Kalbian Hagerty LLP v. Wells Fargo Bank
| Decision Date | 31 March 2023 |
| Docket Number | Civil Action 1:20-cv-1091 (JMC) |
| Parties | KALBIAN HAGERTY LLP, Plaintiff, v. WELLS FARGO BANK, N.A., Defendant. |
| Court | U.S. District Court — District of Columbia |
A Kalbian Hagerty LLP employee deposited a check at a local Wells Fargo, N.A. branch.[1]After that check turned out to be part of a fraud scheme that cost Kalbian Hagerty more than $80,000, the law firm sued Wells Fargo. The bank filed a Motion to Dismiss. The Court grants in part and denies in part Wells Fargo's Motion.
On December 10, 2018, Mr. John R. Lopez (or someone using that name) emailed Eric Siegel, a lawyer at the law firm Kalbian Hagerty, representing that he had signed an engagement letter retaining Siegel in an employment dispute against Lopez's former employer, Sunbelt Rentals, Inc. ECF 1-1 ¶ 8. That same day, Siegel received an email from a Mr. Rod Samples, purportedly the Chief Financial Officer of Sunbelt Rentals, confirming Mr. Lopez's email. Id ¶ 9. The second email (from Mr. Samples) said that Sunbelt Rentals owed Mr. Lopez $126,000. Id. Siegel responded and provided instructions for payment of that money. Id. The next day, Siegel received a cashier's check made payable to Kalbian Hagerty for $126,000. Id. ¶ 10. The check was a bit unusual: it displayed a variety of different fonts, and had an “HSBC” watermark but was drawn from a Citibank account. Id. ¶¶ 36-37.
The law firm's Office Manager deposited the check at a local Wells Fargo branch on December 12. Id. ¶ 11. A bank teller at Wells Fargo accepted the check and provided a Transaction Receipt indicating that the money would be available the next day. Id. ¶ 12. According to Kalbian Hagerty, the bank teller did not examine the check for legitimacy at that time. Id. On December 14, Mr. Lopez emailed Mr. Siegel asking him to wire the money received from Sunbelt Rentals, minus the continency fee, to Mr. Lopez's account in Mexico. Id. ¶ 14. The law firm did so, wiring $83,985 to Mr. Lopez's account and withholding $42,015 as attorneys' fees. Id.
The check turned out to be counterfeit. Id. ¶ 15. But according to Kalbian Hagerty, it was not until December 17, five days after the initial deposit, that Wells Fargo sent it a notice that the cashier's check had been returned unpaid, and that $126,000 had been deducted from the law firm's trust account. Id. ¶ 15. Kalbian Hagerty further alleges that Wells Fargo did not attempt to stop the law firm's funds from being disbursed upon learning that the check was fraudulent. Id. ¶ 16. When Kalbian Hagerty asked for a refund, Wells Fargo refused. Id. ¶¶ 23-24.
Apparently, this was not the first time that this scam had been perpetrated against a law firm with a bank account at Wells Fargo. Kalbian Hagerty alleges that a check bearing the same account number as their fraudulent check was previously used to defraud another law firm. Id. ¶¶ 35, 39 (citing Milavetz, Gallop & Milavetz, P.A. v. Wells Fargo, N.A., No. 12-cv-875, 2012 WL 4058065 (D. Minn. Aug. 22, 2012)).
After Wells Fargo declined to refund Kalbian Hagerty's money, the law firm filed this lawsuit in the Superior Court for the District of Columbia. See ECF 1. It filed an Amended Complaint shortly thereafter. See ECF 1-1 at 3. Wells Fargo removed the case to federal court, ECF 1, and moved to dismiss the case, ECF 8.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has facial plausibility when a plaintiff pleads all of the elements of their claim and supports those elements with enough factual allegations to “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
In evaluating a motion to dismiss, courts “must treat the complaint's factual allegations as true and must grant plaintiff the benefit of all inferences that can be derived from the facts alleged.” Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). But the Court is limited to considering only the matters within the complaint: if a party presents matters outside the pleadings and the court considers them, the motion must be converted into a motion for summary judgment under Federal Rule of Civil Procedure 56.
Kalbian Hagerty brought four claims in its Amended Complaint: breach of fiduciary duty, breach of contract, negligence, and failure to provide timely notice of dishonor in violation of D.C. Code § 28:3-503. Wells Fargo's Motion seeks to dismiss all four claims. The Court grants Wells Fargo's Motion as to the breach of fiduciary duty and the negligence claims, but denies it with regards to the breach of contract and failure to provide timely notice of dishonor claims.
Kalbian Hagerty alleges that Wells Fargo breached its fiduciary duty by failing to exercise ordinary care in accepting the fraudulent check. ECF 1-1 ¶¶ 68-73. A breach of fiduciary duty claim must allege facts sufficient to show (1) the defendant owed the plaintiff a fiduciary duty; (2) the defendant breached that duty; and (3) the plaintiff suffered an injury that was proximately caused by that breach. Xereas v. Heiss, 987 F.3d 1124, 1130 (D.C. Cir. 2021).
Wells Fargo argues this claim should be dismissed because the bank did not owe Kalbian Hagerty a fiduciary duty. ECF 8-9 at 21-22. “A fiduciary relationship is founded upon trust or confidence reposed by one person in the integrity and fidelity of another.” Xereas, 987 F.3d at 1131. Some relationships, like the attorney-client relationship, necessitate this type of trust and therefore automatically impose a fiduciary duty. Krukas v. AARP, Inc., 458 F.Supp.3d 1, 7 (D.D.C. 2020). But District of Columbia law is clear that no per se fiduciary relationship between a bank and its depositors exists: generally, the bank-depositor relationship is governed only by the terms of the contractual agreement. Geiger v. Crestar Bank, 778 A.2d 1085, 1090-91 (D.C. 2001).
Even though the nature of Wells Fargo's relationship with Kalbian Hagerty did not automatically establish a fiduciary relationship, the Parties could have developed one by “extend[ing their] relationship beyond the limits of the contractual obligations.” MobilizeGreen, Inc. v. Cmty. Found. for the Cap. Region, 267 A.3d 1019, 1026 (D.C. 2022). Determining whether this occurred requires a “fact-intensive” inquiry into “the nature of the relationship, the promises made, the type of services or advice given and the legitimate expectations of the parties.” Xereas, 987 F.3d at 1131.
Kalbian Hagerty alleges that the Parties developed the sort of “relationship founded upon trust and confidence” that would impose fiduciary duties. ECF 1-1 ¶ 69. To support this assertion, Kalbian Hagerty points to its nearly twenty-year banking relationship with Wells Fargo, as well as the fact that it maintains an Interest on Lawyers Trust Account (IOLTA) at the bank. ECF 1-1 ¶¶ 46-47, 68-73; ECF 13 at 18-19. But these facts, on their own, do not differentiate the Parties' relationship from any other bank-depositor relationship. Kalbian Hagerty does not include any allegations in its Amended Complaint that give the Court reason to think that the services it has received for the past twenty or so years are different from those of any other depositor. Although the IOLTA account might differ from accounts maintained by some (but likely not all) other depositors, Kalbian Hagerty does not allege that the account imposes the sort of obligations that would trigger a fiduciary duty. In fact, Kalbian Hagerty alleges that its entire “banking relationship with Wells Fargo” has been “subject to the terms and conditions of a Deposit Account Agreement.” ECF 1-1 ¶ 6. Kalbian Hagerty notes that the IOLTA account incurs extra fees to compensate for its additional regulatory requirements, ECF 13 at 19, but the Amended Complaint does not allege that anything beyond the terms of the Parties' contract governs the calculation of those fees or the bank's obligations.
Whether a fiduciary duty exists is a factual question generally left to be resolved later in litigation. E.g., Council on Am.-Islamic Rels. Action Network, Inc. v. Gaubatz, 793 F.Supp.2d 311, 341 (D.D.C. 2011). However, a claim alleging breach of fiduciary duty should be dismissed when a plaintiff's complaint does not include enough factual allegations to make it plausible that a fiduciary relationship exists. See Henok v. Chase Home Fin., LLC, 915 F.Supp.2d 162, 168-69 (D.D.C. 2013) (); Paul v. Judicial Watch, Inc., 543 F.Supp.2d 1, 6 (D.D.C. 2008) (). Such is the case here. The sparse and conclusory allegations set forth by Kalbian Hagerty do not suggest that it has anything but a bank-depositor relationship with Wells Fargo. Given the background assumption that a bank and its depositors do not share a fiduciary relationship, Kalbian Hagerty's claim is dismissed at this juncture. If Kalbian Hagerty has, or amasses, additional allegations to support this claim, it may seek leave to further amend its complaint.
As noted earlier, Kalbian Hagerty alleges that its banking relationship with Wells Fargo is “subject to the terms and conditions of a Deposit Account...
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