Grodner & Associates v. Regions Bank

Filing 38

RULING granting 15 Motion for Summary Judgment. Plaintiff's claims are dismissed with prejudice. The Oral Argument set for Monday, September 10, 2018 is hereby CANCELED. All pending motions are denied as moot, and the Clerk of Court is directed to terminate these motions. Judgment shall be entered accordingly. Signed by Chief Judge Shelly D. Dick on 9/5/2018. (SWE)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

GRODNER & ASSOCIATES, APLLC

CIVIL ACTION
17-44-SDD-RLB

VERSUS
REGIONS BANKS

RULING
This matter is before the Court on the Motion for Summary Judgment,1 filed by
Defendant Regions Bank (“the Bank”).

Plaintiff, Grodner & Associates, APLLC

(“Plaintiff”), has filed an Opposition2 to this motion, to which the Bank filed a Reply.3 For
the reasons which follow, the Bank’s motion shall be GRANTED.
I.

BACKGROUND
Plaintiff is a Baton Rouge law firm that utilized the Bank for its day-to-day banking.4

Plaintiff hired Anna Alford (“Alford”) as its bookkeeper in February 2015.5 A mere month
after Alford began working for Plaintiff, she began forging checks that she would
sometimes present to the Bank’s College Drive branch, and the Bank would cash the
checks.6 Alford also received funds from fraudulent Automated Clearing House (“ACH”)
transactions. Plaintiff claims that the Bank had previously placed Alford on “a list” based

1

Rec. Doc. No. 15.
Rec. Doc. No. 21.
3
Rec. Doc. No. 25.
4
Rec. Doc. No. 1-2, ¶¶ 1, 6.
5
Id. at ¶ 6.
6
Id. at ¶ 13.
2

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on her alleged past fraudulent banking conduct.7 Plaintiff contends the Bank never
notified Plaintiff about Alford’s history,8 and the Bank failed to follow its policy of calling
Plaintiff to gain telephone approval to disburse funds any time a non-account holder
attempted to cash a check drawn on the Bank.9
Plaintiff also claims Alford would intercept the bank statements sent by the Bank
and would photo shop the bank statements to conceal her fraudulent activity.10 Only
when Plaintiff’s manager and member, Donna Grodner (“Grodner”), bounced a personal
check in June 2016, was Alford’s fraud finally detected.11 Plaintiff claims that, in June
2016, Grodner “could not figure out why the books did not seem consistent with reality.”12
Plaintiff also contends the Bank was either in bad faith or grossly negligent in failing
to check the signature on Alford’s checks against Plaintiff’s signature card or
contemporaneous checks.13

Plaintiff maintains it is not liable on these instruments

because the checks were not signed by Grodner, the only authorized signer.14 Further,
Plaintiff alleges that, if the Bank had checked Plaintiff’s bank statements prior to cashing
Alford’s checks, it would have discovered that Alford was paid by ACH and never by check
like all of Plaintiff’s employees.15
Plaintiff contends Grodner exercised reasonable care in checking the firm’s bank
statements, but Alford’s photo shopped statements prevented her from ascertaining the

7

Id. at ¶ 7.
Id. at ¶ 8.
9
Id. at ¶ 9.
10
Id. at ¶ 15.
11
Id. at ¶ 16.
12
Id.
13
Id. at ¶ 20.
14
Id. at ¶ 21.
15
Id. at ¶ 22.
8

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fraud.16 Due to the alleged bad faith or gross negligence on the part of the Bank, Plaintiff
contends Alford was paid more than $150,000.00 over the course of a little over a year,
which constitutes conversion under Louisiana law.17
The Bank maintains that it is not responsible for Plaintiff’s losses because Plaintiff’s
own conduct substantially contributed to the alleged forgeries.18 The Bank notes that
Grodner admitted in her deposition that her previous bookkeeper had defrauded Plaintiff
in the same or similar manner as Alford.19

Further, Plaintiff’s losses resulted from

Plaintiff’s failure to exercise ordinary care in supervising its employee and timely
examining its bank statements.20 Additionally, the Bank claims it owed no duties to
Plaintiff beyond those set forth in the Deposit Agreements governing Plaintiff’s operating
(account ending in 1715) and trust (account ending in 1634) accounts and applicable
law.21
Grodner met with the Bank’s College Drive branch employee Jorge CanedoMartinez (“Martinez”) in June 2016, and together they identified a number of unauthorized
items made payable to Alford that had cleared Plaintiff’s bank accounts, dating back to
January 2016 on one account and April 2016 on the other. Subsequent to this meeting,
Martinez prepared two Affidavits of Claimant Negotiable Instruments, one identifying
unauthorized items paid to Alford from the firm’s operating account, and a second that
identified the unauthorized items paid to Alford from the firm’s trust account.22 One week

16

Id. at ¶ 26.
Id. at ¶ 28.
18
Rec. Doc. No. 5 at 4.
19
Rec. Doc. No. 15-3 at 15 (Deposition of Donna Grodner, p. 14).
20
Id. at 4-5.
21
Id. at 5.
22
Rec. Doc. Nos. 15-16 & 15-17.
17

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after receiving these Affidavits, Grodner reviewed and executed the documents.
However, Plaintiff’s claims for reimbursement were ultimately denied by the Bank as
untimely under both the Deposit Agreement and Louisiana law.23 This letter prompted
Plaintiff to file this lawsuit.
The record reflects that Grodner identified as forgeries 44 checks drawn on the
operating account.24 Grodner testified that the oldest of these forgeries was check
number 6760, dated March 20, 2015.25 The Bank claims Grodner admitted that this check
was listed and reproduced in full on the account statement for the period of February 28,
2015 through March 31, 2015, which was mailed by the Bank to Plaintiff; however, the
Bank cites to an admission not included in the cited exhibit.26
Grodner acknowledged that there were 25 checks identified as forgeries drawn on
the trust account, and the earliest item was check number 3113, dated March 26, 2015.27
Again, the Bank claims Grodner admitted that this check was listed and reproduced in full
on the account statement for the period of February 28, 2015 through March 31, 2015
which was mailed by the Bank to Plaintiff; however, the Bank cites to an admission not
included in the cited exhibit.28
Further, the Bank claims that, of the 69 checks at issue, only 15 of the forged
checks were cashed by Alford at one of the Bank’s branches, and only 3 were cashed by

23

Rec. Doc. No. 15-18.
Rec. Doc. No. 15-19.
25
Rec. Doc. No. 15-3 at 60-61 (Deposition of Donna Grodner, pp. 59-60).
26
Defendant cites to Rec. Doc. No. 15-15, Response to Request for Admission No. 13, but this document
ends at Request for Admission No. 11.
27
Rec. Doc. No. 15-3 at 59-60 (Deposition of Donna Grodner, pp. 58-59).
28
Defendant cites to Rec. Doc. No. 15-15, Response to Request for Admission No. 14, but this document
ends at Request for Admission No. 11.
24

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Alford at the Bank’s College Drive branch.29 Indeed, the record reflects that the majority
of checks were cashed by Alford at Wal-Mart stores.30
Plaintiff also contends Alford made 34 unauthorized ACH transactions from the
operating account over the course of fifteen months.31 Grodner testified that the oldest
of these ACH transactions was made on April 15, 2015.32 The Bank contends this
transaction appeared on the account statement for the period of April 1, 2015 through
April 30, 2015 that was mailed by the Bank to Plaintiff.33
The Bank now moves for summary judgment on the basis that (1) Plaintiff failed to
report Alford’s fraud within the time period set forth by the Deposit Agreement or within
the deadline set forth by Louisiana law; (2) the Bank exercised ordinary care and was not
required by the Deposit Agreement or by law to check the signatures on Plaintiff’s checks;
(3) the “same wrongdoer” rule precludes Plaintiff’s recovery against the Bank; and (4) the
Bank was not a fiduciary.
II.

LAW AND ANALYSIS
A.

Summary Judgment Standard

“The court shall grant summary judgment 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.”34 “When assessing whether a dispute to any material fact exists, we consider all
of the evidence in the record but refrain from making credibility determinations or weighing

29

Rec. Doc. No. 15-14.
Id.
31
Rec. Doc. No. 15-19 at 5.
32
Rec. Doc. No. 15-3 at 61 (Deposition of Donna Grodner, pp. 60).
33
Rec. Doc. No. 15-4 (Affidavit of Jorge M. Canedo-Martinez).
34
Fed. R. Civ. P. 56(a).
30

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the evidence.”35 A party moving for summary judgment “must ‘demonstrate the absence
of a genuine issue of material fact,’ but need not negate the elements of the nonmovant’s
case.”36 If the moving party satisfies its burden, “the non-moving party must show that
summary judgment is inappropriate by setting ‘forth specific facts showing the existence
of a genuine issue concerning every essential component of its case.’”37 However, the
non-moving party’s burden “is not satisfied with some metaphysical doubt as to the
material facts, by conclusory allegations, by unsubstantiated assertions, or by only a
scintilla of evidence.”38
Notably, “[a] genuine issue of material fact exists, ‘if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.’”39 All reasonable factual
inferences are drawn in favor of the nonmoving party.40 However, “[t]he Court has no
duty to search the record for material fact issues. Rather, the party opposing the summary
judgment is required to identify specific evidence in the record and to articulate precisely
how this evidence supports his claim.”41 “Conclusory allegations unsupported by specific
facts … will not prevent the award of summary judgment; ‘the plaintiff [can]not rest on his
allegations … to get to a jury without any “significant probative evidence tending to
support the complaint.”’”42
35

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008).
Guerin v. Pointe Coupee Parish Nursing Home, 246 F.Supp.2d 488, 494 (M.D. La. 2003)(quoting Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)(en banc)(quoting Celotex Corp. v. Catrett, 477 U.S.
317, 323-25, 106 S.Ct. at 2552)).
37
Rivera v. Houston Independent School Dist., 349 F.3d 244, 247 (5th Cir. 2003)(quoting Morris v. Covan
World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998)).
38
Willis v. Roche Biomedical Laboratories, Inc., 61 F.3d 313, 315 (5th Cir. 1995)(quoting Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
39
Pylant v. Hartford Life and Accident Insurance Company, 497 F.3d 536, 538 (5th Cir. 2007)(quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).
40
Galindo v. Precision American Corp., 754 F.2d 1212, 1216 (5th Cir. 1985).
41
RSR Corp. v. International Ins. Co., 612 F.3d 851, 857 (5th Cir. 2010).
42
Nat’l Ass’n of Gov’t Employees v. City Pub. Serv. Bd. of San Antonio, Tex., 40 F.3d 698, 713 (5th Cir.
36

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B.

Timely Reporting of the Fraud under the Deposit Agreement and
Louisiana Law
1. Plaintiff is Bound by the 2015 Deposit Agreement

The Bank contends that the 2007 Deposit Agreement,43 which was in place when
Plaintiff opened the accounts at issue, and the 2015 Deposit Agreement,44 which
superceded the 2007 Deposit Agreement, govern the relationship between the Parties.
Plaintiff claims that it never received notice nor did it agree to any modifications to the
2007 Deposit Agreement; thus, the 2015 Deposit Agreement is irrelevant to this case.
Plaintiff also argues that the Signature Card is the only contract between the Parties in
this case, and, but for the Bank’s breach of its duty to inspect and compare signatures
pursuant to the Signature Card, Plaintiff would not have been defrauded.
Despite arguing that Plaintiff is not subject to the terms of the Deposit Agreement,
Plaintiff cites the language of the Signature Card which expressly provides that “the
person(s) signing below … (b) agrees to be bound by the terms of the Bank’s Deposit
Agreement and pricing schedule as now in force and as may be amended thereafter
… .”45 Grodner admitted in her deposition that she signed these documents; 46 therefore,
any argument that the 2015 Deposit Agreement does not constitute the contract between
the Parties is without merit and belied by Grodner’s own admission. Nevertheless, the
Bank submits both the 2007 and 2015 Deposit Agreements and contends that the
sections at issue in this litigation are unchanged from the 2007 to the 2015 agreement.

1994)(quoting Anderson, 477 U.S. at 249).
43
Rec. Doc. No. 15-8.
44
Rec. Doc. No. 15-9.
45
Rec. Doc. No. 21 at 1, quoting Rec. Doc. No. 15-5 at 2 (emphasis added).
46
Plaintiff’s argument is undermined by Rec. Doc. Nos. 15-5 & 15-6 which Grodner admitted she signed
upon opening these accounts. Rec. Doc. No. 15-3 at 23 (Deposition of Donna Grodner, p. 22).

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Plaintiff does not dispute this fact.
2. Legal and Contractual Deadlines to Report Fraud
Section 10 of the 2015 Deposit Agreement states as follows:
Review of Statements. You are responsible for exercising reasonable
promptness in examining your account statement each statement period, or
if provided, originals or imaged copies of cancelled checks, or your account
activity through the internet if we provide such access, to determine whether
any payment or debit was not authorized because of an alteration of an item
or because a signature or endorsement on the item was unauthorized, or
for any other discrepancy or reason for which you believe that the debit is
not correct. If you discover an unauthorized payment or other discrepancy,
you must promptly notify us in writing of the relevant facts. Your report must
identify the specific items or debits that you are challenging.
If you fail to comply with your duty to examine your statements and
account activity and report errors, discrepancies, and unauthorized
transactions, in addition to any and all other rights available to us, we shall
have the defenses contained in §4-406 of the Uniform Commercial Code
(UCC), as amended, as adopted in the state in which your account was
established. In addition, if your claim involves a series of items
containing unauthorized signatures or alterations by the same
wrongdoer, you shall be precluded from asserting against us any
unauthorized signature or alteration by the same wrongdoer on any
item paid in good faith on or after 10 calendar days after the first
statement describing the first altered or unauthorized items was sent
or made available to you. By this provision, you and we intend to define a
reasonable time period for the examination of bank statement for the
purposes of the “Repeater Rule,” or the “Same Wrongdoer” rule as provided
in § 4-406(d) of the UCC.47
It is undisputed that both the law48 and the Deposit Agreement impose on the

47

Rec. Doc. No. 15-5 at 10 (emphasis added).
La. R.S. § 10:4-406(c) provides: “If a bank sends or makes available a statement of account or items
pursuant to Subsection (a), the customer must 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 must promptly notify the bank of the relevant facts.”

48

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customer the obligation to review bank statements promptly to determine any fraudulent
activity. The Bank argues that Plaintiff’s claims are barred by both the Deposit Agreement
and La. R.S. § 10:4-406 because Plaintiff failed to properly inspect its bank statements
and did not report the fraud for well over a year after receiving the bank statements that
indicated fraud.
Plaintiff claims it complied with its obligation to review the bank statements but was
unable to detect the fraud because Alford photo-shopped the bank statements. Further,
Plaintiff claims that the bank statements “do not provide sufficient information as to who
the payees are and for whom.”49 For example, Grodner claims that, because Plaintiff has
two Entergy accounts, the fact that two Entergy payments appeared on the bank
statements did not alert Grodner to fraudulent activity although it was later discovered
that one of the Entergy payments was made on Alford’s personal Entergy account.
Plaintiff’s argument demonstrates a misunderstanding of what is required of the
Bank. The law does not require that Plaintiff actually received the statements; it requires
only that the Bank sent or made the statements available to its customers.50 There is no
evidence that the Bank failed to timely send the bank statements to Plaintiff, and Grodner
admitted that the Bank properly sent the monthly bank statements to the correct address.
The Bank cannot be responsible for what happened to the bank statements once in the
hands of Alford, an employee Plaintiff authorized to receive and open the mail.51
49

Rec. Doc. No. 21 at 7.
See Grubaugh v. Central Progressive Bank, No. 13-3045, 2014 WL 794141 at * 3 (E.D. La. Feb. 27,
2014)(citing Gulf States Section, PGA, Inc. v. Whitney National Bank of New Orleans, 96–0844 (La.App.
4 Cir. 2/12/97) 689 So.2d 638, 640–641 (precluding recovery on forged checks despite the court's finding
that the plaintiff's employee was intercepting the true statements and replacing them with forged
statements)).
51
Grodner testified that, during the relevant time period, there was no procedure in place that prohibited
the firm’s bookkeeper from opening the monthly bank statements. Rec. Doc. No. 15-3 at 13 (Deposition of
50

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3. “Same Wrongdoer” Defense
The Bank also contends Plaintiff’s claims are barred under the “Same Wrongdoer”
Rule, which is set forth above in the Deposit Agreement and codified in La. R.S. § 10:4406(d)(2):
(d) If the bank proves that the customer failed, with respect to an item, to
comply with the duties imposed on the customer by Subsection (c), the
customer is precluded from asserting against the bank:
(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 thirty days, in which to examine the item or statement of
account and notify the bank.
Louisiana state courts hold that the “same wrongdoer” rule “imposes on the
customer the risk of loss on all subsequent forgeries by the same wrongdoer after the
customer had a reasonable time to detect an initial forgery if the bank has honored
subsequent forgeries prior to notice.”52 In Marx v. Whitney National Bank, the Louisiana
Supreme Court found that, because the plaintiff did not review and notify the defendant
bank of the initial forgeries appearing in a bank statement within thirty days of receipt of
that statement, he was “precluded from asserting against the bank all subsequent
forgeries by the same unauthorized signatory.”53
Here, it is undisputed that Plaintiff did not notify the Bank within 10 days (under the
Deposit Agreement), or within 30 days (under La. R.S. § 10:4-406(d)(2)), of the first forged

Donna Grodner, p. 12).
52
ASP Enterprises, Inc. v. Guillory, 2008-2235 (La. App. 1 Cir. 9/11/09), 22 So.3d 964, 979 (quoting Marx
v. Whitney Nat. Bank, 97-3213 (La. 7/8/98), 713 So.2d 1142, 1146))(emphasis original)(internal quotation
marks omitted).
53
Marx, 713 So.2d at 1147 (emphasis original).

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check appearing on its February through March 2015 bank statement. Further, it is
undisputed that all of the forgeries claimed in this case were made by the same
wrongdoer, Alford. As the Bank has established these facts, the burden is on Plaintiff to
present competent evidence that the Bank failed to exercise ordinary care in honoring the
checks. Plaintiff argues that the Bank failed to exercise ordinary care by failing to honor
its obligation under the Signature Card to inspect and compare signatures.
4. The Bank’s Obligations Pursuant to the Signature Card
Plaintiff maintains that, pursuant to the Signature Card, the Bank may only honor
the signature that appears on the Signature Card in making payments of any nature.
Further, Plaintiff contends Grodner did not authorize the use of stamp or fax signatures
for electronic transactions.
The Bank cites to a portion of Section 5 of the 2015 Deposit Agreement with
respect to honoring signatures:
Authorized Signers; Remotely Created Drafts; Facsimile Signatures. …We
may, if we elect to do so, honor items signed in a different form from that
set forth on the signature card…If you use a facsimile signature or other
form of signature for signing or authenticating items drown on your
account, you assume the entire risk that such facsimile signature or
device will be used improperly or by an unauthorized person. We will
have no liability to you for paying items signed or authenticated by
any person who is not authorized to affix such facsimile signature or
use such device or by any person who exceeds his or her authority to
do so.54
The Bank also cites the opinion of “leading Uniform Commercial Code commentators”
regrading signature verification under modern banking practices:
In an era of automated check processing, signature verification is a
dinosaur. No longer do we find people with green eyeshades comparing
54

Rec. Doc. No. 15-9 at 8 (emphasis added).

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checks against signature cards in some musty back room of the bank.
Widespread use of facsimile signature machines and rubber stamps would
make such a practice reckless, even if it did not cost a penny. Eliminating
signature verification saves enormous costs, to the benefit of all depositors.
In its wisdom, the Revision recognizes this economic fact of life. If the courts
follow the direction of the statute, drawee bank negligence based on faulty
signature verification should pay a very limited role in deciding check forgery
cases under Revised UCC §§ 3-406 and 4-406. The Revision does not
entirely do away with signature verification, but it makes legal rights turn on
industry practice, which is rapidly moving in that direction.55
The Bank contends its contractual provisions comport with industry standards, and the
Bank’s practices regarding signature verification comply with the standard of ordinary
care as practiced by other commercial banks.
Thus, the Bank claims Plaintiff’s negligence/conversion claim fails because (1) the
Bank had no duty to compare the signatures of the forged items against the signature
card, and Plaintiff agreed to this in the Deposit Agreement; (2) the practice of not checking
signatures under modern banking practices falls within the ordinary standard of care; and
(3) Grodner admits that Alford was given access to Plaintiff’s signature stamp along with
an electronic file of Grodner’s signature which was used on 64 out of the 69 checks at
issue in this case;56 thus, checking the signatures on these 64 checks would have been
futile.
The Court agrees and finds that Plaintiff has failed to carry its burden of
demonstrating that the Bank failed to use ordinary care. Plaintiff offers the incongruous
arguments that it is not a party to the 201557 Deposit Agreement,58 yet the Bank is bound

55

Rec. Doc. No. 15-1 at 15, quoting Barkley Clark and Barbara Clark, The Law of Bank Deposits,
Collections, & Credit Cards, Chapter 10, § 10.06[2] (2015).
56
Rec. Doc. No. 15-3 at 72-73 (Deposition of Donna Grodner, pp. 71-72); Rec. Doc. No. 15-14.
57
Plaintiff repeatedly erroneously refers to the 2015 Deposit Agreement as the 2017 Deposit Agreement.
58
This argument is without merit for the reasons previously discussed herein.

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by the terms of the 2015 Deposit Agreement. Plaintiff also argues that the Bank is not
relieved of its contractual obligations simply because the contract is “outdated according
to market trends.”59 Plaintiff maintains that the Bank was obligated to honor only the
signature on the Signature Card; thus, it was required to check and verify the signature
before making any payments. Plaintiff argues that the Bank’s “excuses” along with
evidence that it never intended to compare signatures “smacks in fraud.”60 Nevertheless,
Plaintiff fails to cite any jurisprudence to support the claim that a bank is fraudulent in
relying on the contract provisions that govern the relationship between the parties.
The Court finds that the Bank exercised ordinary care and complied with its
obligations under the governing contracts. Plaintiff claims the Bank had a policy or
practice of calling Grodner any time someone other than she presented checks to be
cashed. However, Plaintiff failed to present any evidence of such a policy, written or
otherwise. Further, “[t]he mere fact that a forgery of a signature on a check is not detected
does not prove that a bank's signature verification procedures are not in accordance with
reasonable commercial standards of the banking industry.”61 Additionally, “[t]he statutory
definition of ‘ordinary care’ suggests that ‘adherence to local business standards and
practices can be equated with the exercise of ordinary care, even if those practices are
not necessarily in the customer's interest.’”62
The Bank relies on the Louisiana First Circuit Court of Apeal’s decision in Groue

59

Rec. Doc. No. 21 at 3.
Id. at 5.
61
ASP Enterprises, 22 So.3d at 977 (citing Gulf States Section, PGA, Inc. v. Whitney Nat'l Bank of New
Orleans, 96–0844, p. 9 (La.App. 4th Cir.2/12/97), 689 So.2d 638, 643).
62
Id. (quoting A. Brooke Overby, Check Fraud in the Courts After the Revisions to U.C.C. Articles 3 and 4,
57 Ala. L.Rev. 351, 379 (2005)).
60

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v. Capital One.63 In Groue, the plaintiff sued the bank after Sherrie L. Simms, who was
living with him, obtained a series of checks from his home and forged his signature on
several checks which the bank deposited and debited against the plaintiff account in June
2007.64 Simms also allegedly intercepted the bank statements to prevent the plaintiff
from detecting the fraud.65 Approximately 105 checks were forged causing the plaintiff to
suffer a loss of $11,800.00.66 The plaintiff only learned of the forgeries when he received
his August 2007 bank statement on September 5, 2007.67

The trial court entered

judgment dismissing the plaintiff’s claims against the bank, and the plaintiff appealed,
arguing that the bank failed to exercise ordinary care in paying the checks.68
As in the present case, Groue and Capital One were subject to a Deposit
Agreement that required a customer to promptly check the bank statements and report
any fraudulent activity within ten calendar days.69 Notwithstanding the fact that the bank
statements were allegedly stolen, the appellate court found that the plaintiff failed to
comply with his duties under the Deposit Agreement and the law. The court held: “Early
detection of Simms' forgeries could have prevented the subsequent losses, and plaintiff's
failure to review the June 2007 statement precludes him from asserting all subsequent
forgeries by that same unauthorized signatory.”70
The Groue court also rejected the plaintiff’s contention that the bank could not
shorten a legal notice or prescriptive period:
63

2010-0476 (La.App. 1 Cir. 9/10/10), 47 So.3d 1038.
Id. at 1039-40.
65
Id. at 1040.
66
Id. at 1039-40.
67
Id. at 1040.
68
Id.
69
Id. at 1042.
70
Id. (citing Marx, 713 So.2d at 1147).
64

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[B]anks and customers may modify their duties by contract as described in
LSA–R.S. 10:4–103. See Peak v. Tuscaloosa Commerce Bank, 96–1258,
p. 8 (La.App. 1 Cir. 12/29/97), 707 So.2d 59, 64. Louisiana Revised Statutes
10:4–103(a) states, in pertinent part:
The effect of the provisions of this Chapter may be varied by
agreement, but the parties to the agreement cannot disclaim a bank's
responsibility for its lack of good faith or failure to exercise ordinary
care or limit the measure of damages for the lack or failure. However,
the parties may determine by agreement the standards by which the
bank's responsibility is to be measured if those standards are not
manifestly unreasonable.
As such, a bank and its customer may contract for any object which is lawful,
possible, determined or determinable, and once the contract has been
established, it is the law between the parties. Peak, 96–1258 at p. 8707,
707 So.2d at 64 (citing LSA–C.C. arts. 1971 and 1983).71
Notably, the Groue court also held that La. R.S. § 10:3–103(a)(7), which defines
“ordinary care,” “does not impose a duty upon a paying bank to inspect every check to
verify signatures appearing thereon prior to processing the check for payment. The mere
fact that a bank may have paid an item over a forged signature does not establish that a
bank failed to exercise ‘ordinary care.’”72
Accordingly, Plaintiff has failed to demonstrate a deviation from the Bank’s own
policies and procedures, the language of the Deposit Agreement and Signature Card, or
local banking standards and practices. Plaintiff’s claims are time barred under the law
and the contract between the Parties.
5. Plaintiff Failed to Exercise Ordinary Care
The Court finds that the record is replete with evidence demonstrating that Plaintiff
failed to exercise ordinary care, and Plaintiff’s own negligence caused the losses Plaintiff

71
72

Id. at 1041.
Id. at 1044.

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has suffered. Plaintiff does not dispute that its bookkeeper immediately preceding Alford
defrauded the firm in similar fashion by forging checks. Despite this history, Plaintiff
allowed Alford significant access to its finances and continued to allow Alford to open the
firm’s bank statements.73

Additionally, despite Alford’s altering the signatures on

numerous bank statements, several ACH transactions explicitly list Alford’s name and
should have alerted Plaintiff that a more substantive review of the statements were
necessary.74
Grodner also admitted that she allowed Alford to use her signature stamp on a few
occasions and, although it was only to be used with Grodner’s permission, the stamp was
kept in a “double lockbox” to which Alford was given the keys.75 By Grodner’s own
admission, Plaintiff assumed the risk set forth in Section 5 of the Deposit Agreement: “If
you use a facsimile signature or other form of signature for signing or authenticating items
drown on your account, you assume the entire risk that such facsimile signature or
device will be used improperly or by an unauthorized person. We will have no liability
to you for paying items signed or authenticated by any person who is not authorized to
affix such facsimile signature or use such device or by any person who exceeds his or
her authority to do so.”76
Plaintiff appears to place a greater burden on the Bank to supervise the conduct
of its employee than Plaintiff itself was willing to undertake. Plaintiff alleges that the Bank
should have “paused” and “realized” that Alford was an ACH employee paid every two

73

Rec. Doc. No. 15-3 at 12-14 (Deposition of Donna Grodner, pp. 11-13).
See Rec. Doc. No. 19-1 at 6, Regions Bank Statement on Account ending in 1715, dated January 30,
2016 through February 29, 2016, ACH transaction of 2/23 payable to Anna Alford.
75
Id. at 73 (Deposition of Donna Grodner, p. 72).
76
Rec. Doc. No. 15-9 at 8 (emphasis added).
74

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weeks like Plaintiff’s other employees.77 Plaintiff further alleges that the Bank should
have “paused” and realized that Alford “did not make that kind of money,” and should not
have believed a bookkeeper made “commission.”78 According to Plaintiff, the Bank
should have “paused and used a little common sense” because it should have known
“that bookkeepers do not make that kind of money.”79 To the contrary, the record in this
case demonstrates that Plaintiff should have paused and investigated Alford’s
background before hiring her; monitored the financial affairs of the firm more closely
considering the embezzlement by the previous bookkeeper; protected Grodner’s
signature stamp from unauthorized access; and realized something was amiss before
losing over $150,000.00 at the hands of its employee. Indeed, it is simply not the Bank’s
duty or responsibility, under the law or the Deposit Agreements, to make the inquiries
Plaintiff suggests or to rectify Plaintiff’s failure to supervise its employees and failure to
implement rudimentary internal controls.
In a similar case, the District Court for the Eastern District of Louisiana noted that
“[o]ne persistent undercurrent of the banking laws that apply to this action are that bank
customers have a duty to monitor their own affairs.”80 The obligation was on Plaintiff to
monitor the financial affairs of the firm, safeguard its assets and access to funds, and
supervise the conduct of its employees. It is simply an untenable argument that the Bank
had this obligation rather than the Plaintiff.

77

Rec. Doc. No. 1-2, ¶ 22.
Id. at ¶ 23.
79
Id. at ¶ 24.
80
Grubaugh v. Central Progressive Bank, No. 13-3045, 2014 WL 794141 at *4 (E.D. La. Feb. 27, 2014).
78

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C.

Plaintiff’s Claims are Untimely Without Consideration of Fault81

Notwithstanding the Court’s reasoning and analysis set forth above in
consideration of the fault of the Parties, Plaintiff’s claims are time barred as a matter of
law even without regard to fault. La. R.S. § 10:4–406(f) provides:
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 (Subsection (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
alteration. (emphasis added).
Notably, good faith considerations are wholly irrelevant under La. R.S. § 10:4–
406(f).

Plaintiff had one year to report any unauthorized signatures or alterations but

failed to do so. Plaintiff’s meritless claims regarding the alleged illegality of shortening a
legal prescriptive period were considered and rejected by the court in Groue, in keeping
with a wealth of jurisprudence on the issue.
The court in Grubaugh v. Central Progressive Bank addressed a bank customer’s
claim of conversion pursuant to La. R.S. § 10:3–420, which carries a prescriptive period
of one year, against the bank after the customer’s mother and sister obtained checks and
forged fraudulent checks on his account.82 Because the plaintiff failed to establish fraud
on the part of the bank, the court held that the theory of contra non valentum did not toll
the prescriptive period, and the plaintiff’s conversion claims had prescribed. The court
stated:

81

Plaintiff has not argued that contra non valentum should apply in this case to interrupt prescription;
however, the Court finds that the doctrine of contra non valentum is nonetheless unavailable to Plaintiff
because it would require a showing of fraudulent concealment on the part of the Bank, which has not been
demonstrated here. See Peak Performance Physical Therapy & Fitness, LLC v. Hibernia Corp., 2007-2206
(La.App. 1 Cir. 6/6/08), 992 So.2d 527, 533.
82
2014 WL 794141 at *1.

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This conclusion best reflects the UCC's “goals of certainty of liability, finality,
predictability, uniformity, and efficiency in commercial transaction,” as well
as the tenet that the “victim of conversion is often in the best position
to prevent or detect the loss, and thus should be responsible to
monitoring their accounts and employees to detect if they have been
the victim of conversion of funds.”83
Accordingly, Plaintiff is precluded from making claims for Alford’s unauthorized
signatures and/or alterations as a matter of law.84
D.

The Bank is not a Fiduciary

Plaintiff’s Petition does not appear to allege that the Bank was a fiduciary.
However, Plaintiff’s arguments in briefing suggest that Plaintiff believes the Bank owed
Plaintiff numerous duties outside those clearly set forth in the Deposit Agreement. To the
extent that Plaintiff has asserted this claim, it is clearly foreclosed by Louisiana law. La.
R.S. § 6:1124 states, in pertinent part:
No financial institution or officer or employee thereof shall be deemed or
implied to be acting as a fiduciary, or have a fiduciary obligation or
responsibility to its customers or to third parties other than shareholders of
the institution, unless there is a written agency or trust agreement under
which the financial institution specifically agrees to act and perform in the
capacity of a fiduciary. The fiduciary responsibility and liability of a financial
institution or any officer or employee thereof shall be limited solely to
performance under such a contract and shall not extend beyond the scope
thereof. [ ... ] This Section is not limited to credit agreements and shall apply
to all types of relationships to which a financial institution may be a party.
Plaintiff has provided no evidence that the Bank assumed any fiduciary duties or
obligations outside of the Deposit Agreements governing the relationship of the Parties.

83

Id. at *5 (quoting Specialized Loan Servicing, LLC v. January, 2012-2668 (La. 6/28/13), 119 So.3d 582,
589–590)(emphasis added).
84
The Court notes that Plaintiff repeatedly refers to breach of contract and argues its claims are subject to
a 10 year prescriptive period. However, Plaintiff has not asserted a breach of contract claim against the
Bank, and the Petition states only one cause of action for “GROSS NEGLIGENCE/CONVERSION.” Rec.
Doc. No. 1-2, ¶ 29.

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Plaintiff has failed to present any legal authority for, or evidence of, any written policy that
required the Bank to call Plaintiff for approval before cashing checks, required the Bank
to check and compare signatures, or required the Bank to know the salary and payment
procedures for Plaintiff’s employees. The Court finds, as a matter of law, that Plaintiff has
no claim against the Bank for breach of fiduciary duty because it has failed to offer
summary judgment evidence to support the conclusion that a fiduciary relationship
existed.
III.

CONCLUSION
For the foregoing reasons, the Motion for Summary Judgment85 filed by Regions

Bank is GRANTED. Plaintiff’s claims are dismissed with prejudice.
The Oral Argument set for Monday, September 10, 2018 is hereby CANCELED.
All pending motions are denied as moot, and the Clerk of Court is directed to terminate
these motions.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
Baton Rouge, Louisiana, this 5th day of September, 2018.

S

________________________________
SHELLY D. DICK
CHIEF DISTRICT JUDGE
MIDDLE DISTRICT OF LOUISIANA

85

Rec. Doc. No. 15.

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