Grand Bayman Belize, Ltd. v. Wells Fargo & Co.

• Decision Date: 21 January 2021
• Docket Number: Case ? 2:19-cv-07698 ODW (RAOx)
• Citation: 514 F.Supp.3d 1188
• Parties: GRAND BAYMAN BELIZE, LTD., Plaintiff, v. WELLS FARGO & COMPANY et al., Defendants.
• Court: U.S. District Court — Central District of California

514 F.Supp.3d 1188

GRAND BAYMAN BELIZE, LTD., Plaintiff,

v.WELLS FARGO & COMPANY et al., Defendants.

Case ? 2:19-cv-07698 ODW (RAOx)

United States District Court, C.D. California.

Signed January 21, 2021

Howard E. King, Stephen D. Rothschild, King Holmes Paterno and Soriano LLP, Los Angeles, CA, for Plaintiff.

Elizabeth Courtney Farrell, Loren W. Coe, Severson and Werson PC, Irvine, CA, Marquis Ian Wraight, Severson and Werson APC, San Francisco, CA, for Defendants.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT [17]

OTIS D. WRIGHT, II, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Before the Court is Defendant Wells Fargo Bank, N.A.'s (sued as Wells Fargo & Company) motion for summary judgment on Plaintiff Grand Bayman Belize, Ltd.'s claim for wrongful payment of a wire transfer. (Mot. for Summ. J. ("Mot.") 4, ECF No. 17.) For the following reasons, the Court GRANTS the Motion.¹

II. BACKGROUND

On or about October 1, 2018, Grand Bayman received a fraudulent email, purportedly an invoice from one of its vendors, RAD Architecture, Inc. (Notice of Removal Ex. A ("Compl.") ¶ 5, ECF No. 1-1.) The email directed Grand Bayman to wire $226,991.45 to a Wells Fargo account ending in x3420 ("Account x3420"). (Id. ) On October 2, 2018, in accordance with the email, Grand Bayman issued a payment order to its bank to transfer the requested amount to Account x3420 (the "Wire Transfer"). (Id. ¶ 7; Decl. Stephen D. Rothschild ¶ 7, Ex. 5, ECF No. 26 ("Payment Order").)

On October 5, 2018, Wells Fargo received the Wire Transfer, which identified the beneficiary as Wells Fargo Account x3420, RAD Architecture, Inc., located in Miami, Florida. (Wells Fargo's Statement of Uncontroverted Facts ("SUF") 1–2, ECF No. 17-3;² see also Decl. of Michelle Swirtz ("Swirtz Decl.") Ex. 1, at WF 0019, ECF No. 17-2 ("Wire Details"); Payment Order.) Within seven seconds of receipt, Wells Fargo's Money Transfer System ("MTS") processed the Wire Transfer and credited beneficiary Account x3420 with $226,991.45. (SUF 4–8.) By October 17, 2018, the funds had been withdrawn and Account x3420 closed. (SUF 10.) On November 1, 2018, Wells Fargo received a message from Grand Bayman's bank requesting that the funds be returned. (SUF 11.)

On May 23, 2019, Grand Bayman initiated this action to retrieve the transferred funds, apparently based on California Commercial Code section 11207(a).³ (See Compl. ¶¶ 10, 14.) Wells Fargo now moves for summary judgment, arguing that it falls under the safe harbor of section 11207(b)(1) because it processed the transfer automatically (i.e., without human intervention), based on the account number alone, and thus had no actual knowledge of a mismatch between the beneficiary account number and name. (Mot. 4.)

Grand Bayman purports to dispute that Wells Fargo processed the Wire Transfer automatically. (SGD 3; Opp'n 8–9, ECF No. 26.) However, the parties do not dispute that Wells Fargo's automated MTS confirmed Account x3420 was a Wells Fargo account and passed an external screening before the MTS credited Account x3420. (SGD 4–8.) The parties also do not dispute that the entire transfer process lasted only seven seconds. (See id. ) Nevertheless, Grand Bayman contends that Wells Fargo does not fall within the safe harbor because it had actual knowledge of the mismatch between the beneficiary's account number and name when it processed the Wire Transfer. (SGD 9, 11; Opp'n 8–9.)

III. LEGAL STANDARD

A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The burden of establishing the absence of a genuine issue of material fact lies with the moving party, See Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), and the court must view the facts and draw reasonable inferences in the light most favorable to the nonmoving party. Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). A disputed fact is "material" where the resolution of that fact might affect the outcome of the suit under the governing law, and the dispute is "genuine" where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Conclusory or speculative testimony in affidavits is insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill Publ'g Co. v. GTE Corp. , 594 F.2d 730, 738 (9th Cir. 1979). Moreover, though the Court may not weigh conflicting evidence or make credibility determinations, there must be more than a mere scintilla of contradictory evidence to survive summary judgment. Addisu v. Fred Meyer, Inc. , 198 F.3d 1130, 1134 (9th Cir. 2000).

Once the moving party satisfies its burden, the nonmoving party cannot simply rest on the pleadings or argue that any disagreement or "metaphysical doubt" about a material issue of fact precludes summary judgment. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; See Celotex , 477 U.S. at 322–23, 106 S.Ct. 2548. Nor will uncorroborated allegations and "self-serving testimony" create a genuine issue of material fact. Villiarimo v. Aloha Island Air, Inc. , 281 F.3d 1054, 1061 (9th Cir. 2002). The court should grant summary judgment against a party who fails to demonstrate facts sufficient to establish an element essential to the case when that party will ultimately bear the burden of proof at trial. See Celotex , 477 U.S. at 322, 106 S.Ct. 2548.

Pursuant to the Local Rules, parties moving for summary judgment must file a proposed "Statement of Uncontroverted Facts and Conclusions of Law" that should set out "the material facts as to which the moving party contends there is no genuine dispute." C.D. Cal. L.R. 56-1. A party opposing the motion must file a "Statement of Genuine Disputes" setting forth all material facts as to which it contends there exists a genuine dispute. C.D. Cal. L.R. 56-2. "[T]he Court may assume that material facts as claimed and adequately supported by the moving party are admitted to exist without controversy except to the extent that such material facts are (a) included in the ‘Statement of Genuine Disputes’ and (b) controverted by declaration or other written evidence filed in opposition to the motion." C.D. Cal. L.R. 56-3.

IV. DISCUSSION

Wells Fargo moves for summary judgment on grounds that it is entitled to protection under section 11207(b), because it processed the Wire Transfer automatically without actual knowledge of the mismatch between account name and number. (Mot. 4)

"Article 4A of the UCC governs fund transfers, which includes wire transfers ... [and] has been adopted in California as Division 11 of the California Uniform Commercial Code." Chino Com. Bank , 190 Cal. App. 4th at 1172, 118 Cal.Rptr.3d 866 (citation omitted). A " ‘[f]unds transfer’ means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order[, and] includes any payment order issued by the originator's bank ... intended to carry out the originator's payment order." Sliders Trading Co. L.L.C. v. Wells Fargo Bank NA , No. 17-CV-04930-LB, 2017 WL 6539843, at *6 (N.D. Cal. Dec. 21, 2017) (quoting Cal. Com. Code § 11104(a) ). Here, Grand Bayman (the "originator") requested that its bank (the "originator's bank" or "receiving bank") issue a payment order to Wells Fargo (the "beneficiary's bank") to wire funds to Account x3420, RAD Architecture (the "beneficiary"). (See Payment Order; Wire Details WF 0018–19.)⁴ Accordingly, Division 11 governs this dispute.

The Division 11 statute upon which Grand Bayman appears to primarily rely, section 11207(a), states:

Subject to subdivision (b), if, in a payment order received by the beneficiary's bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.

Cal. Com. Code § 11207(a). Essentially, Grand Bayman claims Wells Fargo violated this provision by accepting the Wire Transfer. (Opp'n 5–7.)

However, section 11207(b) applies where, as here, a beneficiary's bank receives a payment order that "identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons." Cal. Com. Code § 11207(b). In such a case, section 11207(b) expressly authorizes the beneficiary's bank to rely on the account number "so long as the bank does not know that the beneficiary's name and account number refer to different persons." TME Enters., Inc. v. Norwest Corp. , 124 Cal. App. 4th 1021, 1031, 22 Cal.Rptr.3d 146 (2004) ; Cal. Com. Code § 11207(b)(1) (permitting reliance on the account number "as the proper identification of the beneficiary of the order"). In this context, " ‘[k]now’ means to have actual knowledge." TME , 124 Cal. App. 4th at 1031, 22 Cal.Rptr.3d 146 (emphasis added).

The beneficiary's bank has no duty to "determine whether the name and number refer to the same person." TME , 124 Cal. App. 4th at 1032, 22 Cal.Rptr.3d 146 ; Cal. Com. Code § 11207(b)(1). This is because "funds transfers should be speedy, inexpensive, and not labor intensive." White & Summers, U.C.C. § 24:6 (6th ed.). Consequently, "[a] very large percentage of payment orders ... are processed by automated means using ... the identifying or bank account number without human reading of the payment order itself." Cal. Com. Code § 11207, cmt. 2.⁵ Thus, although a payment order may allow inclusion of the beneficiary's name, that information "plays no part in the process of payment. " Id. (emphasis added). "[I]f a duty to [determine that the name and number match] is imposed on the beneficiary's bank[,] the benefits...