Submitted: November 14, 2018
Defendant's Motion to Dismiss Amended Complaint GRANTED.
L. Edmonson, Esq., Daniel A. O'Brien, Esq., Jessie F.
Beeber, Esq., Patrick J. Boyle, Esq. (Argued), Adam G.
Possidente, Esq., Venable LLP, Attorneys for Plaintiff
Continental Finance Company, LLC
Alexander D. Bono, Esq., Ryan E. Borneman, Esq. (Argued),
Lynne E. Evans, Esq., Oderah C. Nwaeze, Esq., Mackenzie M.
Wrobel, Esq., Duane Morris LLP, Attorneys for Defendant TD
HONORABLE MARY M. JOHNSTON, J.
AND PROCEDURAL CONTEXT
case arises out of Roberta Czap's conduct in her role as
Vice President of Accounting at Continental Finance Company
("Continental"). Czap embezzled money from
Continental. Czap repeatedly diverted money from
Continental's business account, held with Defendant TD
Bank. Czap utilized automated clearing house
("ACH") services to place the funds in her personal
bank account, also with TD Bank. Czap plead guilty in federal
court. Continental brought this action against TD Bank,
seeking damages for TD Bank's alleged failure to detect
the embezzlement scheme.
and TD Bank had entered into a Cash Management Master
Agreement ("Master Agreement") in 2011. The Master
Agreement established certain security procedures. An
"additional security feature" allowed one
Authorized User to "create, edit, cancel, delete and
restore ACH batches or wire transfer orders under his/her
unique User ID, password and Token." Czap was the
Authorized User and followed this security procedure by using
a User ID, password, and Token.
Master Agreement states: that the "Customer agrees that
all security procedures described in this Agreement and
applicable Appendix are commercially reasonable...";
that the "Customer agrees that it shall be solely
responsible for ensuring compliance with any security
procedures established by Bank..."; and that "Bank
shall have no liability for any losses sustained by Customer
as a result of a breach of security procedures if Bank has
substantially complied with the security procedures."
Master Agreement excludes TD Bank's liability for simple
negligence, but contemplates the possibility of TD Bank's
liability for "gross negligence, willful misconduct, or
argues that Continental has not shown that TD Bank owed any
duty separate from those created by the parties'
agreements and that the duties are expressly and
unambiguously established in those agreements. The agreements
place the burden on Continental for preventing, monitoring,
investigating, and reporting any fraudulent conduct. TD Bank
contends that Continental owed: a duty to maintain procedures
to safeguard against unauthorized transactions and to ensure
that all ACH transactions incorporated dual control; a duty
to monitor account activity; and a duty to be solely
responsible for unauthorized ACH transactions.
Opinion dated January 24, 2018,  the Court dismissed
Continental's Complaint without prejudice. The Court held
that Continental's simple negligence claims were barred
by the clear and unambiguous language of the agreements
governing the parties' relationship and were preempted by
the UCC. The Court also held that any negligence
claims arising prior to 2011 are not barred by contract, but
are displaced by 6 Del. C. §§
4A-201-203. Claims grounded in gross negligence,
willful misconduct, or bad faith supported by particularized
factual allegations are not contractually excluded, but must
be asserted pursuant to any relevant UCC
filed an amended complaint on April 30, 2018. In addition to
the original negligence claim, Continental alleges:
II. Gross negligence against TD Bank - failure to monitor ACH
III. Gross negligence against TD Bank - failure to provide
adequate account statements.
IV. Gross negligence against TD Bank - failure to monitor the
V. Gross negligence against TD Bank - failure to monitor the
VI. Breach of the U.C.C. against TD Bank - failure to employ
commercially reasonable ...