The payee brought an action against the bank seeking to recover funds lost to a non-party fraudster. The payee is a single attorney law firm; the lawyer had directed his client via email to wire funds to the firm’s bank account. Later, the fraudster gained access to the payee’s email account and, mirroring the payee’s original email, sent a message to the client directing it to wire the funds to a different account held by the fraudster at one of the bank’s Texas locations. Once the payee was aware of the apparent fraud, he contacted the bank to inform it of the issue; the bank nevertheless allowed withdrawals out of the fraudster’s account after receiving notice of the fraud from the payee. The payee alleged various UCC and common law claims and argued that the bank owed the payee and its client a duty of care, had a fiduciary responsibility to protect the stolen funds once the bank was made aware of the fraudulent activity, and that the bank breached that duty of care. The bank filed a motion to dismiss the claims, arguing that (1) a Maine statute bars the claims, (2) the UCC preempts the common law claims, (3) there was no fiduciary relationship between it and the client, (4) the payee had failed to provide a specific UCC provision that the bank had violated.
In Hirshon L. Grp. PC v. Wells Fargo Bank N.A., No. 2:23-cv-00445-LEW, 2024 WL 4308285, 2024 U.S. Dist. LEXIS 174079 (D. Me. Sept. 26, 2024) (opinion not yet released for publication), the court dismissed the payee’s claims for breach of fiduciary duty and the UCC claims but allowed the payee to proceed on claims for the breach of common law duties. First, the court discussed the choice-of-law provision to determine whether Maine or Texas law governed. The court applied Texas law after finding that “Texas bears the most direct relationship to the controversy.” Thus, the court denied the bank’s motion to dismiss based on a Maine statute. Second, the court dismissed the bank’s argument that the UCC preempted or displaced the payee’s claims. The bank argued that the only relief available to the payee was through a judicial order under UCC Article 4A-503. The court held that Article 4A-503 was not the “be all, end all of this dispute” because this case “concerns post-acceptance oversight of funds on deposit, rather than any claim of improper acceptance or deposit.” Further, the court stated that it was “not persuaded” that Article 4A-503 was applicable to the controversy. However, it left the issue open for an evaluation of Texas law in a later proceeding. Third, the court found that the bank’s argument that it had no fiduciary duty to the payee or its client was “intuitively reasonable,” because the payee had provided no binding authority that could hold the bank liable as a fiduciary to a non-client depositor. Therefore, the court granted the bank’s motion to dismiss the claim for breach of fiduciary duty. Finally, the court held that the payee had failed to specifically identify a provision in the UCC showing the bank owed the payee or his client a post-acceptance duty regarding the deposit. Thus, the payee’s UCC claim was dismissed. Ultimately, although the court dismissed the payee’s fiduciary duty and UCC claims, it allowed the payee on its remaining claims for breach of common law duties.
By Benjamin A. Fonville: [email protected]
Edited By Nura Elhentaty [email protected]
Edited By Ashley Boyce [email protected]
Edited By Hayden Mariott: [email protected]
The Texas Bank Lawyer Editorial Staff
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