BPi Bright Power, Inc. v. Umpqua Holding Corporation d/b/a Umpqua Bank

Background

BPI Bright Power, Inc. alleged in its second amended complaint that scammers impersonated a business partner and persuaded BPi to transfer more than $150,000 to the scammers’ bank account. BPi sued Umpqua Holding Corporation, doing business as Umpqua Bank, and Wells Fargo N.A. for allegedly failing to prevent the fraud.

The claims against Umpqua were negligence and breach of an implied contract. The claims against Wells Fargo were negligence and violation of Section 11207 of the California Commercial Code. Umpqua and Wells Fargo each moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

Reasons for the ruling

The court applied California law. It held that BPi’s common-law claims against Umpqua were displaced by Division 11 of the California Commercial Code, which governs funds transfers. BPi’s requests that Umpqua wire money to the scammers’ account were payment orders, making BPi the sender, Umpqua the receiving bank, the scammers’ account the beneficiary, and Wells Fargo the beneficiary bank.

The court explained that Division 11 specifically addresses when a receiving bank may be liable for accepting a payment order. Because BPi’s negligence and implied-contract allegations were based on Umpqua’s acceptance of the payment orders despite alleged warning signs, the court dismissed those claims as displaced by Division 11.

As to Wells Fargo, the court stated that Section 11207 provides a safe harbor for a beneficiary bank that processes a wire transfer using the beneficiary account number supplied in the instructions, unless the bank actually knows that the beneficiary’s name and account number refer to different people. The court found that BPi had not alleged facts showing Wells Fargo had that actual knowledge.

The court also dismissed BPi’s negligence claim against Wells Fargo. BPi did not allege that it had a banking relationship with Wells Fargo, and the complaint did not include enough facts showing the unusual and specifically suspicious circumstances that could create a duty of care to a bank’s noncustomer.

Disposition

The court dismissed the claims against Umpqua and Wells Fargo with leave to amend. BPi was permitted to file an amended complaint consistent with the order by May 12, 2023. The court stated that failure to meet that deadline would result in dismissal with prejudice under Rule 41(b). Judge James Donato signed the order.