QDOS, Inc. v. Signature Fin., LLC

*993 A bank or merchant has a common law duty, when conducting a transaction with its customer that also involves a third party, (1) not to ignore "red flags" or "suspicious"

*871 circumstances that may indicate the third party is being defrauded, and in that instance (2) not to proceed with the transaction without doing some investigation. (E.g., *994 Sun 'n Sand, Inc. v. United California Bank (1978) 21 Cal.3d 671 , 693, 148 Cal.Rptr. 329 , 582 P.2d 920 ( Sun 'n Sand ), superseded on other grounds by Cal. U. Com. Code, § 3404 ; Burns v. Neiman Marcus Group, Inc. (2009) 173 Cal.App.4th 479 , 489, 93 Cal.Rptr.3d 130 ( Burns ).) Can the third party sue a merchant for negligence in breaching these duties when the merchant sells a high-end sports car to its customer and the customer pays for most of the car with two checks the third party made out to the merchant? In other words, is a customer's payment with a check not in the customer's own name, by itself, a red flag? We conclude the answer is "no," and affirm the trial court's grant of summary adjudication dismissing the third party's negligence and related claims against the merchant. In the unpublished portion of our decision,…