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Denkewalter & Associates, Ltd., D/B/A Denkewalter & Angelo, and Kim R. Denkewalter v. Cole Taylor Bank

July 27, 2011

DENKEWALTER & ASSOCIATES, LTD., D/B/A DENKEWALTER & ANGELO, AND KIM R. DENKEWALTER, PLAINTIFFS,
v.
COLE TAYLOR BANK, DEFENDANT.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiffs Denkewalter & Associates, Ltd. ("D&A") and Kim R. Denkewalter ("Denkewalter") bring this action against Defendant Cole Taylor Bank ("Defendant" or "Cole Taylor"). Plaintiffs claim state law negligent misrepresentation (Count I), conversion (Count II), and a violation of Illinois's Consumer Fraud and Deceptive Business Practices Act (Count IV). The federal allegations come under the Electronic Funds Availability Act, 12 U.S.C. § 4001 et seq. ("EFAA") and its implementing regulation, known as "Regulation CC." See 12 C.F.R. § 229.33, 229.38.

For the following reasons, I find that Plaintiffs have failed to state a federal cause of action. Therefore, Count IV is dismissed under Rule 12(b)(6) and I decline to exercise supplemental jurisdiction over the remaining state law claims.

I. BACKGROUND

Viewed in the light most favorable to the non-movant, the relevant facts are as follows.

D&A is a law firm located in Skokie, Illinois. Denkewalter is a lawyer in the firm. Defendant Cole Taylor Bank is an Illinois bank with offices, among other places, in Skokie.

D&A used Cole Taylor as its bank. Specifically, D&A maintained an Interest on Lawyers Trust Account ("IOLTA") and an operating account at Cole Taylor. Kim Denkewalter does not maintain an individual account at Cole Taylor.

D&A - along with others - fell victim to a fraudster. On or about May 10, 2010, a long time friend of Denkewalter who was also a licensed real estate agent referred a person identified as "Mr. Z" to Denkewalter's firm. Mr. Z represented himself as being interested in purchasing a home in Hawthorn Woods, Illinois. After conducting some due diligence as to Mr. Z's identity and finances, D&A took on Mr. Z as a client for the purpose of completing the transaction. On May 12, 2010, Mr. Z signed his engagement letter with D&A.

To facilitate the payment of earnest money and other expenses associated with the purchase, Mr. Z sent a check to D&A dated May 12, 2012 for $150,000. The check was drawn on the account of Cassels, Brock, and Blackwell, LLP, a Canadian Law Firm, at the Bank of Nova Scotia. Denkewalter had the check deposited in D&A's IOLTA account at Cole Taylor on May 17, 2010.

In the meantime, the details of the home purchase were being finalized. On May 20, 2010, Mr. Z and the seller settled on a purchase price for the home. The closing was set for June 25, 2010 and earnest money in the amount of $15,000 was to be due on May 25, 2010.

On the same day these terms were finalized, May 20, 2010, Mr. Z sent D&A an email in which he indicated how he wanted his $150,000 in funds to be used. $30,000 was to be for "payment on the property," while the remaining $120,000 was to be wired to a bank in Japan. Mr. Z wanted the larger sum to go toward "Chinese home style furniture, Chinese style home entertainment, Chinese home decoration and Chinese kitchen appliance in Japan that [Mr. Z] will be bringing to this property I love my tradition and I want my home to look like little China Mansion." The Japanese bank account information was purportedly the receivables account of a furniture company in Japan.

In response to Mr. Z's May 20 email, Denkewalter did two things. First, she logged onto the IOLTA account information at Cole Taylor's website. The $150,000 was available in the account. The second thing Denkewalter did was to contact Elizabeth Riesche. Riesche was a Vice President and Relationship Manager at the Skokie branch, and had served as D&A's primary contact at Cole Taylor. Denkewalter asked Riesche on May 20 if she could assist with Mr. Z's desired transfer, and Riesche said she could.

Denkewalter proceeded to the Skokie branch that same day and met personally with Riesche. Denkewalter showed Riesche the email from Mr. Z in which he described his intentions for the money and provided the Japanese account information. Before proceeding, Denkewalter also asked, in the words of the complaint, "to confirm again that Mr. Z's $150,000 in funds from the purported Cassels Brock & Blackwell LLP check, which had been deposited three days earlier, were indeed in the account and could be wired out immediately without risk of any problems." In response, Riesche told Denkewalter in person at the meeting that the funds had been "received" and deposited in D&A's IOLTA account and that the funds were therefore safe to wire to Japan. After this assurance, Riesche conducted the wire transfer.

On May 22, 2010, Mr. Z again contacted D&A. He directed a partial disbursement of the $30,000 remaining in the IOLTA account as follows: $15,000 to the seller as earnest money, $500.00 to D&A as a retainer, $500.00 to Amerispec (a home ...


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