On August 18, 2016, Trey Jones, Joseph Sclafani and William Drinkwater obtained a judgment and dismissal for one of the firm’s bank clients in an important case regarding a bank’s duty to protect noncustomers from the wrongdoing of its customers. After being injured in an automobile accident, the plaintiff hired a law firm to pursue her claims arising from the accident. Subsequently, the plaintiff filed for bankruptcy. During the pendency of the bankruptcy, the law firm the plaintiff hired to pursue her personal injury claim obtained a $500,000 settlement. The law firm then hired a separate bankruptcy attorney to obtain bankruptcy court approval of the settlement and payment of the law firm’s legal fees. After receiving the $500,000, the bankruptcy attorney deposited the funds into his personal account at the bank. The bankruptcy attorney paid the law firm its legal fees but stole the money owed to the plaintiff.
Following the bankruptcy attorney’s theft, the plaintiff sued the law firm she hired to litigate her personal injury claim for malpractice and negligence, among other claims, for allowing the bankruptcy attorney’s conversion. As part of the plaintiff’s settlement of her claims against the law firm, the law firm assigned any causes of action it may have against any financial institution relating to the conversion. The plaintiff, assignee of the law firm, then sued the bank for negligence and conversion, arguing that a bank that has notice or knowledge of a customer’s misappropriation of funds from the customer’s trust account may be held liable to the non-customer whose funds were misappropriated.
Resolving a complicated issue not yet addressed by the Mississippi Supreme Court, the U.S. District Court held that plaintiff, as successor in interest to the law firm, did not have standing to assert a conversion claim because the funds converted never belonged to the law firm. Likewise, the court held, as a matter of law, that the bank owed no duty to plaintiff, as successor in interest to the law firm, to protect it from its customer’s misappropriation of funds that belonged to the law firm’s client. Accordingly, the court dismissed all of plaintiff’s claims with prejudice.