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Ulla Lundgren, Dba A Step Forward Shoes v. Bank of America

October 4, 2011


The opinion of the court was delivered by: Claudia Wilken United States District Judge


Defendants Bank of America, N.A. and Bank of America Corporation (collectively, Bank of America) move pursuant to 14 Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiff Ulla 15 Lundgren's complaint. Docket No. 4. Plaintiff opposes the 16 motion. Having considered all of the parties' submissions and 17 18 oral argument, the Court GRANTS IN PART Bank of America's motion 19 to dismiss, and DENIES IT IN PART. 20


Plaintiff has alleged causes of action based on the following facts.

In 2003, Plaintiff opened a checking account at a branch of Bank of America located in Oakland, California. The deposits in 25 26 the account stood to Plaintiff's credit, for her use and benefit, and were governed by the terms and conditions set forth in the 28 passbook and a signature card contract. Withdrawals were permitted from the account only by check or other order bearing 1 2 Plaintiff's signature. Also in 2003, Plaintiff hired Catherine Bullard as a bookkeeper for her business. From about 2005 through 4 2010, Bullard prepared checks without Plaintiff's knowledge and 5 authorization payable to various vendors from which Plaintiff 6 purchased inventory. The checks were not made in response to 7 invoices from said vendors and were not intended by Bullard to be 8 paid to the vendors. The checks were never tendered to the 9 10 vendors. Instead, Bullard deposited the checks into her own personal account or that of others, using Bank of America's ATM machines. Many of these forged checks lacked an endorsement. The 13 forged checks, including those without endorsements, were paid by 14

Bank of America. Although the number of forged checks and their 15 total amount is not alleged, Plaintiff believes that she was 16 defrauded of at least $250,000. Plaintiff alleges that Bank of 17

America acted both as the payor and depositary bank*fn1 with respect 18 19 to the forged checks. 20

In or about early 2009, Plaintiff discovered the forged 21 checks and demanded that Bank of America replace and re-credit to 22 her account the total sum of all of the forged checks. Bank of 23 America, however, credited to Plaintiff's account only certain 24 checks, totaling $2,300, and refused to restore the remaining 1 2 amount. Plaintiff does not specifically allege the date when she reported the forged checks to Bank of America, but the Court 4 assumes that she reported them in early 2009, when she discovered 5 them. 6

On or about May 31, 2009, Plaintiff submitted a complaint against Bullard, although not against Bank of America, to the 8 Comptroller of the Currency, Administrator of National Banks, 9 10 regarding the forged checks. The Comptroller assigned a case number, but, as of the date this action was filed, the administrative complaint had not been resolved. 13

On December 30, 2010, Plaintiff filed this suit in Alameda County Superior Court. Bank of America removed the action to 15 federal court on February 18, 2011. Essentially, through this 16 action, Plaintiff seeks to recover from Bank of America the 17 amounts Bullard allegedly stole from her. Plaintiff seeks to 18 19 recover the amounts paid through the forged checks, as well as general damages, not less than $1,000,000, resulting from her 21 inability to pay her creditors, injury to her reputation and 22 difficulty in obtaining credit. 23

Plaintiff's complaint alleges four causes of action. The 4 first cause of action is asserted against the Bank of America, as 25 payor bank, to recover payments charged to Plaintiff's account 26 27 based on the forged checks. The first cause of action refers to California Uniform Commercial Code sections 3401, 3403 and 4401.

Plaintiff's second cause of action, alleged against Bank of 1 2 America as depositary bank, seeks recovery based on the bank's failure to exercise ordinary care in accepting for deposit into 4 Bullard's account checks that were not made out to her and were 5 not endorsed. This cause of action cites California Uniform 6 Commercial Code sections 3103(a)(7), 3404(d), 3405(b) and 4401. 7

Plaintiff's third cause of action is for "negligence per se" 8 against Bank of America, both as the payor and the depositary 9 10 bank. The claim cites California Evidence Code section 669 and incorporates the provisions of the California Uniform Commercial Code referred to in the first and second causes of action. 13

Finally, Plaintiff alleges a fourth cause of action for a 14 constructive trust. 15


claim showing that the pleader is entitled to relief." Fed. R. 18 Civ. P. 8(a). On a motion to dismiss under Rule 12(b)(6) for A complaint must contain a "short and plain statement of the failure to state a claim, dismissal is appropriate only when the 21 complaint does not give the defendant fair notice of a legally 22 cognizable claim and the grounds on which it rests. Bell Atlantic 23 Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering 24 whether the complaint is sufficient to state a claim, the court 25 will take all material allegations as true and construe them in 26 27 the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). However, this principle is inapplicable to legal conclusions; "threadbare 1 2 recitals of the elements of a cause of action, supported by mere conclusory statements," are not taken as true. Ashcroft v. Iqbal, 4 129 S.Ct. 1937, 1949-50 (2009) (citing Twombly, 550 U.S. at 555). 5


I. Untimeliness and Preclusion of Plaintiff's Claims 7

Bank of America argues that two statutory provisions bar Plaintiff's claims based on untimeliness and issue preclusion. 9 10

A. California Code of Civil Procedure § 340(c) First, Bank of America contends that the statute of limitations set forth in California Code of Civil Procedure 13 section 340(c) applies to all of Plaintiff's claims. Section 14 340(c) establishes a one year statute of limitations for an action 15 by a depositor against a bank for the payment of a forged check. 16

The one year limitations period under section 340(c) begins to run 17 when the bank furnishes to its customer a bank statement 18 19 addressing the check at issue and the cancelled check. Mac v. Bank of America, 76 Cal. App. 4th 562, 565 (1992). 21

Plaintiff counters that the three year statute of limitations 22 period established by California Uniform Commercial Code § 4111 23 applies to all of her claims. Section 4111 applies to disputes 24 between banks and their depositors in connection with the 25 collection and payment of items. 26 27

Whether the enactment of section 4111 abrogated the earlier established one year limitations period set forth in section 340(c) is addressed in Chatsky and Associates v. Superior Court, 1 2 117 Cal. App. 4th 873, 880 (2004). Chatsky reasoned that nothing in the language or history of section 4111 indicated that the 4 legislature intended to repeal section 340(c), and the provisions 5 were reconcilable because section 4111 generally applies to 6 actions arising between banks or a bank and its customers "to 7 enforce an obligation, duty, or right," whereas section 340(c) 8 expressly concerns an action by a depositor against its bank for 9 10 the payment of a forged check. Id. at 878-879.

Plaintiff also asserts the doctrine of equitable tolling to argue that the statute of limitations on her claims should be 13 tolled as of May 31, 2009, the approximate date when she initiated 14 her administrative complaint against Bullard with the 15 Comptroller's office. Plaintiff represents that the Comptroller 16 advised her not to file a civil action during the administrative 17 investigation because the administrative complaint would enable 18 19 her to seek restitution from Bullard. She does not represent that the Comptroller advised her not to file suit against the bank. 21

The doctrine of equitable tolling generally focuses on a 22 plaintiff's excusable ignorance of the limitations period and on a 23 lack of prejudice to the defendant. Naton v. Bank of California, 24 649 F.2d 691, 696 (9th Cir. 1981). Equitable tolling may also 25 apply "'[w]hen an injured person has several legal remedies and, 26 27 reasonably and in good faith, pursues one.'" Daviton v. Columbia/HCA Healthcare Corp., 241 F.3d 1131, 1136 (9th Cir. 2001) (citing Elkins v. Derby, 12 Cal. 3d 410, 414 (1974)). Bank of 1 2 America responds that equitable tolling is unwarranted in the present case. It contends that equitable tolling for pursuit of 4 an alternative remedy requires that the plaintiff seek the 5 alternative remedy against the same defendant as named in the 6 second proceeding. In Cervantes v. City of San Diego, 5 F.3d 7 1273, 1276 n.3 (1993), the Ninth Circuit stated that, although 8 several of the defendants in the federal action were not parties 9 10 to the plaintiff's prior administrative proceeding, there was a sufficiently close relationship between them and the party named in the prior proceeding that a "kind of ...

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