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Insoftvision, LLC v. Mb Financial Bank

September 12, 2011

INSOFTVISION, LLC, PLAINTIFF,
v.
MB FINANCIAL BANK, N.A., DEFENDANT.



The opinion of the court was delivered by: Judge George W. Lindberg

MEMORANDUM OPINION AND ORDER

Before the Court are plaintiff Insoftvision, LLC's ("Insoftvision") motion for summary judgment against defendant MB Financial Bank, N.A. ("MB Financial"); Insoftvision's motion for judgment on the pleadings; Insoftvision's motion in limine to bar the expert testimony of Nicholas Weaver and Alan Slater; MB Financial's motion for summary judgment against Insoftvision; and third-party defendant ICS Technology Services' ("ICS") motions for summary judgment against MB Financial and Insoftvision. For the reasons stated below, Insoftvision's motion for summary judgment is denied, its motion for judgment on the pleadings is granted in part and denied in part, and its motion in limine is granted in part; MB Financial's motion for summary judgment against Insoftvision is denied; ICS's motion for summary judgment against MB Financial is denied, and its motion for summary judgment against Insoftvision is granted in part and denied in part.

I. Factual Background

Unless otherwise noted, the following facts are undisputed. Plaintiff Insoftvision was formed by third-party defendant Lanka Bharath Reddy ("Reddy"), along with non-party Peter Linney ("Linney"). Reddy also provided information technology services to Insoftvision.

Reddy's wife, third-party defendant Chandana Veerareddy ("Veerareddy"), had a 49% equity membership interest in Insoftvision, and claims to have been a co-manager of Insoftvision with Linney.

During the time period relevant to this case, nearly all of Insoftvision's revenue came from a single project for Insoftvision's customer, ABB, Inc. Insoftvision outsourced its work on the ABB project to third-party defendant ICS. Reddy worked on the ABB project, and oversaw the work ICS performed on the project. He also facilitated all of Insoftvision's business with ICS, including billing. Insoftvision contends that Reddy is also a principal of ICS, a contention that Reddy and ICS deny.

Angela Calabrese performed certain clerical and administrative duties for Insoftvision. Calabrese was an authorized signatory on Insoftvision's corporate checking account with defendant MB Financial, and her duties included ordering wire transfers from that account. Calabrese ordered the wire transfers by sending an e-mail from her "angie@everflora.com" e-mail account to her banker at MB Financial. Calabrese ordered at least 42 wire transfers from Insoftvision's account at MB Financial over the forty months prior to February 2009.

According to ICS, between September 2008 and November 2008 it issued three invoices to Insoftvision, totaling $1,110,190, for work done by ICS on the ABB project during that period. Insoftvision contends that it did not receive these invoices until early 2009, and that it received them from Reddy. It is undisputed that prior to February 23, 2009, Reddy asked Calabrese to initiate a $1,110,190 wire transfer to ICS.

On February 23, 2009 at 10:02 a.m., MB Financial received an e-mail from Calabrese's "angie@everflora.com" e-mail account that ordered a wire transfer of $1,110,190 of Insoftvision's funds to ICS in India. MB Financial wired $1,110,190 to ICS, as directed in the e-mail. Calabrese denies sending the February 23, 2009 e-mail to MB Financial. Insoftvision contends that Reddy (who was not an authorized signatory on Insoftvision's account at MB Financial) hacked into Calabrese's e-mail account and sent the wire transfer request to MB Financial without Insoftvision's authorization. ICS denies any involvement in sending the wire transfer order, but maintains that Insoftvision owed it the $1,110,190 based on the three 2008 invoices.

A complicated series of court filings followed. Insoftvision initiated this action against MB Financial, seeking a refund of the transferred funds. MB Financial filed a third-party complaint against ICS, Reddy, and Veerareddy, seeking judgment against these parties in the event MB Financial is found liable to Insoftvision. ICS filed a claim against Insoftvision, seeking contribution in the amount of $1,110,190 for the 2008 invoices, in the event that Insoftvision prevails on its claims against MB Financial, and MB Financial prevails on its claims against ICS; ICS also alleges a breach of contract claim against Insoftvision for five additional invoices. Insoftvision filed a counterclaim against ICS, claiming unjust enrichment, conversion, fraud, and civil conspiracy. MB Financial filed a counterclaim against Insoftvision, seeking to collect on ICS's 2008 invoices under the law of restitution and/or subrogation in the event that Insoftvision prevails on its claim against MB Financial; the bank also seeks to collect on the invoices based on ICS's assignment of those claims to the bank. The parties have filed a number of motions relating to these claims, as described above.

II. Analysis

Summary judgment shall be granted "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." Fed. R. Civ. P. 56(a). In considering a motion for summary judgment, the Court must draw all reasonable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). The moving party bears the initial burden of demonstrating that no material issue exists for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has properly supported its motion, the nonmoving party must offer specific facts demonstrating that a material dispute exists, and must present more than a scintilla of evidence to support its position. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

A. Insoftvision's Claim Against MB Financial

The Court begins by examining Insoftvision's claim that MB Financial is liable to it for making an unauthorized wire transfer of Insoftvision's funds. Insoftvision has moved for summary judgment against MB Financial as to this claim. In addition, MB Financial has moved for summary judgment as to its seventh affirmative defense, through which the bank seeks to avoid liability on the basis that it used a commercially reasonable security procedure to verify the wire transfer order.

The Federal Reserve regulations governing fund transfers through Fedwire*fn1 provide: If a receiving bank accepts a payment order issued in the name of its customer as sender which is (i) not authorized and not effective as the order of the customer under [12 C.F.R. Pt. 210, Subpt. B, App. B,] section 4A-202, or (ii) not enforceable, in whole or in part, against the customer under section 4A-203, the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount....

12 C.F.R. Pt. 210, Subpt. B, App. B § 4A-204(a). The regulations further provide that the receiving bank is not liable, even if the customer did not authorize the order, if the bank and customer agreed on a security procedure for verifying the authenticity of payment orders, the security procedure was "a commercially reasonable method of providing security against unauthorized payment orders," and the bank accepted the payment order "in good faith and in compliance with the security procedure." Id. § 4A-202(b).

In support of its motion for summary judgment on this claim, Insoftvision first argues that there is no dispute that the February 23, 2009 wire transfer order was unauthorized. Calabrese denies having sent the wire transfer request to MB Financial, and she and the two other authorized signatories on Insoftvision's account deny having authorized the wire transfer. In addition, Insoftvision contends that a rule was set up on Calabrese's computer, by someone other than Calabrese, that automatically diverted e-mails from MB Financial into a folder; Insoftvision argues that this is evidence that a hacker was trying to prevent Calabrese from seeing MB Financial's e-mail confirming the wire transfer. Finally, Insoftvision notes that it reported the matter to the FBI, the Secret Service, the Franklin Park Police, and the Illinois Attorney General, which it argues is an action consistent with a response to learning of an unauthorized transfer.

MB Financial responds that a factual dispute exists as to whether Insoftvision authorized the wire transfer, and takes the position that Calabrese sent the e-mail requesting the transfer. As an initial matter, the Court notes that MB Financial did not file a statement of additional facts, but rather attempted to present its additional facts in its response brief. Local Rule 56.1(b)(3)(C) requires that a party opposing a motion for summary judgment file "a statement, consisting of short numbered paragraphs, of any additional facts that required the denial of summary judgment." This rule "provides the only acceptable means of . . . presenting additional facts to the district court." Midwest Imports, Ltd. v. Coval, 71 F.3d 1311, 1317 (7th Cir. 1995). Providing additional facts in a response brief is "insufficient to put those facts before the Court." Malec v. Sanford, 191 F.R.D. 581, 584 (N.D. Ill. 2000). Accordingly, the Court disregards MB Financial's additional facts presented in its response brief.

Even without considering MB Financial's additional facts, however, the Court agrees with the bank that a question of fact exists as to whether Insoftvision authorized the wire transfer. It is undisputed that the wire transfer request was made from Calabrese's e-mail address, that she is an authorized signatory on Insoftvision's account with MB Financial, that she had previously ordered similar wire transfers by e-mail, and that prior to February 23, 2009 Reddy asked her to transfer $1,110,190 to ICS. Although Insoftvision urges the Court to give Calabrese's testimony "significant weight," this is not the time to assess credibility or weigh testimony. See Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003) ("On summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder."). The Court concludes that a genuine issue of material fact exists as to whether Insoftvision authorized the February 23, 2009 wire transfer. Insoftvision's motion for summary judgment as to its claims against MB Financial is denied.

The Court turns to MB Financial's motion for summary judgment based on its seventh affirmative defense. In that defense, MB Financial contends that even if the wire transfer order was unauthorized, it is not liable to Insoftvision because the bank used a commercially reasonable security procedure to verify the order. A security procedure is a procedure established by agreement between a customer and the bank receiving a payment order, for the purpose of verifying that the payment order is that of the customer, or detecting an error in the transmission or content of the payment order. 12 C.F.R. Pt. 210, Subpt. B, App. B ยง 4A-201. A ...


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