APM Rest. Grp., Inc. v. Associated Bank, 16 C 2495

APM RESTAURANT GROUP, INC.,AN ILLINOIS CORPORATION, AND JOSLIN ALFAR, PLAINTIFFS, v. ASSOCIATED BANK, A WISCONSIN BANKING CORPORATION, DEFENDANT.

NO. 16 C 2495

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

July 10, 2019

MAGISTRATE JUDGE SIDNEY I. SCHENKIER

MEMORANDUM OPINION AND ORDER¹

Plaintiffs, APM Restaurant Group, Inc. ("APM") and Joslin Alfar ("Ms. Alfar") (collectively "plaintiffs"), have sued defendant Associated Bank ("Associated") in connection with 15 checks drawn on APM's account that Associated negotiated. APM asserts claims against Associated for breach of the Illinois Uniform Commercial Code ("UCC") for unlawfully charging APM's bank account for allegedly forged checks that were not properly payable, conversion in cashing forged and unauthorized checks from APM's bank account, and estoppel (doc. # 15: Am. Compl., Counts I-II and IV). Ms. Alfar asserts a separate claim against Associated for negligence (Id., Count III). Defendant has asserted various affirmative defenses to plaintiffs' claims (doc. # 20: Answer at 9-13). Following discovery, defendant filed a motion for summary judgment (doc. # 61). The motion is fully briefed. For the reasons set forth below, we grant defendant's motion.

I.

In support of its motion for summary judgment, defendant submitted a statement of material facts (doc. # 62: DSOF). Plaintiffs responded to defendant's statement of material facts (doc. # 66: Pl.s' Resp. to DSOF), filed a declaration of Peter Sayegh (doc. # 65: Sayegh Dec), and filed a Rule 56.1(b)(c)(3) statement of additional facts (doc. # 67: PSOF). Defendant moved to strike (doc. # 74) plaintiffs' statement of additional facts (doc. # 67) which we granted (doc. #78) and to strike Mr. Sayegh's declaration (doc. # 76) which we denied (doc. # 78). The following facts are undisputed unless otherwise indicated.

In early 2014, APM was formed and then acquired and began operating a restaurant known as Niko's Lodge ("Niko's") located in Algonquin, Illinois (DSOF, ¶ 6). Ms. Alfar was the sole owner of APM (DSOF, ¶ 7) but was not involved in the day-to-day operation of Niko's and never reviewed APM's financial records (DSOF, ¶ 30; doc. # 62-4: Alfar Dep. 7:9-15).² Ms. Alfar was not employed from 2013 to the present, she did not know if she filed a federal tax return for 2014 or 2015, and she was not sure if she had ever filed a tax return (DSOF, ¶¶ 31, 32). Ms. Alfar did not know what her income was in 2014 or 2015 and she also did not know how much she was paid by APM in 2014 or 2015 (DSOF, ¶¶ 33, 34).

Ms. Alfar's husband, Peter Sayegh, was the general manager of APM and responsible for the operation of its business (DSOF, ¶ 9). Deanna Marcanti worked as a manager of Niko's (DSOF, ¶ 10).

On October 31, 2014, APM opened a checking account at Associated and became a customer of the bank (DSOF, ¶ 8). A Deposit Account Agreement governed the banking relationship between APM and Associated (DSOF, ¶ 11). Mr. Sayegh signed the documentacknowledging receipt of the Deposit Account Agreement on behalf of APM as its secretary (doc. # 61-3 at 114). APM requested and received online banking services with Associated, and APM (through Mr. Sayegh) reviewed its online statements and checks monthly (DSOF, ¶ 12). Mr. Sayegh was an authorized signer of APM's accounts at Associated (doc. # 61-3 at 114).

Deanna Marcanti was a manager at Niko's (DSOF, ¶ 10). APM kept its checks in a safe at Niko's to which Ms. Marcanti had access as a manager (DSOF, ¶ 13). APM never took steps to prevent Ms. Marcanti from having access to checks for APM's account with Associated, because part of her job description was to pay vendors (DSOF, ¶¶ 14, 15). APM also gave Ms. Marcanti its Associated online banking username and password so that she could access and use APM's accounts online (DSOF, ¶ 16). At various times, Ms. Marcanti participated with Mr. Sayegh on phone calls with Associated to discuss APM's accounts (DSOF, ¶ 17).

APM alleges that Ms. Marcanti first forged and cashed a check drawn on the Associated account dated January 20, 2015 (doc. # 61-3 at 180). APM allegedly first learned that Ms. Marcanti had forged checks "sometime early in 2015," but Mr. Sayegh could not be more specific as to the date (DSOF, ¶ 20). APM did not report to the police that Ms. Marcanti had stolen, forged and cashed any checks until May 5, 2015, almost five months after Ms. Marcanti allegedly first forged and cashed a check (DSOF, ¶ 19). Furthermore, APM did not submit an Affidavit of Forged Endorsement/Forged Maker ("APM Affidavit") to Associated Bank until May 12, 2015 even though the affidavit attests that 15 of its checks were stolen, forged, and negotiated by its manager between January 20, 2015 and April 27, 2015 (DSOF, ¶¶ 21, 22). APM also did not file a claim with its insurer for the alleged theft of its checks by Ms. Marcanti (DSOF, ¶ 27). APM was informed on June 15, 2015 that its claim of alleged fraud on its account was denied by Associated (doc. # 61-3 at 195).

Plaintiffs allege that on February 11, 2015 Mr. Sayegh placed an alert on APM's bank account on the basis that there was an unaccounted withdrawal and a bank balance discrepancy (doc. # 15: Am. Cmplt., ¶ 10; doc. # 20: Answer, ¶ 10). However, there is no evidence that in making that request, Mr. Sayegh identified Ms. Marcanti as a person making "unaccounted" withdrawals or informed Associated it should not cash checks she presented.

APM's Affidavit submitted in May 2015 attests that the following 15 checks totaling $82,657.36 were stolen, forged, and negotiated by Ms. Marcanti:

 Check Number Date Payable to Amount  1001  1/20/2015  Cash  $6,792.10  1001  1/23/2015  Cash  $3,900.00  1001  2/6/2015  Cash  $8,815.56  1001  2/17/2015  Cash  $10,000.00  2006  3/10/2015  Cash  $3,800.00  2009  3/16/2015  Cash  $4,201.00  2010  3/16/2015  Cash  $4,000.00  2011  3/17/2015  Cash  $2,500.00  2014  3/23/2015  Restaurant Depot  $4,712.89  2016  3/23/2015  Cash  $4,500.00  2017  3/24/2015  Cash  $1,500.00  2018  3/27/2015  Restaurant Depot  $5,435.81  2019  3/30/2015  Cash  $2,500.00  2007  4/27/2015  Deanna Marcanti  $10,000.00  2008  4/27/2015  Deanna Marcanti  $10,000.00            Total: $82,657.36 

(DSOF, ¶ 22; doc. 61-3 at 180-82).

Removing the two $10,000.00 checks payable to Ms. Marcanti, which we will discuss later, leaves a potential balance of $62,657.36 in allegedly forged checks. However, Mr. Sayegh testified that check numbers 2014 and 2018, totaling $10,148.70 and payable to Restaurant Depot, were used to purchase supplies for Niko's (doc. # 61-3 at 40, 42, 191, 192). Thus, this reduces the balance to $52,508.66 in alleged forged checks.

The remaining eleven allegedly forged checks all were made payable to "cash"; however, each check contained a notation on the memo line indicating how the funds were to be used, such as for payment to various vendors, payroll, or "cash for store." Gordon Food Service ("GFS"), Costco, Mickey Linens, and Wirtz Beverage were all vendors of Niko's during the relevant time (doc. # 61-3 at 16, 36) and APM received an invoice from the Kane County Health Department for services (doc. # 61-3 at 35). James McGovern, a forensic accountant and certified public accountant for 31 years retained by Associated for this case, prepared an expert report and testified as to the flow of fluids for these 11 checks made payable to cash (doc. # 62-5). The chart below sets forth Mr. McGovern's analysis (to which plaintiffs have offered no rebuttal) as to how the cash from the allegedly forged checks was used (doc. # 62-5 at 37):

 Allegedly Forged Checks  Subsequent distribution of checks payable toCash Date Amount Number Drawnby Payableto  Cashier'sCheck Cash To the Order of     1/20/2015  $6,792.10  1001  APM  Cash   $3,500.00   GFS        $3,292.10   Costco        $6,792.10       1/23/2015  $3,900.00  1001  APM  Cash   $3,206.00   GFS        $694.00   Kane Cty. HealthDept.        $3,900.00       2/6/2015  $8,815.56  1001  APM  Cash   $4,000.00   GFS        $1,815.56   Mickeys Linens         $3,000.00  Payroll        $5,815.56  $3,000.00      2/17/2015  $10,000.00  1001  APM  Cash   $5,000.00   GFS        $3,500.00   Wirtz Beverage         $1,500.00  Cash for Store        $8,500.00  $1,500.00      3/10/2015  $3,800.00  2006  APM  Cash   $2,100.00   Wirtz Beverage         $1,700.00  Cash for Store        $2,100.00  $1,700.00      3/16/2015  $4,201.00  2009  APM  Cash   $4,201.00   GFS     3/16/2015  $4,000.00  2010  APM  Cash    $4,000.00  Cash for Store     3/17/2015  $2,500.00  2011  APM  Cash    $2,500.00  Cash for Store     3/23/2015  $4,500.00  2016  APM  Cash    $4,500.00  Cash for Store     3/24/2015  $1,500.00  2017  APM  Cash    $1,500.00  Cash for Store       3/30/2015  $2,500.00  2019  APM  Cash    $2,500.00  Cash for Store    Total $52,508.66     $31,308.66 $21,200.00   

The check dated January 23, 2015 for $3,900.00 and the check dated February 6, 2015 for $8,815.56 were both signed by Mr. Sayegh (DSOF, ¶¶ 25, 26). Additionally, Mr. Sayegh admitted that the proceeds of these cashed checks were used to purchase the cashier's checks to pay the vendors identified in the chart above (doc. # 61-3 at 35, 36). Mr. Sayegh also testified that the proceeds of the cashed checks dated January 20, 2015 in the amount of $6,792.10, February 17, 2015 in the amount of $10,000.00, and March 10, 2015 in the amount of $3,800.00 were used to purchase the cashier's checks to pay the vendors identified in the chart above (doc. # 61-3 at 35, 36-37, 39). Thus, the balance of alleged forged checks (the proceeds of which were used for corporate purposes) is further reduced by $31,308.66 to $21,200.00.

Mr. Sayegh testified that depending on the day of the week, he kept one thousand to three thousand dollars in cash at Niko's (doc. # 61-3 at 37). Additionally, he did not offer any evidence to refute that the cash obtained by the checks negotiated on March 16, 17, 23,...