A.B. Concrete Coating Inc. v. Wells Fargo Bank, N.A.

509 F.Supp.3d 1217

A.B. CONCRETE COATING INC., Plaintiff,

v.WELLS FARGO BANK, N.A., et al., Defendants.

No. 2:20-cv-0211-EFB

United States District Court, E.D. California.

Signed December 29, 2020

Keith D. Cable, Cable Law, APC, Folsom, CA, for Plaintiff.

Samuel R. Melamed, Severson & Werson, APC, San Francisco, CA, for Defendants.

ORDER

EDMUND F. BRENNAN, UNITED STATES MAGISTRATE JUDGE

Plaintiff initiated this action in Placer County Superior Court; it was removed to this court by defendant Wells Fargo Bank, N.A., on January 29, 2020 on the basis of diversity jurisdiction.¹ ECF No. 1. Wells Fargo previously moved to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6). ECF No. 7. The motion was granted with leave to amend as to all but one claim. Plaintiff's claim for conversion under California Commercial Code § 3420(a) was dismissed with prejudice, and all remaining claims were dismissed with leave to amend. ECF No. 14 at 12.

Plaintiff has since filed a first amended complaint (ECF No. 17) which Wells Fargo now moves to dismiss, again for failure to state a claim (ECF No. 18). For the reasons that follow, the court finds that the motion must be granted with respect to plaintiff's negligence claims and otherwise denied.

I. Legal Standard

A complaint may be dismissed for "failure to state a claim upon which relief may be granted." Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss for failure to state a claim, a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."

Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The plausibility standard is not akin to a "probability requirement," but it requires more than a sheer possibility that a defendant has acted unlawfully. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

Dismissal under Rule 12(b)(6) may be based on either: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable legal theory. Chubb Custom Ins. Co. , 710 F.3d at 956. Dismissal also is appropriate if the complaint alleges a fact that necessarily defeats the claim. Franklin v. Murphy , 745 F.2d 1221, 1228-1229 (9th Cir. 1984).

For purposes of dismissal under Rule 12(b)(6), the court generally considers only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice, and construes all well-pleaded material factual allegations in the light most favorable to the nonmoving party. Chubb Custom Ins. Co. v. Space Sys./Loral, Inc. , 710 F.3d 946, 956 (9th Cir. 2013) ; Akhtar v. Mesa , 698 F.3d 1202, 1212 (9th Cir. 2012).

II. Allegations of the First Amended Complaint

Plaintiff alleges that it established a business banking account with defendant bank in 2010. ECF No. 17, ¶ 9. As part of that process, plaintiff was provided a Wells Fargo Deposit Account Agreement. Id.

On or around December 31, 2018, plaintiff discovered that its former volunteer bookkeeper, Amber Clark, had been writing company checks to herself, on which she forged the signature of plaintiff's owner, Brian Fenno. Id. , ¶ 10. Ms. Clark successfully cashed the checks – which totaled $482,244.76 – at various Wells Fargo branches in Placer County. Id. Plaintiff also discovered that checks payable to Ms. Clark's husband, Kai Clark, amounting to $32,939.66 and also bearing forgeries of Fenno's signature, had been successfully cashed. Id. , ¶ 11.

Plaintiff seeks to recover this money from Wells Fargo under three legal theories: (1) breach of the Deposit Account Agreement; (2) negligence; and (3) violation of the California Commercial Code.

III. Defendant's Evidence and Plaintiff's Objections Thereto

Defendant submits with its motion a declaration of Karen Nelson authenticating an attached "Business Account Agreement." ECF No. 18-2. Ms. Nelson located the Business Account Agreement after a "diligent search and reasonable inquiry to identify and locate the Deposit Account Agreement in effect in or around 2010" referenced in the amended complaint. Id. , ¶ 3. According to Ms. Nelson, the Deposit Account Agreement used by the bank in 2010 was called a Business Account Agreement. Id.

Plaintiff objects to the declaration and appended Business Account Agreement, ECF No. 21, arguing that these items of evidence go impermissibly beyond the pleadings at this stage of the case.

Courts generally may not consider evidence beyond the pleadings when considering a motion to dismiss under Rule 12(b)(6). United States ex rel. Lee v. Corinthian Colls. , 655 F.3d 984, 998-99 (9th Cir. 2011). However, if three conditions are met, the court may consider evidence that the complaint relies on even though it was not attached thereto. Id. Those conditions are that: (1) the complaint refers to the evidence; (2) the evidence is central to plaintiff's claim; and (3) no party questions the authenticity of the evidence. Id.

Ms. Nelson's declaration does not state that the Business Account Agreement she located was definitely the document provided to plaintiff, and plaintiff opposes the court's consideration of it. It is therefore not clear that the Business Account Agreement provided by Ms. Nelson is the same document as the Deposit Account Agreement referred to by the amended complaint and on which plaintiff's breach of contract claim relies.² Accordingly, the court sustains plaintiff's objection to the declaration and its attachment and will not consider the Business Account Agreement in determining the merits of the instant motion.

The court will similarly deny defendant's request that the court take judicial notice of defendant's practice of sending monthly banking statements to its account holders. Federal Rule of Evidence 201(b) provides that the court may judicially notice "a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Defendant provides a number of California cases in which judicial notice was taken of a bank's custom of sending out monthly statements, but notably does not cite a single federal case applying Rule 201. Plaintiff objects that this custom is subject to reasonable dispute and thus judicial notice is inappropriate, and the court agrees. While banks, including defendant, may customarily send out monthly statements, it is certainly conceivable that this custom is fallible and that the parties may dispute whether, in this case, statements were provided, or were accurate. Accordingly, the court declines to judicially notice any custom by defendant to send out monthly account statements.

IV. Analysis

a. Negligence Claims

Defendant first argues that plaintiff's common-law negligence claims fail because they are precluded by various provisions of the California Uniform Commercial Code. Section 1103(b) of that code provides:

Unless displaced by the particular provisions of this code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.

Section 4406 deals specifically with the relationship between a bank and its customer with regard to forged checks:

(c) If a bank sends or makes available a statement of account or items pursuant to subdivision (a), the customer shall exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer shall promptly notify the bank of the relevant facts.

(d) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subdivision (c), the customer is precluded from asserting any of the following against the bank:

(1) The customer's unauthorized signature or any alteration on the item if the bank also proves that it suffered a loss by reason of the failure.

(2) The customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.

(e) If subdivision (d) applies and the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure contributed to loss, the loss is allocated between the customer precluded and the bank asserting the preclusion according to the extent to which the failure of the customer to comply with subdivision (c) and the failure of the bank to exercise ordinary care contributed to the loss. If the customer proves that the bank did not pay the item in good faith, the preclusion under subdivision (d) does not apply.

(f) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer (subdivision (a)) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or

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