[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 08-13400 ELEVENTH CIRCUIT
APRIL 13, 2009
Non-Argument Calendar
THOMAS K. KAHN
________________________
CLERK
D. C. Docket No. 07-23373-CV-JLK
REDLAND COMPANY, INC.,
a Florida corporation,
Plaintiff-Appellant,
versus
BANK OF AMERICA CORPORATION, a
foreign corporation authorized to
do business in the State of Florida,
f.k.a. Bankamerica Corporation,
Defendant,
BANK OF AMERICA, N.A.,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(April 13, 2009)
Before CARNES, MARCUS and ANDERSON, Circuit Judges.
PER CURIAM:
The Redland Company appeals the district court’s dismissal of its complaint
against Bank of America. Redland contends that the district court misinterpreted
Florida’s law regarding commercial paper.
I.
Redland is an engineering contracting company that specializes in road and
highway construction. Its claims in this case are framed in terms of the ever-
fascinating language of commercial paper law—the law of checks. But that is not
really what this case is about. This case is about an alleged embezzlement scheme
perpetrated by one of Redland’s former executives. The mastermind of that
alleged scheme was Frederick Bradford Nowell, Sr., who first served as Redland’s
controller and manager and was later promoted to vice president of the company.
Nowell’s duties included writing and signing checks on Redland’s account at
Community Bank of Florida to pay Redland’s suppliers, vendors, and
subcontractors. Trusting Nowell to perform those duties honestly appears to have
been a mistake.
Redland alleges that from November 1997 to October 2006, Nowell wrote
171 checks totaling over $11 million on Redland’s checking account to “NGI
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Marine.” NGI Marine was not one fo Redland’s suppliers, vendors, or contractors.
The checks were not written to pay Redland’s expenses. Instead, Nowell took the
checks, endorsed the back of them as “NGI Marine,” and deposited them into an
account at Bank of America that he controlled.
Redland received monthly account statements from Community Bank. As
part of those statements, Community Bank sent Redland copies of the fronts of all
of the checks written on its account—including the checks to NGI Marine. Despite
having received that information from Community Bank, and despite the fact that
it did no real business with NGI Marine, Redland did not uncover Nowell’s
embezzlement scheme until 2007. By then Nowell’s account at Bank of America
had been closed. Nowell and the money were gone. Litigation ensued.
Before Redland could attempt to recover its losses from Bank of America, it
needed to lay some procedural groundwork. Under Florida law, Redland did not
have a direct claim against Bank of America based on Nowell’s embezzlement
scheme. See Cheese & Grill Rest., Inc. v. Wachovia Bank, N.A., 970 So. 2d 372,
375 (Fla. 3d DCA 2007); Jett v. Lewis State Bank, 277 So. 2d 37, 39 (Fla. 1st
DCA 1973). To get around that roadblock, Redland acquired Community Bank’s
claim against Bank of America for the breach of the presentment warranty between
the two banks and filed a complaint asserting that claim against Bank of America.
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Bank of America filed a Rule 12(b)(6) motion to dismiss Redland’s
complaint. One of its arguments was that Redland was required to allege, as part
of its breach of presentment warranty claim, that Community Bank had provided
Bank of America with notice that the checks to NGI Marine were unauthorized.
The district court agreed, and it dismissed Redland’s complaint with leave to
amend so that Redland could add allegations concerning the required notice.
Redland filed an amended complaint but did not add any allegations that either
Redland had provided notice to Community Bank of the unauthorized checks or
that Community Bank had provided any notice to Bank of America. Bank of
America filed another motion to dismiss, which the district court granted, this time
with prejudice. This is Redland’s appeal.
II.
We review de novo the district court’s grant of a motion to dismiss under
Rule 12(b)(6). See Berman v. Blount Parrish & Co., Inc., 525 F.3d 1057, 1058
(11th Cir. 2008). In doing so, we accept the allegations in the complaint as true
and construe them in the light most favorable to the plaintiff. Hill v. White, 321
F.3d 1334, 1335 (11th Cir. 2003). “To survive dismissal, the complaint's
allegations must plausibly suggest that the plaintiff has a right to relief, raising that
possibility above a speculative level; if they do not, the plaintiff's complaint should
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be dismissed.” James River Ins. Co. v. Ground Down Eng’g, Inc., 540 F.3d 1270,
1274 (11th Cir. 1008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct.
1955, 1965 (2007)) (quotation marks omitted).
In the posture of this case, Redland stands in the shoes of Community Bank
and alleges that Bank of America breached the presentment warranty that it owed
to Community Bank. In Nowell’s alleged embezzlement scheme, the checks he
wrote were made payable to NGI Marine, and the checks were endorsed as NGI
Marine, Account #3602817237. That account number matched an account
controlled by Nowell at Bank of America. However, the name on the account was
not NGI Marine. Instead, the account was held in the name of Nowell Group, Inc.
Simply put, Redland seeks to hold Bank of America liable because the bank
deposited checks made out to NGI Marine into an account held by Nowell Group,
Inc.
Redland has not brought a typical commercial paper claim. No forged
signatures or altered checks are involved. Nowell was authorized to write checks
on Redland’s behalf, and the checks that he wrote were cashed as written by the
party for whom he intended them (himself). Nowell simply abused his check-
writing authority to the tune of over $11 million.
Under Florida law, “the customer ha[s] an obligation to examine bank
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statements and notify the bank” of any claimed errors or unauthorized activity.
Lowenstein v. Barnett Bank of S. Fla., N.A., 720 So. 2d 596, 597 (Fla. 3d DCA
1998); Fla. Stat. § 674.406; see also Cheese & Grill, 970 So. 2d at 375. Cheese &
Grill demonstrates that when a banking customer fails to notice an ongoing “inside
job” of fraud by a trusted employee despite receiving regular statements from the
bank, the court will not order another party to suffer the loss for the customer. See
970 So. 2d at 373–75 (affirming judgment against a bank customer where “its
losses were [not] anything other than an ‘inside job’ by the Restaurant’s own
trusted bookkeeper”). Here, Redland did not give any notice to Community Bank
of Nowell’s embezzlement scheme until it was too late.
Redland cannot escape that fact by casting its claim as one for breach of a
presentment warranty under Fla. Stat. § 673.4171. Redland’s contention is that
Bank of America breached its presentment warranty because Nowell Group, Inc.
was not “a person entitled to enforce” the check made out to NGI Marine. See §
673.4171(1)(a). The official comment to § 673.4171 states that “[i]f the drawer’s
conduct contributed to a loss . . . the drawee should not be allowed to shift the loss
from the drawer to the warrantor.” Id. cmt. 6. Admittedly, that commentary
applies where the loss is due to “forgery or alteration,” id., and this case does not
involve either. But the logic of the commentary applies with equal force here.
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This case is just as much one where the drawer’s conduct, in failing to review its
bank statements and returned checks, contributed to the loss.
Several other sections of Florida’s UCC further undermine Redland’s claim
(standing in the shoes of Community Bank) against Bank of America. First, under
sections 673.1091 and 673.2052(2) of the Florida Code, once a check is endorsed
by the party to which it was made out it becomes payable to the bearer of the
check. Here, the checks that Nowell presented to Bank of America had been
endorsed by NGI Marine, the party to which they were made out. Bank of
America then deposited the checks into the account number listed on the check’s
endorsement. Second, section 673.1101 of the Florida Code provides that the party
entitled to cash a check is determined based on the intent of the signer of the
check.1 Therefore, the technical discrepancy between the name on the checks
(NGI Marine) and the name on the account (Nowell Group, Inc.) is ultimately
1
Section 673.1101 provides, in relevant part:
(1) The person to whom an instrument is initially payable is determined by the intent of the
person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the
instrument. The instrument is payable to the person intended by the signer even if that person is
identified in the instrument by a name or other identification that is not that of the intended
person.
...
(3) A person to whom an instrument is payable may be identified in any way, including by name,
identifying number, office, or account number. . . .
Fla. Stat. § 673.1101
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irrelevant because it is clear that Nowell intended the checks to be deposited into
his account at Bank of America, and the intent of the signer of the check is what
matters. Under these circumstances, it was Redland’s responsibility to notice that
something fishy was going on, not Bank of America’s. Cf. Cheese & Grill Rest.,
970 So. 2d at 373–75. Redland failed to do that.
Redland responds that an exception applies because it could not reasonably
have detected the wrongdoing here. Community Bank only sent Redland the fronts
of the checks, so it could not review the endorsements on the back of the checks.
Further, it argues that the checks did not put it on notice that checks written to NGI
Marine were being deposited into an account maintained by Nowell Group, Inc.
Therefore, Redland argues that it did not have a duty to report the unauthorized
checks. See Fla. Stat. 674.406(3). That argument fails. For years Redland
received monthly statements, as well as copies of the fronts of its cancelled checks
from Community Bank. That information was more than enough to put it on
notice that unauthorized checks were being written to a company—NGI
Marine—that apparently did not do business with Redland. It was Redland’s duty
to notice these unauthorized payments. There is no reason to believe that Redland
would have discovered Nowell’s embezzlement scheme if it had been given the
benefit of reviewing the back of the checks at issue. Nowell did not sign the
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checks in his own name; the endorsements on the checks simply stated “NGI
Marine.” The opportunity to review those endorsements would not have
reasonably helped Redland uncover Nowell’s fraud.
It is also a matter of common sense that Bank of America cannot be liable
for Redland’s losses. Nothing that Bank of America did reasonably contributed to
Redland’s loss. The blame rests most directly on the shoulders of Nowell, who
went behind Redland’s back and fleeced it of over $11 million. If Redland is
looking to spread the blame further, it need look no further than the internal
controls (or lack thereof) that it used to monitor its own finances.
Redland allowed millions of dollars to be embezzled without detection for
nearly a decade. It cannot now hold Bank of America liable for its misfortune.
AFFIRMED.
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