Nirav Ingredients, Inc. v. Wells Fargo Bank, N.A.

• Court: Court of Appeals for the Fourth Circuit
• Decided: August 12, 2022
• Docket: 21-1893
• Status: Unpublished

Opinion

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UNPUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 21-1893

NIRAV INGREDIENTS, INC.; ASH INGREDIENTS, INC.,

Plaintiffs - Appellants,

v.

WELLS FARGO BANK, N.A.,

Defendant - Appellee,

and

JOHN DOES,

Defendant.

Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Frank D. Whitney, District Judge. (3:20-cv-00366-FDW)

Submitted: July 22, 2022 Decided: August 12, 2022

Before THACKER, RUSHING, and HEYTENS, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ON BRIEF: David G. Redding, Ty K. McTier, TLG LAW, Charlotte, North Carolina, for Appellants. Victor L. Hayslip, Birmingham, Alabama, Mignon Arrington Lunsford, USCA4 Appeal: 21-1893 Doc: 26 Filed: 08/12/2022 Pg: 2 of 8

BURR & FORMAN LLP, Raleigh, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

Nirav Ingredients, Inc. (“Nirav”), appeals the district court’s order granting in part

Wells Fargo Bank, N.A.’s (“Wells Fargo”) motion to dismiss and its order granting Wells

Fargo’s motion for summary judgment. 1 We affirm the district court’s orders.

We review de novo a district court’s order granting a motion to dismiss under Fed.

R. Civ. P. 12(b)(6), “accept[ing] the factual allegations of the complaint as true and

constru[ing] them in the light most favorable to the nonmoving party.” Rockville Cars,

LLC v. City of Rockville, 891 F.3d 141, 145 (4th Cir. 2018). To survive a motion to dismiss,

“a complaint must contain 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) (internal

quotation marks omitted). In other words, “a plaintiff must provide sufficient detail to

show that [it] has a more-than-conceivable chance of success on the merits.” Upstate

Forever v. Kinder Morgan Energy Partners, L.P., 887 F.3d 637, 645 (4th Cir. 2018)

(cleaned up), vacated on other grounds, 140 S. Ct. 2736 (2020).

Because this case was brought under the district court’s diversity jurisdiction, we

must apply North Carolina law as it was determined, or as we predict it would be

determined, by the highest court of North Carolina. Young v. Equinor USA Onshore

Props., Inc., 982 F.3d 201, 206 (4th Cir. 2020). “[W]here the state’s highest court has

1 Although a second party, Ash Ingredients, Inc. (“Ash”), is also listed as an appellant, it does not seek to challenge the dismissal of its claims against the John Doe(s) defendant(s), and its corporate representative clarified in his deposition that Ash has no claims against Wells Fargo in this litigation.

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spoken neither directly nor indirectly on the particular issue before us,” decisions from the

state’s intermediate appellate courts “constitute the next best indicia of what state law is,

although such decisions may be disregarded if the federal court is convinced by other

persuasive data that the highest court of the state would decide otherwise.” McKiver v.

Murphy-Brown, LLC, 980 F.3d 937, 964 (4th Cir. 2020) (cleaned up).

“[S]tate laws that conflict with federal law are without effect.” Altria Grp., Inc. v.

Good, 555 U.S. 70, 76 (2008) (internal quotation marks omitted). We have determined

that Subpart B of Regulation J of the Federal Reserve Board, which incorporates Article

4A of the Uniform Commercial Code (“UCC”) and governs wire transfers, preempts state

law. 2 Donmar Enters., Inc. v. S. Nat’l Bank of N.C., 64 F.3d 944, 949 (4th Cir. 1995). This

is because the Federal Reserve sought “a uniform and comprehensive national regulation

of Fedwire transfers.” Id. Thus, if a bank complied with the regulation, “any liability

founded on state law of negligence or wrongful payment would necessarily be in conflict

with the federal regulations and is pre-empted.” Id.

Applying this standard, we have reiterated that a plaintiff’s claim that a bank

credited a wire to the correct account number but the wrong named beneficiary is

preempted by Regulation J. Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 223 (4th

Cir. 2002). That is the situation here—Ash correctly identified the K.P. account number

North Carolina has also adopted Article 4A. See N.C. Gen. Stat. §§ 25-4A-102, 2

25-4A-207(d) (2021).

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in its wire transfer but listed Nirav, not the Hacker, as the beneficiary. Accordingly, the

district court correctly rejected any state law claim based on the wires. 3

Turning to Nirav’s UCC claim, Article 4A contains detailed provisions on the

obligations and rights surrounding wire transfers. Article 4A identifies three parties to a

wire transfer—the beneficiary, the originator, and the bank. N.C. Gen. Stat. § 25-4A-

104(a) (2021). The UCC defines the beneficiary as “the person to be paid by the

beneficiary’s bank.” N.C. Gen. Stat. § 25-4A-103(a)(2) (2021).

While Nirav argues that it is an intended beneficiary because Ash intended to pay it

and not the Hacker, this argument is foreclosed by the UCC. In the situation presented

here, where the account number and name on the wire transfer identify different persons,

“if the beneficiary’s bank does not know that the name and number refer to different

persons, it may rely on the number as the proper identification of the beneficiary of the

order.” N.C. Gen. Stat. § 25-4A-207(b)(1) (2021). And as explained in the commentary:

The processing of the order by the beneficiary’s bank and the crediting of the beneficiary’s account are done by use of the identifying or bank account number without human reading of the payment order itself. The process is comparable to that used in automated payment of checks. The standard format, however, may also allow the inclusion of the name of the beneficiary and other information which can be useful to the beneficiary’s bank and the beneficiary but which plays no part in the process of payment. . . . Subsection(b) allows banks to utilize automated processing by allowing banks to act on the basis of the number without regard to the name if the bank does not know that the name and number refer to different persons.

3 We discern no error in the district court applying these principles to find both the negligence and unfair trade practice claims preempted.

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N.C. Gen. Stat. § 25-4A-207, cmt. 2 (2021). Moreover, the UCC states that if a mismatch

occurs between the account number and the beneficiary, it is the originator—Ash, not

Nirav—that has the right to recover against the bank. N.C. Gen. Stat. § 25-4A-207(d)

(2021). Thus, the district court correctly concluded that Nirav could not bring a UCC claim

against Wells Fargo. Accordingly, we affirm the district court’s order granting in part

Wells Fargo’s motion to dismiss.

We review the district court’s summary judgment ruling de novo, “applying the

same legal standards as the district court and viewing all facts and reasonable inferences in

the light most favorable to the nonmoving party.” Ballengee v. CBS Broad., Inc., 968 F.3d

344, 349 (4th Cir. 2020). “Summary judgment is warranted ‘if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)). “A genuine question of material fact

exists where, after reviewing the record as a whole, a court finds that a reasonable jury

could return a verdict for the nonmoving party.” J.D. ex rel. Doherty v. Colonial

Williamsburg Found., 925 F.3d 663, 669 (4th Cir. 2019) (internal quotation marks

omitted). In conducting this inquiry, courts may not “weigh conflicting evidence or make

credibility determinations.” Id. But “the nonmoving party must rely on more than

conclusory allegations, mere speculation, the building of one inference upon another, or

the mere existence of a scintilla of evidence.” Humphreys & Partners Architects, L.P. v.

Lessard Design, Inc., 790 F.3d 532, 540 (4th Cir. 2015) (internal quotation marks omitted).

Nirav’s negligence claim, after applying the preemption principles, was limited to

Wells Fargo’s opening and maintenance of the K.P. account. “Under North Carolina law,

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negligence is the failure to exercise proper care in the performance of a legal duty owed by

a defendant to a plaintiff under the circumstances.” Eisenberg, 301 F.3d at 224 (cleaned

up). While the district court offered several reasons for why summary judgment was

appropriate, we need only affirm on one basis—no reasonable jury could find that Wells

Fargo’s maintenance or lack of oversight of K.P.’s account proximately caused Nirav’s

injuries.

In order to succeed on a negligence claim, a plaintiff must show that the defendant’s

“breach of duty was a proximate cause of the injury.” Curlee ex rel. Becerra v. Johnson,

856 S.E.2d 478, 481 (N.C. 2021). “Proximate cause is a cause that produced the result in

continuous sequence and without which it would not have occurred, and one from which

any man of ordinary prudence could have foreseen that such a result was probable under

all the facts as they existed.” F.D.I.C. ex rel. Co-op. Bank v. Rippy, 799 F.3d 301, 316 (4th

Cir. 2015) (internal quotation marks omitted). However, “[a]n independent negligent act

will insulate a defendant’s liability where the facts do not constitute a continuous

succession of events, so linked together as to make a natural whole, and the intervening act

was not itself a consequence of defendant’s original negligence, nor under the control of

defendant, nor foreseeable by him in the exercise of reasonable prevision.” Coleman v.

Rudisill, 508 S.E.2d 297, 300 (N.C. Ct. App. 1998) (cleaned up). In other words, the

intervening cause “must be an independent force, entirely superseding the original action

and rendering its effect in the causation remote.” Id. at 299.

The Hacker was an intervening cause and absolved Wells Fargo of any liability for

any mishandling of K.P.’s account. For the Hacker’s scheme to succeed, they had to

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successfully infiltrate Nirav’s computer system, send a phishing email to Ash, compromise

or gain access to K.P.’s account, and have Ash follow the Hacker’s instructions and

forward the funds into the account. Thus, it was the Hacker’s actions that constituted the

true, proximate cause of Nirav’s injuries. Accepting Nirav’s position would make banks

insurers for their account holders’ Internet security measures and for peoples’ mistakes in

falling for phishing scams.

Therefore, we affirm the district court’s orders. We dispense with oral argument

because the facts and legal contentions are adequately presented in the materials before this

court and argument would not aid the decisional process.

AFFIRMED