Full text
Nos. 21-2218 (L), 21-2219
______________________________
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
______________________________
BLUE FLAME MEDICAL LLC,
Plaintiff-Appellant,
v.
CHAIN BRIDGE BANK, N.A.,
Defendant and Third Party Plaintiff-Appellee,
JOHN J. BROUGH; DAVID M. EVINGER,
Defendants-Appellees,
v.
JPMORGAN CHASE BANK, N.A.,
Third Party Defendant.
(Caption continued on inside cover)
______________________________
Appeals from the United States District Court
for the Eastern District of Virginia (No. 1:20-cv-00658-LMB-IDD)
______________________________
BRIEF FOR APPELLANT BLUE FLAME MEDICAL LLC
______________________________
Eric F. Citron
Kathleen Foley
GOLDSTEIN & RUSSELL, P.C.
7475 Wisconsin Ave., Suite 850
Bethesda, MD 20814
(202) 362-0636
ecitron@goldsteinrussell.com
kfoley@goldsteinrussell.com
Counsel for Appellant Blue Flame Medical LLC
______________________________
BLUE FLAME MEDICAL LLC,
Plaintiff,
v.
CHAIN BRIDGE BANK, N.A.,
Defendant and Third Party Plaintiff-Appellee,
JOHN J. BROUGH; DAVID M. EVINGER,
Defendants,
v.
JPMORGAN CHASE BANK, N.A.,
Third Party Defendant-Appellant.
______________________________
12/01/2019 SCC
- 1 -
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
DISCLOSURE STATEMENT
x
In civil, agency, bankruptcy, and mandamus cases, a disclosure statement must be filed by all
parties, with the following exceptions: (1) the United States is not required to file a disclosure
statement; (2) an indigent party is not required to file a disclosure statement; and (3) a state
or local government is not required to file a disclosure statement in pro se cases. (All parties
to the action in the district court are considered parties to a mandamus case.)
x
In criminal and post-conviction cases, a corporate defendant must file a disclosure statement.
x
In criminal cases, the United States must file a disclosure statement if there was an
organizational victim of the alleged criminal activity. (See question 7.)
x
Any corporate amicus curiae must file a disclosure statement.
x
Counsel has a continuing duty to update the disclosure statement.
No. __________
Caption: __________________________________________________
Pursuant to FRAP 26.1 and Local Rule 26.1,
______________________________________________________________________________
(name of party/amicus)
______________________________________________________________________________
who is _______________________, makes the following disclosure:
(appellant/appellee/petitioner/respondent/amicus/intervenor)
1.
Is party/amicus a publicly held corporation or other publicly held entity?
YES
NO
2.
Does party/amicus have any parent corporations?
YES
NO
If yes, identify all parent corporations, including all generations of parent corporations:
3.
Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or
other publicly held entity?
YES
NO
If yes, identify all such owners:
21-2218(L)
Blue Flame Medical LLC v. Chain Bridge Bank, N.A.
Blue Flame Medical LLC
appellant
✔
✔
✔
- 2 -
4.
Is there any other publicly held corporation or other publicly held entity that has a direct
financial interest in the outcome of the litigation?
YES
NO
If yes, identify entity and nature of interest:
5.
Is party a trade association? (amici curiae do not complete this question)
YES
NO
If yes, identify any publicly held member whose stock or equity value could be affected
substantially by the outcome of the proceeding or whose claims the trade association is
pursuing in a representative capacity, or state that there is no such member:
6.
Does this case arise out of a bankruptcy proceeding?
YES
NO
If yes, the debtor, the trustee, or the appellant (if neither the debtor nor the trustee is a
party) must list (1) the members of any creditors’ committee, (2) each debtor (if not in the
caption), and (3) if a debtor is a corporation, the parent corporation and any publicly held
corporation that owns 10% or more of the stock of the debtor.
7.
Is this a criminal case in which there was an organizational victim?
YES
NO
If yes, the United States, absent good cause shown, must list (1) each organizational
victim of the criminal activity and (2) if an organizational victim is a corporation, the
parent corporation and any publicly held corporation that owns 10% or more of the stock
of victim, to the extent that information can be obtained through due diligence.
Signature: ____________________________________
Date: ___________________
Counsel for: __________________________________
✔
✔
✔
✔
/s/ Eric F. Citron
Dec. 22, 2021
Blue Flame Medical LLC
Print to PDF for Filing
i
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT
TABLE OF AUTHORITIES ................................................................................... iii
JURISDICTION ......................................................................................................... 1
STATEMENT OF ISSUES ....................................................................................... 1
INTRODUCTION ..................................................................................................... 2
STATEMENT OF CASE .......................................................................................... 4
I. Legal Background ................................................................................................ 4
II. Factual Background ............................................................................................. 8
A. Blue Flame’s Creation and California Contract ............................................ 8
B. Blue Flame’s Supply Arrangements ............................................................ 11
C. Blue Flame Picks CBB as Its Bank for the Express Purpose of
Handling This Transaction. ......................................................................... 13
D. CBB Fails to Fulfill Its Role in the Wire-Transfer System. ........................ 15
E. Subsequent Developments ........................................................................... 23
III. Proceedings Below ............................................................................................ 25
SUMMARY OF ARGUMENT ............................................................................... 28
ARGUMENT ........................................................................................................... 31
I. CBB Is Liable For Knowingly Wiring Funds Out Of Blue Flame’s
Account Without Authorization. ....................................................................... 31
A. The District Court Misinterpreted §4A-204(a). .......................................... 32
B. The District Court Erred in Finding Blue Flame’s State-Law Claims
Preempted. ................................................................................................... 38
II. The District Court Usurped The Role Of The Jury In Concluding That
Blue Flame Could Not “Establish” Damages. ................................................... 40
A. The District Court Correctly Found That CBB Violated §4A-404(a). ....... 41
B. The District Court Impermissibly Resolved Factual Disputes and
Drew Inferences Against Blue Flame. ......................................................... 45
1. The evidence that California would have immediately canceled
the entire contract absent CBB’s §4A-404(a) violation is
equivocal at best. ................................................................................... 46
ii
2. There is substantial evidence Blue Flame would have
successfully fulfilled some or all of California’s order. ........................ 49
C. The District Court Ignored CBB’s Ongoing Violation. .............................. 54
III. Summary Judgment Was Unwarranted On Blue Flame’s Tortious-
Interference Claims. ........................................................................................... 55
CONCLUSION ........................................................................................................ 56
REQUEST FOR ORAL ARGUMENT ................................................................... 56
iii
TABLE OF AUTHORITIES
Cases
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242 (1986) ...................................................................................... 31, 45
Banque Worms v. BankAmerica Int’l,
570 N.E.2d 189 (N.Y. 1991) .................................................................................. 7
Dennis v. Columbia Colleton Med. Ctr., Inc.,
290 F.3d 639 (4th Cir. 2002)................................................................................ 45
Eisenberg v. Wachovia Bank, N.A.,
301 F.3d 220 (4th Cir. 2002)................................................................... 26, 38, 39
First Sec. Bank of N.M., N.A. v. Pan Am. Bank,
215 F.3d 1147 (10th Cir. 2000) ............................................................................. 7
Gold v. Merrill Lynch & Co.,
2009 WL 2132698 (D. Ariz. July 14, 2009) ........................................................ 27
Ma v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
597 F.3d 84 (2d Cir. 2010) ................................................................................... 27
Martin v. Duffy,
977 F.3d 294 (4th Cir. 2020)................................................................................ 45
Ray v. Roane,
948 F.3d 222 (4th Cir. 2020)................................................................................ 31
Regatos v. N. Fork Bank,
838 N.E.2d 629 (N.Y. 2005) ................................................................................ 27
Sedar v. Reston Town Ctr. Prop., LLC,
988 F.3d 756 (4th Cir. 2021)................................................................................ 51
Tolan v. Cotton,
572 U.S. 650 (2014) ...................................................................................... 52, 53
W.C. English, Inc. v. Rummel, Klepper & Kahl, LLP,
934 F.3d 398 (4th Cir. 2019)................................................................................ 31
Statutes
28 U.S.C. §1291 ......................................................................................................... 1
28 U.S.C. §1331 ......................................................................................................... 1
28 U.S.C. §1367 ......................................................................................................... 1
iv
U.C.C. §4A-102 cmt. .............................................................................................5, 6
U.C.C. §4A-103(a)(1) .............................................................................................. 33
U.C.C. §4A-103(a)(3) .............................................................................................. 33
U.C.C. §4A-103(a)(4) .............................................................................................. 33
U.C.C. §4A-103(c) ................................................................................................... 33
U.C.C. §4A-104 cmt. 3 ....................................................................................... 8, 44
U.C.C. §4A-104(a) ................................................................................................... 33
U.C.C. §4A-104(c) ................................................................................................... 33
U.C.C. §4A-104(d) ................................................................................................... 33
U.C.C. §4A-202 ....................................................................................................... 35
U.C.C. §4A-203 ....................................................................................................... 35
U.C.C. §4A-203 cmt. 1 ............................................................................................ 35
U.C.C. §4A-204 .................................................................................................. 6, 34
U.C.C. §4A-204 cmt. 1 ....................................................................................... 6, 34
U.C.C. §4A-204(a) ........................................................................................... passim
U.C.C. §4A-205(a)(3) .............................................................................................. 38
U.C.C. §4A-209(a) ................................................................................................... 33
U.C.C. §4A-209(b) ................................................................................................... 33
U.C.C. §4A-211 ....................................................................................................... 43
U.C.C. §4A-211 cmt. 1 ..................................................................................... 37, 42
U.C.C. §4A-211 cmt. 3 ............................................................................................ 43
U.C.C. §4A-211 cmt. 4 ....................................................................................... 7, 43
U.C.C. §4A-211 cmt. 5 ............................................................................................ 43
U.C.C. §4A-211(c) ................................................................................................... 43
U.C.C. §4A-211(c)(2) ......................................................................................... 7, 42
U.C.C. §4A-211(e) ................................................................................................... 42
U.C.C. §4A-301 ....................................................................................................... 33
U.C.C. §4A-404 cmt. 3 ..................................................................................... 42, 43
U.C.C. §4A-404(a) ........................................................................................... passim
v
U.C.C. §4A-404(c) ..................................................................................................... 7
U.C.C. §4A-501 ....................................................................................................... 43
Regulations
12 C.F.R. §210.25(b)(1) ............................................................................................. 6
Funds Transfers Through Fedwire,
55 Fed. Reg. 40,791 (Oct. 5, 1990) ................................................................. 6, 26
Rules
Fed. R. Civ. P. 12(b)(6) ..................................................................................... 31, 39
Fed. R. Civ. P. 56(a) ................................................................................................. 53
Fed. R. Civ. P. 56(c)(1)(A) ...................................................................................... 53
Fed. R. Civ. P. 56(c)(4) ............................................................................................ 53
Fed. R. Evid. 201(b)(2) ............................................................................................ 24
Other Authorities
About Us, Western Union, https://corporate.westernunion.com/ (last visited
Dec. 22, 2021) ........................................................................................................ 4
Amendment No. 3 to Equipment Master Supply Purchase Order Agreement,
https://files.covid19.ca.gov/pdf/BYD-Motors-LLC-OES-3.pdf (last visited
Dec. 22, 2021) ...................................................................................................... 25
Bd. of Governors of the Fed. Rsrv., Fedwire Funds Transfer System:
Assessment of Compliance with the Core Principles for Systemically
Important Payment Systems, https://www.federalreserve.gov/
paymentsystems/fedfunds_coreprinciples.htm (revised July 2014) ...................... 5
BYD Equipment Master Supply Purchase Order Agreement,
https://files.covid19.ca.gov/pdf/BYD-Motors-LLC-OES.pdf (last visited
Dec. 22, 2021) ............................................................................................... 24, 25
Jennifer Cohen & Yana van der Meulen Rodgers, Contributing Factors to
Personal Protective Equipment Shortages During the COVID-19
Pandemic, Preventative Medicine, vol. 141, Dec. 2020,
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7531934/ .................................. 8
Carlyle C. Ring, Jr., The UCC Process—Consensus and Balance, 28 Loy.
L.A. L. Rev. 287 (1994) ......................................................................................... 6
vi
Second Equipment Master Supply Purchase Order Agreement,
https://files.covid19.ca.gov/pdf/BYD-Motors-LLC-OES-5.pdf (last visited
Dec. 22, 2021) ...................................................................................................... 25
Matthew W. Swinehart, Modeling Payments Regulation and Financial
Change, 67 U. Kan. L. Rev. 83 (2018) .................................................................. 5
1
JURISDICTION
The district court had jurisdiction over Blue Flame’s federal banking-regula-
tion claims under 28 U.S.C. §1331, and supplemental jurisdiction over its state-law
claims under 28 U.S.C. §1367. This Court has appellate jurisdiction under 28 U.S.C.
§1291. The district court entered judgment on September 23, 2021, and notice of
appeal was timely filed on October 21, 2021. JA3099; JA3101-02.
STATEMENT OF ISSUES
1. Whether U.C.C. §4A-204(a) requires repayment when a bank accepts a payment
order falsely issued in its customer’s name if the bank itself (rather than a third
party) issued that unauthorized payment order.
2. Whether U.C.C. §4A-204(a) preempts state-law claims respecting a bank’s
knowingly false issuance of a payment order in its customer’s name.
3. Whether, after concluding that Chain Bridge violated U.C.C. §4A-404(a), the
district court erred in entering summary judgment in Chain Bridge’s favor for
lack of damages.
4. Whether the district court erred in granting summary judgment to defendants on
Blue Flame’s tortious-interference claims.
2
INTRODUCTION
This case is about a bank that broke federal law. It’s also about a district court
that apparently considered the affected customer so distasteful, so undeserving of a
legal remedy, that it went out of bounds to deprive it of one.
Plaintiff-Appellant Blue Flame Medical LLC was created in March 2020 by
two former political consultants who saw the new and urgent need for personal pro-
tective equipment (PPE) as a lucrative opportunity. Hoping to create a multibillion-
dollar company, they leveraged their business contacts to find suppliers that could
deliver millions of N95 masks, even in the midst of a global scrum for PPE. Soon,
relying on their contacts and government experience, they had entered into a $600
million contract with the State of California, which had an urgent need for the masks
Blue Flame could supply.
To that point, the deal was American capitalism in its rawest form: not neces-
sarily pretty, but efficient, responsive to the forces of supply and demand, and built
in reliance on the legal and regulatory foundation that structures modern commerce.
But everything collapsed when the bank Blue Flame trusted with its account, Chain
Bridge Bank, N.A. (CBB), placed its own interests above its customer’s. Concerned
about the deposit’s impact on its capital ratios, CBB withheld the funds from Blue
Flame when they arrived, and then forged a wire transfer in Blue Flame’s name to
send the funds away.
3
Unsurprisingly, federal regulations prohibit what CBB did here—or, if they’re
construed not to, state law surely does. But Blue Flame’s suit foundered in the dis-
trict court. Through a combination of internally incompatible rulings, atextualism,
and improper weighing of evidence on summary judgment, the court below nixed
all of Blue Flame’s claims, leaving it without a remedy in the face of CBB’s clear
misconduct.
Blue Flame does not claim to be pure of heart, or even particularly likeable.
But this is a court of law, not of public opinion, and all parties—even the unpopular
ones—are entitled to the law’s protection. Perhaps more to the point, the American
economy depends on the finality and the inflexible allocation of risk that undergird
the federal wire-transfer system. Were the district court’s view of permissible bank
behavior to prevail, the effect could be catastrophic. It’s incumbent on this Court to
make clear that banks are not free to go off-book and do whatever they please with
customers’ funds.
The Court should direct entry of judgment for Blue Flame on its U.C.C. §4A-
204(a) claim, reverse the district court’s entry of judgment against Blue Flame on its
state-law and U.C.C. §4A-404(a) claims, and remand.
4
STATEMENT OF CASE
I.
Legal Background
One big advantage of cash transactions is that the recipient knows immedi-
ately that they have the money and can use it right away. That is to say that such
transactions are immediately verifiable and impossible for the payor to unilaterally
revoke based on subsequent disputes or second thoughts. Likewise, there is no risk
to either party or any intermediary that the funds will not arrive. Payees in large and
important transactions are thus likely to insist on using cash or other payment meth-
ods that approximate it. That’s why buying a home requires something like a cash-
ier’s check, not a personal check or credit card.
Of course, cash has its limits, too. In addition to the hassle of counting bills
or weighing bullion, cash can be stolen or counterfeited. And much more im-
portantly for present purposes, such physical transactions simply cannot harness the
speed of modern telecommunications.
This is where the “wire transfer”—or what banking law now calls the “funds
transfer”—comes in. In 1871, Western Union used its telegraph network to launch
a service where a sender could pay money to one telegraph office, which would then
“wire” a message to another office to pay an intended beneficiary. See About Us,
Western Union, https://corporate.westernunion.com/ (last visited Dec. 22, 2021).
Then, in 1918, the U.S. Federal Reserve Banks developed the Fedwire Funds Service
5
so that “interbank payment obligations” could be settled without “the physical de-
livery of cash or gold …, which was both risky and costly.” Bd. of Governors of the
Fed. Rsrv., Fedwire Funds Transfer System: Assessment of Compliance with the
Core Principles for Systemically Important Payment Systems, https://www.feder-
alreserve.gov/paymentsystems/fedfunds_coreprinciples.htm (revised July 2014)
(Fedwire). Today, Fedwire is routinely used for “time-critical payments such as the
settlement of commercial payments and financial market transactions” between
banks and bank customers, id., largely because it “settles each transaction on a real-
time basis,” Matthew W. Swinehart, Modeling Payments Regulation and Financial
Change, 67 U. Kan. L. Rev. 83, 124 (2018). The Fedwire system “provides sub-
stantial commercial benefits to Fedwire participants, especially those engaged in
large commercial transactions, because”—as with cash—“the receipt of funds is ir-
revocable and verifiable in near real-time.” Id.; see also Fedwire (“Payment to the
receiving participant over the Fedwire Funds Service is final and irrevocable when
the amount of the payment order is credited to the receiving participant’s ac-
count[.]”) (emphasis added).
Despite Fedwire’s benefits, major economic actors still lacked the certainty
that inhered in cash transactions because, for a long time, only state law governed
what happened if a wire transfer went wrong. See U.C.C. §4A-102 cmt. The solu-
tion was Article 4A of the Uniform Commercial Code, which the Federal Reserve
6
Board incorporated into Regulation J, governing funds transfers, in the early 1990s.
Funds Transfers Through Fedwire, 55 Fed. Reg. 40,791 (Oct. 5, 1990); 12 C.F.R.
§210.25(b)(1).
The drafters of Article 4A engaged in a “careful and delicate balancing” be-
tween the “competing interests … of the banks that provide funds transfer services
and the commercial and financial organizations that use the[m].” U.C.C. §4A-102
cmt. In balancing those interests, they made “a deliberate decision … to use precise
and detailed rules to assign responsibility, define behavioral norms, [and] allocate
risks …, rather than to rely on broadly stated, flexible principles.” Id. That way, all
parties could “predict risk with certainty” and adopt appropriate “operational and
security procedures.” Id.; see also Carlyle C. Ring, Jr., The UCC Process—Consen-
sus and Balance, 28 Loy. L.A. L. Rev. 287, 292-93 (1994). Article 4A was thus
given sharp and unyielding teeth in provisions that clearly assign the risk of loss in
various circumstances—including when banks make transfers that do not follow Ar-
ticle 4A’s “precise and detailed rules” for determining whether a wire is authorized.
See U.C.C. §4A-204 & cmt. 1 (explaining circumstances where “the bank takes the
risk of loss with respect to an unauthorized payment order”). Indeed, these provi-
sions were “crafted with the express purpose of creating—in an age of increasing
automation—inflexible rules of liability for wire transfer disputes.” First Sec. Bank
7
of N.M., N.A. v. Pan Am. Bank, 215 F.3d 1147, 1152 (10th Cir. 2000) (emphasis
added).
For the same reasons, Article 4A’s drafters considered “[e]stablishing finality
in electronic fund wire transactions” to be “a singularly important policy goal.”
Banque Worms v. BankAmerica Int’l, 570 N.E.2d 189, 195 (N.Y. 1991). The rules
thus firmly require that, once a transferee’s bank has accepted a wire, it must give
the funds to the intended recipient—as though the beneficiary had received a direct
cash transfer from the sender. See U.C.C. §4A-404(a). Article 4A even specifies
that this requirement cannot be altered by agreement, id. §4A-404(c), while making
it virtually impossible to cancel a wire once the transferee’s bank has accepted it, see
id. §4A-211(c)(2). Indeed, because the cash belongs to the transferee as soon as it
arrives, such an order cannot be cancelled even with the consent of that beneficiary’s
bank “except in unusual cases” involving either the consent of all affected parties or
very specific technical mistakes. See id. & cmt. 4 (“Since acceptance [by the bene-
ficiary’s bank] affects the rights of the originator and the beneficiary it is not appro-
priate to allow the beneficiary’s bank to agree to cancellation or amendment, except
in unusual cases.”).
The result of these detailed rules is that “[t]he function of banks in a funds
transfer under Article 4A is … essentially mechanical in nature.” U.C.C. §4A-104
8
cmt. 3. It is thus clear both what banks need to do to avoid creating liabilities in
funds transfers and what liability they face if they violate their role in the machine.
II.
Factual Background
A.
Blue Flame’s Creation and California Contract
When COVID-19 began to spread rapidly across the country in early 2020,
supplies of PPE lagged well behind need, leaving healthcare workers and others vul-
nerable.1 Believing they could help governmental clients navigate the worldwide
scramble for PPE—and sensing a tremendous business opportunity—John Thomas
and Michael Gula set aside their work as political consultants and fundraisers to form
Blue Flame Strategies in February 2020. See JA1520-21. They hoped their interna-
tional and governmental connections would help them find suppliers and win gov-
ernment contracts, allowing them to capitalize on the moment to create a “multibil-
lion dollar company.” See JA1520-23. In so doing, they took a big risk, leaving
behind stable work in lucrative careers to pursue their entrepreneurial goal. See
JA525-28.
Thomas and Gula incorporated Blue Flame Medical LLC (Blue Flame) in
Delaware on March 23, 2020. JA139; JA3067. They had every reason to think they
1 Jennifer Cohen & Yana van der Meulen Rodgers, Contributing Factors to
Personal Protective Equipment Shortages During the COVID-19 Pandemic, Preven-
tative Medicine, vol. 141, Dec. 2020, https://www.ncbi.nlm.nih.gov/pmc/articles/
PMC7531934/.
9
were about to play a critical—and profitable—role in addressing the early months
of the pandemic.
Indeed, by mid-March 2020—even prior to the business’s formal incorpora-
tion—Blue Flame’s principals had landed an enormous opportunity. On March 20,
Thomas was already discussing a deal with the State of California to deliver N95
masks and other PPE. See JA139; JA1571-72. And only two days later, Thomas
had made direct contact with Michael Wong, California’s Contracts Administrator,
to negotiate a deal to benefit both Blue Flame and California. JA1587.
Over the next several days, via text and email, Wong and Thomas discussed
California’s PPE needs and Blue Flame’s ability to deliver N95 masks. They quickly
reached an understanding. JA1587-95; JA1605-75. Given the competition for sup-
pliers, Thomas made clear that California would have to prepay so Blue Flame could
secure product. JA1587; JA1669-70. In turn, Wong told Thomas he wanted Blue
Flame to “shoot for 100M” masks. JA1591.
In an email exchange on March 24, Thomas summarized the parties’ under-
standing, stating that two million N95 masks could be delivered “on day 7,” six mil-
lion could ship immediately, and another 50 to 55 million could be delivered “within
30 days.” JA1686-87. Thomas indicated that Blue Flame could secure the other 37
million masks but needed to communicate with suppliers before it could “quote exact
capacities.” JA1687. Nothing about this understanding is surprising: Given the
10
nascent worldwide lockdowns and mad scramble for PPE, Blue Flame fully believed
it could deliver the 100 million masks California wanted to “shoot for,” but also
emphasized to California that it needed the funds immediately to secure them, that
different tranches would arrive at different times, and that it was still sorting out
suppliers’ capacities. Accordingly, Blue Flame told California no fewer than four
times that it would be able to inspect the product and reject it for a full refund if it
was not satisfied. JA1755; JA1668; JA1608; JA1587.
California was eager to move forward on those terms. After confirming the
mask models California wanted and asking about pricing, Wong said on March 24
that California wanted to “execute on this today,” JA1684, and asked Thomas to
send him an invoice for 100 million N95 masks, JA1683. Thomas sent that invoice
on March 25, and Wong said California would pay Blue Flame via wire transfer
“first thing in the morning.” JA1716-17. The parties agree that, on that date, Cali-
fornia’s Department of General Services (DGS) formally agreed to purchase 100
million N95 masks for a total of $609,161,000, including tax and shipping, and to
prepay 75% of the total amount. JA139. That night, Thomas sent Wong and Daniel
Kim, DGS Director, a “list of rough delivery timelines and manufacturers,” indicat-
ing that deliveries would take place through most of April. JA1753-54; JA3069.
Both parties understood that the contract’s goal was to deliver masks as soon as
possible. JA1602; JA1558.
11
B.
Blue Flame’s Supply Arrangements
Even before securing California’s commitment, Blue Flame—recognizing
that demand was rising and supply was uncertain—launched itself into the global
scramble for available PPE. See, e.g., JA1720-50 (March and April 2020 texts be-
tween Blue Flame and the CEO of supplier Great Health Companion (GHC)). Those
efforts bore fruit: On March 25, Blue Flame executed an agreement with PPE sup-
plier Suuchi to purchase six million masks—which were available to ship immedi-
ately—for $22,680,000. JA1557; JA1767-68. The Suuchi purchase agreement in-
corporated the terms of an executed Product Reseller Agreement providing that time
was of the essence. JA1767; JA1787.
Blue Flame and GHC executed a substantively identical agreement that same
day. JA1773-84; see JA1774. And the day after, GHC sent Blue Flame an order
confirmation pledging to provide 20 million masks, “shipped in tranches as often
and as soon as available,” by no later than 40 days after receipt of payment. JA1770-
71. GHC’s order confirmation further provided that, for the subsequent two months,
GHC would ship masks to Blue Flame at the estimated rate of 40 million/month,
also “in tranches as often and as soon as available.” JA1771. CEO Henry Huang
contemporaneously told Blue Flame that GHC could supply at least 30 million
masks in the first month. See JA1733; JA1737.
12
Given the state of the world, the timing was certainly going to be tight. But
with California committing to prepay the majority of such a sizeable order and its
suppliers committing to deliver 100 million N95 masks of the specified models, Blue
Flame was confident it could deliver. This confidence was well placed: According
to Marc S. Prisament, an expert with over 35 years of hands-on experience in the
medical, manufacturing, and service sectors, JA2784, there was no reason Blue
Flame would have been unable to fulfill its commitment to California, see JA2811;
see also JA2788-95 (examining China’s manufacturing infrastructure and explain-
ing “that Blue Flame’s supply chain had the capacity to fulfill California’s order”);
JA2795-97 (explaining why China’s export restrictions would not have prevented
Blue Flame from obtaining masks for California); JA2794 (recognizing that,
“[w]hile a 30-60 day delivery timeframe might have been tight, it was certainly pos-
sible”).
Even if Blue Flame ended up falling short of this overarching goal, however,
it was clear enough from Wong’s instruction to “shoot for 100M” masks what was
going to happen: California was going to prepay 75% of a large invoice; Blue Flame
was going to try to secure every mask it could with that money; California was com-
mitting to buy at least 100 million masks; and the State could expect a refund as to
any masks that didn’t materialize or meet its requirements.
13
C.
Blue Flame Picks CBB as Its Bank for the Express Purpose of
Handling This Transaction.
The resulting transaction was exactly what the wire-transfer system contem-
plates. So on the morning of March 25—while Thomas was negotiating California’s
invoice and prepayment—Gula visited CBB and applied to open a business checking
account. JA139; JA1798-99. Blue Flame picked CBB because Gula had trusted it
with his personal and business banking for a decade. JA1527-28. CBB opened the
account later that day and provided Blue Flame wiring instructions and an account-
verification letter. JA139.
Given the transaction’s time-sensitivity and importance, Blue Flame did eve-
rything it could to prepare CBB to receive the funds on its behalf. Gula spoke to
SVP and Branch Manager Heather Schoeppe, telling her that Blue Flame expected
a wire transfer of roughly $450 million from California and needed notice “the sec-
ond” the transfer “hits our accounts.” JA3141 0:15-0:30; JA139-40; JA3070. Later
that day, Gula explained to Schoeppe that the wire’s purpose was to purchase 100
million masks for California and that Blue Flame would need to wire the money out
quickly. JA3142 0:20-0:25, 0:50-1:03; JA3070-71. Gula indicated that roughly
$300 million would be wired out, but that “not all of it’s going out, obviously, be-
cause we have a profit.” JA3142 0:58-1:00; accord JA1814-15. Schoeppe re-
sponded with congratulations. JA3142 1:33-1:37. Taking no chances, Gula also
14
informed CBB’s Assistant VP Maria Cole of the wire’s size, JA1826, and that Blue
Flame “definitely” needed same-day access to the incoming funds, JA1806.
That afternoon, CBB’s CEO John Brough and its president David Evinger
called Gula. JA140. Gula told them, too, about Blue Flame’s California contract,
the incoming wire amount, and its need to move money out quickly to purchase the
PPE. See JA1850-51; JA1881-83. Evinger and Brough assured Gula that CBB
could handle the operational challenges posed by the wire’s size, see JA1912;
JA2337-38. In an internal conversation, Brough stated his understanding that Blue
Flame was “going to make 100 million dollars off selling the masks.” JA3143 9:30-
9:33.
Knowing the wire would be executed on March 26, Thomas followed up with
CBB that morning, reminding Cole that “a lot [was] at stake” and that he needed to
know “the second that wire lands,” because he had “a bunch of manufacturers held
up” waiting for confirmation that Blue Flame had the requisite funds. JA3138 2:30-
2:44. Thomas told Cole that “this is the initial wire that … empowers us to go fill
the other orders.” Id. 4:19-4:33.
There was no pushback whatsoever on these requirements. Indeed, at no point
before CBB received the wire did any CBB employee tell Thomas or Gula that CBB
had concerns about the transaction’s legitimacy, or that Blue Flame would not be
15
able to make the immediate outgoing transfers to its suppliers that Gula had pre-
viewed for CBB’s senior executives. See JA1534-35.
D.
CBB Fails to Fulfill Its Role in the Wire-Transfer System.
As expected, on the morning of March 26, JPMorgan Chase & Co. (JPMC),
California’s bank, sent CBB a wire transfer authorized by the California State Treas-
urer’s Office (STO) for the benefit of Blue Flame. JA140; JA3073. All details on
the wire transfer notice—including the Originator (California’s DGS), Beneficiary
(Blue Flame), and amount ($456,888,000)—matched the information Gula provided
the day before. JA2012; JA1876; JA1847. The incoming wire was flagged by
CBB’s system and manually approved by Rick Claburn in CBB’s Operations de-
partment. JA2014; JA2017-18. At 11:58AM, Claburn emailed Cole, Schoeppe, and
SVP Mike Richardson to notify them that “[t]he wire has been received and credited
to the client’s account.” JA2098; accord JA3073 (“[T]he incoming wire … was
credited to Blue Flame’s [a]ccount.”). That email was forwarded to both Evinger
and Brough at 12:29PM. JA2096-97.
Thanks to Fedwire, this transaction settled almost instantly. At 11:57AM,
Gula received an “Incoming Wire Confirmation” email containing a link to a secure
message reflecting CBB’s acceptance of the funds transfer. JA2064-65; JA140; see
also supra p.5 (noting that wires accepted by the beneficiary’s bank are final and
irrevocable). Thomas called Cole and explained that Gula had received the
16
notification email but was having difficulty opening the secure message and needed
to confirm the amount; Cole responded that she would check and call back. JA3139.
At approximately 12:00PM, Gula successfully accessed Blue Flame’s account
through CBB’s web portal and confirmed the funds were displayed. JA1544. Two
minutes later, Cole called Thomas back to confirm the amount of the wire CBB had
accepted. JA1560-62; see JA2069.
Cole and Thomas then discussed Blue Flame’s need to quickly send outgoing
wires to its suppliers. JA1555; JA1560-62. Cole confirmed that CBB could process
those wires manually, and Thomas agreed to send her the wire instruction details.
JA1560-62. At 12:10PM, Cole emailed Thomas a form for the outgoing wire trans-
fers. JA2071-72. And at 12:12PM, Cole informed CBB’s Operations staff that Blue
Flame “will wire out today 2 wires totaling $22,680,000.00” and asked to confirm
that the “[f]unds are available.” JA2074.
Minutes later, at 12:14PM, Blue Flame’s counsel emailed Cole at Thomas’s
request to provide instructions for wiring $22,680,000 to Suuchi, which had agreed
to ship six million N95 masks immediately upon receipt of the funds. JA2085.
Thomas himself then responded to confirm Blue Flame’s authorization of the in-
structions and to request that the wire be prepared “asap[.]” JA2087.
That wire never went out, however—with disastrous consequences for Blue
Flame’s business with California and beyond. Though it had given Blue Flame no
17
hint of concern (and no opportunity to decide to bank elsewhere), CBB had appar-
ently grown worried, starting the day before, about how these transactions would
affect the bank. On March 25, CFO Joanna Williamson had told Schoeppe she was
worried because the wire “would have a really big impact on [CBB’s] capital ratios,”
JA3144 2:26-2:30; JA3071—which were to be calculated as of March 31, JA1840.
Williamson thus floated the idea of using an Insured Cash Sweep (ICS) account to
keep the funds off CBB’s balance sheet. JA3144 2:00-2:16.
That same day, CBB’s president, Evinger, independently raised the same is-
sue: “[W]e can’t hold that money on our balance sheets. [Gula’s] going to have to
agree to have it go into a feeder’s account or into an ICS account.” JA3143 3:09-
3:18; JA3071. Hearing Evinger’s concern, CEO Brough echoed it while adding an
(unrelated) note of worry about the transaction’s legitimacy, saying: “[O]ur balance
sheet is so flush with money that this is—and this is kind of a weird transaction.”
JA3143 4:02-4:10; JA3073. Brough went on to say he didn’t “like the smell of” the
transaction and that the wire’s “header data [was] going to be really important to
see.” JA3143 9:00-9:03, 11:20-11:28 (expressing concern that “someone has pene-
trated the State coffers and is raiding [them]”).
Unsurprisingly, the parties dispute whether these contemporaneous exchanges
reveal a predominating concern about Blue Flame somehow defrauding California
or about CBB’s own balance sheet. It’s worth noting, however, that placing a “hold”
18
on Blue Flame’s funds to investigate the former concern would not stop those funds
from being “accounted for in the balance sheet the same,” JA1842 (Williamson
depo.)—leaving CBB with the same capital-ratio problem.
While CBB’s motivations are disputed, what happened next is not. At
12:25PM—even though the wire transfer’s “header data” conformed perfectly to the
information Blue Flame provided, JA2012; JA1876; JA1847—CBB placed a “hold”
on the funds, JA2107, per Evinger’s direction, JA141. Then, four minutes later, SVP
Richardson emailed Williamson, Brough, Evinger, Schoeppe, and Cole to note that
Evinger’s idea was not going to work because “the ICS program has a maximum
limit of $125 mil[lion].” JA2096-97. Richardson thus highlighted the need for
“clarity around how long these funds would be on deposit.” Id.
Rather than seeking that clarity or notifying its customer about its concerns,
however, CBB ghosted Blue Flame. Brough directed CBB employees: “Do not con-
tact the client about this wire.” JA2109. Accordingly, CBB employees did not an-
swer Gula’s call to the bank’s main number, JA2096, and Cole—despite having spo-
ken with Blue Flame when the wire landed—did not answer her cell phone when
Gula called her back, JA2095. In both instances, Brough commended his employees
for avoiding CBB’s own customer. Id. (“Continue to hold him off.”); id. (“That was
the right thing to do.”).
19
In the meantime, Evinger called three California state offices, including DGS,
between 12:15PM and 12:21PM. JA2121-23. DGS’s Chief Accounting Officer re-
turned Evinger’s call at 12:50PM and left a voicemail confirming the wire’s legiti-
macy and exact amount. JA3132; JA3075. Nevertheless, CBB pursued the matter
further, calling DGS back and asking to speak to someone in California’s STO.
JA3134 0:42-0:47; JA3075. At 1:19PM, STO officials returned CBB’s call to con-
firm to Evinger and Brough that California had indeed originated the transfer, in-
tended it for Blue Flame, and intended to purchase 100 million N95 masks. JA1891-
92; JA1930. This is to say that CBB’s president had personally confirmed the wire’s
legitimacy with two separate California offices, even though its header data was ex-
actly as expected. One might reasonably expect things to have ended there, if not
well before.
But no. Instead, while asking no further questions, Evinger and Brough took
it upon themselves to tell STO officials about the newness of Blue Flame’s account
and that “the account holder was a lobbyist.” JA1977-78 (STO official confirming
that “the conversation was not about whether the wire amount was right” or “whether
it was actually credited to the right account”); see JA3075. The whole conversation
was highly unusual: Natalie Gonzales, an STO official on the call, testified that she
could not recall ever being contacted by another wire-transfer recipient’s bank.
JA1972.
20
Things would only get more unusual from there. At 12:30PM, a JPMC em-
ployee called CBB to express JPMC’s own suspicions about the wire and see if CBB
could still hold the funds. JA2153-54; see JA3073-74. Evinger responded by noting
CBB’s own suspicions about the wire and then falsely telling JPMC that the funds
had been held by CBB without being credited to Blue Flame’s account. JA2001-05;
JA2007-08. CBB later made the same misrepresentation to STO officials. JA1961;
JA1980; JA3075. Worse, defendants plainly knew this wasn’t true; Evinger and
Brough had received an email confirming that Blue Flame’s account had already
been credited, JA2096-98, and that credit was obviously reflected in CBB’s own
systems, see supra pp.15-16.
Nonetheless, Evinger seemed willing to go to extraordinary lengths to get this
wire off CBB’s books. Accordingly, at 1:34PM, Evinger suggested to JPMC’s
Rakesh Korpal that JPMC take the money back by issuing a recall. JA3135 0:05-
0:09; see JA141; JA3076. Korpal clearly understood the risks involved in trying to
unwind a valid Fedwire funds transfer, responding: “I don’t think you and I want to
get onto the front page of the Wall Street Journal, especially if this is a legitimate
transaction.” See JA3135 0:20-0:28; JA3076. But believing Evinger’s representa-
tion that the funds had not been credited to Blue Flame’s account, JA2003; JA2005,
Korpal ultimately acceded to the “request from Chain Bridge Bank to recall the
21
funds,” JA2006, and directed his subordinate to recall them, per CBB’s request, see
JA2159.
JPMC sent that recall request at 1:45PM. JA2197-98. The message was trans-
mitted over Fedwire at 2:05PM. JA1065.
Even at that point, it was still not too late for CBB to steer back within the
very clear guardrails of Article 4A and Regulation J by acknowledging that the orig-
inal transfer could no longer be recalled without Blue Flame’s consent. See supra
p.7. In fact, in a conversation with the CBB employees who would eventually be
tasked with returning the funds to JPMC, see JA2216-17, both Evinger and Brough
were warned again by their own employees that “we credited the customer’s ac-
count.” JA3140 2:09-2:27 (“Normally, you want to get [an indemnity letter] from
the other bank, just because—and in this case because we credited the customer’s
account.”). Evinger’s response was: “It’s okay, don’t worry about it. … It is what
it is.” Id. 2:27-2:33. Brough agreed, stating, “David [Evinger] and I have been
working on this with both the state of California and JPMorgan, and this is what we
have to do.” Id. 2:35-2:48. So, at 1:54PM, Brough emailed a number of CBB em-
ployees: “We have received a recall notice from JPMorgan to return the wire. I will
let Mike Gula know.” JA2211.
The record unambiguously demonstrates what happened next—which is the
most extraordinary fact of all. It is undisputed that Blue Flame did not initiate,
22
consent to, or authorize a transfer of these critical funds out of its account. So some-
one else—presumably (and according to the district court) someone at CBB,
JA3077; JA3089, but certainly not at Blue Flame—drew up the following payment
order, in the name of Blue Flame as sender:
JA2216. Then, knowing beyond any doubt that it had not in fact been authorized by
Blue Flame, e.g., JA1541-42; JA1563-64, CBB accepted and executed this order,
23
processing it and debiting Blue Flame’s account at 2:59PM, JA2216-17. A funds
transfer of $456,888,600 “from” Blue Flame to the California State Treasurer was
then completed over Fedwire at 3:21PM, JA2214; JA3077, taking the balance off
CBB’s balance sheet, repairing its capital ratios, and leaving Blue Flame without
any funds for the suppliers it had lined up.
Below, defendants relied on hearsay to the effect that—after CBB had re-
quested a recall from JPMC, JA3135 0:05-0:09, and after JPMC sent that request,
JA2197-98 (and, of course, after Brough and Evinger had started calling California
to sow doubt, supra p.19)—California officials contacted JPMC asking that the
funds be recalled, JA916-17 (Korpal deposition, stating that another JPMC em-
ployee told him at some point that California had made such a request at 2:00PM);
JA3077. But, notably, there is no evidence properly in the record indicating that
California was involved in this recall request at all.
E.
Subsequent Developments
1. The unauthorized return of Blue Flame’s funds obviously scuttled not only
the California contract, but much of Blue Flame’s other business as well. Deprived
of cash—and with its supplier relationships badly damaged, e.g., JA2207; JA2529—
Blue Flame inevitably struggled to secure product orders in the global scramble for
PPE. For example, Tennessee ordered 500,000 N95 masks and 500,000 disposable
gowns on April 6, 2020, and Blue Flame received the full deposit of $2,590,122 on
24
April 15. JA1124. But prices had moved significantly in the interim, and lacking
both credibility with its suppliers and the cash that the California contract would
have provided, Blue Flame was unable to secure PPE at the necessary price. See id.
Blue Flame not only issued Tennessee a full refund, but also reimbursed it for the
nearly $40,000 credit-card fee the State incurred in processing the transaction. Id.
Nevertheless, Blue Flame did complete numerous PPE orders, including con-
tracts with Maryland for 1.55 million N95 masks and with Chicago for 100,000 N95
masks. JA2726; JA2759.
2. The core factual dispute below surrounded whether Blue Flame could have
secured 100 million masks in 30 days, and what California might have done if it
didn’t—a matter on which history does not reveal her alternatives. But it is a matter
of public record that California was anything but strict in demanding on-time per-
formance from the N95 supplier it turned to thereafter.
On April 7, 2020, California contracted to purchase $990 million worth of
N95 masks, prepaying $495 million to a firm whose previous business was making
batteries. See BYD Equipment Master Supply Purchase Order Agreement 21-22,
30, https://files.covid19.ca.gov/pdf/BYD-Motors-LLC-OES.pdf (last visited Dec.
22, 2021).2 Because BYD lacked NIOSH certification to produce N95s, the contract
2 California’s contracts are properly subject to judicial notice. Fed. R. Evid.
201(b)(2).
25
made the purchase contingent upon BYD obtaining certification by April 30, 2020.
Id. at 1-2. BYD apparently failed to do so, but instead of canceling the contract,
California simply asked for a refund of half its prepayment and extended the certifi-
cation deadline by 32 days. Id. at 38. BYD then failed to obtain certification again,
to which California responded by again extending the deadline. Amendment No. 3
to
Equipment
Master
Supply
Purchase
Order
Agreement
1,
https://files.covid19.ca.gov/pdf/BYD-Motors-LLC-OES-3.pdf (last visited Dec. 22,
2021).
These two extensions meant that BYD sent California no N95s until at least
June 2020. And, indeed, the second contract extension contemplated deliveries in
July. Id. at 3. But that apparently satisfied California, because it not only paid for
this performance, but also executed another contract with BYD in late July 2020—
without even specifying delivery timelines beforehand. Second Equipment Master
Supply Purchase Order Agreement 20-21, 28, https://files.covid19.ca.gov/pdf/BYD-
Motors-LLC-OES-5.pdf (last visited Dec. 22, 2021).
III.
Proceedings Below
Blue Flame filed a complaint against CBB, Evinger, and Brough in the East-
ern District of Virginia in June 2020, asserting two violations of Article 4A (U.C.C.
§§4A-204(a) and 4A-404(a)) against CBB, and state-law claims against all defend-
ants. JA19-53. Section 204(a) provides, as relevant here, that if a bank “accepts a
26
payment order issued in the name of its customer as sender” without following cer-
tain verification procedures, and so sends out an unauthorized wire, it must refund
the wired amount to its customer. See §4A-204(a). And §4A-404(a) provides that
if a beneficiary’s bank accepts a wire transfer, it must quickly make the wired funds
available to that beneficiary, and is liable—including for consequential damages—
if it does not. Accordingly, Blue Flame’s core allegations were that CBB violated
its common-law and regulatory duties by both knowingly wiring money out of its
account without authorization and failing to give it access to the wired funds after
accepting a valid wire transfer naming its customer Blue Flame as beneficiary. E.g.,
JA20-52 ¶¶4, 94-96, 104-12, 123, 171-73.
The district court eliminated several state-law claims on defendants’ motion
to dismiss, finding them “definitely preempted” by Article 4A. JA61. It did not
explain its reasoning, see id., but presumably believed Blue Flame’s state-law claims
were “premised on conduct … covered by” Article 4A under this Court’s decision
in Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220 (4th Cir. 2002). See id. at 223
(holding that “[s]tate law claims premised on conduct not covered by Subpart B” are
not preempted because they “cannot create a conflict with or duplicate the rules es-
tablished in Subpart B”).3
3 “Subpart B” refers to Subpart B of Regulation J, which incorporates Article
4A into the federal regulatory scheme. 55 Fed. Reg. 40,791.
27
On subsequent cross-motions for summary judgment, however, the district
court seemed to adopt the opposite view, and held that §4A-204(a) did not reach
CBB’s knowingly unauthorized transfer out of Blue Flame’s account after all.
JA3088-89. The court’s opinion affirmatively held that the funds had been credited
into Blue Flame’s account. JA3081. But its view was, essentially, that §4A-204(a)
covers only third-party fraud by someone “pretending to be the bank’s customer,”
JA3089, and not a bank knowingly wiring money out of a customer’s account after
drawing up the fraudulent payment order itself. As support, the court string-cited
three out-of-circuit cases that found §4A-204(a) applicable to third-party frauds, see
JA3089 (citing Gold v. Merrill Lynch & Co., 2009 WL 2132698, at *1 (D. Ariz. July
14, 2009); Regatos v. N. Fork Bank, 838 N.E.2d 629, 630-31 (N.Y. 2005); and Ma
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84, 86-87 (2d Cir. 2010)),
but cited no case limiting it to that context. And while the district court stated that
the unauthorized payment order here “was ‘issued’ by Chain Bridge, not ‘accepted’
by Chain Bridge” for purposes of §4A-204(a), JA3089, it did not explain who else
could possibly have “accepted” the payment order CBB executed by sending money
out of Blue Flame’s account.
As to the §4A-404(a) claim, the court’s order was mixed, but ultimately
against Blue Flame. It first concluded that CBB had violated §4A-404(a) by failing
to give Blue Flame access to the funds after accepting the transfer from JPMC and
28
crediting Blue Flame’s account. JA3080-83. And in so holding, it rightly rejected
(as a matter of law) defendants’ argument that the transfer had been validly can-
celled—correctly citing Article 4A’s “strict scope” for “cancellation.” JA3082-83.
Nevertheless, the district court granted summary judgment for CBB by hold-
ing that Blue Flame “[could ]not establish that it sustained any damage” from the
violation. JA3083 (emphasis added). As that language suggests, the court’s opinion
mostly weighs the evidence and adjudicates what that evidence “establish[ed]” ra-
ther than identifying the absence of any material factual dispute. See JA3083-88. In
so doing, the court accepted defendants’ predicative story (and rejected plaintiff’s)
about what would have happened if CBB had made the money available to Blue
Flame as required, and found insufficient evidence that Blue Flame could have ful-
filled California’s entire order of 100 million masks. JA3088. It did not consider,
however, whether Blue Flame could have partially fulfilled the order and thus suf-
fered some damage sufficient to sustain a claim based on the liability it already
found.
Blue Flame timely appealed. JA3101-02.
SUMMARY OF ARGUMENT
Blue Flame’s argument proceeds in three parts. Part I concerns U.C.C. §4A-
204(a), as well as Blue Flame’s state-law claims; Part II addresses U.C.C. §4A-
404(a); and Part III addresses tortious interference.
29
I. Federal regulations governing funds transfers unambiguously provide that,
unless they follow certain verification procedures not at issue here, banks are liable
for processing payment orders their customers did not in fact authorize. U.C.C. §4A-
204(a). Without addressing the plain text of the relevant provision, however, the
district court gave two explanations for refusing to apply it, neither of them sound.
First, relying on out-of-circuit cases that applied §4A-204(a) to third-party frauds,
the district court effectively held that §4A-204(a) only applies to third-party frauds,
and imposes no liability for accepting an unauthorized payment order the bank
forged itself. Second, the district held that §4A-204(a) does not apply to a “reversal
of funds,” despite having earlier held that no such thing happened here. The undis-
puted facts and §4A-204(a)’s plain text mandate judgment for Blue Flame on this
claim. Infra pp.31-38.
While the regulations dictate how banks process payment orders, however,
they don’t reach the issuance of false orders. The district court was thus incorrect
to find Blue Flame’s state-law claims preempted insofar as they were directed at
CBB’s falsification of a payment order, and Blue Flame should be permitted to re-
plead those claims on remand. At the very least, should this Court find that §4A-
204(a) does not apply to what CBB did here, it should revive the “preempted” state-
law claims to avoid holding that no law prohibits a bank from wiring a customer’s
funds to whomever it chooses. Infra pp.38-40.
30
II. As to U.C.C. §4A-404(a), the district court correctly found CBB liable for
failing to make Blue Flame’s funds available as required after it accepted Califor-
nia’s wire transfer. Nevertheless, the district court entered summary judgment
against Blue Flame, finding it past debate that Blue Flame suffered no damages
whatsoever from the violation.
That holding rested on twin predictive conclusions: (1) that California would
have axed the deal anyway, regardless of CBB’s violation; and (2) that Blue Flame
couldn’t have delivered even one mask. But the first forecast is untethered from
reality—California was unfailingly accommodating in its subsequent PPE con-
tract—and the second is contradicted by record evidence the district court discred-
ited and ignored. Most jarringly, the district court utterly failed to take account of
the clearest form of consequential damages: the funds themselves, which CBB even
now continues to withhold from Blue Flame. This claim should be remanded for
trial, so that the conflicting evidence can be weighed by a jury. Infra pp.40-55.
III. Finally, the district court similarly strayed beyond the bounds of summary
judgment in rejecting Blue Flame’s tortious interference claims, ignoring even the
parties’ agreed facts. These claims should thus be reinstated as well. Infra pp.55-
56.
31
ARGUMENT
This Court reviews dismissal under Fed. R. Civ. P. 12(b)(6) de novo, accept-
ing the complaint’s allegations as true and drawing all reasonable inferences in plain-
tiff’s favor. Ray v. Roane, 948 F.3d 222, 226 (4th Cir. 2020).
This Court also “review[s] summary judgments de novo, ‘applying the same
legal standards as the district court and viewing all facts in the light most favorable
to the nonmoving party.’” W.C. English, Inc. v. Rummel, Klepper & Kahl, LLP, 934
F.3d 398, 402-03 (4th Cir. 2019) (citation omitted). Summary judgment is inappro-
priate where the nonmovant has offered “concrete evidence from which a reasonable
juror could return a verdict in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 256 (1986). A court considering a summary-judgment motion must believe the
nonmovant’s evidence and draw all justifiable inferences in its favor. Id. at 255.
The Supreme Court has particularly earmarked “[c]redibility determinations, the
weighing of the evidence, and the drawing of legitimate inferences from the facts”
as “jury functions, not those of a judge.” Id.
I.
CBB Is Liable For Knowingly Wiring Funds Out Of Blue Flame’s
Account Without Authorization.
The district court’s holding that CBB’s conduct did not violate §4A-204(a) is
not just wrong, but obviously so. That provision’s whole purpose is to place the risk
of an unauthorized funds transfer on any bank that fails to follow certain verification
procedures—for any reason, no matter how innocent or unintentional. The plain text
32
thus clearly reaches the (much worse) circumstance where a bank knows it is accept-
ing an unauthorized payment order because (as even the district court recognized)
the bank “issued” the fraudulent payment order itself. JA3089. The court’s error in
holding otherwise is grossly exacerbated, however, by its simultaneous holding that
state-law claims about such conduct are preempted. If neither §4A-204(a) nor com-
mon-law claims can reach CBB’s unambiguously wrongful conduct here, banks are
free to wire their customers’ money to whomever they want, without consequence.
That is not and cannot be the law.
A.
The District Court Misinterpreted §4A-204(a).
As noted above, the district court held that §4A-204(a) did not reach CBB’s
conduct because it “actually covers payment orders that a bank accepts from a third
party pretending to be the bank’s customer,” and so cannot reach a situation where
the plainly unauthorized payment order “was ‘issued’ by Chain Bridge, not ‘ac-
cepted’ by Chain Bridge.” JA3089. This reasoning is wrong several times over.
1. Begin with the plain text—something the district court surprisingly failed
to discuss. Section 204(a) provides:
(a) If a receiving bank accepts a payment order issued in the name of
its customer as sender which is (i) not authorized and not effective as
the order of the customer under section 4A-202, or (ii) not enforceable,
in whole or in part, against the customer under section 4A-203, the bank
shall refund any payment of the payment order received from the cus-
tomer to the extent the bank is not entitled to enforce payment and shall
pay interest on the refundable amount calculated from the date the bank
received payment to the date of the refund.
33
U.C.C. §4A-204(a) (emphases added).
Although Article 4A uses some counterintuitive terms, the purpose and effect
of this section is very clear. A “receiving bank” is a bank that receives a payment
order (not the funds), see U.C.C. §4A-103(a)(1), (3)-(4), and it “accepts” that pay-
ment order when it sends out funds in response, see id. §4A-209(a) (a receiving bank
“accepts a payment order when it executes the order”).4 The first receiving bank is
also called the “originator’s bank,” id. §4A-104(d), just as the person sending the
money is called the “sender” or “originator,” id. §4A-104(c), and the “payment or-
der” is the instruction to make a funds transfer from that originator to the ultimate
beneficiary, id. §§4A-103(a)(1), 4A-104(a). A payment order is “issued” when it is
sent to the receiving bank. Id. §4A-103(c). So when you submit a wire-transfer
form to your bank, you are “issuing” or “originating” the payment order “in the name
of [the bank’s] customer as sender,” and your bank “accepts” that order by carrying
out its instructions. Section 204(a) thus very simply provides that if that form was
4 Technically, a receiving bank “executes” a payment order by sending out its
own payment order to the beneficiary’s bank. It then sends out the funds that bank
pays to the beneficiary in turn and takes payment from the sender (usually by debit-
ing her account). See U.C.C. §4A-301; supra p.6. This technical distinction ex-
plains why a beneficiary’s bank can accept a payment order but cannot execute one,
U.C.C. §4A-301, and why Article 4A thus provides that a beneficiary’s bank “ac-
cepts a payment order” when it pays the beneficiary, id. §4A-209(b). These techni-
calities help the language deal with complex transactions where there are additional
“receiving banks” between the originating bank and the beneficiary’s bank, but
they’re unimportant in a case like this one, where only those two banks are involved.
34
not authorized by you, or enforceable against you because the bank followed certain
verification procedures, your bank is on the hook for any funds it wired out of your
account, plus interest.
That provision covers this case as clearly as possible. The payment order that
resulted in the transfer out of Blue Flame’s account was “issued in the name of
[CBB’s] customer as sender,” see supra p.22, and CBB accepted it by executing the
transfer it called for. And no one suggests that order was authorized by or enforce-
able against Blue Flame. CBB must thus “refund” Blue Flame’s account and “pay
interest.” It is as simple as that.
Were confirmation needed, however, it is readily found in the U.C.C.’s offi-
cial commentary, which explains that the real question is whether CBB was entitled
to the payment it unilaterally took out of CBB’s account—which it obviously was
not. The commentary states that, “in each of the[] cases” like this one, where an
order is not enforceable against a customer under §4A-204:
[T]he bank takes the risk of loss with respect to an unauthorized pay-
ment order because the bank is not entitled to payment from the cus-
tomer with respect to the order. The bank normally debits the cus-
tomer’s account or otherwise receives payment from the customer
shortly after acceptance of the payment order. Subsection (a) of Section
4A-204 states that the bank must recredit the account or refund payment
to the extent the bank is not entitled to enforce payment.
U.C.C. §4A-204 cmt. 1. This is, happily, a very precise description of exactly what
happened here and what §4A-204(a) requires in response. Given that CBB
35
concededly knew the only payment order in the record was unauthorized, CBB has
not and cannot identify any basis on which it would be entitled to payment from
Blue Flame for the wire it sent. And so “Section 4A-204 states that [CBB] must
recredit the account.” Id.
This conclusion is further underscored by the commentary to §§4A-202 and
203, which detail what it means for a payment order to be authorized by or enforce-
able against a sender. It says:
[A]cceptance of [a payment] order by the receiving bank is based on a
belief by the bank that the order was authorized by the person identified
as the sender. … [T]he receiving bank may suffer a loss unless it is
entitled to enforce payment of the payment order that it accepted. …
Given the large amount of the typical payment order, a prudent receiv-
ing bank will be unwilling to accept a payment order unless it has as-
surance that the order is what it purports to be.
U.C.C. §4A-203 cmt. 1 (emphasis added). Here, having issued the unauthorized
order itself, CBB cannot have “belie[ved] … that the order was authorized by the
person identified as the sender”—i.e., Blue Flame. A “prudent receiving bank” in
CBB’s shoes would thus have done the exact opposite of what CBB did, to avoid
“suffer[ing] a loss.” And so CBB must put the money back with interest under §4A-
204(a)’s plain command.
2. Without even discussing this plain text, the district court offered two rea-
sons for its contrary conclusion. Neither makes any sense at all.
36
a. First, the district court purported to hold that, because the “payment order
was ‘issued’ by Chain Bridge,” it fell outside §4A-204(a), which “actually covers
payment orders that a bank accepts from a third party pretending to be the bank’s
customer.” JA3089. Section 204(a) does not even mention “third party” misconduct
or frauds, however, much less limit its rule to such cases. Indeed, there is no support
whatsoever—in text, commentary, or case law—for the proposition the district court
actually needed to defend its holding here, which is that §4A-204(a) covers only
third-party frauds on receiving banks.
It is therefore unsurprising that the district court not only failed to discuss the
governing text, but also marshalled nothing more for its argument than three out-of-
circuit cases standing for the (obvious) proposition that §4A-204(a)’s rule is broad
enough to cover third-party frauds. See supra p.27. None remotely supports the
conclusion that §4A-204(a) cannot cover anything else—let alone that it excludes
the worse circumstance where the false payment order was issued by the customer’s
own bank.
b. Second, while its reasoning is unclear, the district court appeared to believe
that the payment order was “not ‘accepted’ by Chain Bridge” here, either because it
was “‘issued’ by Chain Bridge” or because the “payment order generated by Chain
Bridge without Blue Flame’s authorization” was used to accomplish a “reversal of
funds.” JA3089. Neither theory is logically coherent. The payment order was
37
clearly accepted here because the funds left Blue Flame’s account and were sent to
JPMC per that order’s instructions, see supra p.22, and the court didn’t even suggest
who besides CBB could have “accepted” that payment order. Nothing in law or
logic excludes the possibility that CBB both “issued” and “accepted” the unauthor-
ized order. And it would be bizarre if those two wrongs somehow made CBB’s
brazen misbehavior right.
Meanwhile, the district court’s reference to a “reversal of funds” contravenes
its own explicit (and correct) holding that JPMC had not effectively cancelled the
original funds transfer because the money had already been credited to Blue Flame’s
account. See JA3081-83 (detailing why “Chain Bridge’s obligation to its customer,
Blue Flame, cannot be nullified through the cancellation process”). As Article 4A’s
official commentary explains, “[t]here is no concept of wrongful cancellation or
amendment of a payment order. If the conditions stated in [§4A-211] are not met
the attempted cancellation or amendment is not effective.” U.C.C. §4A-211
cmt. 1 (emphasis added). Accordingly, the district court itself had found that CBB’s
funds transfer to JPMC could not be effected by CBB accepting a cancellation of
JPMC’s original funds transfer—or by a “reversal of funds,” a term Article 4A does
not use. It thus had to be accomplished by acceptance of the new payment order that
(again, according to the district court itself) had been “issued by Chain Bridge” and
not Blue Flame. JA3089.
38
And so, again, what needs to happen here is clear. The uncontested facts
demonstrate that, under §4A-204(a), CBB is obliged to recredit Blue Flame’s ac-
count with interest, and summary judgment must be entered to that effect. As Article
4A repeatedly recognizes, e.g., U.C.C. §4A-205(a)(3), what happens to the money
thereafter is governed by other sources of law, like “the law governing mistake and
restitution,” and it is doubtful Blue Flame will keep (or even try to keep) it all. But
what CBB did here was very obviously wrong as a matter of banking law and prac-
tice—the kind of misbehavior that lands one on the “front page of the Wall Street
Journal”—and the immediate remedy §4A-204(a) requires is unambiguous.
B.
The District Court Erred in Finding Blue Flame’s State-Law
Claims Preempted.
As to §4A-204(a), the district court got at least one thing right: Neither that
provision of Article 4A, nor any other, addresses the remedies that may exist against
a party who wrongfully caused the actual issuance of the unauthorized payment or-
der in the first place. But that fact necessarily invalidates the preemption holding
the district court reached here.
Under this Court’s decision in Eisenberg, 301 F.3d at 223, Article 4A (as in-
corporated into Regulation J, Subpart B) preempts “any state law cause of action
premised on conduct falling within the scope of Subpart B, whether the state law
conflicts with or is duplicative of Subpart B.” Eisenberg thus makes clear that
“[d]etermining if a state law claim is preempted … turns on whether the challenged
39
conduct in the state claim would be covered under Subpart B as well.” Id. Again,
the district court did not explain its basis for holding several of Blue Flame’s com-
mon-law claims “definitely preempted” at the 12(b)(6) stage. JA61. But assuming
this Court accepts the district court’s (correct) conclusion that a tort or breach of
contract that results in the wrongful issuance of an unauthorized payment order is
not “covered under Subpart B” as such, see JA3089 (holding that §4A-204(a) covers
“accept[ance]” but not “issu[ance]”), it should reverse the dismissal of Blue Flame’s
state-law claims and remand with leave for Blue Flame to replead them in accord-
ance with this accepted scope.5 And, conversely, if this Court concludes that Article
4A does cover the wrongful issuance itself, it must reverse the §4A-204(a) judgment
against Blue Flame on that score.
Indeed, it is particularly critical that this Court reverse the preemption holding
below if it somehow accepts that CBB’s conduct is not otherwise prohibited by §4A-
204(a). That is because, if the district court is right that: (1) CBB did not “accept”
the unauthorized payment order insofar as it issued that order itself; (2) issuing that
5 The district court eventually rejected some state-law causes of action on
other grounds. JA3090-92. But Blue Flame tailored its presentation of those causes
of action to comply with the apparent scope of the district court’s unexplained
preemption holding. Once that preemption holding is rejected, Blue Flame must be
given leave to replead any and all state-law theories to appropriately address the
wrongful issuance of the payment order. Such theories could sound in fraud, breach
of contract, tortious interference, or other claims.
40
unauthorized order is not covered by §4A-204(a); and (3) state-law causes of action
for that wrongful issuance are still preempted, the upshot will be that banks can wire
money out of their customers’ accounts willy-nilly by drawing up their own unau-
thorized payment orders—free from consequences under either Regulation J or any
other source of authority (given Regulation J’s preemptive effect).
This is not and cannot be the law. Instead, Article 4A sets up a plain and
simple system where CBB’s acceptance of the unauthorized order is regulated by
§4A-204(a) and the fraudulent creation of that order remains subject to ordinary
common-law remedies. Rejecting either proposition would be incorrect, but reject-
ing them both is catastrophic. No prior court has ever endorsed anything of the sort,
and this Court should not be the first.
II.
The District Court Usurped The Role Of The Jury In Concluding That
Blue Flame Could Not “Establish” Damages.
The core obligation of a sender’s bank not to execute an unauthorized payment
order is mirrored by an equally clear obligation on the beneficiary’s bank to actually
pay out any payment order it accepts to the intended beneficiary. Section 404(a)
thus provides:
Subject to Sections 4A-211(e), 4A-405(d), and 4A-405(e), if a benefi-
ciary’s bank accepts a payment order, the bank is obliged to pay the
amount of the order to the beneficiary of the order. … If the bank re-
fuses to pay after demand by the beneficiary and receipt of notice of
particular circumstances that will give rise to consequential damages as
a result of nonpayment, the beneficiary may recover damages resulting
from the refusal to pay to the extent the bank had notice of the damages,
41
unless the bank proves that it did not pay because of a reasonable doubt
concerning the right of the beneficiary to payment.
U.C.C. §4A-404(a) (emphasis added).
As the district court concluded, CBB was “obliged to pay the amount of the
order” to Blue Flame and didn’t. JA3083. But, somehow, the district court never-
theless concluded that there was no genuine issue as to Blue Flame’s damages, which
(per §4A-404(a)) include consequential damages resulting from such conduct. The
district court reached this conclusion by adopting the factfinding role that the Con-
stitution reserves for the jury. Reversal is warranted so that the conflicting evidence
can be properly considered and weighed at trial.
A.
The District Court Correctly Found That CBB Violated §4A-
404(a).
Unlike with §4A-204(a), the district court’s reading of §4A-404(a) was sound.
Accordingly, the court correctly concluded that CBB violated §4A-404(a) when it
refused to give Blue Flame access to the funds it accepted from JPMC, and instead
eventually wired them back. JA3080-83.
It did so by correctly rejecting the proposition that CBB could return the funds
through a recall or cancellation by JPMC. First, it observed that “evidence in the
record establishes that the funds were ‘accepted’ because they were credited to Blue
Flame’s account.” JA3081 (citing JA937; JA945; JA2097-98). Then, the district
court persuasively dispensed with defendants’ misguided argument that §4A-
42
211(e)—the only one of §4A-404(a)’s “[s]ubject to” escape hatches6 defendants in-
voked—gave CBB an excuse for its misfeasance. JA3081-83.
Section 211(e) provides that, “[i]f an accepted payment order is canceled, the
acceptance is nullified and no person has any right or obligation based on the ac-
ceptance.” But, as noted above (supra p.37), the only kind of cancellation counte-
nanced by Article 4A is “effective” cancellation, U.C.C. §4A-211 cmt. 1, the defi-
nition of which is spelled out in §4A-211(c)(2):
With respect to a payment order accepted by the beneficiary’s bank,
cancellation or amendment is not effective unless the order was issued
in execution of an unauthorized payment order, or because of a mistake
by a sender in the funds transfer which resulted in the issuance of a
payment order (i) that is a duplicate of a payment order previously is-
sued by the sender, (ii) that orders payment to a beneficiary not entitled
to receive payment from the originator, or (iii) that orders payment in
an amount greater than the amount the beneficiary was entitled to re-
ceive from the originator.
Defendants tried to argue below that “California’s payment order initiating
the wire transfer was issued by ‘mistake’ … because California originated the funds
transfer only as a result of having been misled about Blue Flame’s bona fides as a
PPE supplier.” Dkt. 119 at 17. But any kind of second thought about a payment
could be characterized as this kind of “mistake,” and neither the Fedwire system nor
Article 4A would serve its finality-creating purpose if it were subject to such second
6 The final clause of §4A-404(a) cannot help defendants, because “reasonable
doubt concerning the right of the beneficiary to payment” arises only where “there
is doubt whether acceptance occurred.” U.C.C. §4A-404 cmt. 3.
43
thoughts. Article 4A treats a transfer as a transfer, and so narrowly proscribes the
circumstances in which a transfer can be unwound. Those circumstances involve
essentially technical errors, and even then require the consent of the receiving bank
for cancellation.7
This is not a close question. Anticipating arguments like defendants’, Article
4A’s drafters expressly considered a case like this one and explained that a benefi-
ciary’s bank must still pay the beneficiary notwithstanding that bank’s alleged fraud
concerns. As they put it, “[a] fraud or breach of contract claim of the originator may
be grounds for recovery by the originator from the beneficiary after the beneficiary
is paid, but it does not affect the obligation of the beneficiary’s bank to pay the ben-
eficiary.” U.C.C. §4A-404 cmt. 3 (emphases added). The mistake contemplated by
§4A-211(c)(2)(ii) is thus a mistake in the beneficiary’s identity. Id. §4A-211 cmt. 4.
The drafters could hardly have communicated more clearly that what CBB did here
was “not appropriate,” id.; a bank cannot withhold the exact right amount from the
exact intended beneficiary based solely on (what it says were) its own noble concerns
7 In particular, §4A-211 specifies that either (1) the receiving bank must con-
sent to the cancellation, or (2) a preexisting rule adopted by an association of banks
must permit cancellation without its agreement. U.C.C. §4A-211(c); see also id.
§4A-501 (discussing “funds-transfer system rule[s]”). The receiving bank’s consent
is necessary because that bank may have already incurred a liability to its customer
or the next bank in the chain, and may also wish to avoid jeopardizing its relationship
with the beneficiary over a mistake someone else made. See id. §4A-211 cmts. 3, 5.
44
about whether the originator should have wanted to send the funds transfer at issue.
This makes perfect sense given banks’ “essentially mechanical” role in the
funds-transfer system. See U.C.C. §4A-104 cmt. 3. Indeed, giving intermediaries
some oversight power or discretion to unwind a transfer when they think justice so
requires deprives the wire transfer of the certainty and finality it was built to provide.
It is thus nonsensical to contend—as defendants did below, Dkt. 119 at 18-20—that
some law or other obligates banks to step into disputes between senders and benefi-
ciaries and dole out remedies. Accordingly, while defendants spent several pages in
the district court claiming that CBB “would have put itself in substantial regulatory
jeopardy if it had refused [JPMC’s] cancellation request and paid Blue Flame,” id.
at 18, they never quite got around to explaining what regulation, exactly, they would
have violated, or why Regulation J and its preemption provision would not have
provided a complete defense.
In fact, defendants have it precisely backwards; CBB would have been safe
from any liability whatsoever if it had merely done what Article 4A unambiguously
requires. The right choice was easy, and spelled out in the commentary in terms that
could not more precisely cover this case. The district court’s conclusion that, per
the undisputed facts, “Chain Bridge violated §4A-404(a)” was thus perfectly in line
with the text of Article 4A and the policy concerns that gave rise to it.
45
B.
The District Court Impermissibly Resolved Factual Disputes and
Drew Inferences Against Blue Flame.
Having read §4A-404(a) correctly, however, the district court then proceeded
to overstep its constitutional role on summary judgment by adjudicating factual dis-
putes and questions of credibility. As the Supreme Court has stated—and as this
Court has repeatedly stressed—“[c]redibility determinations, the weighing of the ev-
idence, and the drawing of legitimate inferences from the facts are jury functions,
not those of a judge.” Liberty Lobby, 477 U.S. at 255; accord, e.g., Martin v. Duffy,
977 F.3d 294, 305 (4th Cir. 2020) (citing Liberty Lobby); Dennis v. Columbia Colle-
ton Med. Ctr., Inc., 290 F.3d 639, 649-50 (4th Cir. 2002) (where evidence was “not
sufficient to compel a rational jury” to find in the defendant’s favor, “[t]o grant judg-
ment as a matter of law … would be to intrude on the jury function by substituting
our own judgment for that of the finder of fact”).
The district court did not doubt that Blue Flame demanded payment or that
CBB was on notice of consequential damages. See §4A-404(a) (requiring these el-
ements for a consequential-damages claim). Instead, it held only that Blue Flame
could not “establish” any such damages, id., and that its §4A-404(a) claim thus
failed. It premised that holding on two factual conclusions: (1) that “even if Chain
Bridge had released the disputed funds to Blue Flame on March 26, 2020, California
would have ended its relationship with Blue Flame, resulting in the return of the
funds, because the evidence in this record unequivocally shows that plaintiff could
46
not fulfill the contract,” JA3083-84 (emphasis added); and (2) that “‘there is no rec-
ord evidence that Blue Flame would have successfully fulfilled California’s order
even if Blue Flame had received California’s funds,’” JA3085 (quoting Dkt. 119 at
24) (emphasis added). While these conclusions read similarly, they are conceptually
distinct in that the first covers the district court’s prediction of California’s course of
conduct in the absence of CBB’s §4A-404(a) violation, while the second concerns
its forecasting of Blue Flame’s performance prospects. But, in any event, serious
disputes of fact lurk behind each prophecy.
1.
The evidence that California would have immediately
canceled the entire contract absent CBB’s §4A-404(a)
violation is equivocal at best.
Only by drawing a chain of inferences against Blue Flame was the district
court able to arrive at its conclusive prediction that “California would have ended its
relationship with Blue Flame, resulting in the return of the funds,” regardless of
CBB’s §4A-404(a) violation. JA3083-84. That is, the district court’s conclusion
amounts to a supposition that a particular series of events would have taken place—
all of them unfavorable to the nonmoving party—if CBB had abided by §4A-404(a)
and “pa[id] the amount of the order” to Blue Flame.
1. Regardless of its urgent need for N95 masks, and despite its understanding
that Blue Flame (having received the funds) would immediately wire
money out to buy masks that were ready to ship, supra pp.9-10, California
47
would unquestionably have decided to terminate the contract. But see su-
pra pp.24-25 (detailing California’s accommodating approach to its next
PPE contract).
2. California would thus have delivered to Blue Flame “a Notice of Termina-
tion specifying the extent of the termination and the effective date thereof,”
JA1165—and it definitely would have specified, without further delibera-
tion, that the entire contract was terminated immediately. But see supra
pp.24-25 (California’s conduct with BYD); JA690 (deposition testimony
by California employee, indicating that the events of March 26 “caused
[California] enough concern to … reconsider” the arrangement with Blue
Flame, but that DGS did not “ha[ve] time to fully deliberate”) (emphasis
added).
3. Blue Flame would then have been unable to dissuade California from pro-
ceeding with immediate, complete termination, even by provision of con-
clusive evidence that Suuchi’s promised shipment of six million N95
masks was underway. But see JA2889 (DGS director Kim deposition: The
source of the masks was “irrelevant,” because California “just needed the
product.”); JA3012 (DGS officer Wong deposition: “If we received the
masks [from Blue Flame] that were agreed upon, we would have accepted
them.”) (emphasis added).
48
4. Having failed to convince California to maintain a contract to purchase
even one mask or delay cancellation by even one day, Blue Flame would
have been able to claw back every penny of the funds it had already wired
to suppliers. But see JA1774 (agreement between GHC and Blue Flame
providing that, if Blue Flame terminated the contract, GHC “shall be reim-
bursed for … costs, plus a reasonable profit for work performed to date of
termination”); JA1787 (same, in agreement between Suuchi and Blue
Flame).
5. Blue Flame would have had no colorable claim, under contract law or oth-
erwise, to any part of the consideration California provided for its perfor-
mance, and thus would have had to return the entirety of the $456,888,600
upon demand and without negotiation. But see JA1165-66 (standard Gen-
eral Provisions of California procurement contract contemplates a “termi-
nation settlement” and provides that “the Contract shall be deemed to re-
main in effect until” such settlement “is concluded”).
At an absolute minimum, this is clearly a complex web of hypothetical future events,
many of which depend on principles of contract law the district court did not even
seriously consider, let alone decide. But according to the district court, these
events—subsumed as they are in the ultimate prediction that “California would have
49
ended its relationship with Blue Flame, resulting in the return of the funds”—were
inevitable and no reasonable juror could have concluded otherwise.
In fact, it’s impossible to know for certain what California would have done
in an alternate timeline. But it is possible to get a fair idea by examining California’s
conduct in its next major PPE contract, consummated about two weeks after the
events here. As noted above, supra pp.24-25, BYD missed the deadline to obtain
NIOSH certification twice, and California extended the deadline twice before receiv-
ing its first masks in June 2020. It then renewed the contract despite BYD’s late
performance. Such realities demonstrate how wildly overconfident the district court
was in its predictive powers when it held that California’s hypothetical future actions
could not even be reasonably contested. In reality, this is exactly the kind of purely
factual question the Constitution allocates to the jury.
2.
There is substantial evidence Blue Flame would have
successfully fulfilled some or all of California’s order.
Indeed, it’s not clear the district court was even asking the right question in
reaching its factual conclusions. The court’s analysis suggests a belief that Califor-
nia would eventually cancel the contract, and/or that Blue Flame would not deliver
all 100 million masks. But to grant summary judgment, the court must have believed
that Blue Flame could not prove any damages at all. Put otherwise, any dispute on
the question whether Blue Flame could have delivered six million or 63 million
masks within the 30 days the contract contemplated is in fact a dispute about the
50
amount of Blue Flame’s damages, not their existence. On the more fundamental
question whether Blue Flame was damaged at all by CBB’s §4A-404(a) violation—
that is, whether one supplier would have delivered one N95 mask to California, such
that Blue Flame was deprived of any profits—the record is bursting with sufficient
evidence to preclude summary judgment.
As noted above, supra p.11, the record reflects that Blue Flame executed pur-
chase orders with two suppliers, and the evidence further shows that either Suuchi
or GHC—and indeed quite likely both—would have delivered N95 masks had Blue
Flame been able to keep its end of those agreements. Suuchi had six million masks
that were ready to ship immediately upon its receipt of prepayment. JA1767-68;
JA1787. California and Blue Flame incorporated this occurrence into their agree-
ment, JA1684-87, and even though it makes no difference on summary judgment
(where all that matters is that there is a factual dispute), defendants have proffered
no evidence that this shipment wouldn’t have happened. Moreover, the payment to
Suuchi would have left Blue Flame’s account immediately had CBB complied with
its obligations under §4A-404(a) and processed the outgoing wire as it had promised.
See supra p.16. This alone is reason enough to reverse the district court’s finding
that Blue Flame could establish no consequential damages.
GHC, meanwhile, contracted with Blue Flame to supply 100 million masks
over a three-month period. JA1771. The order confirmation GHC sent to Blue
51
Flame stated that those masks would be “shipped in tranches as often and as soon as
possible.” Id. And as explained in a detailed expert report submitted below, “Blue
Flame’s supply chain had the capacity to fulfill California’s order.” JA2790. As
Blue Flame’s expert explained, “over the first half of 2020,” China’s manufacturing
industry “rapidly ramp[ed] up its production of face masks in general and N95 masks
in particular,” JA2792, such that, by the time the U.S. began tracking the importation
of N95 masks from China in July 2020, China was exporting over 500 million N95
masks per month to the U.S., JA2791. “[W]hile supply was tight and demand was
high, during April to June of [2020,] China was adding a tremendous amount of N95
production capacity that would have been sufficient to satisfy an order of 100 million
N95 type masks.” JA2795. And Henry Huang, GHC’s CEO, stated on March 24
that GHC could obtain at least 30 million N95 masks per month for Blue Flame—if
Blue Flame made prepayment soon. JA1733 (“[E]veryday its getting harder.”); ac-
cord JA2611-12 (Huang confirming that “GHC had the ability to, and would have,
met its obligations … to supply all 100 million masks”). The district court mani-
festly refused to credit all this evidence in Blue Flame’s favor, when the exact op-
posite is required on a motion for summary judgment.
As this Court has recently admonished, “[a] court improperly weighs the evi-
dence if it fails to credit evidence that contradicts its factual conclusions.” Sedar v.
Reston Town Ctr. Prop., LLC, 988 F.3d 756, 761 (4th Cir. 2021). This is precisely
52
the error the district court made repeatedly below. Despite deposition testimony that
Suuchi’s six million masks were ready to ship immediately and Blue Flame’s exe-
cuted purchase order for those masks, the district court found there to be no evidence
“that the order[] would have been, or could have been, filled[.]” JA3085. The dis-
trict court also disregarded Huang’s March 24 statements that he could procure at
least 30 million N95 masks per month upon prompt prepayment, citing to an email
Huang sent two weeks later, when circumstances had changed, as Huang himself
predicted they would. JA3087. And the decision below relied on Blue Flame’s
subsequent difficulty in fulfilling PPE orders, JA3087-88, disregarding evidence that
defendants’ destruction of the California contract caused Blue Flame’s difficulties
through reputational damage and deprivation of working capital, JA2513; JA2516-
20; JA2529-31.
The Supreme Court corrected a similar misstep by the Fifth Circuit in Tolan
v. Cotton, 572 U.S. 650 (2014). Remarking that “this Court is not equipped to cor-
rect every perceived error,” the Court nevertheless “intervene[d] … because the
opinion below reflects a clear misapprehension of the summary judgment stand-
ards.” Id. at 659 (internal quotation marks omitted). Marching through four key
factual disputes, the Court carefully reviewed the record, surfaced evidence that con-
tradicted the Fifth Circuit’s factual findings—including deposition testimony by in-
terested persons—and reached “the inescapable conclusion that the court below
53
credited the evidence of the party seeking summary judgment and failed properly to
acknowledge key evidence offered by the party opposing that motion.” Id. at 657-
59.
A profound misunderstanding of the court’s summary-judgment role is also
evident in its decision to both exclude and disbelieve a sworn declaration from
GHC’s CEO Henry Huang, JA2605-14, who was unavailable for a deposition be-
cause he was in China, JA2607; JA2844. Federal Rule of Civil Procedure 56(c)
expressly contemplates a party’s reliance on “affidavits or declarations” to support
its position. Fed. R. Civ. P. 56(c)(1)(A), 56(c)(4). And given that a nonmovant
succeeds on summary judgment merely by demonstrating that there is a “genuine
dispute as to any material fact,” id. 56(a) (emphasis added), a declaration supporting
the nonmovant’s version of events cannot be discarded simply because it’s one-
sided, because “it was not produced during discovery,” or because “defendants were
not able to depose” the declarant, JA3087. Such complaints would make sense in
the context of a trial, but they are logically incoherent when the procedural posture
requires crediting a witness’s story without regard to the defendants’ contrary at-
tacks.
But the clearest example of the district court’s misapprehension of its sum-
mary-judgment role comes from its alternative consideration of this declaration. It
couldn’t change the outcome, the district court concluded, because it “is inconsistent
54
with other evidence on the record.” JA3087. The court below seemed oblivious,
even as it ran through several asserted conflicts between the declaration and defend-
ants’ evidence, that it had the standard precisely backwards: Evidentiary “inconsist-
encies” on key issues are inherently sufficient to deny summary judgment, not rea-
sons to grant it. The court’s willingness to step into the jury’s role is thus evident
on the face of its opinion.
C.
The District Court Ignored CBB’s Ongoing Violation.
The district court’s decision also ignores a very obvious form of “damages”
that require sustaining Blue Flame’s claim. Section 4A-404(a)’s core legal require-
ment is that the beneficiary’s bank pay the beneficiary the money itself; consequen-
tial damages are available on top of this basic obligation if the bank delays and a
forewarned harm to the beneficiary results. Accordingly, the court could not grant
summary judgment for lack of damages without requiring CBB to remedy its ongo-
ing failure to meet §4A-404(a)’s demand.
To be sure, Blue Flame’s theory has been that, in sending the funds back to
JPMC and debiting Blue Flame’s account, CBB quite obviously “accepted” an un-
authorized payment order, requiring a refund under §4A-204(a). But having found
that (1) CBB did not “accept” the new and unauthorized order, and (2) JPMC did
not effectively cancel the original payment order, the district court was obliged to
explain the legal basis on which CBB could continue refusing to tender payment on
55
that original order. Put another way, §4A-404(a) required CBB to pay Blue Flame,
and absent a valid cancellation or a valid transfer of the money back to JPMC, CBB
is still required to pay Blue Flame. If it was not going to order a refund under §4A-
204(a), the district court was thus obliged at an absolute minimum, under its own
holdings, to order CBB to stop violating §4A-404(a) without regard to whether Blue
Flame could “establish” consequential damages.
III.
Summary Judgment Was Unwarranted On Blue Flame’s Tortious-
Interference Claims.
For similar reasons, this Court should also reverse the district court’s sum-
mary-judgment grants on Blue Flame’s claims that defendants tortiously interfered
with its contract and business expectancy. The district court’s main reason for re-
jecting these claims was the mistaken reasoning on damages discussed above. See
JA3091. But the court also briefly mentioned two other reasons, both of which only
further exemplify the court’s overreach on summary judgment.
First, the court said that record evidence revealed “issues” with the proposi-
tion that California and Blue Flame had either a contract or a business expectancy.
JA3090. But the parties to this case stipulated that an agreement had been formed.
JA139. And the court’s equivocation is nothing like the holding that would have
been necessary to grant summary judgment: namely, a finding that, as a matter of
law, California would have had a valid affirmative defense of fraud in the induce-
ment regarding its agreement with Blue Flame.
56
Second, the court suggested that there was insufficient evidence of CBB’s in-
tent to interfere with the contract. JA3090-91. But there is no other explanation for
CBB’s repeated calls to California—calls that were wholly out of the ordinary, and
made doggedly even after assurances that the transaction was legitimate. See supra
p.19. In any event, the question on summary judgment is not which side is right, but
whether there’s any evidence for Blue Flame’s story. And as noted above, there is
plentiful evidence that CBB’s real motivation was to unwind a transaction that would
have harmed its capital ratios. See supra pp.16-18. This Court should reverse on
these claims as well.
CONCLUSION
For the foregoing reasons, this Court should direct judgment for Blue Flame
on its §4A-204(a) claim; reverse the dismissal of Blue Flame’s state-law claims and
remand them for repleading; and reverse and remand Blue Flame’s §4A-404(a) and
tortious-interference claims for trial.
REQUEST FOR ORAL ARGUMENT
This case raises several issues of first impression, the resolution of which may
have far-reaching economic effects. Blue Flame respectfully requests that the Court
set the case for oral argument.
57
December 22, 2021
Respectfully submitted,
s/ Eric F. Citron
Eric F. Citron
Kathleen Foley
GOLDSTEIN & RUSSELL, P.C.
7475 Wisconsin Ave., Suite 850
Bethesda, MD 20814
(202) 362-0636
ecitron@goldsteinrussell.com
kfoley@goldsteinrussell.com
Counsel for Appellant Blue Flame Medical LLC
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