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Travelers Casualty & Surety Company of America v. Associated Bank, N.A.

United States District Court, W.D. Wisconsin

June 3, 2016

TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, as subrogee and assignee of The Alexander Company, Inc., Plaintiff,
v.
ASSOCIATED BANK, N.A., Defendant.

          OPINION AND ORDER

          WILLIAM M. CONLEY District Judge

         Defendant Associated Bank, N.A. (“Associated Bank") accepted for deposit a number of checks written on the account of The Alexander Company, Inc., and payable to an allegedly fictitious entity. Having reimbursed its insured, Alexander, for the losses arising out of those deposits, plaintiff Travelers Casualty and Surety Company of America (“Travelers") brought this diversity action against Associated Bank for violating Wis.Stat. § 403.404(4) by failing to exercise ordinary care. Pending before the court is defendant’s motion to dismiss (dkt. #7), which will be denied because plaintiff Travelers has alleged enough facts to support a reasonable inference that defendant Associated Bank failed to adhere to the applicable standard of care by accepting checks payable to a fictitious entity.

         ALLEGATIONS OF FACT

         Plaintiff alleges that Travelers is a Connecticut corporation with its principal place of business in Connecticut. Plaintiff further alleges that Associated Bank is a citizen of Wisconsin under 28 U.S.C. § 1348 because it is a national banking association with its main office in Wisconsin. Accepting these facts as true, the court has diversity jurisdiction under 28 U.S.C. § 1332 because the amount in controversy exceeds $75, 000.[1]

         As for the merits, plaintiff alleges that an employee of The Alexander Company, Gregory Hunt, perhaps working with his daughter, Tiffany Hunt, carried out a scheme to steal money from his employer by causing The Alexander Company to issue checks payable to the order of “Floor-Tek." Plaintiff alleges on information and belief that Floor-Tek is a fictitious company with no business operations, employees, records or physical presence.

         Despite being a fictitious company, plaintiff claims, Associated Bank accepted the checks made payable to Floor-Tek, which it then deposited into accounts at Associated Bank opened for Gregory and/or Tiffany Hunt. Ultimately, plaintiff Travelers paid Alexander’s insurance claim for losses amounting to $503, 382.77, the total amount withdrawn from its account to cover Floor-Tek’s checks.

         OPINION

         In resolving a motion to dismiss under Rule 12(b)(6), the court takes all well-pled facts in the complaint as true and draws all reasonable inferences in favor of the non-moving party. Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 763 (7th Cir. 2010). A complaint survives a motion to dismiss if it “contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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.’" Id. “The plausibility standard is not akin to a ‘probability requirement, ’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. While far from a compelling narrative, plaintiff’s pleading meets this admittedly low bar, leaving defendant to move for summary judgment if the record is in fact as one-sided as its motion represents.

         Defendant moves to dismiss the complaint on the basis that plaintiff has failed to plead enough facts from which the court could reasonably infer that it is liable under Wis.Stat. § 403.404(4), which underlies plaintiff’s statutory negligence claim. Adopted from § 3-404 of the Uniform Commercial Code, the Wisconsin statutes state generally that:

(1) If an imposter, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the imposter, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an endorsement of the instrument by any person in the name of the payee is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(2) If a person whose intent determines to whom an instrument is payable under s. 403.110(1) or (2) does not intend the person identified as payee to have any interest in the instrument or if the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special endorsement:
(a) Any person in possession of the instrument is its holder.
(b) An endorsement by any person in the name of the payee stated in the instrument is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(3) Under sub. (1) or (2), an endorsement is made in the name of a payee if it is made in a name substantially similar ...

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