Confidence Analytics v. Banner Bank, Defendant's Answer To First Amended Complaint

1 HON.
BARBARA LINDE
6
SUPERIOR COURT OF WASHINGTON
7 IN AND FOR KING COUNTY
8 STANDARD ANALYTICS, LLC, a Washington

Limited Liability Company d/b/a CONFIDENCE No. 17-2-05704-5 SEA
9 ANALYTICS, Nicholas L. Mosely, an
individual, and Bobby A. Hines, an individual,
10
Plaintiffs, DEFENDANT’S ANSWER AND
11 AFFIRMATIVE DEFENSES TO
v. FIRST AMENDED COMPLAINT,
12 COUNTERCLAIMS, AND THIRD-
BANNER BANK, a Washington Corporation, PARTY CLAIMS
13
Defendant. Clerk’s Action Required
14
BANNER BANK, a Washington Corporation,
15
Counterclaimant,
16
v.
17
STANDARD ANALYTICS, LLC, a Washington
18 Limited Liability Company d/b/a CONFIDENCE
ANALYTICS, Nicholas L. Mosely, an
19 individual, and Bobby A. Hines, an individual,
20 Counterdefendants,
21 BANNER BANK, a Washington Corporation,
22 Third-Party Plaintiff,
23 v.
24 DONNA MOSELY, an individual, and DAVID
MOSELEY, an individual,
25
Third-Party Defendants.
26
27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

L AW O FFICE S
TO FIRST AMENDED COMPLAINT, COUNTERCLAIMS, 1201 Third Avenue, Suite 2200
Seattle, WA 98101-3045
AND THIRD-PARTY CLAIMS - 1 206.622.3150 main · 206.757.7700 fax
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1 For its answer to Plaintiffs’ First Amended Complaint (“Complaint”), Defendant Banner
2 Bank (“Defendant”) admits, denies and alleges:
3 I. NATURE OF ACTION
4 1.1 Plaintiffs Confidence Analytics, Nicholas L. Mosely, and
Bobby A. Hines are suing Banner Bank for unfair and
5 deceptive business practices in violation of Washington state’s
[sic] Consumer Protection Act, misrepresentation, breach of
6 fiduciary duty, and breach of contract.
7 1.1 Paragraph 1.1 requires no response. To the extent a response is required,
8 Defendant admits that Plaintiffs brought suit making certain allegations which Defendants deny;
9 Defendants deny the remaining allegations in paragraph 1.1.
10 II. PARTIES
11 2.1 Plaintiff Nicholas Mosely (“Mosely”) was at all times
relevant a resident of King County, Washington.
12
2.1 Defendant lacks information sufficient to admit or deny the allegations in
13
paragraph 2.1, and therefore denies the same.
14
2.2 Plaintiff Bobby A. Hines (“Hines”) was at all times relevant
15 a resident of King County, Washington.
16 2.2 Defendant lacks information sufficient to admit or deny the allegations in
17 paragraph 2.2, and therefore denies the same.
18 2.3 Plaintiff Standard Analytics, LLC d/b/a Confidence

Analytics (“Confidence”) was at all times relevant a business
19 entity formed under the laws of Washington state.
Confidence’s principal place of business is located in King
20 County, Washington.
22 paragraph 2.3, and therefore denies the same.
23 2.4 Defendant Banner Bank, Inc. (“Banner”) is, and at all

times relevant was, a corporation organized and existing under
24 the law of Washington state which conducts business in King
County, Washington.
25
2.4 Defendant admits that it is a Washington Chartered Bank registered in the State of
26
Washington conducting business in King County. The remaining allegations in paragraph 2.4
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1 call for a legal conclusion and do not require a response. To the extent a response is required,
2 Defendant lacks information sufficient to admit or deny the allegations, and therefore denies the
3 same.
4 III. JURISDICTION AND VENUE

5 3.1 The incidents comprising this lawsuit occurred in King
County, Washington.
6
3.1 Because the phrase “incidents comprising this lawsuit” is ambiguous, Defendant
7
lacks information sufficient to admit or deny the allegations in paragraph 3.1, and therefore
8
denies the same. Defendant does not contest that King County, Washington is an appropriate
9
venue for litigation arising out of the instruments alleged in paragraphs 4.29 to 4.32 of Plaintiffs’
10
Complaint.
11
3.2 This court has jurisdiction over the parties and subject
12 matter, pursuant to RCWs 4.12.010, 4.12.020 and 4.12.025.
13 3.2. Paragraph 3.2 calls for a legal conclusion and does not require a response. To the
14 extent a response is required, Defendant lacks information sufficient to admit or deny the
15 allegations in paragraph 3.2, and therefore denies the same.
16 IV. FACTUAL ALLEGATIONS

17 4.1 A 56% majority of enlightened residents of Washington
State passed Initiative 502 in 2013, which legalized the
18 production, sale and possession of cannabis for recreational
purposes.
19
4.1 Paragraph 4.1 calls for a legal conclusion and does not require a response. To the
20
extent a response is required, Defendant lacks information sufficient to admit or deny the
21
allegations in paragraph 4.1, and therefore denies the same. Defendant further avers and states
22
that pursuant to Article VI, Clause 2 of the United States Constitution, federal law is the supreme
23
law of the land, and federal law preempts contrary state laws. The federal Controlled Substances
24
Act, 21 U.S.C. § 801 et seq., provides criminal penalties for the manufacture, possession, or sale
25
of marijuana, which is classified as a schedule one narcotic; and federal law includes criminal
26
liability for aiding and abetting, and conspiracy. 21 U.S.C. § 812; 21 U.S.C. § 846. The Money
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1 Laundering Control Act of 1986, 18 U.S.C. § 1956 et seq., provides criminal penalties for
2 engaging in monetary transactions involving the proceeds of any illegal activity, including, but
3 not limited to, monetary transactions involving proceeds obtained in violation of the Controlled
4 Substances Act. The Federal Deposit Insurance Corporation, the Department of the Treasury,
5 the Federal Reserve Bank of San Francisco, the Department of Justice and other federal agencies
6 enforce federal law with respect to Defendant. Plaintiffs’ revenue is wholly or substantially
7 derived from testing marijuana (including the possession and handling of marijuana related to
8 such testing), a class one controlled substance, for which plaintiff has no license, exemption or
9 permission under federal law.
10 4.2 The initiative empowered the state to regulate the

production, processing and sale of cannabis.
11
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13
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15
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18
19
Laundering Control Act of 1986, 18 U.S.C. § 1956 et seq., provides criminal penalties for
20
engaging in monetary transactions involving the proceeds of any illegal activity, including, but
21
not limited to, monetary transactions involving proceeds obtained in violation of the Controlled
22
Substances Act. The Federal Deposit Insurance Corporation, the Department of the Treasury,
23
the Federal Reserve Bank of San Francisco, the Department of Justice and other federal agencies
24
enforce federal law with respect to Defendant. Plaintiffs’ revenue is wholly or substantially
25
derived from testing marijuana (including the possession and handling of marijuana related to
26

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3 4.3 The state delegated this authority to the Liquor and

Cannabis Board, which is responsible for issuing and
4 regulating licenses for the production, processing and sale of
cannabis.
5
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such testing), a class one controlled substance, for which plaintiff has no license, exemption or
21
permission under federal law.
22
4.4 The LCB also approved administrative rules for governing
23 the quality assurance of cannabis sold in the state in WAC 314-
55-102, which lays out the necessary requirements for a lab to
24 test cannabis for quality assurance.
25 4.4 Paragraph 4.4 calls for a legal conclusion and does not require a response. To the

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1 allegations in paragraph 4.4, and therefore denies the same. Defendant further avers and states
2 that pursuant to Article VI, Clause 2 of the United States Constitution, federal law is the supreme
3 law of the land, and federal law preempts contrary state laws. The federal Controlled Substances
4 Act, 21 U.S.C. § 801 et seq., provides criminal penalties for the manufacture, possession, or sale
5 of marijuana, which is classified as a schedule one narcotic; and federal law includes criminal
6 liability for aiding and abetting, and conspiracy. 21 U.S.C. § 812; 21 U.S.C. § 846. The Money
16 4.5 Under state laws and regulations, it is not necessary to for a

lab to possess a state license in order to test cannabis for
17 quality assurance.
18 4.5 Paragraph 4.5 calls for a legal conclusion and does not require a response. To the
20 allegations in paragraph 4.5, and therefore denies the same. Defendant further avers and states

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9 4.6 However, a quality assurance lab must be certified through

an accreditation process approved by the LCB.
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4.7 Mosely and Hines formed Confidence in 2013 and opened a
1 laboratory to test legal marijuana for quality assurance in
accordance with Washington law.
2
4.7 Defendant lacks sufficient knowledge to admit or deny the allegations in
3
paragraph 4.7, and therefore denies the same. Additionally, whether Mosely and Hines acted “in
4
accordance with Washington law” calls for a legal conclusion and does not require a response.
5
To the extent a response is required, Defendant lacks information sufficient to admit or deny the
6
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4.8 Confidence’s laboratory is certified and accredited for
22 quality assurance compliance testing of cannabis flower,
concentrates and edibles in Washington state. As clearly stated
23 on its website, “Confidence provides producers, processors,
retailers, and consumers access to pharmaceutical grade
24 analysis of cannabis products that meets and exceeds
regulatory requirements for consumer protection.”
25
4.8 Defendant lacks knowledge sufficient to admit or deny the allegations in
26
paragraph 4.8 and therefore denies the same. Defendant further avers and states that pursuant to
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1 Article VI, Clause 2 of the United States Constitution, federal law is the supreme law of the land,
2 and federal law preempts contrary state laws. The federal Controlled Substances Act, 21 U.S.C.
3 § 801 et seq., provides criminal penalties for the manufacture, possession, or sale of marijuana,
4 which is classified as a schedule one narcotic; and federal law includes criminal liability for
5 aiding and abetting, and conspiracy. 21 U.S.C. § 812; 21 U.S.C. § 846. The Money Laundering
6 Control Act of 1986, 18 U.S.C. § 1956 et seq., provides criminal penalties for engaging in
7 monetary transactions involving the proceeds of any illegal activity, including, but not limited to,
8 monetary transactions involving proceeds obtained in violation of the Controlled Substances Act.
9 The Federal Deposit Insurance Corporation, the Department of the Treasury, the Federal Reserve
10 Bank of San Francisco, the Department of Justice and other federal agencies enforce federal law
11 with respect to Defendant. Plaintiffs’ revenue is wholly or substantially derived from testing
12 marijuana (including the possession and handling of marijuana related to such testing), a class
13 one controlled substance, for which plaintiff has no license, exemption or permission under
14 federal law.
15 4.9 The information quoted in the previous paragraph is

readily available on Confidence’s website, which is the number
16 one result in a Google search for “Confidence Analytics”. [sic]
17 4.9 Defendant lacks knowledge sufficient to admit or deny the allegations in
18 paragraph 4.9 and therefore denies the same.
19 4.10 In early June of 2014, Confidence was the first laboratory

in Washington state to test legal cannabis. This story made the
20 Seattle news cycle.
22 paragraph 4.10 and therefore denies the same. Defendant further avers and states that pursuant
23 to Article VI, Clause 2 of the United States Constitution, federal law is the supreme law of the
24 land, and federal law preempts contrary state laws. The federal Controlled Substances Act, 21
25 U.S.C. § 801 et seq., provides criminal penalties for the manufacture, possession, or sale of
26 marijuana, which is classified as a schedule one narcotic; and federal law includes criminal

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11 4.11 Confidence is not required to and does not possess a

license to produce, process or sell legal cannabis.
12
4.11 Paragraph 4.11 calls for a legal conclusion and does not require a response. To
13
the extent a response is required, Defendant lacks knowledge sufficient to admit or deny the
14
allegations in paragraph 4.11 and therefore denies the same. Defendant further avers and states
15
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3 4.12 Confidence does NOT produce, process or sell marijuana.

4 4.12 Paragraph 4.12 calls for a legal conclusion and does not require a response. To
5 the extent a response is required, Defendant lacks knowledge sufficient to admit or deny the
6 allegations in paragraph 4.12 and therefore denies the same. Defendant further avers and states
21 4.13 The scientific equipment necessary for testing the quality

assurance of cannabis is expensive.
22
4.13 Defendant lacks knowledge sufficient to admit or deny the allegations in
23
paragraph 4.13 and therefore denies the same.
24
4.14 Sometime in 2015, Mosely and Hines decided to expand
25 Confidence’s capacity to test cannabis by purchasing
additional scientific instruments.
26

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3 4.15 In November of 2015, Mosely and Hines walked into the

Redmond branch of Banner to inquire about opening a
4 business account and obtaining financing to purchase the
additional instruments.
5
4.15 Defendant admits that in or around November 2015, someone at Standard
6
Analytics, LLC (“Standard Analytics”) contacted representatives in Defendant’s Redmond
7
branch. Defendant lacks information sufficient to admit or deny the remaining allegations in
8
9
4.16 Mosely and Hines met with Banner employee Tony
10 Young. Mosely and Hines fully informed Young about the
nature of Confidence’s business. Specifically, Mosely and
11 Hines told Young that Confidence was a laboratory for testing
legal cannabis.
12
4.16 Defendant admits that Tony Young met with representatives from Standard
13
Analytics. Defendant lacks information sufficient to admit or deny the remaining allegations in
14
15
4.17 Young informed Mosely and Hines that Banner could do
16 business with Confidence. Young told Mosely and Hines that
Banner determined Confidence’s laboratory to be an ancillary
17 business to the cannabis industry in Washington. Young made
it clear that an ancillary business was a business that
18 supported the legal cannabis industry but did not possess
licenses to produce, process or sell cannabis.
19
20
21
4.18 Young was eager to hear and learn about Confidence’s
22 business. Young was very interested in hearing about
Confidence’s financing needs. Young made several suggestions
23 to Confidence on how Banner could meet Confidence’s
financial needs in the current precarious banking market in
24 which most banks refused to deal with cannabis businesses.

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4.19 Mosely and Hines told Young they were surprised that
1 Banner was going to provide banking services to Confidence
considering the current refusal of most banks to have anything
2 to do with the cannabis industry. Young reassured Mosely that
Banner was willing to provide banking services to Confidence
3 despite the current banking climate surrounding the cannabis
industry.
4
5
6
4.20 After the visit, Young came to Confidence’s laboratory for
7 a tour. Mosely and Hines showed Young around the lab. At the
time of Young’s visit, Confidence’s employees were testing
8 cannabis for quality assurance. The distinct odor of cannabis
was present in the lab.
9
10
11
4.21 In January of 2016, Mosely and Hines began discussing
12 financing options with Young. Mosely and Hines completed
various banking forms and an application for financing.
13
4.21 Defendant admits that on or about December 29, 2016, Mr. Mosely and Mr. Hines
14
as managers for Standard Analytics completed a Quickstep Business Loan Application seeking a
15
loan of $200,000 for “Chromatography Equipment” and described their business as “Testing
16
Laboratory – Agricultural Lab.” Defendant lacks information sufficient to admit or deny the
17
remaining allegations in paragraph 4.21 and therefore denies the same.
18
4.22 Young left Banner’s Redmond branch before Mosely and
19 Hines finalized the loan.
20 4.22 Defendant admits that Mr. Young left Banner Bank before Mr. Mosely and
21 Mr. Hines as managers of Standard Analytics signed the May 5, 2016 Promissory Note
22 (“Promissory Note”). Defendant denies the remaining allegations in paragraph 4.22.
23 4.23 Confidence’s account was transferred to Banner banker

Eric Scroggins.
24
4.23 Defendant admits that Banner Banker Eric Scroggins closed Standard Analytics’
25
loan. Defendant denies the remaining allegations in paragraph 4.23.
26

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4.24 Mosely and Hines met Scroggins several times. During
1 these meetings, Mosely and Hines fully disclosed the nature of
Confidence’s business. Specifically, Mosely and Hines told
2 Scroggins that Confidence operated a laboratory to test
cannabis for quality assurance in accordance with Washington
3 law.
4 4.24 Defendant denies the allegations in paragraph 4.24.
5 4.25 Scroggins assured Mosely and Hines that Banner could

and would continue to provide banking services to Confidence
6 including, but not limited to, providing Confidence’s with a
loan.
7
4.25 Defendant denies the allegations in paragraph 4.25.
8
4.26 Scroggins told Mosely and Hines that he was a banker
9 they could trust. Scroggins told Mosely and Hines that Banner
was interested in establishing a long term banking relationship
10 with Confidence.
12 4.27 Mosely and Hines relied upon Scroggins assurances to

provide a long term banking relationship. This was important
13 to Mosely and Hines due to the current banking climate in
which most banks refused to offer any services to businesses
14 involved in the legal cannabis industry.
16 4.28 Scroggins also wanted Mosely and Hines to conduct their

personal banking with Banner.
17
18
4.29 Mosely and Hines finalized the loan with Scroggins on
19 April 8, 2016.
20 4.29 Defendant admits that on May 5, 2016 Mr. Mosely and Mr. Hines signed the
21 Promissory Note as the managers of Standard Analytics. Defendant denies the remaining
22 allegations in paragraph 4.29.
23 4.30 The amount of the loan was for $134,837.30. The loan’s
maturity date was May 10, 2021 giving the loan a five year
24 term. The interest rate for the loan was 5%.
25 4.30 Defendant admits that it made a loan to Standard Analytics, pursuant to, among
26 other agreements, the Promissory Note, with a principal amount of $134,837.30, maturing on

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1 May 10, 2021, with 5% interest rate per annum. Defendant denies the remaining allegations in
2 paragraph 4.30.
3 4.31 Banner required personal guarantees from Mosely, Hines

and Mosely’s parents, David C. Mosely and Donna T. Mosely.
4
4.31 Defendant admits the allegations in paragraph 4.31.
5
4.32 Banner required the loan to be secured by collateral,
6 which included the instruments and equipment Confidence
was purchasing with the loan. Banner also included all of
7 Confidence’s “inventory and equipment” as collateral.
8 4.32 Defendant admits the Commercial Security Agreement, dated May 5, 2016, and
9 signed by Mr. Mosely and Mr. Hines as managers of Standard Analytics (“Commercial Security
10 Agreement”) included, among other items, “All Inventory, Accounts and Equipment.”
11 Defendant denies the remaining allegations in paragraph 4.32.
12 4.33 Banner required Confidence to purchase additional

insurance on the collateral.
13
4.33 Defendant admits the Commercial Security Agreement contained, among other
14
terms, a requirement for the “Maintenance of Casualty Insurance.” Defendant denies any
15
remaining allegations in paragraph 4.33.
16
4.34 Banner charged Confidence various fees to originate the
17 loan and open banking accounts.
18 4.34 In response to the allegations in paragraph 4.34, Defendant admits it charged
19 Plaintiffs a $100.00 loan origination fee. Defendant denies any remaining allegations in
20 paragraph 4.34.
21 4.35 Confidence used the Banner loan to purchase additional

instruments and equipment. The additional instruments and
22 equipment were necessary for Confidence’s business.
23 4.35 Defendant admits Standard Analytics contracted in at least the Promissory Note
24 and Commercial Security Agreement to provide collateral in certain instruments and equipment.
25 Defendant lacks information sufficient to admit or deny the remaining allegations in paragraph
26 4.35 and therefore denies the same.

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4.36 On January 17, 2017, Banner’s general counsel Craig
1 Miller sent each guarantor a notice of default and termination
of the loan and banking services.
2
4.36 Defendant admits the allegations in paragraph 4.36.
3
4.37 Miller expressed the reason for the default as follows:
4 “Banner Bank has grounds to believe that [Confidence]
actively and materially does business in the cannabis
5 industry.”
6 4.37 Defendant admits that Mr. Miller’s January 17, 2017 letter stated, among other
7 things, that “Banner Bank has grounds to believe that [Confidence] actively and materially does
8 business in the cannabis industry” and that Mr. Miller’s letter of January 17, 2017 speaks for
9 itself. Defendant denies the remaining allegations in paragraph 4.37.
10 4.38 Miller’s reason for defaulting the loan is unfair and

deceptive as Banner was fully aware of Confidence’s business
11 in the cannabis industry prior to authorizing the loan and
banking services.
12
13
4.39 As a result of Banner’s default, the guarantors of the loan
14 faced uncertainty about their financial status including fear of
a reduction in their credit ratings.
15
16
4.40 Mosely and Hines feared that Banner would repossess the
17 equipment that was secured as collateral for the loan. Such a
loss would have put Confidence out of business.
18
19
4.41 As a result of Banner’s actions, Confidence lost significant
20 business opportunities.
22 V. FIRST CAUSE OF ACTION:

23 NEGLIGENCE [SIC] MISREPRESENTATION
24 5.1 Plaintiffs restate the allegations in paragraphs 1.1 through

4.41.
25
5.1 In answer to paragraph 5.1, Defendant restates its responses in paragraph 1.1
26
through 4.41.
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5.2 Banner fully understood Confidence operated a laboratory
1 that tested legal cannabis for quality assurance in accordance
with Washington law.
2
5.2 Defendant denies the allegations in paragraph 5.2. Defendant further avers and
3
states that pursuant to Article VI, Clause 2 of the United States Constitution, federal law is the
4
supreme law of the land, and federal law preempts contrary state laws. The federal Controlled
5
Substances Act, 21 U.S.C. § 801 et seq., provides criminal penalties for the manufacture,
6
possession, or sale of marijuana, which is classified as a schedule one narcotic; and federal law
7
includes criminal liability for aiding and abetting, and conspiracy. 21 U.S.C. § 812; 21 U.S.C. §
8
846. The Money Laundering Control Act of 1986, 18 U.S.C. § 1956 et seq., provides criminal
9
penalties for engaging in monetary transactions involving the proceeds of any illegal activity,
10
including, but not limited to, monetary transactions involving proceeds obtained in violation of
11
the Controlled Substances Act. The Federal Deposit Insurance Corporation, the Department of
12
the Treasury, the Federal Reserve Bank of San Francisco, the Department of Justice and other
13
federal agencies enforce federal law with respect to Defendant. Plaintiffs’ revenue is wholly or
14
substantially derived from testing marijuana (including the possession and handling of marijuana
15
related to such testing), a class one controlled substance, for which plaintiff has no license,
16
exemption or permission under federal law.
17
5.3 Banner assured Confidence that it could provide banking
18 services to Confidence knowing the nature of Confidence’s
business in the legal cannabis market of Washington state.
19
20
5.4 Banner was negligent in communicating to Confidence that
21 it could provide banking services to Confidence.
23 5.5 Confidence relied upon Banner’s representations and took

out a five year loan with Banner to purchase laboratory
24 equipment.
25 5.5 Defendant admits that Standard Analytics signed the Promissory Note. Defendant
26 denies the remaining allegations in paragraph 5.5.

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5.6 Confidence was justified in in relying upon Banner’s
1 promises of supplying banking services including, but not
limited to the loan.
2
3
5.7 As a proximate result of Banner’s negligence, Confidence
4 suffered damages in the amount to be proven at trial.
6 VI. SECOND CAUSE OF ACTION:

7 CPA VIOLATION

4.41.
9
6.1 In answer to paragraph 6.1, Defendant restates the responses in paragraph 1.1
10
through 4.41.
11
6.2 While fully aware Confidence operated a laboratory that
12 tested legal cannabis for quality assurance in accordance with
Washington law, Banner offered Confidence banking services
13 including, but not limited to a business loan.
15 6.3 Banner then unilaterally cancelled the loan and closed

Confidence’s accounts because Confidence operated a
16 laboratory that tested legal cannabis for quality assurance in
accordance with Washington law.
17
6.3 Defendant admits that it issued a notice of default on Standard Analytics’ loan
18
and closed Standard Analytics’ account. Defendant denies the remaining allegations in
19
paragraph 6.3.
20
6.4 Banner’s actions were deceptive and/or unfair business
21 practices and occurred in the course of commerce.
23 6.5 Banner’s unfair and/or deceptive business practices impact

the public including, but not limited to, customers similarly
24 situated to Confidence.
26 6.6 Banner’s unfair and/or deceptive business practices caused

injury to Confidence’s business.
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2 6.7 The amount of Confidence’s damages caused by Banner’s

unfair and/or deceptive business practices will be proven at
3 trial.
5 VII. THIRD CAUSE OF ACTION:

6 BREACH OF FIDUCIARY DUTY

4.41.
8
9
through 4.41.
10
7.2 Before any business was transacted, Confidence fully
11 informed Banner that it operated a laboratory for testing legal
cannabis in accordance with Washington law. Confidence and
12 Banner both understood the precarious legal climate and risks
for providing banking services for a business in the nascent
13 legal cannabis industry. Banner assured Confidence that
despite the precarious and risky legal climate it could provide
14 Confidence with a full suite of banking services. By providing
this assurance and taking on Confidence as a client, Banner
15 created a banking relationship with special circumstances.
17 7.3 The special circumstances imposed a fiduciary duty upon

Banner to Confidence. Banner breached its fiduciary duty
18 when it unilaterally and prematurely defaulted Confidence’s
loan agreement and severed the business relationship.
19
20
7.4 As a proximate result of Banner’s breach, Confidence
21 suffered damages in the amount to be proven at trial including,
but not limited to, emotional distress damages.
22
23
7.5 Banner materially breached the promissory note with
24 Confidence when it put the loan in default for a reason that
was not contemplated in the agreement.
25
26

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7.6 As a result of Banner’s material breach, Confidence
1 incurred financial damages that flowed from the contract.
4 VIII. FOURTH CAUSE OF ACTION

5 CONSTRUCTIVE FRAUD

4.41.
7
8
through 4.41.
9
8.2 Banner created a fiduciary duty with Plaintiffs due to the
10 special circumstances in the banking relationship.
12 8.3 Banner’s action of wrongfully defaulting the loan was a

failure to perform its fiduciary obligation due to Plaintiffs by
13 placing Banner’s interests above its duties to Plaintiffs.
15 8.4 The breach of Banner’s duty resulted in constructive fraud

against Plaintiffs who incurred damages to be proven at trial.
16
17
IX. DEFENDANT’S AFFIRMATIVE DEFENSES
18
9.1 The Promissory Note, Commercial Security Agreement and Guaranties associated
19
with Defendant’s loan to Plaintiffs contain attorneys’ fee provisions.
20
9.2 Defendant asserts the following defenses without assuming any burden of proof
21
as to any fact issue or other element of any cause of action that properly belongs to Plaintiffs.
22
Defendant reserves the right to amend or supplement its defenses.
23
First Affirmative Defense
24
9.3. Plaintiffs’ Consumer Protection Act claim is pre-empted by federal law governing
25
Defendant. Alternatively, federal regulators have primary jurisdiction over Plaintiffs’ Consumer
26
Protection Act claim.
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1 Second Affirmative Defense
2 9.4. Plaintiffs fail to state a claim upon which relief can be granted.
3 Third Affirmative Defense
4 9.5. Plaintiffs’ material breach of the promissory note, security agreement, and
5 guaranties bars, in whole or in part, any recovery.
6 Fourth Affirmative Defense
7 9.6. Defendant is entitled to attorneys’ fees and costs under the parties’ agreements,
8 Washington State law, and as allowed by equity.
9 Fifth Affirmative Defense
10 9.7. Plaintiffs’ claims are barred in whole or in part by the doctrines of unclean hands
11 or in pari delicto.
12 Sixth Affirmative Defense
13 9.8. Plaintiffs’ claims are barred in whole or in part by the failure to mitigate damages,
14 if any.
15 Seventh Affirmative Defense
16 9.9. Plaintiffs’ claims are barred in whole or in part by their own comparative fault
17 and/or contributory negligence.
18 Eighth Affirmative Defense
19 9.10. Plaintiffs’ claims are barred in whole or in part by their assumption of risk.
20 Ninth Affirmative Defense
21 9.11. Plaintiffs’ damages, if any, were caused by an intervening or superseding cause.
22 Tenth Affirmative Defense
23 9.12. Plaintiffs’ claims are barred, in whole or in part, by the doctrine of accord and
24 satisfaction.
25 Eleventh Affirmative Defense
26

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1 9.13. Plaintiffs’ claims are barred, in whole or in part, by plaintiff’s voluntary payment
2 of its obligation.
3 Twelfth Affirmative Defense
4 9.14. Plaintiffs’ claims are barred in whole or part by the doctrines of waiver or
5 estoppel.
6 Thirteenth Affirmative Defense

7 9.14. Plaintiffs’ claims are barred in whole or part by the doctrine of avoidable
8 consequences.
9
Fourteenth Affirmative Defense
10
9.15. Plaintiffs waived their right to a jury through their agreements with Defendant,
11
including but not limited to the Promissory Note, Commercial Security Agreement, and
12
Guaranties.
13
Fifteenth Affirmative Defense
14
9.15. Plaintiffs’ claims are barred and/or set-off by their own fraud and
15
misrepresentations.
16
X. DEFENDANT’S COUNTERCLAIMS AND THIRD-PARTY CLAIMS
17
For its counterclaims against Plaintiffs Standard Analytics, LLC, Nicholas L. Mosely and
18
Bobby A. Hines, and its third-party claims against David Mosely and Donna Mosely, Defendant
19
Banner Bank alleges as follows:
20
10.1. Donna Mosely and David Mosely are individual residents of Colorado.
21
10.2. In Standard Analytics, LLC’s application for a loan with Banner Bank, Nicholas
22
L. Mosely, Bobby A. Hines, and Standard Analytics, LLC represented that Standard Analytics,
23
LLC operated a “Testing Laboratory – Agricultural Lab.”
24
10.3. Nicholas L. Mosely, Bobby A. Hines and Standard Analytics, LLC, in the
25
Limited Liability Company Resolution to Borrow / Grant Collateral, executed in conjunction
26
with Standard Analytics, LLC obtaining a loan from Banner Bank, certified that Standard
L AW O FFICE S
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1 Analytics, LLC “shall comply with all regulations, rules, ordinances, statutes, orders and decrees
2 of any governmental or quasi-governmental authority or court applicable to the Company and
3 Company’s business activities.”
4 10.4. Standard Analytics, LLC, in the Commercial Security Agreement executed in
5 connection with Standard Analytics, LLC obtaining a loan from Banner Bank, represented and
6 warranted that Standard Analytics, LLC “shall comply with all laws, ordinances, rules and
7 regulations of all governmental authorities, now or hereafter in effect, applicable to the
8 ownership, production, disposition, or use of the collateral.” The Commercial Security
9 Agreement contains an attorney-fee provision authorizing Banner Bank to collect all attorney
10 fees incurred in connection with that agreement.
11 10.5. Nicholas L. Mosely and Bobby A. Hines, together with Donna Mosely and David
12 Mosely, each individually guaranteed the Promissory Note Standard Analytics LLC executed in
13 favor of Banner Bank. The Promissory Note contains an attorney fee provision.
14 10.6. On May 5, 2016, Standard Analytics, LLC, Nicholas L. Mosely and Bobby A.
15 Hines, together with Donna Mosely and David Mosely, each executed a Notice of Final
16 Agreement in connection with the Promissory Note.
17 10.7. In the Notice of Final Agreement, Standard Analytics, LLC, Nicholas L. Mosely,
18 Bobby A. Hines, Donna Mosely and David Mosely each individually represented and agreed that
19 “(a) The written Loan Agreement represents the final agreement between the Parties, (b) There
20 are no unwritten oral agreements between the Parties, and (c) The written Loan Agreement may
21 not be contradicted by evidence of any prior, contemporaneous, or subsequent oral agreements or
22 understandings of the Parties.”
23 10.8. The Promissory Note, the Commercial Security Agreement, each Guaranty, and
24 the Notice of Final Agreement, in combination with other documents, constitute the “Loan
25 Agreement” between Standard Analytics, LLC and Banner Bank.
26

L AW O FFICE S
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1 10.9. If Nicholas L. Mosely, Bobby A. Hines, and Standard Analytics, LLC had
2 disclosed on Standard Analytics, LLC’s loan application that Standard Analytics, LLC’s
3 business was all or in major part the testing of marijuana, and that Standard Analytics, LLC’s
4 revenues all or in major part were derived from testing marijuana, Banner Bank would not have
5 issued a loan to Standard Analytics, LLC.
6 10.10. If Nicholas L. Mosely, Bobby A. Hines and Standard Analytics, LLC, had not
7 certified that Standard Analytics, LLC “shall comply with all regulations, rules, ordinances,
8 statutes, orders and decrees of any governmental or quasi-governmental authority,” Banner Bank
9 would not have issued a loan to Standard Analytics, LLC.
10 10.11. If Standard Analytics, LLC had not represented and warranted that Standard
11 Analytics, LLC “shall comply with all laws, ordinances, rules and regulations of all
12 governmental authorities, now or hereafter in effect, applicable to the ownership, production,
13 disposition, or use of the collateral,” Banner Bank would not have issued a loan to Standard
14 Analytics, LLC.
15 10.12. If Standard Analytics, LLC, Nicholas L. Mosely and Bobby A. Hines, with Donna
16 Mosely and David Mosely had not each represented that the written Loan Agreement was the
17 final agreement between the parties, that there were no unwritten oral agreements between the
18 parties, and that the written Loan Agreement could not be contradicted by oral agreements and
19 understandings, Banner Bank would not have issued a loan to Standard Analytics, LLC.
20 10.13. Standard Analytics, LLC does not comply with all laws in the conduct of its
21 business. Standard Analytics, LLC tests cannabis and engages in monetary transactions deriving
22 from the sale and distribution of cannabis in violation of controlling federal law.
23 10.14. Standard Analytics, LLC, Nicholas L. Mosely, and Bobby A. Hines now insist
24 that prior to May 5, 2016, there were unwritten oral agreements between the parties, that the
25 Loan Agreement can be contradicted by oral agreements and understandings, and that the Loan
26 Agreement does not represent the final agreement between the parties.

L AW O FFICE S
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XI. FIRST CAUSE OF ACTION
1
BREACH OF CONTRACT
2
(Against Nicholas L. Mosely, Bobby A. Hines, Standard Analytics, LLC, Donna Mosely
3
and David Mosely)
4
11.1. In the Loan Agreement, Standard Analytics, LLC, Nicholas L. Mosely, Bobby A.
5
Hines, Donna Mosely and David Mosely represented and warranted that the written Loan
6
Agreement was the final agreement between the parties, that there were no unwritten oral
7
agreements between the parties, and that the written Loan Agreement could not be contradicted
8
by oral agreements and understandings.
9
11.2. Standard Analytics LLC’s, Nicholas L. Mosely’s and Bobby A. Hines’s claims
10
against Banner Bank in this litigation are a breach of Loan Agreement. Each and every claim
11
relies on an oral agreement contrary and prior to the written representations in the Loan
12
Agreement.
13
11.3. As a result of the breach of the Loan Agreement, Banner Bank has been damaged
14
in an amount to be proven at trial, including but not limited to expenditures made in defending
15
this action, and any recovery obtained by Standard Analytics, LLC in this action.
16
11.4 Banner Bank is entitled to its attorney fees under the Loan Agreement.
17
XII. SECOND CAUSE OF ACTION
18
FRAUD / FRAUDULENT INDUCEMENT
19
(Count 1, against Nicholas L. Mosely, Bobby A. Hines and Standard Analytics, LLC)
20
12.1 Bobby A. Hines, Nicholas L. Mosely and Standard Analytics, LLC represented
21
that Standard Analytics is a “Testing Lab—Agricultural Facility,” and that Standard Analytics,
22
LLC complied with all laws in the conduct of its business.
23
12.2 These representations were material and false.
24
12.3 Bobby A. Hines, Nicholas L. Mosely and Standard Analytics, LLC knew these
25
representations were false, and intended to induce Banner Bank to make a loan to Standard
26
Analytics, LLC.
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1 12.4 Banner Bank did not know these representations were false, and justifiably relied
2 on the representation, in part, by providing a loan to Standard Analytics, LLC.
3 12.5 As a result of the inducement to enter into the Promissory Note, Banner Bank has
4 been damaged in an amount to be proven at trial, including but not limited to expenditures made
5 in defending this action, and any recovery obtained by Standard Analytics, LLC in this action.
6 (Count 2, against Nicholas L. Mosely, Bobby A. Hines, Standard Analytics, LLC, Donna
7 Mosely and David Mosely)
9 Bobby A. Hines, Donna Mosely and David Mosely represented that the written Loan Agreement
10 was the final agreement between the parties, that there were no unwritten oral agreements
11 between the parties, and that the written Loan Agreement could not be contradicted by oral
12 agreements and understandings.
13 12.7. That representation was material, and now according to Plaintiffs, false.
14 12.8. Standard Analytics, LLC, Nicholas L. Mosely and Bobby A. Hines, Donna
15 Mosely, and David Mosely knew the representation was false, and intended to induce Banner
16 Bank to make a loan to Standard Analytics, LLC.
17 12.9. Banner Bank did not know the representation was false, and justifiably relied on
18 the representation, in part, by providing a loan to Standard Analytics, LLC.
19 12.10. As a result of the inducement to enter into the Promissory Note, Banner Bank has
22 XIII. THIRD CAUSE OF ACTION

23 NEGLIGENT MISREPRESENTATION
24 (Count 1, against Nicholas L. Mosely, Bobby A. Hines and Standard Analytics, LLC)
25
26

L AW O FFICE S
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1 13.1 Bobby A. Hines, Nicholas L. Mosely and Standard Analytics LLC represented
2 that Standard Analytics, LLC is a “Testing Lab—Agricultural Facility,” and that Standard
3 Analytics, LLC complied with all laws in the conduct of its business.
4 13.2 Bobby A. Hines, Nicholas L. Mosely and Standard Analytics LLC knew, or
5 should have known, these representations were false, and that Banner Bank evaluated those
6 representations as part of its determination of whether to enter into a loan transaction with
7 Standard Analytics, LLC.
8 13.3 Bobby A. Hines, Nicholas L. Mosely and Standard Analytics, LLC were
9 negligent in communicating that Standard Analytics, LLC is a “Testing Lab—Agricultural
10 Facility,” and that Standard Analytics, LLC complied with all laws in the conduct of its business.
11 13.4 Banner Bank did not know these representations were false, and justifiably relied
12 on the representations, in part, by providing a loan to Standard Analytics, LLC.
13 13.5 As a result of the inducement to enter into the Promissory Note, Banner Bank has
16 (Count 2, against Nicholas L. Mosely, Bobby A. Hines, Standard Analytics, LLC, Donna
17 Mosely and David Mosely)
19 Bobby A. Hines, Donna Mosely and David Mosely represented that the written Loan Agreement
20 was the final agreement between the parties, that there were no unwritten oral agreements
21 between the parties, and that the written Loan Agreement could not be contradicted by oral
22 agreements and understandings.
23 13.7. Standard Analytics, LLC, Nicholas L. Mosely, Bobby A. Hines, Donna Mosely
24 and David Mosely, knew, or should have known, those representations were false, and that
25 Banner Bank evaluated those representations as part of its determination of whether to enter into
26 a loan transaction with Standard Analytics, LLC.

L AW O FFICE S
4819-1303-5859v.4 0058243-000315
1 13.8. Standard Analytics, LLC, Nicholas L. Mosely, Bobby A. Hines, Donna Mosely
2 and David Mosely were negligent in communicating that the written Loan Agreement was the
3 final agreement between the parties, that there were no unwritten oral agreements between the
4 parties, and that the written Loan Agreement could not be contradicted by oral agreements and
5 understandings.
6 13.9. Banner Bank did not know these representations were false, and justifiably relied
7 on the representations, in part, by providing a loan to Standard Analytics, LLC.
8 13.10. As a result of the inducement to enter into the Promissory Note, Banner Bank has
11
12 PRAYER FOR RELIEF
13 WHEREFORE, having answered, as stated above, Defendant requests a judgment in its
14 favor, as follows:
15 1. That Plaintiffs take nothing from their Complaint;
16 2. The claims set forth in Plaintiffs’ Complaint be dismissed, in their entirety, with
17 prejudice;
18 3. Attorneys’ fees and costs be awarded to Defendant pursuant to the parties’
19 agreements, RCW; and/or under equity; and
20 4. Direct and consequential damages be awarded to Banner Bank on its claims for
21 breach of contract, fraudulent inducement and negligent misrepresentation; and
22 5. The Court award such other relief as is just and proper under the circumstances.
23 DATED this 6th day of November, 2017.
24 Davis Wright Tremaine LLP

25 Attorneys for Defendant Banner Bank
26 By s/ Jaime Drozd Allen

Jaime Drozd Allen, WSBA #35742
L AW O FFICE S
4819-1303-5859v.4 0058243-000315
1201 Third Avenue, Suite 2200
1 Seattle, WA 98101-3045
2 Telephone: 206-757-8039
Fax: 206-757-7039
3 Email: jaimeallen@dwt.com
4 By s/ Timothy M. Cunningham
Timothy M. Cunningham, WSBA #50244
5 1300 SW 5th Avenue, Suite 2400
6 Portland, OR 97201-5682
Telephone: 503-241-2300
7 Fax: 503-778-5299
Email: timcunningham@dwt.com
8
10
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15
16
17
18
19
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23
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26

L AW O FFICE S
4819-1303-5859v.4 0058243-000315
1 CERTIFICATE OF SERVICE
2 I certify under penalty of perjury under the laws of the State of Washington that I caused
3
the document to which this certificate is attached to be filed with the King County Superior
4
Court Clerk via the E-filing Application and to be delivered to the following as indicated:
5
Patrick Moberg
6 JERRY MOBERG & ASSOCIATES, PS  E-Service
P.O. Box 130
7
Ephrata, WA 98223
8 jmoberg@jmlawps.com
pmoberg@jmlawps.com
9
Michael E. Blue  E-Service
10 THE LAW OFFICES OF MICHAEL E. BLUE, P.S.
2245 32nd Avenue West
11
Seattle, WA 98199
12 Michael@michaelblue.com
Attorneys for Plaintiff
13
Dated November 6, 2017.
14
15 Davis Wright Tremaine LLP

Attorneys for Defendant Banner Bank
16
17 By s/ Jaime Drozd Allen

18
19
20
21
22
23
24
25
26

L AW O FFICE S
4819-1303-5859v.4 0058243-000315

Confidence Analytics v. Banner Bank, Defendant's Answer To First Amended Complaint

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Confidence Analytics v. Banner Bank, Defendant's Answer To First Amended Complaint

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1 HON.

8 STANDARD ANALYTICS, LLC, a Washington

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

2 Bank (“Defendant”) admits, denies and alleges:

9 Defendants deny the remaining allegations in paragraph 1.1.

17 paragraph 2.2, and therefore denies the same.

18 2.3 Plaintiff Standard Analytics, LLC d/b/a Confidence

22 paragraph 2.3, and therefore denies the same.

23 2.4 Defendant Banner Bank, Inc. (“Banner”) is, and at all

4 III. JURISDICTION AND VENUE

15 allegations in paragraph 3.2, and therefore denies the same.

16 IV. FACTUAL ALLEGATIONS

9 permission under federal law.

10 4.2 The initiative empowered the state to regulate the

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

2 permission under federal law.

3 4.3 The state delegated this authority to the Liquor and

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

15 permission under federal law.

16 4.5 Under state laws and regulations, it is not necessary to for a

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

8 permission under federal law.

9 4.6 However, a quality assurance lab must be certified through

15 4.9 The information quoted in the previous paragraph is

18 paragraph 4.9 and therefore denies the same.

19 4.10 In early June of 2014, Confidence was the first laboratory

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

10 permission under federal law.

11 4.11 Confidence is not required to and does not possess a

2 permission under federal law.

3 4.12 Confidence does NOT produce, process or sell marijuana.

20 permission under federal law.

21 4.13 The scientific equipment necessary for testing the quality

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

2 paragraph 4.14 and therefore denies the same.

3 4.15 In November of 2015, Mosely and Hines walked into the

26 paragraph 4.18 and therefore denies the same.

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

22 (“Promissory Note”). Defendant denies the remaining allegations in paragraph 4.22.

23 4.23 Confidence’s account was transferred to Banner banker

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

5 4.25 Scroggins assured Mosely and Hines that Banner could

12 4.27 Mosely and Hines relied upon Scroggins assurances to

16 4.28 Scroggins also wanted Mosely and Hines to conduct their

22 allegations in paragraph 4.29.

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

3 4.31 Banner required personal guarantees from Mosely, Hines

11 Defendant denies the remaining allegations in paragraph 4.32.

12 4.33 Banner required Confidence to purchase additional

21 4.35 Confidence used the Banner loan to purchase additional

26 4.35 and therefore denies the same.

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

9 itself. Defendant denies the remaining allegations in paragraph 4.37.

10 4.38 Miller’s reason for defaulting the loan is unfair and

22 V. FIRST CAUSE OF ACTION:

24 5.1 Plaintiffs restate the allegations in paragraphs 1.1 through

23 5.5 Confidence relied upon Banner’s representations and took

26 denies the remaining allegations in paragraph 5.5.

27 DEFENDANT’S ANSWER AND AFFIRMATIVE DEFENSES Davis Wright Tremaine LLP

6 VI. SECOND CAUSE OF ACTION:

8 6.1 Plaintiffs restate the allegations in paragraphs 1.1 through

15 6.3 Banner then unilaterally cancelled the loan and closed

23 6.5 Banner’s unfair and/or deceptive business practices impact