Taylor Anderson, LLP v. U.S. Bank National Association et al

Filing 54

ORDER granting 49 Motion for Summary Judgment and 15 Motion to Dismiss, and dismissing this case with prejudice, by Judge Christine M. Arguello on 3/31/14.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 13-cv-01336-CMA-CBS
TAYLOR ANDERSON, LLP, a Colorado limited liability partnership,
Plaintiff,
v.
U.S. BANK NATIONAL ASSOCIATION, a National Bank corporation, and
ADRIAN D. STONE, an individual,
Defendants.

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

This matter is before the Court on Defendants’ Motion to Dismiss (Doc. # 15),
which this Court converts into a Motion for Summary Judgment and considers together
with Defendants’ recently-filed Motion for Summary Judgment (Doc. # 49). These
motions are addressed together because, as relevant here, both raise similar
arguments, and the parties have supplied full briefing for both motions. See Burnham
v. Humphrey Hospitality Reit Trust, Inc., 403 F.3d 709, 713-14 (10th Cir. 2005).
For the following reasons, this Court grants summary judgment to Defendants
on all claims.
I.

BACKGROUND

The claims asserted by Plaintiff Taylor Anderson resulted from an international
e-mail scam targeting United States law firms and involving fraudulent cashier’s checks.

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Taylor Anderson fell victim to the scam. Ultimately, a third party defrauded Taylor
Anderson of $191,000 from Taylor Anderson’s bank account at Defendant U.S. Bank
National Association (“U.S. Bank”). In this case, Taylor Anderson seeks to recover this
amount from Defendants—U.S. Bank and Ms. Adrian Stone, an employee of U.S.
Bank—essentially alleging that Defendants are to blame for its having fallen prey to
this fraudulent scheme.
Taylor Anderson’s theory as to why Defendants are liable is based on a series
of oral and email communications that occurred between Taylor Anderson and
Defendants. These communications, however, must be interpreted in conjunction with
the deposit agreement (“the Agreement”) that governs Taylor Anderson’s deposits at
U.S. Bank.
A. THE DEPOSIT AGREEMENT
For purposes of this case, the Agreement includes four provisions that address
the status of a deposit once a check has “cleared” and the funds appear in the
depositor’s account. First, under the heading of “Liability for Charges and Overdrafts,”
the Agreement states that “[a]n overdraft occurs if you take more money out of your
account than is available to you for withdrawal, or if it is available to you but is later
reversed. This can happen . . . by making a deposit, withdrawing money based on that
deposit, and having that deposit reversed because the deposited item is later
returned to us unpaid.” (Doc. 49-20, at 4 (first emphasis in original; second emphasis
added).) Thus, the Agreement clearly informs U.S. Bank customers that one form of

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overdraft occurs if an item is deposited but U.S. Bank is later unable to obtain the funds
linked to the deposited item and the deposited item is returned unpaid.
Second, under the heading “Deposits,” the Agreement states:
When you make a non-cash deposit to your account, we give you
credit for that deposit, but that credit is provisional (temporary).
If the deposit needs to be collected from another financial institution,
we must be paid before the credit becomes final. After a credit is final
it may still be reversed. See the sections titled Returned Deposited
and Cashed Items and Funds Availability.
(Id., emphasis added.) By virtue of this provision, U.S. Bank placed Taylor Anderson on
notice that merely because a deposit is “credited” to its account, does not mean that the
process of definitively obtaining those funds has concluded; rather, if the deposit needs
to be collected from another institution [as was that case here], the other institution must
pay U.S. Bank before the credit to Taylor Anderson’s account becomes final. Moreover,
this provision provides notice to Taylor Anderson that, even if the credit becomes final, it
could still be reversed.
Third, immediately following the section entitled “Deposits,” there is a section
entitled “Returned Deposited and Cashed Items.” This section explains how funds that
are collected are deposited into an account and how some deposits are reversed if
there is a problem in the collection process. In pertinent part, this provision states:
The funds you deposit to your account are subject to normal collection
processes even after we make the funds available to you for
withdrawal (i.e., the check has “cleared”). If we do not collect the
funds, or we need to return the funds, your deposit will be reversed
and become your responsibility.

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(Id. at 6, emphasis added.) This section places Taylor Anderson on notice that, even
after a deposited check has “cleared,” the deposit may still be reversed, in which case
the depositor, not the bank, bears responsibility for the bank’s inability to collect.
Fourth, near the end of the Agreement, a bold heading written in the largest font
size used in the Agreement states in pertinent part:
FUNDS AVAILABILITY: YOUR ABILITY TO WITHDRAW FUNDS—ALL ACCOUNTS
***
Please remember that even after the item has “cleared,” we have
made funds available to you and you have withdrawn funds, you are
still responsible for items you deposit that are returned to us unpaid
and for any other problems involving your deposit. See our Returned
Deposited and Cashed Items section.
(Id. at 13; emphasis added.) This provision cross-references the third provision
mentioned above and again explicitly states a second time that just because a deposit
has “cleared,” it does not follow that the funds are definitively in the account or that the
crediting of those funds is not subject to reversal.
B. FALL 2012 TRANSACTION
The events giving rise to this litigation resulted from Taylor Anderson’s
representation of Mr. Alex Carney, who purportedly lived in Japan and retained Taylor
Anderson to help him collect a $378,000 settlement purportedly owed him by North
American Iron & Steel (‘NAI&S”). In partial payment of the settlement, NAI&S submitted
a $191,000 cashier’s check purportedly issued by Chase Bank. (Doc. # 4 at 2.) In late

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September 2012, 1 Taylor Anderson deposited the $191,000 cashier’s check into its
client trust account, which it maintained with U.S. Bank.
In a series of email exchanges on October 1, 2012, Taylor Anderson informed
U.S. Bank that it planned to wire $189,000 of the check’s proceeds to Mr. Carney in
Japan but wanted to know more about the funds associated with the check. (Doc. # 4917.) At about 10:00 a.m. on October 1, 2012, Defendant Ms. Stone began an inquiry as
to whether the check “ha[d] cleared” from Chase bank, the bank upon which the check
was drawn. (Id. at 2.) About an hour later, Ms. Stone followed up in a second email
to Taylor Anderson stating “[i]t was drawn on Chase, and has cleared.” (Doc. # 49-19
at 2.) Subsequent to receiving this email from Ms. Stone, Taylor Anderson wired
$189,000 to an account used by Mr. Carney, and kept the remaining $2,000 as payment
for legal services rendered. (Doc. # 49-2 at 10.)
Several days after Taylor Anderson wired this money, Chase Bank determined
that the check was fraudulent and dishonored the check. U.S. Bank in turn informed
Taylor Anderson about the fraud and its liability for the amount of the check. (Doc. # 4
at 3.)
On April 18, 2013, Taylor Anderson sued Ms. Stone and U.S. Bank, advancing
four claims related to Ms. Stone’s representations concerning the check’s status and
Defendants’ contractual obligations to Taylor Anderson. In particular, Taylor Anderson
alleges that Ms. Stone’s representations constituted a breach of contract, negligent
misrepresentation, fraud, and negligence. (Doc. # 4.) Defendants in turn have filed

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The Parties do not indicate exactly when.

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motions to dismiss and for summary judgment that, as noted above, are considered
together by this Court.
II.

ANALYSIS

A. STANDARD
Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56. In analyzing the evidence on a motion for summary judgment,
this Court must view the factual record and draw reasonable inferences in favor of the
non-moving party. Kidd v. Taos Ski Valley, Inc., 88 F.3d 848, 851 (10th Cir. 1996).
“There is no genuine issue of material fact unless the evidence, construed in the
light most favorable to the non-moving party, is such that a reasonable jury could return
a verdict for the non-moving party.” Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875
(10th Cir. 2004). Further, “[t]o defeat a motion for summary judgment, evidence,
including testimony, must be based on more than mere speculation, conjecture, or
surmise.” Id.
The Court applies the following standard to each of Taylor Anderson’s four
claims and explains why none of the claims survive Defendants’ summary judgment
motion.
B. APPLICATION
1. Breach of Contract Claim
First, this Court addresses Taylor Anderson’s breach of contract claim. “Under
Colorado law, contracts ‘should be interpreted consistently with the well-established

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principles of contractual interpretation.’” Level 3 Commc’ns, LLC v. Liebert Corp., 535
F.3d 1146, 1154 (10th Cir. 2008) (quoting Allstate Ins. Co. v. Huizar, 52 P.3d 816, 819
(Colo. 2002)).
In accord with those principles, “courts must ‘examin[e] the entire instrument, and
not . . . view[ ] clauses or phrases in isolation.’” Id. (quoting Allstate, 52 P.3d at 819)
(alterations and ellipses supplied by Level 3 court). Further, “[a]s an overarching
principle, in construing a contract, courts must also ‘consider the subject matter, the
object of making it, the sense in which the parties naturally understood it at the time it
was made, and the purposes and objects to be accomplished thereby.’” Id. (quoting
Total Petroleum, Inc. v. Farrar, 787 P.2d 164, 167 (Colo. 1990)). Finally, “[w]hen a
contractual provision unambiguously resolves the parties’ dispute, the interpreting
court’s task is over.” Id. In other words, “[i]t is axiomatic that in the absence of an
ambiguity a written contract cannot be varied by extrinsic evidence.” Id. (quoting
Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1314 (Colo. 1984)).
There is no genuine dispute of material fact regarding whether U.S. Bank
honored its contractual obligations to Taylor Anderson. As an initial matter, based on
this Court’s review of the “entire instrument” in question here, cf. Allstate, 52 P.3d at
819, the Agreement is unequivocal on what the term “cleared” means: in two separate
portions of the agreement, when the term “cleared” is used, the Agreement explains that
this means the amount of the check is conditionally credited to the account, although
this determination is subject to reversal. This meaning of “cleared” is reinforced by
other admonishments in the Agreement concerning the “provisional” nature of non-cash

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deposits and warnings about how an item deposited and credited to an account can
later be reversed if the deposit is returned to U.S. Bank unpaid.
Further, this Agreement is a bargained-for exchange between two sophisticated
actors—one of which is trained in the law—and it tracks the default rule from the
Uniform Commercial Code (UCC), which places risk during the collection process on
the depositor and not on the collecting bank. See C.R.S. § 4-4-201(a); Mercantile Bank
& Trust Co. v. Hunter, 501 P.2d 486, 487 (Colo. App. 1972) (“The risk of loss on the
check remained in [depositor], as its owner, and not upon the agent [b]ank”).
Finally, there is no dispute that representatives of U.S. Bank, in responses to
inquiries from Taylor Anderson, consistently stated that the check “had cleared.” This
Court sees no representation from U.S. Bank establishing that the check had both
cleared and that the credit in the account was not subject to reversal. Rather, all the
representations in the record demonstrate that U.S. Bank stated only that the check
had “cleared.”
Based on this evidence, this case falls within the heartland of cases in which a
bank says the check “has cleared,” the client misinterprets this representation to mean
that the credited deposit is not subject to reversal, and then a subsequent reversal
triggers what are ultimately determined to be non-meritorious claims against the bank.
These claims consistently fail because they rely on the client’s misinterpretation of a
contract similar to the instant one or because the default rule from the UCC applies. 2

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Defendants cite as demonstrative of this line of reasoning the following cases: Call v.
Ellenville Nat’l Bank, 5 A.D.3d 521, 522 (N.Y. App. Div. 2004); Banknorth N.A. v. Zeeman,

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Taylor Anderson resists this conclusion and advances a number of arguments
in an attempt to distinguish this case and place it outside of this heartland. For the
reasons stated below, this Court finds none of the arguments persuasive.
First, Taylor Anderson complains about the length of the Agreement and the fact
that the term “cleared” is never “explicitly defined” in the same. (Doc. # 51 at 15.) This
Court finds the length-based argument an almost non-starter, especially because Taylor
Anderson is a law firm with expertise in complex commercial transactions and cites no
authority for the proposition that because a contract is long, it is axiomatically nonbinding. Further, the plain language of the contract supplies a definition of the term
“cleared,” and Taylor Anderson cites no authority holding that a party is bound by a
term only if it is “explicitly defined” in a definitions section of a contract.
Second, Taylor Anderson cites extrinsic evidence suggesting that the term
“cleared” in other contexts means that the funds are credited to the account and the
decision to credit the amount is no longer subject to reversal. (Id.) But this reliance on
extrinsic evidence is unavailing in light of what this Court sees as the plain meaning of
the term as defined in the Agreement. Cf. Pepcol Mfg., 687 P.2d at 1314.
Third, Taylor Anderson emphasizes that its interpretation of the term “cleared”
was different from the one stated in the contract and that this interpretation should
somehow be given controlling weight. Taylor Anderson’s different interpretation seems
to stem in large part from the fact that no firm representative responsible for the Fall
2012 transaction actually read the Agreement before this incident. (Doc. # 49, ¶ 39;
No. 173-3-04-Wncv, 2004 Vt. Super LEXIS 69, at *10-12 (Sup. Ct. Vt. Dec. 20, 2004);
Moughrabie v. Citibank, N.A., 867 N.Y.S.2d 376, 376 (N.Y. App. Div. 2008).

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Doc. # 51, ¶ 39.) This Court does not doubt that Taylor Anderson had this differing
interpretation, perhaps based on its failure to read the Agreement, but that does not
exempt Taylor Anderson from the force of this contract provision: here, it is not a party’s
subjective intent that counts for purposes of interpreting a contract, but rather what the
unambiguous terms state.
Fourth, Taylor Anderson attempts to paint Ms. Stone as a nefarious character
who must have acted fraudulently or negligently when she stated that the check
“cleared.” For example, Taylor Anderson argues that Ms. Stone “knew [Taylor
Anderson] asked whether ‘the funds are good,’ knew that meant whether the [c]heck
was good and valid, knew the specific [c]heck [Taylor Anderson] was referring to, knew
[Taylor Anderson] did not mind waiting to ensure the funds were good, and knew Taylor
Anderson intended to wire funds from that [c]heck to a foreign country.” (Doc. # 51
at 13.)
This argument fails for a number of reasons. As an initial matter, it relies on
conclusory allegations about what Ms. Stone allegedly knew—allegations which are
vigorously contested by Ms. Stone and ones that find no support in the record. Taylor
Anderson does not get beyond summary judgment on such a weak and speculative
theory, especially one devoid of record support. Cf. Bones, 366 F.3d at 875 (“To defeat
a motion for summary judgment, evidence, including testimony, must be based on more
than mere speculation, conjecture, or surmise.”). Further, contrary to Taylor Anderson’s
contentions, U.S. Bank did not provide false information to Taylor Anderson—it merely

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provided information that was accurate and faithful to the Agreement, but which Taylor
Anderson did not fully appreciate. 3
Finally, Taylor Anderson seems to allege that because Ms. Stone knew that the
money in question was being wired to a foreign country for a newer client, it should
have been on alert to Taylor Anderson’s (apparent) concerns about fraud. But Taylor
Anderson provides no basis for making the connection between foreignness or newness
and presumptive fraud, and it advances no convincing explanation about why, if it really
was worried about fraud in this case, it did not explicitly convey this concern to U.S.
Bank. In any case, this Court will not place a burden on Ms. Stone to read between the
lines on these communications from Taylor Anderson, much less bind her in some way
to Taylor Anderson’s post hoc interpretation of the message it was attempting to
convey.
In sum, on this Court’s interpretation of the plain meaning of the Agreement, U.S.
Bank was required to credit deposits in Taylor Anderson’s bank account but was
allowed to reverse its initial determination as to credits if, for example, a deposit was
returned as unpaid. This same provisional-credit condition applied when a check had

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A variation of this argument fails for similar reasons. In particular, Taylor Anderson alleges
that over the course of the professional relationship between the parties, Defendants had been
asked to confirm that credits for Taylor Anderson deposits were no longer subject to reversal.
Plaintiff argues that if this relationship is taken into account, when Ms. Stone said that the check
had cleared, she conveyed a meaning different from the one in the Agreement. (Doc. # 51 at
12-13.) But regardless of what Defendants had been asked to do in the past, in this instance,
they only represented that the check had “cleared.” If Defendants had represented that the
check had cleared and that the credit was no longer subject to reversal—a fact pattern Taylor
Anderson desperately wants to impose on this case—it would be a different story. But those
are not the facts presented here—and this Court will not resort to relying on instances in which
Defendants supplied very different information to Taylor Anderson when assessing the specific
communications giving rise to this litigation.

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“cleared.” These contract provisions govern this case and responsibility for the
reversed deposit lies with Taylor Anderson.
2. Other Claims
Next, Taylor Anderson advances negligence, negligent misrepresentation, and
fraud claims against Defendants. All three of these claims are predicated on Taylor
Anderson’s allegation that the Defendants’ “voluntarily investigated the origins and
validity of the [c]heck” in question and either fraudulently or negligently reported what
they had determined to Defendants. (Doc. # 4 at 2.)
These claims are all barred by the Economic Loss Rule. As the Tenth Circuit
concisely set forth in a recent case, under Colorado law, this rule establishes as follows:
“Broadly speaking, the economic loss rule is intended to maintain the
boundary between contract law and tort law.” Town of Alma v. AZCO
Constr., Inc., 10 P.3d 1256, 1259 (Colo. 2000); see generally id. at 1259–
64 (describing in detail the rule’s origins). Accordingly, under Colorado
law, the “proper focus in an analysis under the economic loss rule is on
the source of the duties alleged to have been breached.” Grynberg v. Agri
Tech, Inc., 10 P.3d 1267, 1269 (Colo. 2000). Boiled down, the rule
prohibits “a party suffering only economic loss from the breach of an
express or implied contractual duty [to] assert a tort claim for such a
breach absent an independent duty of care under tort law.” Id. (emphasis
added). An independent duty of care under tort law thus serves as the
boundary between contract and tort law, permitting only those tort claims
that allege such a duty has been breached. See A.C. Excavating v. Yacht
Club II Homeowners Ass’n, Inc., 114 P.3d 862, 865–66 (Colo. 2005).
Level 3, 535 F.3d at 1162.
The Economic Loss Rule applies here because Taylor Anderson cannot point
to an independent duty in tort law that arises outside of the duties created by the
Agreement. As to this question, what is most devastating to Taylor Anderson is its

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own interpretation of the “explicit and implicit” duties arising out of the Agreement
which, as described in its complaint, include the following:
the duty and obligation to provide complete and accurate answers to
questions from Plaintiff concerning its client trust account, the duty and
obligation to take appropriate and reasonable actions to protect and
safeguard the funds in the account, and the duty and obligation to act in
good faith and to deal fairly with Plaintiff in the exercise of its rights and
responsibilities under the Agreement.
(Doc. # 4, ¶ 17.)
Taylor Anderson attempts to argue around the force of the Economic Loss Rule
by suggesting that Defendants incurred allegedly “independent duties” by allegedly
agreeing to investigate the validity of the check. But that is just another way of saying
that the Defendants were performing their contractual duty “to take appropriate and
reasonable actions to protect and safeguard the funds in the account.” Further, for the
reasons stated above, Defendants fulfilled their investigative duties in informing Taylor
Anderson that, based on their investigation, the check had “cleared”—an accurate
representation of what had in fact occurred based on how that term is used in the
Agreement.
III.

CONCLUSION

For the foregoing reasons, it is ORDERED that Defendants’ Motion for Summary
Judgment (Doc. # 49) is GRANTED and the Motion to Dismiss (Doc. # 15) is GRANTED
as a converted motion for summary judgment. Accordingly, this case is DISMISSED
WITH PREJUDICE, and the Clerk of the Court shall enter judgment in favor of
Defendants and against Plaintiff. Pursuant to D.C.Colo.LCivR 54.1, Defendants

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may thereafter have their costs by filing a bill of costs within 14 days of the date of that
judgment.
DATED: March

31

, 2014
BY THE COURT:

________________________________
CHRISTINE M. ARGUELLO
United States District Judge

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