Liu v. The Charles Schwab Corporation

• Court: District Court, N.D. California
• Decided: September 18, 2025
• Docket: 4:24-cv-07400
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 LAWRENCE LIU, et al., Case No. 24-cv-07400-HSG

8 Plaintiffs, ORDER GRANTING MOTION TO DISMISS 9 v. Re: Dkt. No. 32 10 BANK OF AMERICA, N.A., 11 Defendant.

12 13 Pending before the Court is Defendant Bank of America, N.A.’s motion to dismiss the 14 complaint or, alternatively, motion to stay the case pending alternative dispute resolution. Dkt. 15 No. 32. For the following reasons, the Court GRANTS the motion to dismiss. 16 I. BACKGROUND 17 Plaintiffs Lawrence Liu and Ling-Ling Liu were victims of a fraudulent scheme in which 18 an unidentified scammer took approximately $18 million of their savings. See generally Dkt. 19 No. 1 (“Compl.”). Plaintiffs were deceived into believing that their Charles Schwab investment 20 accounts had been compromised. See id. at ¶¶ 44–55. Beginning in July 2024, the scammer posed 21 as a Charles Schwab representative and told Plaintiffs that they had to transfer their assets to 22 “external sources” to safeguard them. See id. at ¶¶ 53–55. The scammer had accurate and 23 detailed knowledge of Plaintiffs’ accounts and sent Plaintiffs multiple letters purporting to be from 24 the IRS, Social Security Administration, and Charles Schwab’s Fraud Prevention Department. See 25 id. at ¶¶ 47–49, 56–57, 90–93, 144–45, 153–55, 179–80. The letters reiterated that Plaintiffs’ 26 Charles Schwab accounts had been compromised and that Plaintiffs needed to liquidate their stock 27 holdings and move their assets to other accounts. Id. In addition to following the scammer’s 1 ¶¶ 56–57. 2 The scammer linked Plaintiffs’ Charles Schwab accounts to several of Plaintiffs’ other 3 bank accounts, including one at Bank of America. See id. at ¶¶ 58, 76, 79, 94. The scammer also 4 convinced Plaintiffs to open an account with Unchained Trading, LLC, a cryptocurrency 5 exchange. See id. at ¶¶ 66–71. The scammer then linked Plaintiffs’ bank accounts with their new 6 Unchained account. See id. at ¶¶ 75, 94. From July to September 2024, the scammer—either 7 directly or through Mr. Liu—liquidated Plaintiffs’ stock holdings at Charles Schwab, transferred 8 funds to Plaintiffs’ bank accounts via MoneyLink (an Automated Clearing House) or wire 9 transfers, and then transferred funds from the bank accounts to Plaintiffs’ Unchained account via 10 wire transfer. See, e.g., id. at ¶¶ 63, 73, 77–89, 94–97, 99–100, 107–08, 110–15, 137–39, 147–50, 11 156–58, 165–67, 170–75, 181–85, 188–90, 198–99. The scammer then used the funds in the 12 Unchained account to purchase cryptocurrency and swiftly withdrew the cryptocurrency from the 13 account. See id. at ¶¶ 117–18, 142–43, 151–52, 163–64, 168–69, 177–78, 186–87, 200. 14 As relevant here, Plaintiffs allege that Mr. Liu physically walked into Bank of America 15 branch offices on nine different occasions from July 23, 2024, to September 13, 2024, and 16 requested large wire transfers from his Bank of America account to his Unchained account. See 17 id. at ¶¶ 110, 113–15, 126–28, 137–39, 147–50, 156–58, 165–67, 172–74, 183–85, 188–90, 198. 18 Each time, Mr. Liu met with Bank of America bankers and explained that he was having security 19 issues with his Charles Schwab account and needed to move assets to protect them. See id. at 20 ¶¶ 113–14,127–28, 138, 148, 157, 166, 173, 184, 189. Mr. Liu requested seven of these transfers 21 at the same branch location. See id. at ¶¶ 137–39, 147–50, 156–58, 165–67, 172–74, 183–85, 22 188–90. But only once did Bank of America representatives refuse to process the wire transfer. 23 See id. at ¶¶ 126–29. Plaintiffs allege that in the span of two months they transferred 24 approximately $22 million into—and out of—their Bank of America account. See id. at ¶¶ 198– 25 99. On September 16, 2024, the FBI intervened and provided notice to Plaintiffs, the banks, and 26 Unchained that Plaintiffs had been the victims of a fraudulent scheme. See id. at ¶ 192. 27 Based on these allegations, Plaintiffs initially filed a complaint against The Charles 1 Trading, LLC. See id. However, Plaintiffs voluntarily dismissed the claims against The Charles 2 Schwab Corporation; Charles Schwab Bank; and Unchained without prejudice. See Dkt. Nos. 20, 3 25. Plaintiffs appear to acknowledge that they are currently arbitrating those claims. See Dkt. No. 4 38 at 24. Bank of America, therefore, is the only remaining Defendant in the case.1 Plaintiffs 5 bring claims against Bank of America for (1) violations of the California Elder Abuse and 6 Dependent Adult Civil Protection Act (“EADACPA”), Cal. Welf. & Inst. Code §§ 15600 et seq.; 7 (2) violations of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code 8 §§ 17200, et seq.; and (3) gross negligence. See Compl. at ¶¶ 240–82. Defendant Bank of 9 America moves to dismiss the complaint. See Dkt. No. 32. 10 II. LEGAL STANDARD 11 Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain 12 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 13 defendant may move to dismiss a complaint for failing to state a claim upon which relief can be 14 granted under Rule 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the 15 complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” 16 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 17 12(b)(6) motion, a plaintiff need only plead “enough facts to state a claim to relief that is plausible 18 on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible 19 when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that 20 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 21 Rule 9(b) imposes a heightened pleading standard where fraud is an essential element of a 22 claim. See Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity 23 the circumstances constituting fraud or mistake.”); see also Vess v. Ciba–Geigy Corp. USA, 317 24 F.3d 1097, 1107 (9th Cir. 2003). A plaintiff must identify “the who, what, when, where, and how” 25 of the alleged conduct, so as to provide defendants with sufficient information to defend against 26 the charge. Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). However, “[m]alice, intent, 27 1 knowledge, and other conditions of a person's mind may be alleged generally.” Fed. R. Civ. P. 2 Rule 9(b). 3 In reviewing the plausibility of a complaint, courts “accept factual allegations in the 4 complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 5 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nevertheless, 6 courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of 7 fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 8 2008) (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)). 9 III. DISCUSSION 10 A. California Uniform Commercial Code 11 As an initial matter, Defendant argues that Plaintiff’s claims are all displaced by Division 12 11 of the California Uniform Commercial Code, which regulates “funds transfers.”2 See Dkt. No. 13 32 at 5–9; see also Cal. Com. Code §§ 11101 et seq.; Zengen, 41 Cal. 4th at 244–47. Plaintiff 14 does not appear to dispute that the wire transfers at issue here are “funds transfers” under Division 15 11. See Dkt. No. 9–11. Defendant urges that Division 11 reflects a policy choice about the 16 allocation of risk for funds transfers like the wire transfers at issue here, and it thus provides the 17 exclusive rights, duties, and liabilities of the parties. See Dkt. No. 32 at 5–6. Defendant contends 18 that Plaintiffs’ claims attempt to circumvent these policy decisions by imposing liability on banks 19 for processing otherwise authorized transfers where the authorizations were fraudulently induced 20 by third parties. Id. 21 The California Supreme Court has held that given its detailed regulatory structure, 22 Division 11 displaces or “preempts” common law causes of action involving funds transfers in 23 two specific circumstances: 24 (1) where the common law claims would create rights, duties, or 25 liabilities inconsistent with division 11; and (2) where the circumstances giving rise to the common law claims are specifically 26

27 2 In 1990, the California Legislature enacted Article 4A of the Uniform Commercial Code covered by the provisions of division 11. 1 2 Zengen, 41 Cal. 4th at 253 (quotation omitted).3 Defendant appears to suggest that both 3 circumstances exist here because Division 11 explains when funds transfers are considered 4 “authorized,” and when banks must refund payments. See Dkt. No. 32 at 6–9. 5 Under Division 11, a “funds transfer” is defined as “the series of transactions, beginning 6 with the originator’s payment order, made for the purpose of making payment to the beneficiary of 7 the order.” Cal. Com. Code § 11104(a). A “payment order,” in turn, “means an instruction of a 8 sender to a receiving bank, transmitted orally or in a record, to pay, or to cause another bank to 9 pay, a fixed or determinable amount of money to a beneficiary . . . .”4 Cal. Com. Code 10 § 11103(a)(1). Division 11 also identifies when a payment order is considered “authorized”: 11 A payment order received by the receiving bank is the authorized 12 order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency. 13 14 Cal. Com. Code § 11202(a). Likewise, Division 11 outlines a bank’s duty in refunding 15 unauthorized payment orders. A receiving bank that has accepted “a payment order issued in the 16 name of its customer as sender” must “refund” that payment if it was “not authorized and not 17 effective as the order of the customer . . . .” Cal. Com. Code § 11204(a)(i); see also Cal. Com. 18 Code § 11212 (limiting liability of receiving bank for accepting payment orders to that provided in 19 the UCC). 20 In Zengen, the plaintiff’s chief financial officer forged signatures on funds transfers in the 21 amount of $4.6 million from the plaintiff company’s account to an account that he solely 22 controlled. See id. at 243. The plaintiff sued the bank that processed the transfers. Id. at 244–46. 23 The court noted that “[t]he ultimate question in this litigation is who must bear the loss: the bank 24

25 3 The Court notes that Division 11 does not apply to funds transfers governed by the Electronic Fund Transfer Act of 1978. Zengen, 41 Cal.4th at 248, n.6. Although Plaintiffs alleged that the 26 transfers originating from Plaintiffs’ Unchained Trading, Inc. account are unauthorized transfers under the EFTA, there is no such allegation that the fund transfers involving Defendant Bank of 27 America are governed by the EFTA. See Compl. at ¶¶ 293, 297, 304. 1 that honored the fraudulent payment orders or the company that employed the embezzler.” Id. at 2 243. Despite the acknowledged fraud, the California Supreme Court held that the plaintiff’s 3 causes of action for breach of contract, negligence, return of deposit, and money had and received 4 were all displaced by Division 11. See id. at 251–55. The court explained that “the gravamen of 5 each of [the plaintiff’s] causes of action against the Bank, including the one based on the 6 California Uniform Commercial Code, is the same: The Bank should not have accepted and 7 executed the fraudulent payment orders.” Id. at 254. Although the plaintiff alleged circumstances 8 that should have alerted the bank to the suspicious nature of the transfers, the court still found that 9 Division 11 “sets forth the respective rights, duties and liabilities of the parties upon the issuance 10 and acceptance of a payment order” such that the plaintiff’s exclusive remedy was under the 11 California Uniform Commercial Code. Id. at 254–55. 12 Here too, Defendant argues that Plaintiffs’ exclusive remedy is under the California 13 Uniform Commercial Code. See Dkt. No. 32 at 5–9. But Plaintiffs do not raise any causes of 14 action under Division 11, nor is it likely that they could. Plaintiffs’ own allegations confirm that 15 Mr. Liu authorized the wire transfers in person, directing Bank of America to transfer money from 16 his account at Bank of America to his account at Unchained. See, e.g., ¶¶ 110, 113–15, 137–39. 17 Under Plaintiffs’ theory of liability, the bank should have rejected the account owner’s authorized 18 request to move his own money between his own accounts and now should be required to refund 19 such authorized transfers. Division 11 does not require this, and as explained above, specifically 20 defines “authorized” payment orders and limits the circumstances in which banks must provide 21 refunds. Cf. Harborview Cap. Partners, LLC v. Cross River Bank, 600 F. Supp. 3d 485, 491–95 22 (D.N.J. 2022) (finding transfers authorized for purposes of UCC and granting motion to dismiss 23 even where victim had been tricked by third-party fraudster into making the transfer) (collecting 24 cases). 25 Plaintiffs nevertheless respond that Division 11 does not displace their claims because it 26 cannot displace (1) causes of action based on conduct that occurred before or after the wire 27 transfers; or (2) statutory claims. See Dkt. No. 38 at 9–11. 1 i. Scope of Plaintiffs’ Claims 2 Plaintiffs point out that in Zengen, the California Supreme Court stated that “[t]he 3 California Uniform Commercial Code does not automatically displace all other legal principles.” 4 Zengen, 41 Cal.4th at 251. Plaintiffs urge that Defendant therefore cannot escape liability for 5 alleged misconduct that occurred before or after the wire transfers. See Dkt. No. 38 at 10–11. 6 Plaintiffs assert in conclusory fashion that “the Complaint includes numerous allegations” about 7 alleged misconduct that is distinct from the wire transfers. See id. at 10, & n.47; cf. Across Am. 8 Ins. Servs., Inc. v. Bank of Am., N.A., No. SACV180874DOCPLAX, 2018 WL 5906674, at *3–4 9 (C.D. Cal. Sept. 24, 2018) (finding that negligence claim was not displaced where it was based on 10 pre-transfer conduct such as failing to warn of risks involved in wire transfers approved by phone). 11 However, even assuming that Plaintiffs have alleged some misconduct that arguably 12 occurred before the wire transfers, Plaintiffs’ alleged damages all turn on the fact that Defendant 13 processed the transfers. See, e.g., Compl. at ¶¶ 115, 139, 150, 158, 167, 199. For example, in 14 support of their UCL claim, Plaintiffs allege that Defendant failed to protect Plaintiffs from 15 financial elder abuse “by failing to follow their own fraud monitoring, prevention and protection 16 policies . . . .” See id. at ¶ 259. But the harm that Plaintiffs allege they suffered resulted from 17 “transferring millions of dollars of Plaintiffs’ funds via wire transfers . . . .” See id. And as 18 already discussed above, Division 11 squarely covers the processing of wire transfers. 19 ii. Application to Statutory Claims 20 Even if Division 11 displaces their gross negligence claim, Plaintiffs argue that it does not 21 displace their other statutory causes of action under the EADACPA and UCL.5 See Dkt. No. 38 at 22 9–10. Plaintiffs point out that the California Supreme Court in Zengen specifically held that 23 Division 11 displaced the plaintiff’s “common law” causes of action. Id.; see also Zengen, 41 Cal. 24 4th at 253 (“[W]e agree with the Court of Appeal that division 11 provides that common law 25 causes of action based on allegedly unauthorized funds transfers are preempted . . . .” ) (emphasis 26 5 The Court notes that Plaintiffs and Defendant only address this argument in passing. Plaintiffs 27 provide no authority suggesting that Division 11 can only displace common law claims, and 1 added) (quotation omitted). The only claims in Zengen, however, were common law claims. The 2 court thus did not have occasion to consider directly whether Division 11 could likewise displace 3 statutory claims. The court nevertheless framed the legal question before it broadly as “whether 4 the California Code has fully occupied the field of this litigation and displaced the non California 5 Code causes of action” and whether “other principles of law will apply” outside the UCC. See 6 Zengen, 41 Cal. 4th at 251. 7 The court’s reasoning in Zengen would seem to apply equally to common law and 8 statutory claims. The court discussed at length the history of Article 4A to the UCC and 9 California’s adoption of it in Division 11. See id. at 251–53. In doing so, the court highlighted 10 Code Comments to the UCC that it found persuasive in interpreting Division 11: 11 A deliberate decision was [] made to use precise and detailed rules to 12 assign responsibility, define behavioral norms, allocate risks and establish limits on liability, rather than to rely on broadly stated, 13 flexible principles. In the drafting of these rules, a critical consideration was that the various parties to funds transfers need to 14 be able to predict risk with certainty, to insure against risk, to adjust operational and security procedures, and to price funds transfer 15 services appropriately.

16 . . .

17 Funds transfers involve competing interests—those of the banks that provide funds transfer services and the commercial and financial 18 organizations that use the services, as well as the public interest. These competing interests were represented in the drafting process 19 and they were thoroughly considered. The rules that emerged represent a careful and delicate balancing of those interests and are 20 intended to be the exclusive means of determining the rights, duties and liabilities of the affected parties in any situation covered by 21 particular provisions of the Article. Consequently, resort to principles of law or equity outside of Article 4A is not appropriate to create 22 rights, duties and liabilities inconsistent with those stated in this Article.” 23 24 Id. at 252 (citing Cod. Com., Unif. Commercial Code § 4A-102) (emphasis in original). This 25 underlying need for uniformity and predictability compels the conclusion that Division 11 26 displaces both common law and statutory claims. Division 11 could not be “the exclusive means 27 of determining the rights, duties and liabilities of the affected parties” with respect to funds 1 Plaintiffs do not grapple with this language or the Zengen court’s substantive reasoning at 2 all. See Dkt. No. 38 at 9–10. And the Court does not find Plaintiffs’ conclusory opposition 3 persuasive on this point. The Court finds that all Plaintiffs’ claims are displaced by Division 11, 4 and the motion to dismiss is GRANTED on this basis. For the sake of completeness, and to the 5 extent Plaintiffs intend to amend the complaint, the Court briefly addresses the substance of 6 Plaintiffs’ claims below. 7 B. EADACPA 8 Plaintiffs allege that Defendant’s conduct “assisted” the scammer in taking millions of 9 dollars of Plaintiffs’ savings, in violation of the EADACPA, by processing the wire transfers from 10 Plaintiffs’ Bank of America accounts to their Unchained account. See Compl. at ¶¶ 240–56. As 11 relevant here, § 15610.30(a) states that “financial abuse of an elder” occurs when a person or 12 entity “[a]ssists in taking, secreting, appropriating, obtaining, or retaining real or personal property 13 of an elder or dependent adult for a wrongful use or with intent to defraud, or both.” Cal. Welf. & 14 Inst. Code § 15610.30(a)(2). Courts have interpreted the term “assist” in this context to require 15 that the defendant had “actual knowledge of the underlying wrong it purportedly aided and 16 abetted.” See, e.g., Das v. Bank of Am., N.A., 186 Cal. App. 4th 727, 744–45 (Cal. Ct. App. 2010) 17 (quotation omitted). 18 Here, Plaintiffs contend that Defendant “had actual knowledge that Plaintiffs were the 19 victims of a fraud perpetrated by the non-party recipient of Plaintiffs’ wire transfers.” See Compl. 20 at ¶¶ 232, 236, 243–44, 246. Specifically, Plaintiffs contend that Defendant had actual knowledge 21 of the fraud because (1) historically Plaintiffs had only engaged in minimal banking activities at 22 Bank of America, so the influx in funds was anomalous; (2) Mr. Liu requested seven of the eight 23 wire transfers at the same Bank of America branch within a short period of time; and (3) during 24 one of Mr. Liu’s visits at another branch, a banker had refused to process the wire transfer. See id. 25 at ¶ 246. But even accepting these allegations as true and drawing all reasonable inferences in 26 Plaintiffs’ favor, as the Court must at this stage, these allegations are insufficient to plead that 27 Defendant had actual knowledge of the fraud. At best, they suggest that Defendant should have 1 Although the transactions may have been unusual for Plaintiffs, according to the 2 complaint, Mr. Liu offered a brief explanation for his actions: he told branch employees that his 3 accounts at Charles Schwab had been compromised so he was moving funds to his other accounts. 4 See Compl. at ¶¶ 113–14,127–28, 138, 148, 157, 166, 173, 184, 189. And unlike in Lin v. 5 JPMorgan Chase Bank, N.A., No. 2:24-CV-01837-JLS-E, 2024 WL 5182199 (C.D. Cal. Aug. 15, 6 2024), a case which Plaintiffs rely on heavily, Mr. Liu was requesting to transfer funds between 7 his own accounts. In Lin, the elderly plaintiff wired money from her Chase bank account to a 8 “fake account” on a “fake application” for a fake investment opportunity with a scammer. See id. 9 at *1. But here, in contrast, the Unchained account was in Mr. Liu’s name, even if opened at the 10 direction of a scammer. See id. at ¶ 68 (“[A]n account was created for Mr. Liu at Unchained.”); 11 ¶ 71 (“Unchained approved Mr. Liu’s account.”); ¶¶ 143, 152, 164, 169, 178, 187 (alleging “the 12 newly-purchased . . . cryptocurrency was withdrawn from Mr. Liu’s unchained account” and sent 13 to an address “believed to be maintained by the [scammer]”). There are no allegations supporting 14 the inference that the bank knew a third party had access to Mr. Liu’s Unchained account such that 15 his money was unsafe there or that these transfers were part of some larger fraud scheme. 16 C. Gross Negligence 17 Plaintiffs next allege that Defendant was grossly negligent in failing to exercise reasonable 18 care in securing Plaintiffs’ accounts. See Compl. at ¶¶ 265–82. Plaintiffs contend that Defendant 19 “had a special relationship with Plaintiffs” and knew it was “the gatekeeper[] for Plaintiffs’ 20 accounts and valuable assets.” See id. at ¶¶ 269–70. 21 As an initial matter, Defendant argues that California does not recognize a distinct claim 22 for “gross negligence” as opposed to simple negligence. See Dkt. No. 32 at 12–13. This issue 23 appears to be somewhat unsettled. Several cases have broadly stated that “California does not 24 recognize a distinct cause of action for ‘gross negligence’ independent of a statutory basis.” See, 25 e.g., Grappo v. McMills, 11 Cal. App. 5th 996, 1014 (Cal. Ct. App. 2017) (quotation omitted). 26 However, the California Supreme Court, although recognizing these cases, has not definitively 27 weighed in. See City of Santa Barbara v. Superior Ct., 41 Cal. 4th 747, 778–81, & n.59 (Cal. 1 cause of action, they have still pled a claim for simple negligence. See Dkt. No. 38 at 21–23. 2 “The elements of a negligence cause of action are the existence of a legal duty of care, 3 breach of that duty, and proximate cause resulting in injury.” Castellon v. U.S. Bancorp, 220 Cal. 4 App. 4th 994, 998 (Cal. Ct. App. 2013). “The existence of a duty of care owed by a defendant to a 5 plaintiff is a prerequisite to establishing a claim for negligence.” Nymark v. Heart Fed. Sav. & 6 Loan Assn., 231 Cal. App. 3d 1089, 1095 (Cal. Ct. App. 1991). “[A]s a general rule, a financial 7 institution owes no duty of care to a borrower when the institution’s involvement in the loan 8 transaction does not exceed the scope of its conventional role as a mere lender of money.” Id. at 9 1096. And similarly, “banks are not fiduciaries for their depositors,” and instead their relationship 10 is “founded on contract.” See Chazen v. Centennial Bank, 61 Cal. App. 4th 532, 537 (Cal. Ct. 11 App. 1998) (quotation omitted). 12 Plaintiffs recognize this. See Dkt. No. 38 at 22 (“[B]anks typically are not burdened with a 13 duty of care to protect accountholders [from] fraud inflicted upon them that flows through their 14 bank accounts . . . . “). Nevertheless, Plaintiffs contend that this case falls under an exception to 15 the general rule. See id. at 22–23 (citing Sun ’n Sand, Inc. v. United California Bank, 21 Cal. 3d 16 671 (Cal. 1978)). Plaintiffs broadly assert that banks still “‘have a duty to make reasonable 17 inquiries’ when ‘the circumstances alleged’ are ‘sufficiently suspicious’ and the risks are 18 ‘sufficiently apparent.’” Id. (quoting Sun ’n Sand, 21 Cal. 3d at 693). 19 In Sun ’n Sand, one of the plaintiff’s employees embezzled thousands of dollars from the 20 company by manipulating company checks. See Sun ’n Sand, 21 Cal. 3d at 678–79. The 21 employee obtained authorized signatures from a company officer on several checks, each in 22 different but small amounts, and each made payable to the defendant bank. See id. The employee 23 then altered these checks by increasing the amount of each by several thousand dollars. Id. 24 Although the defendant bank—and not the employee—was listed as the payee, the employee 25 presented the checks to the defendant bank to deposit in the employee’s personal account and the 26 bank did so. See id. As relevant here, the plaintiff company brought a negligence claim against 27 the bank for breaching its duty of care in depositing the checks into the employee’s account when 1 The California Supreme Court considered several factors in determining whether the bank 2 should owe the plaintiff company a duty of care under such circumstances, including the 3 foreseeability of the loss. See id. at 695–96. In finding a duty of care, the court was careful to 4 note that the duty was “narrowly circumscribed: it is activated only when checks, not insignificant 5 in amount, are drawn payable to the order of a bank and are presented to the payee bank by a third 6 party seeking to negotiate the checks for his own benefit.” Id. at 695. The court further held that 7 even in such circumstances, “the bank’s obligation is minimal” in that it “[t]here must be objective 8 indicia from which the bank could reasonably conclude that the party presenting the check is 9 authorized to transact in the manner proposed.” Id. at 695–96. 10 The facts alleged here, however, are nothing like those in Sun ’n Sand. This case involved 11 wire transfers, not checks, and unlike the embezzler in Sun ’n Sand, Mr. Liu was authorized to 12 transfer funds from his account at Bank of America to his account at Unchained. There were thus 13 “objective indicia from which the bank could reasonably conclude” that Mr. Liu was “authorized 14 to transact in the manner proposed.” See id. Plaintiffs seek, in effect, to create a new duty of care 15 for banks to protect accountholders from their own choices. Even though Mr. Liu had authority to 16 request the funds transfers, Plaintiffs allege that the bank should have intervened to protect him 17 from the risk of third-party fraud. But nothing in Sun ’n Sand creates such a sweeping duty, and 18 Plaintiffs offer no explanation why such an extension of Sun ‘n Sand is appropriate here.6 Cf. 19 Kurtz-Ahlers, LLC v. Bank of Am., N.A., 48 Cal. App. 5th 952, 956–58 (Cal. Ct. App. 2020) 20 (declining to extend Sun ’n Sand to create new duty for bank to inquire into possible fraud where 21 third party deposited checks payable to her). 22 Defendant also argues that Plaintiffs’ negligence claim is barred by the economic loss rule. 23 See Dkt. No. 32 at 14. “The economic loss rule requires a [party] to recover in contract for purely 24 economic loss due to disappointed expectations, unless he can demonstrate harm above and 25 beyond a broken contractual promise.” See Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 26

27 6 Plaintiffs suggest in passing that Defendant may be held liable for failing to “discharge its 1 979, 988 (Cal. 2004). Plaintiffs appear to concede that the economic loss rule applies, but suggest 2 that they have suffered non-economic losses. See Dkt. No. 38 at 23, & n.88. Plaintiffs cite to a 3 few broad allegations in the complaint that “[f]inancial elder abuse causes irreparable harm to its 4 elderly victims,” and “[m]any victims suffer even more from feelings of betrayal . . . .” See id. 5 (citing Compl. at ¶ 233). But the complaint does not allege that Plaintiffs suffered any specific 6 non-economic losses. 7 D. UCL 8 Lastly, Plaintiffs allege that Defendant’s conduct violated the UCL. See Compl. at ¶¶ 257– 9 64. Defendant raises several procedural problems and substantive deficiencies with this claim. 10 See Dkt. No. 32 at 18–21. 11 i. Equitable Relief 12 “In order to entertain a request for equitable relief, a district court must have equitable 13 jurisdiction, which can only exist under federal common law if the plaintiff has no adequate legal 14 remedy.” Guzman v. Polaris Indus., 49 F.4th 1308, 1313 (9th Cir. 2022). Defendant points out 15 that Plaintiffs have not pled that they lack an adequate legal remedy, and are seeking the same 16 money in restitution that they seek in damages. See Dkt. No. 32 at 18–19. Plaintiffs do not 17 suggest that they have pled that they lack an adequate legal remedy, which (however easy to 18 remedy) precludes them from seeking equitable relief. See Ramos v. Gap, Inc., No. 23-CV-04715- 19 HSG, 2024 WL 4351868, at *6 (N.D. Cal. Sept. 30, 2024). Moreover, although Plaintiffs suggest 20 that their UCL theory is distinct from their EADACPA claim, they offer no explanation as to how. 21 See Dkt. No. 38 at 18–19. Plaintiffs’ bald assertion that they are different is insufficient. 22 ii. Substantive Claim 23 Setting aside these procedural deficiencies, Defendant argues that Plaintiffs’ UCL claim 24 should be dismissed because they also have not pled any actionable unlawful, unfair, or fraudulent 25 conduct. See Dkt. No. 32 at 19–21. But once again, Plaintiffs provide only a cursory response to 26 these arguments. See Dkt. No. 38 at 20–21. Plaintiffs appear to rely solely on the argument that 27 Defendant’s conduct was “unfair.” See id. They urge the Court to apply the test for unfair 1 conduct expressed in Camacho v. Auto. Club of S. California, for consumer cases, which requires: 2 (1)the consumer injury must be substantial; (2) the injury must not 3 be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves 4 could not reasonably have avoided 5 6 142 Cal. App. 4th 1394, 1403 (Cal. Ct. App. 2006). Plaintiffs’ own authority, however, 7 recognizes that there is a “split of authority” as to whether this test applies. See Lin, 2024 WL 8 5182199, at *10. But see Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 735–36 (9th Cir. 9 2007) (applying either “balancing” or “tethering” test in consumer context). 10 But even assuming the Camacho test applies, Plaintiffs only claim that they were elderly 11 victims of a third-party fraud scheme, and could not have avoided the financial losses themselves. 12 They do not allege what specific business practice or policy violated the UCL. Nor have they 13 alleged any facts about the relative utility of Defendant’s practices. As Defendant points out, there 14 may be public policy considerations that outweigh the risks here, such as the efficient processing 15 of banking transactions that are authorized by customers. The Court is sympathetic that Plaintiffs 16 lost an enormous amount of their savings at the hands of a third-party fraudster. But without 17 more, the Court cannot find that Plaintiffs have adequately pled their UCL claim against 18 Defendant. 19 IV. CONCLUSION 20 The Court GRANTS the motion to dismiss. Dkt. No. 32. The Court is skeptical, given the 21 deficiencies identified above, that Plaintiffs could amend their complaint to survive a subsequent 22 motion to dismiss. Still, at this stage in the litigation, the Court cannot say that amendment 23 necessarily would be futile. Plaintiffs may therefore file an amended complaint within 21 days of 24 the date of this order. Plaintiffs are cautioned, however, that they should fully plead their best case 25 in any amended complaint as the Court is unlikely to grant further leave to amend. 26 // 27 // 1 The Court anticipates that Defendant will file a motion to dismiss any amended complaint. 2 || The Court will therefore wait to set a case schedule until after Plaintiffs have filed their amended 3 complaint and Defendant has responded. 4 IT IS SO ORDERED. 5 || Dated: 9/18/2025 6 . ° S. GILLIAM, JR. / 7 United States District Judge 8 9 10 11 12

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