Lee Newman, M.D., Inc. v. Wells Fargo Bank, N.A.

Plaintiffs and appellants Lee Newman, M.D., Inc., a Medical Corporation and Lee Newman, M.D., Inc., a Medical Corporation doing business as Beverly Hills Medical Clinic (Newman) appeal from a judgment of dismissal entered after the trial court sustained without leave to amend the demurrer of defendant and respondent Wells Fargo Bank, N.A. (Wells Fargo) to the two causes of action pleaded against Wells Fargo in Newman’s first amended complaint.

The essential question presented is whether a negligence claim may be asserted against a depositary or collecting bank by an employer that has been victimized by dishonest employees who misappropriate and deposit checks through the use of fraudulent indorsements.

Although the trial court properly ruled that the California Uniform Commercial Code precludes a common law negligence claim against Wells Fargo, we reverse the judgment of dismissal because the factual allegations of the first amended complaint are adequate to state a cause of action against Wells Fargo under California Uniform Commercial Code section 3405, subdivision (b).

Factual and Procedural Background

1. Facts.

In February 1996 Newman hired Naomi Zamano as…