Tex. Star Nut & Food Co. v. Truist Bank
| Decision Date | 29 September 2022 |
| Docket Number | GJH-21-2564 |
| Parties | TEXAS STAR NUT AND FOOD CO., INC. Plaintiff, v. TRUIST BANK and JOHN DOE, Defendants. |
| Court | U.S. District Court — District of Maryland |
Plaintiff Texas Star and Nut Food Co., Inc. (“Texas Star”) brings this civil action against Defendant Truist Bank (“Truist”), alleging the aiding and abetting of a hacker in a wire fraud scheme and subsequent unjust enrichment. ECF No. 8. Plaintiff seeks compensatory damages of $428,490.00, pre- and post-judgment interest, punitive damages of $1,285,470.00, and all attorneys' fees and costs. Id. at 8.[1]
Pending before the Court is Defendant Truist's Motion to Dismiss Counts 3 and 4 of the Amended Complaint, ECF No. 12. No hearing is necessary. See Loc. R. 105.6 (D. Md 2021). For the following reasons, the Motion is granted.
On August 26, 2021, Texas Star filed this matter in Circuit Court for Montgomery County, Maryland, against Truist, on claims of (1) aiding and abetting and (2) unjust enrichment. See ECF No. 1 ¶ 1; ECF. No. 3. On October 6 2021, Truist filed a Notice of Removal on the basis of this Court's diversity jurisdiction, less than thirty days after being served with a copy of the Complaint and Summons.[3] ECF No. 7 ¶ 3. On October 12, 2021, Truist filed a Motion to Dismiss. ECF No. 5. On October 26, 2021, Texas Star filed an Amended Complaint. ECF No. 8.
Plaintiff's claims arise out of the creation of a fraudulent bank account with Truist by an unknown hacker, which led to two fraudulent wire transfers to the hacker by Texas Star, totaling $428,490.00.[4] Id. According to the Amended Complaint, on or around September 24, 2020, the hacker infiltrated an email conversation between a Texas Star employee and an outside vendor of the Plaintiff, SNRA Commodities, Inc. (“SNRA”). Id. ¶ 17. The hacker assumed the identities of two SNRA employees known to Texas Star, under the guise of slightly altered email addresses. See id. ¶¶ 18-19 (); see also ECF No. 8-1.
Unaware of the scheme, an employee of Texas Star began communicating with the hacker, who ultimately requested that a subsequent payment to SNRA be made via a wire transfer. ECF No. 8 ¶¶ 20-24; see also ECF No. 8-1. On October 2, 2020, Texas Star called its bank to initiate two wires to the hacker's bank account at Truist, on the belief that the payments would be issued to SNRA. ECF No. 8 ¶¶ 25-26. On October 28, 2020, SNRA contacted Texas Star to notify them that they were in arrears and that the earlier wire transfers had never been received by the company. Id. ¶ 34.
Texas Star argues that the hacker “presented false identification” to open an account online and that Truist “knowingly failed to follow [its] validation procedures which likely would have detected the fraud.” Id. ¶ 11-13. Texas Star contends that Truist “knew that the identification used to open the account was false, or alternatively, failed to review the false identification,” despite approving the opening of the account. Id. ¶¶ 14-15. Additionally, Texas Star asserts that wire instructions for the two fraudulent transfers showed that the intended beneficiary of the wires was SNRA, not the hacker, and thus, Truist had “actual knowledge” of the fraud. Id. ¶¶ 27-28. At the same time, Texas Star claims that Truist “knowingly failed” to identify that the beneficiary in the wire instructions was different from the name of the bank account holder, as part of its review process. Id. ¶ 30. Further, Texas Star contends that Truist allowed the transaction to proceed “despite allegedly conducting the required review of the wire transaction pursuant to Federal required ‘Know Your Customer' policies.” Id. ¶ 29.
On November 9, 2021, Truist filed its Motion to Dismiss for Failure to State a Claim on Counts 3 and 4 of the Amended Complaint. ECF No. 12. On November 23, 2021, Texas Star responded, ECF No. 13, and on December 7, 2021, Truist filed a reply, ECF No. 14.
Federal Rule of Civil Procedure 12(b)(6) permits a defendant to present a motion to dismiss for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A complaint will survive a motion to dismiss if it contains “sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
Courts must consider a motion to dismiss according to the pleading requirements of Rule 8(a)(2), which demand “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed R. Civ. P. 8(a)(2); see Twombly, 550 U.S. at 554-55. Further, a well-pleaded complaint may proceed even if the “actual proof of those facts is improbable” and “recovery is very remote and unlikely,” Twombly, 550 U.S. at 556 (internal quotations and citation omitted); however, the complaint must still include a “‘showing,' rather than a blanket assertion, of entitlement to relief.” Id. at 555 n.3. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678; see also Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 258 (4th Cir. 2009).
Plaintiff alleges two causes of action against Truist: (1) the bank aided and abetted the hacker in the fraud perpetrated against Texas Star; and (2) the bank has been unjustly enriched due to the fraud. ECF No. 8. Defendant Truist argues in its Memorandum of Law in support of its Motion to Dismiss that Texas Star's claims are preempted by Article 4A of the Maryland Uniform Commercial Code (“UCC”). ECF No. 12-1. Additionally, Truist argues that Texas Star's common law claims fail because Plaintiff has not pleaded sufficient facts to make either claim plausible. Id. Because Plaintiff's common law claims may not proceed if they are preempted by the UCC, the Court will address this issue first.
Truist argues that Texas Star's claims are preempted by Article 4A of the UCC as adopted in Maryland, which governs funds transfers. ECF No. 12-1 at 7-12; see also Md. Code Ann., Com. Law § 4A-101 et seq.[5]
The Maryland UCC provides as follows:
“Funds 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. The term includes any payment order issued by the originator's bank or by 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.
Md. Code Ann., Com. Law § 4A-104(1).
Historically, the UCC was designed in part to “make uniform the law among the various jurisdictions.” Md. Code Ann., Com. Law § 1-103(3). Accordingly, “when the Code and common law both provide a means of recovery, the Code should displace the common law, because variations in the common law among states destroy the uniformity in commercial transactions sought to be accomplished by the [UCC].” Equitable Life Assur. Soc. of the U.S. v. Okey, 812 F.2d 906, 909 (4th Cir. 1987) (citation omitted); see Silver v. Wells Fargo Bank, N.A., No. CV MJG-16-382, 2017 WL 3621235, at *3 (D. Md. Aug. 23, 2017); Advance Dental Care, Inc. v. SunTrust Bank, 816 F.Supp.2d 268, 270-71 (D. Md. 2011).
Thus, Article 4A generally preempts common law claims involving funds transfers. See Mar-Chek, Inc. v. Mfrs. & Traders Co., 2019 WL 3067501, at *6 (D. Md. July 11, 2019). And, indeed, Texas Star admits as much in its Response to Truist's Motion to Dismiss. ECF No. 13 at 5-6 (“Plaintiff's action against Truist is not for its role in receiving a wire transfer from the Plaintiff's bank-Plaintiff concedes that, if that were the case, Title 4A of the UCC would displace the claim and would provide protection to Truist.”).[6]
Texas Star argues, however, that Truist's actions in setting up and managing a bank account for the hacker are not preempted as such. ECF No. 13 at 6-8. There is support for the view that “claims regarding the opening and management of fake accounts will not be preempted” by the UCC's Article 4A. Nirav Ingredients, Inc. v. Wells Fargo Bank, N.A., 516 F.Supp.3d 535, 540 (W.D. N.C. 2021), aff'd, No. 21-1893, 2022 WL 3334626 (4th Cir. Aug. 12, 2022) (per curiam) (citing Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 224 (4th Cir. 2002)).
The matter in Nirav involved a sadly similar tale to the one here. Plaintiffs sought damages from Wells Fargo Bank N.A. (“Wells Fargo”), after an unknown hacker opened a bank account with Wells Fargo and then induced one of the plaintiffs with a fake email to wire a substantial sum to the account, rather than to its intended beneficiary, the second plaintiff. Id. at 537-38. While any claims arising out of the wire transfer were dismissed as preempted under the North Carolina UCC, plaintiffs' state-law negligence claims involving the opening and use of the fraudulent account survived, as falling outside of Article 4A's provisions. Id. at 540. Courts in other jurisdictions have decided likewise. See Shecter Landscaping, Inc. v. JPMorgan Chase Bank NA, No. 22-10106, 2022 WL 2704843, at *3 (E.D. Mich. July 12, 2022); S&S Worldwide, Inc....
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