UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________ ) THE AMERICAN FEDERATION OF ) TEACHERS, AFL-CIO, et al., ) ) Plaintiff, ) ) v. ) Civ. Action No. 03-79 (EGS) ) BARBARA BULLOCK, et al., ) ) Defendants. ) ) ______________________________)

MEMORANDUM OPINION

In a memorandum opinion dated March 17, 2008, this Court

denied defendant Independence Federal Savings Bank’s (“IFSB”)

motion for summary judgment on all claims brought by plaintiffs

American Federation of Teachers (“AFT”) and Washington Teachers’

Union (“WTU”).1 This Court found that the case was “fraught with

genuine issues of material facts in dispute.” AFT v. Bullock,

(D.D.C. 2008). On April 16, 2008, IFSB

filed a motion for reconsideration of this Court’s denial of its

motion for summary judgment, and on May 19, 2008, IFSB filed a

motion for leave to file an amended answer. On December 2, 2008,

this Court held a hearing on defendant’s motions. After careful

consideration of defendant’s motions, plaintiffs’ oppositions,

defendant’s replies, the parties’ oral arguments, the

supplemental briefs, applicable law, and for the reasons stated 1 AFT is a national labor union for teachers affiliated with the AFL-CIO and WTU is AFT’s local affiliate in Washington, D.C. herein, this Court GRANTS defendant’s motion for reconsideration

and vacates the Order previously denying defendant’s motion for

summary judgment; all claims against IFSB are dismissed.

Further, this Court DENIES AS MOOT defendant’s motion for leave

to file an amended answer.

I. BACKGROUND

A. Factual Background

1. The Parties

Plaintiff AFT is a national labor union for teachers, which

is an affiliated international union of the AFL-CIO. AFT

represents local labor unions primarily made up of public and

private school teachers, paraprofessionals and higher education

faculty. AFT is a national labor organization with which local

and state labor organizations are affiliated. To affiliate with

the AFT, local unions pay dues. Plaintiff WTU is the local

affiliate of the AFT for teachers in Washington, D.C.

There are a number of individual defendants in this action

(collectively, “Individual Defendants”). Defendant Barbara A.

Bullock (“Bullock”) served as the President of WTU from mid-1994

to September 2002. As President, Bullock was an officer, agent

and representative of the WTU, had check-signing authority for

the WTU’s bank accounts, and had overall responsibility for

administering the affairs of the WTU. Defendant James O. Baxter,

II (“Baxter”) served as the Treasurer of WTU during Bullock’s

tenure as President. Baxter was an agent, employee and

2 representative of the WTU and had check-signing authority for

WTU’s bank accounts and financial responsibility for WTU’s

affairs. Defendant Gwendolyn M. Hemphill (“Hemphill”) was an

employee of the WTU and served as Bullock’s Special Assistant

during Bullock’s tenure as President. Hemphill shared

responsibility for WTU’s day-to-day financial affairs with

Baxter. Defendant Leroy Holmes was a WTU employee and worked as

Bullock’s chauffeur for some portion of the relevant time period.

Defendant Cheryl Martin is Hemphill’s daughter. Defendant

Michael Martin (“Martin”) is Hemphill’s son-in-law and husband of

Defendant Cheryl Martin. Defendant Errol Alderman (“Alderman”)

is an acquaintance of Michael Martin. Defendant Gwendolyn B.

Clark (“Clark”) is Bullock’s sister.

Defendant IFSB is a federally chartered commercial bank that

was founded in 1968. IFSB has six branches in Washington, D.C.

and Maryland. Between 1994 and 2002, WTU maintained several bank

accounts at IFSB, including a “Premier Checking Account,” with

which the WTU conducted its day-to-day business, including

payroll for WTU employees.

2. The Embezzlement Scheme

The Individual Defendants engaged in a scheme to embezzle,

convert, and misuse the WTU’s funds beginning in 1995 and ending

in 2002. Def.’s Facts ¶ 38. There is no indication that the WTU

Executive Board or the WTU’s members authorized the Individual

Defendants’ appropriation of WTU funds for personal use. Id. ¶

39. Between 1995 and 2002, Bullock, Baxter, and Hemphill wrote

3 checks on the WTU’s IFSB bank account for unauthorized, non-union

business. Id. ¶ 40. Hundreds of these checks were made payable

to Holmes, who then cashed the checks at IFSB, retained some of

the cash for himself, and returned the remainder of the cash to

the other Individual Defendants. Def.’s Resp. To Pls.’ Facts ¶¶

15-19. Some of these checks cashed by Holmes exceeded $10,000.

Id. ¶ 20. According to plaintiffs, between 1997 and 2002, the

checks cashed by Holmes on the WTU’s IFSB account totaled between

$1.45 and $1.7 million. While not conceding the exact amount of

each individual check, IFSB does not appear to dispute the total

amount of the checks cashed, but maintains that the “amount and

Plaintiff’s characterization of each check . . . is immaterial to

resolution” of IFSB’s motion for summary judgment. Id. ¶ 15.

In addition to the checks cashed by Holmes, the Individual

Defendants also made purchases with personal and corporate credit

cards and paid the credit card bills with checks written on the

WTU’s IFSB account. Def.’s Facts ¶¶ 41-44. Some of the

Individual Defendants wrote and cashed checks on the WTU’s IFSB

account and kept the cash or deposited the cash in their personal

bank accounts. Id. ¶¶ 45-50. Furthermore, some of the

Individual Defendants embezzled WTU funds by causing checks to be

written on the WTU’s IFSB account and paid to an entity

maintained by Defendants Martin and Alderman, Expressions

Unlimited, and keeping the funds for personal use. Id. ¶ 51.

Between 1995 and 2002, the Individual Defendants embezzled and

4 misappropriated in excess of five million dollars ($5,000,000)

from the WTU. Id. ¶ 54.

The government brought criminal charges against most or all

of the Individual Defendants. Leroy Holmes pled guilty to

Conspiracy to Launder Proceeds of an Unlawful Activity. See

United States v. Leroy Holmes, Criminal No. 03-00032 (D.D.C. Feb.

6, 2003)(RJL). Michael Martin pled guilty to Conspiracy to

Launder Proceeds of an Unlawful Activity. See United States v.

Michael Wayne Martin, Criminal No. 03-00138 (D.D.C. April 11,

2003)(RJL). Barbara Bullock pled guilty to Mail Fraud and Aiding

and Abetting and Conspiracy to Commit Crimes Against the United

States. See United States v. Barbara A. Bullock, Criminal No.

03-00435 (D.D.C. Oct. 7, 2003)(RJL). Errol Alderman pled guilty

to Conspiracy. See United States v. Errol Alderman, Criminal No.

03-00429 (D.D.C. Oct. 15, 2003)(RJL). Cheryl Martin pled guilty

to Conspiracy. See United States v. Cheryl H. Martin, Criminal

No. 04-00054 (D.D.C. Feb. 19, 2004)(RJL). On August 31, 2005,

following a jury trial, Defendants Gwendolyn Hemphill and James

Baxter were convicted on twenty-three criminal counts, including

Conspiracy and Aiding and Abetting, Wire Fraud, Embezzlement from

a Labor Organization, and Money Laundering. Those convictions

were affirmed on appeal. See United States v. Hemphill, et al.,

(D.C. Cir. 2008).

On April 18, 2006, this Court entered default judgments

against Defendants Barbara Bullock, Gwendolyn Hemphill, James

5 Baxter, Errol Alderman, individually and doing business as

Expressions Unlimited, Cheryl Martin, and Michael Martin,

individually and doing business as Expressions Unlimited. The

Court ordered that the amount of the default judgment shall be

determined pursuant to procedures set forth in Federal Rule of

Civil Procedure 55. On September 28, 2007, the Court granted

plaintiffs summary judgment against Defendant Leroy Holmes.

B. Procedural Background

On December 1, 2006, IFSB filed a motion for summary

judgment against plaintiffs. In its motion, IFSB argued that it

was entitled to summary judgment on all of plaintiffs’ claims on

the grounds that the claims were time-barred. See AFT,

. Citing

, defendant further

maintained that pursuant to District of Columbia banking law,

plaintiffs were under a duty to discover and report the

unauthorized payments within one year because IFSB provided WTU

with monthly bank statements and copies of cancelled checks

written on the WTU account.

IFSB argued that all of the

unauthorized signatures, alterations, and forgeries were evident

from the statements and cancelled checks and, because WTU failed

to notify IFSB that the activity on the account was unauthorized,

plaintiffs’ claims were time-barred.

Plaintiffs, on the other hand, argued that any applicable

statute of limitations in this case was tolled by the “adverse

domination doctrine.”

Plaintiffs asserted that Bullock,

6 Baxter, Hemphill and the other Individual Defendants adversely

dominated, directed, and controlled the WTU throughout their

scheme to embezzle WTU funds, thereby preventing discovery of the

fraud. Plaintiffs also argued that any statute of limitations

was tolled by the Individual Defendants’ fraudulent concealment.

Defendant countered that there was no adverse domination of

the WTU, and therefore the statutes of limitations were not

tolled, because the WTU’s Board, its vice president, and the AFT

had domination and control over the WTU and could have discovered

the embezzlement scheme.

.

This Court found that whether plaintiff WTU was adversely

dominated, whether the Individual Defendants engaged in

fraudulent concealment, and when the plaintiffs discovered or

should have discovered the embezzlement scheme and the

unauthorized activity with respect to the WTU account, required a

highly fact-intensive inquiry that must be made by the fact

finder. In denying the motion, this Court found that genuine

issues of material fact pervaded these claims and must be decided

by a fact finder at trial.

.

On April 16, 2008, IFSB filed a motion for reconsideration,

arguing that it is entitled to summary judgment on all claims

because the claims are time-barred in light of a recent decision

of the D.C. Court of Appeals in Peters v. Riggs National Bank

N.A.,

(D.C. 2008). In Peters, the personal

representative of the Estate of Rhona Graves appealed a grant of

summary judgment against his claims for breach of contract,

7 negligence, and violations of the Electronic Funds Transfer Act.

See Peters,

. Appellant claimed that appellee

Riggs Bank permitted unauthorized withdrawals from his mother's

account despite her incapacitation and even after her death.

Riggs Bank denied liability, and also argued that appellant's

claims were untimely. In affirming the grant of summary

judgment, the D.C. Court of Appeals held that

-

406 imposes a “duty to discover and report unauthorized

signatures or alterations to the bank” and that duty is “an

absolute notice requirement for customers as a pre-requisite to

bringing any claim against the bank.”

; see also

(“‘[A] customer who does not . . . discover and

report . . . is precluded from asserting against the bank the

unauthorized signature or alteration’” holding that “D.C. Code §

28:4-406(f) is a statute of repose.” (citation omitted)).

IFSB argues that because Peters stands for the proposition

that § 4-406(f) imposes an absolute notice requirement and that a

statute of repose is not subject to equitable tolling, any facts

in dispute with regard to equitable tolling are not relevant to

the summary judgment inquiry at issue here. Therefore, IFSB

maintains that it is entitled to summary judgment.

IFSB also filed a motion seeking leave to file an amended

answer in order to specifically plead the statute of repose as a

defense. The Court held a motions hearing on December 2, 2008.

At the hearing, the Court ordered plaintiffs to file supplemental

8 briefing to address what, if any, prejudice plaintiffs would

suffer if IFSB were permitted to amend its answer. The Court

also ordered the parties to file supplemental briefing on the

applicability, if any, of Shea v. Rice,

(D.C. Cir.

2005), and Fox-Greenwald Sheet Metal Co. v. Markowitz Brothers,

(D.C. Cir. 1971). On December 12, 2008, the Court

sua sponte ordered the parties to address the impact, if any, of

the D.C. Circuit’s recent opinion in Long v. Howard University,

(D.C. Cir. 2008).

II. STANDARD OF REVIEW

A. Motion for Reconsideration

The defendant’s motion for reconsideration is governed by

Federal Rule of Civil Procedure 54(b) due to the interlocutory

nature of the Court’s order denying the defendant’s motion for

summary judgment. See Judicial Watch v. Dep’t of Army,

(D.D.C. 2006) (“A ruling that denies a

dispositive motion . . . is an interlocutory judgment.”

(citations omitted)). “The standard of review for interlocutory

decisions differs from the standards applied to final judgments

under Federal Rules of Civil Procedure 59(e) and 60(b).”

Williams v. Savage,

(D.D.C. 2008)

(citations omitted). “In particular, reconsideration of an

interlocutory decision is available under the standard ‘as

justice requires.’” Judicial Watch,

(citations omitted).

9 “‘As justice requires’ indicates concrete considerations” by

the court, Williams,

, such as “whether the

court patently misunderstood the parties, made a decision beyond

the adversarial issues presented, made an error in failing to

consider controlling decisions or data, or whether a controlling

or significant change in the law has occurred,” In Def. of

Animals v. Nat'l Inst. of Health,

(D.D.C.

2008) (internal citation and quotation marks omitted).

“Furthermore, the party moving to reconsider carries the burden

of proving that some harm would accompany a denial of the motion

to reconsider.” In Def. of Aminals,

.

“These considerations leave a great deal of room for the court’s

discretion and, accordingly, the ‘as justice requires’ standard

amounts to determining ‘whether reconsideration is necessary

under the relevant circumstances.’” Judicial Watch,

(quoting Cobell v. Norton,

(D.D.C.

2004)).

B. Motion for Summary Judgment

Under Federal Rule of Civil Procedure 56(c), summary

judgment is appropriate if the pleadings on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to

judgment as a matter of law. Fed. R. Civ. P. 56(c). Material

facts are those that “might affect the outcome of the suit under

the governing law.” Anderson v. Liberty Lobby, Inc.,

242, 248 (1986). The party seeking summary judgment bears the

initial burden of demonstrating an absence of genuine issue of

material fact. Celotex Corp. v. Catrett,

(1986); Tao v. Freeh,

(D.C. Cir. 1994). In

considering whether there is a triable issue of fact, the court

must draw all reasonable inferences in favor of the non-moving

party. Tao,

.

III. Discussion

A. Defendant’s Motion for Reconsideration

The parties raise several legal issues in their filings:

(1) the application of federal or state law as to the accrual of

the limitation period; (2) whether defendant is equitably

estopped from raising a statute of repose defense; (3) whether

(f) has a good faith requirement; (4) whether

§ 4-406(f) applies to the checks used in the embezzlement scheme;

(5) whether a statute of repose is an affirmative defense; and

(6) whether Peters bars all of plaintiffs’ claims. In order to

resolve ISFB’s motion for reconsideration, it is necessary to

consider each of these legal issues to determine if they are

applicable and, if so, whether there are material facts in

dispute with regard to any issue.

a. Applying Federal v. State Law

Plaintiffs contend that Peters is not controlling in this

case as to the period of accrual of the limitation period because

determination of when the period commences is a matter of federal

11 law. Pls.’ Opp’n at 24. Defendant counters that plaintiffs have

not asserted any claims against IFSB that are based on a federal

statute and that the state law claims brought against IFSB are in

federal court based solely on supplemental jurisdiction. Def.’s

Reply at 25. Defendant further maintains that federal equitable

tolling statutes are not applicable to statutes of repose.

The doctrine of equitable tolling provides that a party’s

excusable ignorance may toll the limitations period. See Lehman

v. United States,

(9th Cir. 1998). A

statute of repose, however, serves as an absolute barrier to an

untimely suit and cannot be equitably tolled under any

circumstances. See Pettaway v. Teachers Ins. & Annuity Ass’n of

Am.,

(D.D.C. 2008); see also In re Greater

Se Cmty. Hosp. v. HCA Inc.,

, 305 n.24 (Bankr. D.D.C.

2006)(“The court recognizes that the doctrine of equitable

estoppel does not apply to actions brought under the [Illinois

Uniform Fraudulent Transfers Act] because that statue contains a

statute of repose.”). The Court agrees with IFSB. Plaintiffs

have asserted only state law claims against IFSB, and federal

equitable tolling does not apply to statutes of repose. State

law applies, and Peters is controlling in this case.

b. Equitable Estoppel

Plaintiffs claim that even if Peters applies and equitable

tolling is not available, equitable estoppel still precludes ISFB

from raising a statute of repose defense due to fraudulent

12 concealment. Equitable estoppel holds that a defendant may be

precluded from taking a position because of affirmative

misconduct. See Lehman,

. Defendant

contends, however, that equitable estoppel does not bar IFSB from

relying on the statute of repose defense. Plaintiffs did not

allege that IFSB engaged in fraud in either their First Amended

Complaint or in their summary judgment brief, but instead attempt

to impute the fraudulent conduct of the Individual Defendants to

IFSB. To establish fraudulent concealment, a plaintiff must show

an affirmative act of concealment. See Williams v. Conner,

(D.D.C. 2007) (citing Sprint Commc’ns Co. v.

FCC,

(D.C. Cir. 1996)). Plaintiffs allege

that IFSB “took affirmative steps to aid and abet the concealment

of the embezzlement.” Pls.’ Opp’n at 17. Defendant counters

that the sending of bank statements to plaintiffs demonstrates

disclosure, not concealment, and that plaintiffs did not bring a

claim against IFSB for aiding and abetting the Individual

Defendants’ fraudulent concealment of the embezzlement. See

Def.’s Reply at 19. Defendant further maintains that because

plaintiffs do not allege that IFSB itself fraudulently concealed

information, equitable estoppel should not apply. Id. at 20.

The Court is persuaded by IFSB’s argument. There is no

evidence to support plaintiffs’ theory that IFSB engaged in

fraud, or that the Individual Defendants’ fraudulent conduct can

be imputed to IFSB. Therefore, equitable estoppel does not

preclude defendant from raising a statute of repose defense.

13 C. Requirement of Good Faith

requires bank customers to discover and

report unauthorized signatures or alterations to the bank and

establishes an absolute notice requirement before plaintiffs can

bring any claim against the bank.2 See Peters,

-

67. Plaintiffs argue that the statute of repose in § 4-406(f)

does not apply and cannot be used by defendant as a defense

because IFSB did not act in good faith. Plaintiffs contend that

while § 4-406(f) does not explicitly refer to good faith, good

faith is required by “both the full subtitle and good public

policy.” Pls.’ Opp’n at 9. Defendant counters that Peters makes

clear that § 4-406(f) provides an absolute notice requirement and

does not impose a prior pre-condition of good faith. See Def.’s

Reply at 15.

Section 4-406(f) “is devoid of any language which limits the

customer’s duty to discover and report unauthorized signatures

and alternations to items paid in good faith by the bank.”

Halifax Corp. v. First Union Nat’l Bank,

(Va.

2001).3 In Halifax, the absence of the term “good faith” was 2

reads in relevant part:

Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer . . . discover and report the customer’s unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration.

(f). 3 Va. Code § 8.4-406 mirrors

.

14 significant, especially given the fact that the term “good faith”

does appear in other sections in the statute.

According to

defendant, if § 4-406(f) was meant to be limited to items paid in

good faith, it would have articulated the good faith requirement

explicitly. The Court agrees. Peters states that § 4-406(f) was

intended to be an absolute bar. Therefore, § 4-406(f) does not

impose a prior pre-condition of good faith. See Peters,

.

d. Checks with Unauthorized Signatures or Alterations

Plaintiffs contend that claims related to challenged checks,

known as “red flag checks,” are not barred by § 4-406(f). Pls.’

Opp’n at 5-9. They argue that because § 4-406 refers to

“unauthorized signatures” and “alterations” on checks, the

provision does not apply to red flag checks with the signatures

of the Individual Defendants because those checks do not contain

“unauthorized signatures.” Id. Plaintiffs’ argument is without

merit. An “unauthorized signature” under the D.C. Code is a

signature “made without actual, implied, or apparent authority

and includes a forgery.” § 28:1-201(43). The customer was the

WTU, not any of the Individual Defendants. While the Individual

Defendants were authorized to sign checks for plaintiffs’

official business, the Individual Defendants were not authorized

to sign checks for their own use and as part of the embezzlement

scheme. They had no “actual, implied, or apparent authority” to

write checks for their own use, and the instruments, thereby,

15 “include[d] a forgery.” Id. Therefore, claims related to the

red flag checks are barred by § 4-406(f).

e. Statute of Repose as Affirmative Defense

Having determined that state law applies, equitable estoppel

does not apply, there is no good faith requirement in § 4-406(f),

and that claims related to the red flag checks are barred by § 4-

406(f), the Court must next determine whether any of plaintiffs’

claims can survive in light of Peters. The heart of the

defendant’s motion for reconsideration is defendant’s argument

that it adequately plead the statute of repose in its answer,

and, therefore, all of plaintiffs’ claims are barred.

The issue here is whether a statute of repose is an

affirmative defense that must be pled, the failing of which

waives the defense. IFSB argues that statutes of repose are not

affirmative defenses and need not be specifically mentioned in an

answer. In its answer IFSB did not specifically mention “statute

of repose” but it did argue that “Plaintiffs are barred from

pursuing their claims against IFSB by the applicable statutes of

limitations.” Answer at 27. Because Peters says that the

statute at issue is a statute of repose, AFT argues that pleading

the statute of limitations is not sufficient if a party intends

to plead the statute of repose as an affirmative defense.

In order to address this issue, the Court directed the

parties to file supplemental briefing on the implications of Shea

v. Rice,

(D.C. Cir. 2005), and Fox-Greenwald

16 Sheet Metal Co. v. Markowitz Bros,

(D.C. Cir.

1971). Specifically, the Court was interested in the possible

significance of the statement, “statutes of limitations are

statutes of repose; their purpose is to quiet stale

controversies, the evidence as to which may be eroded by time.”

Fox-Greenwald,

.

Some courts, though not the D.C. Circuit or the D.C. Court

of Appeals, have explicitly found that statutes of repose are not

affirmative defenses, and therefore need not be pleaded in a

defendant’s answer. See, e.g., Roskam Baking Co., Inc., v.

Lanham Machinery Co., Inc.,

(6th Cir.

2002); Cheswold Volunteer Fire Co. v. Lamberston Constr. Co.,

(Del. 1985). AFT argues that some courts have

found that statutes of repose, by themselves, are affirmative

defenses subject to waiver if not affirmatively pled in the

answer. See Baxter v. Sturm, Ruger, & Co.,

(2d

Cir. 1993). In Baxter, however, the Second Circuit did not hold

that a statute of repose is an affirmative defense. Baxter

simply noted that “Sturm, Ruger raised several affirmative

defenses, including the assertion that Baxter’s claims were

barred by the Oregon statute of repose for product liability

actions.”

This simply means that Sturm, Ruger raised the

statute of repose in its answer, not that the statute of repose

needed to be raised at the risk of waiver. Likewise, in Federal

Insurance Company v. Boston Water & Sewer Commission,

Supp. 2d 130, 133 (D. Mass. 2007), also cited by plaintiffs, the

court did not find that a statute of repose was an affirmative

defense. Rather, the court merely noted that the plaintiffs had

agreed to drop a claim against one of the defendants, making the

statute of repose, which had been plead as an affirmative

defense, moot.

In Bonti v. Ford Motor Company,

(S.D. Miss. 1995), the court specifically did not reach

the question of whether a statute of repose is waived if not pled

as an affirmative defense. In fact, the court found that the

defendant’s answer stating, “[t]he Plaintiff’s claims may be

barred by applicable statutes of limitation of other states

including, but not limited to, those of South Carolina and North

Carolina,” had in fact sufficiently plead the statute of repose

as a defense.

Defendant’s answer in Bonti is strikingly

similar to IFSB’s answer. See IFSB’s Answer, Affirmative

Defenses at ¶ 3 (“Plaintiffs are barred from pursuing their

claims against IFSB by the applicable statutes of limitations.”);

see also id. at ¶ 9 (“Plaintiffs failed to reasonably take

advantage of preventative and corrective opportunities provided

by IFSB to avoid harm.”).

This Court is persuaded by the Sixth Circuit’s adoption of

the reasoning in Cheswold Volunteer Fire Company. In Cheswold,

the Delaware Supreme Court reasoned that:

While the running of a statute of limitations will nullify a party’s remedy, the running of a statute of repose will extinguish both the remedy and the right. The statute of limitations is therefore a procedural

18 mechanism, which may be waived. On the other hand, the statute of repose is a substantive provision which may not be waived because the time limit expressly qualifies the right which the statute creates.

(citations omitted).

Accordingly, a statute of repose is not an affirmative

defense that must be pled in an answer to avoid waiving the

defense. A statute of repose extinguishes a plaintiff’s cause of

action before it accrues, while a statute of limitations does not

nullify the action, but nullifies a party’s remedy.

Even if a statute of repose were a statute of limitations

defense that must be pled in the answer, Long v. Howard

University,

(D.C. Cir. 2008), provides guidance as to

the degree of specificity required in an answer. The bar is not

a high one to meet. The issue in Long was whether Howard

University had waived its statute of limitations defense by

“failing to raise it beyond the ‘boilerplate’ assertion in its

answer.”

. The D.C. Circuit found that Howard

University had met its burden under Rule 8, and that even a

“boilerplate” assertion of the statute of limitations as an

affirmative defense in its answer was sufficient to preserve that

affirmative defense at trial.

.

IFSB notes that in its Ninth Affirmative Defense, IFSB

clearly stated that “Plaintiffs failed to reasonably take

advantage of preventative and corrective opportunities provided

by IFSB to avoid harm.” IFSB raised the statute in its answers

to interrogatories, in response to Plaintiff’s interrogatory

19 seeking factual details in support of IFSB’s Ninth Affirmative

Defense. IFSB responded to the interrogatory by answering that

“IFSB was prepared to act on any report made under D.C. Code

28:4-406. . . . For seven years, no one ever informed the Bank

that the activity on the account was unauthorized.” The parties

also argued the applicability of § 4-406(f) in their respective

motion for and opposition to summary judgment.

IFSB clearly put plaintiffs on notice in its answer and then

in response to a request for clarification of its Ninth

Affirmative Defense that IFSB believed that plaintiffs’ suit was

barred by the statute of limitations and § 4-406(f). Plaintiffs

“could not have been prejudiced during discovery in [their]

ability to obtain factual information relevant to the statute-of-

[repose] issue. Moreover, [plaintiffs] could have sought clearer

statements from [IFSB] about its statute-of-[repose] defense by

using the procedures specified in Rule 36(a)(6) or 37(a)(4) of

the Federal Rules of Civil Procedure.” Long,

.

IFSB’s statute of repose argument was properly raised and is

properly before this Court.

f. Peters Bars All Claims by Plaintiffs

Section 4-406(f) imposes upon customers a duty to discover

and report unauthorized signatures or alterations to the bank.

In Peters, the D.C. Court of Appeals was clear:

[A] statute of repose . . . establishes an absolute time period within which legal proceedings must be initiated, regardless of when a cause of action accrues. Based on the clear statutory language of

28:4-406(f) - “A customer who does not . . . discover and report . . . is precluded from asserting against the bank the unauthorized signature or alteration” - we hold that

(f) is a statute of repose.

Peters,

(internal citation omitted). Section 4-

406(f) establishes an absolute notice requirement for customers

as a pre-requisite to bringing any claim against the bank.

Defendant contends that all of plaintiffs’ claims are

barred, including the aiding and abetting claims, because

plaintiffs failed to give notice to IFSB regarding the underlying

checks. Defendant points to cases which have held that U.C.C. §

4-406(f) bars all claims against a bank, including conversion and

breach of fiduciary duty, which underlie plaintiffs’ aiding and

abetting claims. Def.’s Reply at 22; see Jensen v. Essexbank,

(Mass. 1985) (cited favorably by Peters); Harvey

v. First Nat’l Bank of Powell,

(Wyo. 1996)

(“Appellants attempt to avoid the statutory time limitation by

couching their unauthorized signatures claim in different terms;

i.e., claims under tort and contract and fiduciary duty theories.

They cannot overcome the one-year bar by attempting to assert

their claims in different terms. Plaintiffs’ argument is without

merit.”); Siecinski v. First State Bank,

(Mich. App. 1995) (barring conversion, negligence and contract

claims).

Plaintiffs counter that the aiding and abetting claims are

not duplicative of the negligence claim and should not be

disposed of with the other claims. They further contend that the

21 aiding and abetting claims require different factual proof and

defenses. Plaintiffs argue that because § 4-406(f) only deals

with the negation of a duty by IFSB, that section only reaches

WTU’s negligence claim. See Pls.’ Opp’n at 23. Plaintiffs also

argue that regardless of whether § 4-406(f) applies to this

action, plaintiffs should be allowed to use the evidence

regarding forged and altered checks to prove its aiding and

abetting claims.

Plaintiffs’ arguments are unpersuasive. Section 4-406(f)

bars all of plaintiffs’ claims. Peters clearly holds that the

notice requirement laid out in § 4-406(f) is a pre-requisite to

bringing any claim against IFSB. Peters,

(“‘A

statute of repose . . . establishes an absolute time period

within which legal proceedings must be initiated.’” (quoting

Sandoe v. Lefta Assocs.,

, 735 n.5 (D.C. 1988))).

All of plaintiffs’ claims must fail.

B. Defendant’s Motion for Leave to File Amended Answer

As a precaution, and in the event that the Court denied

defendant’s motion for reconsideration, IFSB filed a motion for

leave to file an amended answer pursuant to Federal Rule of Civil

Procedure 15(a) and Local Rule 15.1. IFSB seeks to include two

additional affirmative defenses: (1) plaintiffs’ claims are

barred by the applicable statute of repose in § 4-406(f); and (2)

plaintiffs’ claims are barred by the applicable statute of repose

in § 4-406(f) as amended and shortened by agreement of the

22 parties. See Am. Answer at 34. Given the disposition of the

motion for reconsideration in IFSB’s favor, this motion is denied

as moot. Any prejudice plaintiffs’ claim would result from this

motion is, likewise, moot.

III. Conclusion

The defendant’s motion for reconsideration is GRANTED; the

Order previously denying defendant’s motion for summary judgment

is VACATED, the defendant’s motion for summary judgment is

GRANTED and all claims against IFSB are dismissed. Defendant’s

motion for leave to file an amended answer is DENIED AS MOOT.

This is a final appealable order. See Fed. R. App. P. 4(a). An

appropriate Order accompanies this memorandum.

Signed: Emmet G. Sullivan United States District Judge March 31, 2009

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