During the time that Carol Young worked as an assistant to Brian P. Burns,her salary never exceeded $75,000 a year. But during this period, she opened several credit card accounts with Neiman Marcus on which she charged more than $1 in luxury goods. Although Neiman knew Young’s salary, it assigned her a personal shopper to encourage more buying.

Young waspaying for all of these purchases by forging checks from Burns’s personal bank account and then taking them to the Customer Service Center in Neiman Marcus’s San Francisco store – sometimes several days in a row. When Young received Burns’s bank statements, she systematically destroyed her forged Neiman Marcus checks and altered Burns’s account records to make it appear that the checks had been to other third parties. This behavior went on for 12 years.

When Burns finally realized what was going on, he could no longer sue the bank because that statute of limitations had expired. Instead, Burns sued Neiman Marcus, alleging that the company was liable because of its negligence in accepting Burn’s checks to pay Young’s bills. Burns argued that, when Neiman Marcus saw these massive checks drawn on his personal account, it should have contacted him, especially since the company knew that Young could not possibly afford such large expenditures.

The trial court found for Neiman Marcus and Burns appealed. 

Questions:

1. Is Neiman Marcus liable for the checks that Young forged?

2. Upon discovering the embezzlement, why didn’t plaintiff sue the bank?

3. Did the court impose a duty on Neiman Marcus to investigate third-party checks?