Imperium Logistics, LLC v. Truist Fin. Corp.

686 F.Supp.3d 600

IMPERIUM LOGISTICS, LLC and Michigan Business Law Center, PLLC, Plaintiffs, v. TRUIST FINANCIAL CORPORATION, Fraudster #1, and Fraudster #2, Defendants.

Case No. 23-10001

United States District Court, E.D. Michigan, Southern Division

Signed August 10, 2023

Steven B. Haffner, Steven B. Haffner Assoc., Farmington Hills, MI, for Plaintiffs.

Amy Sabbota Gottlieb, Dickinson Wright PLLC, Troy, MI, Amy Elizabeth Murphy, Miller Johnson, Grand Rapids, MI, Brian L. Moffet, Michael Benjamin Brown, Miles & Stockbridge PC, Baltimore, MD, Jared Alexander Christensen, Dickinson Wright PLLC, Detroit, MI, for Defendant Truist Financial Corporation.

OPINION AND ORDER GRANTING IN PART TRUIST'S MOTION TO DISMISS [6]

LAURIE J. MICHELSON, UNITED STATES DISTRICT JUDGE

Imperium Logistics, LLC, and its counsel, Michigan Business Law Center, PLLC, were supposed to be the recipients of a $150,000 settlement payment. But they never received the money. Instead, they say, Fraudster 1 hacked MBLC's emails and changed the wiring instructions for the payment so the money was deposited into Fraudster 1's Truist Financial Corporation bank account. Plaintiffs also allege that Fraudster 1 had help on the inside from Fraudster 2, an unknown Truist employee. Plaintiffs say that, between the involvement of Fraudster 2 and the inconsistencies on the wire-transfer order, Truist had actual knowledge that it was accepting a fraudulent wire transfer. So they sued Truist, Fraudster 1, and Fraudster 2 for fraud, violations of Michigan's Uniform Commercial Code (UCC), and common-law and statutory conversion.

Truist moved to dismiss all claims against it. (ECF No. 6.) For the following reasons, the Court dismisses the fraud and UCC claims against Truist, but the common-law and statutory conversion claims will survive.

I.

Because Truist seeks dismissal under Federal Rule of Civil Procedure 12(b)(6), the Court accepts the factual allegations in Plaintiffs' complaint as true and draws reasonable inferences from those allegations in their favor. See Waskul v. Washtenaw Cnty. Cmty. Mental Health, 979 F.3d 426, 440 (6th Cir. 2020).

In 2022, Imperium settled a claim with an unknown entity (hereinafter referred to as the settling entity) for $150,000. (ECF No. 1, PageID.14.) The Michigan Business Law Center (MBLC) represented Imperium in that case. (Id.) The settlement agreement provided that the settlement payment was to be wired to MBLC's client-trust account. (Id.) It also contained the details needed to facilitate the settlement payment, including the payee name, payee address, bank name, bank address, bank routing number, bank account number, and name on the bank account where the settling entity was to send payment. (Id.)

Plaintiffs say that at some point before the settlement payment was sent, unknown Fraudster 1 "hacked into the email account of either or both of Settling Entity's counsel and/or MBLC and 'shadowed' those accounts, their respective email addresses, domain names, and internet protocol addresses[.]" (PageID.15.)¹ Fraudster 1 was then able to send an email to the settling entity's counsel "from" MBLC—without its knowledge—stating, "Kindly hold on wire[.] Please confirm back so i can provide wiring info[.] The wire info provided is on hold[.] I await your urgent response Thanks[.]" (Id.) A few hours later, Fraudster 1 sent another email that appeared to come "from" MBLC to the settling entity's counsel, stating, "Kindly process wire to the updated wire info[.]" (Id.) The "updated" wire information changed the recipient bank name from "Level One Bank" to "BB&T"—a defunct bank that merged with Sun Trust banks to become Truist in 2019—and altered the routing number and the bank account number. (PageID.15-16.) All other information, including the payee name, payee address, the bank address, and the name on the bank account, stayed the same. (Id.)

According to Plaintiffs, Fraudster 1 did not work alone. They allege that Fraudster 1 "informed Fraudster 2, an employee of Truist, to watch for and accept the fraudulent wire transfer into a Truist account in the name of Fraudster 1, notwithstanding that the account at Truist was not and had never been in the name of either MBLC or Imperium; and notwithstanding that on that date BB&T did not exist and did not then, nor had it ever maintained a branch bank at 30201 Orchard Lake Road, Farmington Hills, Michigan 48334" as set forth in the doctored wiring instructions. (PageID.16.)

About two weeks after the two fraudulent emails were sent, the settling entity wired the $150,000 settlement payment according to the new instructions. (PageID.16.) Plaintiffs say that Fraudster 2 "accepted" the settlement payment into Fraudster 1's account at Truist, despite three clear inconsistencies in the wire-transfer order. (Id.) One, the name on the account did not match the payee name or the name on the bank account fields. (Id.) Two, BB&T no longer existed at the time of the transaction—that entity had merged with Sun Trust Banks in 2019 and been renamed Truist. (PageID.17.) And three, neither BB&T nor Truist had a location in Farmington Hills, Michigan. (Id.)

Ultimately, Fraudster 1, "with the knowledge and cooperation of Fraudster 2," promptly withdrew the settlement funds from the Truist account. (Id.)

So Imperium and MBLC, being deprived of their settlement payment, sued Truist, Fraudster 1, and Fraudster 2 for fraud, violations of the UCC, common-law conversion, and statutory conversion in Michigan state court. (ECF No. 1.) The case was removed to this Court. (Id.) In response to the complaint, Truist moved to dismiss the claims against it under Federal Rule of Civil Procedure 12(b)(6). Fraudster 1 and Fraudster 2, being unknown, have not yet been served.

Given the adequate briefing, the Court considers the motion without further argument. See E.D. Mich. LR 7.1(f).

II.

In deciding this motion to dismiss, the Court "construes the complaint in the light most favorable" to Plaintiffs and determines whether their "complaint 'contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.' " See Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 403 (6th Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). Detailed factual allegations are not required to survive a motion to dismiss, HDC, LLC v. City of Ann Arbor, 675 F.3d 608, 614 (6th Cir. 2012), but they must "raise a right to relief above the speculative level," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). What is plausible is "a context-specific task" requiring this Court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937.

III.

A. Fraud

The fraud claim is relatively simple to address. Plaintiffs "concede that Count I of their complaint, a fraud claim, fails to state a claim against Truist, only." (ECF No. 9, PageID.88.) As such, the Court will dismiss that claim as to Truist.

B. UCC

Now to Plaintiffs' claim under Michigan's Uniform Commercial Code. As Truist points out, the complaint is not clear under which provision of the UCC Plaintiffs are seeking to bring a claim. (ECF No. 1, PageID.22-23.) But in their response, Plaintiffs identify a specific provision as the basis of their UCC claim. (ECF No. 9, PageID.109.) So the Court proceeds to analyze the motion with that specific provision in mind.

Article 4A of the UCC governs funds transfers. Under the language of the UCC, the parties agree that the settling entity was the "originator," JP Morgan Chase was the "originator's bank," MBLC was the intended beneficiary, Fraudster 1 was the actual beneficiary, and Truist was the "beneficiary's bank." See Mich. Comp. Laws §§ 440.4603(c), 440.4604(c), (d).

Article 4A provides rules for when, like here, "a payment order received by the beneficiary's bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons[.]" Mich. Comp. Laws § 440.4707(2). Specifically, it provides that "[i]f the beneficiary's bank . . . knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary's bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur." Id. at § 440.4707(2)(b). In other words, if a beneficiary's bank has knowledge of a mismatch between the name associated with the bank account number and the listed beneficiary, and transfers the funds to an unintended beneficiary, the transfer was not legally accepted. Plaintiffs say that is what happened here—Truist knew the account number on the wire-transfer order was associated with a name other than MBLC, so "no person" had "rights as beneficiary" and acceptance of the wire transfer never occurred.

Lack of acceptance has consequences under the UCC. For one, only "acceptance of the order by the bank obliges the sender to pay the bank the amount of the order[.]" Mich. Comp. Laws § 440.4902(2). So here, if there was no acceptance, JP Morgan would not be obligated to pay Truist the amount of the order. And two, the settling party's "obligation . . . to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary's bank of a payment order instructing payment to the beneficiary of that sender's payment order." Mich. Comp. Laws § 440.4902(3). So the settling entity would also be relieved of its obligation to pay the wire transfer amount to JP Morgan if it was shown that acceptance did not legally occur. The provision goes on to say that "[i]f the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged...