Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Last month, the Third Circuit upheld the dismissal of a putative class action against TD Bank, finding that plaintiffs’ conclusory allegations lacked sufficient evidence and failed to satisfy Rule 9(b)’s heightened pleading standard for claims that sound in fraud.

In MZL Capital Holdings, Inc. et al. v. TD Bank, N.A. et al., two account holders with TD Bank filed a proposed class action accusing the Bank of obscuring its exchange rates and improperly charging an embedded fee for converting foreign currency, thereby defrauding its customers in violation of the New Jersey Consumer Fraud Act. Shortly thereafter, plaintiffs amended their complaint to add claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of numerous other state consumer-protection laws. TD Bank moved to dismiss plaintiffs’ claims for failure to state a claim, and the District Court granted TD Bank’s motion, dismissing all of plaintiffs’ claims. On appeal, the Third Circuit affirmed the district court’s decision, concluding that plaintiffs’ claims were inadequately pled.

At the outset, the Court re-affirmed the basic principle that claims brought under the Consumer Fraud Act sound in fraud and therefore must comply with Rule 9(b)’s particularity requirement. The Third Circuit held that plaintiffs’ general allegations, which failed to identify any provision in their agreement with TD Bank requiring the bank to use a specific exchange rate, were insufficient to meet the Rule 9(b) bar. In so holding, the Third Circuit acknowledged that a claim under the Consumer Fraud Act can stem from an intentional omission of material information. However, because plaintiffs failed to particularly allege that TD Bank intentionally withheld its foreign-bank conversion fees to deceive its customers, the Third Circuit affirmed the dismissal of plaintiffs’ consumer-fraud claim.

Turning to plaintiffs’ contractual claims, plaintiffs argued that TD Bank’s failure to disclose the existence of an embedded fee breached TD Bank’s agreements and that the use of the phrase “applicable exchange rate” in the agreement was to mislead customers to allow TD Bank to make a profit. The Third Circuit held that plaintiffs’ failure to identify any provision in the parties’ agreement requiring TD Bank to disclose the existence of an embedded fee warrants the dismissal of plaintiffs’ contractual claims as “[a]bsent any such contractual obligation, a breach of contract claim cannot lie.”

While this decision does not break new ground, the Third Circuit’s ruling serves as a reminder to litigants of the importance of satisfying the requisite pleading standards and supporting all claims with particularized allegations.