R.J. Zayed v. Associated Bank, N.A., 913 F.3d 709

Background

From 2006–2009 five individuals ran a Ponzi scheme that raised >$193M and returned only $49M; federal and state enforcement actions followed and a court-appointed Receiver was tasked with recovering assets.
The Receiver sued Associated Bank alleging the bank (through employee Lien Sarles) aided and abetted fraud, conversion, breach of fiduciary duty, and negligent misrepresentation by providing accounts, approving transfers, and otherwise facilitating the scheme.
On pleadings appeal this Court reversed a dismissal (Zayed I) and allowed discovery; after discovery the bank moved for summary judgment arguing insufficient evidence of actual knowledge and no substantial assistance beyond routine banking.
The district court granted summary judgment for Associated Bank; the majority affirms, concluding the record lacked direct evidence and the circumstantial evidence only supported "sloppy banking" or red flags, not actual knowledge or substantial assistance.
A dissent would have reversed, arguing that viewing the record in the Receiver’s favor produces sufficient circumstantial evidence (meetings, account openings without documentation, improper transfers and withdrawals, social ties) to submit aiding-and-abetting claims to a jury.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Associated Bank had actual knowledge of the scammers' torts	Sarles knew the scheme based on meetings, social ties, irregular account openings, and approval of transfers/withdrawals	No direct knowledge; record shows routine or sloppy banking and contrary testimony; circumstantial facts insufficient	No — actual knowledge not reasonably supported by record (affirmed)
Whether constructive knowledge suffices for aiding-and-abetting under Minnesota law	Constructive knowledge should suffice (red flags, long-term relationship, facially illegal conduct)	Minnesota requires actual knowledge; constructive knowledge insufficient	No — court rejects constructive-knowledge theory (and finds record fails even under that standard)
Whether the bank substantially assisted the scam beyond routine services	Bank employee’s account openings, approvals of internal transfers, and facilitation of withdrawals amounted to substantial assistance	Conduct was routine banking or negligent/sloppy handling, not blameworthy assistance that furthered torts	No — assistance did not rise above routine/sloppy banking to be "substantial" (affirmed)
Whether summary judgment was proper given circumstantial nature of evidence	Circumstantial evidence suffices to create genuine issue of fact for jury	Circumstantial evidence here is too speculative; plaintiff must do more than conjecture	Summary judgment proper — plaintiff’s circumstantial proof too speculative to create triable issue

Key Cases Cited

United States v. Beckman, 787 F.3d 466 (8th Cir.) (background on the Ponzi scheme and criminal convictions)
Zayed v. Associated Bank, N.A., 779 F.3d 727 (8th Cir. 2015) (prior appeal reversing dismissal and setting aiding-and-abetting framework)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Supreme Court) (summary judgment standard and genuine-issue test)
Witzman v. Lehrman, Lehrman & Flom, 601 N.W.2d 179 (Minn. 1999) (elements of aiding-and-abetting under Minnesota law)
Varga v. U.S. Bank Nat. Ass'n, 952 F. Supp. 2d 850 (D. Minn.) (actual-knowledge requirement discussion under Minnesota law)
Camp v. Dema, 948 F.2d 455 (8th Cir.) (relationship between scienter and substantial-assistance showings)
Wiand v. Wells Fargo Bank, N.A., 938 F. Supp. 2d 1238 (M.D. Fla.) (circumstantial-evidence standard for actual knowledge)
Williams v. Mannis, 889 F.3d 926 (8th Cir.) (summary judgment cannot rest on speculation or conjecture)
Henderson v. Kennedy, 253 F.3d 12 (D.C. Cir.) (illustrative aphorism on cumulative weak evidence)
Best Buy Stores, L.P. v. Benderson-Wainberg Assocs., L.P., 668 F.3d 1019 (8th Cir.) (fact-intensive, knowledge inquiries generally inappropriate for summary judgment)