273 F. Supp. 3d 203
D.D.C.2017Background
- John Doe (longtime international figure) and his daughter Jane Doe sued Bank of America Corporation (BAC) after their bank accounts were summarily closed in March 2015; they allege reputational harm, negligence, and breach of contract.
- Plaintiffs alleged BAC closed the accounts without explanation or investigation after receiving information in 2014 suggesting possible illicit activity involving John Doe; they claim BAC should have investigated and given Mr. Doe an opportunity to respond.
- The operative account agreements and signature cards show the retail banking relationship was with Bank of America, N.A. (BANA), a subsidiary, and the deposit agreements expressly permit either party to close accounts without advance notice.
- BAC moved to dismiss for failure to state a claim, arguing BAC is a holding company not the contracting bank; plaintiffs conceded claims against Merrill Lynch and sought leave to amend to name BANA if necessary.
- The court held plaintiffs pleaded no facts establishing direct or derivative liability of BAC, and found that claims would fail even if asserted against BANA because the contracts allow account closure without notice and plaintiffs identified no breached contractual term or industry duty to investigate.
- The court dismissed the complaint with prejudice and denied leave to amend as futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BAC (parent) can be liable for account closures | BAC was responsible for closing accounts and breached duties by not investigating or notifying Mr. Doe | BAC is a holding company; the banking relationship and contracts were with BANA, not BAC | Dismissed: Plaintiffs pled no facts of direct or veil-piercing liability against BAC; claims against BAC fail |
| Whether bank owed duty to investigate third-party allegations before closing accounts | Bank had a duty of reasonable care (including investigating allegations and allowing response) given 34-year relationship and Mr. Doe’s status | No commercial standard or contractual requirement compelled investigation or notice; deposit agreement permits closure without notice | Dismissed: No legally enforceable duty to investigate or notify shown; contract terms allow closure without advance notice |
| Breach of implied covenant of good faith and fair dealing | Closing without investigation breached implied covenant; bank should have alerted and investigated | Implied covenant cannot override express contract terms that permit account closure at will | Dismissed: Plaintiffs identify no breached express term; implied covenant cannot contradict contract permitting closure |
| Request to amend to add BANA and conduct discovery | Amendment would allow pleading proper defendant and exploring older contracts/different terms | Amendment is futile because 2010/2015 deposit agreements (signed by plaintiffs) govern and foreclose the claimed duties; further discovery unnecessary | Denied: Amendment would be futile; plaintiffs bound by current BANA agreement and allegations remain insufficient |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (courts need not accept legal conclusions as true)
- United States v. Bestfoods, 524 U.S. 51 (parent corporation generally not liable for acts of subsidiary; direct participation or veil piercing required)
- Erie R. Co. v. Tompkins, 304 U.S. 64 (federal courts apply state substantive law in diversity cases)
- Forman v. Davis, 371 U.S. 178 (leave to amend should be freely given absent futility or other reason)
- Firestone v. Firestone, 76 F.3d 1205 (denial of leave to amend appropriate where amendment cannot cure defects)
- Harris v. D.C. Water & Sewer Auth., 791 F.3d 65 (district court not to speculate about facts to be discovered when deciding Rule 12(b)(6) motion)