The company opened an account at the bank, which was governed by the Commercial Bank Service Agreement (“CBSA”). The company agreed to sell medical gowns to a broker for the Canadian government. On the day the account was opened, the broker successfully wired $6.75 million into the account. The following business day, the company attempted to wire $2.1 million from the account to a supplier in Hong Kong. The bank requested more information regarding the transaction, and the company responded with purchase order details, but the recipient information did not match. Additionally, the company explained that it was wiring the money in connection with the sale of garments spurred by high demand during the pandemic. After an internal investigation, the bank declined to process the outgoing wire. It explained that bank employees had been cautioned to be alert for scams involving customers quickly wiring funds abroad for COVID-19 medical supplies. The company sued the bank for breach of contract, alleging improper handling of wire transfers and the closing of its account. The bank moved for summary judgment, and the district court granted the motion. The company appealed.
In Gent Row, LLC v. Truist Fin. Corp, No. 24-10387, 2025 WL 1721485, 2025 U.S. App. LEXIS 15256 (11th Cir. June 20, 2025) (opinion not yet released for publication), the Eleventh Circuit affirmed the summary judgment verdict for the bank, reasoning that the bank properly exercised its discretion provided by the CBSA, and thus did not breach its contract with the company. The CBSA allowed the bank to use discretion to “close any account with or without cause at any time,” and without prior notice if closing the account was “necessary to protect the bank, its employees, or others from risk, harm, or loss.” Moreover, the CBSA allowed the bank to “freeze all or any portion of the funds it deemed appropriate until the dispute was resolved.” The court recognized that when one party is vested with “a degree of discretion in performance,” that there is an implied obligation of good faith” guided by the “reasonable party in the same position” standard. It explained that the bank acted reasonably by refusing to send the funds because it sought to avoid facilitating fraudulent transactions. It further noted the relevance of the bank’s guidance sent to employees regarding scams and that the bank completed an internal investigation; these facts bolstered the bank’s argument that it had acted in good faith. The court held that the bank “reasonably exercised the broad discretion the CBSA afforded” when it declined the customer’s wire and returned funds to the broker and closed the account.
By Bryant Breckenridge [email protected]
Edited By Callighan Ard [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]