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LICHTENSTEIN v. KIDDER

November 14, 1991

JODIE B. LICHTENSTEIN, AN INDIVIDUAL, PLAINTIFF,
v.
KIDDER, PEABODY & CO. INCORPORATED, A DELAWARE CORPORATION, DEFENDANT, V. ALAN I. LICHTENSTEIN, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Cohill, Chief Judge.

  MEMORANDUM OPINION

Before us is plaintiff's Motion for Rescission of Order Based Upon Newly Discovered Evidence and plaintiff's Motion For Leave to Amend Complaint and to Name Charles W. Chewing, Jr. as an Additional Defendant. For the following reasons, we will grant plaintiff's motion for rescission and grant plaintiff's motion to amend in part.

BACKGROUND AND PROCEDURAL HISTORY

On April 8, 1985, the plaintiff opened a "premium account" with defendant Kidder, Peabody & Company. ("Kidder, Peabody"). This account permitted plaintiff to deposit cash and securities with Kidder, Peabody and its affiliates, and to draft checks against her deposits. From 1985 to 1987, the plaintiff's husband, Alan I. Lichtenstein, allegedly forged his wife's signature on various checks and other documents and thereby depleted her account with Kidder, Peabody. The plaintiff divorced her husband in July, 1988.

The plaintiff filed this action against Kidder, Peabody attempting to recover the money that was withdrawn from her account by her former husband. In her complaint, the plaintiff alleged conversion, negligence, breach of fiduciary duty, and breach of express and implied contract. Subsequently, Kidder, Peabody, filed a third party complaint against the plaintiff's former husband, alleging that Mr. Lichtenstein is liable for any amount due and owing the plaintiff. On May 26, 1991, Kidder, Peabody filed a motion for partial summary judgment arguing that the one year statute of limitations set forth in 13 Pa.Cons.Stat. § 4406 prevents the plaintiff from recovering the majority of her alleged losses.

This motion presented an issue of first impression in Pennsylvania, and, to the best of our knowledge, in other jurisdictions as well; whether a brokerage firm which offers check-writing services to its clients should be considered a "bank" within the meaning of section 4406. We answered this question in the affirmative and granted Kidder, Peabody's motion holding that the plaintiff could not recover against Kidder, Peabody for any forged checks honored more than one year prior to the time the plaintiff notified Kidder, Peabody of the forgeries. See, Lichtenstein v. Kidder, Peabody & Co., Inc., 727 F. Supp. 975 (W.D.Pa. 1989). This reduced the amount of the plaintiff's claim against the defendant by more than $200,000.00.

In her motion for rescission, the plaintiff requests that we rescind our prior order granting the defendant partial summary judgment due to newly discovered evidence which the plaintiff asserts shows the defendant had knowledge of the forgeries prior to the time she notified it in writing, and that the defendant's actions constituted constructive fraud. In her motion to amend her complaint, the plaintiff seeks to add a constructive fraud claim and to name Charles W. Chewing, the Kidder, Peabody employee with whom she dealt, as an additional defendant. The plaintiff's motions are based primarily upon the following facts and allegations which the plaintiff asserts are newly discovered.

  (1) The plaintiff's former husband, Alan I.
  Lichtenstein, testified during oral deposition
  that Charles W. Chewing, Kidder Peabody's
  employee in charge of the plaintiff's account,
  told him that no one would notice if he signed
  his wife's name

  on checks drawn on her account, if she were
  unavailable to sign
  (2) Mr. Lichtenstein deposited money into the
  plaintiff's account
  (3) Kidder, Peabody was aware that many
  transactions took place in the plaintiff's
  account over a short period of time, despite the
  plaintiff's statements to Mr. Chewing that she
  wanted to preserve the principal of the account
  (4) Checks were returned due to insufficient
  funds.

Motion to Rescind

Mrs. Lichtenstein asserts two bases for her motion to rescind. The first is that, taken as a whole, the facts listed above put Kidder, Peabody on notice of the forgeries within the one year limitations period imposed by 13 Pa.Cons.Stat. § 4406(d). Section 4406 states in relevant part:

    (a) General rule. — When a bank sends to its
  customer a statement of account accompanied by
  items paid in good faith in support of the debit
  entries or holds the statement and items pursuant
  to a request or instructions of its customer or
  otherwise in a reasonable manner makes the
  statement and items available to the customer, the
  customer must exercise reasonable care and
  promptness to examine the statement and items to
  discover ...

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