Suit against TD Bank dismissed

Posted 3/20/12

NEW YORK - A New York judge has thrown out a case against TD Bank in which depositors had accused the bank of unlawfully freezing their accounts.

TD Bank froze the accounts of customers Gary Cruz and Claude Palin in 2009 and 2010 after a third-party creditor moved to garnish their wages. The depositors argued that by freezing their accounts and turning the funds over to creditors, the bank violated a provision in a New York law that prohibits garnishment of certain types of income. They also argued that the bank violated the law by failing to notify them that the accounts had been frozen.

In a ruling last week, however, District Judge P. Kevin Castel said essentially that it was the plaintiffs’ responsibility to notify the bank if certain funds in the account were exempt from garnishment. The ruling might have ramifications in similar cases filed in New York courts against Capital One Bank, HSBC Bank, Bank of America, Citibank, JPMorgan Chase and Municipal Credit Union.

“The law doesn’t say that banks are gatekeepers,” said Lex Bono, of Duane Morris LLP in Philadelphia, who represented TD Bank. Claims that the bank breached its fiduciary duty, committed fraud and unjustly enriched itself by assessing fees on the accounts after they were frozen were also dismissed. “Under most circumstances this ruling would be looked to as a precedent by other judges,” Bono said.

In October 2010, the plaintiffs filed a class-action suit in United States District Court for the Southern District of New York seeking injunctive relief and unspecified damages.

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