Nirav Ingredients, Inc. v. Wells Fargo Bank

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NIRAV INGREDIENTS, INC.; ASH INGREDIENTS, INC., Plaintiffs - Appellants, v. WELLS FARGO BANK, N.A., Defendant-Appellee, and JOHN DOES, Defendant.

No. 21-1893

United States Court of Appeals, Fourth Circuit

August 12, 2022

UNPUBLISHED

Submitted: July 22, 2022

Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Frank D. Whitney District Judge. (3:20-cv-00366-FDW)

ON BRIEF:

David G. Redding, Ty K. McTier, TLG LAW, Charlotte, North Carolina for Appellants.

Victor L. Hayslip, Birmingham, Alabama, Mignon Arrington Lunsford BURR & FORMAN LLP, Raleigh, North Carolina, for Appellee.

Before THACKER, RUSHING, and HEYTENS, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Unpublished opinions are not binding precedent in this circuit.

PER CURIAM

Nirav Ingredients, Inc. ("Nirav"), appeals the district court's order granting in part Wells Fargo Bank N.A.'s ("Wells Fargo") motion to dismiss and its order granting Wells Fargo's motion for summary judgment.^1[] We affirm the district court's orders.

We review de novo a district court's order granting a motion to dismiss under Fed.R.Civ.P. 12(b)(6), "accept[ing] the factual allegations of the complaint as true and constru[ing] them in the light most favorable to the nonmoving party." Rockville Cars, LLC v. City of Rockville, 891 F.3d 141, 145 (4th Cir. 2018). 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 (2009) (internal quotation marks omitted). In other words, "a plaintiff must provide sufficient detail to show that [it] has a more-than-conceivable chance of success on the merits." Upstate Forever v. Kinder Morgan Energy Partners, L.P., 887 F.3d 637, 645 (4th Cir. 2018) (cleaned up), vacated on other grounds, 140 S.Ct. 2736 (2020).

Because this case was brought under the district court's diversity jurisdiction, we must apply North Carolina law as it was determined, or as we predict it would be determined, by the highest court of North Carolina. Young v. Equinor USA Onshore Props., Inc., 982 F.3d 201, 206 (4th Cir. 2020). "[W]here the state's highest court has spoken neither directly nor indirectly on the particular issue before us," decisions from the state's intermediate appellate courts "constitute the next best indicia of what state law is, although such decisions may be disregarded if the federal court is convinced by other persuasive data that the highest court of the state would decide otherwise." McKiver v. Murphy-Brown, LLC, 980 F.3d 937, 964 (4th Cir. 2020) (cleaned up).

"[S]tate laws that conflict with federal law are without effect." Altria Grp., Inc. v. Good, 555 U.S. 70, 76 (2008) (internal quotation marks omitted). We have determined that Subpart B of Regulation J of the Federal Reserve Board, which incorporates Article 4A of the Uniform Commercial Code ("UCC") and governs wire transfers, preempts state law.^[2] Donmar Enters., Inc. v. S. Nat'l Bank of N.C. , 64 F.3d 944, 949 (4th Cir. 1995). This is because the Federal Reserve sought "a uniform and comprehensive national regulation of Fedwire transfers." Id. Thus, if a bank complied with the regulation, "any liability founded on state law of negligence or wrongful payment would necessarily be in conflict with the federal regulations and is pre-empted." Id.

Applying this standard, we have reiterated that a plaintiff's claim that a bank credited a wire to the correct account number but the wrong named beneficiary is preempted by Regulation J. Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 223 (4th Cir. 2002). That is the situation here-Ash correctly identified the K.P. account number in its wire transfer but listed Nirav, not the Hacker, as the beneficiary. Accordingly, the district court correctly rejected any state law claim based on the wires.^[3]

Turning to Nirav's UCC claim, Article 4A contains detailed provisions on the obligations and rights surrounding wire transfers. Article 4A identifies three parties to a wire transfer-the beneficiary, the originator, and the bank. N.C. Gen. Stat. § 25-4A-104(a) (2021). The UCC defines the beneficiary as "the person to be paid by the beneficiary's bank." N.C. Gen. Stat. § 25-4A-103(a)(2) (2021).

While Nirav argues that it is an intended beneficiary because Ash intended to pay it and not the Hacker, this argument is foreclosed by the UCC. In the situation presented here, where the account number and name on the wire transfer identify different persons, "if the beneficiary's bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order." N.C. Gen. Stat. § 25-4A-207(b)(1) (2021). And as explained in the commentary:

The processing of the order by the beneficiary's bank and the crediting of the beneficiary's account are done by use of the identifying or bank account number without human reading of the payment order itself. The process is comparable to that used in automated payment of checks. The standard format, however, may also allow the inclusion of the name of the beneficiary and other information which can be useful to the beneficiary's bank and the beneficiary but which plays no part in the process of payment.... Subsection(b) allows banks to utilize automated processing by allowing banks to act on the basis of the number without regard to the name if the bank does not know that the name and number refer to different persons.

N.C. Gen. Stat. § 25-4A-207, cmt. 2 (2021). Moreover, the UCC states that if a mismatch occurs between the account number and the beneficiary, it is the originator-Ash, not Nirav-that has the right to recover against the bank. N.C. Gen. Stat. § 25-4A-207(d) (2021). Thus, the district court correctly concluded that Nirav could not bring a UCC claim against Wells Fargo. Accordingly, we affirm the district court's order granting in part Wells Fargo's motion to dismiss.

We review the district court's summary judgment ruling de novo, "applying the same legal standards as the district court and viewing all facts and reasonable inferences in the light most favorable to the nonmoving party." Ballengee v. CBS Broad., Inc., 968 F.3d 344, 349 (4th Cir. 2020). "Summary judgment is warranted 'if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Id. (quoting Fed.R.Civ.P. 56(a)). "A genuine question of material fact exists where, after reviewing the record as a whole, a court finds that a reasonable jury could return a verdict for the nonmoving party." J.D. ex rel. Doherty v. Colonial Williamsburg Found., 925 F.3d 663, 669 (4th Cir. 2019) (internal quotation marks omitted). In conducting this inquiry, courts may not "weigh conflicting evidence or make credibility determinations." Id. But "the nonmoving party must rely on more than conclusory allegations, mere speculation, the building of one inference upon another, or the mere existence of a scintilla of evidence." Humphreys &Partners Architects, L.P. v. Lessard Design, Inc., 790 F.3d 532, 540 (4th Cir. 2015) (internal quotation marks omitted).

Nirav's negligence claim, after applying the preemption principles was limited to Wells Fargo's opening and maintenance of the K.P. account. "Under North Carolina law, negligence is the failure to exercise proper care in the performance of a legal duty owed by a defendant to a plaintiff under the circumstances." Eisenberg, 301 F.3d at 224 (cleaned up). While the district court offered several reasons for why summary judgment was appropriate, we need only affirm on one basis-no...