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American Express Travel Related Services Co., Inc. v. Stevens

United States District Court, Tenth Circuit

December 18, 2013



WILEY Y. DANIEL, Senior District Judge.

THIS MATTER is before the Court on Plaintiff American Express Travel Related Services Company, Inc.'s Motion to Dismiss the Counterclaim pursuant to Fed.R.Civ.P. 12(b)(6) [ECF No. 17]. For the reasons stated below, the motion is DENIED.


On October 3, 2011, Defendant Earl Stevens informed a representative of American Express Travel Related Services Company, Inc. (AETRS) that AETRS had made erroneous deposits into Defendants' bank account at Wells Fargo Bank, N.A. (ECF No. 1, ¶ 8). The next day, Mr. Stevens opened up a new account at Wells Fargo and transferred a portion of the funds from the old account into the new account, leaving what he believed to be AETRS's funds in the old account. (ECF No. 1, ¶ 11). Mr. Stevens and a Wells Fargo employee then requested that AETRS withdraw the erroneously deposited funds. (ECF No. 1, ¶ 12). AETRS provided an accounting of the amount deposited and made a demand upon Earl and Twila Stevens for funds in the amount of $174, 693.15. (ECF No. 1, ¶¶ 17, 18). The Stevens contend that this accounting is inaccurate and that AETRS's agent, Mr. James Gebeleil, had previously confirmed that the proper amount owed to Plaintiff was $171, 707.06. (ECF No. 14, ¶¶ 16, 21). The Stevens have offered to return this amount. (ECF No. 14, ¶ 20).

On May 2nd, 2013, AETRS filed a complaint [ECF No. 1] against the Stevens for conversion and unjust enrichment based on its allegation that the Stevens failed to return funds that AETRS erroneously deposited into their bank account. (ECF No. 1, ¶ 22). In their Answer, Counterclaim, and Jury Demand [ECF No. 14], the Stevens assert a counterclaim for negligence based on the hardship caused by AETRS's erroneous deposits. The Stevens claim that the deposits created substantial accounting and legal difficulties and caused their accounts to be frozen, preventing them from receiving their Social Security checks. (ECF No. 20 at 5). On July 17, 2013, AETRS filed this Motion to Dismiss the Counterclaim [ECF No. 17] on the basis that AETRS, a bank, can never owe a duty of care to a non-customer and therefore cannot be held liable for negligence here. (ECF No. 17, ¶¶ 13, 14).


A party may move to dismiss a claim for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Twombly, 550 U.S. at 570). When ruling on a motion to dismiss, a court must accept all well-pleaded factual allegations as true and construe all reasonable allegations in the light most favorable to the non-moving party. United States v. Colorado Supreme Court, 87 F.3d 1161, 1164 (10th Cir. 1996). Thus, dismissal under Rule 12(b)(6) is only appropriate when the non-moving party can allege no set of facts entitling it to relief. Id. Here, whether the Stevens' counterclaim warrants dismissal hinges upon whether AETRS owed the Stevens a duty of care under the facts alleged.


Federal courts sitting in diversity must apply the substantive law of the state in which they sit. Erie R.R. v. Thompkins, 304 U.S. 64, 78 (1938). In Colorado, a negligence claim must fail unless a legal duty is owed. Hesse v. McClintic, 176 P.3d 759, 762 (Colo. 2008). The existence and scope of a legal duty is a question of law for the court to determine. Id.

Courts consider many factors when determining whether the law imposes a duty, including "the risk involved, the foreseeability and likelihood of injury as weighed against the social utility of the defendant's conduct, the magnitude of the burden of guarding against injury or harm, and the consequences of placing the burden upon the defendant." Taco Bell, Inc. v. Lannon, 744 P.2d 43, 46 (Colo. 1987) (citations omitted). "Other considerations may also be relevant, depending on the circumstances of each particular case." Id. "No one factor is controlling, and the question of whether a duty should be imposed in a particular case is essentially one of fairness under contemporary standards-whether reasonable persons would recognize a duty and agree that it exists." Id.

One Colorado court has held that, in some circumstances, a bank owes no duty to non-customers to protect them from the torts of the bank's customers ("no-duty rule"). See Weil v. First Nat. Bank of Castle Rock, 983 P.2d 812, 814 (Colo. Ct. App. 1999); accord Sigler v. Doe, No. 10-CV-01794-LTB-BNB, 2011 WL 4829659 (D. Colo. Sept. 22, 2011). In Weil, the plaintiff's office manager and assistant opened an account at the defendant bank in their own names d/b/a plaintiff's business. Id. at 813. The pair embezzled $150, 000 from the plaintiff by depositing checks payable to plaintiff's business into their account at the defendant bank. Id. The Weil court looked to the Taco Bell factors, supra, and reasoned that the bank owed no duty to the plaintiff because "it would be unreasonable to require banks to make an independent investigation of their customers' authority to use any particular unregistered trade name." Id.

While not unanimous, other jurisdictions have mostly embraced this no-duty rule in some form. See, e.g., Lerner v. Fleet Bank, N.A., 459 F.3d 273, 286 (2d Cir. 2006) ("Banks do not owe non-customers a duty to protect them from the intentional torts of their customers."); In re Terrorist Attacks on Sept. 11, 2001, 349 F.Supp.2d 765, 830 (S.D.N.Y. 2005) (same); Gil v. Bank of Am., Nat. Ass'n, 138 Cal.App.4th 1371, 1379, 42 Cal.Rptr.3d 310, 315 (2006) ("[A] bank owes no duty to nondepositors to investigate or disclose suspicious activities on the part of an accountholder."); Volpe v. Fleet Nat. Bank, 710 A.2d 661, 664 (R.I. 1998) ("[A]bsent extraordinary circumstances a bank is not liable in negligence to a noncustomer payee for having failed to ascertain whether a check paid by it bears the payee's genuine indorsement."); McCallum v. Rizzo, 942878, 1995 WL 1146812 (Mass. Super. Oct. 13, 1995) ("[A] bank's failure to investigate a customer's suspicious activity, or failure to disclose suspicious activity to a third party, does not give rise to liability to the third party who is injured by the customer's fraud."); City Check Cashing, Inc. v. Manufacturers Hanover Trust Co., 166 N.J. 49, 64, 764 A.2d 411, 419 (2001) (bank owed no duty to non-customer check cashing service to warn about fraudulent certified check). Courts justify the no-duty rule with the concern that imposing a duty on banks to protect non-customers from the torts of others "would expose banks to unlimited liability for unforeseeable frauds." Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 226 (4th Cir. 2002).

AETRS relies on Weil to contend that a financial institution can never, under any circumstances, owe a duty to a non-customer. However, this no-duty rule is rooted in the widely-acknowledged principle that "in actions based on nonfeasance ... it is necessary to find some definite relation between the parties, of such a character that social policy justifies the imposition of a duty to act." City Check Cashing, 166 N.J. at 59 (quoting W. Page Keeton et. al., Prosser & Keeton on Torts § 56 at 374 (5th ed.1984)) (emphasis added). See also 57A Am. Jur. 2d Negligence § 13 ("Liability for nonfeasance is largely limited to those circumstances in which some special relationship can be established."). Nonfeasance describes a "fail[ure] to aid... through beneficial intervention." Id.

Misfeasance, by contrast, "occurs when... affirmative actions create a risk of harm." Id. The nonfeasance rationale underpinning the no-duty rule does not apply to a bank's misfeasance. Indeed, application of the no-duty rule to banks' misfeasance would lead to absurd results. For example, a bank could negligently hit a non-customer with one of its armored cars and escape liability simply because the armored car belonged to a bank. Accordingly, no courts have applied the no-duty ...

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