Without a duty to act, a claim for negligence will usually fail. The Eighth Circuit recently faced the question of whether a bank has to investigate the authority of a customer opening a d/b/a account. In Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Raczkowski (2014 WL 3929101), investment advisor, Mark Henry opened a d/b/a bank account under the name of his employer, Investment Centers of America. Henry did not have ICA’s permission. The institution involved, Hometown Bank, only verified his identification upon opening the account. He was allowed to negotiate checks to ICA from their customers and wrongfully appropriated nearly $300,000. When ICA discovered the fraud, they settled with their customers and National Union paid the claims. National Union then sued Hometown for negligence. Hometown moved to dismiss, the district court granted the motion, and National Union appealed.
The Eighth Circuit stated that a legal relationship establishes a duty of care. Neither National Union, nor ICA, had a relationship with Hometown. Henry was the customer and only party with a relationship with Hometown. Although a bank can be negligent for not investigating the authority of an employee of their customer, ICA was not the customer. The Eighth Circuit noted the difficulty determining authority under fictitious names, labels, and monikers as opposed to natural persons. The Court declined to impose a duty based on the complicated nature.
The Eighth Circuit affirmed the dismissal.