Opinion (summary judgment terminated; discovery granted) — Harborview v. Cross River (D.N.J. No. 2:21-cv-15146)

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U.S. District Court for the District of New Jersey · No. 2:21-cv-15146-KM-ESK · Doc. 98 · 2023-10-11 · Docket on CourtListener

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UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF NEW JERSEY 
 
HARBORVIEW CAPITAL PARTNERS, 
LLC, 
Plaintiff, 
v. 
CROSS RIVER BANK, 
Defendant. 
 
Civ. No. 21-15146 (KM) (ESK) 
OPINION 
KEVIN MCNULTY, U.S.D.J.: 
Harborview deposited funds at Cross River. A hacker took control of the 
email account belonging to the CEO of Harborview and directed an employee to 
wire money to an account in Hong Kong. The employee, believing she was 
acting on the instructions of her CEO, directed Cross River to transfer the 
money to the Hong Kong account. Cross River discovered the fraud, but too 
late to recover Harborview’s funds. Harborview then sued Cross River. I granted 
Cross River’s motion to dismiss without prejudice, and Harborview filed an 
amended complaint.  
In response, Cross River bypassed the motion to dismiss stage; instead, 
attaching additional evidence obtained thus far in discovery, and citing 
purported admissions in the now-superseded initial complaint, it has moved 
for summary judgment. Meanwhile, the Magistrate Judge has granted Cross 
River’s motion to stay discovery. Harborview, in response, argues that 
summary judgment is premature because discovery is not complete, and has 
filed a declaration outlining the additional discovery it needs to respond to 
Cross River’s motion. For the following reasons, Cross River’s motion for 
summary judgment is administratively terminated without prejudice, and 
Harborview’s application for additional discovery is GRANTED. 
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I. 
BACKGROUND1 
Harborview is a Delaware limited liability company and Cross River is a 
New Jersey banking corporation. (FAC ¶¶ 1–2.) A detailed factual background 
regarding the Harborview lawsuit against Cross River can be found in my prior 
opinions granting Cross River’s motion to dismiss (DE 44) and denying 
Harborview’s motion for reconsideration (DE 64). For ease of reference, I 
summarize that background and provide detail on procedural developments 
that have occurred in the interim.  
Harborview initially filed a complaint in August 2021, with claims for 
violation of N.J.S.A. § 12A:4A-202, negligent misrepresentation, breach of 
contract, and promissory estoppel. (Compl. ¶¶ 86–130.) The complaint alleged 
that the email of Harborview CEO Ephraim Kutner was hacked, that the 
hacker directed an accounting manager to wire $1.795 million to a Hong Kong 
bank, that the accounting manager completed the necessary wire transfer 
forms, and that Cross River received the forms, contacted the accounting 
manager for confirmation, and then transferred $1.375 million. (Id. ¶¶ 26–28, 
 
1  
Certain citations to the record are abbreviated as follows: 
 
DE = docket entry 
 
Compl. = Complaint (DE 1) 
 
FAC = First Amended Complaint (DE 75) 
 
DSUMF = Cross River’s Statement of Undisputed and Material Facts (DE 78-2) 
 
PSUMF = Harborview’s Statement of Undisputed and Material Facts (DE 87-1) 
Gelbard Cert. Exs. A – D = Arlen W. Gelbard’s Certification in Support of the 
Motion for Summary Judgment (DE 78-3), Exhibits A – D (DE 78-4 – 78-7) 
Pearlson Decl. = A. Ross Pearlson’s Declaration Pursuant to Fed. R. Civ. P. 56(d) 
(DE 87-3) 
Br. = Cross River’s Brief in Support of the Motion for Summary Judgment (DE 
78-1) 
 
Opp. = Harborview’s Opposition to the Motion for Summary Judgment (DE 87) 
Reply = Cross River’s Reply in Support of the Motion for Summary Judgment 
(DE 88) 
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30–34.)2 Harborview suggested that it only opened accounts at the bank 
because Cross River President Gilles Gade requested the deposits, Kutner 
maintained a social relationship with Gade, and Cross River assured 
Harborview that the funds would be safe. (Id. ¶¶ 6–11.) According to 
Harborview, Cross River was aware that its business activity was domestic in 
nature, both because the account opening data entry forms indicated no 
foreign wire activity, transfers, or business, and because the prior wire 
transfers were all successfully directed at domestic beneficiaries, rather than 
foreign entities. (Id. ¶¶ 12–19, 22–25.)3 Harborview alleged that it relied on 
these past practices and instructions, but that Cross River still proceeded to 
transmit its money overseas to unfamiliar accounts. (Id. ¶¶ 20, 36, 50–57.) 
Harborview asserted that the loss would not have occurred if Cross River had 
promptly raised the issue, investigated the matter, or retrieved the money, or if 
Cross River had contacted Harborview’s CEO or Managing Director for 
confirmation. (Id. ¶¶ 38–49, 58–64, 81–85.)4 Harborview also asserted that, in 
allowing the loss to occur, Cross River failed to follow commercially reasonable 
banking practices or security measures. (Id. ¶¶ 21, 65–66, 70–80.) 
In April 2022, I granted Cross River’s motion to dismiss. (DE 44.) For 
purposes of the motion, I accepted as true that Harborview’s data entry forms 
indicated no foreign wire activity, transfers, or business, and that its prior wire 
transfers were all directed at domestic beneficiaries. (Id. at 2.) However, I 
concluded that Cross River’s overseas transactions were authorized pursuant 
to N.J.S.A. § 12A:4A 202(1) because the accounting manager who signed the 
 
2  
Harborview alleged that $1.375 million of the $1.795 million was transmitted 
because $420,000 did not properly process. (Compl. ¶ 37.) 
3  
According to Harborview, the account opening data entry forms even listed 
“USA” as the “Trade Area.” (Id. ¶¶ 16, 18.) 
4  
Harborview asserted that senior management should have been contacted for 
confirmation, not only because of past practices and instructions, but also because 
CEO fraud was common and Kutner was known to travel frequently. (Id. ¶¶ 29, 35, 
60–63, 67–69.) 
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wire transfer forms and provided confirmed was an authorized signatory on the 
account. (Id. at 11–12.) Since authorization was provided, I found that the 
commercial reasonableness of Cross River’s procedures under N.J.S.A. § 
12A:4A 202(2) did not need to be examined, and that Harborview’s common 
law claims were preempted. (Id. at 15, 17.) Nevertheless, I wrote that the 
N.J.S.A. § 12A:4A 202 claim “might have a chance of succeeding if Cross River 
was not entitled to rely on the instructions of Harborview’s Account Manager.” 
(Id. at 12.)  
In November 2022, I denied Harborview’s motion for reconsideration. (DE 
64.) In deciding the motion, I considered the argument that the accounting 
manager was not authorized to approve Cross River’s foreign wire transfers 
because Harborview’s past practices and instructions anticipated only domestic 
transactions. (Id. at 5–6.) I also considered the argument that Cross River 
should not have heeded the accounting manager in light of the past practices 
and instructions. (Id. at 6.) Despite these arguments, I concluded that I had 
already considered the relevant facts, and that mere disagreement with my 
opinion did not warrant a different outcome. (Id. at 6–7.) Likewise, I maintained 
the opinion that commercial reasonableness did not need to be examined and 
that common law claims were preempted. (Id. at 7–11.) 
Harborview ultimately filed an amended complaint in February 2023, 
without any common law claims. (FAC ¶¶ 120–39.) The amended complaint 
contained new allegations, including ones that Gade was personally aware of 
Harborview’s lack of foreign business and Kutner’s extensive travel, and that 
“Gade communicated both with Kutner and internally with Cross River 
personnel about Harborview setting up its accounts at Cross River, and was 
involved in getting the accounts established at the Bank.” (Id. ¶¶ 12–13, 41–
42.) According to Harborview, Gade supervised the set-up of the accounts, 
negotiating interest rates, offering overdraft protections, and working closely 
with Cross River branch manager Tina Rubino to establish the accounts. (Id. 
¶¶ 26–28, 30–32.) Harborview also alleged that communications between the 
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companies were primarily and routinely conducted directly between Gade and 
Kutner, and that Gade personally assured Kutner of Cross River’s ability to 
keep the accounts safe and Cross River’s intent to make top people accessible 
to Harborview. (Id. ¶¶ 16–17, 20–21.) Furthermore, Harborview asserted that 
authorized signatories on the accounts were only authorized for domestic wire 
transfers, that Cross River was aware foreign wire transfers should not occur, 
and that this expectation was reflected in Cross River’s system to ensure 
transactions aligned with Harborview’s preferences. (Id. ¶¶ 43, 46–49, 53, 64, 
71.) Therefore, Harborview asserted that “[b]ased on information Cross River 
solicited from Harborview as well as Gade’s and Cross River’s ongoing 
communications with the Kutners and Harborview, Cross River knew or should 
have known that a transfer of funds to a foreign entity was not authorized, and 
could not be authorized by administrative staff.” (Id. at 72.) The amended 
complaint contained new allegations regarding the commercial 
unreasonableness of Cross River’s security procedures as well. (See, e.g., id. ¶¶ 
68–69.) 
On March 16, 2023, Cross River filed a motion for summary judgment 
(DE 78), along with a brief in support (Br.). Cross River notified the Court that 
the motion was essentially an “application to dismiss Plaintiff’s claims,” but 
that it “was forced to file the application as one for summary judgment” to 
present evidence that would preclude Harborview from disputing the title of the 
employee who sent the wire transfer forms. (DE 81 at 1–2.)5 On May 1, 2023, 
Harborview filed an opposition (Opp.), along with a declaration requesting 
additional discovery to present facts essential to justify its opposition (Pearson 
Decl.). On May 8, 2023, Cross River filed a reply. (Reply.) On September 12, 
2023, the Magistrate Judge granted Cross River’s request to stay discovery for 
the pendency of the summary judgment motion. (DE 96.) 
 
5  
According to Cross River, Harborview “admitted” that the employee was an 
accounting manager in the initial complaint, only to back away from that admission in 
the amended complaint. (DE 81 at 1–2.) 
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II. 
STANDARD OF REVIEW 
“The court shall grant summary judgment if the movant shows that there 
is no genuine dispute as to any material fact and the movant is entitled to 
judgment as a matter of law.” Fed. R. Civ. P. 56(a). To defeat summary 
judgment, the opposing party must point to evidence that creates a genuine 
issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 
(1986). “A fact is material if—taken as true—it would affect the outcome of the 
case under governing law. And a factual dispute is genuine if the evidence is 
such that a reasonable jury could return a verdict for the nonmoving party.” 
M.S. by and through Hall v. Susquehanna Twp. Sch. Dist., 969 F.3d 120, 125 
(3d Cir. 2020) (citations omitted).  
“If a nonmovant shows by affidavit or declaration that, for specified 
reasons, it cannot present facts essential to justify its opposition, the court 
may: (1) defer considering the motion or deny it; (2) allow time to obtain 
affidavits or declarations or to take discovery; or (3) issue any other appropriate 
order.” Fed. R. Civ. P. 56(d). The nonmovant may request discovery under Rule 
56(d) “by simply attaching an appropriate affidavit or declaration to that party's 
response to a motion for summary judgment,” as “a formal motion is not 
required to request discovery.” Shelton v. Bledsoe, 775 F.3d 554, 567–68 (3d 
Cir. 2015). 
III. 
DISCUSSION 
The following facts are undisputed.6 In January 2018, Harborview 
completed a data entry form to open an account at Cross River. (DSUMF ¶ 5.) 
The form indicated that no business of a foreign nature was conducted at 
Harborview, that no foreign wire activity or volume was anticipated, that the 
“Trade Area” of the company was the “USA,” and that Kutner and Marilyn 
 
6  
I treat a fact as undisputed if it is admitted in Harborview’s Response to the 
DSUMF (see DE 87-2), supported by the evidence cited in the PSUMF (see DE 87-5), or 
demonstrated by “other materials in the record,” Fed. R. Civ. P. 56(c)(3). Citations to 
the DSMUF and PSUMF incorporate the evidence cited therein. 
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Tirado were authorized signatories for the account (Gelbard Cert. Ex. C.)7 At 
least one other data entry form submitted to Cross River also indicated that 
Harborview did not conduct foreign transactions. (PSUMF ¶ 1.) However, in 
August 2018, a hacker took control of Kutner’s email and directed Tirado to 
transmit Harborview funds overseas. (DSUMF ¶¶ 7, 9.) Tirado then sent emails 
to Cross River on behalf of Harborview with four wire transfer forms. (Gelbard 
Cert. Ex. D.) Upon receiving the forms, which were signed by Tirado and 
Kutner, Cross River contacted Tirado for verbal confirmation and processed the 
transactions. (DSUMF ¶¶ 12, 14–15.) Kutner attests, not only that Gade 
personally assured him Harborview’s money would be safe with Cross River, 
but also that Tirado’s authorization did not extend beyond domestic wire 
transfers. (PSUMF ¶¶ 4–6.)  
Nevertheless, the parties dispute whether Tirado’s authorization did, in 
fact, extend to foreign transactions pursuant to N.J.S.A. § 12A:4A 202(1). (Br. 
at 10–14; Opp. at 17–18.)8 The parties also contest the appropriateness of 
adjudicating the motion for summary judgment; Harborview contends that 
summary judgment is premature because it cannot present facts essential to 
justify its opposition (Opp. at 11–12), while Cross River disagrees (Reply at 13–
16). Since “it is improper for a district court to rule on summary judgment 
without first ruling on a pending Rule 56[(d)] motion,” Doe v. Abington Friends 
Sch., 480 F.3d 252, 257 (3d Cir. 2007) (citations omitted), I will convert the 
motion for summary judgment into a Rule 56(d) motion for discovery.  
By declaration, Harborview attests that Cross River’s motion for 
summary judgment is premature because “discovery is needed to establish 
 
7  
Tirado was listed as “SR ACCT” in an opening data form package submitted to 
Cross River, and she declared under penalty of perjury in another matter that she was 
a “senior accountant.” (DSUMF ¶¶ 20–21.) The anticipated dispute about Tirado’s job 
title appears to have not materialized. (DE 87-2 ¶¶ 20–21.) 
8  
So too, the parties dispute whether Cross River’s security procedures were 
commercially reasonable under N.J.S.A. § 12A:4A 202(2). (Br. at 14–17; Opp. at 18–
22; Reply at 11–13; DSUMF ¶ 22; PSUMF ¶¶ 2–3, 10–12.)  
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whether Defendant was entitled to rely on the signatory’s alleged authorization 
for a foreign wire transfer.” (Pearlson Decl. ¶ 2.) In order to dispute Tirado’s 
authority to authorize foreign wire transfers, Harborview attests that it needs 
discovery to explore the following: when and how Cross River inputted 
information from data entry forms; whether processes, procedures, and coding 
were instituted to prevent or scrutinize overseas or Hong Kong transactions; 
and whether Cross River discussed the domestic-foreign distinction with 
Harborview or reviewed its past practices or instructions. (Id. ¶ 13.) Harborview 
also attests that it needs discovery to probe the communications between 
Gade, Kutner, Rubino, and others, as well as the extent of Gade’s involvement 
in opening the accounts, in order to assess Cross River’s knowledge that only 
domestic transactions were permitted. (Id. ¶ 11.) 
I find that Harborview’s requested discovery could present facts essential 
to justify its opposition to the motion for summary judgment. Much of the 
thrust of Harborview’s argument seems to be that Cross River possessed 
knowledge that disentitled it to rely on the legitimacy of the wire transfer order. 
Based on the current record, the wire transfer forms received by Cross River 
were the authorized orders of Harborview because they were signed, imparted, 
and confirmed by Tirado, who was an authorized signatory for the account. 
Account opening data entry forms and company custom may have notified 
Cross River that Harborview avoided foreign transactions, but I already 
considered these facts and concluded that the wire transfers were, on their 
face, authorized. However, Harborview might still develop the record to show, 
not only that Cross River was aware of general expectations regarding foreign 
transactions, but also that Cross River was in receipt of a specific directive 
limiting Tirado’s authorization to domestic transactions. Indeed, discovery of 
Cross River’s gathering, processing, discussion, and review of Harborview’s 
past practices and instructions might uncover the existence of such a directive, 
as might discovery of Gade’s communications and involvement.  
In all frankness, it must be said that Cross River has presented 
arguments and evidence which, if presented after adequate discovery, might be 
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deemed persuasive. Nevertheless, Cross River has presented its motion as one 
for summary judgment, at a time when discovery is far from complete. 
Harborview is entitled to sufficient discovery and an opportunity to probe that 
evidence in advance of any grant of summary judgment. Accordingly, I will 
grant the request for additional discovery under the supervision of the 
Magistrate Judge, who will ensure that such discovery is limited to the issues 
that remain concerning the authority of Harborview’s employee, the scope of 
Cross River’s knowledge regarding that authority, and the commercial 
reasonableness of its procedures to verify the authenticity of the wire transfer.  
IV. 
CONCLUSION 
For the reasons set forth above, Cross River’s motion for summary 
judgment is administratively terminated without prejudice to renewal after 
suitable discovery under the supervision of the Magistrate Judge. Harborview’s 
application for additional discovery is GRANTED. A separate order will issue. 
Dated: October 11, 2023 
 
 
 
 
 
 
 
/s/ Kevin McNulty 
__________________________________ 
Hon. Kevin McNulty 
United States District Judge 
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