The opinion of the court was delivered by: Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
Plaintiff, Peter S. Willmott ("Willmott") filed suit against Federal Street Advisors, Inc. ("Federal Street") and Bank of America, N.A. ("BOA") alleging various state law violations in contract and tort. The Complaint against Federal Street and BOA arose as a result of embezzlement from Willmott's accounts by Rose Erwin ("Erwin"), Willmott's personal secretary, that resulted in Erwin's criminal conviction. Willmott now seeks to recover against Federal Street and BOA for violations of their agreements with Willmott that he alleges facilitated Erwin's criminal conduct.
BOA filed two motions pursuant to Federal Rule of Civil Procedure 16(c) to address specific legal issues that BOA alleged barred Willmott's claims and The Court treated those as motions for partial summary judgment. First, BOA moved for a determination that any damages Willmott sought in Count VI of Plaintiff's Amended Complaint were properly characterized as consequential damages and therefore not recoverable. This Court held that some of the damages were direct and some of the damages were consequential. Because consequential damages were barred by the terms of the contract, the motion was granted in part and denied in part. Second, BOA moved to eliminate all the claims against it arguing that they were barred by the Illinois Fiduciary Obligations Act. Because the Court found that a genuine material fact existed as to whether Erwin was acting as Willmott's authorized fiduciary, that motion was denied.
BOA now brings a Motion for Summary Judgment,*fn1 arguing that it is not responsible for Willmott's losses because it fullfilled its duties under the contracts and owed Willmott no extracontractual duties and regardless, all Willmott's claims were barred by its affirmative defenses, namely apparent authority, estoppel, and ratification. Because this Court finds that Erwin had apparent authority to draw from Willmott's lines of credit and Willmott ratified her actions, BOA's Motion for Summary Judgment is granted.
Willmott is a successful businessman who has been a director of various large companies since the 1970's. BOA 56.1 at 1, 5.*fn3 Willmott used BOA's "Private Bank" services and maintained checking and deposit accounts, lines of credit, and custodial accounts with collateral for the lines of credit. Id. at ¶ 6. Several employees at BOA worked in the Private Bank division and worked with Willmott's various accounts. Willmott 56.1 at 1-6.*fn4 Federal Street provided cash management advice to Willmott. BOA 2nd 56.1 at 19.
In December 1998, Willmott hired Erwin as his executive assistant.Am. Cmplt. at 10. Willmott hired Erwin to replace Joan Noble ("Noble"), his prior executive assistant, to whom he had given substantial authority over his financial affairs. BOA 56.1 Factsat 9. Willmott expected Erwin to provide the same services as Noble. Id. While Noble was Willmott's executive assistant, she drew on his lines of credit. BOA 2nd 56.1 at 10.
The Private Bank at BOA employed a team approach which generally involved a relationship manager and an executive assistant as the points of contact for Willmott's banking relationship. BOA Second 56.1 at 7. The team was to provide personalized and attentive service to clients. Willmott 56.1 at 2. The administrative assistants at the bank handled the day-to-day business relating to Wilmott's accounts such as assisting in wire transfers or processing requests for advances under the lines of credit. BOA 2nd 56.1 at 9. Wilmott's executive assistants, first Noble and then Erwin, submitted requests for draws on Wilmott's lines of credit to the administrative assistant assigned to the Willmott relationship. BOA 2nd 56.1 at 10.
According to Willmott, from February 1999 through May 2004, Erwin abused her authority by writing $11 million in checks drawn on the Checking Account for the benefit of herself and her family. BOA 56.1 at ¶ 11. Erwin wrote most of the checks to her husband, Vernon Erwin; but also wrote checks to credit card companies, AT&T Wireless, Nordstrom's and United Airlines. Id.; BOA
2nd 56.1 at 5; Erwin Plea Agreement at 5. In addition, Erwin wired money to Las Vegas casinos and car dealerships. Erwin Plea Agreement at 5-6. Erwin drew on Willmott's lines of credit to put funds in his checking account and then wrote checks for her own benefit on the checking account. BOA 56.1 at 11, 21-22. Willmott did not discover the theft until May 2004, in spite of recurring monthly checking account statements and quarterly loan statements. Id. at 12, 26. He fired Erwin immediately when he discovered the theft. Id. at 12. Erwin pled guilty to charges of embezzlement and is currently serving a prison term. Id. In her plea agreement, she admitted to stealing between 7 and 20 million dollars from Willmott's accounts. Willmott 56.1 at 20. None of the BOA employees deposed by Willmott were suspicious of Erwin prior to May of 2004. BOA 2nd 56.1 at 11.
During the period between February 1999 and May 2004, BOA disbursed advances on Willmott's lines of credit of approximately $18 million by means of 120 separate draws. BOA 56.1 at 16. Willmott claims that BOA breached the Loan Agreements by honoring Erwin's draw requests because the Loan Agreements prohibited BOA from permitting advances on the lines of credit without a written authorization on file and Erwin did not have Willmott's written authorization. Id. at 18. All of the advances on the lines of credit (other than rollovers from previous loans) were deposited into the checking account. BOA 56.1 at 21. Erwin embezzled the funds by writing checks from that checking account, for which she had Durable Power of Attorney. Id. at 11.
Willmott had two separate lines of credit at the Bank, one established on August 18, 1997 and one established on August 30, 1999, each pursuant to written loan agreements (the "loan agreements"). Id. at 15; Willmott 56.1 at 11. Willmott was the only signatory as borrower on those agreements. Willmott 56.1 at 12. Both of the loan agreements contained provisions waiving the borrower's right to recover consequential damages on account of a breach. BOA 56.1 at 25. In addition, both agreements noted that "the bank may honor . . . instructions . . . given by . . . persons authorized in writing by any one of the signer(s) of this agreement." Willmott 56.1 at 13. Both the 1997 and 1999 Loan Agreements stated that "the Borrow indemnifies and excuses the bank . . . from all liability, loss, and costs in connection with any act resulting from telephone or facsimile instructions it reasonably believes are made by an individual authorized by the Borrower to give such instructions." BOA 3rd 56.1 at 175.
Erwin's Written Authorizations
Two months after Erwin was hired, Willmott executed and delivered an unconditional power of attorney that empowered Erwin to write checks on the checking account. BOA 56.1at 10. The signed power of attorney form stated,
By signing below, you appoint Rose Marie Erwin . . . your lawful attorney and you empower her to do the following for you and in your name (in any way you could act in person):
(I) With respect to the Account to which this Power applies, to endorse checks, certificates of deposit or other instruments owned or held by you for deposit in any Account and to withdraw from and write checks or other orders for payment on any Account; to open new accounts and to close, continue, or control all Accounts; and in general, to exercise all powers with respect to any Accounts which you could if present and under no disability. . . .
You authorize BofA to rely on this Power. BofA shall honor, receive, or pay all instruments signed in accordance with this Power even though drawn or endorsed to the order of said attorney or tendered by him for cashing or delivered or used in payment of the individual obligation of such attorney, or for deposit to his personal account. BofA shall not be required to see to the application of ...