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Financial Services Law Insights and Observations

Court of Chancery throws out suit against bank for alleged fraud

Courts EFTA Regulation E U.S. Senate


On April 16, in the Court of Chancery of the State of Delaware, a judge threw out a case with prejudice where a shareholder (the plaintiff) sued a bank but ultimately failed to show a “substantial likelihood of liability.” The plaintiff alleged that the bank, along with its board, violated the EFTA and Regulation E by failing to resolve unauthorized electronic transfer claims and provisionally credit the consumer’s accounts within 10 business days, by failing to resolve unauthorized electronic transfer claims within 45 days, and by failing to reimburse victims of unauthorized electronic fund transfers after 45 days. To bolster the plaintiff’s claims, the plaintiff cited a 2022 U.S. Senate Committee on Banking, Housing, and Urban Affairs (Committee) investigation into the same alleged unauthorized electronic transfers and related reports, including one produced by Senator Elizabeth Warren (D-MA). However, the court found the reports at issue failed to demonstrate a violation of federal regulations. Accordingly, the court denied the plaintiff’s motion for leave to file a supplemental brief and granted the bank’s motion to dismiss.