Guardian Angel v . MetaBank CV-08-261-PB 03/08/10 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Guardian Angel Credit Union, on its own behalf and on behalf of a class of persons similarly situated
v. Case N o . 08-cv-261-PB Opinion N o . 2010 DNH 043 MetaBank, and Meta Financial Group, Inc.
MEMORANDUM AND ORDER
Guardian Angel Credit Union (“Guardian Angel”) has moved to
amend its complaint against MetaBank and Meta Financial Group,
Inc. (collectively, “MetaBank”) to add a claim under New
Hampshire Revised Statutes Annotated § 382-A:4A, New Hampshire’s
codification of Article 4A of the Uniform Commercial Code
(“Article 4 A ” ) . I deny Guardian Angel’s motion because I
determine that its proposed amendment would be futile.
I. BACKGROUND
In 2005, Guardian Angel attempted to purchase a $99,000
Certificate of Deposit (“CD”) from MetaBank’s predecessor, First
Federal Savings Bank of the Midwest (hereinafter also referred to
as “MetaBank”). (Am. Compl. - Class Action - Jury Trial Demand (hereinafter “Am. Compl.”), Doc. N o . 37-2, ¶¶ 2 , 6, 55.)
Guardian Angel initiated the purchase by electronically
transferring funds to the Federal Home Loan Bank of Des Moines,
where MetaBank maintained an account. (Compl. - Class Action -
Jury Trial Demand (hereinafter “Compl.”) Ex. A , Doc. N o . 1-2.)
The wire transfer confirmation lists Guardian Angel as the
“originator” and “beneficiary” of the transfer and identifies
MetaBank as the “beneficiary’s bank.” (Id.)
In return for the wire transfer, Guardian Angel received
what appeared to be a legitimate CD issued by MetaBank. (Am.
Compl., Doc. N o . 37-2, ¶ 6.) Guardian Angel renewed its CD in
2006 and 2007, but learned in 2008 that the CD had been
fraudulently issued without authorization by an employee of
MetaBank, Charlene M . Pickhinke. (Id. ¶¶ 7-10.)
Guardian Angel brought its initial class action complaint
against MetaBank after MetaBank refused to honor the CD and it
became apparent that Pickhinke had used a similar scheme to
defraud approximately fifty other entities that had attempted to
purchase CDs from MetaBank. (See id. ¶¶ 12-13.) The complaint
asserted causes of action for breach of contract, negligence, and
conversion. (See Compl., Doc. N o . 1 , ¶¶ 29-49.) Guardian Angel
-2- now seeks to amend its complaint to add a claim under Article 4A.
II. STANDARD OF REVIEW
A motion for leave to amend should not be granted if the
amendment “would be futile or reward undue delay.” Abraham v .
Woods Hole Oceanographic Inst., 553 F.3d 1 1 4 , 117 (1st Cir.
2009). “If leave to amend is sought before discovery is complete
and neither party has moved for summary judgment, the accuracy of
the ‘futility’ label is gauged by reference to the liberal
criteria of Federal Rule of Civil Procedure 12(b)(6).” Hatch v .
Dep’t for Children, Youth and Their Families, 274 F.3d 1 2 , 19
(1st Cir. 2001). Under Rule 12(b)(6), a complaint must “state a
claim to relief that is plausible on its face.” Ashcroft v .
Iqbal, 129 S . C t . 1937, 1949 (2009) (internal quotation marks
omitted). “The plausibility standard,” while not a “probability
requirement,” requires more than a “sheer possibility that a
defendant has acted unlawfully.” Id. (internal quotation marks
omitted). Although the court must accept all facts in the
complaint as true, that requirement does not apply to “legal
conclusion[s] couched as . . . factual allegation[s].” Id. at
1949-50 (internal quotation marks omitted). “Threadbare recitals
-3- of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. at 1949.
III. ANALYSIS
Guardian Angel seeks to add a single count based upon
Article 4A. In reality, however, it asserts two distinct claims.
Guardian Angel’s first theory is that MetaBank was a “receiving
bank” that violated § 382-A:4A-302(a)(1) by failing to execute a
“payment order.” Its second theory is that MetaBank was a
“beneficiary’s bank” that violated § 382-A:4A-404(a) by accepting
a “payment order” and thereafter failing to pay the amount of the
order to its “beneficiary,” Guardian Angel. In the discussion
that follows, I examine each statutory section in detail and
explain why Guardian Angel’s attempt to assert a cause of action
under either section would be futile.
A. Section 382-A:4A-302(a)(1)
Section 382-A:4A-302 describes the obligations that a
“receiving bank” assumes when executing a “payment order.” A
payment order is “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
-4- money to a beneficiary . . . .” N.H. Rev. Stat. Ann. § 382-A:4A-
103(a)(1) (2004). A receiving bank is “the bank to which the
sender’s instruction is addressed.” § 382-A:4A-103(a)(4).
Guardian Angel argues that MetaBank violated § 382-A:4A-302 by
failing to execute a payment order obligating it to invest the
proceeds of the $99,000 wire transfer in a CD.
The fatal flaw in Guardian Angel’s argument is that it seeks
to hold MetaBank liable for failing to execute a payment order
that is not executable under New Hampshire law. Guardian Angel
concedes that if MetaBank was a receiving bank, it was also a
“beneficiary’s bank” as this term is used in Article 4A.1 (Am.
Compl., Doc. N o . 37-2, ¶ 58.) Because Article 4A provides that
“a payment order received by the beneficiary’s bank can be
accepted but cannot be executed,” N.H. Rev. Stat. Ann. § 382-
A:4A-301(a) (2004), it necessarily follows that a beneficiary’s
bank cannot be held liable for failing to execute a payment
order. Thus, Guardian Angel’s concession that MetaBank was a
beneficiary’s bank precludes it from basing its Article 4A claim
1 A “beneficiary’s bank” is “the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.” N.H. Rev. Stat. Ann. § 382-A:4A- 103(a)(3) (2004).
-5- on § 382-A:4A-302(a)(1).
B. Section 382-A:4A-404(a)
Section 382-A:4A-404(a) provides in pertinent part that “if
a beneficiary’s bank accepts a payment order, the bank is obliged
to pay the amount of the order to the beneficiary of the order.”
N.H. Rev. Stat. Ann. § 382-A:4A-404(a) (2004). Guardian Angel
argues that MetaBank violated this provision by failing to use
the proceeds of the $99,000 wire funds transfer to purchase a CD
on its behalf.
I am unpersuaded by Guardian Angel’s argument because it
relies on Article 4A to cover aspects of a funds transfer that
the drafters of the UCC did not intend the article to cover.
Comment 3 to UCC § 4A-104 provides that “[t]he function of banks
in a funds transfer under Article 4A is comparable to the role of
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Guardian Angel v . MetaBank CV-08-261-PB 03/08/10 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Guardian Angel Credit Union, on its own behalf and on behalf of a class of persons similarly situated
v. Case N o . 08-cv-261-PB Opinion N o . 2010 DNH 043 MetaBank, and Meta Financial Group, Inc.
MEMORANDUM AND ORDER
Guardian Angel Credit Union (“Guardian Angel”) has moved to
amend its complaint against MetaBank and Meta Financial Group,
Inc. (collectively, “MetaBank”) to add a claim under New
Hampshire Revised Statutes Annotated § 382-A:4A, New Hampshire’s
codification of Article 4A of the Uniform Commercial Code
(“Article 4 A ” ) . I deny Guardian Angel’s motion because I
determine that its proposed amendment would be futile.
I. BACKGROUND
In 2005, Guardian Angel attempted to purchase a $99,000
Certificate of Deposit (“CD”) from MetaBank’s predecessor, First
Federal Savings Bank of the Midwest (hereinafter also referred to
as “MetaBank”). (Am. Compl. - Class Action - Jury Trial Demand (hereinafter “Am. Compl.”), Doc. N o . 37-2, ¶¶ 2 , 6, 55.)
Guardian Angel initiated the purchase by electronically
transferring funds to the Federal Home Loan Bank of Des Moines,
where MetaBank maintained an account. (Compl. - Class Action -
Jury Trial Demand (hereinafter “Compl.”) Ex. A , Doc. N o . 1-2.)
The wire transfer confirmation lists Guardian Angel as the
“originator” and “beneficiary” of the transfer and identifies
MetaBank as the “beneficiary’s bank.” (Id.)
In return for the wire transfer, Guardian Angel received
what appeared to be a legitimate CD issued by MetaBank. (Am.
Compl., Doc. N o . 37-2, ¶ 6.) Guardian Angel renewed its CD in
2006 and 2007, but learned in 2008 that the CD had been
fraudulently issued without authorization by an employee of
MetaBank, Charlene M . Pickhinke. (Id. ¶¶ 7-10.)
Guardian Angel brought its initial class action complaint
against MetaBank after MetaBank refused to honor the CD and it
became apparent that Pickhinke had used a similar scheme to
defraud approximately fifty other entities that had attempted to
purchase CDs from MetaBank. (See id. ¶¶ 12-13.) The complaint
asserted causes of action for breach of contract, negligence, and
conversion. (See Compl., Doc. N o . 1 , ¶¶ 29-49.) Guardian Angel
-2- now seeks to amend its complaint to add a claim under Article 4A.
II. STANDARD OF REVIEW
A motion for leave to amend should not be granted if the
amendment “would be futile or reward undue delay.” Abraham v .
Woods Hole Oceanographic Inst., 553 F.3d 1 1 4 , 117 (1st Cir.
2009). “If leave to amend is sought before discovery is complete
and neither party has moved for summary judgment, the accuracy of
the ‘futility’ label is gauged by reference to the liberal
criteria of Federal Rule of Civil Procedure 12(b)(6).” Hatch v .
Dep’t for Children, Youth and Their Families, 274 F.3d 1 2 , 19
(1st Cir. 2001). Under Rule 12(b)(6), a complaint must “state a
claim to relief that is plausible on its face.” Ashcroft v .
Iqbal, 129 S . C t . 1937, 1949 (2009) (internal quotation marks
omitted). “The plausibility standard,” while not a “probability
requirement,” requires more than a “sheer possibility that a
defendant has acted unlawfully.” Id. (internal quotation marks
omitted). Although the court must accept all facts in the
complaint as true, that requirement does not apply to “legal
conclusion[s] couched as . . . factual allegation[s].” Id. at
1949-50 (internal quotation marks omitted). “Threadbare recitals
-3- of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. at 1949.
III. ANALYSIS
Guardian Angel seeks to add a single count based upon
Article 4A. In reality, however, it asserts two distinct claims.
Guardian Angel’s first theory is that MetaBank was a “receiving
bank” that violated § 382-A:4A-302(a)(1) by failing to execute a
“payment order.” Its second theory is that MetaBank was a
“beneficiary’s bank” that violated § 382-A:4A-404(a) by accepting
a “payment order” and thereafter failing to pay the amount of the
order to its “beneficiary,” Guardian Angel. In the discussion
that follows, I examine each statutory section in detail and
explain why Guardian Angel’s attempt to assert a cause of action
under either section would be futile.
A. Section 382-A:4A-302(a)(1)
Section 382-A:4A-302 describes the obligations that a
“receiving bank” assumes when executing a “payment order.” A
payment order is “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
-4- money to a beneficiary . . . .” N.H. Rev. Stat. Ann. § 382-A:4A-
103(a)(1) (2004). A receiving bank is “the bank to which the
sender’s instruction is addressed.” § 382-A:4A-103(a)(4).
Guardian Angel argues that MetaBank violated § 382-A:4A-302 by
failing to execute a payment order obligating it to invest the
proceeds of the $99,000 wire transfer in a CD.
The fatal flaw in Guardian Angel’s argument is that it seeks
to hold MetaBank liable for failing to execute a payment order
that is not executable under New Hampshire law. Guardian Angel
concedes that if MetaBank was a receiving bank, it was also a
“beneficiary’s bank” as this term is used in Article 4A.1 (Am.
Compl., Doc. N o . 37-2, ¶ 58.) Because Article 4A provides that
“a payment order received by the beneficiary’s bank can be
accepted but cannot be executed,” N.H. Rev. Stat. Ann. § 382-
A:4A-301(a) (2004), it necessarily follows that a beneficiary’s
bank cannot be held liable for failing to execute a payment
order. Thus, Guardian Angel’s concession that MetaBank was a
beneficiary’s bank precludes it from basing its Article 4A claim
1 A “beneficiary’s bank” is “the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.” N.H. Rev. Stat. Ann. § 382-A:4A- 103(a)(3) (2004).
-5- on § 382-A:4A-302(a)(1).
B. Section 382-A:4A-404(a)
Section 382-A:4A-404(a) provides in pertinent part that “if
a beneficiary’s bank accepts a payment order, the bank is obliged
to pay the amount of the order to the beneficiary of the order.”
N.H. Rev. Stat. Ann. § 382-A:4A-404(a) (2004). Guardian Angel
argues that MetaBank violated this provision by failing to use
the proceeds of the $99,000 wire funds transfer to purchase a CD
on its behalf.
I am unpersuaded by Guardian Angel’s argument because it
relies on Article 4A to cover aspects of a funds transfer that
the drafters of the UCC did not intend the article to cover.
Comment 3 to UCC § 4A-104 provides that “[t]he function of banks
in a funds transfer under Article 4A is comparable to the role of
banks in the collection and payment of checks in that it is
essentially mechanical in nature.” N.H. Rev. Stat. Ann. § 382-
A:4A-104 cmt. 3 . Transactions that are subject to conditions or
that require the exercise of discretion to execute are not
“mechanical in nature.” Article 4A thus specifies that an
instruction to a bank will qualify as a payment order potentially
giving rise to liability under § 382-A:4A-404(a) only if “the
-6- instruction does not state a condition to payment to the
beneficiary other than time of payment.” § 382-A:4A-
103(a)(1)(i).
The purported instruction on which Guardian Angel’s claim is
based is more than an unconditional order to pay Guardian Angel a
specified sum on a given date: it is an instruction to purchase
a CD with specified terms and conditions such as a designated
interest rate and a set prepayment penalty. The instruction thus
includes conditions on payment that preclude it from qualifying
as a payment order that can serve as the basis for a claim under
§ 382-A:4A-404(a).
IV. CONCLUSION
For all of the foregoing reasons, I conclude that the
proposed amendment would be futile and deny Guardian Angel’s
motion to amend its complaint (Doc. N o . 3 7 ) .
SO ORDERED.
Paul Barbadoro United States District Judge
March 8 , 2010
cc: Christine BB.. Cesare, Esq. Randall F. Cooper, Esq.
-7- Bruce W . Felmly, Esq. Christopher T . Meier, Esq. Rachel E . Barber Shwartz,
-8-