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Mar-Chek, Inc. v. Manufacturers and Traders Trust Co.

United States District Court, D. Maryland, Southern Division

July 11, 2019

MAR-CHEK, INC. et al., Plaintiffs,
v.
MANUFACTURERS AND TRADERS TRUST COMPANY et al., Defendants.

          MEMORANDUM OPINION

          GEORGE J. HAZEL, UNITED STATES DISTRICT JUDGE

         Plaintiffs Mar-Chek, Inc. and Mar-Chek II, Inc. (collectively, “Mar-Chek” or “Plaintiffs”) initiated this case in the Circuit Court for Anne Arundel County asserting a number of state law claims. ECF No. 1. After Plaintiffs stipulated to the dismissal of a non-diverse party, the remaining Defendants Manufacturers and Traders Trust Company and M&T Bank Corporation (collectively, “M&T”) and Branch Banking and Trust Company (“BB&T”) filed a Notice of Removal. Id. Pending before the Court is Plaintiffs' Motion to Remand or for Leave to Amend Complaint, ECF No. 30, and Defendants' Motions to Dismiss, ECF Nos. 45 & 49. No. hearing is necessary. See Loc. R. 105.6 (D. Md. 2016). For the following reasons, Plaintiffs' Motion to Remand or for Leave to Amend will be denied, and Defendants' Motions to Dismiss will be granted.

         I. BACKGROUND

         A. Factual Background[1]

         Plaintiffs operate multiple “Checkers” fast food restaurants throughout Maryland. ECF No. 1-2 ¶ 16. Prior to 2007, Mar-Chek hired Mitul B. Shah to perform bookkeeping services. Id. ¶ 17. Shah was eventually promoted to be Mar-Chek's Chief Financial Officer. Id. However, Shah was not authorized to sign checks. Id. Rather, Keith A. Martin, Mar-Chek's owner and President, was the only person authorized to sign checks or transfer Mar-Chek funds. Id. ¶¶ 16- 17.

         In February 2007, Shah opened bank accounts in the name of Mar-Chek, Inc., at Provident Bank (“Provident”). Id. ¶ 18. Provident employed Christina Stroud, later Christina Cooper (“Stroud”), as a bank teller and teller manager. Id. Stroud was involved in a romantic relationship with Shah, and she processed the opening of the Mar-Chek account for Provident. Id. To open the account, Shah completed and executed paperwork that falsely represented that he was authorized to open the account and take actions on behalf of Mar-Chek with regard to the account. Id. ¶¶ 19-24.

         Shah completed and executed a form provided by Provident that was entitled “Resolution for Corporate Deposit Account.” Id. ¶ 19. The Resolution falsely stated that Mar-Chek authorized Shah to act on behalf of Mar-Chek in all respects concerning the account. Id. ¶ 20. The Resolution listed Martin, who was identified under the title “President, ” and Shah, who was identified under the title “Authorized Signer, ” as the only individuals who were purportedly authorized to sign checks on behalf of Mar-Chek. Id. ¶ 21. The Resolution represented that the person signing it was the Secretary of Mar-Chek, but only Shah signed the document, under a line marked as “Other Officer.” Id. ¶¶ 19, 21. Shah's title was not listed, although the form required that it be listed. Id. ¶ 21.

         Martin never authorized Shah to be an authorized signatory or act on behalf of Mar-Chek concerning any bank account. Id. ¶ 22. Shah also was never the Secretary or other officer of Mar-Chek, and Provident knew that, because it had Mar-Chek's Articles of Incorporation, which did not identify Shah as the Secretary or other officer of Mar-Chek. Id. ¶ 19.

         Shah also opened a Commercial Signature Card. Martin did not sign the card, was not present at Provident while the account paperwork was processed, and did not authorize Shah to sign on his behalf. Id. ¶¶ 23, 25. However, Shah signed Martin's name to obtain the card and claimed that he was an authorized signatory for the account. Id. The Signature Card listed “Christina Stroud” as the “Branch Representative” who processed the Signature Card. Id. Stroud and Provident had the Articles of Incorporation in their possession but made no attempt to verify the signatures on the account opening paperwork or to contact Martin or anyone at Mar-Chek (other than Shah) regarding the account opening paperwork. Id. at ¶ 24. A cursory comparison of Martin's signature on the Articles of Incorporation with his purported signature (actually forged by Shah) on the Signature Card would have revealed that the signature on the Signature Card was not Martin's. Id.

         To open the account, Stroud was required to obtain supporting documentation and verify that she completed a Commercial Account Opening Checklist. Id. at ¶ 26. The Checklist required employees to secure approvals for all authorized signers, verify the identification of all account holders, and obtain an authorized signer verification form. Id. Stroud falsely represented on the Checklist that she performed these tasks, even though she did not. Id. The “Operations” department was required to verify the documentation, and the Checklist includes another set of initials for the Operations employee who purportedly performed this verification, but no such verification was performed. Id. at ¶ 28. Additionally, the branch manager was required to approve the account paperwork, but the space where the branch manager is required to be identified is blank, indicating that the branch manager never approved the paperwork. Id.

         Once Shah opened the account and added himself as a signatory who could act on the account's behalf, he wrote and personally endorsed checks from the Mar-Chek accounts to himself and others and sent electronic/wire transfers for his personal benefit without Mar-Chek's authorization. Id. ¶ 30. Shah concealed the payments in Mar-Chek's accounting software by posting them as a reduction to accounts payable to appear as if vendor invoices were being paid and also as a reduction to a fictitious payroll account. Id. at ¶ 35. In addition, Shah and his father began making loans to Mar-Chek, which Shah recorded on the Mar-Chek accounts as a liability, but did not record repayments as a reduction of the loan/liability. Id.

         In 2009, the Provident/M&T accounts were closed, and Shah opened four bank accounts on behalf of Mar-Chek at BB&T and then added himself as a signatory on the accounts. Id. at ¶ 32. Martin did not execute any account initiation or modification paperwork with BB&T to include Shah as a signatory on the account. Id. ¶ 34. Shah wrote and personally endorsed checks from the accounts to himself and others and sent electronic/wire transfers for his personal benefit, without the authorization of Mar-Chek. Id. BB&T failed to follow its operating procedures and/or prevailing banking standards in permitting Shah to add himself to the accounts as a signatory with the authority to transmit funds through electronic/wire transfers, despite the fact that he was not an officer of the corporation. Id. ¶ 32.

         In May 2013, Shah moved three operating and payroll accounts of Mar-Chek from BB&T back to M&T. Id. at ¶ 40. Stroud remained employed by M&T as a Teller Manager and remained personally involved with the Mar-Chek accounts. Id. In the process of re-opening accounts with M&T, Shah completed and executed forms provided by M&T entitled “Certified Banking Resolutions of Corporation.” Id. at ¶ 41. The Resolutions stated, among other things, that Mar-Chek duly approved resolutions to open the accounts at M&T and that Shah was authorized to open the accounts and act on Mar-Chek's behalf. Id. The Resolutions contained Martin's purported signatures, but the signatures were not originals; instead they were stamped replicas. Id.

         Martin never authorized Shah to add himself as a signatory on the Mar-Chek accounts, and he never signed the Resolutions or authorized anyone to execute the Resolutions on his behalf or stamp his signature on the Resolutions. Id. Martin was never present at M&T, and no one at M&T made any attempt to contact Martin or verify his signature or that he authorized the Resolutions. Id. Moreover, M&T knew that Shah was not authorized to open the accounts or submit the Resolutions, because it had the ...


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