The opinion of the court was delivered by: ATTRIDGE
Pending before the Court are several motions for summary judgment by the numerous defendants, and a motion by the plaintiff, Piedmont Resolution, for a voluntary dismissal. This memorandum opinion and order will address only the summary judgment motion by defendant First National Bank of Maryland [FNB] [# 73], whose participation in the transaction giving rise to the instant dispute was indirect due to, in FNB's words, its "misfortune to be chosen by one of Piedmont's lawyers to wire (for a $ 36 fee) Piedmont's $ 3 million to England." [FNB mot. at 1-2].
The tangential relationship between FNB and the plaintiff, and the fact that FNB's summary judgment motion was filed prior to Piedmont's motion for voluntary dismissal, leads the Court to resolve FNB's motion prior to turning to Piedmont's, which will be addressed in a separate memorandum opinion and order filed concurrently herewith. FNB's motion for summary judgment is opposed by the plaintiff, Piedmont Resolution, and partially opposed by three of the 14 codefendants, Lewis A. Rivlin, Lewis A. Rivlin, P.C., and Anne T. Taylor.
In its several-count First Amended Complaint, Piedmont alleges (1) breach of contract (count VI), (2) negligence (count VII), and (3) gross negligence (count VIII)
against defendant FNB.
Pursuant to 28 U.S.C. § 636(c), the parties consented to proceed before a U.S. Magistrate Judge for all purposes, including the entry of final judgment. Upon consideration of the motion, oppositions, reply and the applicable law, and for the reasons explained below, the Court concludes that First National Bank of Maryland is not entitled to summary judgment as a matter of law against the plaintiff, Piedmont Resolution, on counts VI, VII or VIII of the First Amended Complaint. Accordingly, FNB's motion for summary judgment shall be denied.
I. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate when "there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). Federal Rule of Civil Procedure 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). "At the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). "The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. at 247-248.
A material dispute of fact "is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth", Hirschhorn v. Sizzler Restaurants Int'l Inc., 913 F. Supp. 1393, 1397 (D. Nev. 1995); "[a] dispute of fact 'is genuine...if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Haysman v. Food Lion, Inc., 893 F. Supp. 1092, 1099 (S.D. Ga. 1995)(quoting Anderson, 477 U.S. at 248).
If the moving party makes a sufficient showing pursuant to Rule 56(c), then the nonmoving party must come forward with affidavits and/or other evidence as provided by Rule 56(e), setting forth specific facts showing that there is a genuine issue for trial; the party opposing summary judgment may not rest upon the mere allegations or denials of the adverse party's pleadings. Matsushita Elec. Indus. Co. v Zenith Radio Corp., 475 U.S. 574, 586-587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).
Viewing all facts and inferences in a light most favorable to the non-moving party, Tao v. Freeh, 307 U.S. App. D.C. 185, 27 F.3d 635, 638 (D.C. Cir. 1994)(citing Anderson, 477 U.S. at 250), the Court concludes that genuine issues of material fact exist, thus FNB is not entitled to summary judgment as a matter of law. To find otherwise would force the Court to make credibility determinations, which is the role of the jury, not the Judge.
This Court has jurisdiction over this case pursuant to 28 U.S.C. § 1332(a). The parties have not raised any choice of law issues and, in their arguments in support of and in opposition to FNB's motion for summary judgment, all parties have relied solely on District of Columbia law. Accordingly, the Court will resolve the motion under District of Columbia law.
III. ISSUES OF MATERIAL FACT -- DISPUTED AND UNDISPUTED
It is unnecessary for the Court to recite the entire history of the transaction giving rise to the instant dispute -- the purchase of a non-existent 108% per annum bank guarantee for $ 1.5 million. It suffices to say that this is a classic "tale" (a term artfully used by Piedmont and FNB) of a situation where, in retrospect, a deal sounded too good to be true from the beginning and, consequently, it was.
Only hindsight, however, is 20/20, and thus necessarily capable of distinguishing a legitimate business transaction from a "prime bank instrument scam". [See Interagency Advisory, FNB mot., exh. 42]. Accordingly, the Court must look at the events surrounding the transaction at their place in time, in 1995, when perhaps the scam was not as "easily recognized" as FNB alleges in its motion for summary judgment; otherwise FNB, a legitimate banking institution, "would have immediately rejected the request" and, thus, would not be defending this action today. [FNB expert rpt., FNB mot., exh. 8, PP B, G].
For the purposes of this summary judgment motion, most of the material facts begin on Wednesday, December 13, 1995, when Ernest Reigel, Piedmont's attorney, entered into an escrow agreement with defendants Lewis Rivlin and his law firm, Johnston, Rivlin & Foley [JR&F].
The escrow or attorney trust agreement between Piedmont and Rivlin and his firm, JR&F, for the transfer of $ 3 million into Rivlin's escrow account is set forth in a letter dated December 13, 1995, from Reigel to Rivlin and counter-signed and initialed by Rivlin; it provides in pertinent part:
The $ 3M that Piedmont will transfer to [Rivlin's] trust account will be held on behalf of Piedmont and will not be pledged, hypothecated, transferred or released except as follows:
1. In the event that pursuant to the Contract [Rivlin] and an authorized representative of Piedmont (that will be [Reigel__ initially) execute joint instructions to your trust account bank to issue by S.W.I.F.T. wire the agreed upon MT-100 Field 72 Cash Backed Conditional S.W.I.F.T. wire under procedures substantially in the form attached hereto as EXHIBIT A.
2. If after ten (10) banking days from the date Piedmont's funds are deposited in your trust account, the release of the funds pursuant to paragraph 1 above has not occurred, Piedmont's authorized representatives may by written request direct [Rivlin] to return the funds immediately to Piedmont.
[FNB mot., exh. 19]. Exhibit A noted in paragraph 1 (above) of the escrow agreement, however, was not attached to this letter agreement because "time was of the essence, according to the other parties involved, that we needed to hurry or we would miss the opportunity...[and] Rivlin had assured [Reigel/Piedmont] that the wire instructions could be worked out and would be worked out before anything happened with the money. [Reigel depo., 87:20-88:9]. Although the attorney trust agreement was between Rivlin and Piedmont, Jones was compensating Rivlin (and his firm) with "a percentage of the completed transaction." [Rivlin depo., 60:4-20].
Rivlin expressed his concerns about the transaction to Reigel. [Rivlin depo., 139:4-8; see also Reigel's notes, Rivlin opp., exh. A]. Reigel assured Rivlin "that in the wire room they would make the final decision of how to convey that condition within the number of lines and the number of characters available for field 72 [of a conditional S.W.I.F.T.]." [Rivlin depo., 143:15-19]. From Reigel's assurances and instructions with respect to the line and character limitations, Rivlin believed "Reigel had spoken to somebody expert [with S.W.I.F.T.]". [Rivlin depo., 92:1-93:6].
Rivlin's understanding of "conditional" was "that there was to be a use of an MT-100 screen 72." [Rivlin depo., 52:7-10]. Rivlin did not independently know what that meant, but had previously used S.W.I.F.T. [Rivlin depo., 52:11-17]. Rivlin was under the impression he could obtain a "S.W.I.F.T. 100 Field 72" "form and study it", which he tried to do at NationsBank where Rivlin's trust account was located, but "the people at the branch level had no idea what [Rivlin] was talking about." [Rivlin depo., 53:6-25; 55:2-24].
On December 14, 1995, despite Reigel's (and Rivlin's [Rivlin depo., 326:5-25]) earlier reservations about Jones or anyone else having a power of attorney [Reigel depo., 107:3-18], Reigel, on behalf of Piedmont, gave C.P. Jones a "Limited Power of Attorney", which provided:
We hereby confer upon you a Limited Power of Attorney to act for and on behalf of Piedmont Resolution, LLC, c/o Ernest W. Reigel, Moore & Van Allen, PLLC,...for the purpose of the designated limited partnership, Transaction Code: EFS494899731A.
You are hereby authorized and employed with full responsibility to negotiate; open and close account(s); transfer, and disburse funds to appropriate parties as per our instructions; and act as the financial advisor for the benefit of the limited partnership (Contractual Agreement).
We hereby grant to you this Limited Power of Attorney this day, December 14, 1995, and this power is valid for one year and one day from this date.
[FNB mot., exh. 21; see also Reigel depo., 56:15-57:6]. Thus, Jones became the attorney in fact. [Reigel depo., 57:3-6]. Reigel agreed to Jones having the power of attorney "because the way [Reigel/Piedmont] had established how the money was going to be handled through Mr. Rivlin's trust account and with Mr. Rivlin's assurances gave [Reigel/Piedmont] plenty of comfort that [Reigel/Piedmont] weren't exposed by [Jones] having that power of attorney. In other words, the power of attorney would not be able to be exercised until we either got in our hands the guarantee for the 108 percent or had some other form of collateral that would protect us." [Reigel depo., 108:12-21].
On Friday, December 15, 1995, Reigel, on behalf of Piedmont, transferred $ 3 million into Rivlin's trust account at NationsBank in Washington, DC. [FNB mot., exh. 22]. Rivlin, unable to work out the funds transfer procedures with NationsBank [Rivlin depo., 55:4-24], opened a new trust account (with Reigel's concurrence [FNB mot., exh. 23]) at a Washington, D.C. branch of FNB. [FNB mot., exh. 38]. While opening the account, Rivlin explained to FNB employee Donald R. Lee that he:
had clients who wanted to use the facility of [Rivlin's] attorney trust account to make a conditional transfer of $ 3 million to England and that it would be done on an MT-100/72. [Rivlin] had a copy [of the instructions] with [him] when [he] talked to [Lee] of what was required. [Lee], too, did not know that there was no such form as a form because he tried to get a form for me. He then learned that there was no such form but indicated they could nevertheless make a conditional transfer consistent with the requirements of my client.
[Rivlin depo., 94:15-95:1]. Rivlin concedes that he did not know how much Lee "knew then about what the limitations were on a Field 72", but Rivlin asserts that he "told [Lee] specifically [that Rivlin] wanted an MT-100 Field 72", and that it was to be conditional, and showed him the two-page instruction draft indicating that the funds were to be held until a particular event occurred in an effort to explain his client's request. [Rivlin depo., 95:7-96:13]. Rivlin explained to Lee that "the funds wouldn't be distributed in accordance with the contract until the bank in England had expressed its willingness to accept the money and promise to have in place a bank guarantee of 108 percent." [Rivlin depo., 96:22-97:8]. Lee showed "no indication whatsoever that [the conditional transfer] wouldn't be readily done and just as required." [Rivlin depo., 97:9-13].
Rivlin indicated to Reigel and Jones in a letter of the same date, December 15, that FNB "seemed more up-to-speed, and were offering, and have provided, very personal service." [FNB mot., exh. 23; see also Reigel depo., 142:5-10]. In the same letter, Reigel advised that Lee, with whom Rivlin opened the account, indicated that the funds, if transferred Monday, December 18, would arrive in England on Tuesday, December 19, 1995. [FNB mot., exh. 23]. Rivlin further expressed confidence that, working with FNB, "the funds are now on a path that will lead to a prompt and effective transfer on Monday to get your transaction started on Tuesday." [FNB mot., exh. 23.].
Lee recalls the events of December 15, 1995, rather differently:
[Anna Coates] told [Lee] that Mr. Rivlin was going to be coming in to open up an account...He came in and opened an account and introduced himself to me. [Lee] doesn't remember the specifics of the conversation. But [Lee] opened the account and that was about the extent of it. ...[Lee does not recall] any conversation about a wire transaction that was going to occur...Several days later [FNB] received a big wire for [Rivlin] and then [Rivlin] called [Lee] to tell [him] that [Rivlin] was going to be wiring that money out [and gave no other details], [and] came in that day.
[Lee depo., 11:17-12:20]. Lee denies any discussion with Coates about a wire transfer. [Lee depo., 11:6-13]. Lee recalled receiving $ 75 for opening the account, and that Rivlin was a friend of Farrell [see supra n.1], but Lee did not recall Rivlin telling him why he opened the account. [Lee depo, 36:13-37:6]. Lee said that if Rivlin had "mentioned a SWIFT wire designated an MT-100 field back 72" it "would have definitely raised a red flag with [him], so when [he] said that [he doesn't recall such a conversation], [he] said it very confidently." [Lee depo., 13:10-17]. It raises a red flag with Lee "because to the best of [his] knowledge there is no such thing as a conditional wire." [Lee depo., 13:18-21].
Lee could not explain why he had written on his daily planner for the date of December 15, 1995, "call Anna about Mr. Rivlin's wire". [Lee depo., 37:12-24; pl's opp., exh. E].
Over the weekend (December 16-17) when Rivlin was to draft the "attachment to the MT 100/72 [FNB mot., exh. 23; see also Reigel depo., 100:11-22], Jones called Rivlin and told him he was sending him "what was going to be the attachment to the contract, the final version of the agreement as to his instruction on the conditional S.W.I.F.T. wire." [Rivlin depo., 180:19-24; FNB mot., exh. 24].
On Tuesday, December 19, Rivlin proceeded to FNB with the two-page "wire transfer procedures" from Jones. Lee, however, was with a customer, so Melissa Rempe Holt (Ms. Rempe at the time) volunteered to complete transaction. [Rivlin depo., 97:23-98:6]. According to Rivlin,
[He] came in expecting to see Don Lee. [Rivlin] talked to [Lee] briefly. [Lee] introduced [Rivlin] to [Holt]. [Lee] had a desk out front. [Holt] appeared to be occupying an office behind him. The implication was that she was the more senior of the two. [Rivlin] sat down to explain in detail what it was [they] had to accomplish, and [Holt] had to ask a couple of questions of Mr. Lee before [they] could even get started.*** [Rivlin] explained that [they] had to transfer by an MT-100 screen 72 conditionally funds that would go from [Rivlin's] account to an account in England. And [Rivlin] gave [Holt] the details of the account and that this was to be a conditional transfer because there was supposed to be a guarantee of 108 percent that would come to [Piedmont]. And it was to come back to [Holt]--although it was Mr. Lee that [Rivlin] kept checking if it had arrived yet -- come back to [Holt]. That would confirm that the bank had a 108 percent guarantee or it was communicating that they were about to in authorizing the transaction to commence. [Rivlin] went through, in other words, all the details that are in the attachment to the agreement, explaining as much as [Rivlin] could about each aspect of it. [Holt] talked to the wire room during - after talking to Don Lee about some aspects of it, and I don't remember what they were. [Holt] talked to the wire room and then told [Rivlin] that the MT-100 transfer, that it was limited in terms of how [Piedmont] could express the guarantee. Mr. Reigel had explained to me that we had a limitation of six lines and the bank would compress them into the right section. *** [Rivlin and Holt] discussed this issue [of the six-line limitation]...And the question was how to get the limiting instructions to go over with this S.W.I.F.T. wire. And it ended up...with [Holt] telling [Rivlin] that she would send the attachment physically that [Rivlin] had given her to the wire room. And that was [Rivlin's] understanding at the time [he] left. [Rivlin] had made a slight change in the form to make sure that [FNB] didn't convert it to pounds but the transaction would be done in dollars. [Rivlin] just left with the most complete understanding that [Rivlin] had spoken directly to her mind and [Holt] had understood the importance of this aspect of it and that she was going to attach those two pages to what she would send to the wire room so they could handle the manner in which it would go over. But [Rivlin] left with the impression that physically these pages were going to be transmitted to England in addition to whatever was to be put on the MT-100.
[Rivlin depo., 98:11-99:25; 100:1-23].
"Rivlin didn't know [what language could be typed into Field 72]. That was why [he] understood that the bank itself with experience in sending MT-100 Field 72 cash backed conditional S.W.I.F.T. wires was, as [Reigel] instructed [Rivlin], to take it upon themselves to make sure the condition was clearly stated within the limits of the Field 72." [Rivlin depo., 112:19-113:2]. Rivlin "came away from [his] discussion with [Holt] thinking that the bank in England was going to get this document, in addition to getting the S.W.I.F.T. message...that it was not only going to be attached by [Holt] and sent to the wire room, so that the wire could be sent consistently with what Jones and Reigel wanted, but that the physical two pages were going to arrive there and be cross referenced by the, by the -- the S.W.I.F.T. ***[Holt] was accepting [the two pages] on that basis [that it was accepted procedure]." [Rivlin depo., 352:4-20]. Rivlin said he "had no question, when [he] left [FNB], that these pages were not only attached to what she was sending up there, to the wire room in Baltimore, but that they would be physically referenced, I mean, referenced in the text of what was being sent and in their hands, so they could interpret the wire, but the wire, the S.W.I.F.T. wire, was the effective instrument with whatever they had to say in the Field 72 to convey what was important to convey from this [two-page instructions] and that, for explanatory purposes, they would be holding this [two-page instructions], physically, as they were reading the S.W.I.F.T. wire." [Rivlin dep., 352:25-353:11].
Rivlin "did not know what the bank was going to say," [Rivlin depo., 349:11-14], which is consistent with the "Application and Agreement for Foreign Transfer", which provided for the wire room to designate the codes. [See infra at 13 (quoting P 5)]. In Rivlin's mind, "as long as we had conveyed what it was that we needed to have as the condition, which [Rivlin] thought we had, The [sic] concept of its going from Baltimore to England and physically ending up, [Rivlin] didn't know, but [his], in [his] own mind, whether [he] fully understood how a SWIFT worked, and that [Holt] had said this would go with it, what [Rivlin] think[s] [he] was seeing in [his] mind was that simultaneously that [two-page instruction] run through a fax machine and it would come out the other end. There are lots of ways of conveying messages from point A to point B." [Rivlin depo., 288:9-20].
In the course of his discussions with Rempe, Rivlin signed an "Application and Agreement for Foreign Transfer", which FNB argues is a contract setting forth the exclusive rights and obligations of the parties, and does not provide anywhere for a conditional transfer of the funds to the Midland Bank in England. The "Application and Agreement for Foreign Transfer", provides in pertinent part:
This application is accepted only on the following terms and conditions.
1) To be transacted & received in USD.
5) [FNB] may send any message relative to this transfer in explicit language, code or cipher, and it shall not be responsible for errors, delays or defaults in the transmission or delivery of messages in execution of this order by telegraph, cable, wireless, foreign governmental telegraphic services, or by letter, postal remittance by the post office of this or any foreign country, or by any express company, nor shall it be responsible for any loss or damage in consequences of any cause beyond its control, all of which risks are assumed by the purchaser.
[FNB mot., exh. 27]. The entire Agreement was preprinted to which Rivlin made one alteration --he crossed through term and condition no. 1, and wrote in the ...