The customer was an elderly woman who opened a priority credit line with the bank. Several years later, scammers purporting to be from Microsoft obtained access to the customer's credit line and used it to place tens of thousands of dollars into the customer's bank account. The scammers told the customer that the money was an accidental refund and instructed the customer to send the money back to the scammers via a wire transfer. The customer complied. The banker who authorized the wire transfer checked off on the wire transfer form that the bank had conducted a risk evaluation, despite not actually having conducted one. The scammers successfully performed the scam on the customer two more times. Each time, the authorizing banker falsely marked that the bank had conducted a risk evaluation. The fourth time the scammers attempted the scam, the banker conducted a risk evaluation, determined that the customer was likely being scammed, and did not complete the wire transfer. The customer sued the bank under California's Elder Abuse Act and California's Unfair Competition Law (UCL). The bank filed a motion to dismiss the customer's suit.
In Kanter-Doud v. Wells Fargo Bank, N.A., No. 2:23-cv-00678-DAD-AC, 2024 WL 382325, 2024 U.S. Dist. LEXIS 17904 (ED Cal. Jan. 31, 2024) (opinion not yet released for publication), the court granted the bank's motions to dismiss. The customer claimed that the bank violated the Elder Abuse Act through both direct financial abuse and indirect financial abuse. Direct financial abuse under the Elder Abuse Act occurs when a person or entity "takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for wrongful use or with intent to defraud." The act defines "taking" as when a person or entity deprives "an elder or dependent adult . . . of any property right." The act explains that "wrongful use" occurs when "the person or entity knew or should have known that [their] conduct is likely to be harmful to [an] elder." The court held that the bank engaged in a wrongful act by not conducting a risk evaluation, as the customer's wire transfers were suspicious enough that the bankers should have suspected that their approval of the wire transfers without conducting a risk evaluation would harm the customer. However, because the bank itself did not deprive the customer of any property, the customer failed to state a claim for direct financial abuse. The court similarly held that the bank did not engage in indirect financial abuse because indirect financial abuse requires that a person or entity assist a third party in depriving an elder of property with "actual knowledge of [a] third-party scammer's wrongful conduct." Although the bankers acted carelessly in not conducting risk evaluations, the fact that the bankers did not conduct risk evaluations meant that the bankers did not have actual knowledge of the scammers' wrongful conduct and thus could not be found liable for indirect financial abuse.
The court also dismissed the customer's claims under the UCL. The UCL prohibits "any unlawful, unfair, or fraudulent business act[s] or practice[s]." People may sue under the UCL for violations of other laws that constitute unlawful business acts or practices. The court held that the bank did not engage in unlawful activity because the customer failed to establish that the bank had engaged in unlawful activity under the Elder Abuse Act or any other law. Concerning the fraudulent prong of the UCL, the court held that while the customer did allege that the bank had engaged in potentially deceptive or misleading conduct through the bankers falsely indicating that they had conducted risk assessments, she did not state with sufficient specificity exactly that which about the bank's conduct was fraudulent. Lastly, the court held that the customer failed to state a claim for unfair business practices. Courts evaluate unfair business practices through a balancing test in which they balance a business activity's harm to the consumer with the benefits to the business. While the bankers falsely had indicated that they conducted risk assessments of the customer's wire transfers may be an unfair business practice, the customer did not sufficiently explain how the harm caused to the customer outweighed the benefit to the bank. As such, the court granted all of the bank's motions to dismiss, although it allowed leave to amend and suggested that the customer could successfully amend her complaints for fraudulent and unfair business practices under the UCL.
By Gregory Ferrer [email protected]
Edited By Joshua Shetler [email protected]
Edited By Ashley Boyce [email protected]