Cruz v. TD Bank, N.A., Martinez v. Capital One Bank, N.A. ( 2013 )

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: March 27, 2013)
Docket No. 12-1200-cv
________________________
GARY CRUZ and CLAUDE PAIN, individually and on behalf of all
others similarly situated,
Plaintiffs-Appellants,
v.
TD BANK, N.A.,
Defendant-Appellee.
________________________
Docket No. 12-1342-cv
________________________
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
*
The Clerk of Court is directed to amend the official
caption to conform to the above.
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.
DECISION RESERVED and QUESTIONS CERTIFIED.
G. OLIVER KOPPEL (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 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.
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CHIN, Circuit Judge:
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 ("EIPA"), 2008 N.Y. Laws Ch. 575
(codified as amended at CPLR 5205, 5222, 5222-a, 5230,
5231, and 5232), and (2) New York common law.
In both cases, the plaintiff judgment debtors
maintained accounts with the defendant banks. The banks
notified plaintiffs that their accounts were 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 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 EIPA's procedural requirements. See Cruz v.
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TD Bank, N.A., 855 F. Supp. 2d 157 (S.D.N.Y. 2012);
Martinez v. Capital One, N.A., 863 F. Supp. 2d 256(S.D.N.Y. 2012).
These appeals present unresolved questions of New
York law:
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 proceedings are the
exclusive mechanism for such relief or whether judgment
debtors may also seek relief in a plenary action.
Because these unresolved questions implicate
significant New York state interests and are determinative
of these appeals, we reserve decision and certify them to
the New York State Court of Appeals.
BACKGROUND
For purposes of these appeals, we assume the facts
alleged in the complaints to be true and draw all
reasonable inferences in plaintiffs' favor. See Mortimer
Off Shore Servs., Ltd. v. Fed. Rep. of Germ., 615 F.3d 97,
113-14 (2d Cir. 2010).
-4-
A. CPLR Article 52 and EIPA
CPLR Article 52 governs the enforcement and
collection of money judgments in New York State courts.
See CPLR 5201-5252. In 2008, the New York State
legislature amended Article 52 by enacting EIPA, which
created a procedure for the execution of money judgments
such that judgment debtors would retain access to certain
exempt funds deposited in their bank accounts. These
exempt funds included, for example, a certain minimum
amount regardless of the source, as well as a minimum
amount received from social security benefits, public
assistance, unemployment insurance, and pensions. See N.Y.
State Senate Introducer's Mem. in Supp., Bill No. S6203, at
3-4 [hereinafter "Sponsors Memo"].1 The stated purpose of
EIPA was to protect a baseline amount of every person's
income "[t]o ensure that money judgments do not render
1
See, e.g., CPLR 5222(i) (prohibiting restraint of a
minimum amount of funds in an account, regardless of the source);
id. 5222(h), 5205(l)(1) (prohibiting restraint of the first
$2,500 of income in a debtor's bank account "reasonably
identifiable as statutorily exempt" and deposited electronically
or by direct deposit within the preceding forty-five days); id.
5205(l)(2) (defining "statutorily exempt payments" as "any
personal property exempt from application to the satisfaction of
a money judgment under any provision of state or federal law,"
including but not limited to "retirement, survivors' and
disability benefits, supplemental security income or child
support payments; veterans administration benefits; public
assistance; workers' compensation; unemployment insurance; public
or private pensions; railroad retirement; and black lung
benefits").
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working New Yorkers unable to care for their or their
families' most basic needs." Id. at 3.
As relevant to these cases, EIPA prohibits the
restraint of a minimum amount of funds in a judgment
debtor's account, regardless of the source of the funds.
See CPLR 5222(i).2 Further, pursuant to EIPA's new
procedures, judgment debtors must be notified of the
available exemptions and how to claim them. Accordingly,
to restrain a debtor's bank account, a judgment creditor
must serve the debtor's bank with two copies of the
restraining notice, an exemption notice, and two exemption
claim forms, in a prescribed format. CPLR 5222-a(b)(1),
(4). If the creditor fails to serve these notices and
2
CPLR 5222(i) provides, in relevant part:
A restraining notice issued pursuant to this
section shall not apply to an amount equal to
or less than the greater of two hundred forty
times the federal minimum hourly wage
prescribed in the Fair Labor Standards Act of
1938 or two hundred forty times the state
minimum hourly wage prescribed in section six
hundred fifty-two of the labor law as in
effect at the time the earnings are payable
. . . except such part thereof as a court
determines to be unnecessary for the
reasonable requirements of the judgment
debtor and his or her dependents.
CPLR 5222(i). At the time of the restraints at issue here, the
first $1,740 in plaintiffs' bank accounts were exempt from
restraint, regardless of the source. See Cruz Am. Compl. ¶ 22
n.4, ECF No. 17; Cruz v. T.D. Bank, N.A., 855 F. Supp. 2d 157,
167 (S.D.N.Y. 2012); Martinez Am. Compl. ¶ 22 n.5, ECF No. 16;
Martinez v. Capital One, N.A., 863 F. Supp. 2d 256, 259 (S.D.N.Y.
2012).
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forms on the bank, the bank cannot restrain the debtor's
account and any restraint on the account is void. Id.EIPA also requires the debtor's bank to serve the
notices and forms on the debtor within two days after
receiving them from the creditor. Id. 5222-a(b)(3). Banks
are prohibited from charging fees to debtors whose accounts
are exempt from restraint or restrained "in violation of"
EIPA. Id. 5222(j). Nevertheless, under CPLR 5222-a(b)(3),
"[t]he inadvertent failure by a depository institution to
provide the notice required by this subdivision shall not
give rise to liability on the part of the depository
institution." Id. 5222-a(b)(3).
Article 52 prescribes certain procedures to
resolve disputes that arise in connection with the
enforcement and collection of money judgments. CPLR 5239,
entitled "[p]roceeding to determine adverse claims,"
provides:
Prior to the application of property or
debt by a sheriff or receiver to the
satisfaction of a judgment, any
interested person may commence a special
proceeding against the judgment creditor
or other person with whom a dispute
exists to determine rights in the
property or debt.
Id. 5239. The presiding court "may vacate the execution or
order, void the levy, direct the disposition of the
property or debt, or direct that damages be awarded." Id.
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In addition, CPLR 5240 empowers a court "at any time, on
its own initiative or the motion of any interested person,
. . . [to] make an order denying, limiting, conditioning,
regulating, extending or modifying the use of any
enforcement procedure." Id. 5240. The New York State
Court of Appeals has explained that CPLR 5240 "grants the
courts broad discretionary power to control and regulate
the enforcement of a money judgment under article 52 to
prevent unreasonable annoyance, expense, embarrassment,
disadvantage, or other prejudice to any person or the
courts." Guardian Loan Co. v. Early, 47 N.Y.2d 515, 519
(1979) (citations and internal quotation marks omitted).
Finally, CPLR 5222-a(h), entitled "[r]ights of
judgment debtor," provides that "[n]othing in this section
shall in any way restrict the rights and remedies otherwise
available to a judgment debtor, including but not limited
to, rights to property exemptions under federal and state
law." CPLR 5222-a(h).
B. Cruz v. TD Bank, N.A., No. 12-1200-cv
Named plaintiffs Gary Cruz and Claude Pain
(together, the "Cruz plaintiffs") are residents of New York
who maintained bank accounts at TD Bank, a national bank
with branches in several states, including New York. In
August 2009, TD Bank notified Cruz that his checking
account and savings account, containing a total of
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approximately $3,020 received from wages, had been frozen
pursuant to a restraining notice served by Cruz's third-
party creditors. On December 31, 2010, TD Bank notified
Pain that his checking account, containing approximately
$340 received from wages, had been frozen pursuant to a
restraining notice served by Pain's third-party creditors.
TD Bank subsequently charged the Cruz plaintiffs
administrative fees associated with restraining their
accounts and overdraft fees due to checks that bounced
after their accounts were frozen. Further, the Cruz
plaintiffs allege that TD Bank did not provide them with
copies of the restraining notices that the third-party
creditors served on TD Bank, disclosures concerning
property that was exempt from restraint, or forms advising
them how to claim an exemption, as required by EIPA.
On October 21, 2010, Cruz filed this putative
class action seeking damages and injunctive relief pursuant
to EIPA and New York common law, principally alleging that
TD Bank failed to provide him with the required notices and
forms as required by CPLR 5222-a(b)(3), restrained his
entire account in violation of CPLR 5222(i), and assessed
him fees in violation of CPLR 5222(j).3 On March 14, 2010,
3
The same day that Cruz filed the instant action,
Geraldo Martinez and five additional judgment-debtor depositors
filed nearly identical lawsuits against their respective banks in
New York federal courts. See Compl., Martinez v. Capital One
Bank, N.A., No. 10 Civ. 8028 (S.D.N.Y. Oct. 21, 2010), ECF No. 1;
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Cruz filed an amended complaint that added Pain as a named
plaintiff.
On March 2, 2012, the district court (Castel, J.)
granted TD Bank's motion to dismiss the Cruz plaintiffs'
claims.4 See Cruz, 855 F. Supp. 2d at 164. The court
concluded that EIPA did not create a private right of
action for money damages and that plaintiffs' common law
claims failed as a matter of law.5 See id. at 168, 174.
C. Martinez v. Capital One Bank, N.A., No. 12-1342-cv
Named plaintiffs Geraldo Martinez and Joseph
Cummings (together, the "Martinez plaintiffs") are
residents of New York who maintained bank accounts at
Capital One, a national bank with branches in several
states, including New York. On January 15, 2010, Capital
One notified Cummings, who maintained one checking account
and two savings accounts at Capital One, that one of his
Compl., Matin v. HSBC Bank USA, N.A., No. 10 Civ. 8029 (S.D.N.Y.
Oct. 21, 2010), ECF No. 1; Compl., Acevado v. Citibank, N.A., No.
10 Civ. 8030 (S.D.N.Y. Oct. 21, 2010), ECF No. 1; Compl.,
Latimore v. Mun. Credit Union, No. 10 Civ. 8031 (S.D.N.Y. Oct.
21, 2010), ECF No. 1; Compl., Luciano v. Bank of Am., N.A., No.
10 Civ. 8032 (S.D.N.Y. Oct. 21, 2010), ECF No. 1; Compl., Onate
v. JP Morgan Chase Bank, N.A., No. 10-cv-4853 (E.D.N.Y. Oct. 21,
2010), ECF No. 1.
4
On March 23, 2012, another district court (Gardephe,
J.) granted a motion to dismiss nearly identical claims brought
in a separate action against Citibank, N.A. See Acevado v.
Citibank, N.A., No. 10 Civ. 8030, 2012 U.S. Dist. LEXIS 40242(S.D.N.Y. Mar. 23, 2012).
5
The district court did not decide whether plaintiffs
had a private right of action for injunctive relief under EIPA.
See Cruz, 855 F. Supp. 2d at 164, 170-74.
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savings accounts had been frozen due to a restraining
notice served by Cummings's third-party creditors.6
According to Cummings, Capital One also restrained his
other savings account (containing approximately $240.00)
and his checking account (containing less than $2,500.00),
but did not notify him that the accounts had been frozen.
On April 29, 2010, Capital One notified Martinez that a
portion of his checking account, containing approximately
$2,156.15 received from wages, had been frozen due to a
restraining notice served by Martinez's third-party
creditors.
Capital One subsequently charged the Martinez
plaintiffs legal processing fees associated with
restraining their accounts. Further, the Martinez
plaintiffs allege that Capital One did not provide them
with copies of the restraining notices that the third-party
creditors served on Capital One, disclosures concerning
property that was exempt from restraint, or forms advising
them how to claim an exemption, as required by EIPA.
Ultimately, Capital One paid the money in the Martinez
plaintiffs' accounts to their respective creditors.7
6
Although the restraining notice purported to restrain
$5,630.16 in Cummings's savings account, Cummings asserts that
his account contained only $1,137.29, received from wages.
7
Capital One paid Cummings's creditors $1,087.43 from
his first savings account, and all of the funds in his other
savings account and his checking account.
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On October 21, 2010, Martinez filed this putative
class action seeking damages and injunctive relief pursuant
to EIPA and New York common law, principally alleging that
Capital One failed to provide him with the required notices
and forms as required by CPLR 5222-a(b)(3), restrained his
entire account in violation of CPLR 5222(i), and assessed
him fees in violation of CPLR 5222(j). On February 7,
2011, Martinez filed an amended complaint that added
Cummings as a named plaintiff.
On March 27, 2012, the district court (Sullivan,
J.) granted Capital One's motion to dismiss the Martinez
plaintiffs' claims. See Martinez, 863 F. Supp. 2d at 259.
The court concluded that EIPA "does not carry with it a
private right of action" and held that plaintiffs' common
law claims failed as a matter of law. Id. at 266.
These appeals followed.
DISCUSSION
A. Applicable Law
1. Standard of Review
We review de novo a district court's order
granting a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6). Absolute Activist Value Master
Fund Ltd. v. Ficeto, 677 F.3d 60, 65 (2d Cir. 2012). "To
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a
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claim to relief that is plausible on its face." Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal
quotation marks omitted).
2. Certification to the New York State Court of
Appeals
"When we are faced with a question of New York law
that is decisive but unsettled, we may 'predict' what the
state's law is, consulting any rulings of its intermediate
appellate courts and trial courts, or we may certify the
question to the New York Court of Appeals." Windsor v.
United States, 699 F.3d 169, 177 (2d Cir. 2012). New York
law and Second Circuit local rules permit us to certify to
the New York State Court of Appeals "an unsettled and
significant question of state law that will control the
outcome of a case pending before this Court." Zakrzewska
v. New Sch., 574 F.3d 24, 27 (2d Cir. 2009) (internal
quotation marks omitted) (citing N.Y. Comp. Codes R. &
Regs. tit. 22, § 500.27(a); 2d Cir. R. 27).
"We have deemed certification appropriate where
state law is not clear and state courts have had little
opportunity to interpret it, where an unsettled question of
state law raises important issues of public policy, where
the question is likely to recur, and where the result may
significantly impact a highly regulated industry." State
Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 505 (2d
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Cir. 2004) (internal citations and quotation marks
omitted); accord Georgitsi Realty, LLC v. Penn-Star Ins.
Co., 702 F.3d 152, 158 (2d Cir. 2012). Accordingly, in
deciding whether to certify a question to the New York
State Court of Appeals, we consider: (1) the absence of
controlling state court decisions interpreting the law in
question; (2) the importance of the issue to the state and
whether the issue implicates state public policy; and (3)
the capacity of the certified issues to resolve the
litigation. See Pachter v. Bernard Hodes Grp., Inc., 505
F.3d 129, 131 (2d Cir. 2007); Zakrzewska, 574 F.3d at 27-
28.
B. Application
On appeal, plaintiffs challenge the district
courts' conclusion that judgment debtors have no plenary
private right of action against banks that violate EIPA's
procedural requirements. Plaintiffs argue that the history
of Article 52 and the text of EIPA create by negative
inference a private right of action by judgment debtors
against their banks. Plaintiffs point to the purported
"lengthy history" of New York cases permitting private
rights of action against banks that violate Article 52 and
argue that in light of the reservation of rights set forth
in CPLR 5222-a(h), it is "clear that preexisting rights of
the judgment debtor, such as the right to bring lawsuits
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against banks for violating Article 52, are permitted."
Cruz Appellants' Br. 17-18; accord Martinez Appellants' Br.
15-16. Further, plaintiffs argue that because CPLR 5222-
a(b)(3) specifically excludes a private right of action
against banks for their inadvertent failure to provide
customers with the required notice, the legislature must
have intended to allow such a private right of action in
all other instances -- inadvertent or otherwise -- where a
bank fails to comply with the requirements of EIPA.
Finally, plaintiffs argue that a private right of action
may be inferred by this Court because it is consistent with
EIPA's purpose and legislative scheme.
For the reasons set forth below, we conclude that
these appeals turn on unsettled and important questions of
New York law, and we certify those questions to the New
York State Court of Appeals.
1. The Absence of Controlling Precedent.
EIPA does not explicitly state that judgment
debtors have a private right of action against their banks,
and no New York court has decided whether judgment debtors
have such a right against banks that fail to comply with
EIPA's procedural guarantees. As plaintiffs point out,
courts have recognized private rights of action under CPLR
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Article 52 by judgment creditors against banks,8 by non-
debtor accountholders against banks,9 and by judgment
debtors challenging the constitutionality of Article 52.10
But no court applying New York law has addressed whether a
judgment debtor has a private right of action against his
or her bank for failing to provide the required notice,
improperly restraining an account, or improperly assessing
fees.
8
See, e.g., Aspen Indus. v. Marine Midland Bank, 52
N.Y.2d 575, 580 (1981) ("[V]iolation of the restraining notice by
the party served is punishable by contempt . . . and subjects the
garnishee to personal liability in a separate plenary action or a
special proceeding under CPLR article 52 brought by the aggrieved
judgment creditor."); Mazzuka v. Bank of N. Am., 280 N.Y.S.2d
495, 499 (N.Y. Civ. Ct. 1967) ("[A] Bank may be held liable to a
judgment-creditor for its negligence in complying with a
Restraining Notice."); Jackson v. TD Bank, No. 995/10, 2010 N.Y.
Misc. LEXIS 3797, at *4-7 (N.Y. Civ. Ct. Aug. 9, 2010) (bank may
be held liable to creditor for negligent failure to restrain
debtor's account); see also Salles v. Chase Manhattan Bank, 754
N.Y.S.2d 236, 239 (1st Dep't 2002) (bank may be held liable to
creditors' attorneys for fraudulent misrepresentations in
connection with restraining notice, information subpoena, and
levy).
9
See, e.g., Walter v. Doe, 402 N.Y.S.2d 723, 725 (N.Y.
Civ. Ct. 1978) (bank may be held liable to third-party
accountholders who are not judgment debtors for negligently
restraining their account); see also Nejeidi v. Rep. Nat'l Bank
of N.Y., 642 N.Y.S.2d 61, 62-63 (2d Dep't 1996) (assuming,
without deciding, that third-party accountholders who are not
judgment debtors can state a claim for money damages against bank
for negligently restraining their accounts).
10
See, e.g., Deary v. Guardian Loan Co., 534 F. Supp.
1178, 1180, 1185 (S.D.N.Y. 1982) (alleging that procedures for
restraint and execution on judgments violates the Due Process
Clause and the Supremacy Clause); Sims v. Bank of Am., No. 06-cv-
5991, 2008 U.S. Dist. LEXIS 11972, at *2-3 (E.D.N.Y. Feb. 19,
2008) (alleging that restraint of accounts containing only exempt
supplemental security income violated, inter alia, the Due
Process Clause and the Supremacy Clause).
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In addition, it remains an open question whether
plaintiffs could have pursued their claims against their
banks in a special proceeding under CPLR 5239 and 5240 and,
if so, whether such a proceeding is plaintiffs' exclusive
mechanism for relief. On the one hand, as plaintiffs
argue, CPLR 5239 on its face provides for a stakeholder
action in which parties may assert competing claims to
property owned by the judgment debtor.11 Assuming, as we
must, that plaintiffs' allegations are true, the dispute in
these cases is not over the parties' respective rights to
plaintiffs' property itself; rather, plaintiffs claim that
they suffered damages because their banks denied them
certain procedural protections required by EIPA. On the
other hand, as defendants and amici assert, in practice,
CPLR 5239 and 5240 proceedings can serve as broad
mechanisms for relief.12 Moreover, the uncertain scope of
11
See Nat'l Union Fire Ins. Co. v. Eland Motor Car Co.,
85 N.Y.2d 725, 729 (1995) (noting that CPLR 5239 permits "[r]ival
claimants" to be joined in a proceeding "so that the court may
prioritize the competing interests"); David D. Siegel, Practice
Commentaries, N.Y. C.P.L.R. 5239:1 (McKinney 2013) (CPLR 5239 "is
the path to the courthouse for a claimant who wants to have a
priority or lien or other dispute with another claimant ironed
out").
12
See Herman v. Siegmund, 415 N.Y.S.2d 681, 682 (2d Dep't
1979) (describing CPLR 5239 as "an all inclusive tool for the
settlement of almost any problem that may arise in connection
with the enforcement of money judgments"); Johnson v. Chem. Bank,
No. 96 Civ. 4262, 1996 U.S. Dist. LEXIS 18027, at *11 n.2
(S.D.N.Y. Dec. 9, 1996) (Sotomayor, J.) ("Plaintiff's remedy, if
at all, may be in a state court action under CPLR § 5239 to
challenge The Bank of New York's entitlement to restrain his
accounts."); Jonas v. Citibank, N.A., 414 F. Supp. 2d 411, 418
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these proceedings is underscored by the fact that the two
district courts disagreed about whether plaintiffs could
have pursued their claims in special proceedings under
Article 52.13 Compare Cruz, 855 F. Supp. 2d at 172 (holding
that enforcement mechanisms available to judgment debtors
are limited to special proceedings under Article 52, but
that CPLR 5239 "does not allow a debtor to seek damages or
injunctive relief against a bank following restraint"),
with Martinez, 863 F. Supp. 2d at 264-65 (holding that "the
'special proceeding' remedy is available to compel
garnishee banks to adhere to their obligations under EIPA,"
(S.D.N.Y. 2006) ("C.P.L.R. 5239 provides a mechanism for a debtor
to commence a special proceeding to determine the rights in
disputed property such as [plaintiff's] alleged exempt funds.");
Guardian Loan Co. v. Early, 47 N.Y.2d 515, 519 (1979) ("CPLR 5240
is perhaps the most practical method to protect judgment debtors
from the often harsh results of lawful enforcement procedures.");
Paz v. Long Island R.R., 661 N.Y.S.2d 20, 22 (2d Dep't 1997)
("CPLR 5240 is an omnibus section empowering the court to
exercise broad powers over the use of enforcement procedures.");
see also, e.g., Sharon Towers, Inc. v. Bank Leumi Trust Co. of
N.Y., 673 N.Y.S.2d 138, 139-40 (1st Dep't 1998) (permitting
corporation, of which judgment debtor was signatory, to bring
CPLR 5239 proceeding against bank to challenge propriety of
restraints on accounts); Nejeidi, 642 N.Y.S.2d at 62 (noting that
restraining notice was vacated in CPLR 5239 proceeding brought by
non-debtor accountholders against bank for negligently
restraining accounts); Costello v. Casale, 835 N.Y.S.2d 354, 355
(2d Dep't 2007) (vacating restraints on debtor's bank accounts
pursuant to CPLR 5240).
13
If CPLR 5239 and 5240 do provide a mechanism for
judgment debtors to seek damages and injunctive relief from their
banks, a further procedural question is whether plaintiffs can
assert their claims in federal court in the form of a class
action, which would require the amount in controversy to exceed
$5,000,000 and require the plaintiffs to satisfy the requirements
for certifying a class. See 28 U.S.C. § 1332(d); Fed. R. Civ. P.
23.
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but that debtors' enforcement options are limited to such
proceedings).
Accordingly, we conclude that there is no
controlling precedent in New York that governs these cases.
2. The Certified Questions Involve Important Issues
of State Law.
The questions presented by these appeals involve
important issues of New York State law and policy that are
likely to recur. As stated in the Sponsors Memo, EIPA was
enacted to address difficulties in protecting exempt funds
from forcible collection -- a "problem [that had] reached
epidemic proportions" in New York State. Sponsors Memo,
supra, at 4. Accordingly, EIPA was enacted to "create a
legal procedure by which judgment debtors are informed of
which funds are exempt and provided an opportunity to
assert that the funds in their account are exempt from
seizure before the account is completely restrained or
executed against." Id. Whether judgment debtors may sue
their banks for violating EIPA's procedural requirements
will significantly affect the force of that legal
procedure. In addition, where, as here, the plaintiffs
represent putative classes, the outcome of these cases can
have broad and lasting consequences.
We believe that questions involving such policy
concerns are more appropriately resolved by the New York
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State Court of Appeals. See Barenboim v. Starbucks Corp.,
698 F.3d 104, 117 (2d Cir. 2012); Georgitsi Realty, LLC,
702 F.3d at 159.
3. The Answers to the Certified Questions May Be
Determinative.
The New York State Court of Appeals's response to
the certified questions may determine the outcome of these
cases. Specifically, if the Court of Appeals holds that
judgment debtors do have a cause of action against banks
that violate EIPA's procedural requirements, then the
district courts' judgments will be vacated and the cases
will be permitted to proceed. On the other hand, if the
Court of Appeals determines that plaintiffs may not sue
their banks for failing to provide the required notices,
then plaintiffs' claims under EIPA fail as a matter of law.
Further, insofar as plaintiffs' common law claims are
predicated on violations of EIPA, the decision of the Court
of Appeals may determine whether those claims will proceed
or not. See Broder v. Cablevision Sys. Corp., 418 F.3d
187, 200-03 (2d Cir. 2005) (rejecting plaintiffs' common
law fraud and unjust enrichment claims predicated on duties
created by a statute under which there is no private right
of action); Assured Guar. (UK) Ltd. v. J.P. Morgan Inv.
Mgmt. Inc., 18 N.Y.3d 341, 353 (2011) ("[A] private
litigant may not pursue a common-law cause of action where
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the claim is predicated solely on a violation of [a statute
that carries no private right of action] or its
implementing regulations and would not exist but for the
statute.").
CONCLUSION
In sum, we reserve decision and certify the
following questions for these cases in tandem to the New
York State 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 CPLR Article 52
and, if so, whether those special proceedings are the
exclusive mechanism for such relief or whether judgment
debtors may also seek relief in a plenary action.
We do not bind the Court of Appeals to the
particular questions stated. Rather, the Court of Appeals
may expand the certified questions to address any other
issues that may pertain to the circumstances presented in
these appeals.
This panel retains jurisdiction and will consider
any issues that remain on appeal once the New York State
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Court of Appeals has either provided us with its guidance
or declined certification.
It is therefore ORDERED that the Clerk of this
Court transmit to the Clerk of the Court of Appeals of the
State of New York a Certificate, as set forth below,
together with a complete set of briefs and appendices, and
the records filed in this Court by the parties.
CERTIFICATE
The foregoing is hereby certified to the Court of
Appeals of the State of New York pursuant to Second Circuit
Local Rule 27.2 and New York Codes, Rules, and Regulations
Title 22, § 500.27(a), as ordered by the United States
Court of Appeals for the Second Circuit.
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