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Tuesday, September 23, 2008 

NJ Appeals Court Says Commercial Bank Subject to Consumer Fraud Act Claim

A bank employee who misappropriates a customer's cash deposit can expose the bank to a claim under the New Jersey Consumer Fraud Act, a NJ appeals court ruled in Lee v. First Union National Bank, et al., App. Div., Case No.: 09-2-1547.

In this case, the plaintiff, an existing customer of First Union National Bank, alleged she paid $2,000 in cash to a bank employee who worked in the bank's brokerage services unit which was supposed to be used to purchase shares of a mutual fund. Instead of depositing these funds into her brokerage account, the plaintiff claimed the bank's employee misappropriated her $2,000 cash tender for his own personal use which resulted in an overdraft in her checking account. The bank covered the shortfall by taking money from plaintiff's checking account and liquidating some of the mutual fund shares.

Plaintiff's complaint alleged violation of the Consumer Fraud Act (CFA) and common-law conversion. The trial judge granted summary judgment in favor of the bank and its brokerage arm, holding that the CFA was not applicable to a sale of securities and the count for misappropriation was barred by the two-year statute of limitations under the Blue Act, N.J.S.A. 49:3-71(g).

On appeal, the New Jersey Appellate Division reversed on the following grounds: (1) The transaction is not exempt from the CFA prohibition on deceptive sales practices because the claim relates to misrepresentation as to performance of services and not the nature or existence of the security; (2) N.J.S.A. 49:3-71(g) is not applicable because the gravaman of this count of the complaint concerns the unlawful "taking, detaining, or converting of personal property," which is subject to the six-year statute of limitations.

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Quite an interesting case . It is completly employees fault as he made a mistake in understanding and those money should be deducted from his salary cap . thanks for the article

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  • Glenn R. Reiser
  • From Hackensack, New Jersey, United States
  • New Jersey lawyer practicing in bankruptcy & creditors' rights, complex commercial litigation in state & federal courts, Internet law, foreclosure, real estate, and business law.
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