The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
As explained at length elsewhere, Plaintiffs in this case are a group of trusts and companies controlled by the Feiger Family. They have sued Defendant, the Bank of America, successor to LaSalle Bank (the "Bank"), alleging it is liable for losses Plaintiffs suffered when their accountant and fiduciary, Robert Rome, embezzled millions of dollars from Plaintiffs by drawing checks on their accounts at the Bank and depositing the proceeds in his personal accounts. The court has issued several opinions and assumes the reader's familiarity with them. See Crawford Supply Group, Inc. v. Bank of America, N.A., No. 09 C 2513, 2011 WL 3704262 (N.D. Ill. Aug. 23, 2011); Crawford Supply Group, Inc. v. Bank of America, N.A., No. 09 C 2513, 2011 WL 1131292 (N.D. Ill. Mar. 28, 2011); Crawford Supply Group, Inc. v. Bank of America, N.A., No. 09 C 2513, 2010 WL 320299 (N.D. Ill. Jan. 21, 2010).
In Count VI of their amended complaint, Plaintiffs allege that Defendant is liable for aiding and abetting Rome's breach of fiduciary duty. The Bank now moves for partial summary judgment on that count and for judgment in its favor on claims brought by one of the Feiger entities, referred to here as the Children's Trust. For the reasons explained here, the motion for partial summary judgment on Count VI is denied, and the motion for judgment in the Bank's favor against the Children's Trust is otherwise granted.
When Robert Rome served as a fiduciary, in various capacities, to the Feiger companies and trusts, he breached his duties and robbed the Plaintiffs of millions of dollars. Rome's scheme primarily involved drawing checks on Plaintiffs' accounts and depositing the proceeds into his personal accounts. Plaintiffs' suit against Rome has since settled. In this lawsuit, Plaintiffs seek to recover against the Bank, asserting that the Bank failed to monitor accounts over which Rome had control, despite Bank officials' knowledge that Rome had a history of deceitful conduct and was suffering from serious financial instability. The court has recounted the details regarding the Bank's relationship with Rome in prior opinions. See Crawford Supply Group, 2011 WL 3704262 *2-4; Crawford Supply Group, 2011 WL 1131292 *2-3. Significantly, before any of the checks at issue in this suit were deposited, the Bank had already begun to investigate Rome and his company, Rome Associates, for what appeared to be accounting malpractice with regard to two other clients. (Def.'s Resp. to Feiger Family Investment Partnership's Local Rule 56.1(B)(3) Statement of Additional Facts (hereinafter "Def.'s Resp. to FFIP 56.1(B)(3)") , at ¶¶ 24, 32.) First, in January 2003, the Bank discovered "severe accounting irregularities" in the financial statements of one of Rome's clients, Northwestern Golf. (Id. at ¶ 24.) Then, in March 2004, the Bank learned that Rome Associates had made "material misrepresentations" about the assets and liabilities of yet another client, Builders Plumbing & Heating Supply Co. (Id. at ¶ 32.) The Bank's investigation ultimately prompted the Bank to file two lawsuits against Rome and his company in 2005. (Id. at ¶¶ 28, 38.)
The bankruptcy of Northwestern Golf and Builders Plumbing, the corresponding negative publicity, and the pending lawsuits appeared to threaten the financial stability of Rome Associates. On April 1, 2004, the Bank downgraded Rome Associates' credit. (Id. at ¶ 43.) Later that same month, the Bank entered a forbearance agreement with Rome Associates which it later extended in exchange for shifting roughly $240,000 in Rome Associates' debt to Rome's personal mortgage. (Id.) The Bank also refinanced Rome's $600,000 home equity line of credit, further increasing his personal mortgage indebtedness to $2.475 million. (Id. at ¶ 54.) Even having so reduced Rome Associates' debt, by September 2004 the Bank asked Rome Associates to take its banking business elsewhere. (Id. at ¶ 44.) The next month, the Bank determined that Rome himself had "effectively exhausted his access to capital." (Id. at ¶ 52.) Amidst Rome's financial turmoil, certain Bank employees explicitly discussed the possibility of advising Rome's other clients, including Crawford Supply Group, about the credit downgrade of Rome Associates, as reflected in an e-mail message from Robert Dewsberry, a loan review examiner, to Bruce Lubin, the head of commercial banking at the time, dated April 1, 2004. (E-mail, Ex. 61 to App. to Feiger Family Investment Partnership's Local Rule 56.1(B)(3) Statement of Additional Facts .) Ultimately, they decided against it. (Def.'s Resp. to FFIP 56.1(B)(3) at ¶ 61.) Plaintiffs contend that the Bank's failure to investigate was self-interested because Rome's embezzling scheme enabled him to continue to pay down his debts to the Bank.
The Bank's motion for summary judgment against the Children's Trust focuses on eighteen checks issued between January 2004 and September 2007 from the Children's Trust to Rome which Rome then deposited into his various personal accounts. The Children's Trust was the guarantor on certain loans the Bank had made to other Feiger trusts. (Plaintiff Steven Feiger Children's Trust Rule 56.1 Statement of Undisputed Facts (hereinafter "Children's Trust's 56.1") , at ¶¶ 1-2). Pursuant to the guarantees, some of the Children's Trust assets were held as collateral in a brokerage account managed by another institution, ABN AMRO Financial Services, Inc. ("ABN"). (Id.) At all relevant times, Robert Rome was a trustee and the primary administrator of the Children's Trust. (Def.'s Rule 56.1 Statement of Undisputed Facts (hereinafter "Def.'s 56.1") , at ¶ 12.) The eighteen Children's Trust checks at issue in this motion were issued to Rome from the ABN brokerage account, ostensibly to make tax payments on behalf of the trust (Id. at ¶ 25.) Steven Feiger is listed as trustee on the account, but he insists this was an error; he claims LaSalle mistakenly designated him as trustee in a form and that he inadvertently signed without noticing the mistake. (Children's Trust's 56.1 at 7-8.)
Defendant insists that ABN was, at all relevant times, an entirely separate legal entity from LaSalle, predecessor to the Bank of America, and therefore the Bank never had any relationship with the Children's Trust. (Def.'s 56.1 at ¶ 17.) Plaintiffs, on the other hand, maintain that ABN was a "subsidiary or affiliate" of LaSalle, and that LaSalle routinely "blurred any legal distinction" between its own corporate form and ABN's by failing to materially distinguish the two entities. (Plaintiff Steven Feiger Children's Trust's Mem. in Opp'n to Bank of America's Mot. for Partial Summ. J. on Count IV (hereinafter "Children's Trust's Mem. in Opp'n") , at 2, 3.) For example, LaSalle Vice-President Marcus Montanye served as the "Relationship Manager" for each of the Feiger trusts, including the Children's Trust, and managed the "entire banking relationship" between Plaintiffs and LaSalle. (Montanye Dep., Ex. B to Children's Trust's 56.1, 12:15-22.) Montanye admitted that he "quarterback[ed]" the transactions stemming from Plaintiffs' various trusts and entities (id.), and that he oversaw the issuance of the eighteen Children's Trust checks drawn on the brokerage account at ABN. (Id. at 66:4-6.) In his deposition, Montanye referred to the collateral, i.e., the Children's Trust funds in the brokerage account, as "held in a brokerage account at the bank" (Id. at 65:3-4) and "housed in trust accounts, which were with our brokerage group at LaSalle." (Id. at 62:12-14).
Before Rome embezzled the first check from the Children's Trust in early 2004, Steven Feiger received an e-mail from Kristin Shoemaker of LaSalle, entitled "Streamlining Future Tax Payments from Trust Accounts" and dated June 4, 2003. (E-mail, Ex. C to Children's Trust's 56.1.) The signature on Shoemaker's e-mail identifies her as a loan associate for LaSalle Bank, yet the domain name on her e-mail address is "abnamro.com." (Id.) Montanye also received a copy of the message. (Id.) Shoemaker's June 4, 2003 message explained that she was sending Steven Feiger a form letter which Steven Feiger was to sign in order to "authorize LaSalle to issue checks" from the Children's Trust. (Id.) The form letter, pre-addressed to ABN, specifically authorized ABN to issue "checks payable to Robert Rome as trustee when collateral is released by Marcus Montanye" from the Children's Trust. (Id.) Thus, before each of the eighteen checks was issued, a representative from the Bank called Steven Feiger to inform him that a check had been requested and to ask for authority to issue the check. (Children's Trust's 56.1 at ¶ 7.) In each instance, Steven Feiger signed a version of the authorization letter approving the disbursement of funds on the date and for the amount requested. (Exs. D-MM to Def.'s 56.1.) As the last step in the process, Montanye authorized the release of the collateral and subsequently, the issuance of each check. (Montanye Dep. at 65-66.) Although Steven Feiger's authorization letters all requested that the check be issued to "Robert Rome as trustee" (Exs. D-MM to Def.'s 56.1), seven of the checks were issued simply to "Robert Rome." (Exs. O, S, U, Y, GG, II and KK to Def.'s 56.1.)
Of the eighteen checks issued, Rome deposited three of them, all payable to "Robert Rome as Trustee" or "Robert Rome TTEE," into his personal account at LaSalle. (Def.'s 56.1 at ¶ 30.) Rome deposited the other fifteen checks into personal accounts he held at Harris Bank and North Shore Bank & Trust. (Id. at ¶ 32.) The Bank asserts that all eighteen checks were paid by National Financial Services, LLC ("NFS") at the Bank of New York Delaware ("BNYD") and that neither LaSalle nor its successor, Bank of America, "issued or caused to be issued" any of the eighteen checks. (Id. at ¶ 24.) Plaintiffs, however, state that LaSalle's delegation of custodial and check clearing services to NSF and BNYD, who were acting as agents, does not diminish the Bank's direct role in the management of the transactions. (Children's Trust's Mem. in Opp'n at 7.)
The court grants summary judgment where "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). The court must examine the evidence in the light most favorable to nonmoving party without making credibility determinations or weighing evidence. Abdullahi v. City of Madison, 423 F.3d 763, 773 (7th Cir. 2005). The party who bears the burden of proof on an issue may not rest on the pleadings or mere speculation, but must affirmatively demonstrate that there is a genuine issue of material fact that requires a trial to resolve. FED. R. CIV. P. 56(c);Springer v. Durflinger, 518 F.3d 479, 484 (7th Cir. 2008).
Defendant seeks partial summary judgment on Plaintiffs' claim of aiding and abetting a breach of fiduciary duty (Count VI). Defendant contends that Plaintiffs have produced no facts that show the Bank knowingly and substantially assisted Rome in his misconduct. Defendant also seeks summary judgment on all remaining claims brought by the Children's Trust, arguing primarily that the claims are displaced by the U.C.C. and, alternatively, that the Bank had no business relationship with the ...