In Oguguo v. Wells Fargo Bank, NA, et al., No. 14-cv-2383, 2016 WL 3041853 (D.N.J. May 27, 2016), the United States District Court for the District of New Jersey considered a customer’s duty to timely report unauthorized transactions on their account. Plaintiffs Constance Oguguo (“Oguguo”) and Nkecchi Osuji (“Osuji,” together with Oguguo, “Plaintiffs’) sought reimbursement of $160,645 withdrawn from Osuji’s account at defendant Wells Fargo (the “Account”) to pay six allegedly forged checks between May and July 2012. The checks were made payable to Metal Building Associates and deposited in defendant Michael Stephen’s business account bearing that name at defendant PNC Bank. Osuji contends that she never authorized the checks and had no knowledge until August 14, 2016, when a Wells Fargo representative called to report an overdraft on the Account. Osuji contended that all of the funds deposited in the Account came from Oguguo and Osuji never made any withdrawals. Wells Fargo initiated an investigation based on Osuji’s affidavit of check fraud, but denied the claim because it took too long to report the alleged fraud. Osuji’s Customer Account Agreement required notice within thirty days from the date that Wells Fargo mailed, or otherwise made available the account statement and also disclaimed liability by the same wrongdoer that could have been prevented by timely notice. Plaintiffs filed suit against Wells Fargo and PNC Bank for, among other things, violation of New Jersey’s Uniform Commercial Code (the “UCC”).
Wells Fargo and PNC Bank moved for summary judgment. On the claims asserted against Wells Fargo, the District Court found that under the UCC the initial liability falls on a bank for a forged check, but can be shifted to a customer if the bank makes available its statements and the customer fails to timely report the fraud. The District Court found that Wells Fargo made the first two statements available online and then mailed the second two statements. Although Osuji denied receiving the statements, the District Court found that, absent proof to the contrary, Wells Fargo’s mailing of the statements satisfied its obligation. The District Court then found that the 30-day requirement in the Customer Account Agreement was not unreasonable given the UCC’s recognition that one of the most serious consequences of failure of the customer to comply with notice provisions is the missed opportunity to report losses. The District Court determined that Osuji’s failure to timely report the first two checks resulted in future losses that may have been prevented and any subsequent checks by the same wrongdoer were precluded from recovery. However, with respect to the final check on June 25, 2012, even if Osuji had reviewed her June 11, 2012 statement and objected within 30 days that may not have prevented the fraud with respect to the final check, leaving the bank potentially liable for such loss. Thus, the District Court granted summary judgment in favor of Wells Fargo with respect to all but the last check.
On Plaintiffs’ claims against PNC Bank for breach of the present warranty, the District Court found that the presentment warranty under the UCC is made to the drawee – i.e., the person ordered in a check to make payment, here, Wells Fargo. Thus, Plaintiffs had no right to assert a presentment warranty. Further, the pleadings made plain that Plaintiffs were really seeking to hold PNC Bank liable for negligently opening the account of Metal Building Associates due to improper documentation. Any negligence claim, however, is barred by the UCC. Therefore, the District Court granted summary judgment in favor of PNC Bank on Plaintiffs’ claims.