Bank records later showed Lipps was in Tennessee when the North Dakota crimes took place, according to the lawsuit.
According to the complaint, a West Fargo investigator used facial-recognition software on a photograph from a fake identification document connected to a suspect.
He said Fargo detectives wrongly assumed that surveillance photographs from the Fargo bank thefts had also been run through facial-recognition software.
A computer match is still only a lead Facial-recognition software can compare an image against a database and return possible matches.
Lipps' lawsuit argues police failed at that second step.