Court Opinion

ID: 4364924
Source: CourtListenerOpinion
Date Created: 2019-02-06 08:37:33.455018+00
Date Added: 2024-06-11T13:30:43.800016
License: Public Domain

2019 WI 7

                  SUPREME COURT             OF   WISCONSIN
CASE NO.:               2016AP636
COMPLETE TITLE:         Koss Corporation,
                                   Plaintiff-Appellant-Petitioner,
                             v.
                        Park Bank,
                                   Defendant-Third-Party
                                   Plaintiff-Respondent-Cross-Appellant,
                             v.
                        Michael J. Koss,
                                   Third-Party
                                   Defendant-Appellant-Cross-Respondent,
                        Grant Thornton LLP,
                                  Third-Party Defendant-Cross-
                                  Respondent.

                            REVIEW OF DECISION OF THE COURT OF APPEALS
                           Reported at 379 Wis. 2d 639, 907 N.W.2d 447
                                PDC No: 2018 WI App 1 - Published

OPINION FILED:          January 29, 2019
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:          September 7, 2018

SOURCE OF APPEAL:
   COURT:               Circuit
   COUNTY:              Milwaukee
   JUDGE:               David L. Borowski

JUSTICES:
   CONCURRED:           A.W. BRADLEY, J. concurs, joined by ABRAHAMSON,
                        J., and DALLET, J. (opinion filed).
  DISSENTED:            KELLY, J. dissents joined by R.G. BRADLEY, J.
                        (opinion filed).
  NOT PARTICIPATING:

ATTORNEYS:

       For        the   plaintiff-appellant-petitioner      and   third-party
defendant-appellant-cross-respondent, there were briefs filed by
Michael S. Yellin,           Ralph Weber, and      Gass Weber Mullins LLC,
Milwaukee, with whom on the brief were                Michael J. Avenatti,
Ahmed        Ibrahim,     and   Eagen   Avenatti     LLP,   Newport    Beach,
California.         There was an oral argument by Ahmed Ibrahaim.
    For      the    defendant-third-party-plaintiff-respondent-cross-
appellant, there was a brief filed by Dean P. Laing, Gregory W.
Lyons, Joseph D. Newbold, and O'Neil, Cannon, Hollman, DeJong &
Laing    S.C.,    Milwaukee.   There       was   an   oral   argument   by   Dean
Laing.

    For the third-party-defendant-cross-respondent, there was a
brief filed by Joseph L. Olson and Michael Best & Friedrich LLP,
Milwaukee.       There was an oral argument by Joseph Olson.

    An amicus curiae brief was filed on behalf of Wisconsin
Bankers Association and the American Bankers Association by John
E. Knight, James E. Bartzen, Kirsten E. Spira, and Boardman &
Clark LLP, Madison.

                                       2
                                                                        2019 WI 7

                                                               NOTICE
                                                 This opinion is subject to further
                                                 editing and modification.   The final
                                                 version will appear in the bound
                                                 volume of the official reports.
No.   2016AP636
(L.C. No.   2010CV21290)

STATE OF WISCONSIN                          :             IN SUPREME COURT

Koss Corporation,

            Plaintiff-Appellant-Petitioner,

      v.

Park Bank,

            Defendant-Third-Party
            Plaintiff-Respondent-Cross-Appellant,
                                                                    FILED
      v.                                                       JAN 29, 2019

Michael J. Koss,                                                  Sheila T. Reiff
                                                               Clerk of Supreme Court

            Third-Party
            Defendant-Appellant-Cross-Respondent,

Grant Thornton LLP,

            Third-Party Defendant-Cross-
            Respondent.

      REVIEW of a decision of the Court of Appeals.               Affirmed.

      ¶1    PATIENCE       DRAKE   ROGGENSACK,       C.J.      We      review       a

published decision of the court of appeals1 that affirmed an

      1
       Koss Corp. v. Park Bank, 2018 WI App 1, 379 Wis. 2d 629,
907 N.W.2d 447.
                                                                            No.     2016AP636

order of the circuit court2 granting summary judgment dismissing

Koss Corporation's Uniform Fiduciaries Act (UFA) claim against

Park Bank.3

     ¶2        Our    review   centers     on       two    related     issues:          First,

consistent with the UFA, we interpret and apply the terms "good

faith" as set out in Wis. Stat. § 112.01(1)(c) and "bad faith"

employed       in    § 112.01(9);        and       second,    we     determine      whether

summary        judgment    dismissing          Koss       Corporation's       claim          was

properly granted.

     ¶3        We conclude Wis. Stat.                § 112.01(1)(c) describes the

term "good faith" as honest bank acts, even when negligently

done,     and       consistent     with    the       majority       of   jurisdictions'

interpretations of the UFA, "bad faith" is inconsistent with the

statutory       criteria     for   "good       faith."         Therefore,         bad   faith

pursuant to § 112.01(9), which is an intentional tort, may be

shown     by    acts    evidencing        bank      dishonesty       such    as     a    bank

willfully failing to further investigate compelling and obvious

known     facts       suggesting     fiduciary            misconduct     because        of    a
deliberate desire to evade knowledge of fiduciary misconduct.

     2
       The       Honorable       David    L.       Borowski    of     Milwaukee         County
presided.
     3
       Wisconsin Stat. § 112.01 (2015-16) is Wisconsin's version
of the UFA.

       All subsequent references to the Wisconsin Statutes are
to the 2015-16 version unless otherwise indicated.

                                               2
                                                                      No.       2016AP636

     ¶4   We further conclude that given the allegations that

Koss Corporation asserts in regard to its claim that Park Bank

is liable for the intentional tort of bad faith, no proof has

been proffered of bank dishonesty wherein Park Bank willfully

failed to further investigate compelling and obvious known facts

suggesting fiduciary misconduct because of a deliberate desire

to evade knowledge of fiduciary misconduct.

     ¶5   Accordingly,         we     affirm           the   court    of        appeals'

affirmance     of      the     circuit          court's      dismissal      of      Koss

Corporation's    claim       that    Park       Bank    acted   in   bad    faith     in

processing   the    transactions        that       Sujata    Sachdeva      initiated.

Because we conclude Park Bank is not liable to Koss Corporation,

we also affirm the dismissal of Park Bank's third-party claims.4

                                I.    BACKGROUND

     ¶6   In    this    lawsuit,      Koss      Corporation     seeks      to    collect

millions of dollars from Park Bank that Sachdeva embezzled from

its accounts at Park Bank.             As Vice President of Finance for

Koss Corporation, Sachdeva was one of three people authorized to
conduct transactions from Koss Corporation's Park Bank accounts

pursuant to bank signature cards.5                     As was explained by Park

     4
       Two justices join in the totality of the decisions
expressed in this opinion:        Chief Justice Patience Drake
Roggensack and Justice Annette Kingsland Ziegler. The opinions
of other justices in regard to the issues presented for the
court's review are found in the separate opinions that follow.
     5
       Sachdeva also served as Secretary and Principal Accounting
Officer for Koss Corporation.

                                            3
                                                                              No.    2016AP636

Bank's attorney at oral argument, nothing prohibited Sachdeva

from exercising her transaction authority for Koss Corporation's

accounts at Park Bank through another Koss Corporation employee

so    long     as    Sachdeva      made   the       decision        to    initiate         the

transaction.

      ¶7      Sachdeva embezzled approximately $34 million from Koss

Corporation over a period of ten years, from about 1999 until

she was caught in 2009.            In 2010, she pled guilty to six counts

of wire fraud in connection with her embezzlement from Park Bank

and from Koss Corporation's Chicago banks.                    She was sentenced to

eleven     years     in   prison    and   ordered       to    pay     $34      million     in

restitution.

      ¶8      One method Sachdeva used to embezzle funds from Koss

Corporation         was   to    order     cashier's          checks       for       personal

expenditures.         She admits that she used hundreds of cashier's

checks drawn on Koss Corporation's Park Bank accounts to pay for

her   purchases      from    luxury     retailers,      as    well       as    to    pay   her

personal credit card bills.                   She sometimes used the payee's
initials to avoid detection, such as "S.F.A., Inc." for Saks

Fifth Avenue or "N.M." for Nieman Marcus.

      ¶9      Generally, Sachdeva did not go to the bank herself to

obtain       cashier's      checks.       Instead,        she       instructed         Julie

Mulvaney, another Koss Corporation employee, to call the bank

and request a cashier's check on Sachdeva's behalf.                                  Mulvaney

was not a signatory on Koss Corporation's Park Bank accounts.

Despite      the    existence      of   the       signature    cards,         Park    Bank's

                                              4
                                                                                   No.     2016AP636

general     practice       was    to     allow         non-signatories             to     call    and

request cashier's checks on a signatory's behalf.

      ¶10      After     receiving        telephone           requests            for    cashier's

checks,     Park    Bank    would       place         the   checks      in    an       envelope    to

Sachdeva's attention.              Sachdeva would then send another Koss

Corporation        employee,      usually         Betty       Caver,         to    pick    up     the

envelopes.       Caver     was    not    a    signatory            on   Koss       Corporation's

account.       The employees who picked up the checks were not asked

to present signed documentation from Sachdeva, and Park Bank did

not     call    Sachdeva     to     verify            the    transactions.               When     the

cashier's checks reached Sachdeva, she would mail them to her

creditors to pay personal debts.

      ¶11      On one occasion in January of 2004, Betty Caver went

into the bank and endorsed a $60,598.03 counter check6 against a

Koss Corporation account, made payable to cash.                                   Park Bank did

not call Sachdeva to verify the transaction.                                  The funds were

then used to purchase two cashier's checks in the amounts of

$42,441.61 and $18,156.42, which were used to pay Sachdeva's
personal       credit    card    bills       to       American      Express        and     Comerica

Bank.     Koss Corporation does not dispute that Caver, Mulvaney,

and   any      other    employees       involved            were   acting         at    Sachdeva's

direction.

      ¶12      Sachdeva also used "petty cash" requests to embezzle

funds.      Sachdeva would instruct a non-signatory Koss employee,

      6
       A counter check is a check available at a bank that can be
used to make a withdrawal from an account at the bank.

                                                  5
                                                                     No.   2016AP636

usually Betty Caver, to go to the bank and endorse a manually

written check made out to "petty cash."              Sachdeva would call and

tell the bank the employee was coming.               The employee would pick

up cash for Sachdeva, sometimes from a drive-through window,

without being asked for identification.              Sachdeva used the cash

to pay her "handyman," as well as to buy shoes, purses, and

dinners.    The petty cash requests were often for thousands of

dollars at a time.        From 2005 to 2009, there were at least 43

such "petty cash" checks, totaling $171,985.02.

    ¶13     Sachdeva's third method of embezzling funds, and the

method that eventually led to her downfall, was to request wire

transfers    to    an    out-of-state       bank    where     Koss     Corporation

maintained accounts.         Between 2004 and 2009, Park Bank made

seven wire transfers totaling $2 million from Koss Corporation's

Park Bank accounts to Koss Corporation's accounts in Chicago

banks.     Either Sachdeva or Mulvaney would call Park Bank and

initiate    the   wire    transfer    over    the    phone     by     providing    a

"repetitive code," which was used in lieu of providing account
numbers when the same client regularly wired money between the

same two accounts.       Park Bank's policy required a wire transfer

agreement to initiate wire transfers, which Koss Corporation did

not have.

    ¶14     In    December   of   2009,       an    employee        from   American

Express's   fraud    department      called   Michael       Koss7    directly     and

    7
       Michael Koss was Koss Corporation's President, COO, CEO,
and CFO.

                                        6
                                                                         No.    2016AP636

informed him that Sachdeva had been using wire transfers from

Koss    Corporation's      Chicago       bank      account    to   pay    her    credit

transactions with American Express.                 This call led to Sachdeva's

prosecution and eventual guilty plea.

       ¶15     In 2010, Koss Corporation originally sued Park Bank

for negligence.          It later amended its complaint to add a UFA

"bad faith" claim, and to add factual information about the

petty cash and wire transfers.                  Park Bank filed a third-party

complaint against Michael Koss and against Koss Corporation's

auditors,      Grant    Thornton    LLP,     for    contribution     and       equitable

subrogation.        In 2013, Koss Corporation dismissed its negligence

claim with prejudice.           Its second and third amended complaints

both asserted bad faith under the UFA as the sole claim for

relief.

       ¶16     In support of its claims, none of Koss Corporation's

factual allegations asserted, or even implied, that Park Bank

acted dishonestly such as being motivated by self-interest with

regard    to    the    transactions      Sachdeva     initiated.          Furthermore,
none of Koss Corporation's allegations assert that Park Bank

suspected       that     Sachdeva      was      acting       improperly.           After

considerable        discovery    was     completed,      Park      Bank    moved     for

summary judgment on the UFA bad faith claim.

       ¶17     On March 11, 2016, the Milwaukee County Circuit Court

granted      Park     Bank's    motion     for      summary     judgment,       thereby

dismissing all claims against Park Bank.                     It also dismissed the

third-party complaint against Grant Thornton LLP and Michael J.
Koss.     In regard to the claims against Park Bank, the circuit
                                           7
                                                                      No.     2016AP636

court first held that Park Bank, as the moving party, had met

its   initial     burden   and    that    Koss      Corporation     had     failed   to

establish the existence of a material factual dispute.                               The

circuit court concluded that to show bad faith under the UFA,

Koss Corporation would have had to have provided evidence that

Park Bank intentionally ignored evidence of Sachdeva's breach of

her fiduciary obligations, which Koss Corporation had failed to

do.

      ¶18   The    court   of    appeals      affirmed      the    circuit    court's

decision dismissing Koss Corporation's UFA claim.                    Koss Corp. v.

Park Bank, 2018 WI App 1, ¶2, 379 Wis. 2d 629, 907 N.W.2d 447.

The court of appeals first acknowledged that Wisconsin's version

of the UFA must be interpreted to make Wisconsin law uniform

with the law of other states that have enacted the UFA.                           Id.,

¶23; Wis. Stat. § 112.01(14).                 After reviewing case law from

other UFA jurisdictions, the court of appeals created a two-

element test for bad faith that required a showing of:

      1) circumstances that are suspicious                 enough to place a
      bank on notice of improper conduct                   by the fiduciary;
      and   2) a deliberate failure to                      investigate the
      suspicious circumstances because of                  a belief or fear
      that such inquiry would disclose                     a defect in the
      transaction at issue.
Koss Corp., 379 Wis. 2d 629, ¶27.

      ¶19   The court of appeals agreed with the circuit court's

determination      that    Park    Bank       had    established      prima      facie

eligibility     for   summary     judgment,         id.,    ¶29,   and    that    Koss

Corporation failed to controvert that eligibility with a genuine
issue of material fact as to whether Park Bank acted with bad

                                          8
                                                                   No.   2016AP636

faith regarding Sachdeva's embezzlement, id., ¶50.                  Because the

court of appeals concluded that Park Bank was not liable to Koss

Corporation, the court of appeals did not address Park Bank's

third-party complaints.        Id., ¶2 n.3.

      ¶20   We granted Koss Corporation's petition for review and

now affirm.

                               II.    DISCUSSION

                          A.     Standard of Review

      ¶21   This case requires us to interpret and apply statutes,

and   to    review   a    grant      of   summary    judgment.       "Statutory

interpretation and the application of a statute to a given set

of facts are questions of law that we review independently, but

benefiting from the analyses of the court of appeals and the

circuit court."      Marder v. Bd. of Regents, 2005 WI 59, ¶19, 286

Wis. 2d 252, 706 N.W.2d 110.

      ¶22   We   also     independently       review      grants    of   summary

judgment, applying the same methodology as the circuit court and

the court of appeals, while once again benefitting from their
analyses.     Dufour v. Progressive Classic Ins. Co., 2016 WI 59,

¶12, 370 Wis. 2d 313, 881 N.W.2d 678.               "The standards set forth

in Wis. Stat. § 802.08 are our guides."             Id.

                     B.   The Uniform Fiduciaries Act

                            1.     History of UFA

      ¶23   The UFA was approved by the National Conference of

Commissioners on Uniform State Laws in 1922.                It was adopted by

Wisconsin in 1925, and is set out in Wis. Stat. § 112.01(1)-

                                          9
                                                                                No.    2016AP636

(16).     Bolger v. Merrill Lynch Ready Assets Tr., 143 Wis. 2d

766, 774, 423 N.W.2d 173 (Ct. App. 1988).

       ¶24    Prior to the development of the UFA, a bank could be

found liable to a principal in common law negligence if the bank

"negligently        assisted      a    fiduciary            in   misappropriating           [the]

principal's funds."         Maryland Cas. Co. v. Bank of Charlotte, 340

F.2d 550, 553 (4th Cir. 1965).                       Some courts "went so far as to

charge depository banks with constructive notice of fiduciary

misconduct."        Bolger, 143 Wis. 2d at 774.                        The result burdened

banks with the duty of "seeing that fiduciary funds are properly

applied to the account of the principal."                              Sugarhouse Fin. Co.

v. Zions First Nat'l Bank, 440 P.2d 869, 870 (Utah 1968).

       ¶25    As banking grew as a business and "[a]s banks began to

process      more   and    more       transactions,"             policymakers      questioned

"whether it was wise policy to place the duty of monitoring

fiduciary      accounts     for       wrongdoing        on       the   bank's     shoulders."

Attorneys Title Guar. Fund v. Goodman, 179 F. Supp. 2d 1268,

1274    (D. Utah 2001).               This       led    several         states,       including
Wisconsin in 1925, to adopt the newly drafted UFA.                              Id.; Bolger,

143 Wis. 2d at 774.

       ¶26    The   UFA's    purpose            was    to    "facilitate        banking      and

financial     transactions"           by   "provid[ing]           relief    from      the    dire

consequences of the common law rule," as well as to "place on

the    principal     the    burden         of    employing         honest    fiduciaries."

Bolger, 143 Wis. 2d at 774-75; Johnson v. Citizens Nat'l Bank,

334 N.E.2d 295, 300 (Ill. App. 1975).                              Adoption of the UFA
evinced a recognition of the economic importance of allowing
                                                10
                                                                      No.    2016AP636

banks to efficiently process a high volume of transactions.                        For

this reason, courts have long recognized that a return to the

common   law   rule   of    liability   based       on   negligence     by    a   bank

"would practically put an end to the banking business," Am. Sur.

Co. of N.Y. v. First Nat'l Bank in W. Union, 50 F. Supp. 180,

185-86   (N.D.    W. Va. 1943),      and     that     "[t]he     present     banking

system under which an enormous number of checks are processed

daily could not function effectively if banks were not required

to make prompt and effective decisions on whether to pay or

dishonor checks."          Chazen v. Centennial Bank, 71 Cal. Rptr. 2d

462, 466 (Ct. App. 1998).

                           2.   Koss Corporation's Claim8

    ¶27    Koss    Corporation      grounds     its      claim   in    Wis.       Stat.

§ 112.01(9), which states in relevant part:

    If a check is drawn upon the account of a fiduciary's
    principal in a bank by a fiduciary, who is empowered
    to draw checks upon his or her principal's account,
    the bank is authorized to pay such check without being
    liable to the principal, unless the bank pays the
    check with actual knowledge that the fiduciary is
    committing a breach of the fiduciary's obligation as
    fiduciary in drawing such check, or with knowledge of
    such facts that its action in paying the check amounts
    to bad faith. If, however, such a check is payable to
    the drawee bank and is delivered to it in payment of

    8
       In the case before us, Wis. Stat. § 112.01(9) is argued as
a claim against Park Bank, rather than as a defense to a claim
that   Park    Bank   assisted   Sachdeva's   unlawful   conduct.
Accordingly, we shall discuss it as a claim.     However, Compare
Appley v. West, 832 F.2d 1021, 1031 (7th Cir. 1987) (explaining
that the "UFA did not create the cause of action. Rather, the
UFA is a defense."); Manfredi v. Dauphin Deposit Bank, 697 A.2d
1025, 1029-30 (1997) (same).

                                        11
                                                                     No.    2016AP636

      or as security for a personal debt of the fiduciary to
      it, the bank is liable to the principal if the
      fiduciary in fact commits a breach of the fiduciary's
      obligation as fiduciary in drawing or delivering the
      check.
      ¶28    Wisconsin   Stat.     § 112.01(9),       quoted      above,   provides

three     entirely   different     standards     whereby      a    bank    could    be

liable:     (1) when a bank had actual knowledge of the unlawful

conduct     of   a   fiduciary;    (2) when      a    bank   had    knowledge       of

sufficient facts to show that it acted in bad faith by honoring

a   fiduciary's      withdrawals    from   the       principal's     account;       or
(3) when a drawee bank accepts its own check in payment of or as

security for a personal debt of the fiduciary at the drawee

bank, contrary to the interest of the principal.9

      ¶29    Koss    Corporation    sued   Park      Bank    alleging      that    the

bank's transactions with Sachdeva were done in bad faith.                         Koss

Corporation did not allege, nor has any proof been shown, that

Park Bank had knowledge of Sachdeva's unlawful conduct or that

it paid, or used Koss's funds as security for, personal debts of

Sachdeva at Park Bank.           Accordingly, we focus on defining bad

faith.

                         3.   Defining "Bad Faith"

      ¶30    The UFA does not define bad faith.                It does, however,

define good faith.        Under the UFA, "[a] thing is done 'in good

      9
       Maryland Cas. Co. v. Bank of Charlotte, 340 F.2d 550, 554-
55 (4th Cir. 1965) is often cited. There, the Bank of Charlotte
had a monetary interest in the transactions where it received
checks drafted on the corporation's account at the bank and
applied those checks to the employee's private debt at the bank.

                                      12
                                                                            No.     2016AP636

faith' . . . when it is in fact done honestly, whether it be

done negligently or not."                Wis. Stat. § 112.01(1)(c).                     A bank

does    not    violate       its   obligations        to     its     depositor      if     its

transactions with the depositor's fiduciary are honestly done.

Buffets, Inc. v. Leischow, 732 F.3d 889, 899, (8th Cir. 2013);

Rheinberger v. First Nat. Bank of St. Paul, 150 N.W.2d 37, 41

(Minn. 1967) (concluding that "[b]ad faith does not exist if the

bank was acting honestly.").

       ¶31     Accordingly, the definition of good faith under Wis.

Stat. § 112.01(1)(c) implies that bad faith under § 112.01(9)

must involve something more than negligent bank conduct and must

involve conduct during which the bank did not act honestly.

Because § 112.01 is a uniform law, we consider decisions from

other jurisdictions that have defined bad faith.                            § 112.01(14).

As we do so, we note that variations in facts from which claims

of bad faith arose have resulted in different expressions of the

definition of bad faith, with bank dishonesty expressed in most

decisions.       See Attorneys Title Guar. Fund, 179 F. Supp. 2d at
1277 (concluding that "bad faith is the subjective deliberate

desire    to    evade    knowledge       because      of    a     belief    or    fear    that

inquiry        would     disclose         a        vice      or      defect        in      the

transaction . . . [and]            bad        faith       requires     dishonesty          and

implies       wrongdoing      or   some       motive       of     self-interest"          when

considering       repetitive       nonsufficient           fund     activities);          N.J.

Title    Ins.    Co.    v.    Caputo,      748      A.2d     507,     514    (N.J.       2000)

(concluding that when "facts suggesting fiduciary misconduct are
compelling and obvious, it is bad faith to remain passive and
                                              13
                                                                 No.     2016AP636

not     inquire   further   because    such        inaction    amounts     to   a

deliberate desire to evade knowledge" of improper trust account

transactions); Rheinberger, 150 N.W.2d at 41 (concluding that

bad faith in making transfers between accounts by a son who had

power of attorney for his mother "does not exist if the bank was

acting honestly").

      ¶32   As a preliminary matter, we do not apply Wisconsin

common law from other contexts to define "bad faith" under Wis.

Stat.    § 112.01(9)   because   bad       faith   under   the   UFA   requires

interpretation of a term in a specific statute.                Under Wisconsin

common law, the definitions of bad faith and good faith can vary

depending on the context in which they arise.                 For example, in

contract law, bad faith does not simply mean the absence of good

faith because good faith can be defined in a number of ways by

contract.     Amoco Oil Co. v. Capitol Indem. Corp., 95 Wis. 2d

530, 542, 291 N.W.2d 883 (Ct. App. 1980).                     In an insurance

context, bad faith and good faith have developed definitions

relative to an insurer's obligations.                Roehl Trans., Inc. v.
Liberty Mut. Ins. Co., 2010 WI 49, ¶49, 325 Wis. 2d 56, 784

N.W.2d 542.

      ¶33   That said, our task is to define bad faith as it is

used in Wis. Stat. § 112.01(9).             We are required to interpret

and apply the provisions of § 112.01 "to effectuate its general

purpose to make uniform the law of those states which enact it."

§ 112.01(14).      Given that legislative directive, as we define

                                      14
                                                                          No.    2016AP636

bad     faith,       we        consider     judicial         decisions    from         other

jurisdictions that have adopted the UFA.10

                 a.        Bad faith principles and criteria

       ¶34    There are a number of general principles and specific

criteria      that        appear      repeatedly       in     decisions    from        other

jurisdictions as courts have considered how to analyze and to

define bad faith.              We will not address all of them, but rather,

we will discuss those general principles and specific criteria

that    appear   most          frequently      and    have    been   central      to    the

reasoning of many courts as they sought to analyze and define

bad faith.

       ¶35    We begin by noting that under the UFA when presented

with    the   issue       of    bad   faith,      generally     courts    consider       the

circumstances             surrounding          each         fiduciary     transaction,

individually.         They do not aggregate circumstances as though

each transaction           were    a part of          preceding transactions.             We

agree that aggregation of transactions is inapposite, relying on

the structure of Wis. Stat. § 112.01(9) and prior UFA decisions.
       ¶36    Wisconsin Stat. § 112.01(9) states that "[i]f a check

is drawn upon the account of a fiduciary's principal in a bank

by a fiduciary, who is empowered to draw checks upon his or her

       10
       All states that have adopted the UFA have not adopted the
same version as has Wisconsin, e.g., Peoples Nat. Bank v. Guier,
145 S.W.2d 1042, 1047 (Ky. 1940) (explaining that the Kentucky
version of the UFA does not contain the same provisions as
Wisconsin has in Wis. Stat. § 112.01(9)).          Sometimes the
differences in state law matter in regard to the usefulness of a
decision from such a state and sometimes they do not.

                                             15
                                                                   No.    2016AP636

principal's account," the bank is liable to the principal if

"its action in paying the check amounts to bad faith."11                   Section

112.01(9) does not envision aggregation of general protections

from    fiduciary    misconduct.12        As    the   Eighth   Circuit    recently

explained, "[t]he UFA is drawn in terms of specific transactions

made in violation of certain fiduciary obligations."                      Buffets,

Inc., 732 F.3d at 899.         It does not provide "general protection"

to     principals,     but     rather,        "provides   principals       limited

protection against a bank's knowing or bad-faith processing of a

specific transaction that breaches a fiduciary obligation."                     Id.

at 900; see also Rosemann v. St. Louis Bank, No. 14-CV-983-LLR,

slip op. at *14 (E.D. Mo. Nov. 17, 2015).                 Furthermore, a bank

has no obligation to piece together various transactions by a

fiduciary,    but     rather    it   is       permitted   to    engage     in   the

presumption that the fiduciary is acting in accord with the

fiduciary's lawful authority for each transaction.                       Gen. Ins.

Co. of Am. v. Commerce Bank of St. Charles, 505 S.W.2d 454, 457

(Mo. Ct. App. 1974).

       11
       Wisconsin Stat. § 112.01(9) also provides that if "a
check is payable to the drawee bank and is delivered to it in
payment of or as security for a personal debt of the fiduciary
to it, the bank is liable to the principal if the fiduciary in
fact commits a breach of the fiduciary's obligation as
fiduciary." This appears to assign a bank greater potential for
liability. However, those circumstances are not present in the
matter before us.
       12
       We also note that the text of Wis. Stat. § 112.01(9)
employs singular forms of nouns and verbs.

                                         16
                                                                                No.     2016AP636

       ¶37    This is not to say that when examining an individual

transaction about which the bank has become suspicious, previous

transactions by the fiduciary cannot be examined as the bank

considers       whether       the    fiduciary          has   breached           a    fiduciary

obligation in the current transaction.                        The focus, however, is

on    whether      the    bank    exhibited       bad    faith      with       regard    to    the

individual transaction in question at the time the transaction

occurred.       Mikrut v. First Bank of Oak Park, 832 N.E.2d 376, 387

(Ill. App. 2005).

       ¶38    In      their      decisions,       courts      often       have       opined        on

whether the standard for bad faith is subjective or objective,

with the majority concluding that the test is subjective.                                     See,

e.g., Caputo, 748 A.2d at 514.                 The conclusion that bad faith is

determined by a subjective standard contrasts with the due care

or objective reasonableness standard applicable to negligence

determinations           because     the    UFA     directs         that       negligence          is

insufficient        to    support    liability          for   a    fiduciary's          conduct.

See id.       And finally, the vast majority of UFA decisions hold,
and Koss Corporation has repeatedly conceded, that bad faith

under the UFA is an intentional tort.                         See Lawyers Title Ins.

Corp. v. Dearborn Title Corp., 904 F. Supp. 818, 820 (N.D. Ill.

1995).       It would be unusual to conclude that an intentional tort

does not require subjective intent.

       ¶39    In regard to particular factors that are indicative of

bad    faith,      most    courts    have     concluded           that    dishonesty          is   a

necessary component in the assessment of whether a bank has
acted    in     bad      faith.      See,     e.g.,      Caputo,         748    A.2d     at    514
                                              17
                                                                            No.       2016AP636

(explaining        that    the    dishonesty        standard   "has     been      a    static

epithet      in    our    bad    faith       jurisprudence");     Research-Planning,

Inc. v. Bank of Utah, 690 P.2d 1130, 1132 (Utah 1984) (reasoning

that bad faith requires a dishonest purpose and implies some

motive of self-interest by the bank); Bd. of Cty. Comm'rs of Hot

Springs Cty. v. First Nat'l Bank of Thermopolis, 368 P.2d 132,

139 (Wyo. 1962) (concluding that bad faith "is not simply bad

judgment" but "imports a dishonest purpose"); Nat'l Cas. Co. v.

Caswell & Co., 45 N.E.2d 698, 699 (Ill. App. Ct. 1942) (holding

that   "bad       faith    imports       a    dishonest      purpose");      Edwards        v.

Northwestern Bank, 250 S.E.2d 651, 657 (N.C. 1979) (adopting the

dishonesty standard for bad faith and concluding that dishonesty

"is, unlike negligence, wilful"); C-Wood Lumber Co. v. Wayne

Cty. Bank, 233 S.W.3d 263, 284 (Tenn. Ct. App. 2007) (requiring

a UFA plaintiff to prove that "the bank was acting dishonestly

or that the bank actually knew [the fiduciary] was breaching her

fiduciary obligations").

       ¶40       When    the     bank    permits        a   fiduciary     to      use      the
principal's funds to pay his or her personal debt to the same

bank where the principal's account is located, dishonesty of a

type involved in bad faith is shown.                        Maryland Cas. Co., 340

F.2d at 554 (affirming that "where a bank had both reason to

suspect      a    misappropriation           by   the   fiduciary     and    a    monetary

interest in the continuance of such activity" dishonesty under

the UFA is evidenced) (citing Union Bank and Trust Co. v. Girard

Trust Co., 161 A. 865 (Pa. 1932)).

                                               18
                                                                              No.     2016AP636

    ¶41    In    contrast       to    negligence,      dishonesty         is        viewed   as

requiring purposeful bank conduct.                   See, e.g., Caputo, 748 A.2d

at 513 (concluding that dishonesty is "a way of differentiating

bad faith from negligence in terms of purpose."); Guild v. First

Nat'l Bank of Nev., 553 P.2d 955, 958 (Nev. 1976) (concluding

that a showing of "conscious purposeful misconduct" is required

for bad faith).

    ¶42    In    Davis     v.   Pa.    Co.    for     Ins.   on    Lives        &    Granting

Annuities, 12 A.2d 66 (Pa. 1940), the Pennsylvania Supreme Court

articulated     a   test    for      distinguishing          bad    faith       from       mere

negligence that has since been repeated in numerous UFA cases

across the country:

    At what point does negligence cease and bad faith
    begin?    The distinction between them is that bad
    faith, or dishonesty, is, unlike negligence, willful.
    The mere failure to make inquiry, even though there be
    suspicious circumstances, does not constitute bad
    faith unless such failure is due to the deliberate
    desire to evade knowledge because of a belief or fear
    that inquiry would disclose a vice or defect in the
    transaction,——that is to say, where there is an
    intentional closing of the eyes or stopping of the
    ears.
Id. at 69 (internal citations omitted).                      The court's reasoning

supports   the      conclusion         that     "a     thing       is    done         in     bad

faith . . . only     when       it    is   done     dishonestly         and     not    merely

negligently."       Id. at 68.             Many states use this "dishonesty

standard" to define bad faith.                  See, e.g., Smith v. Halverson,

273 N.W.2d 146, 151-52 (S.D. 1978); Sugarhouse Fin. Co., 440

P.2d at 870.

                                           19
                                                                                No.    2016AP636

       ¶43    However, the dishonesty involved in bad faith does not

require "a high degree of moral guilt."                          Maryland Cas. Co., 340

F.2d   at     554;    see       also    Caputo,       748   A.2d   at     514    (dishonesty

"should not be interpreted as having sinister implications").

"Neither criminal fraud nor downright corruption is an essential

ingredient of legal 'bad faith.'"                       Maryland Cas. Co., 340 F.2d

at 554.       Rather, "wrongdoing or some motive of self-interest" by

the bank is required for bad faith.                          Sugarhouse Fin. Co., 440

P.2d at 870.

       ¶44    In     addressing         dishonesty,         none    of     these       opinions

eliminated the subjective purpose requirement that has been a

necessary component of bad faith under the UFA.                            In Caputo, for

example,      the     New       Jersey    Supreme       Court      explained          that   the

dishonesty standard is "a way of differentiating bad faith from

negligence in terms of purpose."                      Caputo, 748 A.2d at 514.                In

Maryland      Cas.    Co.,       where    the    Bank       of   Charlotte      permitted      a

fiduciary to credit checks written on the principal's account to

her personal debt at the bank, the Fourth Circuit asked whether
it was commercially unjustifiable for the payee to "disregard

and refuse to learn facts readily available."                                Maryland Cas.

Co.,    340    F.2d       at     554.      The        Eighth     Circuit       has     recently

reaffirmed         that     a    bank    cannot        be    liable      for     failing     to

investigate        suspicious          circumstances         unless      that    failure      to

investigate is due to "the deliberate desire to evade knowledge

because of a belief or fear that inquiry would disclose a vice

or defect in the transaction."                       Buffets, Inc., 732 F.3d at 901
(citations omitted); see also Nations Title Ins. of N.Y., Inc.
                                                20
                                                                                     No.        2016AP636

v.     Bertram,       746       N.E.2d      1145,        1151      (Ohio       App.        3d        2000)

(concluding that "failure to make inquiry, even though there be

suspicious            circumstances,                  does        not      constitute                  bad

faith . . . unless such failure is due to the deliberate desire

to evade knowledge because of a belief or fear that inquiry

would     disclose          a    vice       or        defect      in     the        transaction").

Subjective          intent       grounded         in    dishonest         purpose          has       been

required in the majority of UFA decisions.

       ¶45     Koss     Corporation             points       to    language          from        a    few

opinions that it contends evidences an objective test for bad

faith, citing Caputo, Master Chem. Corp. v. Inkrott and UNR-

Rohn, Inv. v. Summit Bank of Clinton Cty.

       ¶46     In     Caputo,        the     court       reasoned        that       "where           facts

suggesting fiduciary misconduct are compelling and obvious, it

is bad faith to remain passive and not inquire further because

such     inaction       amounts            to     a     deliberate         desire          to        evade

knowledge."         Caputo, 748 A.2d at 514.

       ¶47     Master Chem. Corp. v. Inkrott, 563 N.E.2d 26, 31 (Ohio
1990), employs similar language in explaining that a bank acts

in bad faith when "facts and circumstances" are "so cogent and

obvious that to remain passive                         would amount            to    a deliberate

desire    to    evade       knowledge           because      of   a     belief      or     fear       that

inquiry would disclose a defect in the transaction."                                       According

to Koss Corporation, the words "would amount to a deliberate

desire" taken from Inkrott and Caputo suggest that an actual,

subjective      desire          to   evade       knowledge        need    not       exist.            Koss
Corporation also asserts that because courts deciding summary
                                                  21
                                                                       No.    2016AP636

judgment motions under the UFA have asked whether "a trier of

fact could conclude that it was commercially unjustifiable for

[the   bank]    to    disregard    and    refuse        to   learn    facts    readily

available," as occurred in              UNR-Rohn, Inc. v. Summit Bank of

Clinton Cty., 687 N.E.2d 235, 239 (Ind. App. 1997) an objective

standard is inferred.

       ¶48    Koss Corporation's arguments are interesting, but when

the quoted language is read in context, they do not support the

use of an objective standard to define bad faith.                      For example,

in   Caputo,    the    court   clarified          the   phrase,      "amounts       to    a

deliberate desire to evade knowledge."                  The court explained that

it was "differentiating bad faith from negligence in terms of

purpose."      Caputo, 748 A.2d at 514.            The court further clarified

that the required determination was "whether the bank recklessly

disregarded or was purposefully oblivious to facts suggesting

impropriety by Caputo."           Id.    Caputo explained that "bad faith

denotes a reckless disregard or purposeful obliviousness of the

known facts suggesting impropriety by the fiduciary."                         Id.        The
court's      reasoning   is    based     on   a    subjective        test.      Stated

otherwise,      negligence,     for     which      an    objective     standard          is

employed, is insufficient to support bad faith under Wis. Stat.

§ 112.01(9).

       ¶49    The existence of facts suggesting fiduciary misconduct

can, of course, serve as strong evidence of bank dishonesty,

such as when facts are so "compelling and obvious" that the

factfinder may be able to infer dishonesty on the part of a bank
employee.      The focus, however, must be on the employee's state
                                         22
                                                                        No.    2016AP636

of mind, not on the circumstances alone.                        This is what the

Caputo   decision      meant     by    describing       fiduciary      misconduct    as

"compelling and obvious" to the bank's employee; otherwise, it

would not have held that "the test for good faith or bad faith

is a subjective one."               Caputo, 748 A.2d at 514.                  To focus

exclusively on facts suggesting fiduciary misconduct, without

considering their effect on the employee's state of mind, would

be to transform the test for "bad faith" into an objective one,

and would thereby cause Wisconsin's interpretation of the UFA to

be inconsistent with the majority of other jurisdictions that

have adopted the UFA.

    ¶50       Similarly,     the    "commercially        unjustifiable"       language

from cases similar to Inkrott, 563 N.E.2d at 31, and UNR-Rohn,

Inc., 687 N.E.2d at 239, does not support Koss Corporation's

contention when read in context.                      As a starting point, Koss

Corporation      focuses       exclusively       on    the    words    "commercially

unjustifiable" without considering the context in which the term

"commercially unjustifiable" is employed.                    Courts ask whether it
was commercially unjustifiable to "disregard and refuse to learn

facts readily available."             Id.    To "refuse" to learn facts is to

deliberately choose not to learn them.                  This necessarily implies

a subjective suspicion that such facts may exist.

    ¶51       Koss Corporation asserts that if we conclude that bad

faith requires a deliberate failure to investigate suspicious

circumstances,        such   a     conclusion     would      swallow    the    "actual

knowledge" prong of the UFA.                We disagree.      The actual knowledge
phrase   in    Wis.    Stat.     § 112.01(9)      requires      the    bank   to   have
                                            23
                                                                         No.   2016AP636

"actual knowledge that the fiduciary is committing a breach of

the fiduciary's obligation as fiduciary."                        § 112.01(9).        Bad

faith, on the other hand, requires a bank to have knowledge of

compelling and obvious facts that raise a subjective suspicion

that     a     fiduciary    has        breached     its   fiduciary      obligations.

Furthermore,       with    knowledge        of    such    compelling     and     obvious

facts, the willful failure to further investigate those facts

must be due to the bank's desire to avoid potentially obtaining

actual knowledge of a fiduciary's misconduct.                          Buffets, Inc.,

732 F.3d at 901; see also Mikrut, 832 N.E.2d at 385 (explaining

that to establish bad faith, evidence must be presented that the

bank        suspected     the        fiduciary    was     acting      improperly    and

deliberately refrained from investigating so that the bank could

avoid knowledge that the improper fiduciary conduct).

                                b.    The test for bad faith13

       ¶52     From the foregoing discussion, we recognize several

UFA     foundational       principles        that       form    the    framework     for

analyzing a bank's conduct when bad faith is alleged.                            First,
bad faith is reviewed on a transaction by transaction basis,

such that the facts known to each individual bank employee are

not aggregated to form collective knowledge of the bank.                           Colby

v.     Riggs    Nat'l     Bank,       92   F.2d   183,    195    (D.C.    Cir.     1937)

(concluding that "[i]t must be remembered also that practically

       13
       We do not adopt the court of appeals test because, as we
explain below, we set out a test that is more consistent with
the majority of jurisdictions that have defined bad faith under
the UFA than is the test chosen by the court of appeals.

                                             24
                                                                         No.    2016AP636

all the clues are not known to any one employee of the bank, and

that the facts known to any one employee are not sufficient to

arouse suspicion.").          Second, whether a bank acted in bad faith

is determined at the time of the breach of fiduciary duty, not

by   looking     back    at   transactions        that       occurred    many    months

earlier.     Bolger, 143 Wis. 2d at 777-78 n.5.

       ¶53   Third, bad faith is an intentional tort; negligence by

a bank is insufficient to show bad faith.                       Lawyers Title Ins.

Corp., 904 F. Supp. at 820 (citing Restatement (Second) of Torts

§ 8A    cmt.b     (1965));     Wis.   Stat.        § 112.01(1)(c).              Fourth,

considerations of bad faith require analyses of a bank's actions

to determine its subjective intent.                    Caputo, 748 A.2d at 514;

Attorneys Title Guar. Fund, 179 F. Supp. 2d at 1277 (concluding

that bad faith "is the subjective deliberate desire to evade

knowledge").

       ¶54   In regard to specific evidence necessary to support an

allegation that a bank acted in bad faith, a claimant who shows

bank dishonesty will be successful.                    A majority of courts have
held that "[b]ad faith does not exist if the bank was acting

honestly."       Rheinberger, 150 N.W.2d at 41; Official Comm. of

Unsecured Creditors of Allegheny Health, Educ. & Research Found.

v.   Pricewaterhouse       Coopers,   LLP,       2:0001684,       slip    op.    at   *12

(W.D. Penn. July 19, 2011); Guild, 553 P.2d at 958.

       ¶55   Bad faith requires some evidence of bank dishonesty

such    as   a    bank    willfully   failing           to     further     investigate

compelling       and    obvious   known        facts    that     suggest       fiduciary
misconduct because of a deliberate desire to evade knowledge of
                                          25
                                                                                 No.    2016AP636

fiduciary misconduct.               Caputo, 748 A.2d at 514; see also Trenton

Trust       Co.    v.   W.   Sur.    Co.,     599    S.W.2d         481,   492    (Mo.       1980)

(concluding that the failure to further investigate suspicious

circumstances is not bad faith "unless such failure is due to

the deliberate desire to evade knowledge because of a belief or

fear    that       inquiry    would       disclose       a    vice    or    defect      in     the

transaction").             Bank inaction under those circumstances is an

intentional         tort.          Id.;    see      also     Davis,        12    A.2d    at     69

(explaining         that     the    distinction       between        negligence         and    bad

faith "is that bad faith, or dishonesty, is, unlike negligence,

wilful").

                                     C.    Application

       ¶56        The evidence presented by Koss Corporation does not

raise a genuine issue of material fact as to whether Park Bank

acted in bad faith during any transaction related to Sachdeva's

embezzlement.14            We first address Koss Corporation's arguments

that Park Bank's policies and general practices constitute bad

faith; then we address the three types of transactions Sachdeva
employed:           cashier's       checks,      petty       cash    requests,         and    wire

transfers.

                        1.   Policies and General Practices

       ¶57        Many of Koss Corporation's allegations in regard to

bad faith are driven by Koss Corporation's assertion that Park

       14
        Generally, the determination of bad faith is for the
trier of fact unless only one finding can be made as a matter of
law.   N.J. Title Ins. Co. v. Caputo, 748 A.2d 507, 514 (N.J.
2000).

                                              26
                                                                                       No.     2016AP636

Bank's     general          practice           of        not     enforcing         bank       policies

contributed         to     Koss       Corporation's             loss.        For    example,         Koss

Corporation asserts that Park Bank had a "practice of giving out

cashier's       checks . . . to                 persons          not      authorized           on     the

signature card," had "inadequate policies to detect suspicious

activity,"      and        "routinely          violated"         its    stated      wire      transfer

policy.     These allegations could go toward proving negligence.

However,       negligence          is    not        at    issue;        Koss     Corporation          has

voluntarily dismissed its negligence claim.                                  Park Bank's general

practices       do       not     suggest        that       any        employee      of    Park       Bank

deliberately failed to investigate compelling and obvious known

facts    that       suggested         impropriety          by     Sachdeva         because      of    the

belief    or        fear    that        such    inquiry          would       disclose        fiduciary

misconduct.

    ¶58        Koss Corporation cites to Inkrott, 563 N.E.2d 26, in

which the Supreme Court of Ohio found bad faith under the UFA

when a bank had "established a procedure where a transfer from

one corporate account to another would be presumed correct and
would not be questioned."                     Id. at 31.          Koss Corporation contends

this suggests that a bank's policy, itself, is sufficient to

support    a    finding          of     bad    faith.            However,      assuming        without

deciding that the Inkrott decision is not an outlier, Inkrott is

distinguishable from the case now before us.

    ¶59        In    Inkrott,         the      court      determined         that      the    policies

enacted    by       the     bank      were      "more          than    negligent,"           they    were

"designed       to         promote       [the        bank's]           own     self-interest           in
derogation          of     the    Uniform        Commercial             Code     and     beyond       the
                                                    27
                                                                               No.    2016AP636

protections provided by the Uniform Fiduciaries Act."                                     Id. at

31.     In other words, the Inkrott decision concluded that in

establishing           bank     policies,          the       bank     enacted        deficient

procedures       for     the     purpose      of      allowing       the   bank      to    avoid

discovering evidence of misconduct by fiduciaries.                              Here, there

has been no offer of proof that Park Bank established deficient

bank        policies     in      order       to      avoid        discovering        fiduciary

misconduct.

       ¶60     Koss Corporation's allegation is quite the opposite.

Koss Corporation alleges that Park Bank's general practice of

carelessly       failing        to     follow        its    own     policies      facilitated

Sachdeva's embezzlement.                However, carelessness is a negligence

standard, Zastrow v. Journal Commc'ns, Inc., 2006 WI 72, ¶30,

291 Wis. 2d 426, 718 N.W.2d 51, and negligence is insufficient

to support a claim for bad faith under the UFA.                               O'Neal v. Sw.

Mo. Bank of Carthage, 118 F.3d 1246, 1251 (8th Cir. 1997).

                                 2.     Cashier's Checks

       ¶61     Koss Corporation alleges that Park Bank's processing
Sachdeva's requests for cashier's checks constituted bad faith.

Koss    Corporation           points    to    Park         Bank's    method    of    readying

cashier's checks for non-signatories, as well as Holly Pape's

testimony, years after cashier's checks were issued, that the

number of cashier's checks Mulvaney ordered was "strange."15

       15
       Holly Pape was the Park Bank employee assigned to work
with Koss Corporation.

                                                28
                                                                   No.   2016AP636

      ¶62    Over the ten years of Sachdeva's embezzlement, 49 bank

employees issued the 359 cashier's checks to Koss Corporation

employees at Sachdeva's request.16              Koss Corporation has provided

no evidence that any of those 49 employees was dishonest in

processing Sachdeva's requests because the employee believed the

transaction in which he or she engaged was improper for Sachdeva

to have initiated.          Stated otherwise, there is no evidence that

any Park Bank employee had knowledge of compelling and obvious

facts that suggested impropriety by Sachdeva that the employee

willfully failed to further investigate because of a deliberate

desire to evade knowledge of Sachdeva's misconduct or that such

an employee shared his or her suspicions with another employee.17

      ¶63    Another problem for Koss Corporation is the relevance

of   the    evidence   it   did    present.       That   a   non-signatory   made

requests for cashier's checks and later picked them up is not

relevant to the issue of bad faith.                Koss Corporation does not

dispute that its employees were acting at Sachdeva's direction,

or argue that any of its other employees stole money.                        Koss
Corporation     does     not     explain    how   Mulvaney's     being   a   non-

signatory     amounted      to    an   obvious    and    compelling   fact   that

      16
       Park Bank issued more than 60,000 cashier's checks during
that same period of time.
      17
        Although we do not examine transactions collectively when
reviewing a claim of bad faith, we note that Park Bank provided
monthly   statements   to  Koss   Corporation.     Those  monthly
statements included a complete listing of every transaction
Sachdeva initiated, including the date and the amount of each
transaction.

                                           29
                                                                           No.   2016AP636

Sachdeva     was   breaching        her       fiduciary        obligations       to        Koss

Corporation.

     ¶64    With respect to the $60,568.03 counter check that a

non-signatory drafted, cashed and used to purchase two cashier's

checks,     Koss     Corporation          has        never     asserted      that          this

transaction was not personally initiated by Sachdeva or honestly

completed by Park Bank.          Koss Corporation appears to argue that

Park Bank was negligent in permitting a non-signatory this much

latitude, but negligent conduct is not sufficient to support bad

faith,     which   is    grounded        in        intentional     conduct.           It     is

undisputed    that      Sachdeva,    a    signatory          and   Vice    President         of

Finance for Koss Corporation, carried out each cashier's check

transaction personally or through an agent.                        There is no genuine

issue of material fact as to whether Park Bank acted in bad

faith regarding any of the cashier's checks.

                            3.   The Petty Cash Requests

     ¶65    Koss     Corporation's        argument           surrounding    petty          cash

requests fails for reasons similar to those applied above to
cashier's checks.         It is true that on 43 occasions, Sachdeva

drafted checks for petty cash at Koss Corporation's offices and

that Park Bank allowed non-signatories to retrieve the cash at

Sachdeva's request.18

     ¶66    Furthermore, Koss Corporation provides no proof that

Park Bank did not cash Koss Corporation checks in the honest

     18
       During that same period of time, Park Bank cashed more
than 7.6 million checks for its customers.

                                              30
                                                                          No.     2016AP636

belief     that     Sachdeva    had    authority       to     draft       them    and     to

authorize    a    Koss   Corporation         employee        to    cash    them.         And

finally,    no    evidence     has    been       proffered    that     any      Park    Bank

employee     knew     compelling      and        obvious    facts     that       suggested

impropriety by Sachdeva and then willfully failed to further

investigate those facts because of a deliberate desire to evade

knowledge of misconduct by Sachdeva.                   Accordingly, there is no

genuine issue of material fact as to whether Park Bank acted in

bad faith under the UFA with regard to Sachdeva's petty cash

requests.

                               4.     Wire Transfers

     ¶67    Koss Corporation's final argument is that Park Bank's

violation of its own wire transfer policy by conducting wire

transfers without a wire transfer agreement in place constituted

bad faith.        Between 2004 and 2009, Park Bank made seven wire

transfers totaling $2 million from Koss Corporation's Park Bank

accounts to Koss Corporation's accounts with Chicago banks.19

     ¶68    Koss     Corporation       requested      wire        transfers      over    the
phone, sometimes by a non-signatory, in violation of Park Bank's

wire transfer policy.          Sachdeva later used wire transfers from

Koss Corporation's Chicago banks to pay more than $16 million in

credit card bills.         However, Sachdeva's misconduct with regard

to Koss Corporation's Chicago banks does not give rise to a

triable issue of fact in the matter before us.

     19
       During that same period of time, Park Bank made more than
40,000 wire transfers on behalf of its customers.

                                            31
                                                                                 No.     2016AP636

       ¶69     No evidence has been proffered that Park Bank did not

honestly     complete      the    wire       transfers         or    that      any     Park    Bank

employee who participated in them was suspicious that Sachdeva

was violating her fiduciary obligation to Koss Corporation in

commencing the transfers.                   Additionally, Koss Corporation does

not     dispute    that    each        wire        transfer       was     to    another        Koss

Corporation bank account.                  Koss Corporation retained possession

of the funds after each wire transfer.                              Koss Corporation also

does not explain why wire transfers that were admittedly sent to

other     Koss     Corporation             bank        accounts      would      have         raised

suspicions on the part of any Park Bank employee.                                  Accordingly,

there is no genuine issue of material fact as to whether Park

Bank acted in bad faith with regard to any of the seven wire

transfers.

                                      D.    Summary Judgment

       ¶70     Summary    judgment           is    granted        when      "the       pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law."                                       Dufour, 370

Wis. 2d 313, ¶12; Wis. Stat. § 802.08(2).

       ¶71     While discovery was extensive and conducted for years,

no proof has been proffered from which a factfinder could find

that any Park Bank transaction was not honestly done.                                   There is

much    here     from    which    a    claim           of   negligence      could       be    made.

However,       negligence        is        not     sufficient        to     establish          bank
liability         for     transactions                 that    were       honestly            done.
                                                  32
                                                                       No.     2016AP636

Rheinberger,     150    N.W.2d      at    41;     Pricewaterhouse     Coopers,      LLP,

2:0001684, slip op. at *12; Guild, 553 P.2d at 958; Wis. Stat.

§ 112.01(1)(c).        Furthermore, there was no proffer of proof from

which a factfinder could infer dishonesty by finding that Park

Bank    willfully      failed      to    further    investigate      compelling      and

obvious known facts suggesting Sachdeva's embezzlement because

of Park Bank's desire to evade further knowledge out of fear

that it would find her misconduct.                   We conclude that the court

of appeals did not err in affirming the circuit court's summary

judgment      that    dismissed     Koss     Corporation's      complaint      against

Park Bank.

                             E.    Third Party Claims

       ¶72    Park    Bank   brought       third-party    claims      against      Grant

Thornton LLP and Michael Koss for contribution and equitable

subrogation, contingent on Park Bank's having liability to Koss

Corporation.         Because we conclude that Park Bank is not liable

to Koss Corporation, we affirm the circuit court's dismissal of

Park Bank's third-party claims without further comment.
                                   III.    CONCLUSION

       ¶73    We conclude Wis. Stat. § 112.01(1)(c) describes                        the

term "good faith" as honest bank acts, even when negligently

done,    and    consistent         with     the    majority     of   jurisdictions'

interpretations of the UFA, "bad faith" is inconsistent with the

statutory      criteria      for    "good    faith."      Therefore,         bad   faith

pursuant to § 112.01(9), which is an intentional tort, may be

shown    by    acts    evidencing         bank     dishonesty   such    as     a    bank
willfully failing to further investigate compelling and obvious
                                            33
                                                                                No.    2016AP636

known       facts    suggesting          fiduciary        misconduct       because         of    a

deliberate desire to evade knowledge of fiduciary misconduct.

       ¶74    We further conclude that given the allegations that

Koss Corporation asserts in regard to its claim that Park Bank

is liable for the intentional tort of bad faith, no proof has

been proffered of bank dishonesty wherein Park Bank willfully

failed to further investigate compelling and obvious known facts

suggesting fiduciary misconduct because of a deliberate desire

to evade knowledge of fiduciary misconduct.

       ¶75    Accordingly,          we      affirm        the   court       of         appeals'

affirmance          of   the        circuit        court's      dismissal             of      Koss

Corporation's        claim     that       Park     Bank    acted      in   bad        faith     in

processing Sachdeva's transactions.                        Because we conclude Park

Bank    is    not    liable    to    Koss     Corporation,       we    also       affirm        the

dismissal of Park Bank's third-party claims.

       By    The    Court.—The       decision       of    the   court      of     appeals       is

affirmed.

                                              34
                                                   No.   2016AP636.awb

    ¶76   ANN WALSH BRADLEY, J.    (concurring).     I agree with

the lead opinion1 that summary judgment was properly granted to

    1
       I use the term "lead" opinion because I am concerned that
without this cue, the reader may mistakenly believe that the
lead opinion has precedential authority. Although five justices
join in the mandate of the opinion to affirm the court of
appeals, it represents the reasoning of only two justices
(Roggensack, C.J., joined by Ziegler, J.).        I, along with
Justices Abrahamson and Dallet, join in the mandate, but would
rely on contrary reasoning.    Justice Kelly, joined by Justice
Rebecca Grassl Bradley, does not join in the mandate of the
court, and would adopt a legal standard for bad faith that is
also contrary to the lead opinion's formulation. Thus, although
set forth in two separate opinions (this concurrence and Justice
Kelly's dissent), five justices would not adopt the legal
standard for bad faith set forth by the lead opinion.

     In order to alert the public, litigants and courts, I urge
the court to adopt a procedure requiring the author of a lead
opinion to include an admonition that it is a lead opinion. The
rationale for such a procedure is simple:        lest there be
confusion that the first appearing opinion be regarded as the
majority opinion.

     Recently such confusion arose in news reports referring to
this court's opinion in State v. Mitchell, 2018 WI 84, 383
Wis. 2d 192, 914 N.W.2d 151, cert. granted, 2019 WL 166881 (U.S.
Jan. 11, 2019) (No. 18-6210), announcing that the United States
Supreme Court granted certiorari in that case.          The first
appearing opinion gave no alert that it was anything other than
a majority opinion. Some media reports apparently assumed that
the first appearing opinion garnered sufficient votes and
referred to it as a majority opinion. See Kevin Lessmiller and
Barbara Leonard, Unconscious Driver DUI Case Taken Up by Supreme
Court,    Courthouse    News    Service    (Jan.    11,    2019),
https://www.courthousenews.com/justices-take-up-unconscious-
drivers-dui-case/.   Litigants and courts may inadvertently make
the same erroneous assumption.

                                                         (continued)
                               1
                                                 No.   2016AP636.awb

Park Bank.   See lead op., ¶71.     I write separately, however,

because in interpreting a uniform law, the lead opinion unearths

a heretofore unknown standard for bad faith.

    ¶77   The lead opinion errs in its creative exercise in two

ways.   First, this new standard for bad faith runs afoul of the

legislative directive that uniform laws are to be interpreted

uniformly with other jurisdictions.   Second, the legal standard

     The only reference to "lead opinions" in our Internal
Operating Procedures (IOPs) states that if during the process of
circulating and revising opinions, "the opinion originally
circulated as the majority opinion does not garner the vote of a
majority of the court, it shall be referred to in separate
writings as the 'lead opinion.'"     Wis. S. Ct. IOP III(G)(4)
(Feb. 22, 2018).      The potential confusion that arises from
mislabeling   a   lead   opinion  is  exacerbated   because  the
precedential effect (or lack thereof) of a lead opinion is
uncertain.   This remains an uncertainty even though two prior
certifications from the court of appeals have asked us to
resolve the issue. State v. Dowe, 120 Wis. 2d 192, 192–93, 352
N.W.2d 660   (1984);    State  v.  Hawley,   No.  2015AP1113-CR,
unpublished certification, 2-3 (Nov. 21, 2018); see also State
v. Lynch, 2016 WI 66, ¶145, 371 Wis. 2d 1, 885 N.W.2d 89
(Abrahamson and Ann Walsh Bradley, JJ., concurring in part,
dissenting in part).

     In the midst of the potential confusion and uncertainty,
the very least we can do is to alert the reader to beware that
no part of the rationale in the first appearing opinion has
garnered   a majority vote.  Unlike the first appearing opinion
in Mitchell, 383 Wis. 2d 192, which completely failed to advise,
the lead opinion here takes a first step.     It announces that
only two justices join the opinion in totality. But that leaves
unanswered the question of whether any of the separate writings
join in part.

     When the opinion originally circulated as the majority
fails to garner sufficient votes during the process of revising
and circulating opinions, it should as clearly as possible
advise the reader of its status.      It is not something that
should be hidden or left for the reader to figure out.

                                2
                                                                   No.    2016AP636.awb

for bad faith that the lead opinion embraces is too exacting on

bank customers with Uniform Fiduciaries Act (UFA) claims.

       ¶78   Because I determine that Wisconsin should adopt a bad

faith    standard    that    promotes         uniformity    among        the   states,

vindicates the purpose of the UFA, and provides bank patrons

with a meaningful check on bank behavior, I respectfully concur.

                                          I

       ¶79   The   Uniform    Law    Commission,         which    has     a    diverse

representation from all fifty states, promulgates uniform laws

for    consideration   by    state    legislatures.              "The     purpose   of

uniform laws is to establish both uniformity of statutory law

and uniformity of case law construing the statutes, ensuring

certainty and guidance to litigants who rely on the courts to

interpret    uniform   statutes      in       a     predictable    and     consistent

manner."     Estate of Matteson v. Matteson, 2008 WI 48, ¶42, 309

Wis. 2d 311, 749 N.W.2d 557 (citing M.J. Wallrich Land & Lumber

Co. v. Ebenreiter, 216 Wis. 140, 143, 256 N.W. 773 (1934)).                         In

this    context,     the     goal    is        to     provide     uniformity        and
predictability for both banks and those who use them, regardless

of the state in which the banking transaction occurs.

       ¶80   At issue here is the bad faith provision set forth in

Wisconsin's enactment of the UFA.                   Wis. Stat. § 112.01(9).          It

is substantially identical to other state enactments throughout

                                          3
                                                                              No.   2016AP636.awb

the country.2          Pursuant to this provision, a bank that wrongfully

cashes a check can be liable to a defrauded principal if one of

two    possibilities            is    fulfilled:            (1)    the    bank      has    actual

knowledge that the fiduciary is committing a breach of his or

her    obligations          or        (2)      the       bank   acts     in     "bad      faith."

§ 112.01(9).3          The question before us is the standard that must

be    fulfilled      for    a        plaintiff       to    prove   "bad       faith"      in   this

context.

       ¶81     The       lead    opinion         observes         that    "bad      faith"       is

inconsistent with "good faith," a defined term in the statute.

Lead       op.,    ¶3;    see        Wis.      Stat.      § 112.01(1)(c).           Using       the

definition of "good faith" as a springboard, it concludes that

"bad       faith   pursuant          to   § 112.01(9),          which    is   an    intentional

tort, may be shown by acts evidencing bank dishonesty such as a

bank       willfully     failing          to   further      investigate       compelling        and

obvious known facts suggesting fiduciary misconduct because of a

       2
       See, e.g., Ariz. Rev. Stat. Ann. § 14-7507; 760 Ill. Comp.
Stat. 65/8; Ind. Code § 30-2-4-8; Md. Code Ann., Est. & Trusts
§ 15-207; Minn. Stat. § 520.08; N.J. Stat. Ann. § 3B:14-55; N.C.
Gen. Stat. § 32-9; Ohio Rev. Code Ann. § 5815.07; 7 Pa. Cons.
Stat. § 6392.
       3
           Wis. Stat. § 112.01(9) provides:

       If a check is drawn upon the account of a fiduciary's
       principal in a bank by a fiduciary, who is empowered
       to draw checks upon his or her principal's account,
       the bank is authorized to pay such check without being
       liable to the principal, unless the bank pays the
       check with actual knowledge that the fiduciary is
       committing a breach of the fiduciary's obligation as
       fiduciary in drawing such check, or with knowledge of
       such facts that its action in paying the check amounts
       to bad faith.

                                                     4
                                                                        No.   2016AP636.awb

deliberate desire to evade knowledge of fiduciary misconduct."

Lead op., ¶3.

       ¶82    Wisconsin Stat. § 112.01 does not define "bad faith."

However it does provide some guidance to our endeavor, dictating

that our state's UFA "shall be so interpreted and construed as

to effectuate its general purpose to make uniform the law of

those states which enact it."                 § 112.01(14).            Thus, we look to

the case law of other states to guide our analysis.

       ¶83    The    lead      opinion       correctly         observes       that   other

jurisdictions have been inconsistent in defining bad faith when

it states, "variations in facts from which claims of bad faith

arose have resulted in different expressions of the definition

of bad faith, with bank dishonesty expressed in most decisions."

Lead op., ¶31 (citations omitted).                       However, it errs when it

deviates from the legislative directive that the interpretation

of    our    uniform    laws      be   consistent        with    the    interpretations

adopted by our sister states.

       ¶84    Contrary to the directive, the lead opinion adopts a
standard for bad faith that is inconsistent with the majority of

our sister states that have interpreted the uniform act.                             It is

not even consistent with a minority of states' interpretations.

The standard for bad faith that the lead opinion embraces does

not   closely       track   the    case   law      in    any    other    jurisdictions.

Wisconsin stands alone.

                                             II

       ¶85    Although      there      has        been    some     inconsistency        in
interpretation among the various states, not all expressions of

                                             5
                                                              No.    2016AP636.awb

the definition of bad faith are created equal.                      The standard

this court adopts should promote uniformity and vindicate the

purpose of the UFA, while at the same time avoid placing an

inordinate and nearly impossible burden on bank patrons.

       ¶86    Several courts have adopted such a standard.                    They

interpret the UFA bad faith standard to attach liability to a

bank in the event the bank does not affirmatively act but simply

"remains passive" in the face of compelling and obvious facts

suggesting fiduciary misconduct.               See; In re Broadview Lumber

Co., 118 F.3d 1246, 1251 (8th Cir. 1997); Maryland Cas. Co. v.

Bank   of    Charlotte,      340   F.2d 550,   554   (4th   Cir.    1965);    Time

Savers, Inc. v. LaSalle Bank, N.A., 863 N.E.2d 1156, 1165 (Ill.

App.   Ct.    2007);;   New    Jersey   Title    Ins.   Co.   v.    Caputo,    748

A.2d 507, 514 (N.J. 2000).              As the New Jersey supreme court

stated the standard in Caputo:

       [B]ad faith denotes a reckless disregard or purposeful
       obliviousness    of    the   known    facts    suggesting
       impropriety by the fiduciary.     It is not established
       by   negligent   or   careless  conduct   or   by   vague
       suspicion.      Likewise,   actual   knowledge   of   and
       complicity   in   the   fiduciary's   misdeeds   is   not
       required.   However, where facts suggesting fiduciary
       misconduct are compelling and obvious, it is bad faith
       to remain passive and not inquire further because such
       inaction amounts to a deliberate desire to evade
       knowledge.
Caputo, 748 A.2d at 514.

       ¶87    I would adopt the Caputo standard in Wisconsin.                 This

standard is preferable to that proffered by the lead opinion

because      it   promotes   uniformity   and    emphasizes    that    no    "high
degree of moral guilt" is required on the part of the bank.                    See

Wis. Stat. § 112.01(14); Maryland Cas. Co., 340 F.2d at 554.
                              6
                                                                       No.    2016AP636.awb

"Neither criminal fraud nor downright corruption is an essential

ingredient of legal 'bad faith.'"                  Maryland Cas. Co., 340 F.2d

at 554.       The Caputo standard would permit bank patrons with

legitimate claims a better chance at relief.                          Otherwise, it is

the    rare   customer     indeed      that      will    be    able    to     demonstrate

"willful" and "deliberate" actions on the part of a bank.

       ¶88    Importantly, such a standard also remains consistent

with the purpose of the UFA.              The UFA was instituted to provide

banks with relief from the dire consequences of the previous

common law rule that entities dealing with fiduciaries had the

duty to assure that fiduciary funds were properly applied to the

account of the principal.              Bolger v. Merrill Lynch Ready Assets

Tr., 143 Wis. 2d 766, 774, 423 N.W.2d 173 (Ct. App. 1988); see

Master Chem. Corp. v. Inkrott, 563 N.E.2d 26, 29 (Ohio 1990)

("By    altering     the   common      law,      the    Act   relaxes        some   of   the

harsher rules which require of a bank and of individuals the

highest degree of vigilance in the detection of a fiduciary's

wrongdoing.") (internal quotations and citations omitted).                                It
was meant to "facilitate banking and financial transactions and

place    on    the    principal        the       burden       of     employing       honest

fiduciaries[,]"       thereby     relieving        banks       of    their     previously

onerous duty.         Bolger, 143 Wis. 2d at 775 (citing Johnson v.

Citizens Nat'l Bank of Decatur, 334 N.E.2d 295, 300 (Ill. App.

Ct. 1975)).

       ¶89    Although     the   UFA    was      certainly         enacted    to    provide

relief to banks, it should not make proving a bank's liability a
mountain that is nearly impossible for a bank customer to scale.

                                             7
                                                                   No.   2016AP636.awb

The Caputo standard strikes the right balance by furthering the

purpose of the UFA while at the same time allowing bank patrons

a more significant check on bank behavior.

                                         III

       ¶90    I conclude that even under the less exacting Caputo

standard, summary judgment for Park Bank is appropriate.                          Koss

has not put forth evidence sufficient to create a genuine issue

of material fact that Park Bank remained passive in the face of

"compelling and obvious" facts suggesting fiduciary misconduct.

       ¶91    The sheer number of transactions and number of Park

Bank   employees    involved      in    cashing       Koss   checks   belie   Koss's

assertion that a nefarious pattern was apparent.                      Over the ten

years of Sachdeva's embezzlement, a period during which Park

Bank   issued    greater   than      60,000       cashier's   checks,     forty-nine

bank   employees    issued     the     359       cashier's   checks   requested    by

Sachdeva.      Lead op., ¶62, n.16.              Neither "the amount and number

of transactions carried out on an account containing fiduciary

funds, nor the mere names of payees on checks drawn on that
account, are sufficient to create bad faith liability based on

the bank's action in paying such checks."                      Heffner v. Cahaba

Bank & Tr. Co., 523 So. 2d 113, 115 (Ala. 1988).

       ¶92    Indeed,   Koss   itself        did    not   notice   the    fraud   for

years.       Even viewed in the light most favorable to Koss, the

facts of this case do not present the "compelling and obvious"

suggestion of fiduciary misconduct so as to foist liability onto

Park Bank.
       ¶93    For the above stated reasons, I respectfully concur.

                                             8
                                                           No.   2016AP636.awb

    ¶94   I    am    authorized   to   state    that   Justice   SHIRLEY   S.

ABRAHAMSON     and    Justice     REBECCA      FRANK   DALLET    join    this

concurrence.

                                       9
                                                            No.    2016AP636.dk

    ¶95    DANIEL    KELLY,   J.   (dissenting).         There    is    no   bad

faith, Park Bank says, when it disburses funds from fiduciary

accounts while intentionally remaining ignorant of whether the

individuals    making   the    requests   have   authority       to    transact

business on those accounts.        The court agreed——not as a matter

of fact, but of law.          Because the law does not require that

conclusion, I respectfully dissent.

                                     *

    ¶96    Bad faith does not exist in a vacuum——it occurs in the

context   of   a   specific   relationship.      Here,   Koss     Corporation

tells us the bad faith took place within a relationship created

by statute as well as the documentation requested and maintained

by Park Bank.      With respect to the latter, Park Bank provided a

copy of its Depository Declaration form to Koss Corporation to

complete and return.      The form's purpose is to identify the Koss

Corporation employees who have authority to transact business on

the company's accounts:

    The persons and the number thereof designated by name
    or title on the reverse side opposite the accounts
    ("authorized person") are authorized, for and on
    behalf of the Depositor, (a) to sign checks, drafts
    notes, bills, certificates of deposit and other orders
    for payment or withdrawal of money from the accounts
    and to issue instructions regarding them, (b) to
    endorse for cash, deposit, negotiation, collection or
    discount by the Bank any and all checks, drafts,
    notes, bills,    certificates of deposit or other
    instruments or orders for the payment of money owned
    or held by the Depositor.

                                     1
                                                                         No.    2016AP636.dk

Koss Corporation identified its President & CEO,1 Vice-President

of Finance,2 Vice-President of Sales,3 and Vice-President of MIS

as the only "authorized persons" to transact business on its

general account.

       ¶97     Koss     Corporation    subsequently            submitted    a    Corporate

Authorization          Resolution     to    Park    Bank,       which    (as     with   the

Depository Declaration) identified the employees authorized to

transact business          on   its   accounts.           It    provided       that   "[a]ny

agent       listed     below,   subject     to     any    written       limitations,     is

authorized       to      exercise     the        powers    granted         as    indicated

below:       . . . (3) Endorse checks and orders for the payment of

money or otherwise withdraw or transfer funds on deposit with

this       Financial    Institution."        The     resolution         identified      only

three people:           Michael J. Koss, John C. Koss Jr., and Sujata

Sachdeva.        Together, the resolution and Depository Declaration

serve as the "signature card," and so I will refer to them as

such.

       ¶98     Park Bank had Koss Corporation's completed signature
card on file before Ms. Sachdeva embarked on her embezzlement

spree, and it remained on file all during her criminal behavior.

So that is the documentary aspect of Koss's relationship with

Park Bank.

       1
           Michael Koss
       2
       Koss Corporation's Vice-President of Finance was Sujata
Sachdeva.
       3
           John C. Koss Jr.

                                             2
                                                                               No.    2016AP636.dk

       ¶99     The statutory aspect of the Park Bank/Koss Corporation

relationship        arises          from    Wis.     Stat.     § 112.01(9),      a     provision

that       received      such    intense,       but       narrow,    inspection        that    its

significance seems to have become a little warped.                                   The court's

analysis,       with      a     heavy       assist      from   the    parties,        gives    the

impression that § 112.01(9) created a bank-specific tort of "bad

faith."        It didn't.             Customers were free to bring bad faith

actions against banks before adoption of § 112.01(9), and they

can, right now, bring those claims without ever mentioning this

statute.       And that is true because § 112.01(9) does nothing but

give       banks      limited        immunity           from   liability       for      improper

transactions on fiduciary accounts.

       ¶100 The statute starts with a grant of immunity, followed

by two potentially relevant exceptions.4                           The immunity provision

says:       "If a check is drawn upon the account of a fiduciary's

principal in a bank by a fiduciary, who is empowered to draw

checks       upon       his    or     her     principal's         account,      the     bank    is

authorized         to    pay     such       check       without     being    liable      to    the
principal . . . ."                  Wis.     Stat.       § 112.01(9).           The     relevant

exception clauses say the immunity applies "unless the bank pays

the    check       [1]    with       actual    knowledge          that   the    fiduciary       is

committing a breach of the fiduciary's obligation as fiduciary

in drawing such check, or [2] with knowledge of such facts that

its action in paying the check amounts to bad faith."                                 Id.
       4
       The lead opinion lists all three potential exceptions to
immunity. See lead op., ¶¶27-28. However, because the facts of
this case do not implicate the third exception, I will confine
my attention to the first two.

                                                    3
                                                                                     No.    2016AP636.dk

      ¶101 The first exception to immunity depends on the nature

of the fiduciary's actions.                    That is, the analysis focuses on

the fiduciary's culpable conduct in relation to his company.                                           If

the   fiduciary       is     "committing            a    breach          of     the        fiduciary's

obligation," and the bank knows it, there is no immunity from

liability.      Id.         I'll refer to this exception as a "Fiduciary

Breach Exception."               The second exception, however, depends on

the bank's conduct in relation to the company.                                       If the bank's

knowledge of relevant facts makes the transaction an act of bad

faith,   there       is     no    immunity.             That       is    to     say,       Wis.     Stat.

§ 112.01(9) provides no defense against a common-law claim of

bad   faith.         I'll    refer       to    this      exception             as    a     "Bad     Faith

Exception."

      ¶102 The difference between the Fiduciary Breach Exception

and   the      Bad     Faith       Exception            is     important             because         Koss

Corporation's        complaint           described           two        conceptually          distinct

categories of transactions.                   The first comprises those in which

Ms.   Sachdeva       personally          contacted        Park          Bank    to    initiate        the
process.        The       second     encompasses              those       initiated           by     Koss

Corporation employees who were not listed on the signature card

maintained     by     Park       Bank.        The   court          collapsed         the     two,     and

applied an analysis to the resulting mélange that was suitable

for only one of the categories.                          In doing so, it missed Park

Bank's     potential         bad    faith       with         respect           to    many      of    the

transactions described by Koss Corporation.

      ¶103 A proper assessment of Park Bank's potential liability
requires us to test the two categories of suspect transactions

                                                4
                                                                         No.   2016AP636.dk

against the      two    exceptions     to       the    immunity    provided       by    Wis.

Stat.    § 112.01(9).        The      four      possible       permutations       are    as

follows:

       1.   Did the transactions initiated by Ms. Sachdeva
       create a Fiduciary Breach Exception to immunity
       (Combination 1)?

       2.   Did the transactions initiated by Ms. Sachdeva
       create a Bad Faith Exception to immunity (Combination
       2)?

       3.   Did the transactions initiated by unauthorized
       Koss employees create a Fiduciary Breach Exception to
       immunity (Combination 3)?

       4.   Did the transactions                initiated by unauthorized
       Koss employees create a                   Bad Faith Exception to
       immunity (Combination 4)?
Because my purpose in this dissent is simply to demonstrate that

Koss Corporation identified matters that should have gone to the

jury    for   its   consideration,       I      will    not    assess      each   of    the

combinations; addressing only the fourth should be sufficient to

make the point.

                                            *

       ¶104 With    respect      to    Combination            4,   the     task    is    to
determine whether Park Bank acted in bad faith when it processed

a transaction on a fiduciary account without first checking the

fiduciary's name against the signature card.                       And so we arrive

at the heart of the lead opinion, to wit, the definition of "bad

faith."       It said that, for purposes of Wis. Stat. § 112.01(9),

"bad faith" means "acts evidencing bank dishonesty such as a

bank    willfully      failing   to   further         investigate        compelling      and
obvious known facts suggesting fiduciary misconduct because of a

deliberate desire to evade knowledge of fiduciary misconduct."
                              5
                                                                No.    2016AP636.dk

Lead op., ¶¶3, 73.        I disagree with this formulation because it

improperly mixes elements of the Fiduciary Breach Exception with

elements of the Bad Faith Exception.

    ¶105 As I mentioned above, the Fiduciary Breach Exception

inquires into the fiduciary's fidelity to his company.                    The Bad

Faith Exception does not.         With respect to this exception, the

terms of Wis. Stat. § 112.01(9) require only that the bank know

of facts sufficient to demonstrate it——the bank——had acted in

bad faith in conducting the transaction.             And although bad faith

may arise     out   of   knowledge    of   a   fiduciary's    misconduct,      the

statute's terms do not limit the tort to such a situation.                     Nor

does the statute's context or structure suggest such a reading

is necessary, or even reasonable.              So when the court borrowed

"fiduciary misconduct" from the Fiduciary Breach Exception and

imported it into the Bad Faith Exception, it gratuitously and

atextually limited       the   type   of   facts   that   could       establish   a

bank's bad faith.

    ¶106 I agree with Justice Ann Walsh Bradley that we should
adopt a definition of "bad faith" that comports with our sister

states.     However, I would not adopt (as she does) the Caputo

standard    because      it,   too,   conflates     the      Fiduciary     Breach

Exception with the Bad Faith Exception.             The New Jersey Supreme

Court said:

     [B]ad faith denotes a reckless disregard or purposeful
     obliviousness    of    the   known    facts    suggesting
     impropriety by the fiduciary.     It is not established
     by   negligent   or   careless  conduct   or    by   vague
     suspicion.      Likewise,   actual   knowledge    of   and
     complicity   in   the   fiduciary's   misdeeds    is   not
     required.   However, where facts suggesting fiduciary
                                       6
                                                                    No.    2016AP636.dk

        misconduct are compelling and obvious, it is bad faith
        to remain passive and not inquire further because such
        inaction amounts to a deliberate desire to evade
        knowledge.
N.J. Title Ins. Co. v. Caputo, 748 A.2d 507, 514 (N.J. 2000).

The references to the fiduciary's "impropriety," "misdeeds," or

"misconduct" (if we adopted this test) would read into the Bad

Faith Exception limiting factors that simply do not exist in the

statute's language.

     ¶107 I think the United States Court of Appeals for the

Fourth    Circuit     more   accurately       assesses      bad    faith     in   this

context:

     Neither criminal fraud nor downright corruption is an
     essential ingredient of legal 'bad faith.'    The 'bad
     faith' test was borrowed from the Uniform Negotiable
     Instruments Act.   The standard used in construing the
     term under that Act has not been evil motive. Instead
     courts have asked whether it was 'commercially'
     unjustifiable for the payee to disregard and refuse to
     learn facts readily available. At some point, obvious
     circumstances become so cogent that it is 'bad faith'
     to remain passive.
Maryland Cas. Co. v. Bank of Charlotte, 340 F.2d 550, 554 (4th

Cir. 1965) (citations and footnote omitted).                      This standard is

compatible with the language of Wis. Stat. § 112.01(9) because
it does not limit the tort to instances of fiduciary misconduct.

Instead, it accurately reflects the statutory structure in that

it   allows     a    plaintiff    to     address     the     bank's       bad     faith

independently from that of the fiduciary.

                                         *

     ¶108 Applying       those    principles       to    this     case     inevitably

leads    to   the    conclusion   that      the   circuit    court       should   have
allowed       Koss    Corporation      to     submit       the     Combination        4

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transactions to the jury.               Everyone acknowledges that Park Bank

allowed Koss Corporation employees who were not listed on the

signature card to request and pick up cashier's checks.                                     See

lead op., ¶63.5          They also agree that Park Bank allowed one such

employee to draft a counter check against Koss Corporation's

account, cash it, and use the proceeds to purchase two cashier

checks.     Id., ¶64.           The facts of record demonstrate that a jury

could     find    Park    Bank     acted     in    bad       faith    when     it    remained

intentionally ignorant             of   whether        the     individuals       transacting

business on Koss Corporation's accounts had the authority to do

so.

      ¶109 In      summarily        dismissing          the     significance         of     this

conduct,    the    court        illustrated       the    defect      in    its     analytical

structure.       It said that "Koss Corporation does not explain how

Mulvaney's       being    a     non-signatory       amounted         to   an   obvious      and

compelling       fact     that     Sachdeva       was        breaching     her      fiduciary

obligations to Koss Corporation."                       Id., ¶63.         That misses the

point.      If    we     were    analyzing       this    case     under      the    Fiduciary
Breach Exception          to     immunity,    we       would    be   interested        in   Ms.

Sachdeva's conduct toward Koss Corporation.                          But we aren't doing

that analysis, and so we aren't particularly interested in Ms.

Sachdeva's        behavior.             We       are     instead          assessing         Koss

      5
       Although these employees were not listed as individuals
authorized to transact business on Koss Corporation's accounts,
they were, nonetheless, fiduciaries.     According to Wis. Stat.
§ 112.01(1)(b),   a  "fiduciary"   includes   an  "agent"  of  a
corporation.    It is fair to say that the Koss Corporation
employees were holding themselves out as agents of the company
when they transacted business on Koss Corporation's accounts.

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Corporation's claims under the Bad Faith Exception to immunity,

which means the proper focus is on Park Bank's conduct toward

Koss Corporation.

       ¶110 Properly    re-oriented,            the    undisputed          facts    reveal    a

pattern of conduct that should cause any corporate officer's

heart to fearfully skip a beat, or several.                             Park Bank said,

unapologetically(!), that its policy is to remain intentionally

and    steadfastly     ignorant        of   whether        an     individual         has    the

authority to transact business on a fiduciary account.                               Avoiding

that knowledge takes some effort because the information resides

in the bank's own records.                  It's in the signature card, the

specific purpose of which is to tell the bank which of Koss

Corporation's employees may access the company's accounts.                                  Yet

the bank deliberately and consistently refused to consult the

signature     card     to     determine         whether         it     was        helping    an

unauthorized person gain access to a fiduciary account.

       ¶111 This is not evidence of negligence, as the court would

have   it.     Id.,    ¶57.      Negligence           would      be    a     bank    employee
forgetting to check the signature card, or checking so cursorily

that the names failed to register in his mind, or a training

regimen that failed to teach employees to check the signature

cards, or an inconstant enforcement of a policy to check the

signature cards.       None of that is at issue here.                       What Park Bank

did    was   intentional.         It     chose        to   ignore       its       depositors'

signature     cards.        It   chose      not       to   know       whether       the     Koss

Corporation employees with whom it was dealing had the authority
to access the company's accounts.                 It chose to have a policy of

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ignorance     with   respect      to    its        customers'    instructions.         The

consequence of those intentional choices was that it disbursed

enormous sums of money to people who were not authorized to

access Koss Corporation's accounts.

       ¶112 This     does   not        mean,       however,     that   Park     Bank    is

necessarily liable to Koss Corporation.                       It is possible that a

jury would find no bad faith in Park Bank's conduct.                            Further,

Koss Corporation must still prove that Park Bank's actions were

the proximate cause of its damages.                      If Park Bank had called

Koss Corporation when an unauthorized employee tried to access

its accounts, perhaps Ms. Sachdeva's embezzlement attempt would

have   been   revealed.        We      know    this     is    possible,   because      her

scheme came to light when American Express observed suspicious

activity      on     Koss   Corporation's              account     and       called     to

investigate.       Or perhaps Park Bank's call would have gone to Ms.

Sachdeva, who would have been in a position to ratify what the

unauthorized employee was doing.

       ¶113 These "perhaps" are within the jury's province, and a
jury should have been allowed to consider them.                              Caputo, 748

A.2d at 514 ("The test for good or bad faith is a subjective one

to be determined by the trier of fact unless only one inference

from the evidence is possible.").                   By concluding, as a matter of

law, that Park Bank's intentional ignorance of its own records

could not amount to bad faith, we erred.

       ¶114 For the foregoing reasons, I respectfully dissent.

       ¶115 I am authorized to state that Justice REBECCA GRASSL
BRADLEY joins this dissent.

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