Court Opinion

ID: 6464022
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:51:17.589884+00
Date Added: 2024-06-11T15:53:37.282614
License: Public Domain

Berry, J.
(dissenting in part and concurring in part). I dissent from all parts of the majority opinion which hold that the complaint stated any legally cognizable claim upon which relief can be granted against Citizens Bank of Massachusetts (Citizens Bank).1
1. This was not an attorney-client or fiduciary account under Mass.R.Prof.C. 1.15. The relationship between Goldings and Go-Best Assets Limited (Go-Best) was not one of attorney-client. This was not an individual or pooled IOLTA attorney-client account under Mass.R.Prof.C. 1.15, 426 Mass. 1363 (1998). Morris M. Goldings was not holding funds for Go-Best, either as a lawyer, or as a fiduciary in connection with legal representation subject to the provisions of rule 1.15.2,3 To the *497contrary, this was a wholly commercial deal in which Goldings stole $5 million in funds that had been wired to the Citizens Bank account by the financing entity, Go-Best, and that were supposed to be used by Goldings for the purchase of stock in Starwood Hotels and Resorts, Inc., thereafter with Go-Best and Goldings to share in the profits.
While it so happened in this structured commercial transaction with Go-Best that Goldings, in place as the go-between,4 turned out be a dishonest criminal broker who pilfered the $5 million stock investment funds, Goldings’s criminal scheme does not recast the nature of what was nothing more nor less than an investment deal. Cutting a wide swath of criminal activity, Goldings was ultimately the subject of Federal indictments and convictions in what was a multimillion dollar criminal enterprise. See United States vs. Goldings, U.S. Dist. Ct., No. 01-CR-10433 (D. Mass. February 21, 2002). That Goldings in furtherance of his criminal acts placed the moniker of “Morris M. Goldings’ Client Account” on this Citizens Bank account does not, by alchemy, make the account an attorney-client account, and does not mean that Citizens Bank has civil liability under rule 1.15 for Goldings’s commercial investment based theft.
The deal remained a business deal, not a case involving attorney-client representation, and not a case involving fiduciary funds being held by Goldings in connection with legal representation. Hence, contrary to the majority, I fail to see the predicate for the imposition of any duty of care and potential liability on the part of Citizens Bank under Mass.R.Prof.C. 1.15. Accordingly, I dissent from the majority, which seeks to utilize *498Mass.R.Prof.C. 1.15 to create a new theory of Massachusetts banking law that moves far beyond the attorney-client underpinnings of that rule of professional conduct.
Indeed, given the absence of Massachusetts law, in seeking to extend the attorney professional conduct provisions of Mass. R.Prof.C. 1.15, so as to impose liability upon Citizens Bank, the majority relies heavily on the law of other jurisdictions, particularly New York State law. In the first place, this is simply not what the law of Massachusetts is. Rather, as the majority acknowledges, the law of Massachusetts is that “banks have no duty to monitor the use of deposit accounts they hold.” Ante at 479. See, e.g., Newburyport v. First Natl. Bank, 216 Mass. 304, 304-305 (1914). See also Kendall v. Fidelity Trust Co., 230 Mass. 238, 241-242 (1918). Second, the two most extensively cited, and quoted, New York cases, which are central and at the core of the majority opinion, were not commercial transaction cases, such as this one. Hence, while the majority heavily relies upon, and oft quotes from, Lerner v. Fleet Bank, N.A., 459 F.3d 273, 288 (2d Cir. 2006) (Lerner), which in turn rests on, and quotes from, Home Sav. of Am., FSB v. Amoros, 233 A.D.2d 35, 41 (N.Y. 1997) (Amoros), these two cases are inapposite.5 Unlike this case, in Lerner and Amoros, the banks were alleged to have had actual knowledge that funds were being held pursuant to agreements between the attorney and clients, that withdrawals by the attorney were subject to restrictions, and that continuing overdrafts signified a breach in the attorney’s fiduciary obligations to clients. These two New York cases, then, present as quintessential attorney-client cases with overdrafting problems. The two cases do not present, as does this one, as a commercial business transaction case with a several million dollar criminal theft — surely not an attorney overdrafting problem. Indeed, in Lerner, the United States Court of Appeals for the Second Circuit expressly notes that “[a]s a general matter, a depositary bank has no duty to monitor fiduciary accounts maintained at its branches in order to safeguard funds in those accounts from *499fiduciary misappropriation.” Lerner, supra at 287, quoting from Norwest Mort. Inc. v. Dime Sav. Bank of N.Y., 280 A.D.2d 653, 654 (N.Y. 2001). The majority takes bits and pieces of Lerner and ignores this fundamental reservation.
In conclusion, nothing in the majority supports, as matter of Massachusetts law, the imposition of liability against Citizens Bank. Rule 1.15 simply does not apply. The New York cases do not alter that fundamental inadequacy.
To the extent the majority suggest that a legally cognizable claim might be stated against Citizens Bank in negligence, the analysis, I believe, has the same error as the analysis pertaining to rule 1.15, in that the negligence theory of liability spun out in the majority also erroneously assumes the client account was a trust account (see ante at 483) — which the account was not. Beyond the foregoing, this negligence part of the majority opinion would craft an expansive and not hitherto known duty of care on banks to noncustomers. The concept suggested in the majority would require a bank to monitor deposits and withdrawals in a given account, even though wholly unrelated in time, source, and character, in order to avoid liability to future depositors in the account who would, in effect, seek to have the bank act as an insurer of the trustworthiness of the account owner.
2. The aiding and abetting claims lack an essential knowledge element on the part of Citizens Bank. I also dissent from part I.C. of the majority opinion, which relates to the aiding and abetting fraud, breach of fiduciary duty, and conversion claims, and which holds that these claims were not subject to dismissal. There is, I believe, a problem common to all of Go-Best’s aiding and abetting tort claims.
A principal requirement for a claim for aiding and abetting a tort is that the aider and abetter have actual knowledge of the principal tortfeasor’s wrongdoing. As the motion judge aptly observed, “the plaintiff must show that the defendant knew of the breach and actively participated in it.” Spinner v. Nutt, 417 Mass. 549, 556 (1994). “Massachusetts courts have made clear that a defendant ‘aids and abets’ a tortfeasor only if, at the least, the defendant actually knows about ‘its substantial, supporting role in an unlawful enterprise.’ ” Maruho Co. v. Miles, Inc., 13 F.3d 6, 10 (1st. Cir. 1993) (emphasis original), quoting from *500Kyte v. Philip Morris, Inc., 408 Mass. 162, 168 (1990).6 “[T]he elements of the tort of aiding and abetting a fiduciary breach are: (1) there must be a breach of fiduciary duty, (2) the defendant must know of the breach, and (3) the defendant must actively participate or substantially assist in or encourage the breach to the degree that he or she could not reasonably be held to have acted in good faith.” Arcidi v. National Assn. of Govt. Employees, Inc., 447 Mass. 616, 623-624 (2006).
Furthermore, the Go-Best complaint did not allege that Citizens had actual knowledge that there were restrictions upon Goldings making withdrawals of the Go-Best funds in Gold-ings’s client account, such that the investment agreement and related documents restricted the transfer of the Go-Best funds wired to Citizens Bank to an escrow account with PaineWebber, Inc. “Massachusetts law is clear, moreover, that banks do not have a duty to depositors to make inquiry as to withdrawals by an authorized person that do not contravene an express limitation on his authority to draw on the account.” Schlichte v. Granite Sav. Bank, 40 Mass. App. Ct. 179, 181 (1996). Accord Spinner v. Nutt, 417 Mass, at 556.
For these reasons, I respectfully dissent.

 I concur with the majority that the Go-Best Assets Limited (Go-Best) claims against Citizens Bank for misrepresentation, conversion, and an accounting were all correctly dismissed. I also concur with the majority that the claims against the partners were correctly dismissed.

 Paragraph (d) of Mass.R.Prof.C. 1.15 describes funds held by the attorney in trust as follows.
“Funds held in trust include funds held for clients and in any other fiduciary capacity in connection with a representation, whether as a trustee, agent, escrow agent, guardian, executor, or otherwise. Whenever ‘client’ or ‘clients’ is referred to in this rule, it shall be intended to refer to any person or entity on whose behalf a lawyer or law firm holds funds in trust.”
Paragraph (e) of Mass.R.Prof.C. 1.15 states that an attorney who holds trust funds must deposit them in one of two types of interest-bearing accounts, either a “pooled account (‘IOLTA account’) for all trust funds which in the judgment of the lawyer are nominal in amount, or are to be held for a short period of time,” or “for all other trust funds, an individual account with the interest payable as directed by the client.”

 Beyond the fact that the complaint does not allege that Goldings was acting as an attorney, or holding funds as a fiduciary in connection with legal representation, there is a substantial question in this case whether the Mass.R. Prof.C. 1.15 reporting requirements by a bank would be implicated in any event. Paragraph (f)(1) of Mass.R.Prof.C. 1.15 provides that an attorney must use a bank that agrees to provide notice to the Board of Bar Overseers of “bounced” checks on a client account, or fiduciary account held in connection with legal services. The provision states as follows.
“A lawyer or law firm shall maintain trust accounts [as defined in Rule 1.15 (d)] only in financial institutions which have filed with the Board of Bar Overseers an agreement, in a form provided by the Board, to report to the Board in the event any properly payable instrument is *497presented against any trust account that contains insufficient funds, and the financial institution dishonors the instrument for that reason.”
Thus, the triggering event under Mass.R.Prof.C. 1.15 for a bank’s reporting obligations to the Board of Bar Overseers occurs when there is “any trust account that contains insufficient funds, and the financial institution dishonors the instrument for that reason.” Here, the Go-Best complaint does not allege dishonoring of a check but, rather, that Goldings stole Go-Best funds.

 Why Go-Best needed, or wanted, a middleman is not discernible on the record. According to the complaint. Go-Best is a corporation organized under the laws of the British Virgin Islands, with a usual place of business in Hong Kong.

 To illustrate, in the part of the opinion seeking to impose a legally cognizable duty of care on the part of Citizens Bank (such that the complaint should not have been dismissed), the majority commences its analysis, ante at 480, with a lengthy quotation from Lerner, in turn quoting from Amoros, and then, throughout the opinion appear many more bits and pieces quoted from Lerner.

 As a substitute for actual knowledge, the complaint and the majority cite Goldings’s prior misdeeds. But there is a disconnect between trying to draw a line between this investment deal and the prior attorney-client misdeeds by Goldings, wherein Goldings was acting as an attorney and overdrafting on client-deposited, entrusted accounts. The shadow of Goldings’s prior misdeeds as attorney responsible for client funds does not somehow extend so far as to create a special rule of bank liability under rule 1.15 in a purely commercial deal.
In contrast to prior attorney-related misdeeds, Goldings had a past successful investment history with Go-Best. Prior to this investment, Goldings had engaged in two investment deals using funds loaned to him by Go-Best. In both instances, Goldings had repaid the loans to Go-Best, with interest and profits, in accordance with written investment agreements.