Evans et al v. ZB, N.A.

Filing 28

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 12/19/2017 GRANTING 21 Motion to Dismiss. CASE CLOSED. (Hunt, G)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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RONALD C. EVANS, an
individual; JOAN M. EVANS, an
individual; DENNIS TREADAWAY,
an individual; and all others
similarly situated,

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Plaintiffs,

CIV. NO. 2:17-1123 WBS DD

MEMORANDUM AND ORDER RE: MOTION
TO DISMISS

v.
ZB, N.A., a national banking
association, dba California
Bank & Trust,

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Defendant.

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Ronald C. Evans, Joan M. Evans, and Dennis Treadaway

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(collectively “plaintiffs”) initiated this action on behalf of

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over fifty people against defendant ZB, N.A., a national banking

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association, doing business as California Bank & Trust (“CB&T”),

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for allegedly knowingly providing substantial assistance to a

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fraudulent scheme initiated by International Manufacturing Group,

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Inc. (“IMG”).

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customers of defendant, they seek to recover from CB&T

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nonetheless.

Although plaintiffs are not, and never were,

Presently before the court is defendant’s Motion to
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Dismiss pursuant to Federal Rule of Civil Procedure Rule 12(b)(6)

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(“Rule 12(b)(6)”).

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Plaintiffs assert eight claims against CB&T for

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allegedly aiding and abetting the torts of IMG:1 (1) Aiding and

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Abetting Fraud; (2) Securities Fraud; (3) Conspiracy to Commit

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Fraud; (4) Aiding and Abetting Breach of Fiduciary Duty; (5)

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Intentional Interference with Contract; (6) Negligence; (7) Penal

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Code § 496 Violation; and (8) Conspiracy to Violate Penal Code §

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496.2

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Plaintiffs allege that CB&T, as IMG’s depository

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institution, owed plaintiffs a duty to protect them from IMG’s

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intentional torts.

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argument, which plaintiffs rely on for all of their claims, is

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that plaintiffs were neither CB&T customers nor had any

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relationship with CB&T, and a bank does not owe a duty of care to

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noncustomers unless extraordinary and specific facts are present.

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See Software Design & Application v. Hoefer & Arnett, 49 Cal.

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App. 4th 472, 479 (1st Dist. 1996).

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alleged no such facts, CB&T was under no legal duty to warn

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plaintiffs about IMG’s financial condition, nor did defendant owe

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a “duty to [plaintiffs] to investigate or disclose suspicious

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activities on the part of an account holder.”

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Bank Nat’l Ass’n, 127 Cal. App. 4th 1138, 1149 (4th Dist. 2005).

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The primary flaw with regard to this

Because plaintiffs have

See Casey v. U.S.

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Plaintiffs have not sued IMG because the company filed
for bankruptcy on May 30, 2014. (Compl. ¶ 9.) Plaintiffs have
also not sued Deepal Wannakuwatte, IMG’s Chief Executive officer,
who pled guilty to federal fraud charges and was sentenced to
twenty years in prison for this crime. (Compl. ¶ 4.)
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Plaintiffs have voluntarily dismissed their Aiding and
Abetting Conversion claim. (Docket No. 25.)
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In fact, federal law explicitly prohibits financial institutions

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from directly or indirectly disclosing nonpublic personal

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information to nonaffiliated third parties.

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et seq.; 15 U.S.C. §§ 6801-6809(a).

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See 12 U.S.C. § 3401

Consistent with this, CB&T had “no duty to prevent

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commingling of assets in fiduciary accounts, to monitor fiduciary

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accounts for irregular transactions, to prevent improper

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disbursements from the accounts, or to conduct an investigation

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of possible misappropriation of funds.”

See Chazen v. Centennial

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Bank, 61 Cal. App. 4th 532, 541 (1st Dist. 1998).

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does not have a duty to investigate or police its accounts,

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CB&T’s “alleged knowledge of [a depositor’s] suspicious account

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activities--even money laundering--without more, does not give

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rise to tort liability for the banks.”

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4th at 1141.

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Because a bank

See Casey, 127 Cal. App.

The only relevant question therefore becomes whether

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CB&T had actual knowledge that IMG was operating a Ponzi scheme

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and misappropriating funds.

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not pled sufficient facts to give rise to a plausible inference

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that defendant knew IMG was misappropriating funds.

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simply allege that CB&T “knew that [IMG was] engaged in wrongful

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or illegal conduct . . . in breach of their fiduciary duties.”

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Id. at 1152; see also Compl. ¶ 154 (alleging defendant had actual

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knowledge IMG was not using its investors’ money for the

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designated purpose, thereby breaching its fiduciary duties.)

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support their claim that CB&T was aware of IMG’s Ponzi scheme,

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plaintiffs point to an October 2009 letter in which CB&T informed

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IMG that it intended to “disengage from the Lending relationship”

Id. at 1149.

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Here, plaintiffs have

Plaintiffs

To

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because “there has been little to no revolving of the outstanding

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balances.” (Compl. ¶ 117).

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that CB&T was aware that IMG could not meet its financial

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obligations, it does not sufficiently allege that the bank knew

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that IMG was engaging in fraud and misappropriating money.

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Accordingly, plaintiffs’ Complaint fails to plead more than

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“alleged knowledge,” and instead “essentially alleges the [bank]

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knew something fishy was going on with the accounts opened by”

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IMG, see Casey, 127 Cal. App. 4th at 1149, which is insufficient

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to plead a cause of action for any of the eight claims plaintiffs

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assert against CB&T.

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However, even if this demonstrates

Moreover, even assuming that CB&T had actual knowledge

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of the fraud IMG was committing against plaintiffs, the court

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rejects plaintiffs’ argument that CB&T was therefore obligated to

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terminate its depository relationship with IMG.3

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lender is entitled to pursue its own economic interests in a loan

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transaction.”

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App. 3d 1089, 1093, n.1 (3rd Dist. 1991).

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bank may terminate a deposit account, it is not liable for

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failing to do so, even if it has notice of adverse claims or

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improper disbursements from a trust account.

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App. 4th. at 541.

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plaintiffs to terminate its banking relationship with IMG or to

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otherwise warn and protect plaintiffs from IMG’s fraud,

“A commercial

Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal.
Therefore, while a

Chazen, 61 Cal.

Accordingly, because CB&T had no duty to

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Notably, plaintiffs cite no authority for their
contention that CB&T had a duty to terminate its banking
relationship with IMG. In fact, plaintiffs concede that there
are no known cases supporting this point. (Pls.’ Opp’n at 20:8
(Docket No. 25).)
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plaintiffs’ claim against CB&T must be dismissed.

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IT IS THEREFORE ORDERED that defendant’s Motion to

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Dismiss (Docket No. 21) be, and the same hereby is, GRANTED.

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Dated:

December 19, 2017

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