. UNAS S I GNE D NYSCEF DOC. NO. 141 RECEIVED NYSCEF: 07/10/2018 09/21/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ---------------------------------------------------------------------X LANE'S FLOOR COVERINGS & INTERIORS, INC., Index No. -against- Plaintiff, SUMMONS Plaintiff designates New York ANTHONY DILALLA and VALLEY NATIONAL County as the place of trial. BANK, The basis of venue is plaintiff's Defendants. principal places of business are located in New York County. ---------------------------------------------------------------------x To the above-named defendants: YOU ARE HEREBY SUMMONED to answer the complaint in this action and to serve a copy of your answer, or, if the complaint is not served with this summons, to serve a notice of appearance on plaintiff's attorney(s) within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York), and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. Dated: New York, New York September 21, 2016 DAVIDO U, CIT LLP By: Derek Wolman Andrew K. Rafalaf 605 Third Avenue New York, New York 10158 (212) 557-7200 Attorneys for Plaintiff TO: Valley National Bank 100 Park Avenue New York, New York 10017-1101 1 of 13
Anthony DiLalla Century 21 Semiao & Associates 761 Ridge Road Lyndhurst, NJ 07071 2 of 13
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ---------------------------------------------------------------------x LANE'S FLOOR COVERINGS & INTERIORS, INC. IndeX No. and LANE BRETTSCHNEIDER, Plaintiff, COMPLAINT -against- ANTHONY DILALLA and VALLEY NATIONAL BANK, Defendants. ---------------------------------------------------------------------X Plaintiff Lane's Floor Coverings & Interiors, Inc. ("Lane's" or "Plaintiff" "Plaintiff"), by its attorneys, Davidoff Hutcher & Citron LLP, as and for its complaint, alleges as follows: THE PARTIES 1. Plaintiff Lane's is a New York corporation with its principal place of business in New York County. 2. Upon information and belief, defendant Anthony DiLalla ("DiLalla") is an individual residing in New Jersey. (" 3. Upon information and belief, defendant Valley National Bank ("Valley National Bank" Bank") is a national banking institution having its principal place of business in the State of New Jersey and is authorized to conduct business in the State of New York. JURISDICTION AND VENUE 4. This Court has jurisdiction over DiLalla as he conducts and transacts business in New York County. 3 of 13
5. This Court has jurisdiction over Valley National Bank as it operates multiple offices in New York County and conducts and transacts business in New York County. 6. Venue is proper in New York County pursuant to CPLR 503(a) because one or more of the parties reside in New York County. FACTS 7. Lane's is a privately-owned company engaged in the sale and installation of floor coverings for institutional, commercial and residential projects. (" Smith" 8. In or about October 1998, Lane's hired Howard Smith ("Smith") as its controller. In his capacity as controller, Smith was put in charge of all financial aspects of Lane's business, including supervising its payroll and processing and accounting for payments made by Lane's to its vendors and payments received by Lane's from its clients. 9. From the time Smith was hired until Plaintiff discovered his criminal misconduct against Plaintiff, described below, Plaintiff mistakenly believed that Smith was a diligent and honest employee. Plaintiff now knows it was sorely mistaken. A. Plaintiff First Learns of Smith's Fraud 10. On or about December 23, 2013, Smith failed to appear for work, claiming illness. He would never return to Lane's. 11. On or after December 23, 2013, other employees at Lane's, including Lane's Vice President, Umberto Aponte ("Aponte"), were required to assume Smith's responsibilities to insure that its employees and installers continued to be paid and that payments made and received by Lane's were properly debited and credited on Lane's books. 12. On or after December 23, 2013, Plaintiff quickly realized that there were a staggering amount of inconsistencies in the financial records maintained by Smith, concealing 553337v,4 of 13
theft of company funds. Among other things, Plaintiff discovered that as far back as February 2011, Smith had been illegally diverting Plaintiff's funds by directing them to himself. B. Smith Works with DiLalla to Cash Five Lane Checks That Were Made Out To American Express, But Never Paid to American Express 13. At all relevant times herein, Lane's maintained a business checking account with Account" Valley National Bank (the "Valley National Bank Account"). 14. In the course of its investigation into Smith's various fraudulent schemes, Plaintiff identified at least five checks drawn from the Valley National Bank Account totaling $60,066.67, made out to American Express from one of Lane's corporate accounts (the "Fraudulent Checks" Checks"), that were cashed by Valley National Bank. 15. Although the Fraudulent Checks were made out to American Express and although they were cashed by Valley National Bank, American Express never received these payments. 16. Tellingly, in violation of the customary and ordinary rules and regulations applicable to banking institutions, some of the Fraudulent Checks were endorsed by someone other than American Express, while other of the Fraudulent Checks were simply not endorsed by anyone. 17. Further, the proceeds of these Fraudulent Checks were never returned to Lane's. The proceeds of the Fraudulent Checks remain unaccounted for. 18. Instead, upon information and belief, at Smith's direction, bank manager DiLalla allowed the checks to be cashed, with the proceeds going directly to Smith and DiLalla. 19. Notably, Smith did not have authorization to transact business with Valley National Bank on behalf of Lane's. 5 of 13
20. Upon information and belief, Valley National Bank has established policies addressing the manner with which checks are drawn against accounts maintained by depositors of Valley National Bank, and for confirming the endorsement of checks drawn against such Policies" accounts (the "Bank Policies") that accord with the customary and ordinary rules and regulations applicable to banking institutions. AS AND FOR A FIRST CAUSE OF ACTION (Violation of UCC 3-404 - As Against Valley National Bank) 21. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 22. At all relevant times herein, Lane's maintained a bank account, and was a depositor of, Valley National Bank. 23. The five Fraudulent Checks, which were to be paid out to American Express, were drawn against the Valley National Bank Account, and were cashed at a Valley National Bank branch located at 776 Avenue of the Americas, New York, New York. 24. DiLalla was the bank manager at the branch where the checks were cashed. 25. American Express, the identified payee, never received the Fraudulent Checks, and certainly never received the proceeds of the Fraudulent Checks. 26. Two of the Fraudulent Checks were cashed by Valley National Bank even though they were not endorsed: (1) Check No. 39758, dated September 2, 2013, in the amount of $9,317.46; and (2) Check No. 39938, dated October 7, 2013, in the amount of $8,145.94. 27. The other three Fraudulent Checks were cashed by Valley National Bank even though they bear an endorsement unrelated to or unaffiliated with American Express: (1) Check No. 40072, dated November 2, 2013, in the amount of $5,781.73; (2) Check No. 40076, dated 6 of 13
November 2, 2013, in the amount of $18,153.12; and (3) Check No. 40238, dated December 10, 2013, in the amount of $18,668.42. 28. DiLalla oversaw and signed off on the cashing of the five Fraudulent Checks. 29. Pursuant to UCC 3-404(d), "[i]f a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss." 30. By allowing the Fraudulent Checks to be endorsed by a party that was not the intended payee of those checks, or by allowing the Fraudulent Checks to be paid without any endorsement, Valley National Bank did not observe reasonable commercial standards prevailing in the banking industry. 31. Further, by allowing the Fraudulent Checks to be endorsed by a party that was not the intended payee of those checks, or by allowing the Fraudulent Checks to be paid without any endorsement, Valley National Bank violated its own Bank Policies. 32. The acts of Valley National Bank appear to be intentional, habitual, conspiratorial and collusive. 33. As a direct and proximate result of Defendant's actions, Plaintiff has suffered damages in an amount to be determined at trial, but no less than $60,066.67. AS AND FOR A SECOND CAUSE OF ACTION (Violation of UCC 3-306 - As Against DiLalla) 34. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 7 of 13
35. Smith could not have cashed the Fraudulent Checks without the support and assistance of DiLalla. 36. Upon information and belief, Smith shared the proceeds of the Fraudulent Checks with DiLalla. 37. Pursuant to UCC 3-306, "[a] person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds." 38. As such, DiLalla is liable to Plaintiff for the full amount of the five Fraudulent Checks. 39. As a direct and proximate result of DiLalla actions, Plaintiff seeks recovery and restitution of the proceeds of the Fraudulent Checks in an amount to be determined at trial, but no less than $60,066.67. AS AND FOR A THIRD CAUSE OF ACTION (Fraud - As Against DiLalla) 40. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 41. Smith was allowed to cash checks written out to American Express that either were not endorsed or were endorsed in a flagrantly fallacious manner. 42. DiLalla intentionally and actively concealed that these checks were being cashed fraudulently, and that the proceeds of such fraudulently cashed checks were paid out to Smith and himself. 43. As a direct and proximate result of DiLalla's fraud, Lane's has suffered damages in an amount to be determined at trial, but no less than $60,066.67. 8 of 13
AS AND FOR A FOURTH CAUSE OF ACTION (Fraud - As Against Valley National Bank) 44. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 45. Valley National Bank engaged in conduct that helped DiLalla and Smith perpetrate their fraudulent scheme. 46. Smith's practice of cashing checks made out to American Express that were either not endorsed or were endorsed in an flagrantly fallacious manner would not have prospered without with the assistance of Valley National Bank's employee, DiLalla. 47. DiLalla participated in the fraudulent scheme, and, upon information and belief, Valley National Bank knew of or intentionally ignored these suspicious activities. 48. As a direct and proximate result of Valley National Bank's fraud, Lane's has suffered damages in an amount to be determined at trial, but no less than $60,066.67. AS AND FOR A FIFTH CAUSE OF ACTION (Negligence - As Against Valley National Bank) 49. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 50. Valley National Bank had a duty to exercise ordinary care in honoring Lane's checks. 51. Valley National Bank knew or should have known it was obligated to carry out that duty. 52. Valley National Bank failed to carry out that duty. 9 of 13
53. Specifically, Valley National Bank provided a safe haven for the fruits of DiLalla's and Smith's fraudulent scheme by disregarding the validity of the endorsements and accepting checks with improper endorsements or without any endorsements. 54. Valley National Bank failed to detect the fraud perpetrated by DiLalla and Smith, in violation of customary and ordinary banking rules. 55. Valley National Bank failed to identify that checks were being cashed without endorsements or with endorsements clearly unrelated to American Express. 56. Valley National Bank's internal controls should have identified these discrepancies. 57. Valley National Bank was in a position that, if it had made reasonable inquiries and/or it followed its own Bank Policies and/or if its internal controls were within industry standards, it would have discovered DiLalla's and Smith's fraud. 58. As a direct and proximate result of Valley National Bank's actions, Plaintiff has suffered damages in an amount to be determined at trial, but no less than $60,066.67. AS AND FOR SIXTH CAUSE OF ACTION (Gross Negligence - As Against Valley National Bank) 59. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 60. Valley National Bank had a duty to exercise ordinary care in honoring Lane's checks. 61. Valley National Bank knew or should have known it was obligated to carry out that duty. 62. Valley National Bank failed to carry out that duty. 10 of 13
63. Specifically, Smith was allowed to cash checks written out to American Express that either were not endorsed or were endorsed in a flagrantly fallacious manner. 64. DiLalla intentionally and actively concealed that these checks were being cashed fraudulently, and that the proceeds of such fraudulently cashed checks were paid out to Smith and himself. 65. Valley National Bank engaged in conduct that helped DiLalla and Smith perpetrate their fraudulent scheme. 66. Smith's practice of cashing checks made out to American Express that were either not endorsed or were endorsed in an flagrantly fallacious manner would not have prospered without with the assistance of Valley National Bank's employee, DiLalla. 67. DiLalla participated in the fraudulent scheme, and Valley National Bank recklessly disregarded any warning signs, and its own policies and procedures, that would have prevented the successful consummation of this scheme. 68. As a direct and proximate result of Valley National Bank's gross negligence, Lane's has suffered damages in an amount to be determined at trial, but no less than $60,066.67. AS AND FOR A SEVENTH CAUSE OF ACTION (Breach of Contract - As Against Valley National Bank) 69. Plaintiff repeats and realleges each and every allegation contained in paragraphs "1" through "TKTK" hereof as if set forth in full herein. 70. The Valley National Bank Account was maintained pursuant to a deposit agreement between Lane's and Valley National Bank. 71. As with every contract, this deposit agreement required Valley National Bank to act in good faith. 11 of 13
72. DiLalla, Valley National Bank's employee and agent, intended to defraud Lane's, and did defraud Lane's. 73. By failing to abide by customary practices and by paying the Fraudulent Checks to DiLalla and Smith, replete with fake endorsements or no endorsements, Valley National Bank failed to act in good faith. 74. As a direct and proximate result of Valley National Bank's failure to act in good faith, Plaintiff was damaged in amount to be determined at trial, but no less than $60,066.67. WHEREFORE, Plaintiff Lane's Floor Coverings & Interiors, Inc. demands judgment against defendants Valley National Bank and Anthony DiLalla as follows: a) On the First Cause of Action for violation of UCC 3-404, compensatory damages, according to the proof; b) On the Second Cause of Action for violation of UCC 3-306, compensatory damages, according to the proof; c) On the Third Cause of Action for fraud, compensatory damages according to the proof, and an award of any and all special, incidental and/or consequential damages and exemplary and/or punitive damages; d) On the Fourth Cause of Action for fraud, compensatory damages according to the proof, and an award of any and all special, incidental and/or consequential damages and exemplary and/or punitive damages; e) On the Fifth Cause of Action for negligence, compensatory damages according to the proof; 12 of 13
f) On the Sixth Cause of Action for gross negligence, compensatory damages according to the proof, and an award of any and all special, incidental and/or consequential damages and exemplary and/or punitive damages g) On the Seventh Cause of Action for breach of contract, compensatory damages according to the proof; h) On all causes of action, interest according to the law; and i) For such other and further relief as the Court deems just and proper, together with the costs and disbursements of this action, including reasonable attorneys' fees. Dated: New York, New York September 21, 2016 DAVIDO U H <. & C RON QL By: ~.4~1 DEi~e Wolman, Esq Andrew K. Rafalaf, Esq. 605 Third Avenue New York, New York 10158 (212) 557-7200 Attorneys for Plaintiff Lane 's Floor Coverings & Interiors, Inc. 't 13 of 13