the lighting system tells you how much time you have left and then when it turns out amber you have two minutes and when to turn it around you should finish your thought and complete your your presentation rebuttal only should not break new issues i am with that will call the first case of the morning midwest peters incorporated versus the bank of franklin bank this was not a fraud or theft scheme that happened to involve the bank this was a banking scheme that involves theft and fraud the cif could not have accomplished what he did without the assistance of a friendly it's i'm willing to wager that no one in this courtroom has ever written a check to someone and then simultaneously ask that person do indorsed their own check right back to them so you could go deposit that check in your own check in your own account and i'll certainly wager that no one has done this with checks in six figure amounts over and over again and you've got your kind as a big judgment against rolls right that's correct uncollectable on collective judgment  none of the cases cited by any party involve the kind of checks at issue in this case the precise kind of checks because these kind of checks are beyond suspicious they have no conceivable business or personal purpose they're not used in the cattle industry or any other industry and in the banking industry they use words like red flag and irregular on its face and commercially on reasonable to describe these checks yet bank of franklin processed and accepted thousands of these kind of checks totaling hundreds of millions of dollars in a staggering velocity contrary to what has been argued we don't claim that bank of franklin had a duty to investigate mr ralls or launch some kind of investigation or to pry into his affairs or to force him to close his account or take any other extraordinary measures disclaimed in the cases cited by bank of franklin all bank of franklin had to do is what banks do all the time when presented with questionable instruments simply decline to accept these kind of checks that alone would have deprived mr ralls of the accounts receivable or some inability to pay it you know it's if you run up a valid tab invalid commercial transactions and then you just don't have the money at the end of it all that's one situation if you defraud that provides a claim for someone who fails to exercise ordinary care in accepting checks like this any kind of person who accepts them and grandstanding to the person bearing the bearing the loss those who are harmed are forced to bear the l banks don't have a duty to non non customers and i guess our question or maybe a chicken of bob's express a better but what case law gets you there that says under some circumstances maybe a bank could be liable to a non customer and where you draw the line if you open the door or there get going to be all sorts of lawsuits every time somebody loses money at our how far do you go if you open the door at all or is there any case law that did say is that under some limited circumstances some we're buying do have a duty to non customers that there are limits on the kind of duties too many questions that you want time it's all right i'll try and answer them in turn that there are limits every one of the cases in the negligence realm for instance finding that you know that the bank of franklin cites finding an absence of duty to non customers the condition that on there not being any exceptional or extraordinary circumstances that we would claim are present in this case there is a foreseeability limit and one is common law and the mississippi legislature chose to extrude extend standing and liability in duty to those bearing the loss and that's that's not a catchphrase that we came up with  that's if there if that's too broad or too far out that's an issue to take up with the mississippi legislature but if you could just pause for a minute just because you want what you began saying you have for food claims yes so trying to be as rigorous as possible as to  each instead of slipping between the common law negligence and the u c c provision my question would be focusing just on the statutory u c c what case do you have anywhere in the country that him that a tricked people into writing it that the plaintiff was hans financial services he opened an account called i think something with getting within each firearm services on and then trick people into writing checks to h f s in a customer on financial service was in a customer of the defendant bank on the check and the checks were made to hans financial services and the account wasn't opened by holmes financial services and yet the bank processes checks and the claim was allowed to go forward in that case and that's not a conversion argument that's on the the loss that is under yes there's a little bit of different standards in nuances for each of the four claims and that is under the four hundred four d statutory call which which wouldn't have the limiting principles you just suggested exist for quite exceptional circumstances in the negligence in other words actual knowledge of the misappropriation and ought to have known about the produce  relationship that is correct though it it to me that seems pretty limitless well it you have to have first of all is condition unfair to exercise ordinary care and second it's a person bearing the loss and if and i have two questions about that could we say that the u c c only contemplated the persons to be the traditional pay pay your and wouldn't be third parties what case contemplates person embracing third party non customers i would say that it's every case we cite concerning just the usual principles of statutory construction it's not as though the mississippi legislature didn't know what a  party to an instrument was or a person entitle to enforce an instrument that those are specifically defined terms and yet the mississippi legislature chose not to include those specifically defined terms in will note that for all there disclaiming of a duty to investigate banker franklin did find it necessary to in two separate camps actually go out and investigate but simply these particular instruments and and these are the extraordinary circumstances here were so irregular on their face and so unusual and in such high dollar amounts in volume and velocity that the only real duty is to just not accept them not to not process the last question  because i would have thought the more developed area of law to impose liability would be the common law negligence because it does have limiting principles and it an if that is my leaning in this case what evidence does exist as to actual knowledge of fraud what would you point to here prior to his confessing to everyone in twenty eleven these investigations i'm bringing up to the highest levels of the highest officers in the bank organization the c e o the chief compliance officer the chief credit officer everybody charged with detecting fraud and became aware of these and they went out and undertook this investigation they reviewed documents and they talked to mr ralls and in a memo between exchanged between the loan officer and the bank's president they specifically reference you know risks associated with mr ross checking practices and the fact that the midwest feeders and midwest feeders was specifically identified in that memo and the line of credit that it was extending to mr the december memo does to me show they were aware of the  relationship if we don't account for to share which it probably would be but what does that say about their knowledge of actual fraud that he's leaving from them well i think if they if if if it if you were going to put in a memo we have actual knowledge  of a fraud then then they would have closed the account and we wouldn't be here they had constructive knowledge or our conspiracy theory is that there was a sort of tacit agreement to look the other way because they had everything to do  that delta chemical seems to describe what you have here friendship and business profiting as short of sufficient the friendship provided a nice vehicle for this but it's not there it's not really what cemented this is all these suspicious circumstances in an industry a heavily regulated industry where you're supposed to look for suspicious circumstances and it's like suspicious circumstances both in two thousand and eleven and over and over again after the conduct issue is not running up a tab it's not the fact that mr rolls was being dishonest and using his money through a gotten gains or even the fact that he had a bank account that it's that he  rob you know of several stores or people and happen to deposit my old gotten gains in a bank the bank doesn't have to ask where i got that money or anything else but banks do are supposed to scrutinize instruments prevented that is what's for all four d provides and yes go ahead yes me i it's thank you one of the causes is this gentleman's conduct i would submit that we don't think it's nearly as attenuated as the maritime example you gave and in the confines of this particular case and again person bearing the losses that's not a common law standard or when we're trying to slip in here or not to tell you what you have heard time losses you're close the river and you have people up all the way up stream through the country that  any limit of a building here other than you're a bike to it there certainly are limits within the negligence realm in the statutory realm i'll concede it you know person bearing the loss is much well banks and those accepting checks accept responsibility they they enter a fraud laden complex field and they make money from it and so the only reason i can offer is that the georgia legislature i'm sorry the mississippi legislature  please the court my name is mark one and i represent the bank right on midwest meters is asking this court in this case to extend the liability of a back to a place where no where the court has been  go this is one of three lawsuits that midwest fader's has filed against three different banks as a result of alleged for all of their cattle clearing business in one of those other cases in georgia which was brought against someone other than robert rawls the district court granted the motion to dismiss the case against the bank and oral argument was heard on that case on december supposedly adopted a rule that any any person bearing the law also under three four or four can bring a claim and that is not the case the same language was considered by the eleventh circuit in eight case out of mist be supreme court that says the court looks to the whole of the statute to avoid it hearing to one senate or phrase in a way that skews its true meaning to read three four zero four in a way that any person bar loss can bring a client is to disregard the entire purpose of article three and section three four zero four which is a comparative law bill of the provision which  there is no evidence that bank of franklin was privy to the contractual relationship between alba state bank robber roles in the us for years in fact basically talking about an issue that came up with the fact that the bank was not charging interest uncollected thought and also about making sure the bank was secure which is their obligation to do there's nothing in there that they knew whatever they assume the banking relationship with robert rawls there was a piece of real estate that was to secure a lot of credit and another one when they did the title search in the title search it was revealed that midwest peters had a lien on the property they asked why the ra's about that he said he had a lot of credit with midwest feeders they requested that at his insistence they requested that midwest feeders  make their lame subordinate to that of bank franks and they agreed to do that memo actually proves that banker franklin did not understand the arrangement because in that memo they suggest their understanding is that robert ross has a lot of credit with alba state by and a lot of credit with midwest feeders there wasn't a lot of credit with out of state and even the little depository yes and even the what was called a lot of credit what robert rawls described as a lot of credit with midwest traders it was actually a promissory note there was a security agreement there was a promissory note for seven million dollars and then there was a deposit account control agreement there is not one shred of evidence in the record and midwest fader's is not a party because they were not a party to the edge and judge brinn it was correct in saying that given all of those specific definitions as to who can and cannot recover under article three to take person bearing the loss and say well that doesn't mean person very the laws that has a right to recover your right to force yesterday that just means anybody so if we bother us proposition banking on the fifth circuit would look  something like robert ross comes in with dozens of checks and suddenly the teller has to say well who are these people are these people real did you see them sign the check is anyone else finding the check eleven circuit there's been no argument as to preemption in this case well the midwest leaders did not brief common law conversion in their praise before this court i believe judge  court in georgia also said that the common law of inverse of was preempt the uses but whether you go it whichever one you're going by midwest favors has to say that they have an interest in th conceded under some extraordinary circumstances or might be a liability of the bank your bank knew exactly what was going on and well went along with it i mean when i'm not saying that happened but are there exceptional circumstances it would  could apply in other situations well let me answer it in two ways we submitted a case that just came down from the eastern district of california i think these were twenty years and in that case it was a case against a bank non customer alleging that the buy should have monitored their customers kept basically saying that the budget should have protected the non customer from the intentional works of  said banks did not have a duty to non customers to protect them from the international courts of their customers the evidence case was so important because one of the climbs was conspiracy to commit fraud and the court in california said there is no duty to a non customer to monitor the bank customers account or to even report that tae said even if they knew their customer was laundering money they had no duty to report that to the non customer that was the victim of that in fact it said federal law prohibits them from communicating now there are all sorts of under the bank secrecy that there are all sorts of reports you can do the government suspicious with the hala theel case out of mississippi well and our own cheney case where it seemed to be much more in line with what i thought is a near consensus that if there is actual knowledge of the fraud then the other  representations encouraging the customer to invest in their they're not they encourage the non customer to invest in the bank customers investment scheme and they have knowledge that scheme was not that it was not a good thing to do that those people were able to sue them for misrepresentation because they've assumed to do they would have and they had relied on the midwest leaders has asserted no representation the banker frank burke said that it was on collectible but i think that's not exactly accurate this car is the conversion midwest fader's confuses an interest in the money funding the church with an interest in the check itself in an echo case of the seventh circuit makes it clear article three is about negotiable is from it's not about money and in plaintiff actually had a stronger argument that they had some interest in the proceeds of the chat because the pay of the check under contract was supposed to write a check for most of the money after the i deducted their fees to the plaintiff and even that was not sufficient to show an interest in the proceeds because the the plaintiff was not a party to the check they said their rights are under the  a checking account or an account at the state bank and he had the right right check so he was doing exactly what he had the right to do he could have written himself a chit because the account where this franklin would have had to honor that chit the end of coke ace talks about the the fundamental axiom of article three that banks have to pay the payee because if they dub without a good then the system does not work what do you understand the district court to have ruled here that your bank had no duty at all what i think of as the evans rule to the non customer or did the district court and i'm focusing on the ruling that we're reviewing decide yes you could have it but there are no facts to show actual no i think judge brown that said that there was no evidence that bank of franklin had any knowledge of the fraud and there is no evidence concern if you read the memo at the very beginning his concern was that the bank was not charging interest and that's why mr ross had left as per by because they had not been charged some interest and then they started charging interest on different argument here but i want to say one thing real quick about i think mr sandberg said there's no business reason for these checks they were beyond suspicious even though bank of franklin the midwest favors no duty to look into this even if everything is true that it was suspicious in the bank or frankly did not use good banking practices there's nobody out midwest favors but being said when these checks came out there was nothing illegal about them but the bank officer did was told to ask them why are you doing this to the checks this way where you write somebody and they give you the check back and he tell them well whenever i am paying someone for their cattle sometimes they want me to invest the money in the new lot of cattle and brother her and so instead of may write the check and then write me a check or write them a check i cite it over explanation but interesting reading in one of their own cases the dog and her case this was not the big issue being considered by the court but in that case they make the comment investors commonly use their share of the sale proceeds to fight it a new lot of pedal so apparently it's not that absurd and even more important is the fact that jeff sternberg or the president of midwest faders in his individual definition and this is record on appeal at three nine seven one three nine seven two basically testified that he accepted the same explanation when robert ross was asked about why he had such so the check then went to al the state bank who didn't know about the terms of this had ulterior business how it was supposed to be done what the checks were supposed to be used for after al the state bank honored the check which they did every single check until march two thousand and fourteen after that midwest faders would find the check by putting money in the it count so that's where the exactly what he was given the right to do they allowed him to put in the ghost boat estimates that they had no legal interest in into the stream of commerce in the world of the uses they assume the reverse their loss was caused by the fact that asked two questions one is could you respond quickly to his record reliance on hans financial yes and then and then i actually since you will be stepping back up if you could address the sanctions motion issue just quickly that would be helpful ok hans hans the plaintiff was the intended paid the party who is intended to be the person who is intended was really interesting the way it happened they filed a motion and i think his opinion came out a few hours later so the parties emailed and said do you want us to respond to this we did not this would not respond and he lives on the on the record to answer your question there's no question about most of the so there's no question that he has his brush and just very much has discretion to conduct discovery in his courts and there has to be an abuse of discretion to find that he was incorrect  is there a factual question with regard to whether there was knowledge of any fraud going on that would be part cryo we would we would characters characterize it is precisely that we would carry say that there is evidence providing at a minimum a reasonable inference inference but probably much more than that that there was fraud going on and that made with feeders would be victimized by that fraud it's not that fraud is going on that's bank of frankly knew of the fraud yes and so what's the best instruments and the dollar amounts and the velocity and the volume we also have the fact that mr rolls was passing checks that had no endorsement at all on them he was passing checks that had a indorsement of fo only even though that's not a proper endorsement of the u c c and bank of franklin's own policies internally noted that and yet they were going through anyway we have a check to this you know a check made out to bank of franklin's president and we have this contrived investigation in this completely implausible explanation all of grand internally what was his name again is yes mr mcgee's there's any suggestion mickey was aware there were the false invoices for the cattle no aum i want to address the regions case that case was dismissed at the rule twelve stage in the district court here extraordinary facts that distinguish this case from all of the other universal rule cases right up to the the evans case from last week which said there is no duty  a non customer unless extraordinary fact extraordinary and specific facts are present which they are here the duties disclaimed in evans were a duty to prevent commingling more to monitor or to conduct an investigation or to tell some third party about what a bank customer is doing it is not the duty that we are claiming here again we go back to the simple don't accept checks that are facially suspicious certainly don't accept them after you become aware that there possible criminal implications circuit courts disagree all the time and we would submit that the eleventh circuit erred in its holding in regions this court has hundreds of pages of briefing  thousands of pages of records and had regions had that same had the eleventh circuit had that same background and had it carefully and comprehensively analyzed the issues and it might have some persuasive value but the region's opinion spans less than two pages and many of the issues that we're all talking about here today aren't even touched in that opinion we will acknowledge that statutes are to be read harmoniously but reading in statutes harmoniously does not mean that you go out and search for conflicts where those don't exist and it doesn't mean that you ignore plain language the person bearing the loss and it doesn't mean that you assume the diligence later meant party entitle to enforce the instrument even though it had that exact term at its at its ready and chose not to include that in a particular statute we can debate the wisdom or the policy implications of extending in the statute liability or a remedy to all those bearing the loss but what we can't debate is that's what the legislature chose to use that is the language that they chose now on the negligence front we would submit that it all of the organs made by bank of franklin res nothing more than factual issues evidence of actual knowledge or a constructive knowledge or for a jury not for the court evidence of the of the of knowledge of the roles alva make midwest feeders relationship or factual issues in just a few seconds left you have a thought on that motion the sanctions motion but yes your honor for us of all that didn't that didn't arise out of some suspicion bank of franklin fall the separate lawsuit disclosing multiple policies that they took the position provided coverage for this case and that were never never disclosed as required under rule twenty six a one what we didn't hear today and what we've never heard i discretion thank you thank you