FLORIDA FIRE CHIEF ASSOCIATION INC v. TRUIST BANK JOHN DOE (2024)

ORDER GRANTING IN PART MOTION TO DISMISS AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Florida Fire Chief's Association (FFCA) sued Truist Bank, alleging that Truist allowed “fraudsters” to steal more than one million dollars from FFCA's account. ECF No. 1 (Cmpl.). Truist moved to dismiss on several grounds, including that the parties' contract barred some or all claims. See ECF No. 23 at 33-38.

Truist attached documents it claimed showed the parties' “governing account terms,” ECF No. 23-1 ¶¶ 8-10, and asked me to consider them. FFCA challenged the documents' authenticity and insisted I should disregard them on a motion to dismiss. ECF No. 25 at 3, 20. In an exercise of discretion, I converted the motion to a motion for summary judgment on the limited issue of whether the parties' agreement barred FFCA's claims. ECF No. 31.

Both parties had an opportunity to present additional argument and evidence. ECF Nos. 35, 36. After that, I held a hearing and allowed supplemental briefs. See ECF Nos. 43, 44. Having considered the parties' written and oral arguments and the cited record portions,¹ I now grant Truist's motion to the extent described below.

I.

I will start with the summary-judgment issue: whether the documents Truist proffered contain the parties' agreement and, if so, whether the agreement bars any claims. A party is entitled to summary judgment on a claim (or part of a claim) if it “shows that there is no genuine dispute as to any material fact and [it] is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In considering a summary-judgment motion, the court must draw all reasonable inferences and resolve all evidentiary disputes in the nonmoving party's favor. Essex Ins. Co. v. Barrett Moving & Storage, Inc., 885 F.3d 1292, 1299 (11th Cir. 2018). But the nonmovant still must identify more than “the mere existence of some alleged factual dispute between the parties.” Pesci v. Budz, 935 F.3d 1159, 1165 (11th Cir. 2019) (emphasis omitted) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).

Most relevant facts (as to this issue) are undisputed. Around 2000, FFCA opened accounts with SunTrust (formerly SunBank). Cmpl. ¶ 7; ECF No. 35-1 ¶¶ 5, 8. After SunTrust's 2019 merger with BB&T to form Truist, FFCA became a Truist customer. Cmpl. ¶¶ 6-9; ECF No. 35-1 ¶¶ 4-5. FFCA maintained several Truist accounts, including one with an account number ending in -6633 (the Account). Cmpl. ¶ 9; ECF No. 35-1 ¶ 5. FFCA alleges that some thirty-nine transactions posted to the Account between September and October 2022 were unauthorized and fraudulent.² Cmpl. ¶ 17; see also ECF No. 35-1 at 3, 14-19. These transactions— which form the basis of FFCA's complaint—include both wire transfers and ACH transfers. Cmpl. ¶¶ 18-19; ECF Nos. 1-1 at 2-5; 35-1 at 3, 14-19.

Truist submitted evidence that on September 1, 2020, an FFCA representative signed a signature card for the Account. See ECF No. 35-1 at 4, 28. The signature card notes that the Account “shall be governed by the rules and regulations for th[e] account” and that the signer “acknowledges receipt” of those rules. Id. at 28. The rules then in effect limited the bank's liability to only damages caused by the bank's “gross negligence or wanton and intentional misconduct.” Id. at 5-6, 65. Truist updated the rules in December 2020. Id. at 7. The revised rules—which remained in effect until FFCA closed the Account—contained the same liability limitation. Id. at 7, 124. In short, Truist has offered evidence that it had a contract with FFCA that bars FFCA's negligence claim as pleaded.

FFCA continues to question the authenticity of Truist's documents, ECF No. 36 at 5, but it points to no evidence to create a genuine issue of material fact about whether the documents are authentic or whether they govern the parties' relationship. FFCA submitted an affidavit expressing concerns about a BB&T document Truist submitted. See ECF No. 36-1 at 1-3. But FFCA's affidavit does not create an issue of fact as to whether (1) FFCA agreed that the Account would to be governed by certain rules, (2) FFCA acknowledged receipt of those rules, or (3) rules in effect at that time—and at the time of the fraudulent transfers—contained a provision limiting liability.³ See ECF No. 35-1 at 8-9 (referencing the BB&T document in the context of accounts ending -6927 and -1147, but not the Account).

FFCA also argues I should not have converted the motion to dismiss into a summary-judgment motion because FFCA has not yet obtained discovery. ECF No. 36 at 6-7. But FFCA has never been clear on what discoverable materials it sought or what specifically was necessary to address this narrow issue. See id. at 7; see also Fed. R. Civ. P. 56(d) (discussing how the court may defer judgment or allow additional time for discovery when the “nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition” (emphasis added)). Nor did it explain why it was precluded from obtaining such discovery.

FFCA further argues that, even assuming the agreement controls, the liability limitation is unenforceable under Florida law (or the Uniform Commercial Code). But this argument fares no better. FFCA points to Florida Statute § 674.103(1), which is part of Florida's codification of UCC Article 4. That provision says UCC provisions “may be varied by agreement,” but it specifically prohibits agreements that “disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure.” Fla. Stat. § 674.103(1). FFCA contends this precludes any limitations on bank liability. But FFCA asks too much of this section, which applies only to bank deposits and collections. See Lamm v. State St. Bank & Tr., 749 F.3d 938, 949 (11th Cir. 2014) (discussing how “the standard of care [§ 674.103(1)] articulates applies to specific actions relating to the processing of checks and similar instruments, such as presenting a check for payment or sending a customer a notice of dishonor, none of which is at issue here”). FFCA's claims involve fund transfers. See, e.g., Cmpl. ¶¶ 1, 17, 55; ECF Nos. 1-1; 36 at 2. Fund transfers are controlled under Chapter 670, which lacks a similar limiting provision. FFCA has not shown that § 674.103(1) is relevant to its negligence claim.

Finally, FFCA argues that the liability limitation is inapplicable because the provision says Truist is not liable when “acting in accordance with applicable laws, regulations, [or] rules,” and FFCA has alleged that Truist violated one or more laws. ECF No. 43 at 4-6. But FFCA ignores the latter part of the liability provision, which states that Truist “shall only be liable for [FFCA's] damages ․ caused by [its] gross negligence or wanton and intentional misconduct.” ECF No. 35-1 at 5-6, 65.

In sum, Truist has shown that the parties had an agreement governing the Account and that the agreement bars FFCA's negligence claim related to that account. FFCA has not raised a genuine issue of material fact on this point. Nor has it raised any other argument that would preclude summary judgment on this issue. Truist is entitled to summary judgment on FFCA's negligence claim as to actions related to the Account.⁴ I do not address whether any other agreements regarding other accounts limit liability—or whether other provisions of the agreement bar the remainder of FFCA's claims.⁵

This conclusion makes it unnecessary to address the Independent Tort Doctrine issue or preemption. However, because FFCA will have an opportunity to replead, I note that a new negligence claim (one not involving the Account, since the parties' agreement bars any involving the Account) can likely avoid preemption only if premised on matters not “covered by any of the particular provisions of [UCC] Article 4A.” Barak v. ACS Int'l Projects, Ltd., 347 So. 3d 81, 85 (Fla. 3d DCA 2021) (cleaned up) (quoting Schlegel v. Bank of Am., N.A., 628 S.E.2d 362, 368 (Va. 2006)); see also Peter E. Shapiro, P.A. v. Wells Fargo Bank N.A., 795 F. App'x 741, 750 (11th Cir. 2019) (finding no error in the district court's conclusion that Article 4A preempted plaintiff's negligence claim where the complaint “alleged no negligence beyond the scope of the erroneous funds transfer”). Article 4A is “intended to be the exclusive means of determining the rights, duties and liabilities of the affected parties in any situation covered by particular provisions of the Article.” Regions Bank v. Provident Bank, Inc., 345 F.3d 1267, 1274 (11th Cir. 2003) (additional emphasis omitted) (quoting U.C.C. § 4A-102 cmt.). Should this issue arise again in future motions, Truist should be mindful to highlight the specific UCC provisions it claims outline the relevant duties and liabilities in question and specify exactly which of the bases for the negligence (or any other) claims it believes are preempted. Cf. ECF No. 35 at 21 (Truist's arguing that the negligence claim is preempted “in whole or in part” without specifying which part or under which provision); ECF No. 38 at 13 (noting that a “significant part of Count[ ] I” is preempted).

II.

Next, I address Truist's motion to dismiss Count II. To survive a motion to dismiss, FFCA must allege “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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007)). A claim is facially plausible if it contains “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The mere “possibility that a defendant has acted unlawfully” is not enough. Id.

Count II relies on UCC Article 4A and the Florida and federal codifications of it.⁶ Article 4A makes banks liable for unauthorized payment orders under certain circumstances. Truist moves to dismiss Count II on various grounds. I am not convinced that Truist's argument about ACH debits ⁷ warrants dismissal, and I am not convinced that FFCA must—at this stage—identify the type of wire system used for the transfers. It is enough that FFCA has identified transactions that are likely covered by Article 4A (the ACH transactions) and Regulation J (the wire transactions).

But I agree with Truist that FFCA has not alleged enough to show that § 4A-203 (or its codifications) actually applies to its claims. FFCA does little more than reference § 4A-203(a)(2) and add a conclusory allegation that Truist violated it. See Cmpl. ¶ 56. If FFCA wants to pursue such a claim, it must offer facts (not conclusions) to show § 4A-203(a)(2) applies. This would likely require including facts showing the payment orders are orders pursuant to Section 4A-202(b). See § 4A-203(a). I decline (for now) to decide if or to what extent the parties' agreement would bar a § 4A-203 claim.

III.

Finally, Truist seeks dismissal of FFCA's aiding and abetting claim (Count III). For this claim, FFCA had to allege facts showing (1) the existence of the underlying fraud, (2) that Truist had actual knowledge of the fraud, and (3) that Truist provided substantial assistance in the fraud's commission. Gilison v. Flagler Bank, 303 So. 3d 999, 1002 (Fla. 4th DCA 2020) (citing ZP No. 54 Ltd. P'ship v. Fid. & Deposit Co. of Md., 917 So. 2d 368, 372 (Fla. 5th DCA 2005)); see also Lawrence v. Bank of Am., N.A., 455 F. App'x 904, 907 (11th Cir. 2012) (“To be liable, the bank would have had to have actual knowledge of [the] fraudulent activities.”). Truist argues FFCA has failed to plausibly allege knowledge. I agree.

Both parties rely on Perlman v. Wells Fargo Bank, N.A., 559 F. App'x 988 (11th Cir. 2014), a nonbinding Eleventh Circuit decision. FFCA correctly notes that Perlman found “additional” allegations in the plaintiff's proposed amended complaint “establish[ed] a fact pattern that, if proven, a reasonable fact finder could view as sufficient” to support Wells Fargo's actual knowledge of a Ponzi scheme. Id. at 996. But FFCA ignores the deficiencies Perlman highlighted in the plaintiff's earlier complaint, which contained significantly fewer allegations supporting knowledge. Perlman notes that alleging “red flags” or matters that “arouse suspicion,” even where those matters might put a bank on notice of possible misdeeds, is not enough to plead actual knowledge of the underlying fraud. Id. at 993-94 (citing Lerner v. Fleet Bank, N.A., 459 F.3d 273, 294 (2d Cir. 2006)); see also Ritchie Special Credit Invs., Ltd. v. JPMorgan Chase & Co., 48 F.4th 896, 900 (8th Cir. 2022) (“Even ‘alleged ignorance of obvious warning signs of fraud will not ․ adequately allege actual knowledge.’ ” (quoting Chemtex, LLC v. St. Anthony Enters., Inc., 490 F. Supp. 2d 536, 547 (S.D.N.Y. 2007))).

Alleging “atypical transactions and procedural oddities” is also not enough. Perlman, 559 F. App'x at 993. Nor is alleging that Truist opened accounts that might have otherwise raised suspicion. See Heinert v. Bank of Am. N.A., 835 F. App'x 627, 630 (2d Cir. 2020) (alleging bank opened more than “120 business and personal accounts for the Individual Defendants” was not enough to plead bank had actual knowledge of specific underlying scheme).

At best, FFCA alleges Truist had actual knowledge of the fraud after FFCA reported it to the bank. But this knowledge is not enough to sustain a claim for aiding and abetting when FFCA has not plausibly alleged that Truist's actions beyond that point provided substantial assistance to enable the underlying fraud. See Chang v. JP Morgan Chase Bank, N.A., 845 F. 3d 1087, 1098 (11th Cir. 2017) (“Substantial assistance occurs when a defendant affirmatively assists, helps conceal, or fails to act when required to do so, thereby enabling the breach to occur.” (quoting Lerner, 459 F.3d at 295)); see also id. (noting how knowledge of the underlying fraud “is the crucial element” when determining whether a bank substantially assisted a fraudulent scheme (quoting In re First All. Mortg. Co., 471 F.3d 977, 995 (9th Cir. 2006))).

FFCA alleges that after it reported the fraud to Truist, Truist “locked the compromised Account,” locked FFCA's other accounts, assisted FFCA in opening new accounts, and within the week, provided FFCA with a list of the suspicious transactions Truist flagged. Cmpl. ¶¶ 24-30. While FFCA no doubt believes Truist should have done more—and done it sooner—it identifies no duty on the part of Truist to have cooperated in a manner more to FFCA's liking. See Chang, 845 F.3d at 1098 (noting how a failure to act “when required to do so” qualifies as substantial assistance (emphasis added) (quoting Lerner, 459 F.3d at 295)). And the allegation that Truist's (in)actions gave the fraudsters “additional time to abscond” and delayed mitigation, Cmpl. ¶ 45, is conclusory at best.

Because FFCA has not plausibly alleged actual knowledge, Count III will be dismissed.⁸

CONCLUSION

Truist's motion to dismiss and motion for partial summary judgment (ECF Nos. 23, 35) are granted to the following extent: Count I is dismissed on the merits to the extent it alleges ordinary negligence based on Truist's actions as to the account ending -6633. Count I is otherwise dismissed without prejudice. Counts II and III are dismissed with leave to amend. The deadline for an amended complaint is 14 days from the date of this order. Truist will then have 14 days to respond. If FFCA does not file an amended complaint, final judgment will issue.

FFCA never responded to the court's order regarding the John Doe defendants (ECF No. 30). The claims against the fictitious defendants are dismissed without prejudice. FFCA may later seek amendment to name additional defendants.

SO ORDERED on May 13, 2024.

FOOTNOTES

1.   At summary judgment, parties must cite “particular parts of materials in the record” to support factual assertions. Fed. R. Civ. P. 56(c)(1)(A). And “[t]he court need consider only the cited materials.” Fed. R. Civ. P. 56(c)(3). In my discretion, on deciding the issue on summary judgment, I decline to consider materials not pinpoint cited in the briefs or addressed in this order. See N.D. Fla. Loc. R. 56.1(F).

2.   Truist acknowledges that “[t]he vast majority of the transactions disputed in this litigation were made in October of 2022 from the -6633 Account.” ECF No. 35-1 at 3. But Truist also identifies two other FFCA accounts it says are relevant: one ending -6927 and one ending -1141. Id. FFCA, however, offers no indication that its claims turn on transactions from these accounts. See Cmpl. ¶ 9 (noting that FFCA “maintain[ed] multiple accounts” but identifying only the Account as the “compromised business account”).

3.   FFCA's affidavit (and FFCA's summary-judgment response) say there are “conflicts” between Doug Legrow's declaration (attached to Truist's earlier motion to dismiss (ECF No. 23-1)) and his subsequent declaration (submitted with Truist's summary-judgment motion (ECF No. 35-1)). To the extent FFCA argues the differences raise a genuine issue of material fact, I disagree. Legrow's second declaration contains additional information, but I cannot say the new information conflicts with anything in the earlier declaration.

4.   FFCA briefly argued at the hearing that it had pleaded enough to support a claim for gross negligence or willful conduct. I disagree, but FFCA may plead such claims—if it can—in an amended complaint. Any claim for ordinary negligence as to the Account, though, is precluded.

5.   Truist acknowledges that the other accounts it identified did not contain an identical liability provision at the time of the transfers, but it notes that the limiting provision was added before FFCA closed those accounts. See ECF No. 38 at 5-6. Truist offers cursory arguments that (1) the terms when the accounts were closed are binding, and (2) other provisions in place at the time of the transfers would likewise limit liability. See id. But because FFCA has not pleaded that these accounts are even relevant to its claims, I will not now address what limitations (if any) apply to those accounts. Truist may later raise these arguments with greater specificity if the issue becomes relevant.

6.   FFCA relies on both § 4A-203 and Florida Statute § 670.202, which is part of Florida's codification of Article 4A. See Chavez v. Mercantil Commercebank, N.A., 701 F.3d 896, 899-900 (11th Cir. 2012). FFCA also relies on Regulation J, which contains an identical provision, see 12 C.F.R. pt. 210, but applies only to Fedwire wire transfers, see Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1232 (11th Cir. 2000).

7.   Truist seems to argue that because Article 4A does not apply to ACH debits, and FFCA's allegations involve ACH transfers, FFCA has not stated a claim under Article 4A. See ECF No. 35 at 16-17. But ACH transfers can be debits or credits, Azure Coll., Inc. v. Bank of Am., N.A., 629 F. Supp. 3d 1200, 1205-06 (S.D. Fla. 2022), and Article 4A covers ACH credits, see id.; see also Fla. Stat. § 670.104; UCC Article 4A-104 cmt. 4 (“Transfers of funds made through the banking system are commonly referred to as either ‘credit’ transfers or ‘debit’ transfers. In a credit transfer the instruction to pay is given by the person making payment. In a debit transfer the instruction to pay is given by the person receiving payment. The purpose ․ is to include credit transfers in Article 4A and to exclude debit transfers.”). To the extent FFCA must at this stage plausibly allege the ACH transfers were credits, it met its burden. See, e.g., Cmpl. ¶ 1 (“Plaintiff's business bank account was used to originate transfer orders distributing Plaintiff's money to unknown payees ․” (emphasis added)). If Truist wishes to renew this argument, it may do so, but should provide additional clarity.

8.   Truist also argues that the parties' agreement bars Count III, that the Independent Tort Doctrine precludes the claim, and that the UCC preempts the claim. I do not reach these alternative arguments.

Allen Winsor United States District Judge