Philip Markowitz sued JPMorgan Chase Bank, N.A., and related defendants after the bank froze his account and refused to allow him to withdraw funds from two checks he had deposited. The checks were issued by SureTec Insurance Co. Chase initiated an investigation because the deposit was out of the customer's normal pattern, the typeface on the checks appeared irregular, and the payee name might have been altered. For several months, from May until December 8, 2023, the bank attempted to verify the authenticity of the checks by contacting SureTec and its legal representatives. Markowitz filed suit in early July but did not immediately provide the bank with contact information for SureTec. The district court granted summary judgment to Chase on claims for intentional infliction of emotional distress and punitive damages, and limited Markowitz's recovery on conversion and negligent infliction of emotional distress claims to the period after the checks were confirmed genuine on December 8, 2023.
The Ninth Circuit reviewed the case de novo, focusing on whether Chase's actions constituted a 'wrongful act' under California tort law. The court noted that an essential element of conversion is the defendant's conversion by a wrongful act. Because Markowitz's account agreement authorized Chase to freeze the account 'pending investigation,' the bank's actions were not wrongful during the period it was actively investigating. The court found that Chase had reasonable grounds for suspicion, including the irregular typeface and the out-of-pattern deposit. Furthermore, Chase made ongoing efforts to verify the checks, attempting to reach SureTec from May until December. The court rejected Markowitz's argument that the bank's conduct was extreme and outrageous enough to support a claim for intentional infliction of emotional distress, noting that the evidence did not show the bank acted with the intent to cause severe emotional distress or with reckless disregard of that probability. Regarding punitive damages, the court held that Markowitz failed to provide clear and convincing evidence that a corporate officer, director, or managing agent authorized or ratified the oppressive acts. Specifically, the Vice President responsible for the fraud department was not involved in the litigation department's actions after the suit was filed, and thus could not be said to have ratified the conduct.
The decision limits a bank's liability for freezing funds when it has a reasonable basis for suspicion and is actively investigating, provided the freeze is within the scope of the account agreement. Plaintiffs may still recover damages for periods where the freeze continues without justification after the bank has verified the funds are genuine. The ruling clarifies that punitive damages require proof of corporate ratification by a managing agent, which may be difficult to establish if the investigation is handled by a department separate from the one that initiated the freeze.
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