## Facts

- Auto Sision, Inc. (ASI) operated an auto body-repair business and employed Barbara Szeliga as its bookkeeper, entrusting her with responsibility for receiving, handling, and accounting for insurer checks payable to ASI.
- Szeliga fraudulently indorsed checks payable to ASI and deposited them into a Wells Fargo checking account held by United Check Cashing, a business co-owned by Szeliga and Albert Buccini.
- Plaintiffs alleged United had ceased operating as a check-cashing business by 2014 but continued to maintain an active account at Wells Fargo and continued to process checks.
- Plaintiffs alleged Wells Fargo discontinued annual third-party audit requirements for United in 2015 and failed to monitor United’s operational status, enabling the fraudulent deposits to continue.
- ASI discovered the embezzlement in mid-2016, terminated Szeliga, and reported the matter to police.
- Due to the statute of limitations, the court considered only claims based on fraudulent indorsements occurring after October 23, 2015.

## Issues

1. Whether Pennsylvania’s UCC (13 Pa. C.S. § 3405) treats an entrusted employee’s fraudulent indorsement as effective against the employer, shifting the loss to the employer rather than the depository bank.
2. Whether plaintiffs plausibly alleged that the bank failed to exercise “ordinary care” under the UCC based on account-monitoring and audit-related practices, as opposed to how the bank processed the specific checks.
3. Whether a common-law negligence claim against the bank is displaced by the UCC’s Article 3 scheme governing negotiable instruments.

## Decision

- The court granted Wells Fargo’s Rule 12(b)(6) motion to dismiss.
- The court held that, because ASI entrusted Szeliga with responsibility over the checks, her fraudulent indorsements were effective as ASI’s under 13 Pa. C.S. § 3405, allocating the loss to ASI.
- The court dismissed the UCC “ordinary care” theory, concluding plaintiffs did not plausibly plead a breach tied to the bank’s handling of the instruments under reasonable commercial standards.
- The court dismissed the common-law negligence claim as displaced by the UCC.
- The court dismissed all claims against Wells Fargo & Company (the holding company).

## Legal Principles

- Under 13 Pa. C.S. § 3405 (UCC § 3-405), when an employer entrusts an employee with responsibility for instruments, the employee’s fraudulent indorsement is treated as effective in favor of a person who, in good faith, pays or takes the instrument for value or collection; the resulting loss is generally allocated to the employer.
- A bank’s UCC “ordinary care” duty in this context focuses on the bank’s conduct in taking or paying the specific instruments under reasonable commercial standards, not on generalized compliance or risk-management choices (e.g., whether to require third-party audits or close an account based on a customer’s business status).
- Article 3 of the UCC displaces overlapping common-law negligence claims that would alter the statutory allocation of loss and duties governing negotiable instruments.

## Conclusion

The court dismissed claims seeking to hold Wells Fargo liable for losses caused by ASI’s entrusted employee’s fraudulent indorsements, holding that § 3405 allocates the loss to the employer and that allegations about relaxed audits and account monitoring did not state a UCC “ordinary care” violation tied to check processing; the UCC also displaced common-law negligence.


Auto Sision, Inc. v. Wells Fargo Bank, N.A., 375 F. Supp. 3d 627 (E.D. Pa. 2019)