HARRISBURG – A Pennsylvania federal judge ruled to dismiss a Scranton law firm’s contract litigation against JPMorgan Chase Bank without prejudice, pending the finalization of a settlement which counsel says is already agreed to in principle.

U.S. District Court for the Middle District of Pennsylvania Judge A. Richard Caputo made the dismissal ruling on March 29, towards the lawsuit filed by Minora, Minora, Colbassani, Krowiak, Mattioli & Munley versus JPMorgan Chase.

In its June 2016 suit, initially filed in the Lackawanna County Court of Common Pleas, the plaintiff law firm claims it “fell victim to a fraudulent scheme.” In the process, the firm alleges one of its clients asked the firm to “deposit a check in its account and wire certain funds to an account in Japan (after plaintiff deducted its fee).”

The check was fraudulent, but appeared to be drawn on the defendant, JPMorgan Chase Bank. The plaintiff then sued the defendant in Pennsylvania state court, alleging that defendant failed to return the check within Pennsylvania’s Uniform Commercial Code’s (UCC) midnight deadline. The defendant timely removed to the instant federal court.

During discovery, the defendant requested the production of documents related to the firm’s insurance policy and any financial recoveries the firm obtained according to the policy in connection with the fraudulent check, to which the firm objected to providing this information for reasons of confidentiality and the collateral source rule.

However, the defendant argues the insurance documents are relevant to establish the proper parties in this case.

“Specifically, defendant claims that if plaintiff received a full recovery for its insurance claim related to the harm it allegedly suffered in this case, its insurer, and not plaintiff, is the real party in interest and the correct plaintiff in this litigation. And if plaintiff’s insurer is the proper plaintiff, its claims and this lawsuit may be subject to dismissal, as courts have held that insurance companies may not enforce alleged violations of the UCC’s midnight deadline rule in subrogation actions,” Caputo said.

Under this “midnight rule," a bank must “pay, return, or dishonor a check before midnight on the day following presentment to or receipt by the bank.” Further, “a payor bank that fails to return or pay a check before the midnight deadline may be held accountable by the payee of that check for its face amount plus any actual damages incurred.”

“Defendant argues that because plaintiff may have received recovery from its insurance company, plaintiff’s claim may be fully subrogated, precluding plaintiff from pursuing the instant suit as ‘the real party in interest.’ I disagree,” Caputo said.

Representation for the plaintiffs sent a letter dated March 28 informing the Court that a settlement had been agreed to in principle, but not finalized. The letter explained another note would be sent to the Court upon such finalization of the settlement.

“It is hereby ordered that this case is dismissed without costs and without prejudice to the right of any party, upon good cause shown, to reinstate the action within 60 days of the date of this order if the settlement is not consummated,” Caputo stated on March 29.

The plaintiff is represented by Candidus K. Dougherty, Caryn J. Steiger and Jeffrey B. McCarron of Swartz Campbell, in Philadelphia.

The defendant is represented by Laura A. Lange and Benjamin J. Sitter of McGuire Woods, in Pittsburgh.

U.S. District Court for the Middle District of Pennsylvania case 3:16-cv-01095

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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McGuire Woods
600 Travis St
Houston, TX - 77002

U.S. District Court for the Middle District of Pennsylvania
235 N Washington Ave
Scranton, PA - 18503

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