ISAAC LERNER, ELI LERNER, BALLYWARD INVESTMENT COMPANY, LTD., JAIME SOHACHESKI, GASTON LIMITED, HOTEL INVESTORS, INC., PERKY LIMITED, ABRAHAM RAPPAPORT, ESTHER RAPPAPORT, MOSHE COHN, ESTABLISSEMENT SOMER, JOSEF KOHN, CHANCERY ENTERPRISES, LTD., ROSDEV DEVELOPMENTS, INC., MICHAEL ROSENBERG, BRUCE BAYROFF, JOSHUA GOLDSTEIN, LAND TECH MANALAPAN LLC, THEODORE BRODIE, MEYER ROSENBAUM, MR ASSOCIATES LLC, ILANA BLUMKIN, as Trustee, EMDEE TOURS, INC., ALEXANDER HASENFELD, INC., PROFIT SHARING RETIREMENT PLAN, HASENFELD STEIN, INC., PENSION TRUST, AEG AGENCY, INC., AARON GARFINKEL, RIVKA STEIN, AARON Y. RUBINSON, STEVEN B. ROTHCHILD, P.C., MONEY PURCHASE PLAN, PINCHOS RUBINSON, AKIVA LEIMAN, ESTATE OF BORUCH RUBINSON, CHAIM and RACHEL LEFKOWITZ, NAFTALI and SARAH LIPSHUTZ, MENDEL and FEIGY LIPSCHUTZ, REISEL BERGSTEIN, MICHAEL KONIG, ESTHER WERTENTEIL, AARON WERTENTEIL, TEENA RUBINFELD, MARK WERTENTEIL, MORRIS and SARAH FRIEDMAN, THE REGAL TRADE, S.A., VAVEL CORP., CHADWICK FUNDING CO., L.P., ALLEN SAUSEN and LEONARD SAUSEN, d/b/a ATASSCO, KEREN HACHESED OF MONSEY, INC., GENEVA PROPERTIES, L.L.C., MT. PLEASANT PARTNERS, HERSCHEL KULEFSKY, ALBERT DAVID PEARLS & GEMS, INC., DEFINED BENEFIT PENSION PLAN, CHAI PROPERTIES CORP., ARTHUR KURTZ, CRESTFIELD ASSOCIATES, INC., WEINREB MANAGEMENT, and HOWARD MERMELSTEIN, Plaintiffs-Appellants, - v - FLEET BANK, N.A., STERLING NATIONAL BANK AND TRUST COMPANY OF NEW YORK, and REPUBLIC NATIONAL BANK OF NEW YORK, Defendants-Appellees., 459 F.3d 273
Summary
The investors were defrauded by a lawyer as part of an investment scheme. The investors alleged that defendant banks assisted the lawyer by failing to report his overdrafts on attorney fiduciary accounts to the state bar for disciplinary action as required by N.Y. Comp. Codes R. & Regs. tit. 22, § 1200.46(b)(1). On appeal, the court found that the district court erred when it applied the same standard for proximate cause to the state claims as it did to the investors' claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.S. § 1962, which was a different standard. The investors alleged a negligence claim against the banks in which the investors' funds were deposited. Once the lawyer began repeatedly to overdraw on his attorney trust accounts at a bank, that bank had a duty to make reasonable inquiries and to safeguard attorney trust funds from the lawyer's misappropriation. Only one investor alleged an affirmative representation that it relied upon to its ...