Summary: Defendant moved for summary judgment on both of plaintiff’s claims. The court granted defendant’s motion. Plaintiff sued defendant claiming defendant negligently allowed an imposter to open a checking account in another’s name and for violating plaintiff’s civil rights under 42 U.S.C. § 1983. Plaintiff conceded its section 1983 claim by failing to respond to defendant’s arguments. Plaintiff’s negligence claim fails because defendant fulfilled any duty of care it owed to plaintiff in this case.

Case Name: David Nuss v. Wells Fargo

Case Number: A2-00-33

Docket Number: 19

Date Filed: 2/20/01

Nature of Suit: 440

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NORTH DAKOTA

SOUTHEASTERN DIVISION

MEMORANDUM AND ORDER

            Plaintiff commenced this action in federal court seeking damages for plaintiff’s improper incarceration. Defendant’s motion for summary judgment is before the court. (Doc. # 9.) For the reasons articulated in this memorandum, the court grants defendant’s motion.

I. Background

            In October of 1996, an imposter of plaintiff was allowed to open a checking account in one of defendant’s North Dakota banks. The defendant employee who allowed the imposter to open the account filed an affidavit in this case. She asserts the imposter presented what appeared to be a valid Florida driver’s license. The imposter, a young man, explained why he had a Florida driver’s license. He said his parents were divorced and he had been living with one parent in Florida, but more recently had been living with the other parent in Grand Forks.

            The employee does not have any other specific memories of the relevant events. However, she stated that defendant has mandatory, routine policies and procedures that govern the process of opening new checking accounts. The person opening the account must appear in person and provide satisfactory identification. The identification must be issued by a state, federal or foreign government and provide the applicant’s photograph, full name and signature for verification purposes. The employee taking the application must ensure the applicant matches the photograph on the form of identification. The signature obtained in the employee’s presence must be matched against the signature on the identification to ensure they are the same. According to the employee, all of these verification procedures must be completed; otherwise the account cannot be opened.

            After opening the account, the imposter wrote non-sufficient fund (NSF) checks totaling $7,713.85. Defendant reported the unsatisfactory account history to a national reporting agency. Early in 1998, plaintiff attempted to open an account at the Bank of Pennsylvania. The Bank ran a credit check on plaintiff and found the NSF information from North Dakota. Plaintiff contacted defendant and provided proof that he could not have opened the earlier account or written the NSF checks. Defendant cleared plaintiff’s record and he was able to open the account with the Bank of Pennsylvania the next day. However, the Grand Forks County State’s Attorney’s office sought to prosecute the person who wrote the NSF checks. Plaintiff was arrested on June 18, 1999 and was extradited to North Dakota. Plaintiff was incarcerated at the Grand Forks Correctional Center until his release on August 4, 1999.

            Plaintiff has sued defendant for negligently allowing an imposter to open a checking account in another’s name and for violating plaintiff’s civil rights under 42 U.S.C. § 1983.

II. Discussion

            Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. Pro. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Rule 56 of the Federal Rules of Civil Procedure “mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. If the moving party has supported its motion for summary judgment, the nonmoving party has an affirmative burden placed on it to go beyond the pleadings and show a genuine triable issue of fact. Commercial Union Ins. Co. v. Schmidt, 967 F.2d 270, 271 (8th Cir. 1992). However, the court considering a motion for summary judgment must view the evidence in the light most favorable to the nonmoving party who enjoys “the benefit of all reasonable inferences to be drawn from the facts.” Vacca v. Viacom Broadcasting of Missouri, Inc. Et al., 875 F.2d 1337, 1339 (8th Cir. 1989)(citation omitted).

             Summary judgment is improper if the court finds a genuine issue of material fact; however, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment . . .” Schmidt, 967 F.2d at 271-72 (citation omitted). The issue is whether “the evidence is sufficient to allow a reasonable jury to return a verdict for the non-moving party.” Landon v. Northwest Airlines, Inc., 72 F.3d 620, 624 (8th Cir. 1995).

            Since this is a diversity action, North Dakota substantive law applies. Kovarik v. American Family Insurance Group, 108 F.3d 962, 964 (8th Cir. 1997). In resolving issues of state law presented in this action, this Court is bound by the decisions of the North Dakota Supreme Court. Id. If the North Dakota Supreme Court has not spoken on these issues, this Court must attempt to predict what that court would decide if it were faced with them. Id.

             Defendant has moved for summary judgment on both of plaintiff’s claims. Plaintiff did not respond to any of defendant’s arguments in favor of dismissing the 42 U.S.C. § 1983 claim, presumably conceding the motion on that claim is well taken. In addition, the court finds defendant did not act under color of state law, a necessary element of a § 1983 claim. Therefore, the § 1983 claim is dismissed. 

            As to the negligence claim, defendant seeks summary judgment, on the basis that it owed no duty to plaintiff, because a bank generally owes no duty to a non-customer with whom it has no relationship. The North Dakota Supreme Court has said negligence "consists of a duty on the part of an allegedly negligent person to protect the plaintiff from injury, a failure to discharge the duty, and a resulting injury proximately caused by the breach of the duty. " Hurt v. Freeland, 589 N.W.2d 551, (N.D. 1999) (quoting Diegel v. City of West Fargo, 546 N.W.2d 367, 370 (N.D. 1996)). If no duty exists on the part of the defendant, there is no negligence. Id. Whether a duty exists is generally a preliminary question of law for the court to decide. Id.

            In support of its argument defendant cites Schleicher v. Western State Bank, 314 N.W.2d 293, 297 (N.D. 1982). In Schleicher, the plaintiff was given a $300 check by a hitchhiker. Id. at 294. Before cashing the check, Schleicher called a bank in Crookston, MN to determine the validity of it. Id. An employee of the bank in Crookston then phoned Western State Bank (Western) and found out the payor listed on the check had a checking account at Western with sufficient funds to pay a $300 check. Id. Schleicher endorsed the check, sent it to Western and received a cashier’s check back. Id.

            Unfortunately, the hitchhiker was not the owner of the account on which the check was written. Id. The true owner of the account informed Western it had paid over a forged signature. Id. Western recredited the account and asked Schleicher to repay the money. Id. The Devils Lake police contacted Western and obtained a photocopy of the forged check. Id. The police turned over the results of their inquiry to the Ramsey County State’s Attorney, who charged Schleicher with theft of property. Id. Schleicher, who was arrested and spent time in jail, sued Western under several theories of recovery.

            One of the claims the court analyzed was negligence, specifically, whether Western owed the plaintiff a duty of care. The court ruled: “We decide that under these facts the Bank did not have the duty to the payee of a forged check to compare the signature of the payor with its signature card in order to determine the authenticity of the payor’s signature, where the payee is not a customer or depositor.” Id. at 297.

            Plaintiff, however, points to an Alabama case with similar facts to those alleged here. See Patrick v. Union State Bank, 681 So.2d 1364 (Al. 1996). Bridgette Patrick, the plaintiff, applied for renewal of her Alabama driver’s license and was issued a temporary license pending the issuance of a new permanent driver’s license. Id. at 1365. The temporary driver’s license did not contain a picture of the licensee. Id. Ms. Patrick later discovered her temporary driver’s license and a credit card were missing from her wallet. Id. An imposter to Bridgette Patrick opened a checking account at Union State Bank (Union) in Alabama using Patrick’s temporary driver’s license. Id. The Union employee who opened the account testified she noticed that

the imposter did not completely sign her last name on the account signature card; that she noticed that the signature on the card was different from the signature on Ms. Patrick’s temporary driver’s license; that she did not ask the imposter to verify the Social Security number by presenting a Social Security card; and that she did not attempt to verify either of the telephone numbers given to her by the imposter.

 Id.

            The imposter ended up writing numerous NSF checks that were posted in different counties and cities. Id. at 1365-66. Warrants for Patrick’s arrest were issued in 11 jurisdictions. Id. Patrick sued Union for negligently allowing an imposter to open a checking account in her name by failing to demand proper identification from the imposter and failing to verify information which had been obtained at the time the account was opened. Id. at 1366. When Union moved for summary judgment, the plaintiff presented the affidavit of a bank security expert, who:

expressed the opinion that almost all banks require photographic identification and that banks do this not only for their own protection, but for the protection of others as well. Moreover, Mr. Gruber stated that banks should compare the signature on the potential customer's identification with the signature on the bank's signature card. According to Mr. Gruber, it follows that several factors should have alerted the bank teller that the person opening the account in Bridgette Patrick's name was, in fact, an imposter. This included the lack of photographic identification, the different signatures on the stolen driver's license and the signature card, the incomplete signature on the signature card, and the different addresses presented by the imposter.

Id. at 1367.

            The Supreme Court of Alabama reversed the lower court’s grant of Union’s motion for summary judgment. The court held that a bank owes a duty of reasonable care to the person in whose name, and upon whose identification, an account is opened to ensure that the person opening the account and to whom the checks are given is not an imposter. Id. at 1371.

            This court must determine whether the North Dakota Supreme Court would find a bank owes a duty of reasonable care to the person in whose name an account is opened. While the Schleicher case is relevant, it is not necessarily dispositive; some distinguishing facts arguably provide greater reason to impose a duty here. There appears to be a greater likelihood of foreseeable harm to the victim in a case like this than in Schleicher. See Patrick, 681 So.2d at 1368 (concluding the success of the imposter’s scheme was directly related to the bank teller’s failure to verify properly the identification presented). Secondly, requiring a bank to follow reasonable standards in opening new accounts is not as burdensome as requiring a bank to verify that every check written on a customer’s account and presented for payment by a non-customer payee is not written by an imposter.

            There is also a greater relationship between the bank and the victim here. In Schleicher, the victim had no connection with the bank. Defendant argues there is no connection here between plaintiff and defendant, because plaintiff is not a client of defendant bank. However, it would ignore the big picture to say there is no connection whatsoever between the victim and the bank, because the bank allowed an account to be opened in the victim’s name.

            Consequently, this court cannot definitely say there is no duty owed in this state by a bank to a person in whose name a new account is opened. A definitive ruling could be achieved through certification of the question of law to the North Dakota Supreme Court. However, this court finds it unnecessary to certify the question because, even assuming that a duty does exist, defendant is still entitled to judgment as a matter of law on the undisputed facts.

            In this case, the defendant’s employee who opened the account submitted an affidavit stating certain routine policies must be followed every time a new account is opened. The person must present identification issued by a state, federal, or foreign government, which provides the applicant’s full name, photograph and signature for verification purposes. The employee taking the application must ensure the applicant matches the photograph on the form of identification. The signature obtained in the employee’s presence must be matched against the signature on the identification to ensure they are the same. According to the employee, all of these verification procedures must be completed; otherwise the account cannot be opened. The imposter presented what appeared to be a valid Florida drivers license, meeting the requirements of the bank’s policy.

            Plaintiff has not in any way challenged or rebutted the assertions made by defendant’s employee. See Commercial Union Ins. Co. v. Schmidt, 967 F.2d 270, 271 (8th Cir. 1992) (stating that if the moving party has supported its motion for summary judgment, the nonmoving party has an affirmative burden placed on it to go beyond the pleadings and show a genuine triable issue of fact). Plaintiff does, however, claim defendant could have done more to prevent an imposter from opening a bank account. For instance, plaintiff points out there is no indication from the defendant employee that the employee checked the imposter’s fingerprints, that the employee requested a second form of identification, that the employee verified a social security number, or that the employee consulted a guide setting forth the drivers licenses of each state and the security features built into those licenses.

            The court is aware that with nearly every new account, the bank could undertake more stringent screening to ensure the person opening the account is not an imposter. The bank could require more background checks and more proofs of identification. However, the duty of care (if there is one) should not be so high as to make it impossible (or highly invasive) for one to open a bank account. With this in mind, the court finds the thorough, though not onerous, measures followed by defendant bank in the opening of the account were reasonable and fulfilled any duty of care it may have owed to plaintiff.

            IT IS ORDERED that defendant’s motion for summary judgment (doc. #9) is granted. Plaintiff's complaint and causes of action are dismissed, with prejudice, and judgment shall be entered accordingly.

JUDGMENT

It is ORDERED, ADJUDGED and DECREED that plaintiff’s complaint and causes of action are dismissed with prejudice.

Dated: February _____, 2001.

                                                                                                _____________________________

                                                                                                Karen K. Klein

                                                                                                United States Magistrate Judge