Msk Eyes Ltd. v. Wells Fargo Bank, Nat. Ass'n

• Decision Date: 03 November 2008
• Docket Number: No. 07-2825.,07-2825.
• Citation: 546 F.3d 533
• Parties: MSK EYES LTD; Muhannah S. Kakish, Plaintiffs-Appellants, v. WELLS FARGO BANK, NATIONAL ASSOCIATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

546 F.3d 533

MSK EYES LTD; Muhannah S. Kakish, Plaintiffs-Appellants, v. WELLS FARGO BANK, NATIONAL ASSOCIATION, Defendant-Appellee.

No. 07-2825.

United States Court of Appeals, Eighth Circuit.

Submitted: May 12, 2008.

Filed: November 3, 2008.

Damon L. Ward, argued, Lateesa T. Ward, on the brief, Minneapolis, MN, for appellant.

Richard T. Thomson, argued, Minneapolis, MN, for appellee.

Before LOKEN, Chief Judge, BYE, and COLLOTON, Circuit Judges.

BYE, Circuit Judge.

MSK EyEs, LTD (MSK) and its founder, Muhannah S. Kakish (Kakish), appeal from an order of the district court granting summary judgment to Wells Fargo Bank (Wells Fargo). MSK and Kakish (Appellants) brought an action against Wells Fargo on a myriad of claims arising from their banking relationship, including: breach of contract, credit defamation, business disparagement, defamation, interference with prospective business advantage and economic expectancy, violation of the Minnesota Garnishment Statute, and negligence. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I

This case has a lengthy, and somewhat complicated, factual background. We recite it below, as simply and briefly as possible.

A. The Banking Relationship

Kakish incorporated MSK in the state of Minnesota in October 2000 to develop a chain of retail eyewear stores. Kakish is the founder, president, chairman of the board, and majority shareholder of MSK. MSK originally aspired to open fifty retail stores in five years and 495 stores in ten years but has yet to open one store.

In April 2001, MSK signed a promissory note on a $35,000 loan from Wells Fargo. Kakish and his brother, Raed Kakish (Raed), personally guaranteed the MSK loan. In June 2001, Wells Fargo dishonored a number of checks drawn on the MSK account — totaling in excess of $40,000 — because it had not yet deposited the funds into MSK's checking account. According to Appellants, Wells Fargo led them to believe the loan was processed when, in fact, it was not. When the third parties contacted Wells Fargo regarding the dishonored checks, a loan officer made disparaging remarks about Kakish's qualities as a businessman and suggested MSK was a shady operation. As a result of the injury Wells Fargo allegedly inflicted on its reputation, MSK claims it lost "several lucrative business opportunities" and began to incur financial difficulties. MSK overdrew its Wells Fargo checking account, causing checks issued to be returned without payment. Within three months, MSK defaulted on the loan.

B. Previous Litigation

Prior to the current litigation, the parties were involved in two relevant lawsuits in the state of Minnesota, one in Ramsey County and one in Hennepin County. In the first suit, filed on November 2, 2001, in Ramsey County, Wells Fargo sought to collect overdraft charges on the MSK checking account. In the second suit, filed one week later in Hennepin County, Wells Fargo sought to recover the outstanding principal, interest and attorneys' fees related to the defaulted MSK loan. We first address the Hennepin County litigation.

1. Hennepin County Litigation

On November 9, 2001, Wells Fargo sued MSK, and Kakish and Raed as guarantors, in Hennepin County court to recover the outstanding principal, interest and attorneys' fees related to the defaulted MSK loan. In response, Appellants asserted counterclaims against Wells Fargo for breach of contract, deceptive and unlawful trade practices, libel and slander. Wells Fargo and Appellants settled the Hennepin County litigation on July 11, 2002, pursuant to a document entitled Mutual Release. Raed was not a party to this settlement.

The Mutual Release provides, in relevant part, in consideration for a $1,000 payment from Kakish and the release of all claims asserted by Appellants against Wells Fargo,

Wells Fargo does hereby release and forever discharge Muhannah S. Kakish ... of and from each and every claim, demand, liability and cause of action ... which Wells Fargo ever had, presently has or claims to have against MSK EyEs Ltd., Muhannah Kakish or his agents, their representatives, successors or assigns ... that relate in any way to Wells Fargo's April 5, 2001 claims against MSK EyEs, Ltd. pursuant to a promissory note dated April 5, 2001 in the original principal amount of $35,000 and the personal guaranty of Muhannah S. Kakish dated April 5, 2001 guarantying the obligations of MSK EyEs, Ltd. to Wells Fargo.

Wells Fargo did not release its claims against MSK or Raed, as a guarantor. According to Wells Fargo, it intentionally did not release MSK because a release of the underlying loan may have jeopardized its ability to obtain payments from Raed as a personal guarantor.

The parties stipulated the terms of the settlement were confidential and not to be disclosed to anyone except, among others, "the corporate directors, officers or shareholders of Wells Fargo and MSK EyEs Ltd." The parties further agreed not to comment on the resolution of their disputes if contacted by third parties, other than to say "the parties in good faith disputed their liabilities thereunder and the matter was resolved by mutual release." Following the settlement, Wells Fargo posted a note on the MSK account that stated in all capitalized letters: "DO NOT GIVE ANY INFORMATION ON THIS CUSTOMER OUT TO ANYONE, IF ANY CALLERS CLAIM TO BE CUSTOMER PLEASE REFER THEM TO [AN OFFICER] RIGHT AWAY!!!"

Pursuant to a stipulation signed by Wells Fargo and Appellants, the Hennepin County District Court dismissed all claims between the parties with prejudice on July 15, 2002. The parties acknowledged the stipulation did not constitute a waiver of Wells Fargo's causes of action against Raed or an agreement to dismiss Wells Fargo's claims against Raed. Raed ultimately defaulted in the Hennepin County litigation, and the court entered a judgment against him in the amount of $54,349.26. In June 2003, Wells Fargo agreed to vacate the judgment, and Raed agreed to pay $3,200 toward the MSK loan in twenty-one monthly payments of $150 from July 15, 2003, until March 15, 2005. Wells Fargo and Raed further agreed the full outstanding balance on the MSK loan would immediately become due and payable if Raed defaulted on his payments.

Wells Fargo maintained the MSK account as active on its books, credited each settlement payment, and adjusted the outstanding balance accordingly. According to Wells Fargo, the MSK account remained active until the bank received Raed's final settlement payment in March 2005. Wells Fargo claims it sent MSK monthly statements detailing the outstanding balance, interest accrued, and payments received from July 2002 until early 2005. Kakish acknowledges receiving statements from May 2004 onward, but disputes receiving any before that time.

2. Ramsey County Litigation

Meanwhile, despite resolving the Hennepin County litigation, neither MSK nor Kakish filed an answer to Wells Fargo's complaint in the Ramsey County collection action for overdraft charges on the MSK checking account. On October 14, 2002— after Wells Fargo, Kakish and MSK settled the Hennepin County litigation and executed the Mutual Release — Wells Fargo requested a default judgment in the Ramsey County litigation against only MSK, because the checking account was only in MSK's name. On November 4, 2002, the Ramsey County District Court entered judgment against MSK in the amount of $1,634.02. MSK never challenged or appealed the Ramsey County judgment. Between June 13, 2003, and June 5, 2006, Wells Fargo served six garnishment summons on Community First National Bank (Community First), another bank where MSK kept an account. Wells Fargo collected a total of $248.13 towards the Ramsey County judgment.

C. Disputed Monthly Statements & Account Information

Leroy Miller (Miller) is Kakish's domestic partner, who cohabitated with Kakish at times. Miller invested in MSK, served on its board of directors, and allowed MSK to operate out of his property. He is also the sole owner, director, and employee of Leroy Miller Design, Inc. On August 18, 2004, Leroy Miller Design voluntarily petitioned for Chapter 7 Bankruptcy and reported owning only a 0.6% interest in MSK.

In early 2004, Miller had power of attorney for Kakish during the several months Kakish was out of the country. Miller, who was a board member, opened MSK's mail while Kakish was away. At this time, Miller noticed Wells Fargo was sending MSK statements, which referenced an outstanding balance as well as garnishment notices Wells Fargo served on Community First.

In September 2004, Miller contacted Wells Fargo regarding the MSK account. A Wells Fargo officer told Miller he needed signed authorization before the bank could provide him any information regarding the MSK account. Miller informed Kakish. Kakish wrote a letter to Wells Fargo, dated September 20, 2004, stating: "I hereby authorize Wells Fargo Bank to release information relating to MSK EyEs Ltd. and/or Muhannah S. Kakish and related accounts to Leroy Miller Design Inc." Miller then faxed Wells Fargo the following request on the company letterhead of Leroy Miller Design:

Please provide a reference for MSK EyEs Ltd. and/or Muhannah Kakish. A release for the information should be on file at this time. Please fax information to Leroy Miller Design, Inc.

On October 11, 2004, Wells Fargo faxed the following information to the fax number provided by Miller: the current balance ($31,750), opening balance ($35,000), opening date (April 5, 2001), interest rate (7.75%), maturity date (July 31, 2001) and the amount of monthly payments ($150). Wells Fargo included the following disclaimer:

By accepting this information, you warrant that receipt by you is lawful, you agree that it will not be disclosed to anyone else or used in an unlawful manner, you acknowledge that its completeness and accuracy is not guaranteed, it may not disclose the entire relationship of the customer with the bank and is subject to...