Venture General Agency, LLC v. Wells Fargo Bank, N.A.

• Court: District Court, N.D. California
• Decided: October 16, 2019
• Docket: 3:19-cv-02778
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 VENTURE GENERAL AGENCY, LLC, et Case No. 19-cv-02778-TSH al., 8 Plaintiffs, ORDER RE: MOTION TO DISMISS 9 v. Re: Dkt. No. 19 10 WELLS FARGO BANK, N.A., et al., 11 Defendants. 12 13 I. INTRODUCTION 14 Plaintiffs Venture General Agency, LLC and Old American County Mutual Fire Insurance 15 Co. bring a negligence claim against Defendant Wells Fargo Bank, N.A. after a third party 16 fraudulently induced Venture to transfer $1,708,112.86 into an account held by the third party at 17 Wells Fargo. Pending before the Court is Wells Fargo’s Motion to Dismiss pursuant to Federal 18 Rule of Civil Procedure 12(b)(6). ECF No. 19. Plaintiffs filed an Opposition (ECF No. 20) and 19 Defendant filed a Reply (ECF No. 21). The Court finds this matter suitable for disposition 20 without oral argument and VACATES the October 17, 2019 hearing. See Civ. L.R. 7-1(b). 21 Having considered the parties’ positions and the relevant legal authority, the Court GRANTS 22 Wells Fargo’s motion for the following reasons. 23 II. BACKGROUND 24 The Court laid out in detail the allegations in this case in its order granting Wells Fargo’s 25 motion to dismiss Plaintiffs’ original complaint. ECF No. 16. Because the First Amended 26 Complaint (“FAC”) is largely identical to the original complaint, the Court assumes familiarity 27 with those allegations and will not repeat them in full here. Summarizing the dispute, however, 1 American, was fraudulently induced by an unknown, third-party fraudster into transferring 2 $1,708,112.86 of Old American’s funds into a fraudulent account opened with Wells Fargo in Old 3 American’s name. Plaintiffs’ original complaint (ECF No. 1), filed on May 21, 2019, asserted one 4 count of negligence and one count of negligence per se against Wells Fargo. Wells Fargo moved 5 for dismissal of that complaint on June 25, 2019. ECF No. 8. 6 On reviewing Wells Fargo’s motion to dismiss the original complaint, the Court found that 7 a bank does not owe a duty of care to noncustomers. It found that because the complaint did not 8 allege that Plaintiffs were customers of Wells Fargo, it failed to plead allegations showing a duty 9 of care owed by Wells Fargo to Plaintiffs. Thus, the Court found Plaintiffs failed to state a valid 10 claim of negligence. It dismissed that claim with leave to amend. Regarding Plaintiffs’ 11 negligence per se claim, the Court noted that the claim was based on Wells Fargo’s alleged failure 12 to comply with the Bank Secrecy Act (“BSA”) as amended by the USA PATRIOT Act, 31 U.S.C. 13 §§ 5311-32. The Court found that there is no private right of action under the BSA or Patriot Act, 14 and that because there is no private right of action, there can be no duty of Wells Fargo to 15 Plaintiffs arising out of those acts. The Court dismissed Plaintiffs’ negligence per se claim 16 without leave to amend. 17 Plaintiffs’ FAC makes the same factual allegations in support of the negligence claim as 18 the original complaint did, save for the addition of the following: During the relevant time periods herein, Old American maintained 19 two premium trust accounts with Wells Fargo, which were joint accounts shared by Old American as well as its MGAs. One such 20 premium trust account, ending in *7076, was opened in or about August 2012, while the other such premium trust account, ending in 21 *3430, was opened in or about September 2015. These accounts remain open and active between Old American and/or its MGAs and 22 Wells Fargo. 23 FAC ¶ 7. 24 Wells Fargo has moved for dismissal of the FAC pursuant to Federal Rule of Civil 25 Procedure 12(b)(6). ECF No. 19. 26 III. LEGAL STANDARD 27 A complaint must contain a “short and plain statement of the claim showing that the 1 dismiss, a complaint must plead “enough facts to state a claim to relief that is plausible on its 2 face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility does not mean 3 probability, but it requires “more than a sheer possibility that a defendant has acted unlawfully.” 4 Ashcroft v. Iqbal, 556 U.S. 662, 687 (2009). A complaint must provide a defendant with “fair 5 notice” of the claims against it and the grounds for relief. Twombly, 550 U.S. at 555 (quotations 6 and citation omitted); Fed. R. Civ. P. 8(a)(2) (A complaint must contain a “short and plain 7 statement of the claim showing that the pleader is entitled to relief.”). In considering a motion to 8 dismiss, the court accepts factual allegations in the complaint as true and construes the pleadings 9 in the light most favorable to the nonmoving party. Manzarek v. St. Paul Fire & Marine Ins. Co., 10 519 F.3d 1025, 1031 (9th Cir. 2008).; Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). However, 11 “the tenet that a court must accept a complaint’s allegations as true is inapplicable to threadbare 12 recitals of a cause of action’s elements, supported by mere conclusory statements.” Iqbal, 556 13 U.S. at 678. 14 If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no 15 request to amend the pleading was made, unless it determines that the pleading could not possibly 16 be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en 17 banc) (citations and quotations omitted). However, the Court may deny leave to amend for several 18 reasons, including “undue delay, bad faith or dilatory motive on the part of the movant, repeated 19 failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing 20 party by virtue of allowance of the amendment, [and] futility of amendment.” Eminence Capital, 21 LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 22 182 (1962)). 23 IV. DISCUSSION 24 The Court based its first dismissal of Plaintiffs’ negligence claim on the principle that, 25 “absent extraordinary and specific facts, a bank does not owe a duty of care to a noncustomer.” 26 Software Design & Appl., Ltd. v. Hoefer & Arnett, Inc., 49 Cal. App. 4th 472, 479 (1996) 27 (citations omitted); Dodd v. Citizens Bank of Costa Mesa, 222 Cal. App. 3d 1624, 1628 (1990) 1 noncustomer was an alter ego of, or had personally guaranteed the debts of, the bank’s customer); 2 Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 226 (4th Cir. 2002) (“[I]t has been held that 3 banks do not owe a duty of care to noncustomers even when the noncustomer is the person in 4 whose name an account was fraudulently opened.”). Plaintiffs attempt to cure the defect of their 5 first complaint by alleging in the FAC that Old American (along with its MGAs) was a customer 6 of Wells Fargo at the times surrounding the fraudulent transfers. 7 Wells Fargo argues that even though Old American was a customer of Wells Fargo at the 8 time of the fraudulent transfers, that is insufficient to give rise to a duty of care to Old American as 9 to the transactions in this matter. It argues that because a bank’s duty of care is “born from its 10 contract with its customer, it follows that the duty of care is limited by the terms of the contract . . 11 . .” Mot. to Dismiss FAC 7, ECF No. 21. It argues that Plaintiffs have not pleaded any facts 12 showing a nexus between Plaintiffs’ Wells Fargo accounts and the funds transferred into the 13 fraudster’s Wells Fargo account. Id. As a result, it argues, Plaintiffs are not considered Wells 14 Fargo customers for purposes of the fraudulent transactions, where the alleged fraudster is the 15 owner of the Wells Fargo account. Id. 16 Plaintiffs argue that after receiving actual knowledge of fraud on Old American, one of its 17 customers, Wells Fargo had a duty to cooperate with Plaintiffs in correcting the fraud. Pls.’ Opp’n 18 to Mot. to Dismiss (“Opp’n”) 6-7, ECF No. 20. They contend that they are asserting a novel legal 19 theory—that a bank owes a duty to a customer when the customer is defrauded on an unrelated 20 account. They argue dismissal is disfavored where a party is asserting a novel legal theory, and 21 thus this motion to dismiss should be denied. Id. at 4-5. They also argue that their case should be 22 allowed to proceed so that they may be permitted to obtain discovery on the contracts and 23 amendments Old American has with Wells Fargo to “verify their authenticity and ascertain their 24 terms and conditions and whether same are enforceable.” Id. at 5. And they argue alternatively 25 that, even if their theories of recovery are “imperfectly pleaded,” dismissal is not warranted 26 because the facts demonstrate their entitlement to relief. Id. 27 A. Whether Wells Fargo Owed Plaintiffs a Duty 1 customer of Wells Fargo at the time of fraudulent transactions, Wells Fargo owed no duty to 2 Plaintiffs vis-à-vis those transactions. While a bank owes its customers a duty of care, that “basic 3 duty of care derives from the contract with their customer[.]” Software Design, 49 Cal. App. 4th 4 at 479; Roy Supply, Inc. v. Wells Fargo Bank, 39 Cal. App. 4th 1051, 1076 (1995) (“The duty 5 owed by the Bank in this case derives from its contracts with its customers[.]”); Allen v. Bank of 6 America Nat'l Trust & Sav. Asso., 58 Cal. App. 2d 124, 127 (1943) (“The relation of banker and 7 depositor is founded on contract.”). Even though Plaintiffs now allege Old American was a 8 customer of Wells Fargo, they have not alleged that they were parties to the agreement underlying 9 the account involved in the fraudulent transfers. See Roy Supply, 39 Cal. App. 4th 1076 10 (shareholder of corporate plaintiffs owed no duty of care where he “was not a party to [bank] 11 contracts, nor is there any allegation [he] was an intended beneficiary of the contracts between 12 defendant and the corporate plaintiffs”). “Absent extraordinary and specific facts . . . a bank is 13 liable only to its customer for its mishandling of that customer’s account.” Id. (citations omitted); 14 Chazen v. Centennial Bank, 61 Cal. App. 4th 532, 537 (1998) (the contractual relationship 15 between bank and depositor “entails no contractual obligation to persons other than the account 16 holder”). Plaintiffs have not alleged any actions by Wells Fargo in connection with any of Old 17 American’s accounts. Their FAC relates to actions Wells Fargo took (or didn’t take) in 18 connection with a third-party’s account. Plaintiffs have not alleged that they had any interest in 19 that account. Whatever duties Wells Fargo owed in connection with that account were owed to 20 that accountholder. That duty did not extend to Old American as a holder of separate, unrelated 21 accounts. The FAC does not allege facts showing a general duty of care owed by Wells Fargo to 22 Plaintiffs, even with the added allegation that Old American had separate, existing accounts at 23 Wells Fargo. 24 Plaintiffs allege alternatively that Wells Fargo had an independent duty to cooperate with 25 them in investigating and remedying the fraud after receiving actual knowledge of the fraud. FAC 26 ¶ 51. Similarly, they allege that Wells Fargo acted negligently, after learning of the fraud, by 27 failing to inform Plaintiffs of the amounts of funds remaining in the account, to whom the funds 1 funds. Id. ¶ 53. However, California courts have found that, “under California law, a bank owes 2 no duty to nondepositors to investigate or disclose suspicious activities on the part of an account 3 holder.” Casey v. U.S. Bank Nat. Assn., 127 Cal. App. 4th 1138, 1149 (2005). “Courts are more 4 reluctant to recognize duties in this context because such duties run the risk of violating the bank’s 5 or merchant’s customers’ right to privacy and of forcing the bank or merchant to act as the 6 guarantor of their customers’ transactions.” QDOS, Inc. v. Signature Financial, LLC, 17 Cal. 7 App. 5th 990, 1000 n.3 (2017) (quoting Casey, 127 Cal. App. 4th at 1149) (internal quotations 8 omitted); Chi. Title Ins. Co. v. Superior Court, 174 Cal. App. 3d 1142, 1159 (1985) (“If . . . banks 9 had a duty to reveal suspicions about their customers, they would violate their customers’ right to 10 privacy, not to mention be forced to act as the guarantor of checks written by the depositors.”). 11 Plaintiffs rely on a single case in arguing otherwise. But that case does not stand for the 12 proposition that a bank has a duty to cooperate with a defrauded party. In Sun’n Sand, Inc. v. 13 United California Bank, an employee of Sun’n Sand prepared and obtained authorized signatures 14 on checks payable to United California Bank (“UCB”) for small amounts. 21 Cal. 3d 671, 678 15 (1978). The employee then altered the checks, increasing the amount on each check, and 16 presented them to UCB. Id. “Although UCB was the named payee, it ‘caused or permitted’ the 17 proceeds of the checks to be deposited in a personal account maintained by [the employee] at 18 UCB.” Id. A two-justice plurality of the California Supreme Court held that the “sufficiently 19 suspicious” circumstances surrounding the checks gave rise to a “duty of inquiry” into the 20 employee’s authorization to complete the transaction. Id. at 694-95. The duty, the plurality wrote, 21 “is narrowly circumscribed: it is activated only when checks, not insignificant in amount, are 22 drawn payable to the order of a bank and are presented to the payee bank by a third party seeking 23 to negotiate the checks for his own benefit.” Id. at 695. The plurality did not discuss “objective 24 indicia” of fraud “activating” a duty of care, as Plaintiffs argue; it held that once a bank has a duty 25 of inquiry, it should look for “objective indicia” that the “party presenting the check is authorized 26 to transact in the manner proposed.” Id. 695-96. Since Sun’n Sand discussed a duty to inquire 27 into suspected fraud, and not a duty arising after a fraud has been committed, it does not help 1 See Roy Supply, 39 Cal. App. 4th at 1071 (“[N]ot only is the lead opinion in Sun’n Sand not a 2 landmark decision, it is not even precedent.”). 3 Lastly, under California law, a bank is generally required to disregard any notice of 4 adverse claims to an account: Notice to any bank of an adverse claim (the person making the 5 adverse claim being hereafter called “adverse claimant”) to a deposit standing on its books to the credit of or to personal property held for 6 the account of any person shall be disregarded, and the bank, notwithstanding the notice, shall honor the checks, notes, or other 7 instruments requiring payment of money by or for the account of the person to whose credit the account stands and on demand shall deliver 8 that property to, or on the order of, the person for whose account the property is held, without any liability on the part of the bank[.] 9 10 Cal. Fin. Code § 1450 (emphasis added). The statute lists two exceptions to that general rule, but 11 neither was applicable in the circumstances alleged. See id. at § 1450(a) (affidavit regarding 12 anticipated misappropriation of property by fiduciary), (b) (adverse claim supported by an order or 13 injunction). So, to the extent Wells Fargo disregarded any claims by Plaintiffs to the transferred 14 funds, it was required to do so without incurring liability. 15 In sum, Wells Fargo owed no duty to Plaintiffs vis-à-vis the third-party account in this 16 case, or to cooperate with Plaintiffs to remedy the fraud, or to disclose to Plaintiffs information 17 related to the third-party account.1 18 Plaintiffs’ FAC fails to state a plausible claim for negligence. 19 B. Plaintiffs’ Additional Arguments 20 Plaintiffs additionally argue that their FAC should not be dismissed because they are 21 asserting a novel legal theory. That argument is unpersuasive. Plaintiffs’ purported theory is that, 22 while courts have clearly decided that a bank owes no duty to noncustomers in general, a bank 23 owes a duty to a customer when the customer has been defrauded on a separate account. Opp’n at 24 4. But as discussed above, existing law draws the conclusion that Wells Fargo owed Plaintiffs no 25 duty concerning the fraudster’s third-party account, nor a duty to cooperate with Plaintiffs in 26

27 1 To the extent that the FAC continues to allege failures by Wells Fargo to comply with BSA or 1 investigating the fraud, nor a duty to disclose to Plaintiffs nonpublic information regarding the 2 third-party account. Plaintiffs are merely arguing that liability should be extended to where it does 3 not extend. Their other argument that dismissal is not warranted because “the facts demonstrate 4 Plaintiffs’ entitlement to relief” is without merit for the same reason, because the facts alleged do 5 not show Wells Fargo owed them a duty. 6 Plaintiffs also posit that, even if Wells Fargo owed them no duty, the FAC could succeed 7 under an intentional tort theory of liability. Specifically, they point to aiding and abetting a fraud. 8 As Wells Fargo points out, if Plaintiffs believed that there is a plausible claim against Wells Fargo 9 for an intentional tort, it is unclear why they did not make it in the FAC. Generally, under Fed. R. 10 Civ. P. 8, a plaintiff must raise a claim in its complaint. See Conservation Force v. Salazar, 677 11 F. Supp. 2d 1203, 1211 (N.D. Cal. 2009) (“A claim raised for the first time in briefing on a motion 12 to dismiss may not be considered.”) (citing Stallcop v. Kaiser Foundation Hospitals, 820 F.2d 13 1044, 1050 n.5 (9th Cir 1987)); Touchstone Research Grp. LLC v. United States, 2019 U.S. Dist. 14 LEXIS 172203, *8 n. 5 (S.D.N.Y. 2019) (“[I]t is ‘axiomatic that the Amended Complaint cannot 15 be amended by the briefs in opposition to a motion to dismiss.’”) (quoting O’Brien v. National 16 Property Analysts Partners, 719 F. Supp. 222, 229 (S.D.N.Y. 1989)). Nevertheless, Plaintiffs 17 clearly have not pleaded a plausible claim of aiding and abetting a fraud. “California courts have 18 long held that liability for aiding and abetting depends on proof the defendant had actual 19 knowledge of the specific primary wrong the defendant [allegedly] substantially assisted.” 20 Upasani v. State Farm General Ins. Co., 227 Cal. App. 4th 509, 519 (2014) (citations omitted). 21 Plaintiffs have not alleged that Wells Fargo had actual knowledge that a fraud was being 22 committed until after its commission. FAC ¶¶ 15-22, 52. Nor do the allegations in the FAC 23 plausibly support any other intentional tort claim. 24 Finally, Plaintiffs assert that they should be given more time to obtain discovery regarding 25 the agreements Old American had with Wells Fargo vis-à-vis Old American’s accounts with the 26 bank. However, that argument is not persuasive. Those accounts are legally irrelevant because 27 there are no allegations in the FAC connecting them to the transactions at issue. Further, the 1 agreements itself and ascertain the rights and duties contained therein. 2 Vv. CONCLUSION 3 For the reasons stated above, the Court GRANTS Defendant Wells Fargo’s Motion to 4 || Dismiss the First Amended Complaint. Since Plaintiffs will not be able to sufficiently amend their 5 || complaint to state a valid negligence cause of action, Plaintiffs’ claim is DISMISSED 6 || WITHOUT LEAVE TO AMEND. 7 IT IS SO ORDERED. 8 Dated: October 16, 2019 TAA. □□ □□ THOMAS S. HIXSON 10 United States Magistrate Judge 11 12

© 15 16

= 17

Z 18 19 20 21 22 23 24 25 26 27 28