John Norton v. Us Bank Association
74058-0
| Wash. Ct. App. | Feb 21, 2017Background
- Jose Nino de Guzman, a former U.S. Bank employee, formed NDG Investment Group and solicited investor funds for purported Peruvian real estate projects; the Nortons invested $11 million and later discovered a Ponzi scheme.
- Nortons obtained default judgments against Nino de Guzman and NDG, and sued U.S. Bank alleging aiding-and-abetting fraud and negligent supervision based on bank employees' assistance to De Guzman and account activity.
- During discovery Nortons sought U.S. Bank internal documents and materials concerning suspicious-activity monitoring, investigations, and policies; U.S. Bank asserted the Bank Secrecy Act (BSA) confidentiality/regulatory privilege for SARs and related materials.
- Trial court initially compelled discovery; on discretionary review this court reversed in Norton v. U.S. Bank (179 Wn. App. 450), holding internal SARs and materials revealing existence of SARs are privileged; on remand the trial court barred such discovery.
- U.S. Bank moved for summary judgment; the trial court granted it, dismissing the aiding-and-abetting and negligent supervision claims; Nortons appealed, arguing (1) the court should revisit the prior BSA-privilege ruling and (2) there was sufficient evidence to survive summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of BSA/SAR discovery privilege | Norton: bank policies/procedures and ordinary-course documents independent of SARs should be discoverable | U.S. Bank: BSA and 12 C.F.R. 21.11 prohibit disclosure of SARs and information revealing their existence, including internal investigative materials | Court adhered to prior ruling: privilege covers internal reports/methods that would reveal existence of SARs; no intervening change warrants reversal |
| Whether internal bank documents could be compelled on remand | Norton: subsequent cases favor narrower privilege; remand allows revisiting | U.S. Bank: prior appellate ruling controls; policy reasons support broad privilege | Court: prior appellate decision binding; exceptions to stare decisis not met; privilege stands |
| Aiding and abetting fraud (actual knowledge & substantial assistance) | Norton: bank employees accepted compensation, opened accounts, lowered risk scores — jury could infer bank's actual knowledge/deliberate indifference | U.S. Bank: no direct evidence of bank-level knowledge; employee conduct insufficient to impute actual knowledge or substantial assistance to bank | Court: evidence insufficient to prove actual knowledge or substantial assistance; summary judgment proper |
| Negligent supervision / duty to non-customers | Norton: bank’s conduct made scheme appear legitimate; duty extends to foreseeable victims | U.S. Bank: no special relationship; Nortons were not bank customers; no duty owed (Zabka) | Court: no duty owed to Nortons as noncustomers; negligent supervision claim fails |
Key Cases Cited
- Norton v. U.S. Bank Nat'l Ass'n, 179 Wn. App. 450 (Wash. Ct. App. 2014) (prior appellate decision recognizing BSA/SAR confidentiality extends to internal reports)
- Roberson v. Perez, 156 Wn.2d 33 (Wash. 2005) (rule that appellate rulings bind subsequent stages absent narrow exceptions)
- Zabka v. Bank of Am. Corp., 131 Wn. App. 167 (Wash. Ct. App. 2005) (bank owed no duty to noncustomer investors)
- LaHue v. Keystone Inv. Co., 6 Wn. App. 765 (Wash. Ct. App. 1972) (aiding-and-abetting tort principles requiring knowledge)
- Westerfield v. United States, 714 F.3d 480 (7th Cir. 2013) (circumstantial evidence can support deliberate ignorance/inference of knowledge)
- Cotton v. PrivateBank & Trust Co., 235 F. Supp. 2d 809 (N.D. Ill. 2002) (distinguishing ordinary-course documents from privileged SAR-related internal reports)