Customer is Not a Third-Party Beneficiary of Bank Employee's Agreement to Be Bound By Bank's Code of Ethics
INTERACTIVE INTELLIGENCE, INC. v. KEYCORP (October 24, 2008)
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For seven years, KeyBank provided foreign exchange currency conversion services to Interactive Intelligence, Inc. (“Interactive”). The parties operated without a written contract for three years. They signed a written agreement in 2001, but the agreement was silent on how Interactive was going to compensate KeyBank. Apparently, Interactive believed it paid a service fee on each transaction. In fact, KeyBank charged Interactive a percentage mark-up on each transaction. The amount of the mark-up increased over time. Adam Ravens was the KeyBank employee who managed the Interactive account. Ravens never told Interactive that he was applying a spread. Interactive, on a couple of occasions, was troubled by the difference between the market rates for the transactions and what they were paying KeyBank. They inquired but never received an adequate response. Interactive brought this action against KeyBank to recover more than $2 million in alleged overcharges. The district court granted summary judgment to KeyBank. Interactive appeals.
In their opinion, Judges Ripple, Rovner, and Evans affirmed. The Court first addressed Interactive’s principal argument that it was a third-party beneficiary of a contract between Raven and KeyBank. There was no employment contract between Raven and KeyBank of which Interactive could be a beneficiary. Although Raven did sign a Code of Ethics, which he allegedly breached, the Court observed that it would be against public policy for customers to be considered a third-party beneficiary of an ethics code. The Court was concerned that such an approach would encourage companies to weaken or eliminate codes of conduct. Thus, the district court properly granted summary judgment on this claim. Next, the Court upheld the court below on the negligent supervision, breach of fiduciary duty, and breach of contract claims. The Court held that: a) since Ravens had no duty to Interactive, KeyBank could not have been negligent, b) Ravens had no fiduciary duty to Interactive, and c) the oral contract that left the price term to be negotiated was too vague to be enforceable.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select