Berry v. Regions Fin. Corp.

507 F.Supp.3d 972

David BERRY and Melanie Berry, Plaintiffs,

v.REGIONS FINANCIAL CORPORATION; Regions Bank; Truist Financial Corporation ; Truist Bank; SunTrust Bank; and Branch Banking & Trust Company, d/b/a SunTrust Bank, Defendants.

Case No. 2:20-cv-2393-JPM-atc

United States District Court, W.D. Tennessee, Western Division.

Signed December 17, 2020

Louis P. Chiozza, Jr., Chiozza & Associates, Milton E. Magee, Jr., Husch & Eppenberger, Memphis, TN, Milton S. McGee, III, Riley Warnock & Jacobson, PLC, Nashville, TN, for Plaintiffs.

Zachary A. Kisber, Robert F. Tom, Baker Donelson Bearman Caldwell & Berkowitz, Memphis, TN, for Defendants Regions Financial Corporation, Regions Bank.

John R. Cheadle, Cheadle Law, Nashville, TN, for Defendants Truist Financial Corporation, SunTrust Bank, Branch Banking & Trust Company.

John R. Cheadle, Cheadle Law, Nashville, TN, Elizabeth M. Briones, Pro Hac Vice, Mary Zinsner, Troutman Pepper Hamilton Sanders LLP, Washington, DC, for Defendant Truist Bank.

ORDER DENYING PLAINTIFFS’ MOTION TO AMEND COMPLAINT ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS

JON P. McCALLA, UNITED STATES DISTRICT JUDGE

Before the Court is Plaintiffs’ Motion to Amend Complaint ("Motion to Amend"), filed on July 20, 2020. (ECF No. 25.) Plaintiffs move the Court pursuant to Federal Rule of Civil Procedure 15 for leave to amend the Complaint "in order to correct and clarify the allegations and averments of the Original Complaint." (Id. at PageID 161.) Plaintiffs attached a copy of the Proposed Amended Complaint to their Motion to Amend. (ECF No. 25 at PageID 163–70.)

Defendants Regions Bank and Regions Financial Corporation ("the Regions Defendants") filed their Response to Plaintiffs’ Motion to Amend on August 3, 2020. (ECF No. 31.) The Regions Defendants argue that the Proposed Amended Complaint fails to state a claim upon which relief can be granted, that each alleged claim in the Proposed Amended Complaint is futile and that therefore this Court should deny the Motion to Amend. (See generally id. )

Defendant Truist Bank¹ filed its Response to Plaintiffs’ Motion to Amend on August 3, 2020. (ECF No. 32.) Truist adopts the arguments of the Regions Defendants. (Id. at PageID 203.) Additionally, Truist argues that Plaintiffs are not a customer of Truist and that they cannot maintain a direct cause of action against Truist. (Id. at PageID 204.)

Plaintiffs filed a Reply² on August 4, 2020. (ECF No. 34.) Plaintiffs argue that Defendants’ arguments in opposition of the Motion to Amend are premature and effectively turn the Motion to Amend into a summary judgment motion. (Id. ¶ 3.) Plaintiffs also argue that the Tennessee Court of Appeals cases cited by Defendants in support of their assertion that Plaintiffs’ common law claims are preempted by Article 4A of title 47 of the Tennessee Code Annotated are inapplicable "as neither case deals with the issues presented by cyber criminals. " (Id. ¶¶ 4–7.)

For the reasons set forth below, Plaintiffs’ Motion to Amend is DENIED .

I. BACKGROUND

A. Factual Background

This action arises out of a fraudulent wire transfer initiated by Plaintiffs on August 3, 2018. (Am. Compl., ECF No. 25 ¶ 8.) Plaintiffs entered into a contract to purchase real property in July 2018 and retained the law firm of J. Gilbert Parrish ("Parrish Law Firm") as their closing attorney. (Id. ¶¶ 2–3.) The closing was scheduled for August 9, 2018. (Id. ¶ 10.)

Plaintiffs allege that on July 26, 2018, Jan Baugus at the Parrish Law Firm "received fraudulent emails purporting to have been sent by Plaintiff David Berry requesting a copy of the closing statement and wiring instructions." (Id. ¶ 5.) Plaintiffs allege that those emails "were in fact sent by an unknown 3^rd party from the South African time zone." (Id. ) Plaintiffs further allege that on August 1, 2018, they received fraudulent emails purporting to be from Baugus and from their realtor with wire transfer instructions. (Id. ¶¶ 6–7.) The emails instructed Plaintiffs to contact Baugus at Parrish Law Firm with any questions, but provided a fraudulent email address for Baugus. (Id. ¶ 6.)

On August 3, 2018, Plaintiffs visited a Regions Bank branch in Shelby County and caused a wire transfer order in the amount necessary to close the sale to be issued. (Id. ¶ 8.) Plaintiffs allege that on August 7, 2018, a fraudulent wire transfer request was sent to and processed by Regions Bank,³ resulting in $244,422.60 being wired to SunTrust Bank "who then caused the funds to be deposited ... into an account which had been fraudulently substituted for the account number belonging to attorney J. Gilbert Parrish." (Id. ¶ 9.) On August 9, 2018, the scheduled date for the closing, Plaintiffs discovered that the closing attorney never received the necessary funds. (Id. ¶ 9.)

B. Procedural Background

Plaintiff filed this action on April 27, 2020 in the Tennessee state court. (Compl., ECF No. 1-1.) The Regions Defendants removed the case to this Court on June 3, 2020. (ECF No. 1.)

On June 10, 2020, the Regions Defendants filed a Motion to Strike Plaintiffs’ Jury Demand and a Motion to Dismiss. (ECF Nos. 9 & 11.) The Regions Defendants cite to the arbitration and jury waiver clause contained within the Domestic Wire Transfer Request/Authorization Form which Plaintiffs’ executed in support of their Motion to Strike Plaintiffs’ Jury Demand. (See generally ECF No. 9-1.) The Regions Defendants’ Motion to Dismiss alleges that Plaintiffs’ Complaint fails to state a claim for relief because: (1) Article 4A of the U.C.C. preempts Plaintiffs’ common law negligence, breach of warranty, and conversion claims; (2) Plaintiffs’ allegations "negate any basis for a conversion claim"; (3) Plaintiffs have failed to "identify any provision of Article 4A [of the U.C.C.] allegedly breached by Regions, let alone any ‘warranty’ made by Regions pursuant to Article 4A"; (4) Plaintiffs have not pled the elements of their breach of contract claim under Tennessee law; and (5) Plaintiffs cannot recover attorney's fees or punitive damages. (ECF No. 11-1 at PageID 106–14.)

Truist filed its Motion to Dismiss on June 10, 2020. (ECF No. 10.) Truist's Motion to Dismiss alleges that Plaintiffs’ Complaint fails to state a claim for relief because: (1) Plaintiffs’ claims fail under Federal Reserve Board Regulation J and Article 4A of the U.C.C.; (2) "Plaintiffs lack statutory standing to sue Truist"; (3) Plaintiffs’ common law claims are preempted by Regulation J and Article 4A"; and (4) if Plaintiffs’ common law claims are not preempted, they fail as a matter of law for a variety of reasons. (Mot. to Dismiss, ECF No. 10; Mem. in Support of Mot. to Dismiss, Table of Contents, ECF No. 10-1 at PageID 79.)

Plaintiffs filed a Response and Motion for Leave to File an Amended Complaint on July 20, 2020. (ECF Nos. 24 & 25.) Plaintiffs, in their 3-page Response, assert that: (1) their proposed Amended Complaint "references Section 4A [of the U.C.C.], which is virtually identical to the Federal Counterpart, 12 C.F.R. Pt. 210, Subpt. B, App. B, Section 4A"; (2) the claims for negligence against all Defendants arise out of conduct that occurred "antecedent to the mechanics of the handling of the wire transfer instructions by the Defendants, which but for such negligent conduct, the loss to Plaintiffs would not have occurred"; and (3) this antecedent allegation of negligence entitles Plaintiffs to discovery and trial. (ECF No. 24 at PageID 150–51 (emphasis in original).) Plaintiffs failed to respond to the Regions Defendants’ Motion to Strike. (See generally ECF Nos. 24 & 25.)

On July 28, 2020, Plaintiffs filed a Reply (ECF No. 30) to a Supplemental Memorandum filed by the Regions Defendants on July 27, 2020 (ECF No. 29). In their reply, Plaintiffs assert that their Motion to Amend should "be heard prior to consideration of the pending Motions of all Defendants to Dismiss." (ECF No. 30 at PageID 178.) Plaintiffs concede that "if the Motion to Amend the Original Complaint should be denied, the Motions to Dismiss must be granted. There would be no need to Amend the Original Complaint filed in State Court if it complied with the Federal Rules of Civil Procedure and Federal law in stating a claim for relief in this Court." (Id. )

On August 3, 2020, both the Regions Defendants and Truist filed Responses to Plaintiffs’ Motion to Amend. (ECF Nos. 31 & 32.) All Defendants oppose Plaintiffs’ Motion on the grounds that the claims in the Proposed Amended Complaint are futile. (See generally id. ) The Regions Defendants specifically assert that: (1) Plaintiffs’ negligence claim is preempted by Article 4A; (2) the commercial reasonableness of Regions’ security procedures under Tenn. Code Ann. § 47-4A-205 is irrelevant because Plaintiffs authorized the wire transfer in person; (3) Plaintiffs’ allegations demonstrate that the Regions Defendants have no liability under Tenn. Code Ann. § 41-4A-207(b); and (4) Plaintiffs’ Proposed Amended Complaint still fails to identify a contract or any specific provision of an alleged contract that Regions Defendants breached. (See generally ECF No. 31.) Truist adopts the Regions Defendants’ arguments and reiterates its assertion that Plaintiffs cannot maintain a direct cause of action against Truist because they "are not a Truist customer" and "Truist is not in privity with Plaintiffs". (ECF No. 32 at PageID 203–04.)

On August 4, 2020, Plaintiffs filed their Reply. (ECF No. 34.) Plaintiffs argue that Defendants’ responses to the Motion to Amend are premature. (Id. ¶ 3.) Plaintiffs dispute that their negligence claim is preempted by Article 4A, stating that "neither [of the Tennessee Court of Appeals cases] cited by Regions are in any way applicable to the instant case, as neither case deals with the issues presented by cyber criminals [.]" (Id. ¶ 5 (emphasis in original).) Plaintiffs do not otherwise respond to Defendants’ arguments regarding the futility of their claims.

II. LEGAL STANDARD

Federal Rule of Civil...