Simi Mgmt. Corp. v. Bank of Am., N.A.

• Decision Date: 15 March 2013
• Docket Number: No. C 11–05573 DMR.,C 11–05573 DMR.
• Citation: 930 F.Supp.2d 1082
• Court: U.S. District Court — Eastern District of California
• Parties: SIMI MANAGEMENT CORPORATION, Plaintiff(s), v. BANK OF AMERICA, N.A., Defendant(s).

930 F.Supp.2d 1082

SIMI MANAGEMENT CORPORATION, Plaintiff(s),

v.BANK OF AMERICA, N.A., Defendant(s).

No. C 11–05573 DMR.

United States District Court, N.D. California.

March 15, 2013.

Donald J. Putterman, San Francisco, CA, Laura Michelle Mooney, William Arthur Logan, Jr., Walnut Creek, CA, for Plaintiff(s).

Charles David Marshall, Kurt Christopher Wendlenner, Mark Joseph Kenney, Mark Ian Wraight, Severson & Werson, APC, San Francisco, CA, for Defendant(s).

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; GRANTING DEFENDANT'S MOTION TO STRIKE

DONNA M. RYU, United States Magistrate Judge.

Plaintiff Simi Management Corporation, d/b/a Connell Auto Center operated car dealerships. After selling its last franchises in August 2007, Plaintiff discovered that its long-time chief financial officer (“CFO”) Roger Reichart had embezzled millions of dollars from the firm via its accounts with Defendant Bank of America, N.A. (“BofA”). Plaintiff brought suit to recover damages from the bank, asserting that BofA knowingly participated in Reichart's scheme. BofA now moves pursuant to Federal Rule of Civil Procedure 56 for summary judgment or, in the alternative, partial summary judgment. [Docket No. 36 (“Def.'s Mot.”).] Plaintiff opposes the motion. [Docket No. 55 (“Pl.'s Opp'n”).] For the following reasons, the court grants the motion in part and denies it in part.

I. Facts¹and Background

A. Plaintiff and BofA's Relationship

Plaintiff owned and operated automobile dealerships in Oakland, California.² (Joint Statement of Undisputed Material Facts (“Jt. Stmt”) 2.) Between 1982 and 1994, Roger Reichart was Plaintiff's business manager and controller. He served as CFO from 1994 through 2007. (Jt. Stmt 2.) As CFO, Reichart supervised Plaintiff's accounting department and exercised control over Plaintiff's finances and bank accounts. (Wendlenner Decl. Ex. C (Simi Dep. at 34:18–35:3, 193:15–22, 196:12–13, 204:1–205:3).)

On August 1, 1994, based on Reichart's recommendation, (Simi Decl. ¶ 3), Plaintiff began its account relationship with BofA. (Jt. Stmt 2.) Plaintiff opened bank accounts at the Fremont, California office of BofA's Dealer Corporate Services division (“Dealer Services”), which provides specialized services to car dealerships. Thereafter, Plaintiff conducted most of its banking transactions at BofA's Oakland Main Branch. (Logan Decl. Ex. E (Mausten Dep. at 14:3–16:3, 23:18–24:2, 21:1–18.)) BofA knew Reichart was Plaintiff's CFO. (Jt. Stmt 2.)

One of the key disputed questions in this litigation is whether BofA had the authority to honor Plaintiff's checks that were signed by only one, as opposed to two, approved signatories. The answer lies in part in the agreements between the parties. The form and content of the original contracts governing the parties' banking relationship remain unclear.³ BofA produced three documents dating back to the 1994 opening of Plaintiff's accounts: (1) a Funds Transfer Agreement, (2) a Service Agreement concerning the Quick Business Deposit Service; and (3) a signature card (“Original Signature Card”). (Logan Decl. ¶ 7; Mausten Dep. 41:3–22, 45:16–46:8; Lee Decl. Exs. A (Funds Transfer Agreement), B (Service Agreement), C (Original Signature Card).) The Funds Transfer Agreement, executed by Reichart on July 22, 1994, “specifies who may act for [Plaintiff]” under its terms. (Lee Decl. Ex. A at 1.) The agreement lists five individuals—Steve Simi, Robert Rubino, Reichart, Andrea Cabral, and Todd Simi—as “authorized persons,” “designated callers,” and “verifiers.” (Lee Decl. Ex. A at 2.) According to the agreement, Plaintiff “authorizes each Authorized Person ..., acting alone ... [t]o give instructions orally ... on [Plaintiff's] behalf to Bank to initiate, amend, cancel or verify funds transfers from [Plaintiff's] accounts” “[i]n any amount. There is no limit.” (Lee Decl. Ex. A at 1–2.) The Original Signature Card includes the signatures of Reichart, Steve Simi, Todd Simi, Cabral and Rubino. It bears the handwritten statement, “2 Signatures Required,” and a checked box for “New Account.” (Lee Decl. Ex. C; Mausten Dep. 41:3–28, 45:16–46:8.)

Plaintiff contends that these documents governed its BofA accounts when they were established. Defendant asserts without evidence that a Master Agreement/Signature Card governed, and that it incorporated a Corporate Deposit Agreement by reference. Defendant further claims that as of 1996, the Corporate Deposit Agreements, which Plaintiff accepted as binding when it completed the Master Agreements, explicitly informed Plaintiff that the bank was not bound by any “indicat[ion] on [Plaintiff's] signature card or other account opening documents that more than one signature is required for withdrawal.” (Lee Decl. Ex. I.) Neither party has located an executed Master Agreement dating from 1994. (Logan Decl. ¶ 4; Lee Decl. ¶ 5.) Further, Carmy Mausten, head of Dealer Services from 1987 until March 2012, testified that he had never seen BofA's 1994 Corporate Deposit Agreement, and that Dealer Services provided its customers with a different pamphlet. (Mausten Dep. 48:8–49:7.)

BofA maintains that the parties executed new Master Agreements in 1996 and 2000. (Lee Decl. Exs. D–F). The 1996 Master Agreement contains the following language:

You begin a deposit account relationship with us by giving us information about your business and by signing below. We enter the information on our computer system. The written information we give you is part of this agreement and tells you the current terms of our deposit accounts. We may change these terms at any time. We inform you of changes that affect your rights and obligations. You or we can end this banking relationship at any time.

(2d Lee Decl. Ex. A at 1.) The top of the reverse side of the document states that the “Bank may pay out funds ... with any one of the signatures below unless you specify another number here.” (Lee Decl. Ex. D; Supp Br. Ex. D; 2d Lee Decl. Ex. A at 2.) The space after the sentence for an alternate number is blank, but the phrase “2 signatures required” is typed into the “Special Payment Instructions” field. (Lee Decl. Ex. D; Supp Br. Ex. D.) The “Authorized Signature(s)” field contains the signatures of Steve Simi, Rubino, Reichart, Cabral, and Todd Simi. (Lee Decl. Ex. D at 1; Supp. Br. Ex. D at 1.)

The two 2000 Master Agreements begin, in relevant part, as follows:

You begin or continue a deposit account relationship with us by giving us information about your business and by signing below. The written information we give you is part of your agreement with us and tells you the current terms of our deposit accounts. We may change the agreement at any time. We inform you of the changes that affect your rights and obligations. You acknowledge receipt of the deposit agreement.((Lee Decl. Exs. E at 2, F at 2; Supp. Br. Exs. E at 2, F at 2) (emphasis added).) The signature section for both documents is blank. (Lee Decl. Exs. E at 2, F at 2; Supp. Br. Exs. E at 2, F at 2.) The reverse of the documents state that the “Bank may pay out funds on any one of the signatures below.” (Lee Decl. Ex. E at 1; Supp. Br. Ex. E at 1.) The “Authorized Signature(s)” field contains the signatures of Steve Simi, Rubino, Reichart, Cabral, Todd Simi, and Mary Tejada. (Lee Decl. Exs. E at 1, F at 1; Supp. Br. Exs. E at 1, F at 1.) Below the “Authorized Signature(s)” fields is the statement, “You agree that the written information we give you is part of your agreement with us and tells you the current terms of our deposit accounts.” (Lee Decl. Exs. E at 1, F at 1; Supp. Br. Exs. E at 1, F at 1.)

Plaintiff does not dispute the validity of the 1996 Master Agreement. ( See Pl.'s Opp'n 4.) However, Plaintiff challenges the validity of the two 2000 Master Agreements—which appear to be dated April 6, 2000—because unlike the 1996 Master Agreement, these documents “were not filled in by [Plaintiff] and they were not executed by ... anyone on behalf of [Plaintiff].” (Pl.'s Opp'n 4 (citing Lee Decl. Exs. E, F ⁴) (emphasis removed).) Plaintiff also submitted an updated signature card dated April 6, 2000 which includes Mary Tejada as an authorized signatory, see infra, and has “Two Signatures Required” typed in its header. (Logan Decl. Ex. F.)

According to Steve Simi, Plaintiff's President and Chief Executive Officer, since its inception in 1978, Plaintiff maintained a two-signature requirement on all company checks, a requirement that he communicated to BofA. (Simi Decl. ¶ 5.) All of Plaintiff's checks had dual signature lines. (Kirwan Decl. ¶ 5.c.i.) Reichart was one of several authorized signers on all of Plaintiff's BofA accounts between August 1, 1994 and October 1, 2007. (Jt. Stmt 2; Simi Decl. ¶ 4.) Through late 1999, the other authorized signers were Steve Simi, Rubino, Cabral, and Todd Simi. (Simi Decl. ¶ 4.) In January 2000, because Steve Simi worked at a different location than the other signers, and Plaintiff required two signatures to present a check on its BofA accounts, Mary Tejada, who worked at the same location as Steve Simi, also became an authorized signer. (Simi Decl. ¶ 4.) On May 24, 2000, BofA faxed Plaintiff the images of three checks bearing only the signature of Andrea Cabral, with an accompanying stamp notation that “two signatures [are] required.” (Logan Decl. ¶ 9, Ex. G.)

From the inception of the parties' banking relationship, BofA mailed Plaintiff weekly checking account statements. (Jt. Stmt 2.) These statements contained images of the checks written on the accounts during the relevant weekly period. In August 2005 the check images began arriving on CD ROM. (Jt. Stmt 2.) Plaintiff also received monthly analysis statements for each of its BofA accounts. ( Id.) BofA's monthly statements did not include copies of cashiers checks that had been issued with Plaintiff's funds. (Kirwan Decl. ¶ 5.1.)

After Plaintiff sold its last franchises in the latter half...