Lucky Star Enters. III, LLC v. Wells Fargo Bank, N.A.

585 F.Supp.3d 1297

LUCKY STAR ENTERPRISES III, LLC, Plaintiff,

v.WELLS FARGO BANK, N.A., Defendant.

CASE NO. C21-1698JLR

United States District Court, W.D. Washington, at Seattle.

Signed February 11, 2022

Jihee Ahn, Pro Hac Vice, John B. McDonald, Harris Bricken LLP, Seattle, WA, for Plaintiff.

Al Roundtree, Fox Rothschild LLP, Seattle, WA, for Defendant.

ORDER GRANTING MOTION TO DISMISS

JAMES L. ROBART, United States District Judge

I. INTRODUCTION

Before the court is Defendant Wells Fargo Bank, N.A.’s ("Wells Fargo") motion to dismiss. (Mot. (Dkt. # 6); Reply (Dkt. # 11).) Plaintiff Lucky Star Enterprises III, LLC ("Lucky Star") opposes the motion. (Resp. (Dkt. # 10).) The court has considered the motion, the parties’ submissions, the relevant portions of the record, and the applicable law. Being fully advised,¹ the court GRANTS Wells Fargo's motion to dismiss.

II. BACKGROUND

Lucky Star is a limited liability company ("LLC") that operates fitness centers in Snohomish County, Washington. (Compl. (Dkt. # 1-1) ¶¶ 1.1, 2.1, 3.1.) Sometime before February 4, 2021, it hired Flynn Construction Management General Contracting Inc. ("Flynn") to remodel a fitness center located in Marysville, Washington. (Id. ¶ 3.1.) On or about February 4, 2021, Lucky Star received an email that purported to be from Flynn, which attached an invoice for payment in the amount of $125,621.85. (Id. ¶ 3.2.) The email instructed Lucky Star to send that sum by wire transfer to an account at a Wells Fargo branch in Pennsylvania, which Lucky Star later learned had been closed. (Id. ¶ 3.3.)

On March 12, 2021, Lucky Star did as the email instructed it to do and sent $125,621.85 from an account it held with U.S. Bank National Association ("U.S. Bank") to the Wells Fargo account described in the email. (Id. ¶¶ 3.4.) Wells Fargo received the funds on the same date—March 12, 2021—and placed them into the designated account. (Id. ¶ 3.6.) Approximately six days later, Lucky Star received a phone call from Wells Fargo informing it that the account into which the $125,621.85 had been transferred "had been flagged by Wells Fargo." (Id. ¶ 3.7.) A Lucky Star employee contacted Wells Fargo later that same day and confirmed that the Wells Fargo account had been flagged but was allegedly assured by Wells Fargo that "the wired funds remained on deposit in" the flagged account and that they "would be deposited back into Lucky Star's account within 72 hours." (Id. ¶ 3.8.) Flynn also contacted Wells Fargo on March 18, 2021 and was allegedly told the same information that Wells Fargo had relayed to Lucky Star. (Id. ¶ 3.9.)

When Wells Fargo did not deposit the $125,621.85 back into Lucky Star's account, as it allegedly promised to do, Lucky Star and U.S. Bank—acting on Lucky Star's behalf—requested that Wells Fargo send the money back to Lucky Star's account. (Id. ¶¶ 3.10, 3.12.) Wells Fargo refused to do so. (Id. ¶ 3.12.) At some point after the funds were deposited into the Wells Fargo account, the funds were "withdrawn or wired or transferred to a different account" and, effectively, "disappeared." (Id. ) As a next step, Lucky Star retained counsel and submitted a request to Wells Fargo for "return of the funds," which Wells Fargo again declined to do. (Id. ¶ 3.14.)

Lucky Star filed a complaint on February 2, 2021 in Snohomish County Superior Court. (Notice (Dkt. # 1) ¶ 2.) It alleges that Wells Fargo: (1) violated the Uniform Commercial Code ("U.C.C.") (Compl. ¶¶ 4.1-4.5); (2) aided and abetted in the fraudulent procurement of Lucky Star's funds (id. ¶¶ 5.1-5.4); (3) aided and abetted in the unlawful conversion of Lucky Star's funds (id. ¶¶ 6.1-6.4); (4) negligently breached duties of care it owed to Lucky Star (id. ¶¶ 7.1-7.4); and (5) made promises to Lucky Star on which Lucky Star detrimentally relied (id. ¶¶ 8.1-8.5). Wells Fargo removed the complaint to this court on December 22, 2021 (see Notice) and moved for dismissal seven days later, on December 29, 2021 (see Mot.).

III. ANALYSIS

Wells Fargo argues that Lucky Star's "[c]omplaint should be dismissed under Rule 12(b)(6) for failure to state a claim because it lacks a cognizable legal theory or sufficient facts alleged under a cognizable legal theory." (Mot. at 3.) Specifically, Wells Fargo argues that: (1) it had no obligation to "freeze, refund, or return the wired funds" once they had "been placed in the account of the beneficiary," and so could not have violated provisions of the U.C.C., as Lucky Star alleges (id. at 4-6); (2) Lucky Star's common law negligence claim is preempted by the U.C.C. (id. at 6-8); and, even if the common law claims are not preempted, (3) Lucky Star has failed to plead allegations sufficient to state a claim for negligence or promissory estoppel (id. at 10-11). It further argues that Lucky Star has either withdrawn or abandoned its aiding and abetting causes of action. (See Reply at 5-6.)

The court begins by describing the applicable legal standard when considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), before turning to consider whether dismissal of Lucky Star's complaint is appropriate under that standard.

A. Motion to Dismiss Standard

Federal Rule of Civil Procedure 12(b)(6) provides for dismissal when a complaint "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The court construes the complaint in the light most favorable to the nonmoving party. Livid Holdings Ltd. v. Salomon Smith Barney, Inc. , 416 F.3d 940, 946 (9th Cir. 2005). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

B. Lucky Star's Uniform Commercial Code Claim

Lucky Star's first cause of action alleges Wells Fargo violated article 4A of the U.C.C. ("Article 4A") "by releasing Lucky Star's funds from the Wells Fargo [a]ccount when it had actual and direct knowledge that Flynn was not the account holder," and then "refusing to refund Lucky Star's wired funds." (Compl. ¶¶ 3.16-3.24, 4.1-4.5.) The court first considers whether the law of Washington—where Lucky Star's wire transfer originated—or Pennsylvania—where the wire transfer was sent—will govern this claim. After deciding which state's substantive law to apply, the court considers whether Lucky Star has stated a claim under the U.C.C.

1. Choice of Law

"To determine the applicable substantive law, a federal court sitting in diversity applies the choice-of-law rules of the forum." Narayan v. EGL, Inc. , 616 F.3d 895, 898 (9th Cir. 2010). Under Washington's choice-of-law rules, the court must first consider whether a real conflict exists between the laws of Washington and the laws of another state. Seizer v. Sessions , 132 Wash.2d 642, 940 P.2d 261, 264 (1997).² Both Washington and Pennsylvania have adopted identical versions of the U.C.C., including Article 4A. See 13 Pa. Cons. Stat. § 4101 et seq. ; RCW 62A.1-101 et seq. Because no conflict exists, the court applies Washington law. Seizer , 940 P.2d at 264. That does not end the inquiry, however, because the U.C.C. instructs that issues relating to "a funds transfer by the originator to the beneficiary [are] governed by the law of the jurisdiction in which the beneficiary's bank is located." See RCW 62A.4A-507(a) ; see also 13 Pa. Cons. Stat. § 4A507(a). Lucky Star alleges that it transferred the at-issue funds to a Wells Fargo account located in Pennsylvania. (Compl. ¶ 3.3.) Accordingly, the court will apply Pennsylvania law to Lucky Star's claim under Article 4A.³

2. Wells Fargo's Liability Under Article 4A

Lucky Star's first count alleges, in effect, that Wells Fargo behaved improperly when it received a request to deposit money into an account bearing the same account number as the wire transfer, but different account holder name. (See Compl. ¶¶ 4.1-4.4.) Wells Fargo argues that Lucky Star's first cause of action, which arises under P.C.C. Article 4A, must be dismissed because Lucky Star fails to allege "that Wells Fargo had actual knowledge that there was a name mismatch at the time it processed and accepted [Lucky Star's] [f]unds [t]ransfer" (Reply at 3 (emphasis in original)) and, accordingly, Wells Fargo's only obligations as to the transferred funds were "to 1) make payment of the amount to the beneficiary, and 2) notify the beneficiary of same" (Mot. at 4).

Article 4A of the P.C.C. governs issues arising out of electronic wire transfers. See 13 Pa. Cons. Stat. § 4A102 ; Fragale v. Wells Fargo Bank, N.A. , 480 F. Supp. 3d 653, 659 (E.D. Pa. Aug. 19, 2020). Section 207 of Article 4A sets forth specific obligations with which a beneficiary's bank must comply when it receives a "misdescription" payment order, depending on the nature of the misdescription. See 13 Pa. Cons. Stat. § 4A207. When the payment order describes the beneficiary "both by name and ... bank account number and the name and [account] number identify different persons," the beneficiary's bank "may rely on the number as the proper identification of the beneficiary of the order" if it "does not know that the name and number refer to different persons." Id. § 4A207(b)(1). Subsection (b)(1) clarifies that "[t]he beneficiary's bank need not determine whether the name and number refer to the same person." Id. However, if the beneficiary's bank "knows that the name and number identify different persons" then "acceptance of the order cannot occur." Id. § 4A207(b)(2). "Knows" means "actual knowledge." Id. § 1202(b); see also 13 Pa. Cons. Stat. § 4A207, cmt. 2 ("The time of payment is the pertinent time at which...