Chen v. Bank of America

Background

Ricky Chen and Amin Wu filed a class action against Bank of America, alleging violations of the Electronic Fund Transfer Act (EFTA). They alleged that, on September 16, 2024, unauthorized electronic fund transfers of $78,000 and $28,000 were sent from their Bank of America accounts to an unknown third party, Ship N Slide LLC. They alleged that they did not perform, authorize, or benefit from the transfers.

The plaintiffs disputed the transfers the same day. Bank of America later stated that its investigation found that the transactions were completed using a device consistent with prior valid account activity and that an authorized signer had performed them. Bank of America also stated that the transactions had been confirmed by text-message response or communication with its fraud-detection department. After the plaintiffs appealed, the bank maintained that the transactions were sent according to the account holder’s instructions.

Motion to Dismiss

Bank of America moved to dismiss, arguing that the EFTA does not apply to wire transfers and that the plaintiffs had not adequately pleaded an unauthorized transfer. The court applied Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally sufficient claim.

The EFTA defines an unauthorized electronic fund transfer as a transfer from a consumer’s account initiated by someone other than the consumer, without actual authority, from which the consumer receives no benefit. The court explained that when a consumer personally initiates a transfer because of a fraudster’s deception, the transfer is not unauthorized under the EFTA. To invoke the EFTA, the plaintiffs therefore had to plausibly allege that someone else physically initiated the transfers.

Court’s Analysis

The court found that the complaint was largely based on legal conclusions and passive descriptions of the transfers. It did not provide further details about how the transactions occurred. The allegation that the plaintiffs did not authorize the transfers was conclusory and did not adequately allege that another person physically initiated them.

The court noted that the parties’ arguments presented difficult and complex questions about the EFTA, including whether the statute applies to wire transfers. The court declined to undertake those issues before the plaintiffs more clearly alleged facts showing that the EFTA applied.

Disposition

Judge Edward M. Chen granted Bank of America’s motion to dismiss with leave to amend. The plaintiffs’ claims were dismissed with leave to amend, and any amended complaint had to be filed within 30 days. The opinion does not state that the court resolved whether the EFTA covers wire transfers.