930 F. Supp. 2d 1082
N.D. Cal.2013Background
- Plaintiff Simi Management Corp. sued Bank of America alleging aiding and abetting embezzlement/conversion, aiding and abetting breach of fiduciary duty, and breach of contract related to Reichart's scheme.
- Reichart, the CFO, embezzled millions from Plaintiff's accounts at BofA from 2001 to 2007; embezzlement largely occurred at the Oakland Main Branch.
- Plaintiff maintained two-signature checks; Reichart was an authorized signer; later, Plaintiff added Mary Tejada as signer; at issue are BofA's authority to honor single-signature checks.
- Documents surrounding 1994–2000 banking agreements are disputed: original 1994 documents vs. later 1996/2000 Master Agreements; question whether they bound Plaintiff to a one-signature vs two-signature policy.
- BofA statements to Plaintiff showed check images; time bars: forged vs. unauthorized signatures governability under Cal. Civ. Proc. Code §340(c) and Cal. Commercial Code §4406; significant preclusion issues.
- Court granted in part and denied in part BofA’s summary judgment motion, with dismissal of some precluded/for time-barred claims and denial of others depending on contract interpretation and knowledge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §340(c) and §4406(f) bar Plaintiff's claims related to forged/unauthorized checks. | Plaintiff argues some checks were unauthorized but not forged; statute of limitations should not bar precluded items. | BofA contends claims based on forged/unauthorized checks are time-barred under §340(c) and precluded under §4406(f). | Partially barred; forged-check claims time-barred; precluded checks limited under §4406(f); non-forged single-signature items may survive for other theories. |
| Whether BofA breached the contract by paying checks bearing only one signature. | Contract terms (1994/1996/2000 Master Agreements and signature cards) may have required two signatures; BofA may have exceeded authority. | Certain Master Agreements/Signature Cards allowed payment with any one signature; Plaintiff did not receive/acknowledge a binding one-signature deposit agreement. | Genuine dispute of material fact exists about contract terms; summary judgment denied on breach of contract, due to unclear authority regarding single-signature payments. |
| Whether Plaintiff can prove BofA had actual knowledge of Reichart's embezzlement for aiding and abetting claims. | Evidence shows 'red flags' and interactions with tellers; direct knowledge can be inferred from conduct and banking patterns. | Plaintiff lacks direct evidence of actual knowledge; mere red flags are insufficient. | Not foreclosed; issues of actual knowledge survive under Method 1; summary judgment denied on aiding and abetting based on knowledge. |
| Whether the aiding and abetting claims can proceed under Method 2 (independent breach of duty by bank). | Bank owed reasonable-care duties in transactions; by paying unauthorized items, BofA breached. | Bank-customer relationship is contractual, not fiduciary; no duty to supervise or preempt misuse; potential duties arise only as implied by contract. | Issues of contract terms and duties unresolved; Court grants partial relief, denying summary judgment on Method 2 to extent it rests on precluded checks; however, portions fail for precluded checks. |
Key Cases Cited
- Chatsky & Assocs. v. Superior Court, 117 Cal.App.4th 873 (Cal. Ct. App. 2004) (340(c) and 4406 interplay; timely notice requirement for forged checks)
- Roy Supply, Inc. v. Wells Fargo Bank, N.A., 39 Cal.App.4th 1051 (Cal. Ct. App. 1995) (section 4406 notification period aligned with 340(c) limitations)
- Union Tool Co. v. Farmers’ & Merchants’ Nat. Bank of Los Angeles, 192 Cal. 40 (Cal. 1923) (when the limitations period begins for forged checks)
- Fineman v. Danning, 66 Cal.App.4th 1110 (Cal. App. 1998) (unauthorized signature and bank liability for paying such items)
- Casey v. U.S. Bank Nat’l Ass’n, 127 Cal.App.4th 1138 (Cal. App. 2005) (aiding and abetting requires known substantial assistance)
- Chazen v. Centennial Bank, 61 Cal.App.4th 532 (Cal. App. 1998) (bank-customer duties; fiduciary vs contractual relationship)
- In re CFLC, Inc., 166 F.3d 1012 (9th Cir. 1999) (course of dealing supplementing contract interpretations)