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Upsher-Smith Laboratories, Inc. v. Fifth Third Bank

United States District Court, D. Minnesota

December 29, 2016


          Richard T. Ostlund, Randy G. Gullickson, and Steven C. Kerbaugh, BAER & LOUWAGIE P.A., for plaintiff.

          Scott M. Rusert, Gregory A. Bromen, and Jennifer L. Cornell, NILAN JOHNSON LEWIS P.A., for defendant.



         This action arises from a third-party, fraudulent scheme whereby Plaintiff Upsher-Smith Laboratories (“Upsher-Smith”) sent nine foreign exchange (“FX”) wire transfers totaling approximately $52, 509, 373.49 to an individual claiming to act at the direction of Upsher-Smith's Chief Executive Officer (“CEO”) in the acquisition of a company. Upsher-Smith commenced this action in Minnesota state court alleging Defendant Fifth Third Bank (“Fifth Third”), the processor of the nine FX wire transfers, breached its contract and other legal duties when it sent the wire transfers based on the instructions of and confirmation by a single Upsher-Smith employee. Fifth Third removed this action to federal court and now seeks to transfer venue to the Southern District of Ohio pursuant to 28 U.S.C. § 1404(a).

         Because Upsher-Smith's choice of venue is entitled to considerable deference, and Fifth Third has not met its burden of showing the convenience of the parties and witnesses and the interest of justice strongly favor transfer to the Southern District of Ohio, the Court will deny Fifth Third's motion.


         Upsher-Smith is a privately held Minnesota corporation that engages in pharmaceutical manufacturing, distribution, and sales. (Compl. ¶ 6, Mar. 3, 2016, Docket No. 1; Decl. of Sheila Handy (“Handy Decl.”) ¶ 3, May 26, 2016, Docket No. 28.) Upsher-Smith maintains its corporate headquarters in Maple Grove, Minnesota and employs approximately 76% of its 720 employees in Minnesota. (Handy Decl. ¶¶ 4-6.) Upsher-Smith also maintains its business records relating to FX trades, FX wire transfers, financial procedures, and banking relationships, including all documents and records relating to Upsher-Smith's association with Fifth Third, in Minnesota. (Id. ¶ 7.)

         Fifth Third is a nationally regulated bank incorporated in Ohio. (Compl. ¶ 7.) Fifth Third maintains its corporate headquarters in Cincinnati, Ohio and employs over 19, 000 people. (Id.; Decl. of Robert Tull (“Tull Decl.”) ¶ 31, Apr. 7, 2016, Docket No. 20.) Of its 19, 000 employees, only six currently work in Minnesota. (Tull Decl. ¶ 31.) Fifth Third allegedly maintains no FX trading or healthcare group personnel in Minnesota.[1] (Decl. of Joshua Livingston (“Livingston Decl.”) ¶¶ 2, 17, Apr. 17, 2016, Docket No. 19.) Fifth Third generates its agreements, maintains its business records, and houses its Wallstreet FX system - which confirms, validates, implements, and settles FX trades - in Ohio. (Tull Decl. ¶¶ 9, 16.)

         Both parties agree their relationship began when Upsher-Smith entered into a credit agreement with a number of banks, including JPMorgan Chase (“JPMorgan”). The parties disagree, however, on the formation of their business relationship. Fifth Third contends Upsher-Smith solicited its services through JPMorgan and that Fifth Third did not accept Upsher-Smith's offer until Fifth Third clarified it provided services solely through Ohio. (Livingston Decl. ¶¶ 4, 7-11.) In contrast, Upsher-Smith contends the banks in the credit agreement, including JPMorgan, separately allocated the risk associated with the credit agreement to other banks, including Fifth Third, and that Upsher-Smith did not agree to allow Fifth Third to provide ancillary services until a Fifth Third employee residing in Minnesota solicited business from Upsher-Smith. (Compl. ¶¶ 12-14; Decl. of Stephen Robinson (“Robinson Decl.”) ¶¶ 4, 6-7, 9-10, May 26, 2016, Docket No. 27.)

         Fifth Third began processing Upsher-Smith's FX trades and wire transfers around August 2013. (Compl. ¶ 18.) The parties entered into a contractual relationship using forms prepared by Fifth Third. (Id. ¶ 16; see also Tull Decl., Ex. B.) Upsher-Smith employees discussed and executed the contracts with Fifth Third while in Minnesota. (Compl. ¶¶ 16-17; Livingston Decl. ¶¶ 5, 10; Robinson Decl. ¶ 9-10.) Upsher-Smith also communicated with Fifth Third over the course of the business relationship from Minnesota by either phone or email - including requests for FX trades and wire transfers. (Tull Decl. ¶ 9-10; Robinson Decl. ¶ 9; Decl. of Christine Hopper (“Hopper Decl.”) ¶¶ 5-6, May 26, 2016, Docket No. 26.)

         As relevant to this action, Upsher-Smith completed an “FX Customer Information Form” which required, among other things, designation of Upsher-Smith's “Primary Confirmation Contact, ” “Secondary Confirmation Contact, ” and “Optional Confirmation Contact.” (Compl. ¶¶ 16-17 & Ex. A; Tull Decl., Ex. B.) One major dispute underlying this action is whether the designation of a “Secondary Confirmation Contact” required Fifth Third to verify an FX trade or wire transfer with more than one Upsher-Smith employee.

         On May 29, 2014, the Upsher-Smith employee designated as the “Primary Confirmation Contact” - Christine Hopper - received an email purporting to be from the CEO. (Compl. ¶ 21; see also Tull Decl., Ex. B.) The email advised Hopper that an attorney would contact her regarding the acquisition of a company. (Compl. ¶ 21) The email also told Hopper to “execute everything” the attorney needed and to keep the information about the acquisition confidential. (Id.) The purported attorney contacted Hopper who, over the course of several days, initiated nine FX wire transfers through Fifth Third. (Id. ¶ 65.) Fifth Third, at Hopper's request, did not inform anyone at Upsher-Smith about the transactions and did not halt the transactions based upon their irregularity. (Id. ¶¶ 68-69.) Ultimately, Upsher-Smith determined this email was not from the CEO, but was part of a scam to defraud Upsher-Smith. (Id. ¶ 21.) Fifth Third assisted Upsher-Smith in recovering $12, 746, 589.97, but Upsher-Smith ultimately lost approximately $39, 792, 783.53 (id. ¶¶ 66-67) and ended their business relationship with Fifth Third in September 2015 (Livingston Decl. ¶ 15).

         Upsher-Smith commenced this action in Minnesota state court, alleging Fifth Third: (1) breached its contract; (2) breached the implied covenant of good faith and fair dealing; and (3) failed to comply with Article 4A of the Uniform Commercial Code, pursuant to Minn. Stat. § 336.4A-202. (Compl. ¶¶ 73-94.) Fifth Third removed this case to federal ...

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