Fragale v. Wells Fargo Bank, N.A.

• Decision Date: 19 August 2020
• Docket Number: CIVIL ACTION NO. 20-1667
• Citation: 480 F.Supp.3d 653
• Parties: Frank FRAGALE, Plaintiff v. WELLS FARGO BANK, N.A., Defendant
• Court: U.S. District Court — Eastern District of Pennsylvania

480 F.Supp.3d 653

Frank FRAGALE, Plaintiff

v.WELLS FARGO BANK, N.A., Defendant

CIVIL ACTION NO. 20-1667

United States District Court, E.D. Pennsylvania.

Filed August 19, 2020

Kenneth T. Levine, Andrew G. Hunt, DeLuca Levine LLC, Blue Bell, PA, for Plaintiff.

Diane A. Bettino, Reed Smith LLP, Princeton, NJ, for Defendant.

MEMORANDUM OPINION

NITZA I. QUIÑONES ALEJANDRO, J.

INTRODUCTION

In this civil action, Plaintiff Frank Fragale ("Plaintiff") alleges that Defendant Wells Fargo Bank, N.A. ("Wells Fargo") was negligent and, therefore, liable for its intermediary role in a fraudulent wire transfer transaction perpetrated by a third party against Plaintiff. Defendant disagrees and filed a motion to dismiss Plaintiff's complaint filed pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6), [ECF 4]. Plaintiff filed a response in opposition thereto, [ECF 5], and Wells Fargo filed a reply. [ECF 8]. The issues presented in the motion have been fully briefed and the motion is ripe for disposition. For the reasons stated herein, Wells Fargo's motion to dismiss is granted.

BACKGROUND

In deciding a motion to dismiss, courts must accept all relevant and pertinent factual allegations in the complaint as true. Phillips v. Cnty. Of Allegheny , 515 F.3d 224, 233 (3d Cir. 2008). Here, the relevant factual allegations are summarized as follows:

While in the process of preparing to purchase a retirement home in Celebration, Florida, Plaintiff communicated with his title company, Equitable Title of Celebration, LLC ("Equitable Title"), regarding the closing process. (Compl. at ¶¶ 4-5). On May 16, 2019, Plaintiff received an e-mail from an entity falsely claiming to be Equitable Title that provided instructions for Plaintiff to wire transfer settlement funds in the amount of $166,054.96 in order to close on the Celebration property. (Id. at ¶ 6). The next day, Plaintiff initiated a wire transfer for the full amount from his personal bank account to the Wells Fargo bank account specified in the e-mail, which was maintained under the name of Kelleen Chea (the "Account"). (Id. at ¶¶ 7, 29). After Plaintiff completed the wire transfer and Wells Fargo credited the funds to the Account, the funds were withdrawn from the Account almost immediately through two cashier's checks collectively totaling $160,000. (Id. at ¶ 8). Plaintiff was later informed that the Account was fraudulent, and Wells Fargo was unable to recover the funds. (Id. at ¶¶ 8-9).

Plaintiff alleges that Wells Fargo was aware of the large number of similar fraudulent acts occurring throughout the country in which criminals send false wiring instructions to victims and immediately withdraw the funds once the victims complete the transfer. (Id. at ¶ 11). Wells Fargo was also aware that such activity is often perpetrated by criminals who fraudulently open bank accounts in false names. (Id. at ¶ 12). Wells Fargo became aware of this kind of fraudulent scheme through many different sources over the past five years. (Id. at ¶ 13). For example, approximately one year prior to the underlying funds transfer, the Federal Bureau of Investigation issued a Public Service Announcement regarding this very type of fraud. (Id. at ¶ 15). Similarly, the American Bankers Association issued numerous publications over the last five years identifying the importance of banks in combatting wire transfer fraud schemes. (Id. at ¶ 18).

Plaintiff asserts a negligence claim premised on his contention that his financial loss was the result of Wells Fargo's (1) failure to properly verify the identity of the individual opening the Account under a purportedly false name (Kelleen Chea), and (2) failure to undertake reasonable, preventative steps before permitting the withdrawal of a large amount of funds when such funds had just been wired into the Account, which itself was recently opened. (Id. at ¶¶ 10, 29).

LEGAL STANDARD

Rule 12(b)(6) provides that a defendant may seek to have a plaintiff's complaint dismissed because it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When considering whether to grant a Rule 12(b)(6) motion, a court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Fowler v. UPMC Shadyside , 578 F.3d 203, 210-11 (3d Cir. 2009) (citing Ashcroft v. Iqbal , 556 U.S. 662, 667, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). The court must determine whether the plaintiff has alleged facts sufficient to "nudge[ ] [his or her] claims across the line from conceivable to plausible." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The complaint may not merely allege a plaintiff's entitlement to relief—it must " ‘show’ such an entitlement with its facts." Fowler , 578 F.3d at 211. Mere "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. A claim will not survive a motion to dismiss if the court has construed the complaint's factual allegations in light most favorable to the plaintiff and finds the plaintiff could not be entitled to relief. Fowler , 578 F.3d at 210.

DISCUSSION

As noted, Plaintiff asserts that Wells Fargo was negligent when it failed to exercise reasonable care and allowed (1) a fraudulent account to be opened at one of its banks and (2) the withdrawal of a large sum of money to be immediately after it was transferred to a newly-opened, fraudulent account.¹ In its motion to dismiss, Wells Fargo argues that (1) the negligence claim is preempted by Pennsylvania Uniform Commercial Code ("PUCC") Article 4A ("Article 4A"), and (2) Plaintiff has failed to plausibly allege facts sufficient to show that Wells Fargo owed a duty of care to Plaintiff, a non-customer. Because a negligence claim cannot proceed if it is preempted by Article 4A, this Court will address that issue first.

I. Article 4A Preemption

Wells Fargo argues that Plaintiff's negligence claim is preempted by Article 4A of the Pennsylvania Uniform Commercial Code. ("Article 4A"), 13 Pa. Cons. Stat. §§ 4A101 - 4A507. "Article 4A, which applies generally to wire transfers, ... is a comprehensive scheme enacted to govern electronic wire transfers." U.S. Att'y Gen. v. PNC Bank , 2009 WL 10736701, at *3, 2009 U.S. Dist. LEXIS 153155, at *8 (E.D. Pa. March 31, 2009) ; see also 13 Pa. Cons. Stat. § 4A102 ("Except as otherwise provided in section 4A108 (relating to relationship to Electronic Fund Transfer Act), this division applies to funds transfers defined in section 4A104 (relating to funds transfer; definitions)."). "[P]arties whose conflict arises out of a funds transfer should look first and foremost to Article 4-A for guidance in bringing and resolving their claims." PNC Bank , 2009 WL 10736701, at *3, 2009 U.S. Dist. LEXIS 153155, at *8 (quoting Sheerbonnet, Ltd. v. Am. Express Bank, Ltd. , 951 F. Supp. 403, 407 (S.D.N.Y. 1995) (emphasis added)). Article 4A provides "the exclusive means of determining the rights, duties and liabilities of the affected parties in any situation covered by particular provisions of the Article. Consequently, resort to principles of law or equity outside of Article 4A is not appropriate to create rights, duties and liabilities inconsistent with those stated in this Article." 13 Pa. Cons. Stat. § 4A102, cmt. As such, Article 4A "displace[s] the common law where ‘reliance on the common law would thwart the purposes of the code.’ " Bucci v. Wachovia Bank, N.A. , 591 F. Supp. 2d 773, 779 (E.D. Pa. 2008) (quoting New Jersey Bank N.A. v. Bradford Sec. Operations, Inc. , 690 F.2d 339, 346 (3d Cir. 1982) ).

"The scope of 4A is determined by the definition of ‘payment order’ and ‘funds transfer’ found in Section 4A-103 and Section 4A-104." 13 Pa. Cons. Stat. § 4A102, cmt. The term "funds transfer" is defined as:

the series of transactions, beginning with the originator's payment order , made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order .

Id. § 4A104(a) (emphasis added). The term "payment order" is defined as:

An instruction of a sender to a receiving bank, transmitted orally, electronically or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:

(i) the instruction does not state a condition to payment to the beneficiary other than time of payment;

(ii) the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and

(iii) the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system or communication system for transmittal to the receiving bank.

Id. § 4A103.

This Court finds that these definitions provide the precise range of transactions and/or occurrences governed by Article 4A. By definition, Article 4A governs only those actions occurring between the originator's wire fund instruction ("beginning with the originator's payment order") and the beneficiary bank's acceptance of the wire transferred funds ("completed by acceptance by the beneficiary's bank of a payment order").

Here, as clarified by Plaintiff in his response to the motion to dismiss, Plaintiff's claims are premised only on the opening of the Account at Wells Fargo and the subsequent withdrawal of the funds from that Account. Plaintiff has expressly disclaimed any cause of action premised on the wire transfer itself. (Pltf. Br. at 3). From a chronological factual perspective, it is apparent that the opening of the Account occurred at a point in time prior to Plaintiff's wire fund transfer instruction (the payment order). Thus, any claim premised on...