McCarthy v. Wachovia Bank, N.A.
759 F. Supp. 2d 265
E.D.N.Y2011Background
- Plaintiff James J. McCarthy resided in New York and Florida; Wachovia maintained nationwide branches and offered banking by multiple channels.
- In January 2008, McCarthy opened a Florida Wachovia account with a Deposit Agreement authorizing Wachovia to comply with legal process and to restrain funds.
- NCO Portfolio Management obtained a Suffolk County default judgment against McCarthy in 2004 for approximately $8,895.
- Harris Defendants served a CPLR 5222 restraining notice on Wachovia in February 2008; Wachovia restrained McCarthy’s Florida account balance.
- Wachovia never dispersed funds; restraint lifted March 2, 2009, after which McCarthy withdrew funds; plaintiff filed §1983 and related state-law claims.
- The court granted summary judgment for defendants and denied plaintiff’s motion, dismissing the action in its entirety.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Deposit Agreement bars McCarthy’s claims against Wachovia. | McCarthy did not read or understand the Deposit Agreement; cannot be bound. | Signing the Customer Access Agreement binds McCarthy to the Deposit Agreement. | Yes; Deposit Agreement precludes claims against Wachovia. |
| Whether §1983 against Wachovia and Harris Defendants survives as state-action claim. | Defendants acted under color of state law by restraining out-of-state property. | Private actors using state-law tools are not state actors; no color-of-state-law action. | No; §1983 claim fails against both parties. |
| Whether the restraining notice procedure and notices violated due process or caused liability under FDCPA. | Notice/collection practices were deceptive and violated due process. | CPLR 5222 permits out-of-state restraints; FDCPA requires no misrepresentation; due process satisfied. | FDCPA claim dismissed; due process not violated. |
| Whether abuse of process, CPLR 5222 notice failures, tortious interference, and GBL §349 support damages. | Harris violated multiple state-law doctrines and misrepresented notices. | No actual breach, improper notice, or deceptive practice; plaintiff undisputably benefited; damages absent. | All state-law claims dismissed; CPLR 5222(d) claim dismissed as harmless. |
| Whether Wachovia owed a duty to investigate the restraining notice’s validity. | Wachovia should have questioned facial defects in the restraining notice. | CPLR 5209 safe harbor precludes such duty; garnishee not obligated to investigate. | Yes; Wachovia had no duty to investigate. |
Key Cases Cited
- Koehler v. Bank of Bermuda, Ltd., 12 N.Y.3d 533 (N.Y. 2009) (post-judgment turnover reach of out-of-state property via CPLR 5222)
- McCahey v. L.P. Investors, 774 F.2d 543 (2d Cir. 1985) (no pre-notice hearing required before post-judgment garnishment)
- Abuhamda v. Abuhamda, 236 A.D.2d 290 (1st Dep't 1997) (New York court can restrain out-of-state property)
- Endicott-Johnson Corp. v. Encyclopedia Press, Inc., 266 U.S. 285 (1924) (due process in relation to procedural requirements)
- Metzger v. Aetna Ins. Co., 227 N.Y.411 (1920) (contractual assent and knowledge of terms)