Medilink Ins. Co. v. Bank
| Decision Date | 23 March 2011 |
| Docket Number | Case No. 09-13692 |
| Parties | MEDILINK INSURANCE COMPANY, LIMITED Plaintiff/Counter-Defendant, v. COMERICA BANK, Defendant/Counter-Plaintiff. |
| Court | U.S. District Court — Eastern District of Michigan |
Pending before the court are cross motions for summary judgment by Plaintiff/Counter-Defendant Medilink Insurance Company, Limited, and Defendant/Counter-Plaintiff Comerica Bank, both filed on September 27, 2010. Responses and replies were timely filed. All told, the parties filed 168 exhibits supporting or opposing the motions. In addition to this extensive record filed by the parties, the court held a hearing on January 5, 2011. For the reasons stated below, the court will grant Comerica's motion for summary judgment and will grant in part Medilink's motion for summary judgment.
The instant case arises out of the fraud or false pretenses of John P. Bender, J.P. Bender & Associates, Inc., and Bender, Inc., (collectively and individually "Bender") through 2007. At the relevant times, Medilink operated as a reinsurance company, reimbursing payments of claims against certain hospitals in and around Detroit, Michigan. Medilink maintained certain accounts with the Institutional Trust Department of Comerica bank, which were used to reimburse payment of such claims ("Trust Accounts") and which were covered by contracts ("Trust Agreements") between Medilink and Comerica. (Def. Mot. Ex. 19-21; Pl. Mot. 2-3.) The parties agree that Comerica has not breached any provisions of these agreements. The Trust Agreements include various clauses limiting the liability of Comerica, but Medilink challenges their applicability in this case. (Def. Mot. Ex. 22.)
Bender also maintained demand deposit accounts with Comerica, with terminal digits x1154, x7866, and x7749 (collectively "Bender Accounts"). (Def. Mot. Ex. 26.) These accounts listed Bender as the sole owner and were covered by an account contract between Bender and Comerica. (Def. Mot. Ex. 26 & 27.) The Bender Accounts were unrestricted business checking accounts, and Bender had authority to transfer funds from them for any purpose without obtaining the authorization of Medilink or any other entity. (Def. Mot. Ex. 26 & 27.) The Bender Accounts were thus distinct from the Medilink Accounts in both ownership and type. Bender also maintained with Comerica an account with terminal digits x0973 ("Carlisle Account") and an account with terminal digits x4520 ("Personal Account"). (Def. Mot. Ex. 26.) In addition to maintaining these accounts with Comerica, Bender had obtained various loans from Comerica, secured in part by the Bender Accounts. (Def. Mot. Ex. 27 §§ 1.58, 2.12, 2.14; Def. Mot. Ex. 30.)
In handling claims ultimately reinsured by Medilink, Bender acted as third-party claims administrator. (Pl. Mot. Ex. 4 at 36.) Upon resolution of a claim, Bender would submit a request for payment to Medilink. (Pl. Mot. Ex. 4 at 71-72.) Medilink wouldthen review the claim and determine whether to approve it. (PI. Mot. Ex. 4 at 72.) If approved, the claim would then go to a subsidiary of Marsh & McLennan Companies ("Marsh") for additional approval. (PI. Mot. Ex. 4 at 72-73.) Marsh would then direct Comerica to transfer funds from a Trust Account to a Bender Account. (Pl. Mot. Ex. 4 at 73.) At this point, Bender was expected to pay the funds over to the claimant or claimants. However, it is undisputed that on numerous occasions between 2005 and 2007, Bender had obtained funds for which there existed no legitimate claim; Bender instead retained the funds for his personal and business use. (Pl. Mot. Ex. 4 at 131-32.)
One such instance of inappropriately obtaining funds from the Trust Accounts is at issue in this case. It involves the false claim that ultimately led to the discovery of Bender's fraud. On August 21, 2007, Bender submitted a false claim to Medilink for reimbursement of a claim payment to Louis Rahall. (Def. Mot. Ex. 32.) The request was approved, and funds were transferred from a Trust Account to a Bender Account on August 30, 2007. (Def. Mot. Ex. 32.) On August 31, 2007, Bender presented a check in the amount of $318,048 for payment at a Comerica branch bank for deposit into his Carlisle Account. (Def. Mot. Ex. 37; Def. Mot. Ex. 7 at 11.) The check issued from Bender to Rahall and his attorney, Christopher Sciotti, was drawn on Bender Account x1154, and was series number 2166 ("Rahall Check"). (Def. Mot. Ex. 39.) The Rahall Check had been endorsed on the back with the names "Louis Rahall and Christopher Sciotti" in a hand sufficiently similar to Bender's to eventually lead to an investigation. (Def. Mot. Ex. 38; Def. Mot. Ex. 39.) However, at that time, the check appeared complete and properly endorsed. (Def. Mot. Ex. 7 at 64-65; Def. Mot. Ex. 39.) Immediately upon depositing the Rahall Check into the Carlisle Account, Bender issueda check drawn on the Carlisle Account for $300,000 and payable to cash ("Carlisle Check"). (Def. Mot. Ex. 37.) Bender then deposited the Carlisle Check into his Personal Account. (Def. Mot. Ex. 37.) Bender was authorized to sign on the Bender Account, the Carlisle Account, and the Personal Account. (Def. Mot. Ex. 26.)
Noting that the endorsements on the Rahall check appeared to match the "very distinctive" handwriting of Bender, branch manager Todd Salo filed an internal suspicious activity form. (Def. Mot. Ex. 38.) When Christopher Curry, a fraud investigator at Comerica, investigated this report, other suspicious transactions were uncovered. (Def. Mot. Ex. 9 at 35-36.) On September 4, 2007, Comerica placed a pledge on the Bender Account on which the Rahall check was drawn (x4520) in order to protect itself should the check prove to be improperly paid. (Pl. Mot. Ex. 14 at # 2.) After further investigation, on September 10, 2007, Comerica exercised its discretionary power to freeze the three Bender Accounts, the Carlisle Account, and the Personal Account. (Pl. Mot. Ex. 14 at # 2; Def. Mot. Ex. 27 at § 3.05.) On the same day, Curry contacted Ruth Goodell, Comerica's contact at Marsh, with information regarding the suspicious activity of Bender. (Def. Mot. Ex. 9 at 77-78; Def. Mot. Ex. 18 at ¶ 10.) On September 11, 2007, Curry met with Goodell and Medilink chairman Gary Ley to investigate the suspicious activity, at which point Goodell and Ley verified that the funds transfers from the Trust Accounts to the Bender Accounts were validly authorized by Marsh and Medilink. (Def. Mot. Ex. 9 at 80-83; Pl. Mot. 5 at 98-101; Def. Mot. Ex. 28 at ¶¶ 5-6; Def. Mot. Ex. 32.)
As far as the parties dispute the material facts, the disagreement concerns only the events beginning with the September 11, 2007, meeting. Goodell states that herunderstanding, based upon the discussions at that meeting, was that the funds would remain frozen if Marsh or Medilink notified the appropriate governmental agencies and merely provided notice to Comerica that the transactions were disputed. (Pl. Mot. Ex. 5 at 144-45.) In an e-mail message sent to Curry on September 12, 2007, Goodell declared that Medilink did dispute ten payments to Bender. (Def. Mot. Ex. 43; Pl. Mot. Ex. 24.) Goodell claims to have added specific language disputing the accounts at the direction of Curry, and she believed this notice would suffice to ensure the Bender Accounts remained frozen. (Pl. Mot. Ex. 5 at 145; compare Pl. Mot. Ex. 23 with Pl. Mot. Ex. 24.) On the same day, representatives of Comerica, Medilink, and Marsh conferred regarding the Bender activities. (Goodell Dep., Def. Mot. Ex. 2 at 138; Peraino Dep., Def. Mot. Ex. 11 at 16-17, 26-27; Def. Mot. Ex. 42.) Comerica's in-house counsel, Frank Peraino, asserts that he informed Medilink of the Michigan Adverse Claim Statute, Mich. Comp. Laws § 487.691, during that conference. (Def. Mot. Ex. 11 at 4344, 48-49.) Medilink disputes this. (Goodell Dep., Pl. Mot. Ex. 5 at 142-45.) Following the meeting and Goodell's e-mail, it appears Medilink believed the Bender Accounts would be frozen indefinitely without further action. (Ley Dep., Pl. Mot. Ex. 4 at 122-23, 152; Goodell Dep., Pl. Mot. Ex. 5 at 145-46.)
On September 13, 2007, Ley and Goodell met with Bender, who confessed to defrauding Medilink. (Ley Dep., Pl. Mot. Ex. 4 at 130-132.) Following the meeting, Medilink contacted the Federal Bureau of Investigation and the Department of Justice. (Goodell Dep., Def. Mot. Ex. 226-27.) An investigation ensued, and a subpoena issued to Curry on October 3, 2007, for Comerica's records relating to Bender's bank transactions. (Pl. Mot. Ex. 27.) Ultimately, Bender was charged by information under18 U.S.C. 2314, to which he pled guilty, and was ordered to pay restitution to Medilink in the amount of $3,619,765. United States v. Bender, No. 08-20465 (E.D. Mich. May 28, 2009). Medilink earlier brought a civil case against Bender and obtained judgment in the amount of $4,749,920. Medilink Ins. Co. v. Bender, No. 07-15019 (E.D. Mich. Mar. 5, 2007).
Prior to this, on October 1, 2007, Comerica declared Bender's loans in default for "certain conduct" impairing the prospect of repayment. (Def. Mot. Ex. 44.) Comerica simultaneously set off $382,812.37 against the Personal Account and another account of Bender. (Def. Mot. Exs. 45-46; Pl. Mot. Exs. 37-38.) The parties dispute the exact amounts and from which accounts the funds were set off. (Def. Mot. Facts ¶ 82; Pl. Resp. Facts ¶ 82.) Following the default, Bender and Comerica negotiated a forbearance agreement on October 19, 2007. (Def. Mot. Ex. 47.) As part of the forbearance, Bender opened a new account with terminal digits x7687 ("Cash Collateral Account"), which was to be frozen. (Def. Mot. Exs. 47-48.) The Collateral Account was funded with substantially all the...
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