Reg'l Produce Coop. Corp. v. TD Bank, N.A.

645 F.Supp.3d 394

REGIONAL PRODUCE COOPERATIVE CORPORATION, Plaintiff, v. TD BANK, N.A., Defendant.

CIVIL ACTION NO. 19-1883

United States District Court, E.D. Pennsylvania

Filed December 12, 2022

Christie Rita McGuinness, Saul Ewing Arnstein & Lehr LLP, New York, NY, Jennifer L. Beidel, Patrick M. Hromisin, Saul Ewing Arnstein & Lehr LLP, Philadelphia, PA, Virginia E. Hansen, Dechert LLP, Philadelphia, PA, for Plaintiff.

Lynne E. Evans, Breeana J. Somers, Ryan E. Borneman, Duane Morris LLP, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

Goldberg, District Judge

This case involves the extent to which a bank is responsible for the embezzlement of funds by a bank customer's Chief Executive Officer. Plaintiff, Regional Produce Cooperative Corporation ("RPCC"), was the victim of an extensive, multi-million dollar embezzlement scheme by its former President and CEO, Sonny "Caesar" DiCrecchio. RPCC's complaint, originally filed in state court, alleged that T.D. Bank, N.A. ("TD Bank") permitted and facilitated this scheme. That complaint set forth allegations of common law negligence, negligence under the Pennsylvania Commercial Code, conversion under the Pennsylvania Commercial Code, and common law aiding and abetting conversion. On May 1, 2019, TD Bank removed the case to federal court.

TD Bank now moves for summary judgment on all of RPCC's claims. For the following reasons, I will grant judgment in favor of TD Bank on all claims except for the statutory negligence claim relating to transactions appearing on bank statements after August 16, 2017.

I. STATEMENT OF FACTS

For general background purposes, the following facts are derived from the evidence submitted by the parties and the parties' statements of facts. Where there is conflicting evidence about a particular fact, Federal Rule of Civil Procedure 56 requires that I view those facts and evidence in the light most favorable to RPCC. Facts recited by the parties but not pertinent to the issues at hand are not included.¹

A. General Background

RPCC is a Pennsylvania non-profit cooperative corporation that operates the Philadelphia Wholesale Produce Market ("the Market"), the world's largest fully-refrigerated wholesale produce market. The Market is open to the public and gathers dozens of wholesale produce merchants in a central location to supply fresh produce to the greater Philadelphia region. Those merchants are also shareholders of RPCC and eligible to serve as volunteer, unpaid members its Board of Directors (the "Board"). (PSUF ¶ 1; DR ¶ 1.)

Prior to the creation of RPCC, its predecessor, the Philadelphia Fresh Food Terminal Corporation ("PFFTC"), operated a smaller wholesale produce market at a different location in Philadelphia. On July 14, 2008, in anticipation of forming the current and larger market, PFFTC created RPCC as a Pennsylvania non-profit corporation. (PSUF ¶ 2; DR ¶ 2.) After the Market opened in 2011, RPCC took over its operations, and, following a brief period of co-mingled operations, PFFTC ceased operating. (PSUF ¶ 3; DR ¶ 3.) At all relevant times, Caesar "Sonny" DiCrecchio was the President and Chief Executive Officer of PFFTC and then RPCC. (PSUF ¶ 5; DR ¶ 5.) Patricia Pumphrey was PFFTC's accounts payable clerk and bookkeeper and assumed those same roles for RPCC. (PSUF ¶ 6; DR ¶ 6.)

B. The Banking Relationship Between RPCC and TD Bank

In 1998, PFFTC commenced a banking relationship with TD Bank by opening a Business Statement Savings Account, with the account number ending in -5470. (DSUF ¶ 2; PR ¶ 2.) On May 25, 2000, DiCrecchio opened a new account for PFFTC, with an account number ending in -3085. (DSUF ¶ 4; PR ¶ 4.) The "Temporary Signature Card" for that account (-3085) indicated that DiCrecchio was the only authorized signer and that only one signature was required for checks drawn on the account. (Def.'s Ex. 3.) PFFTC's Board members knew that DiCrecchio was an authorized signer on the -3085 account but believed that there were other signers on the account. (Dep. of George Binck ("Binck Dep."), 207:9-21; Dep. of George Manos ("Manos Dep."), 76:24-77:5.)

In 2009, PFFTC was the victim of a check-counterfeiting ring unrelated to the embezzlement at issue here. (DSUF ¶ 8; PR ¶ 8.) Following discovery of this fraud, TD Bank offered PFFTC several options, one of which was closing the compromised account and opening a new one. (Def.'s Ex. 88.)

On July 31, 2009, TD Bank, through DiCrecchio, issued PFFTC a new account, with the account number ending in -5031 (the "-5031 Account"). (Def.'s Ex. 2.) At the time DiCrecchio opened the -5031 Account, the new Market was not yet operational, and, as such, the -5031 Account was opened in PFFTC's name, not RPCC's name. (Def.'s Ex. 2; DSUF ¶ 22; PR ¶ 22.) The -5031 Account was created as a single-signer account, with DiCrecchio as the sole signer. (DSUF ¶¶ 11-12; PR ¶¶ 11-12.) PFFTC and, subsequently, RPCC's Board members still believed that two signers were required on every check. (Dep. of Louis Penza ("Penza Dep.") 99:23-100:19; Dep. of John Vena ("Vena Dep.") 32:10-17); Dep. of John DeFeliciantonio ("DeFeliciantonio Dep.") 57:5-20) Binck Dep. 209:16-209:20; Dep. of Thomas Fleming ("Fleming Dep.") 66:12-68:17.)

DiCrecchio had opened two prior accounts with TD Bank on PFFTC's behalf. Thus, when signing the Business Signature Card for the -5031 Account, DiCrecchio confirmed that he again had the required authority to act with respect to the -5031 Account and that TD Bank had "no responsibility or duty to assure or verify that [DiCrecchio] ha[d] or [was] acting within the authority given [him] by the authorizing document or that such authorizing document [was] genuine or valid." (Def.'s Ex. 2.) DiCrecchio's signatory authority on checks was permitted under Section 17.1 of RPCC's Bylaws, which stated that, "[t]he Board shall designate the President/CEO, and, if so desired, one or more other officers or other persons who shall sign all checks or demands for money and notes of the Corporation." (Def.'s Exs. 4, 6.) The Bylaws, however, also provided that "[a]ll sums received by the Corporation shall be deposited in its name in such bank as may be designated by the board of Directors." (Def.'s Ex. 4 § 10.10.) PFFTC and RPCC Board Member Louis Penza testified that he could not recall any meeting by the Board authorizing the opening of the -5031 account. (Penza Dep. 10:17-11:18; 196:11-197:24.)

When DiCrecchio opened the -5031 Account, TD Bank required him to complete two forms: (1) a "For Profit Banking Resolution," and (2) a "Business Signature Card." (Def.'s Exs. 2, 9; PSUF ¶ 13; DR ¶ 13.) The For Profit Banking Resolution provided a space for the "Secretary of the Corporation" to certify (a) the correct name and address of the Corporation, and (b) that the Corporation, via a meeting of the Board of Directors of the Corporation, adopted a resolution making TD Bank the Corporation's financial institution. (Def.'s Ex. 9.) The only signature on the Resolution was that of DiCrecchio, who was neither a member of the Board nor the Corporate Secretary. (Def.'s Ex. 9.) According to TD Bank, its policies did not require that all the information on these forms be filled in. (Dep. of Joseph Robinson ("Robinson Dep.") 126:7-127:13; Dep. of Danielle McMahon ("McMahon Dep.") 104:17-105:18.)

The Business Signature Card designated individuals who were "authori[zed] to act with respect to th[e] account," stating:

The Authorized Individual(s) signing agree(s), jointly and severally if multiple signers, to the terms set forth in the Deposit Account Rules and Disclosure, as amended by "Bank" from time to time. Each of the Authorized Individual(s) signing also acknowledge that "Bank" provided at least one copy of these deposit account documents.

(PSUF ¶ 17; DR ¶ 17, Def.'s Ex. 2.) The Business Signature Card also had spaces for the following information to be filled in: "Account Purpose"; "Account Type"; "Date Opened"; and "Special Instructions." (Def.'s Ex. 2.) On the Business Signature Card for the -5031 Account, only the "Date Opened" and "Account Type" fields were completed. (Id.) DiCrecchio signed the Business Signature Card indicating that he agreed to the terms of TD Bank's Deposit Account Rules and Disclosure ("Account Agreement") and had received a copy of the Account Agreement. (Id.)

TD Bank's representative testified that the bank always provided a copy of its Account Agreement to every customer. (Robinson Dep. 92:3-8; 148:11-23.) The Account Agreement contained the following relevant language:

No Two-Signer Accounts. We do not offer accounts on which two or more signatures are required for a check or other withdrawal. Notwithstanding any provisions to the contrary on any signature card or other agreement you have with us, you agree that if any Account purports to require two or more signers on items drawn on the Account, such provision is solely for your internal control purposes and is not binding on us. If more than one person is authorized to write checks or draw items on your Account, you agree that we can honor checks signed by any Authorized Signer, even if there are two or more lines on the items for your signature and two signatures are required.

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ACCOUNT STATEMENT. You are responsible for promptly examining your statement each statement period and reporting any irregularities to us. The periodic statement will not be considered correct for all purposes and we will not be liable for any payment made and charged to your Account unless you notify us in writing within certain time limits after the statement and checks are made available to you. We will not be liable for any check that is altered or any signature that is forged unless you notify us within a reasonable period of time, not to exceed thirty (30) calendar days after the statement and the altered or forged item(s) are made available. Also, we will not be liable for any subsequent items paid, in good faith, containing an

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