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Barrett v. JPMorgan Chase Bank

United States District Court, S.D. California

February 13, 2015

RUBEN M. BARRETT, an individual, Plaintiff,
JPMORGAN CHASE BANK, a New York corporation, et al., Defendants.


DANA M. SABRAW, District Judge.

This case comes before the Court on Defendant JP Morgan Chase Bank, N.A.'s motion to dismiss Plaintiff's Complaint. Plaintiff filed an opposition to the motion, and Defendant filed a reply. For the reasons set out below, the Court grants in part and denies in part Defendant's motion.



In May 2012, Plaintiff Ruben M. Barrett entered into an investment agreement with SSMG, Inc. (Compl. ¶ 6.) It appears the agreement required Plaintiff to provide $150, 000 to SSMG to be placed towards an off-shore oil investment. (Id. ) Plaintiff was to send his investment to the client trust account of Arizona attorney Larry Busch of the Larry Busch Law Center, where the monies would be held in escrow subject to their release to the entity making the actual purchase. (Id. ) SSMG was serving as an intermediary, allegedly combining Plaintiff's money with other investments to accumulate a total of $750, 000. (Id. ) SSMG would then be the name on the investment prior to its release to the actual buyer of the fuel, Nacim Energy, LLC. (Id. )

On or about May 8, 2012, Plaintiff went to his local Chase bank located in Hillcrest, California. (Id. ¶ 7.) Plaintiff informed a Chase representative that he wished to execute a wire transfer. (Id. ) Plaintiff was led to a private desk where he was assisted by a single Chase employee. (Id. )

Plaintiff informed the employee that he wished to execute the transfer and provided him with specific wiring instructions. (Id. ¶ 8.) Plaintiff alleges he informed the employee he would need pre-advice to be sent to Busch to confirm the transaction was executed properly. (Id. ) Plaintiff alleges he specifically requested pre-advice in the following form: "Pre-Advice payment and Transaction Codes Must Be Sent to Larry@Buschlawcenter.Com Please call XXXXXXXXXX To Notify That Wire Has Sent." (Id. )

Plaintiff alleges the employee then left the desk for several minutes before returning and informing Plaintiff that the pre-advice had been sent, and that the transaction had been successful. (Id. ¶ 10.)

Plaintiff alleges that within a matter of days, it became clear to him that things were not moving as planned. (Id. ¶ 11.) He contacted SSMG in an attempt to recover his funds, but those attempts were unsuccessful. (Id. ) He also contacted Busch and demanded return of the funds. (Id. ) Busch informed him that the funds had been released pursuant to an escrow agreement between him, SSMG and a Colorado corporation entitled FRUCOM CAPITAL. (Id. ) Busch informed Plaintiff that he had never heard of him, and told Plaintiff he was under the impression the funds were coming directly from SSMG and were to go directly to FRUCOM. (Id. ¶ 11.)

Immediately after the transfer and on several occasions over the following years, Plaintiff spoke with Chase representatives about the transfer. (Id. ¶ 12.) Plaintiff alleges the Chase representatives repeatedly reassured Plaintiff that pre-advice had been issued to Busch. (Id. )

In the months following the transfer, Plaintiff learned that he was the victim of a scam and had been defrauded out of $150, 000 by SSMG and FRUCOM. (Id. ¶ 13.) Plaintiff notified federal law enforcement authorities and law enforcement in California and Arizona about the scam, but he was unable to secure a return of his funds. (Id. )

At some time in 2013, Plaintiff was informed by a Chase representative that he could request a recall of the May 2012 wire transfer, which Plaintiff did. (Id. ¶ 14.) Chase denied Plaintiff's request on October 25, 2013. (Id. ¶ 15.)

In November 2013, Plaintiff filed a complaint against Chase with the Consumer Financial Protection Bureau ("CFPB") regarding its refusal to recall the wire transfer. (Id. ¶ 16.) In response to the claim and in its defense, Chase sent a letter to the CFPB stating it did not perform the pre-advice instruction as Plaintiff requested. (Id. ) Shortly after receiving this letter, the CFPB closed Plaintiff's claim. (Id. ¶ 18.)

On November 13, 2014, Plaintiff filed the present case against Chase in San Diego Superior Court alleging claims for professional negligence, negligent misrepresentation, and two claims for fraud. Chase removed the case to this Court on December 19, 2014, on the ground of diversity jurisdiction. The present motion followed.



Defendant Chase moves to dismiss the Complaint in its entirety. It argues Plaintiff's first three claims are foreclosed by the California Uniform Commercial Code, and Plaintiff's fourth claim is legally incognizable. Plaintiff has agreed to dismiss his fourth claim, therefore the Court will address only the first three claims for relief.

A. Standard of Review

In Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court established a more stringent standard of review for 12(b)(6) motions. To survive a motion to dismiss under this new standard, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 570). "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. (citing Twombly, 550 U.S. at 556).

"Determining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679 (citing Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007)). In Iqbal, the Court began this task "by identifying the allegations in the complaint that are not entitled to the assumption of truth." Id. at 680. It then considered "the factual allegations in respondent's complaint to determine if they plausibly suggest an entitlement to relief." Id. at 681.

B. California Uniform Commercial Code

Defendant argues Plaintiff's first three claims for relief are barred by the California Uniform Commercial Code. The California Supreme Court has stated "[t]he California Uniform Commercial Code does not automatically displace all other legal principles." Zengen, Inc. v. Comerica Bank, 41 Cal.4th 239, 251 (2007). Other legal principles will apply "unless some particular provisions of the California Uniform Commercial Code have displaced them." Id. [1]

Here, Defendant relies on Division 11 of the Code, which applies to "funds transfers defined in Section 11104." Cal. Comm'l Code § 11102. Section 11104 defines "funds transfers" as:

the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order.

Cal. Comm'l Code § 11104(a). Defendant argues the wire transfer at issue in this case constitutes a funds transfer under the Code, therefore the Code displaces Plaintiff's common law claims. Plaintiff disagrees, for two primary reasons.

First, Plaintiff asserts the transaction at issue here does not fall within the definition of a "payment order." The Code defines a "payment order" as:

an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if all of the following apply:
(i) The instruction does not state a condition to payment to the beneficiary other than time of payment.
(ii) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender.
(iii) The instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank.

Cal. Comm'l Code § 11103(a)(1). Plaintiff argues the transaction at issue here did not begin with a payment order because it included pre-advice instructions. Defendant responds that the pre-advice instructions did not state "a condition to payment to the beneficiary, " therefore the transaction did involve a payment order.

In the Complaint, Plaintiff alleges he provided the Chase employee "with specific wiring instructions." (Compl. ¶ 8.) Those instructions required that payment and transaction codes be sent to "Larry@Buschlawcenter.Com[.]" (Id. ) They also required that Chase call "XXXXXXXXXX To Notify That Wire Has Sent." (Id. ) Based on these allegations, it is unclear whether the pre-advice instructions stated "a condition to payment to the beneficiary other than time of payment." Without further information about the pre-advice instructions, the Court cannot say whether this transaction involved a "payment order, " and thus whether it is governed by that portion of the Code devoted to "funds transfers."

Defendant argues, in the alternative, that even if the pre-advice did place a condition on payment to the beneficiary, the pre-advice was not followed, therefore the payment was issued without any conditions. In support of this argument, Defendant relies on the Official Comment to the Uniform Commercial Code § 4A-104, which discusses payment orders. See U.C.C. § 4A-104, Official Comment ¶ 3.[2] Noticeably, Defendant omits a large portion of the Comment from its brief, and when the Comment is read in its entirety, it does not support Defendant's position. The Comment describes a situation where the receiving bank places a condition on payment to the beneficiary bank. Under those circumstances, the Comment explains that the transaction is not covered by Article 4A. The Comment goes on to state that if the receiving bank "had erroneously sent an instruction to the [beneficiary bank] unconditionally instructing payment[, ]" then the transaction would be covered by Article 4A, even though the instruction was erroneous. Defendant takes the example of an erroneous instruction and argues that the same result applies if there is a condition on payment, but that condition is not met. However, the Comment does not speak to that situation. Rather, it makes clear that if there is a condition placed on payment to the beneficiary bank, the transaction is not covered by Article 4A, whereas if payment is made unconditional, even if that is in error, the transaction will be covered by Article 4A. The Comment says nothing about whether a transaction is covered by Article 4A if there is a condition on payment but that condition is not met. Accordingly, this argument does not demonstrate the transaction at issue in this case is covered by Article 4A. Absent such a showing, the Court declines to dismiss Plaintiff's claims on the ground they are displaced by the California Uniform Commercial Code.[3]



For these reasons, the Court grants in part and denies in part Defendant's motion to dismiss. Specifically, the Court grants Defendant's motion to dismiss Plaintiff's fourth claim for relief, and denies Defendant's motion to dismiss Plaintiff's other claims for relief.


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