Legal Memorandum: Bank's Liability for Deceptive Practices

Issue: Can a bank that specializes in providing services to lawyers be held liable for verifying a fraudulent check had passed through a trust account under the Unfair or Deceptive Trade Practices Act or other Massachusetts statutes?

Area of Law: Antitrust & Trade Regulation, Banking & Finance Law
Keywords: Unfair and deceptive practices; Banks; Fraudulent check
Jurisdiction: Massachusetts
Cited Cases: 321 N.E.2d 915; 892 N.E.2d 777; 730 F.2d 831
Cited Statutes: Mass. Gen. Laws ch. 93A, § 1; Mass. Gen. Laws ch. 167, §§ 2A, 2C
Date: 04/01/2009

Massachusetts’ Unfair or Deceptive Trade Practices Act, Mass. Gen. Laws ch. 93A, § 1, et seq., makes unlawful any unfair or deceptive practices or acts in the conduct of trade or commerce, id., § 2.  Persons aggrieved or injured under this statute have the right to bring a civil action and recover damages.  Id. at §§ 9, 11.  See Atl. Cement Co. v. S. Shore Bank, 730 F.2d 831, 834 (1st Cir. 1984) (stating that the plaintiff’s claim for a chapter 93A violation must plead detrimental reliance and injury).

Conduct is considered unfair under the Act if it is unfair under common law or another statute—or even another “established concept of unfairness”; “it is immoral, unethical, oppressive, or unscrupulous” and it causes a substantial injury to consumers or business.  Renovator’s Supply, Inc. v. Sovereign Bank, 72 Mass. App. Ct. 419, 892 N.E.2d 777, 786-87 (2008) (quoting PMP Assocs. v. Globe Newspaper Co., 366 Mass. 593, 596, 321 N.E.2d 915 (1975)).  In Renovator’s Supply, the court applied the statute to hold that the bank acted in an unfair or deceptive manner in violation of §§ 9 and 11.  It held that the bank acted unfairly by attempting to force unwanted credit terms on a supplier.  Id. at 787-88.

Other Massachusetts statutes also appear to provide potential claims against the Bank.  Banks in Massachusetts are explicitly prohibited from unfair or deceptive acts.  Mass. Gen. Laws ch. 167, §§ 2A, 2C.  Similarly, there are banking regulations […]

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