The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge
In a memorandum opinion dated March 17, 2008, this Court denied defendant Independence Federal Savings Bank's ("IFSB") motion for summary judgment on all claims brought by plaintiffs American Federation of Teachers ("AFT") and Washington Teachers' Union ("WTU").*fn1 This Court found that the case was "fraught with genuine issues of material facts in dispute." AFT v. Bullock, 539 F. Supp. 2d 161, 163 (D.D.C. 2008). On April 16, 2008, IFSB filed a motion for reconsideration of this Court's denial of its motion for summary judgment, and on May 19, 2008, IFSB filed a motion for leave to file an amended answer. On December 2, 2008, this Court held a hearing on defendant's motions. After careful consideration of defendant's motions, plaintiffs' oppositions, defendant's replies, the parties' oral arguments, the supplemental briefs, applicable law, and for the reasons stated herein, this Court GRANTS defendant's motion for reconsideration and vacates the Order previously denying defendant's motion for summary judgment; all claims against IFSB are dismissed. Further, this Court DENIES AS MOOT defendant's motion for leave to file an amended answer.
Plaintiff AFT is a national labor union for teachers, which is an affiliated international union of the AFL-CIO. AFT represents local labor unions primarily made up of public and private school teachers, paraprofessionals and higher education faculty. AFT is a national labor organization with which local and state labor organizations are affiliated. To affiliate with the AFT, local unions pay dues. Plaintiff WTU is the local affiliate of the AFT for teachers in Washington, D.C.
There are a number of individual defendants in this action (collectively, "Individual Defendants"). Defendant Barbara A. Bullock ("Bullock") served as the President of WTU from mid-1994 to September 2002. As President, Bullock was an officer, agent and representative of the WTU, had check-signing authority for the WTU's bank accounts, and had overall responsibility for administering the affairs of the WTU. Defendant James O. Baxter, II ("Baxter") served as the Treasurer of WTU during Bullock's tenure as President. Baxter was an agent, employee and representative of the WTU and had check-signing authority for WTU's bank accounts and financial responsibility for WTU's affairs. Defendant Gwendolyn M. Hemphill ("Hemphill") was an employee of the WTU and served as Bullock's Special Assistant during Bullock's tenure as President. Hemphill shared responsibility for WTU's day-to-day financial affairs with Baxter. Defendant Leroy Holmes was a WTU employee and worked as Bullock's chauffeur for some portion of the relevant time period.
Defendant Cheryl Martin is Hemphill's daughter. Defendant Michael Martin ("Martin") is Hemphill's son-in-law and husband of Defendant Cheryl Martin. Defendant Errol Alderman ("Alderman") is an acquaintance of Michael Martin. Defendant Gwendolyn B. Clark ("Clark") is Bullock's sister.
Defendant IFSB is a federally chartered commercial bank that was founded in 1968. IFSB has six branches in Washington, D.C. and Maryland. Between 1994 and 2002, WTU maintained several bank accounts at IFSB, including a "Premier Checking Account," with which the WTU conducted its day-to-day business, including payroll for WTU employees.
2. The Embezzlement Scheme
The Individual Defendants engaged in a scheme to embezzle, convert, and misuse the WTU's funds beginning in 1995 and ending in 2002. Def.'s Facts ¶ 38. There is no indication that the WTU Executive Board or the WTU's members authorized the Individual Defendants' appropriation of WTU funds for personal use. Id. ¶ 39. Between 1995 and 2002, Bullock, Baxter, and Hemphill wrote checks on the WTU's IFSB bank account for unauthorized, non-union business. Id. ¶ 40. Hundreds of these checks were made payable to Holmes, who then cashed the checks at IFSB, retained some of the cash for himself, and returned the remainder of the cash to the other Individual Defendants. Def.'s Resp. To Pls.' Facts ¶¶ 15-19. Some of these checks cashed by Holmes exceeded $10,000. Id. ¶ 20. According to plaintiffs, between 1997 and 2002, the checks cashed by Holmes on the WTU's IFSB account totaled between $1.45 and $1.7 million. While not conceding the exact amount of each individual check, IFSB does not appear to dispute the total amount of the checks cashed, but maintains that the "amount and Plaintiff's characterization of each check . . . is immaterial to resolution" of IFSB's motion for summary judgment. Id. ¶ 15.
In addition to the checks cashed by Holmes, the Individual Defendants also made purchases with personal and corporate credit cards and paid the credit card bills with checks written on the WTU's IFSB account. Def.'s Facts ¶¶ 41-44. Some of the Individual Defendants wrote and cashed checks on the WTU's IFSB account and kept the cash or deposited the cash in their personal bank accounts. Id. ¶¶ 45-50. Furthermore, some of the Individual Defendants embezzled WTU funds by causing checks to be written on the WTU's IFSB account and paid to an entity maintained by Defendants Martin and Alderman, Expressions Unlimited, and keeping the funds for personal use. Id. ¶ 51. Between 1995 and 2002, the Individual Defendants embezzled and misappropriated in excess of five million dollars ($5,000,000) from the WTU. Id. ¶ 54.
The government brought criminal charges against most or all of the Individual Defendants. Leroy Holmes pled guilty to Conspiracy to Launder Proceeds of an Unlawful Activity. See United States v. Leroy Holmes, Criminal No. 03-00032 (D.D.C. Feb. 6, 2003)(RJL). Michael Martin pled guilty to Conspiracy to Launder Proceeds of an Unlawful Activity. See United States v. Michael Wayne Martin, Criminal No. 03-00138 (D.D.C. April 11, 2003)(RJL). Barbara Bullock pled guilty to Mail Fraud and Aiding and Abetting and Conspiracy to Commit Crimes Against the United States. See United States v. Barbara A. Bullock, Criminal No. 03-00435 (D.D.C. Oct. 7, 2003)(RJL). Errol Alderman pled guilty to Conspiracy. See United States v. Errol Alderman, Criminal No. 03-00429 (D.D.C. Oct. 15, 2003)(RJL). Cheryl Martin pled guilty to Conspiracy. See United States v. Cheryl H. Martin, Criminal No. 04-00054 (D.D.C. Feb. 19, 2004)(RJL). On August 31, 2005, following a jury trial, Defendants Gwendolyn Hemphill and James Baxter were convicted on twenty-three criminal counts, including Conspiracy and Aiding and Abetting, Wire Fraud, Embezzlement from a Labor Organization, and Money Laundering. Those convictions were affirmed on appeal. See United States v. Hemphill, et al., 514 F.3d 1350 (D.C. Cir. 2008).
On April 18, 2006, this Court entered default judgments against Defendants Barbara Bullock, Gwendolyn Hemphill, James Baxter, Errol Alderman, individually and doing business as Expressions Unlimited, Cheryl Martin, and Michael Martin, individually and doing business as Expressions Unlimited. The Court ordered that the amount of the default judgment shall be determined pursuant to procedures set forth in Federal Rule of Civil Procedure 55. On September 28, 2007, the Court granted plaintiffs summary judgment against Defendant Leroy Holmes.
On December 1, 2006, IFSB filed a motion for summary judgment against plaintiffs. In its motion, IFSB argued that it was entitled to summary judgment on all of plaintiffs' claims on the grounds that the claims were time-barred. See AFT, 539 F. Supp. 2d at 166. Citing D.C. Code § 28:4-406, defendant further maintained that pursuant to District of Columbia banking law, plaintiffs were under a duty to discover and report the unauthorized payments within one year because IFSB provided WTU with monthly bank statements and copies of cancelled checks written on the WTU account. Id. IFSB argued that all of the unauthorized signatures, alterations, and forgeries were evident from the statements and cancelled checks and, because WTU failed to notify IFSB that the activity on the account was unauthorized, plaintiffs' claims were time-barred. Id.
Plaintiffs, on the other hand, argued that any applicable statute of limitations in this case was tolled by the "adverse domination doctrine." Id. Plaintiffs asserted that Bullock, Baxter, Hemphill and the other Individual Defendants adversely dominated, directed, and controlled the WTU throughout their scheme to embezzle WTU funds, thereby preventing discovery of the fraud. Plaintiffs also argued that any statute of limitations was tolled by the Individual Defendants' fraudulent concealment. Id. Defendant countered that there was no adverse domination of the WTU, and therefore the statutes of limitations were not tolled, because the WTU's Board, its vice president, and the AFT had domination and control over the WTU and could have discovered the embezzlement scheme. Id. at 166-67.
This Court found that whether plaintiff WTU was adversely dominated, whether the Individual Defendants engaged in fraudulent concealment, and when the plaintiffs discovered or should have discovered the embezzlement scheme and the unauthorized activity with respect to the WTU account, required a highly fact-intensive inquiry that must be made by the fact finder. In denying the motion, this Court found that genuine issues of material fact pervaded these claims and must be decided by a fact finder at trial. Id. at 167.
On April 16, 2008, IFSB filed a motion for reconsideration, arguing that it is entitled to summary judgment on all claims because the claims are time-barred in light of a recent decision of the D.C. Court of Appeals in Peters v. Riggs National Bank N.A., 942 A.2d 1163 (D.C. 2008). In Peters, the personal representative of the Estate of Rhona Graves appealed a grant of summary judgment against his claims for breach of contract, negligence, and violations of the Electronic Funds Transfer Act. See Peters, 942 A.2d at 1164. Appellant claimed that appellee Riggs Bank permitted unauthorized withdrawals from his mother's account despite her incapacitation and even after her death. Riggs Bank denied liability, and also argued that appellant's claims were untimely. In affirming the grant of summary judgment, the D.C. Court of Appeals held that D.C. Code § 28:4-406 imposes a "duty to discover and report unauthorized signatures or alterations to the bank" and that duty is "an absolute notice requirement for customers as a pre-requisite to bringing any claim against the bank." ...