A New York bank customer (the “account holder”) was defrauded out of nearly a quarter of a million dollars, after being convinced by scammers that his accounts were compromised and that his funds needed to be “secured” through urgent wire transfers. Over a series of in-person visits to his bank, the account holder made several large wire transfers to overseas accounts controlled by the fraudsters. When requesting each wire transfer, the account holder informed the bank employee “that he had been instructed to wire money to Thailand.” After he discovered that the funds were lost, he brought suit against the bank in federal court. The account holder alleged the bank “knew or should have known” that there was a “substantial probability” he was being scammed and did nothing to warn him, contending that it had a duty to warn or halt the transactions (seemingly asserting a negligence claim under New York common law, although the complaint did not specifically assert a cause of action). A contractual relationship existed between the account holder and the bank through various account agreements and wire transfer agreements. The bank moved to dismiss the complaint, arguing primarily that the claim was preempted by New York UCC Article 4-A (“Article 4-A”). The bank contended that Article 4-A provides an exclusive statutory structure that governs the duties and liabilities of parties involved in facilitating and initiating wire transfers, meaning that because each payment order was authorized and properly executed separately and in accordance with Article 4-A, it had fulfilled its obligations under the statute. Therefore, it owed no common law duty to intervene or warn of suspicious activity. The account holder did not dispute the bank’s presentation of Article 4-A but asked the court to nonetheless “impose ‘a duty to warn’” on the bank before completing the transfers, which he argued would bring the claim outside of Article 4-A’s scope.
In McCarthy v. JP Morgan Chase Bank, 772 F. Supp. 3d 298 (E.D.N.Y. 2025), the court held that Article 4-A preempted the common law claim, and that even if the claim was not preempted, it had failed to state a negligence claim under New York tort law, and no “duty to warn” was created by any agreements between the bank and the account holder. First, the court held that Article 4-A preempts common law claims when they arise from the execution of funds transfers (which are “commonly referred to…as a wholesale wire transfer”) because Article 4-A was designed to be the “‘exclusive means of determining the rights, duties, and liabilities’” of parties engaged in activity covered by Article 4-A. N.Y. U.C.C. § 4-A-102; Fischer & Mandell LLP v. Citibank, N.A., 632 F.3d 793, 797 (2d Cir. 2011). It further found the account holder’s claim fell completely within the scope of a funds transfer governed by Article 4-A because the wire transfers were ordered in-person, and, therefore, “authorized” under Article 4-A-202(1). Next, the court, relying on Article 4-A-212, rejected the account holder’s attempt to avoid preemption by framing his claim as a pre-transaction “duty to warn” negligence action. Article 4-A-212 limits a bank’s duties to those specifically in Article 4-A, which do not include a duty to warn. Next, the court found that even if the claim was not preempted, the account holder had failed to state a claim for negligence under New York law. To successfully bring a claim for negligence under New York law, a plaintiff must allege that “the defendant owed the plaintiff a cognizable duty of care as a matter of law.” Serengeti Express, LLC v. JPMorgan Chase Bank, N.A., No. 19-cv-5487, 2020 U.S. Dist. LEXIS 81151, 2020 WL 2216661 *1, *3 (S.D.N.Y. May 7, 2020). The duty of care must arise under New York tort law. Fillmore East BS Subsidiary LLC v. Capmark Bank, 552 F. App’x 13 (2d Cir. 2014). The court noted that New York courts have consistently refused to impose extra-statutory duties on institutions facilitating a wire transfer. Therefore, the court similarly refused to impose any “duty to warn” on the bank here. Finally, the court found that there was no contractual duty to warn created by any of the agreements, and the account holder had failed to allege that the bank failed to comply with any of the agreements’ terms. Ultimately, the court found the account holder’s claims were preempted by Article 4-A, and all alternate arguments raised by the account holder attempting to bring his claims out of the scope of Article 4-A had failed.
By Landon Womack [email protected]
Edited By Kristin Meurer [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]