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Rachuy v. Anchor Bank et al.: US District Court : CIVIL PROCEDURE - res judicata bars plaintiff's claims regarding bank action on counterfeit scheme

Sandra Rachuy, Civil No. 08-1188 (DWF/RLE)
Anchor Bank, individually and as a Minnesota
Corporation; Kristie Shafer, individually and in
her official capacity as an employee of Anchor
Bank; Joyce Maddox, individually and in her
official capacity as an employee of Anchor Bank;
Donald Kottke, individually and in his official
capacity as an employee of Anchor Bank; and
Denise Nelson, individually and in her official
capacity as an employee of Anchor Bank,
Sandra Rachuy, Pro Se, Plaintiff.
Alan I. Silver, Esq., and Jessica Schulte Williams, Esq., Bassford Remele, counsel for
This matter is before the Court upon a Motion for Summary Judgment brought by
Defendants Anchor Bank (the Bank), Kristie Shafer (Shafer), Joyce Maddox, Donald
Kottke and Denise Nelson (together, the Defendants). For the reasons set forth below,
the Court grants the motion.
On October 12, 2005, Plaintiff Sandra Rachuy (Plaintiff) and her husband Gale
Rachuy (Rachuy) opened a joint account at the Bank. On November 14, 2005, Rachuy
deposited two checks into the account, one for ,836.49 and another for ,000.
Plaintiff and Rachuy used their debit cards and wrote a number of checks drawing upon
the deposited funds. Subsequently, the Bank learned that the checks Rachuy had
deposited were counterfeit. Bank employee Shafer investigated the matter by doing an
Internet search and obtaining credit reports for both Plaintiff and Rachuy. The Bank
learned that Rachuy had a criminal history related to fraudulent financial transactions.
After this investigation, the Bank closed the debit cards associated with the account and
placed the account on restricted status. Rachuy then deposited another check for almost
,000 into the account and assured the Bank that he had confirmed that the check was
valid. The Bank learned, however, that this third check also was a counterfeit.
Additionally, the Bank received a wire transfer for ,500 directed to Rachuy.
The funds transferred were related to a contract between an individual, James Tickler,
and Rachuy that involved the purchase of wood. At the time the funds were transferred,
the account was frozen and, therefore, though the funds were deposited in the account,
they were never available for withdrawal. Tickler became suspicious about the
transaction with Rachuy and requested that the wire transfer be reversed. The Bank
retained a portion of the funds to cover Plaintiff and Rachuys account deficit and
returned the remainder of the funds.
The Bank informed the police about the counterfeit checks and the wire transfer.
The Bank also submitted a Suspicious Activity Report (SAR) to the Comptroller of the
Currency. Ultimately, Rachuy was charged with and convicted of three counts of
offering a forged check and was sentenced to prison.1
Rachuy sued Anchor Bank in state court in Hennepin County, Minnesota, in
January 2007. Rachuy asserted claims against the Bank related to its alleged wrongful
failure to honor checks written on the account. Rachuy also claimed that employees of
the Bank conspired with prosecutors in Rachuys criminal cases. The Bank obtained
summary judgment in the state court case; among other things, the court found that
Rachuys claims were barred by collateral estoppel because he had been found guilty of
offering a forged check in connection with the funds upon which he intended to draw.
The state court entered a judgment in favor of the Bank.
In this case, Plaintiff claims that the Bank wrongfully dishonored checks written
against funds in the account and converted a portion of the funds from the wire transfer
by applying them to the account deficit. As a result, Plaintiff claims she sustained harm
in that she was evicted and her furniture repossessed. Plaintiff further contends that the
Bank violated the Fair Credit Reporting Act (FCRA) by obtaining her credit report.
Plaintiff also claims that the Bank defamed her by submitting the SAR and breached her
right of privacy and confidentiality.
1 Rachuy was also charged with and found guilty of wire fraud relating to the
Tickler transaction, but the state court hearing his criminal case vacated the jurys verdict
as to this count.
Defendants contend they are entitled to summary judgment. First, Defendants
contend that the doctrine of res judicata bars Plaintiff from litigating her claims relating
to any dishonored checks and the wire transfer. Second, Defendants argue the Bank was
authorized to obtain Plaintiffs credit report. Finally, Defendants argue that they are
protected from suit for their submission of the SAR because they were reporting illegal
activity to law enforcement.
I. Legal Standard
Summary judgment is proper if there are no disputed issues of material fact and
the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
Court must view the evidence, and the inferences that may be reasonably drawn from the
evidence, in the light most favorable to the nonmoving party. Enter. Bank v. Magna
Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). However, as the Supreme Court has
stated, [s]ummary judgment procedure is properly regarded not as a disfavored
procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which
are designed to secure the just, speedy and inexpensive determination of every action.
Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).
The moving party bears the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter of law. Enter. Bank, 92 F.3d at
747. The nonmoving party must demonstrate the existence of specific facts in the record
that create a genuine issue for trial. Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th
Cir. 1995). A party opposing a properly supported motion for summary judgment may
not rest upon mere allegations or denials but must set forth specific facts showing that
there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
II. Res Judicata
The doctrine of res judicata applies to repetitive suits involving the same cause
of action. Lundquist v. Rice Mem'l Hosp., 238 F.3d 975, 977 (8th Cir. 2001).
Res judicata precludes the relitigation of claims rather than the relitigation of specific
issues, which is barred by the doctrine of collateral estoppel. Canady v. Allstate Ins. Co.,
282 F.3d 1005, 1014 (8th Cir. 2002). Res judicata, therefore, bars litigants from bringing
claims on grounds that were raised or could have been raised when: (1) a court of
competent jurisdiction rendered the prior judgment; (2) the prior judgment was a final
judgment on the merits; and (3) both cases involved the same cause of action and the
same parties or their privies. Banks v. Int'l Union Elec., Elec., Tech., Salaried and
Machine Workers, 390 F.3d 1049, 1052 (8th Cir. 2004); Canady, 282 F.3d at 1014. A
claim is barred by res judicata if it arises out of the same nucleus of operative facts as the
prior claim. Banks, 390 F.3d at 1052.
The Court agrees with Defendants that Plaintiffs claims are barred by
res judicata. Plaintiff claims that the Bank wrongfully dishonored checks and converted
a portion of the funds received by wire transfer.2 The state court in Hennepin County
entered summary judgment in favor of the Bank with respect to essentially identical
claims brought by Rachuy. Plaintiffs claims, therefore, arise from the same nucleus of
operative facts as the claims litigated in the Hennepin County case. That court was a
court of competent jurisdiction, and its grant of summary judgment and subsequent entry
of judgment in favor of the Bank was a final adjudication on the merits.
Further, the Court concludes that the case involved the same cause of action and
the same parties or their privies. Under Minnesota law, husbands and wives are not in
privity with each other for the purposes of res judicata solely because they are married.
Deli v. Hasselmo, 542 N.W.2d 649, 656 (Minn. Ct. App. 1996) (finding collateral
estoppel did not bar wifes state data practices act suit based on public statements made
about her employment because wife was not in privity with husband with respect to
husbands previous suit under the same law and regarding some of the same statements).
Plaintiff and Rachuy, however, stand in the same position with respect to the state court
suit and the present action. Plaintiffs claims stem from her status as a joint account
holder with Rachuy and her assertion that she has some rights to the funds in the account
also arises from that status. Rachuys identical claims also arise from his status as a
2 The counterfeit nature of the checks was established by Rachuys criminal
convictions for offering forged checks. As the deposits were fraudulent, it was not
wrongful for the Bank to refuse to honor checks written in order to draw down those
holder on the account and his alleged entitlement to the funds.3 Therefore, Plaintiff was
in privity with Rachuy with respect to the state court litigation.4
The Court also concludes that the Bank and its employees are privies for
res judicata purposes. Employers and employees do not always stand in privity with
each other. Kaiser v. N. States Power Co., 353 N.W.2d 899, 903-904 (Minn. 1984)
(concluding firefighters were not in privity with employing city where firefighters
asserted different and broader claims that those previously brought by city). In this case,
however, the employees are sued for actions they took in connection with their
employment and regarding an account with the Bank. The Banks defenses in the state
court litigation were based on the acts of its employees, and the Banks defense of itself
in the state court litigation necessarily included a defense of the actions of its employees.
The Court concludes that res judicata bars Plaintiff from re-litigating claims
asserted by Rachuy in the state court action. Therefore, the Court grants Defendants
3 Rachuy framed his claims differently in the state court action, but the core of the
claims is the same.
4 There are some indications that Rachuy is the real party in interest in this litigation
as well. For instance, the Complaint appears to have been written asserting allegations
relating to Rachuy; often Plaintiffs name has been inserted in handwriting and the word
his is repeatedly crossed out and replaced with her. (Compl. 4, 6, 12, 32.)
Rachuy attempted to intervene in this case and, though his motion to intervene was
denied, Rachuy subsequently filed additional papers with the Court styling himself as an
intervenor. Further, Plaintiffs untimely response to the present motion includes the
assertion that employees of the Bank conspired with prosecutors, an allegation also raised
by Rachuy in the state court action. Additionally, Rachuy attempted unsuccessfully to
amend his complaint in the state court action to assert claims raised here by the Plaintiff.
request for summary judgment as to Plaintiffs claims of wrongful dishonor and
conversion and for any consequential damages arising from those claims.
The FCRA permits a party to obtain a credit report regarding a consumer if done
so for a permissible purpose. 15 U.S.C. 1681b(a). One permissible purpose identified
by the statute is that the party requesting the report:
[O]therwise has a legitimate business need for the information
(i) in connection with a business transaction that is initiated by the
consumer; or
(ii) to review an account to determine whether the consumer continues to
meet the terms of the account.
15 U.S.C. 1681b(a)(3)(F).
The Court concludes that the Bank had a legitimate need to access Plaintiffs
credit report.5 Plaintiff was a joint account holder with respect to an account in which
Rachuy deposited over 0,000 in counterfeit checks, which funds were also drawn
down leaving the account with a deficit. The Bank had a legitimate business need to
determine whether Plaintiff and Rachuy should be prohibited from making additional
deposits and withdrawing funds and whether the account should be closed. See
Cambridge Title Co. v. Transamerica Title Ins. Co., 817 F. Supp. 1263 (D. Md. 1992)
5 The Bank also argues that it was entitled to draw credit reports for Plaintiff and
Rachuy because the account application they signed grants the Bank permission to obtain
a credit report. Plaintiff argues that the grant of permission only applied to a report
drawn in connection with opening the account and not to a report obtained under other,
later circumstances. The Court determines that it need not address this issue because the
Bank so clearly had a legitimate business need to obtain a credit report due to the deposit
of counterfeit checks in the account.
(title insurance company had a dire and legitimate need to draw credit report regarding
title agent to determine whether agent had misappropriated funds in escrow account
leaving .3 million shortfall). This is a determination regarding whether a bank
customer continues to meet the terms of the account. Therefore, the Court grants
Defendants motion with respect to Plaintiffs claims regarding the draw of her credit
IV. Claims Related to the SAR
Plaintiff claims that Defendants defamed her by submitting a SAR to the relevant
authorities. According to Plaintiff, the SAR defamed her by indicating that she and
Rachuy were suspected of depositing counterfeit checks and wire fraud. Additionally,
Plaintiff claims that the Defendants breached her right to privacy and confidentiality by
reporting suspicious activity to the authorities. Defendants contend that their report of
suspected illegal activity cannot be the basis of liability. The Court agrees with
The elements of defamation are: (1) a false and defamatory statement about the
plaintiff; (2) publication of that statement to a third party; and (3) harm to the plaintiffs
reputation. Weinberger v. Maplewood Review, 668 N.W.2d 667, 673 (Minn. 2003). The
truth of a statement is an absolute defense to a defamation claim. Stuempges v. Parke,
Davis & Co., 297 N.W.2d 252, 255 (Minn. 1980). Rachuy was convicted of depositing
three counterfeit checks into the joint account, upon which funds were drawn leaving a
negative balance. To the extent that the SAR stated that counterfeit checks had been
deposited and the funds drawn down, the Bank reported true information to law
enforcement and banking authorities.
Further, banks are shielded from liability for reporting customer information to
law enforcement and regulatory authorities when they report suspected illegal activity.
Minnesota law limits the information financial institutions may provide to government
authorities, but expressly exempts from these limitations a financial institutions report of
a possible violation of law. Minn. Stat. 13A.02, 13A.04. In addition, Minnesota law
provides that [a]n individual who in good faith seeks assistance from, or reports
apparent unlawful conduct to, law enforcement is not liable for civil damages as a result
of that action. Minn. Stat. 604A.34. Federal law also grants broad protection to a
financial institution or an employee of such an institution that reports any possible
violation of law or regulation to a government agency. 31 U.S.C. 5318(g)(3)(A). That
section shields the reporter from civil liability under any federal or state law or
regulation, as well as under any contract or other legally enforceable agreement. Id.
The Defendants conduct falls well within the parameters of these protections.
Therefore, the Court concludes no liability arose from the Banks report of suspected
illegal activity to law enforcement and other authorities. The Court grants the
Defendants motion with respect to Plaintiffs defamation and breach of privacy and
confidentiality claims.
The Court grants Defendants Motion for Summary Judgment. Further, the Court
specifically and expressly finds that Plaintiffs claims asserted in this case are frivolous.
Therefore, Plaintiffs claims will be dismissed in their entirety and judgment entered in
favor of the Bank.
Accordingly, IT IS HEREBY ORDERED that:
1. Defendants Motion for Summary Judgment (Doc. No. 42) is GRANTED.
2. Plaintiffs Complaint (Doc. No. 1, Attach. 1) is DISMISSED in its entirety.
Dated: February 17, 2009 s/Donovan W. Frank
Judge of United States District Court


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