MIDWEST FEEDERS INC v. REGIONS BANK (INC) (ALABAMA)
1:15-cv-00013
| M.D. Ga. | Sep 30, 2016Background
- Plaintiff Midwest Feeders financed Moseley Cattle and funded an Alva State Bank account into which livestock purchasers were to send payments to repay the loan.
- Cheryl Moseley (not an authorized signer) allegedly forged/issued at least 153 checks from the Alva State Bank account totaling >$23 million and endorsed/deposited them into a Regions Bank account used by Moseley Cattle.
- Regions accepted and presented those checks to Alva State Bank, which paid Regions; Moseley Cattle/Cheryl Moseley later withdrew funds from the Regions account for non-cattle purposes.
- After Cheryl Moseley confessed in March 2014 and subsequently died, Plaintiff discovered the scheme and sought copies of checks; Plaintiff sued Regions asserting UCC conversion (O.C.G.A. § 11-3-420), failure to exercise ordinary care (§ 11-3-404(d)), common-law conversion, negligence, and negligent hiring/supervision.
- Regions moved to dismiss for lack of standing/subject-matter jurisdiction and failure to state a claim; the court granted the motion without prejudice, dismissing all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under Georgia UCC § 11-3-301/3-420 to sue for conversion of checks | Midwest says it has an interest tied to the funds and should be permitted to sue for conversion of the instruments | Regions says only the statutorily enumerated persons (holder, nonholder in possession with holder rights, or person entitled under specified sections) may enforce an instrument; Midwest is not one | Court: Midwest lacks standing under the UCC because it is not among the "persons entitled to enforce" the checks and the statute's enumeration excludes others |
| Claim under § 11-3-404(d) (failure to exercise ordinary care) | Midwest contends Regions failed ordinary care in accepting and presenting forged/unauthorized checks, causing its loss | Regions argues § 11-3-404(d) does not confer standing to a non-enforced-party like Midwest; no authority supports Midwest's position | Court: Dismissed — § 11-3-404(d) does not give Midwest a cause of action in these circumstances |
| Common-law conversion of funds (separate from UCC conversion) | Midwest argues common-law conversion applies because Regions accepted/cashed checks and refuses to repay | Regions contends § 11-3-420 preempts common-law conversion for instruments and Midwest's remedy (if any) is under the UCC and limited to entitled persons | Court: Dismissed — § 11-3-420 preempts common-law conversion; Midwest lacks UCC standing, so common-law claim fails |
| Common-law negligence and negligent hiring/supervision | Midwest alleges Regions breached banking standards/policies and had employees who accepted improper deposits, causing loss | Regions argues (and cites authority) that banks do not owe a common-law duty of care to noncustomers and Midwest has no recognized legal duty from Regions | Court: Dismissed — Midwest failed to allege a legally cognizable duty owed by Regions to a non-customer |
Key Cases Cited
- Stalley v. Orlando Reg'l Healthcare Sys., Inc., 524 F.3d 1229 (11th Cir.) (standing facial attack standard and Rule 12(b)(1) discussion)
- Lawrence v. Dunbar, 919 F.2d 1525 (11th Cir.) (Rule 12(b)(1) facial challenge safeguards akin to 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard — plausible claims required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility/requirement for factual matter to permit discovery)
- Dees v. Logan, 282 Ga. 815 (Ga.) (statutory interpretation: express mention implies exclusion of others)
- Jenkins v. Wachovia Bank Nat'l Ass'n, 309 Ga. App. 562 (Ga. Ct. App.) (party lacking right to enforce check lacked standing under Georgia UCC)
- National Acc. Ins. Underwriters, Inc. v. Citibank, F.S.B., 543 F.3d 907 (11th Cir.) (distinguishing interest in funds vs. interest in the instrument)
- Ownbey Enters., Inc. v. Wachovia Bank, N.A., 457 F. Supp. 2d 1341 (N.D. Ga.) (§ 11-3-420 preempts common-law conversion claims)
- Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220 (4th Cir.) (banks generally owe no duty to defrauded noncustomers)