1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 BPI BRIGHT POWER, INC., Case No. 22-cv-03285-JD

8 Plaintiff,

ORDER RE MOTIONS TO DISMISS

v. 9

10 UMPQUA HOLDING CORPORATION D/B/A UMPQUA BANK, et al., 11 Defendants.

12 13 Plaintiff BPi Bright Power Inc. alleges in a second amended complaint (SAC) that 14 scammers impersonated a business partner and duped BPi into transferring more than $150,000 to 15 the scammers’ bank account. Dkt. No. 42. ¶¶ 2-8. BPi sued its bank, defendant Umpqua Holding 16 Corporation, and the scammers’ bank, defendant Wells Fargo N.A., for failing to prevent the 17 fraud. Id. ¶¶ 17-30. The claims in the SAC are negligence and breach of implied contract against 18 Umpqua, and claims for negligence and breach of Section 11207 of the California Commercial 19 Code against Wells Fargo. 20 Umpqua and Wells Fargo ask to dismiss the SAC under Federal Rule of Civil Procedure 21 12(b)(6). Dkt. Nos. 43, 44. The parties’ familiarity with the record is assumed, and the claims 22 against Umpqua and Wells Fargo are dismissed with leave to amend. 23 LEGAL STANDARDS 24 The standards that govern a Rule 12(b)(6) motion to dismiss are well-established, and are 25 incorporated here. See McLellan v. Fitbit, Inc., No. 3:16-cv-00036-JD, 2018 WL 2688781, at *1 26 (N.D. Cal. June 5, 2018). In pertinent part, Rule 8(a)(2) of the Federal Rules of Civil Procedure 27 requires that a complaint make “a short and plain statement of the claim showing that the pleader 1 must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 2 Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads 3 factual content that allows the court to draw the reasonable inference that the defendant is liable 4 for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 5 U.S. at 556). Determining whether a complaint states a plausible claim for relief is a “context- 6 specific task that requires the reviewing court to draw on its judicial experience and common 7 sense.” Id. at 679. “Because this diversity case arises in California, California law applies.” 8 Allstate Ins. Co. v. Smith, 929 F.2d 447, 449 (9th Cir. 1991). 9 DISCUSSION 10 BPi’s common law claims against Umpqua are displaced by division 11 of the California 11 Commercial Code, which codifies Article 4A of the Uniform Commercial Code. See Cal. Com. 12 Code §§ 11101, et seq. Division 11 applies to “funds transfers,” and provides “a comprehensive 13 body of law to govern the rights and obligations resulting from wire transfers.” Zengen, Inc. v. 14 Comerica Bank, 41 Cal. 4th 239, 253 (2007) (citation omitted). Division 11 displaces common 15 law claims based on allegedly unauthorized funds transfers “in two specific areas: (1) where the 16 common law claims would create rights, duties, or liabilities inconsistent with division 11; and (2) 17 where the circumstances giving rise to the common law claims are specifically covered by the 18 provisions of division 11.” Id. 19 The transactions alleged in SAC are funds transfers within the meaning of division 11. 20 Division 11 defines a “funds transfer” as “the series of transactions, beginning with the 21 originator’s payment order, made for the purpose of making payment to the beneficiary of the 22 order.” Cal. Com. Code § 11104(a). A “payment order” refers to “an instruction of a sender to a 23 receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to 24 pay, a fixed or determinable amount of money to a beneficiary.” Id. § 1103(a)(1). BPi’s requests 25 for Umpqua to wire funds to the scammers’ account were payment orders. Dkt. No. 42 ¶¶ 4, 8. 26 BPi was the sender, Umpqua was the receiving bank, the scammers’ bank account was the 27 beneficiary, and Wells Fargo was the beneficiary bank. See id. Umpqua “accepted” BPi’s 1 The SAC alleges that Umpqua was negligent and breached its implied contract to protect 2 BPi because it executed BPi’s payment orders despite being aware of “red flags” regarding the 3 scammers’ activities. See Dkt. No. 42 ¶¶ 21-25. In effect, BPi says that Umpqua is at fault for 4 accepting BPi’s payment orders. See id. Division 11 specifically addresses when a receiving bank 5 may be liable for accepting a payment order. See Cal. Com. Code § 11212; Chino Com. Bank, 6 N.A. v. Peters, 190 Cal. App. 4th 1163, 1174-75 (2010) (“[T]he Bank’s liability for that 7 acceptance is limited, to its liability, if any, under article 4a.”) (citing Cal. Com. Code §§ 11209, 8 11212). Consequently, the SAC’s common law claims against Umpqua are displaced by division 9 11, and are dismissed. See Chino, 190 Cal. App. 4th at 1174-75.; see also Zengen, 41 Cal. 4th at 10 253. 11 So too in similar part for the claims against Wells Fargo. For the allegation that Wells 12 Fargo violated Section 11207 of the California Commercial Code, the section provides a safe 13 harbor from liability for beneficiary banks that process wire transfers based on the beneficiary 14 account number provided in the transfer instructions. See Cal. Com. Code § 11207(b). The safe 15 harbor applies so long as the beneficiary bank “does not know that the beneficiary’s name and 16 account number refer to different persons.” TME Enters., Inc. v. Norwest Corp., 124 Cal. App. 17 4th 1021, 1031 (2004); see also Cal. Com. Code § 11207(b)(1); Grand Bayman Belize, Ltd. v. 18 Wells Fargo Bank, N.A., No. 21-55146, 2022 WL 171937, at *1 (9th Cir. Jan. 19, 2022) 19 (unpublished). The SAC does not allege any facts indicating that Wells Fargo had “actual 20 knowledge” of a discrepancy between BPi’s intended beneficiary and the recipient of the funds. 21 See TME Enters., Inc., 124 Cal. App. 4th at 1031. 22 The SAC also has not stated a plausible negligence claim against Wells Fargo. It does not 23 allege that BPi had any banking relationship with Wells Fargo. This is a problem for BPi because 24 under California law, “[a]bsent extraordinary and specific facts, a bank does not owe a duty of 25 care to a noncustomer.” Software Design & Application, Ltd. v. Hoefer & Arnett, Inc., 49 Cal. 26 App. 4th 472, 479, 481-82 (1996) (no duty to protect noncustomers when opening accounts for 27 alleged wrongdoers); see also Kurtz-Ahlers, LLC v. Bank of America, N.A., 48 Cal. App. 5th 952, 1 not include enough factual allegations of “sufficiently suspicious” circumstances for the Court to 2 || conclude that this is one of the “extraordinary and specific” situations where Wells Fargo might 3 owe a duty of care to BPi. See Software Design, 49 Cal. App. 4th at 479-80. 4 CONCLUSION 5 BPi may file an amended complaint consistent with this order by May 12, 2023. A failure 6 || to meet this deadline will result in dismissal with prejudice under Federal Rule of Civil Procedure 7 |} 41(b). 8 IT IS SO ORDERED. 9 || Dated: April 19, 2023 10 11

JAMES PONATO

12 United Ptates District Judge

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it

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