United States District Court, E.D. Virginia, Richmond Division
FREDRICK W. HEROLD, JR., Plaintiff,
MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Defendant.
A. GIBNEY JR. UNITED STATES DISTRICT JUDGE.
matter comes before the Court on the motion for summary
judgment of the defendant, Merrill Lynch, Pierce, Fenner
& Smith, Inc. The plaintiff has filed a complaint
alleging negligence and gross negligence. Merrill Lynch has
moved for summary judgment, and the plaintiff moved for
certain discovery that he deemed necessary to respond to the
summary judgment motion. Because the plaintiff fails to
demonstrate that Merrill Lynch owes him a duty, the Court
grants the defendant's motion for summary judgment and
denies the plaintiffs motion for discovery.
case arises from financial accounts that Fredrick W. Herold,
Sr. ("Fredrick"), opened in 2004 with Merrill
Lynch. Fredrick is the father of the plaintiff, Fredrick W.
Herold, Jr., known as Skip. The accounts created a joint
tenancy with right of survivorship between Fredrick and his
wife, Kristina C. Herold. According to the summary judgment
motion, Fredrick told Merrill Lynch he wanted to designate
Kristina as sole beneficiary and specifically exclude his
children as beneficiaries on all of his accounts. Merrill
Lynch Vice President and Wealth Management Advisor Bradford
E. Bugher drafted a Customer Relationship Agreement
("CRA") reflecting Fredrick's instructions.
Merrill Lynch submitted a declaration by Bugher stating that
Fredrick continued to hold and manage his accounts over a
ten-year period, and never indicated to Merrill Lynch an
intent to remove or change Kristina as the sole beneficiary
on the accounts.
died in January 2014. Kristina then gave Merrill Lynch the
necessary documentation to transfer the accounts to her name,
which included Kristina's transfer authorization as
co-owner. After reviewing all relevant documentation, and
considering statements Fredrick had made to Bugher
instructing the transfer, Merrill Lynch transferred account
ownership to Kristina.
surprisingly, Skip was unhappy that Kristina received the
assets in his father's Merrill Lynch account. In May
2014, Skip contacted Merrill Lynch about the allegedly
improper transfers to Kristina. Skip says that Merrill Lynch
gave the documents the quick once over, but otherwise
"failed to reasonably scrutinize the document."
(Dk. No. 1, Compl., at ¶ 2.) Skip then took his
complaint to Bugher. Bugher told Skip that he saw nothing out
of the ordinary about the transaction and that Kristina was
the sole beneficiary on the accounts. Bugher also told Skip
that he knew about the legal dispute between Skip and
Kristina and that he could provide only limited information
to Skip due to privacy laws. Skip next brought his complaint
to Bugher's supervisor, to no avail.
then went to the Securities Division of the Maryland Attorney
General's Office, again to no avail. Skip's complaint
says that Merrill Lynch "either neglected to conduct a
reasonable inquiry" or "concealed information"
in response to the Attorney General's inquiry. (Dk. No.
1, Compl., at ¶ 6.) Skip then contacted Merrill
Lynch's customer service line to request that they place
a fraud alert on the accounts, but they failed to do so.
says that Merrill Lynch gave him "an incomplete, nearly
illegible copy of a fraudulent photocopied" CRA in
response to a subpoena Skip issued in a related Maryland
case. (Dk. No. 1, Compl., at ¶ 10.) According to the
complaint, Merrill Lynch "accepted and processed"
the CRA through "unknown employees/agents, at an unknown
time and place, " failed to show that Merrill Lynch had
the original CRA on file, and provided "no signed
disclosures" and "no documents that were
countersigned by a registered representative of Merrill
Lynch." (Dk.No. 1, Compl., at ¶ 13.)
short, Skip has continually protested that he and his
siblings should have the assets that went to Kristina. Having
received unfavorable answers, he turns to this Court.
STANDARD OF REVIEW
may grant summary judgment where the movant establishes that
no genuine dispute of any material fact exists, entitling the
movant to judgment as a matter of law. Fed.R.Civ.P. 56(a);
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
Once the movant satisfies its showing for summary judgment,
the burden shifts to the non-moving party to establish a
genuine issue of material fact. See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-88
(1986). The non-movant may not rest on claims within its
pleading, but "must come forward with specific facts
showing that there is a genuine issue for trial."
Id. at 587 (internal quotation and emphasis
adequate opportunity to respond to a motion, Rule 56(c)
requires courts to grant summary judgment "against a
party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial." Celotex Corp., 477 U.S. at 322. The
Court resolves all genuine factual disputes and inferences in
favor of the non-moving party. United States v. Diebold,
Inc., 369 U.S. 654, 655 (1962).
law requires three elements to prove negligence: (1) a legal
duty that the defendant owes the plaintiff; (2) a breach of
that duty; and (3) that the breach proximately caused injury
to the plaintiff. Talley v. Danek Med, Inc., 179
F.3d 154, 157 (4th Cir. 1999). Courts in numerous
jurisdictions have held that a bank owes no legal duty to a
noncustomer with whom no direct relationship
exists.Eisenberg v. Wachovia Bank, N.A.,301 F.3d 220, 225 (4th Cir. 2002); MLSMK Inv. Co. v. JP
Morgan Chase & Co.,431 Fed.Appx. 17, 20 (2d Cir.
2011) ("Banks generally do not owe non-customers a duty
to protect them from fraud perpetrated by customers.");