Federal District Court Holds New York's EIPA Does Not Permit Private Right of Action for Judgment Debtors to Sue Their Banks

On March 2, the U.S. District Court for the Southern District of New York dismissed a putative class action brought by judgment debtors seeking money damages from their bank for allegedly violating New York’s Exempt Income Protection Act (EIPA), holding that the statute does not support a private right of action. Cruz v. TD Bank, N.A., No. 10-8026, 2012 WL 694267 (S.D.N.Y. Mar. 2, 2012). The EIPA provides a special exemption from satisfaction of money judgments for certain amounts and types of a debtor’s income, including income derived from social security, public assistance, and disability benefits. In Cruz, the judgment debtor plaintiffs alleged that their bank failed to provide them and other members of the putative class with the notices and exemptions forms as required by the EIPA, and asserted that the bank unlawfully restrained their accounts and charged them various fees in violation of the statute. After examining the plain text, legislative history, and purpose of the EIPA, the court held that judgment debtors had neither an express nor implied right to sue their bank for money damages under the statute. Instead of creating a right of action for suing a bank, the court concluded that the EIPA merely permitted judgment debtors and creditors to bring claims against each other. In addition to dismissing the EIPA claim, the court dismissed the plaintiffs’ common law fraud, fiduciary duty, unjust enrichment, negligence, and conversion claims.