Venture Gen. Agency, LLC v. Wells Fargo Bank, N.A.
| Decision Date | 01 August 2019 |
| Docket Number | Case No. 19-cv-02778-TSH |
| Parties | VENTURE GENERAL AGENCY, LLC, et al., Plaintiffs, v. WELLS FARGO BANK, N.A., et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Plaintiffs Venture General Agency, LLC and Old American County Mutual Fire Insurance Co. (together, "Plaintiffs") bring negligence and negligence per se claims against Defendant Wells Fargo Bank, N.A., related to a third party that fraudulently impersonated Old American and induced Venture to transfer funds to bank accounts at Wells Fargo. Wells Fargo moves to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). ECF No. 8. Plaintiffs filed an Opposition (ECF No. 10) and Wells Fargo filed a Reply (ECF No. 11). Having considered the parties' positions, relevant legal authority, and the record in this case, the Court GRANTS Wells Fargo's motion.
Old American is a property and casualty insurance company. Compl. ¶ 2, ECF No. 1. Venture is a managing general agent appointed to hold funds in a premium trust account as a fiduciary of Old American. Id. ¶ 1.
On March 13, 2017, Venture's CFO, Brittany McKinney, received an email from an "unknown fraudster" impersonating Denise Wolfe, a Senior Resource Accountant at Old American from Wolfe's work email address, denise.wolfe@oldam.com. Id. ¶ 8. The fraudster falsely represented to McKinney that Old American was under audit and, in a subsequent email from a false but similar email address, denise.wolfe@accountant.com, requested that she change the account information on the Automated Clearing House ("ACH") destination. Id. ¶ 9. The fraudster then provided a SunTrust Bank account number and induced McKinney to transfer $987,247.81 into that account. Id. ¶ 10. SunTrust immediately recognized the transfer as fraudulent, rejected it, and closed the account. Id. ¶ 11. On March 17, 2017, the fraudster emailed McKinney again, stating that the prior SunTrust account information was incorrect and providing a new SunTrust account number. Id. ¶ 12. The fraudster requested McKinney transfer the original amount to the new SunTrust account. Id. ¶ 13. SunTrust again recognized the indicia of fraud and rejected the second ACH transfer. Id. ¶ 14.
Sometime prior to March 21, 2017, the fraudster opened a Wells Fargo account in the name of Old American. Id. ¶ 15. On March 21, 2017, the fraudster represented to McKinney that there was an issue with the second SunTrust account and requested she re-issue the $987,247.81 a third time, this time to the Wells Fargo account. Id. ¶ 16. On April 12, 2017, the fraudster informed McKinney that the funds from the prior two transfers should be "returned" to the fraudulent Wells Fargo account. Id. ¶ 18. McKinney was then further induced to make two transfers of $137,424,06 each and a transfer of $446,016.93 into the Wells Fargo account. Id. ¶ 19. In total, Wells Fargo allowed $1,708,112.86 of Old American's funds to flow from Venture to the false Old American account set up by the fraudster. Id. ¶ 20.
Old American discovered the fraud on or about May 26, 2017, when it contacted McKinney regarding the ACH transfers. Id. ¶ 21. That same day, Old American contacted Wells Fargo to report the fraud. Id. ¶ 22. In a June 15, 2017 correspondence with a Wells Fargo Financial Crimes Consultant, Venture received confirmation from Wells Fargo that it possessed knowledge of the fraudulent account and transfers since at least May 26, 2017. Id. ¶ 24.
On or about May 31, 2017, the Federal Bureau of Investigation became involved and began investigating the Wells Fargo account and transfers. Id. ¶ 23. On June 20, 2017, Wells Fargo informed Venture that it could not provide any information regarding the account of a customer and that Venture should request that the FBI submit an inquiry to a designatedadministrative-type email address within Wells Fargo. Id. ¶ 27. The FBI submitted such an inquiry one day later. Id. ¶ 28.
Having received no response in more than three months, Old American transmitted a letter to Wells Fargo on September 22, 2017, demanding the return of the funds that were transferred. Id. ¶ 29. On November 28, 2017, the Wells Fargo Financial Crimes Division informed Venture that all inquiries should be directed through law enforcement and that Wells Fargo would not provide any information. Id. ¶ 30. Wells Fargo refused to provide information on the amount of Old American's money remaining in the account and the procedures for returning any remaining funds. Id.
Five months later, on April 30, 2018, Wells Fargo provided a response to the initial demand letter in which it refused to provide any information about the location, identity or procedures for the funds and denied all responsibility for the fraudulent transfers. Id. ¶ 31. Wells Fargo reiterated this position in a follow-up correspondence dated October 1, 2018. Id. ¶ 32.
Plaintiffs filed the present case on May 21, 2019, alleging one count of negligence and one count of negligence per se. Id. ¶¶ 39-68. They allege Wells Fargo failed to follow proper statutory procedures in confirming its customer's identity. Id. ¶¶ 44-48. They also allege Wells Fargo has a duty to investigate potential criminal activity related to its customers' accounts and to assist noncustomer fraud victims in retrieving their funds. Id. ¶ 50. Plaintiffs further allege Wells Fargo failed to comply with the Bank Secrecy Act by not accurately establishing the identity of the fraudster. Id. ¶¶ 57-66. As a result, Plaintiffs allege Wells Fargo facilitated the commission of fraud upon them. Id. ¶¶ 49, 67-68.
Wells Fargo filed the present motion on June 25, 2019.
To survive a Rule 12(b)(6) motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility does not mean probability, but it requires "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 687 (2009). A complaint must therefore provide a defendant with "fair notice" of the claims against it and the grounds for relief.Twombly, 550 U.S. at 555 (quotations and citation omitted); Fed. R. Civ. P. 8(a)(2) (). In considering a motion to dismiss, the court accepts factual allegations in the complaint as true and construes the pleadings in the light most favorable to the nonmoving party. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008); Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). However, "the tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Iqbal, 556 U.S. at 678.
If a Rule 12(b)(6) motion is granted, the "court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal quotations and citations omitted). However, the Court may deny leave to amend for a number of reasons, including "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
Wells Fargo argues Plaintiffs' claims must fail because the Uniform Commercial Code ("UCC") expressly immunizes banks that rely on the beneficiary account number in processing funds transfers. Mot. at 1. It argues the UCC displaces common law claims, like negligence and negligence per se, and that the applicable statute, UCC section 11207(b), authorizes banks to rely on the beneficiary account number in processing payment orders, providing immunity to banks in such circumstances. Id. Wells Fargo further argues that it does not owe a duty of care to non-customers such as Plaintiffs. Id.
In response, Plaintiffs argue the UCC is inapplicable to their claims because they not only seek relief for Wells Fargo's processing of the wire transfers, but for its acts after processing them, including "a failure to communicate with Plaintiffs, a failure to work efficiently and effectivelywith the Federal Bureau of Investigation to remedy the fraud, and a failure to advise Plaintiffs as to the existence, amount and whereabouts of any remaining funds." Opp'n at 5. They maintain the UCC was not intended "to prevent common law negligence claims against banks for failing to properly communicate, address, account for and remedy fraudulent transfers after receipt of notice of same." Id. at 6. As to the merits of their claims, Plaintiffs concede that Wells Fargo owes no duty to noncustomers, id. at 7, but argue their complaint "alleges more than a mere third party or arms-length relationship" between them and Wells Fargo as Plaintiffs were "the originators and depositors of the disputed funds" and "were foreseeable and identifiable injured parties to which [Wells Fargo] owed a duty to act with reasonable care." Id. at 8. Finally, Plaintiffs argue they assert a valid claim for negligence per se for Wells Fargo's alleged violations of the Bank Secrecy Act's Anti-Money Laundering regulations because they properly borrow the statute to prove a duty of care and the standard of care. Id. at 9.
Wells Fargo moves to dismiss Plaintiffs' negligence claims on the ground that UCC Article 4A—adopted as Division 11 of the California UCC, Cal....
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