Confidence Analytics v. Banner Bank, Proposed First Amended Complaint

1
3 SUPERIOR COURT OF WASHINGTON

IN AND FOR KING COUNTY
4
STANDARD ANALYTICS, LLC, a NO.
5 Washington Limited Liability Company d/b/a
CONFIDENCE ANALYTICS, Nicholas L. [PROPOSED] FIRST AMENDED
6 Mosely, an individual, and Bobby A. Hines, an COMPLAINT
individual,
7
Plaintiffs,
8 v.
BANNER BANK, a Washington Corporation,

9
Defendant.
10
I. NATURE OF ACTION
11
1.1 Plaintiffs Confidence Analytics, Nicholas L. Mosely, and Bobby A. Hines are
12
suing Banner Bank for unfair and deceptive business practices in violation of Washington state’s
13
Consumer Protection Act, misrepresentation, breach of fiduciary duty, and breach of contract.
14
II. PARTIES
15
2.1 Plaintiff Nicholas Mosely (“Mosely”) was at all times relevant a resident of King
16
County, Washington.
17
2.2 Plaintiff Bobby A. Hines (“Hines”) was at all times relevant a resident of King
18
County, Washington.
19
2.3 Plaintiff Standard Analytics, LLC d/b/a Confidence Analytics (“Confidence”) was
20
at all times relevant a business entity formed under the laws of Washington state. Confidence’s
21
principal place of business is located in King County, Washington.
22
23
24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx
JERRY MOBERG & ASSOCIATES, P.S.

FIRST AMENDED COMPLAINT rd
Page -- 1 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 2.4 Defendant Banner Bank, Inc. (“Banner”) is, and at all times relevant was, a
2 corporation organized and existing under the law of Washington state which conducts business
3 in King County, Washington.
4 III. JURISDICTION AND VENUE
5 3.1 The incidents comprising this lawsuit occurred in King County, Washington.
6 3.2 This court has jurisdiction over the parties and subject matter, pursuant to RCWs
7 4.12.010, 4.12.020 and 4.12.025.
8 IV. FACTUAL ALLEGATIONS
9 4.1 A 56% majority of enlightened residents of Washington State passed Initiative
10 502 in 2013, which legalized the production, sale and possession of cannabis for recreational
11 purposes.
12 4.2 The initiative empowered the state to regulate the production, processing and sale
13 of cannabis.
14 4.3 The state delegated this authority to the Liquor and Cannabis Board, which is
15 responsible for issuing and regulating licenses for the production, processing and sale of
16 cannabis.
17 4.4 The LCB also approved administrative rules for governing the quality assurance
18 of cannabis sold in the state in WAC 314-55-102, which lays out the necessary requirements for
19 a lab to test cannabis for quality assurance.
20 4.5 Under state laws and regulations, it is not necessary to for a lab to possess a state
21 license in order to test cannabis for quality assurance.
22 4.6 However, a quality assurance lab must be certified through an accreditation
23 process approved by the LCB.

Page -- 2 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 4.7 Mosely and Hines formed Confidence in 2013 and opened a laboratory to test
2 legal marijuana for quality assurance in accordance with Washington law.
3 4.8 Confidence’s laboratory is certified and accredited for quality assurance
4 compliance testing of cannabis flower, concentrates and edibles in Washington state. As clearly
5 stated on its website, “Confidence provides producers, processors, retailers, and consumers
6 access to pharmaceutical grade analysis of cannabis products that meets and exceeds regulatory
7 requirements for consumer protection.”
8 4.9 The information quoted in the previous paragraph is readily available on
9 Confidence’s website, which is the number one result in a Google search for “Confidence
10 Analytics”.
11 4.10 In early June of 2014, Confidence was the first laboratory in Washington state to
12 test legal cannabis. This story made the Seattle news cycle.
13 4.11 Confidence is not required to and does not possess a license to produce, process
14 or sell legal cannabis
15 4.12 Confidence does NOT produce, process or sell marijuana.
16 4.13 The scientific equipment necessary for testing the quality assurance of cannabis is
17 expensive.
18 4.14 Sometime in 2015, Mosely and Hines decided to expand Confidence’s capacity to
19 test cannabis by purchasing additional scientific instruments.
20 4.15 In November of 2015, Mosely and Hines walked into the Redmond branch of
21 Banner to inquire about opening a business account and obtaining financing to purchase the
22 additional instruments.
23

Page -- 3 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 4.16 Mosely and Hines met with Banner employee Tony Young. Mosely and Hines
2 fully informed Young about the nature of Confidence’s business. Specifically, Mosely and
3 Hines told Young that Confidence was a laboratory for testing legal cannabis.
4 4.17 Young informed Mosely and Hines that Banner could do business with
5 Confidence. Young told Mosely and Hines that Banner determined Confidence’s laboratory to
6 be an ancillary business to the cannabis industry in Washington. Young made it clear that an
7 ancillary business was a business that supported the legal cannabis industry but did not possess
8 licenses to produce, process or sell cannabis.
9 4.18 Young was eager to hear and learn about Confidence’s business. Young was very
10 interested in hearing about Confidence’s financing needs. Young made several suggestions to
11 Confidence on how Banner could meet Confidence’s financial needs in the current precarious
12 banking market in which most banks refused to deal with cannabis businesses.
13 4.19 Mosely and Hines told Young they were surprised that Banner was going to
14 provide banking services to Confidence considering the current refusal of most banks to have
15 anything to do with the cannabis industry. Young reassured Mosely that Banner was willing to
16 provide banking services to Confidence despite the current banking climate surrounding the
17 cannabis industry.
18 4.20 After the visit, Young came to Confidence’s laboratory for a tour. Mosely and
19 Hines showed Young around the lab. At the time of Young’s visit, Confidence’s employees
20 were testing cannabis for quality assurance. The distinct odor of cannabis was present in the lab.
21 4.21 In January of 2016, Mosely and Hines began discussing financing options with
22 Young. Mosely and Hines completed various banking forms and an application for financing.
23

Page -- 4 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 4.22 Young left Banner’s Redmond branch before Mosely and Hines finalized the
2 loan.
3 4.23 Confidence’s account was transferred to Banner banker Eric Scroggins.
4 4.24 Mosely and Hines met Scroggins several times. During these meetings, Mosely
5 and Hines fully disclosed the nature of Confidence’s business. Specifically, Mosely and Hines
6 told Scroggins that Confidence operated a laboratory to test cannabis for quality assurance in
7 accordance with Washington law.
8 4.25 Scroggins assured Mosely and Hines that Banner could and would continue to
9 provide banking services to Confidence including, but not limited to, providing Confidence’s
10 with a loan.
11 4.26 Scroggins told Mosely and Hines that he was a banker they could trust. Scroggins
12 told Mosely and Hines that Banner was interested in establishing a long term banking
13 relationship with Confidence.
14 4.27 Mosely and Hines relied upon Scroggins assurances to provide a long term
15 banking relationship. This was important to Mosely and Hines due to the current banking
16 climate in which most banks refused to offer any services to businesses involved in the legal
17 cannabis industry.
18 4.28 Scroggins also wanted Mosely and Hines to conduct their personal banking with
19 Banner.
20 4.29 Mosely and Hines finalized the loan with Scroggins on April 8, 2016.
21 4.30 The amount of the loan was for $134,837.30. The loan’s maturity date was May
22 10, 2021 giving the loan a five year term. The interest rate for the loan was 5%.
23

Page -- 5 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 4.31 Banner required personal guarantees from Mosely, Hines and Mosely’s parents,
2 David C. Mosely and Donna T. Mosely.
3 4.32 Banner required the loan to be secured by collateral, which included the
4 instruments and equipment Confidence was purchasing with the loan. Banner also included all
5 of Confidence’s “inventory and equipment” as collateral.
6 4.33 Banner required Confidence to purchase additional insurance on the collateral.
7 4.34 Banner charged Confidence various fees to originate the loan and open banking
8 accounts.
9 4.35 Confidence used the Banner loan to purchase additional instruments and
10 equipment. The additional instruments and equipment were necessary for Confidence’s
11 business.
12 4.36 On January 17, 2017, Banner’s general counsel Craig Miller sent each guarantor a
13 notice of default and termination of the loan and banking services.
14 4.37 Miller expressed the reason for the default as follows: “Banner Bank has grounds
15 to believe that [Confidence] actively and materially does business in the cannabis industry.”
16 4.38 Miller’s reason for defaulting the loan is unfair and deceptive as Banner was fully
17 aware of Confidence’s business in the cannabis industry prior to authorizing the loan and
18 banking services.
19 4.39 As a result of Banner’s default, the guarantors of the loan faced uncertainty about
20 their financial status including fear of a reduction in their credit ratings.
21 4.40 Mosely and Hines feared that Banner would repossess the equipment that was
22 secured as collateral for the loan. Such a loss would have put Confidence out of business.
23 4.41 As a result of Banner’s actions, Confidence lost significant business opportunities.

Page -- 6 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 V. FIRST CAUSE OF ACTION
2 NEGLIGENCE MISREPRESENTATION
3 5.1 Plaintiffs restate the allegations in paragraphs 1.1 through 4.41.
4 5.2 Banner fully understood Confidence operated a laboratory that tested legal
5 cannabis for quality assurance in accordance with Washington law.
6 5.3 Banner assured Confidence that it could provide banking services to Confidence
7 knowing the nature of Confidence’s business in the legal cannabis market of Washington state.
8 5.4 Banner was negligent in communicating to Confidence that it could provide
9 banking services to Confidence.
10 5.5 Confidence relied upon Banner’s representations and took out a five year loan
11 with Banner to purchase laboratory equipment.
12 5.6 Confidence was justified in in relying upon Banner’s promises of supplying
13 banking services including, but not limited to the loan.
14 5.7 As a proximate result of Banner’s negligence, Confidence suffered damages in the
15 amount to be proven at trial.
16 VI. SECOND CAUSE OF ACTION
17 CPA VIOLATION
19 6.2 While fully aware Confidence operated a laboratory that tested legal cannabis for
20 quality assurance in accordance with Washington law, Banner offered Confidence banking
21 services including, but not limited to a business loan.
22
23

Page -- 7 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 6.3 Banner then unilaterally cancelled the loan and closed Confidence’s accounts
2 because Confidence operated a laboratory that tested legal cannabis for quality assurance in
3 accordance with Washington law.
4 6.4 Banner’s actions were deceptive and/or unfair business practices and occurred in
5 the course of commerce.
6 6.5 Banner’s unfair and/or deceptive business practices impact the public including,
7 but not limited to, customers similarly situated to Confidence.
8 6.6 Banner’s unfair and/or deceptive business practices caused injury to Confidence’s
9 business.
10 6.7 The amount of Confidence’s damages caused by Banner’s unfair and/or deceptive
11 business practices will be proven at trial
12 VII. THIRD CAUSE OF ACTION
13 BREACH OF FIDUCIARY DUTY
15 7.2 Before any business was transacted, Confidence fully informed Banner that it
16 operated a laboratory for testing legal cannabis in accordance with Washington law. Confidence
17 and Banner both understood the precarious legal climate and risks for providing banking services
18 for a business in the nascent legal cannabis industry. Banner assured Confidence that despite the
19 precarious and risky legal climate it could provide Confidence with a full suite of banking
20 services. By providing this assurance and taking on Confidence as a client, Banner created a
21 banking relationship with special circumstances.
22
23

Page -- 8 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 7.3 The special circumstances imposed a fiduciary duty upon Banner to Confidence.
2 Banner breached its fiduciary duty when it unilaterally and prematurely defaulted Confidence’s
3 loan agreement and severed the business relationship.
4 7.4 As a proximate result of Banner’s breach, Confidence suffered damages in the
5 amount to be proven at trial including, but not limited to, emotional distress damages.
6 VIII. FOURTH CAUSE OF ACTION
7 BREACH OF CONTRACT
9 8.2 Plaintiffs signed several written agreements with Banner to secure banking
10 services including, but not limited to, a promissory note for the loan.
11 8.3 The promissory note identified the conditions that constituted default.
12 8.4 Banner identified the reason for default was Confidence “activity” in the cannabis
13 industry.
14 8.5 This was not a condition constituting breach listed in the promissory note.
15 8.6 Banner claims Confidence defaulted on the promissory note because of the
16 following language contained in the note: “This Note will be governed by federal law applicable
17 to Lender, and, to the extent not preempted by federal law, the laws of the State of Washington
18 with regard to its conflicts of law provisions.” However, this language is not listed as a
19 condition for default. Furthermore, Banner was fully aware of the nature of Confidence’s
20 business in the cannabis industry prior to issuing the note. Therefore, Confidence’s activity in
21 the cannabis industry could not be a condition of default as it was accepted by Banner at the time
22 the parties agreed to the promissory note.
23

Page -- 9 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1 8.7 Banner materially breached the promissory note with Confidence when it put the
2 loan in default for a reason that was not contemplated in the agreement.
3 8.8 As a result of Banner’s material breach, Confidence incurred financial damages
4 that flowed from the contract.
5 IX. FIFTH CAUSE OF ACTION
6 CONSTRUCTIVE FRAUD
8 9.2 Banner created a fiduciary duty with Plaintiffs due to the special circumstances in
9 the banking relationship.
10 9.3 Banner’s action of wrongfully defaulting the loan was a failure to perform its
11 fiduciary obligation due to Plaintiffs by placing Banner’s interests above its duties to Plaintiffs.
12 9.4 The breach of Banner’s duty resulted in constructive fraud against Plaintiffs who
13 incurred damages to be proven at trial.
14 X. DAMAGES AND PRAYER FOR RELIEF
15 WHEREFORE, Plaintiffs request that the Court enter judgment against Defendant as follows:
16
1. For all direct and consequential damages arising from Defendant’s deceptive and unfair
17
practices; negligence; violations of the Consumer Protection Act; and breach of fiduciary
18 duties;
19 2. For all general damages arising from emotional distress;
20 3. For treble damages pursuant to the Consumer Protection Act remedies;
21 4. For reasonable attorney’s fees and litigation costs incurred pursuant to the Consumer
22 Protection Act;
5. For post judgment interest at 12% per annum or the highest rate permitted by law, under
23

Page -- 10 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202
1
RCW 4.56.110;
2
6. An award of such other and further relief as the Court may deem just.
3
4 XI. JURY DEMAND
5 11.1 Plaintiff is entitled to and hereby demands trial by a jury.
10
11 DATED August __, 2017.
12
13 JERRY MOBERG & ASSOCIATES, PS
14
15 _______________________________
Jerry Moberg, WSBA #5232
16 Patrick R. Moberg, WSBA #41323
Attorneys for Plaintiffs
17
18
THE LAW OFFICES OF MICHAEL BLUE
19
20 _______________________________
Michael E. Blue, WSBA No. 22368
21 Attorney for Plaintiffs
22
23

Page -- 11 P.O. Box 130  124 3 Ave S.W.
Ephrata, WA 98823
(509) 754-2356 / Fax (509) 754-4202

Confidence Analytics v. Banner Bank, Proposed First Amended Complaint

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Confidence Analytics v. Banner Bank, Proposed First Amended Complaint

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1

3 SUPERIOR COURT OF WASHINGTON

BANNER BANK, a Washington Corporation,

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

3 in King County, Washington.

4 III. JURISDICTION AND VENUE

7 4.12.010, 4.12.020 and 4.12.025.

8 IV. FACTUAL ALLEGATIONS

9 4.1 A 56% majority of enlightened residents of Washington State passed Initiative

19 a lab to test cannabis for quality assurance.

21 license in order to test cannabis for quality assurance.

22 4.6 However, a quality assurance lab must be certified through an accreditation

23 process approved by the LCB.

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

2 legal marijuana for quality assurance in accordance with Washington law.

3 4.8 Confidence’s laboratory is certified and accredited for quality assurance

7 requirements for consumer protection.”

8 4.9 The information quoted in the previous paragraph is readily available on

14 or sell legal cannabis

15 4.12 Confidence does NOT produce, process or sell marijuana.

19 test cannabis by purchasing additional scientific instruments.

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

8 licenses to produce, process or sell cannabis.

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

3 4.23 Confidence’s account was transferred to Banner banker Eric Scroggins.

7 accordance with Washington law.

13 relationship with Confidence.

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

2 David C. Mosely and Donna T. Mosely.

5 of Confidence’s “inventory and equipment” as collateral.

6 4.33 Banner required Confidence to purchase additional insurance on the collateral.

13 notice of default and termination of the loan and banking services.

20 their financial status including fear of a reduction in their credit ratings.

23 4.41 As a result of Banner’s actions, Confidence lost significant business opportunities.

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

3 5.1 Plaintiffs restate the allegations in paragraphs 1.1 through 4.41.

5 cannabis for quality assurance in accordance with Washington law.

8 5.4 Banner was negligent in communicating to Confidence that it could provide

9 banking services to Confidence.

11 with Banner to purchase laboratory equipment.

12 5.6 Confidence was justified in in relying upon Banner’s promises of supplying

13 banking services including, but not limited to the loan.

14 5.7 As a proximate result of Banner’s negligence, Confidence suffered damages in the

15 amount to be proven at trial.

16 VI. SECOND CAUSE OF ACTION

18 6.1 Plaintiffs restate the allegations in paragraphs 1.1 through 4.41.

21 services including, but not limited to a business loan.

24 T:\WPWIN\Mosely, Nick\Confidence Analytics v Banner Bank\Pleadings - Initial\420178.docx

JERRY MOBERG & ASSOCIATES, P.S.

3 accordance with Washington law.

5 the course of commerce.

7 but not limited to, customers similarly situated to Confidence.

11 business practices will be proven at trial

12 VII. THIRD CAUSE OF ACTION

13 BREACH OF FIDUCIARY DUTY

14 7.1 Plaintiffs restate the allegations in paragraphs 1.1 through 4.41.

21 banking relationship with special circumstances.