction and Choice of Law

The Court has subject matter jurisdiction over this action due to diversity jurisdiction. Plaintiff was, at the time he filed this lawsuit, a resident of the District of Columbia. The Credit Union is a corporation with its principal place of business in Martinsville, Virginia. The amount in controversy exceeds $75,000.

In a diversity action, "[f]ederal courts apply the choice of law principles of the jurisdiction in which they sit." GEICO v. Fetisoff, 958 F.2d 1137, 1141 (D.C. Cir. 1992). "The District of Columbia follows a modified 'interests analysis' approach to choice of law. Under this approach, the first step is to determine whether a 'true conflict' exists -- that is, whether more than one jurisdiction has a potential interest in having its law applied and, if so, whether the law of the competing jurisdiction is different." Id.; see also Shapiro, Lifschitz & Schram, P.C. v. Hazard, 24 F. Supp. 2d 66 (D.D.C. 1998). Only after the determination of whether a "true conflict" exists between the laws of two jurisdictions will a court determine whether another jurisdiction has a more substantial interest in the dispute. GEICO, 958 F.2d at 1141; Hazard, 24 F. Supp. 2d at 74.

There are several counts alleged in plaintiff's complaint that are not recognized as causes of action in the State of Virginia, even if they are recognized as a cause of action in the District of Columbia. Where a cause of action exists in one jurisdiction, but is not recognized as a cause of action in another, it is axiomatic that a true conflict of law exists.

Next the Court considers which jurisdiction has a more substantial interest. GEICO, 958 F.2d at 1141. Virginia has an interest in regulating the conduct of parties within its territory and providing redress for injuries, if any, that occurred therein. Specifically, the initial injury at issue in this case occurred when Martinsville failed to return or otherwise credit the stolen funds to plaintiff's checking account. As the account is located in Virginia, any injury suffered by plaintiff as a result of Martinsville's refusal to re-credit his account also occurred in Virginia. Further, plaintiff's account, as well as the Credit Union and its officers, are located in Virginia. It follows that any action or inaction taken by Martinsville with regard to the account also took place in Virginia. Finally, the relationship between the parties, a credit union and its customer, is centered in Virginia.

Plaintiff alleges only limited contacts with the District of Columbia: that he was domiciled in the District at the time that his checkbook was stolen, and that the alleged theft of the checks from his automobile occurred in the District. Standing alone, these allegations are insufficient to support a conclusion that the District of Columbia has a more substantial interest in having its laws ...

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