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U.S. Bank National Association v. San Antonio Cash Network

United States District Court, D. Minnesota

March 1, 2018

U.S. Bank National Association, doing business as Elan Financial Services, Plaintiff,
San Antonio Cash Network, Pendum LLC, and Loomis Armored US, LLC, Defendants.

          Joel T. Wiegert, Meagher & Geer, PLLP, and Martin Jerome Flannery, Jr. and Paul C. Fonseca, Pattison & Flannery, (for Plaintiff);

          San Antonio Cash Network, Attn: Joseph Vasquez, (Defendant).


          Tony N. Leung United States Magistrate Judge

         This matter is before the Court, United States Magistrate Judge Tony N. Leung, on Plaintiff U.S. Bank National Association's (“U.S. Bank”) Motion for Entry of Default Judgement (ECF No. 62). A hearing was held on February 9, 2018. (ECF No. 72.) Joel T. Wiegert appeared on behalf of U.S. Bank. Defendant San Antonio Cash Network (“SACN”) did not appear. For the reasons stated below, the Court recommends U.S. Bank's motion be granted.


         A. Background

         In 2011, U.S. Bank and Defendants SACN and Pendum LLC (“Pendum”) entered into a Cash Provisioning Agreement (“CPA”) where U.S. Bank would provide currency to SACN for use in the operation of its ATMs and Pendum would transport the currency. (Am. Compl. ¶ 10, ECF No. 14.) Defendant Loomis Armored US, LLC (“Loomis”) subsequently acquired Pendum's armored-transportation-and-cash-in-transit business, agreed to assume all Pendum's agreements with U.S. Bank, and agreed to be bound by the CPA. (Am. Compl. ¶ 11.) Under the terms of the CPA, U.S. Bank retained ownership of the currency, but SACN was responsible for and bore the risk of loss of the currency while in SACN's ATMs. (Am. Compl. ¶¶ 13-14.) The CPA also provided that SACN was not to have access to the currency. (Am. Compl. ¶ 16.)

         Sometime following the execution of the CPA, SACN's president, Joe Vasquez, obtained keys to the ATM vaults from Pendum. (Am. Compl. ¶¶ 28, 41.) U.S. Bank alleges that Vasquez accessed ATMs after they were restocked and removed currency. (Am. Compl. ¶ 40.) Vasquez also accessed the ATMs immediately prior to the next replenishment to replace enough currency to avoid suspicion. (Am. Compl. ¶ 40.) U.S. Bank alleges that lock audits on the ATMs showed irregular patterns of access and Loomis was aware of unauthorized access to the ATMs by 2014. (Am. Compl. ¶¶ 32-33, 35, 42.) This unauthorized access continued until November 2016, when U.S. Bank became aware of suspicious activity involving SACN's ATMs. (Am. Compl. ¶¶ 24-25.)

         U.S. Bank directed Loomis to remove all of the currency from SACN's ATMs. (Am. Compl. ¶ 25.) Each of SACN's ATMs contained less currency than U.S. Bank's records showed should have been remaining. (Am. Compl. ¶ 25.) U.S. Bank alleges that a conference call took place between U.S. Bank, Vasquez, and Vasquez's attorney on November 14, during which Vasquez admitted to taking currency from SACN's ATMs. (Am. Compl. ¶ 26.) U.S. Bank “estimates that SACN, through Vasquez, stole approximately $1, 084, 600.” (Am. Compl. ¶ 29.) The missing currency has neither been returned nor refunded to U.S. Bank. (Am. Compl. ¶ 46.)

         B. The Lawsuit

         U.S. Bank commenced this action against SACN, Pendum, and Loomis for breach of contract, negligence, breach of the duty of good faith and fair dealing, an accounting, breach of fiduciary duty, civil theft, and conversion. (Compl., ECF No. 1.) U.S. Bank's claims arise out of the loss of approximately $1, 084, 600 in currency used in SACN's ATMs. (Am. Compl. ¶¶ 29, 52, 59, 66, 78, 81, 84, 89.) By Amended Complaint, U.S. Bank seeks an accounting “to determine the full extent of its losses due to Defendants' wrongful acts”; a monetary judgment in the amount of $1, 084, 600, plus interest and “other charges”; punitive damages pursuant to Minn. Stat. § 604.14; and attorney fees and costs as provided in the CPA. (Am. Compl. ¶¶ 52, 59, 66, 67-71, 78, 83-84, 89, AD.)

         Following the filing of the Amended Complaint and Loomis's motion to dismiss, SACN filed its Answer in April 2017. (ECF Nos. 14, 16, 19.) In June, the Court held a pretrial scheduling conference attended by counsel for all parties, including SACN. (ECF Nos. 31, 35.) A Pretrial Scheduling Order was issued as well as an Order for Settlement Conference. (Pretrial Scheduling Order, ECF No. 36; Order for Settlement Conference, ECF No. 37.) The parties, including SACN, later stipulated to the entry of a Protective Order and established a protocol for electronically stored information. (ECF Nos. 38, 39, 40.)

         C. SACN's Counsel is Permitted to Withdraw

         In August, SACN's counsel moved to withdraw due to a breakdown in the attorney-client relationship. (ECF 42; Sept. 5, 2017 Order at 2, ECF No. 53 [hereinafter Order].) SACN and counsel had not communicated since an exchange of emails in July. (Order at 2.) SACN failed to respond to counsel's requests for information to complete the required Rule 26(a)(1) disclosures and to make disclosures relating to electronically stored information. (Order at 2-3.) Counsel represented that SACN's “failure to communicate and to participate in its defense ha[d] made continued representation ...

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