Interactive Intelligence, Incorporated v. KEYCORP, KEYBANK NATIONAL ASSOCIATION, and ADAM RAVENS

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-4058
INTERACTIVE INTELLIGENCE, INCORPORATED,
Plaintiff-Appellant,
v.
KEYCORP, KEYBANK NATIONAL ASSOCIATION, and
ADAM RAVENS,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 05 C 1518—Larry J. McKinney, Judge.
ARGUED SEPTEMBER 12, 2008—DECIDED OCTOBER 24, 2008
Before RIPPLE, ROVNER, and EVANS, Circuit Judges.
EVANS, Circuit Judge. Interactive Intelligence, Inc.
filed this action against KeyCorp, KeyBank, and Adam
Ravens (a former employee of KeyBank), alleging various
contractual and tort theories of liability arising out of
foreign exchange (FX) currency transactions. The district
court granted the defendants’ motions for summary
judgment; Interactive appeals.

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2 No. 07-4058
Interactive and KeyBank had a commercial banking
relationship in which Interactive began executing FX
transactions through the bank. The transactions involved
both the conversion of dollars into foreign currencies
and foreign currencies into dollars. Ravens, a KeyBank
FX salesman based in Cleveland, Ohio, had primary
responsibility for Interactive’s account during most of the
relationship. KeyBank, not surprisingly, made a profit
from the transactions. The parties continued their rela-
tionship for over seven years.
During the first three years of their relationship the
parties did business without a written contract. Traci Shaw,
who worked in Interactive’s accounting department,
arranged FX transactions. When she received an invoice
with an amount stated in foreign currency, she would go
to the Internet and “come up with a conversion.” She
gave the information to Keith Midkiff, Interactive’s vice-
president of finance. After she received approval from
him, she “would fax that to KeyBank for them to initiate
the transfer.” Then a person at KeyBank would “insert
whatever information she needed to in her system,
initiate the transfer, and then she would call [Shaw] with
an exchange rate and the U.S. dollar amount.” Shaw then
“entered the invoice into the system with the U.S. dollar
amount.” Later confirmations were made by fax or
KeyBank’s FX online system. The terms were binding
on both parties if Interactive did not object within two
business days. But what was KeyBank to be paid for its
services?
John Gibbs, a cofounder and former executive vice-
president of Interactive, testified that he had conversa-

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No. 07-4058 3
tions in either 1997 or 1998 with “someone” from KeyBank
about having the bank perform FX transactions “at mar-
ket.” Gibbs understood “at market” to mean either the
exchange rate from the Wall Street Journal or the rate a
person could obtain using a Visa credit card. He also
recalled that Interactive agreed to pay KeyBank a process-
ing fee for each FX transaction. In other words, Gibbs
thought Interactive would pay a fee per transaction,
rather than “on a spread” (a percentage markup of an
exchange rate).
In May 2001, the parties signed a contract which was
silent on the issue of fixed fees versus “a spread.” The
contract indicated that Interactive was not relying on
advice from KeyBank in entering FX transactions, but
rather had consulted with its own advisors.
Information on exchange rates is widely available.
Interactive’s assistant controller, Barbara Claassen, for
instance, knew that she could find information about
exchange rates on the Internet. And, in fact, at some
point Interactive noticed that the rates KeyBank was
using were not the same as the ones published in the Wall
Street Journal. Shaw was asked to investigate, and Ravens
told her the discrepancy resulted from the differences in
the size of the transactions. Later, another Interactive
official noticed significant disparities but did not request
an investigation. In its suit, Interactive contends that it
was overcharged more than $2 million for KeyBank’s
services.
The culprit, according to Interactive, was Ravens. He
worked for KeyBank as an FX trader from 1998 to 2005.

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4 No. 07-4058
He was an employee at will, but as a condition of his
employment he agreed to comply with the “KeyBank
Code of Ethics,” which contained guidelines concerning
confidentiality, self-interested transactions, gifts, enter-
tainment, loans, etc. No one at Interactive saw KeyCorp’s
Code of Ethics during the time KeyBank provided it
with FX services.
Ravens applied a spread to the FX transactions, and the
amount of the spread gradually increased over the years.
Ravens did not inform Interactive that he was applying
a spread. But KeyBank was allegedly aware that Ravens
aggressively used a spread and lost customers as a result.
KeyBank eventually terminated Ravens’ employment
in July 2005.
In an attempt to recover some of what it contends were
overcharges, Interactive set out a number of causes of
action, which were dismissed on summary judgment. In
this appeal, Interactive claims to be a third-party benefi-
ciary of the “employment contract” between Ravens and
KeyBank. Interactive also claims that KeyBank was negli-
gent in supervising Ravens and that KeyBank breached
a fiduciary duty and an oral contract. Interactive filed some
of the claims as class action claims. The district
judge dismissed those claims as well.
One problem in this case, which is not adequately
addressed by the parties, is what law applies to the claims.
On the claims based on the supposed employment con-
tract, KeyBank says the parties agree that Ohio law gov-
erns; however, Interactive cites the law of Connecticut
and New Jersey. KeyBank says that on all other claims

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No. 07-4058 5
Indiana law controls; however, while Interactive relies on
Indiana law on the claims based on breach of a fiduciary
duty and of oral contract, it says Ohio law applies to the
negligence claims. Like much else in this case, what
law should apply is unclear, but the deficiencies in the
plaintiff’s case are clear under the laws of either Ohio or
Indiana. We will proceed with our de novo review. Gillespie
v. Equifax Info. Servs., L.L.C., 484 F.3d 938 (7th Cir. 2007).
Interactive’s first claim is that it is a third-party benefi-
ciary of a contract between KeyBank and Ravens and
therefore a beneficiary of KeyBank’s Code of Ethics, which
Ravens allegedly violated. This claim is hopelessly
flawed. First, Ravens was an at-will employee. He signed
a form, as a condition of his employment, saying he
would abide by the bank’s Code of Ethics, but he did not
have an employment contract. Second, it would be a
rather bad public policy, it seems to us, to say that cus-
tomers are third-party beneficiaries of codes of ethics. If
that were the case, a company could avoid liability by, of
course, simply doing away with its ethics codes. That
would not be very desirable. Furthermore, there is no
evidence that Interactive relied in any way on the Code
of Ethics in its dealings with the bank. In short, the evi-
dence cannot support this bizarre claim that Interactive
is a beneficiary of any sort of contract or code between
Ravens and his employer.
Interactive also contends that KeyBank was negligent
for failing to properly supervise Ravens. Citing Greenberg
v. Life Insurance Co. of Virginia, 177 F.3d 507 (6th Cir. 1999),
Interactive says that KeyBank negligently failed (a) to

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6 No. 07-4058
train and supervise its employees about making proper
disclosures; (b) to monitor the accuracy of FX trades; and
(c) to take action to stop Ravens’ “aggressive spreading”
despite the company’s knowledge of his activities. This,
Interactive says, is a well-recognized claim under Ohio
law—apparently as set out in Greenberg. KeyBank, on the
other hand, says that under Indiana law, because the
parties have a contract, the extent of any duty owed is
a matter of contract interpretation. Perryman v. Huber,
Hunt & Nichols, 628 N.E.2d 1240 (Ind. Ct. App. 1994).
KeyBank says a “duty” cannot be used to expand the
obligations the parties assumed in their contract, relying
for this proposition on Zenith Insurance Co. v. Employers
Insurance of Wausau, 141 F.3d 300 (7th Cir. 1998), a case,
by the way, in which the law of Wisconsin con-
trols—adding yet more variety to our stroll through
state law.
Unfortunately for Interactive, the case on which it relies
does not support its claim. In Greenberg, the court quoted
an Ohio case for the proposition that an “underlying
requirement in actions for negligent supervision and
negligent training is that the employee is individually
liable for a tort or guilty of a claimed wrong against a
third person, who then seeks recovery against the em-
ployer.” Strock v. Pressnell, 527 N.E.2d 1235, 1244 (1988).
Greenberg does not simply say, as Interactive would have
us believe, that “an employer always has a duty to ade-
quately train and supervise its employees so as not to
cause injury to others.” For KeyBank to be negligent,
Ravens must have breached a duty of care he owed
Interactive. But he had no such duty.

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No. 07-4058 7
It goes without saying that Ravens had no fiduciary
duty to Interactive. Interactive contends, however, that a
fiduciary relationship should be “presumed” even
between contracting parties in situations in which one
party has a superior position and sustains a substan-
tial advantage over the other. The hoary case, which
predates America’s entry into World War I, that Interactive
relies on is Westphal v. Heckman, 113 N.E. 299, 301 (Ind.
1916). In that case, the court said:
There are certain legal and domestic relations in
respect to which the law raises a presumption of trust
and confidence on one side and a corresponding
influence on the other. The relations of attorney and
client, principal and agent, husband and wife, and
parent and child, belong to this class, and there may
be others. Where such a relation exists between two
persons and the one occupying the superior position
has dealt with the other in such a way as to sustain a
substantial advantage, the law will presume that
improper influence was exerted and that the trans-
action is fraudulent.
To put it mildly, Westphal is not helpful. The facts in that
case are that a few days before his death, Westphal con-
veyed property to his son to the exclusion of his two
daughters, who promptly sued, claiming the son had
undue influence over their father. In that context the
court set out the presumption we quoted but then found
that it applied as to the influence of a parent over a child,
but not a child over a parent. So the presumption did not

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8 No. 07-4058
A later case, Rogers v. Nat’l City Bank of Evansville, 622 N.E.2d 1
476 (Ind. 1994), found that the presumption of undue influence
of a husband over a wife was superseded by statute in the
case of joint bank accounts.
carry the day in Westphal. In our view, the Indiana courts1
would not extend the presumption to a commercial
relationship like the one Interactive had with KeyBank.
Our conclusion is buttressed by Wilson v. Lincoln Federal
Savings Bank, 790 N.E.2d 1042, 1046 (Ind. Ct. App. 2003),
where the court says that a “business or ‘arm’s length’
contractual relationship does not give rise to a fiduciary
relationship. That is, the mere existence of a relation-
ship between parties of bank and customer or depositor
does not create a special relationship of trust and confi-
dence.” (Internal citation omitted.)
It is true that a bank may owe a customer a fiduciary
duty if a confidential relationship exists between them.
Paulson v. Centier Bank, 704 N.E.2d 482 (Ind. Ct. App. 1998).
But there is nothing confidential in the FX transaction. The
uncontroverted evidence shows that Interactive’s em-
ployees knew that exchange rates were available on the
Internet and in the Wall Street Journal. In fact, on occasion,
Interactive employees asked KeyBank about the reasons
for the difference between published rates and the rates
the bank was using. This is simply not a situation in
which the bank was acting as a fiduciary.
Finally, Interactive says KeyBank breached a late 1990s
oral contract. Gibbs (the former executive vice-president
of Interactive) testified that he entered into an oral agree-

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No. 07-4058 9
ment with KeyBank for its FX services. The terms of the
agreement, he said, were that Interactive would “get
foreign exchange services at market.” When asked to
explain “market,” he said it would be the rate as pub-
lished in the Wall Street Journal or what Visa would
charge. The testimony continued:
Q All right. So it was your understanding that
KeyBank would be making no profit on FX transac-
tions done for Interactive?
A Not on a spread. It was mentioned that—of course
we have to have some kind of processing fee or
something to that effect. And I said, “Meaning?”
And they said—he said, “A nominal processing
fee.” And I recall the example being, like, $23, $17,
depends, $27, depends on the size of the transac-
tion, but we need to charge some kind of process-
ing fee.
Later he said, “Again, I was told we would get it at ex-
change—at market rate. There would be no spread.” Gibbs
also testified that he left the working out of the details to
Midkiff (Interactive’s vice-president of finance). However,
Midkiff said that he did not recall entering into any
agreement other than the signed contract in 2001.
The supposed oral contract is too vague to be enforce-
able. See Pepsi-Cola Gen. Bottlers, Inc. v. Woods, 440 N.E.2d
696 (Ind. Ct. App. 1982). An agreement to work out more
definite terms at some future time is not enforceable.
Wolvos v. Meyer, 668 N.E.2d 671 (Ind. 1996). That is all that
the evidence can possibly show in this case, and accord-
ingly there is no enforceable oral contract.

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10 No. 07-4058
For these reasons, we will affirm the judgment dismiss-
ing Interactive’s claims against all defendants. There is
no need, then, to consider the appeal relating to dismissal
of requests for class action status.
The judgment of the district court is AFFIRMED.
10-24-08

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