Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-cv-02778/USCOURTS-cand-3_19-cv-02778-1/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 28:1331 Fed. Question

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

VENTURE GENERAL AGENCY, LLC, et 

al.,

Plaintiffs,

v.

WELLS FARGO BANK, N.A., et al.,

Defendants.

Case No. 19-cv-02778-TSH 

ORDER RE: MOTION TO DISMISS

Re: Dkt. No. 19

I. INTRODUCTION

Plaintiffs Venture General Agency, LLC and Old American County Mutual Fire Insurance 

Co. bring a negligence claim against Defendant Wells Fargo Bank, N.A. after a third party

fraudulently induced Venture to transfer $1,708,112.86 into an account held by the third party at 

Wells Fargo. Pending before the Court is Wells Fargo’s Motion to Dismiss pursuant to Federal 

Rule of Civil Procedure 12(b)(6). ECF No. 19. Plaintiffs filed an Opposition (ECF No. 20) and 

Defendant filed a Reply (ECF No. 21). The Court finds this matter suitable for disposition 

without oral argument and VACATES the October 17, 2019 hearing. See Civ. L.R. 7-1(b). 

Having considered the parties’ positions and the relevant legal authority, the Court GRANTS

Wells Fargo’s motion for the following reasons.

II. BACKGROUND

The Court laid out in detail the allegations in this case in its order granting Wells Fargo’s 

motion to dismiss Plaintiffs’ original complaint. ECF No. 16. Because the First Amended 

Complaint (“FAC”) is largely identical to the original complaint, the Court assumes familiarity 

with those allegations and will not repeat them in full here. Summarizing the dispute, however, 

Plaintiff Venture General Agency, acting as a managing general agent (“MGA”) for Old 

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American, was fraudulently induced by an unknown, third-party fraudster into transferring 

$1,708,112.86 of Old American’s funds into a fraudulent account opened with Wells Fargo in Old 

American’s name. Plaintiffs’ original complaint (ECF No. 1), filed on May 21, 2019, asserted one 

count of negligence and one count of negligence per se against Wells Fargo. Wells Fargo moved 

for dismissal of that complaint on June 25, 2019. ECF No. 8. 

On reviewing Wells Fargo’s motion to dismiss the original complaint, the Court found that

a bank does not owe a duty of care to noncustomers. It found that because the complaint did not 

allege that Plaintiffs were customers of Wells Fargo, it failed to plead allegations showing a duty 

of care owed by Wells Fargo to Plaintiffs. Thus, the Court found Plaintiffs failed to state a valid 

claim of negligence. It dismissed that claim with leave to amend. Regarding Plaintiffs’ 

negligence per se claim, the Court noted that the claim was based on Wells Fargo’s alleged failure 

to comply with the Bank Secrecy Act (“BSA”) as amended by the USA PATRIOT Act, 31 U.S.C. 

§§ 5311-32. The Court found that there is no private right of action under the BSA or Patriot Act, 

and that because there is no private right of action, there can be no duty of Wells Fargo to 

Plaintiffs arising out of those acts. The Court dismissed Plaintiffs’ negligence per se claim 

without leave to amend. 

Plaintiffs’ FAC makes the same factual allegations in support of the negligence claim as

the original complaint did, save for the addition of the following:

During the relevant time periods herein, Old American maintained 

two premium trust accounts with Wells Fargo, which were joint 

accounts shared by Old American as well as its MGAs. One such 

premium trust account, ending in *7076, was opened in or about 

August 2012, while the other such premium trust account, ending in 

*3430, was opened in or about September 2015. These accounts 

remain open and active between Old American and/or its MGAs and 

Wells Fargo. 

FAC ¶ 7.

Wells Fargo has moved for dismissal of the FAC pursuant to Federal Rule of Civil 

Procedure 12(b)(6). ECF No. 19.

III. LEGAL STANDARD

A complaint must contain a “short and plain statement of the claim showing that the 

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a Rule 12(b)(6) motion to 

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dismiss, a complaint must plead “enough facts to state a claim to relief that is plausible on its 

face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility does not mean 

probability, but it requires “more than a sheer possibility that a defendant has acted unlawfully.” 

Ashcroft v. Iqbal, 556 U.S. 662, 687 (2009). A complaint must provide a defendant with “fair 

notice” of the claims against it and the grounds for relief. Twombly, 550 U.S. at 555 (quotations 

and citation omitted); Fed. R. Civ. P. 8(a)(2) (A complaint must contain a “short and plain 

statement of the claim showing that the pleader is entitled to relief.”). In considering a motion to 

dismiss, the court accepts factual allegations in the complaint as true and construes the pleadings 

in the light most favorable to the nonmoving party. Manzarek v. St. Paul Fire & Marine Ins. Co., 

519 F.3d 1025, 1031 (9th Cir. 2008).; Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). However, 

“the tenet that a court must accept a complaint’s allegations as true is inapplicable to threadbare 

recitals of a cause of action’s elements, supported by mere conclusory statements.” Iqbal, 556 

U.S. at 678. 

If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no 

request to amend the pleading was made, unless it determines that the pleading could not possibly 

be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en 

banc) (citations and quotations omitted). However, the Court may deny leave to amend for several

reasons, including “undue delay, bad faith or dilatory motive on the part of the movant, repeated 

failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing 

party by virtue of allowance of the amendment, [and] futility of amendment.” Eminence Capital, 

LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 

182 (1962)).

IV. DISCUSSION

The Court based its first dismissal of Plaintiffs’ negligence claim on the principle that, 

“absent extraordinary and specific facts, a bank does not owe a duty of care to a noncustomer.” 

Software Design & Appl., Ltd. v. Hoefer & Arnett, Inc., 49 Cal. App. 4th 472, 479 (1996) 

(citations omitted); Dodd v. Citizens Bank of Costa Mesa, 222 Cal. App. 3d 1624, 1628 (1990) 

(holding that a bank does not owe a duty of care to a noncustomer absent a showing that the 

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noncustomer was an alter ego of, or had personally guaranteed the debts of, the bank’s customer); 

Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 226 (4th Cir. 2002) (“[I]t has been held that 

banks do not owe a duty of care to noncustomers even when the noncustomer is the person in 

whose name an account was fraudulently opened.”). Plaintiffs attempt to cure the defect of their 

first complaint by alleging in the FAC that Old American (along with its MGAs) was a customer 

of Wells Fargo at the times surrounding the fraudulent transfers. 

Wells Fargo argues that even though Old American was a customer of Wells Fargo at the 

time of the fraudulent transfers, that is insufficient to give rise to a duty of care to Old American as 

to the transactions in this matter. It argues that because a bank’s duty of care is “born from its 

contract with its customer, it follows that the duty of care is limited by the terms of the contract . . 

. .” Mot. to Dismiss FAC 7, ECF No. 21. It argues that Plaintiffs have not pleaded any facts 

showing a nexus between Plaintiffs’ Wells Fargo accounts and the funds transferred into the 

fraudster’s Wells Fargo account. Id. As a result, it argues, Plaintiffs are not considered Wells 

Fargo customers for purposes of the fraudulent transactions, where the alleged fraudster is the 

owner of the Wells Fargo account. Id. 

Plaintiffs argue that after receiving actual knowledge of fraud on Old American, one of its 

customers, Wells Fargo had a duty to cooperate with Plaintiffs in correcting the fraud. Pls.’ Opp’n 

to Mot. to Dismiss (“Opp’n”) 6-7, ECF No. 20. They contend that they are asserting a novel legal 

theory—that a bank owes a duty to a customer when the customer is defrauded on an unrelated 

account. They argue dismissal is disfavored where a party is asserting a novel legal theory, and

thus this motion to dismiss should be denied. Id. at 4-5. They also argue that their case should be 

allowed to proceed so that they may be permitted to obtain discovery on the contracts and 

amendments Old American has with Wells Fargo to “verify their authenticity and ascertain their 

terms and conditions and whether same are enforceable.” Id. at 5. And they argue alternatively 

that, even if their theories of recovery are “imperfectly pleaded,” dismissal is not warranted 

because the facts demonstrate their entitlement to relief. Id. 

A. Whether Wells Fargo Owed Plaintiffs a Duty

The Court agrees with Wells Fargo that, even though Old American might have been a 

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customer of Wells Fargo at the time of fraudulent transactions, Wells Fargo owed no duty to 

Plaintiffs vis-à-vis those transactions. While a bank owes its customers a duty of care, that “basic 

duty of care derives from the contract with their customer[.]” Software Design, 49 Cal. App. 4th 

at 479; Roy Supply, Inc. v. Wells Fargo Bank, 39 Cal. App. 4th 1051, 1076 (1995) (“The duty 

owed by the Bank in this case derives from its contracts with its customers[.]”); Allen v. Bank of 

America Nat'l Trust & Sav. Asso., 58 Cal. App. 2d 124, 127 (1943) (“The relation of banker and 

depositor is founded on contract.”). Even though Plaintiffs now allege Old American was a

customer of Wells Fargo, they have not alleged that they were parties to the agreement underlying

the account involved in the fraudulent transfers. See Roy Supply, 39 Cal. App. 4th 1076 

(shareholder of corporate plaintiffs owed no duty of care where he “was not a party to [bank]

contracts, nor is there any allegation [he] was an intended beneficiary of the contracts between 

defendant and the corporate plaintiffs”). “Absent extraordinary and specific facts . . . a bank is 

liable only to its customer for its mishandling of that customer’s account.” Id. (citations omitted); 

Chazen v. Centennial Bank, 61 Cal. App. 4th 532, 537 (1998) (the contractual relationship 

between bank and depositor “entails no contractual obligation to persons other than the account 

holder”). Plaintiffs have not alleged any actions by Wells Fargo in connection with any of Old 

American’s accounts. Their FAC relates to actions Wells Fargo took (or didn’t take) in

connection with a third-party’s account. Plaintiffs have not alleged that they had any interest in 

that account. Whatever duties Wells Fargo owed in connection with that account were owed to 

that accountholder. That duty did not extend to Old American as a holder of separate, unrelated 

accounts. The FAC does not allege facts showing a general duty of care owed by Wells Fargo to 

Plaintiffs, even with the added allegation that Old American had separate, existing accounts at 

Wells Fargo. 

Plaintiffs allege alternatively that Wells Fargo had an independent duty to cooperate with 

them in investigating and remedying the fraud after receiving actual knowledge of the fraud. FAC 

¶ 51. Similarly, they allege that Wells Fargo acted negligently, after learning of the fraud, by 

failing to inform Plaintiffs of the amounts of funds remaining in the account, to whom the funds 

were wired, and the procedures and processes for obtaining return of the fraudulently transferred 

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funds. Id. ¶ 53. However, California courts have found that, “under California law, a bank owes 

no duty to nondepositors to investigate or disclose suspicious activities on the part of an account 

holder.” Casey v. U.S. Bank Nat. Assn., 127 Cal. App. 4th 1138, 1149 (2005). “Courts are more 

reluctant to recognize duties in this context because such duties run the risk of violating the bank’s 

or merchant’s customers’ right to privacy and of forcing the bank or merchant to act as the 

guarantor of their customers’ transactions.” QDOS, Inc. v. Signature Financial, LLC, 17 Cal. 

App. 5th 990, 1000 n.3 (2017) (quoting Casey, 127 Cal. App. 4th at 1149) (internal quotations 

omitted); Chi. Title Ins. Co. v. Superior Court, 174 Cal. App. 3d 1142, 1159 (1985) (“If . . . banks 

had a duty to reveal suspicions about their customers, they would violate their customers’ right to 

privacy, not to mention be forced to act as the guarantor of checks written by the depositors.”). 

Plaintiffs rely on a single case in arguing otherwise. But that case does not stand for the

proposition that a bank has a duty to cooperate with a defrauded party. In Sun’n Sand, Inc. v. 

United California Bank, an employee of Sun’n Sand prepared and obtained authorized signatures 

on checks payable to United California Bank (“UCB”) for small amounts. 21 Cal. 3d 671, 678 

(1978). The employee then altered the checks, increasing the amount on each check, and 

presented them to UCB. Id. “Although UCB was the named payee, it ‘caused or permitted’ the 

proceeds of the checks to be deposited in a personal account maintained by [the employee] at 

UCB.” Id. A two-justice plurality of the California Supreme Court held that the “sufficiently 

suspicious” circumstances surrounding the checks gave rise to a “duty of inquiry” into the 

employee’s authorization to complete the transaction. Id. at 694-95. The duty, the plurality wrote, 

“is narrowly circumscribed: it is activated only when checks, not insignificant in amount, are 

drawn payable to the order of a bank and are presented to the payee bank by a third party seeking 

to negotiate the checks for his own benefit.” Id. at 695. The plurality did not discuss “objective 

indicia” of fraud “activating” a duty of care, as Plaintiffs argue; it held that once a bank has a duty 

of inquiry, it should look for “objective indicia” that the “party presenting the check is authorized 

to transact in the manner proposed.” Id. 695-96. Since Sun’n Sand discussed a duty to inquire 

into suspected fraud, and not a duty arising after a fraud has been committed, it does not help

Plaintiffs’ argument, even assuming the two-justice plurality opinion constitutes legal authority. 

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See Roy Supply, 39 Cal. App. 4th at 1071 (“[N]ot only is the lead opinion in Sun’n Sand not a 

landmark decision, it is not even precedent.”).

Lastly, under California law, a bank is generally required to disregard any notice of 

adverse claims to an account: 

Notice to any bank of an adverse claim (the person making the 

adverse claim being hereafter called “adverse claimant”) to a deposit 

standing on its books to the credit of or to personal property held for 

the account of any person shall be disregarded, and the bank, 

notwithstanding the notice, shall honor the checks, notes, or other 

instruments requiring payment of money by or for the account of the 

person to whose credit the account stands and on demand shall deliver 

that property to, or on the order of, the person for whose account the 

property is held, without any liability on the part of the bank[.]

Cal. Fin. Code § 1450 (emphasis added). The statute lists two exceptions to that general rule, but 

neither was applicable in the circumstances alleged. See id. at § 1450(a) (affidavit regarding 

anticipated misappropriation of property by fiduciary), (b) (adverse claim supported by an order or 

injunction). So, to the extent Wells Fargo disregarded any claims by Plaintiffs to the transferred 

funds, it was required to do so without incurring liability. 

In sum, Wells Fargo owed no duty to Plaintiffs vis-à-vis the third-party account in this 

case, or to cooperate with Plaintiffs to remedy the fraud, or to disclose to Plaintiffs information 

related to the third-party account.1

Plaintiffs’ FAC fails to state a plausible claim for negligence. 

B. Plaintiffs’ Additional Arguments 

Plaintiffs additionally argue that their FAC should not be dismissed because they are 

asserting a novel legal theory. That argument is unpersuasive. Plaintiffs’ purported theory is that,

while courts have clearly decided that a bank owes no duty to noncustomers in general, a bank

owes a duty to a customer when the customer has been defrauded on a separate account. Opp’n at 

4. But as discussed above, existing law draws the conclusion that Wells Fargo owed Plaintiffs no 

duty concerning the fraudster’s third-party account, nor a duty to cooperate with Plaintiffs in 

 

1 To the extent that the FAC continues to allege failures by Wells Fargo to comply with BSA or 

Patriot Act requirements, the Court has already held that those facts would not sustain a private 

right of action. 

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investigating the fraud, nor a duty to disclose to Plaintiffs nonpublic information regarding the 

third-party account. Plaintiffs are merely arguing that liability should be extended to where it does 

not extend. Their other argument that dismissal is not warranted because “the facts demonstrate 

Plaintiffs’ entitlement to relief” is without merit for the same reason, because the facts alleged do 

not show Wells Fargo owed them a duty.

Plaintiffs also posit that, even if Wells Fargo owed them no duty, the FAC could succeed 

under an intentional tort theory of liability. Specifically, they point to aiding and abetting a fraud. 

As Wells Fargo points out, if Plaintiffs believed that there is a plausible claim against Wells Fargo 

for an intentional tort, it is unclear why they did not make it in the FAC. Generally, under Fed. R. 

Civ. P. 8, a plaintiff must raise a claim in its complaint. See Conservation Force v. Salazar, 677 

F. Supp. 2d 1203, 1211 (N.D. Cal. 2009) (“A claim raised for the first time in briefing on a motion 

to dismiss may not be considered.”) (citing Stallcop v. Kaiser Foundation Hospitals, 820 F.2d 

1044, 1050 n.5 (9th Cir 1987)); Touchstone Research Grp. LLC v. United States, 2019 U.S. Dist. 

LEXIS 172203, *8 n. 5 (S.D.N.Y. 2019) (“[I]t is ‘axiomatic that the Amended Complaint cannot 

be amended by the briefs in opposition to a motion to dismiss.’”) (quoting O’Brien v. National 

Property Analysts Partners, 719 F. Supp. 222, 229 (S.D.N.Y. 1989)). Nevertheless, Plaintiffs 

clearly have not pleaded a plausible claim of aiding and abetting a fraud. “California courts have 

long held that liability for aiding and abetting depends on proof the defendant had actual 

knowledge of the specific primary wrong the defendant [allegedly] substantially assisted.” 

Upasani v. State Farm General Ins. Co., 227 Cal. App. 4th 509, 519 (2014) (citations omitted). 

Plaintiffs have not alleged that Wells Fargo had actual knowledge that a fraud was being 

committed until after its commission. FAC ¶¶ 15-22, 52. Nor do the allegations in the FAC

plausibly support any other intentional tort claim. 

Finally, Plaintiffs assert that they should be given more time to obtain discovery regarding 

the agreements Old American had with Wells Fargo vis-à-vis Old American’s accounts with the 

bank. However, that argument is not persuasive. Those accounts are legally irrelevant because 

there are no allegations in the FAC connecting them to the transactions at issue. Further, the 

accounts belong to Old American, which has suggested no reason it could not obtain the 

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agreements itself and ascertain the rights and duties contained therein.

V. CONCLUSION

For the reasons stated above, the Court GRANTS Defendant Wells Fargo’s Motion to 

Dismiss the First Amended Complaint. Since Plaintiffs will not be able to sufficiently amend their 

complaint to state a valid negligence cause of action, Plaintiffs’ claim is DISMISSED 

WITHOUT LEAVE TO AMEND.

IT IS SO ORDERED.

Dated: October 16, 2019

THOMAS S. HIXSON

United States Magistrate Judge

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