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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
(Alexandria Division)
BLUE FLAME MEDICAL LLC,
Plaintiff,
v.
CHAIN BRIDGE BANK, N.A., JOHN J.
BROUGH, and DAVID M. EVINGER,
Defendants.
Civil Action No. 1:20-cv-00658
DEFENDANTS’ ANSWER, AFFIRMATIVE DEFENSES, AND COUNTERCLAIMS
Defendants Chain Bridge Bank, N.A., John J. Brough, and David J. Evinger hereby answer
Plaintiff Blue Flame Medical LLC’s (“Blue Flame”) Complaint and set forth their affirmative
defenses, and counterclaims as follows:
1.
Denied.
2.
Denied.
3.
Denied.
4.
Denied.
5.
Denied.
6.
Denied.
7.
Denied.
8.
On information and belief, Defendants admit that Blue Flame is a Delaware limited
liability corporation. Defendants are without sufficient information to form a belief as to whether
and where Blue Flame has a principal place of business, and therefore deny those allegations.
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9.
Admitted.
10.
Denied.
11.
Admitted.
12.
Defendants admit that this Court has jurisdiction over this action pursuant to 28
U.S.C. § 1331 because it presents a federal question. Defendants deny that Chain Bridge Bank,
N.A., violated any applicable Federal Reserve Board regulations, including Federal Reserve Board
Regulation J, and otherwise deny the allegations in Paragraph No. 12.
13.
Admitted.
14.
Admitted.
15.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 15, and therefore deny those allegations.
16.
Denied. Defendants further state that Blue Flame has admitted to the U.S. House of
Representatives’ Subcommittee on Oversight and Investigations for the Committee on Energy and
Commerce that, in fact, it lacked any meaningful “ability to source … medical supplies” in
response to orders placed during the early months of the global pandemic.
17.
Defendants are without sufficient information to form a belief as to what
arrangements, if any, Blue Flame had with its alleged “manufacturing partners,” or what its alleged
“manufacturer’s prices” were in March 2020, and therefore deny those allegations. Defendants
otherwise deny the allegations in Paragraph No. 17.
18.
Defendants admit, on information and belief, that there was intense competition to
secure certain medical supplies in March 2020. Defendants are without sufficient information to
form a belief as to the remainder of the allegations in Paragraph No. 18, and therefore deny those
allegations.
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19.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 19, and therefore deny those allegations.
20.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 20, and therefore deny those allegations.
21.
Defendants deny, on information and belief, that Blue Flame set out to “provide the
lowest prices possible” for personal protective equipment. Defendants are without sufficient
information to form a belief as to the remaining allegations in Paragraph No. 21, and therefore
deny those allegations.
22.
Defendants admit, on information and belief, that Blue Flame’s principals had no
career experience in the medical supply industry prior to March 2020. Defendants further admit
that Michael Gula is or was associated with Mike Gula & Associates, the Gula Graham Group,
and Prime Advocacy. Defendants are without sufficient information to form a belief as to the
remainder of the allegations in Paragraph No. 22, and therefore deny those allegations.
23.
Defendants admit, on information and belief, that Blue Flame was incorporated in the
State of Delaware on March 23, 2020. Defendants are without sufficient information to form a
belief as to the remainder of the allegations in Paragraph No. 23, and therefore deny those
allegations.
24.
Denied. Defendants further state that, in fact, Blue Flame has admitted to the U.S.
House of Representatives’ Subcommittee on Oversight and Investigations for the Committee on
Energy and Commerce that it has routinely failed to “successfully fill[] orders for personal
protective equipment,” and that it received refund demands from the bulk of its customers.
25.
Defendants admit, on information and belief, that $609,161,000 was California’s
final purchase price for its order of 100 million N95 masks from Blue Flame, including tax and
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shipping. Defendants further admit, on information and belief, that Blue Flame required California
to pay $456,800,000 “up-front” and before the delivery of any masks. Defendants admit that
$456,800,000 is approximately 75% of $609,161,000. Defendants are without sufficient
information to form a belief as to the remaining allegations in Paragraph No. 25, and therefore
deny those allegations.
26.
Defendants admit that Blue Flame contacted Chain Bridge Bank, N.A., to open a new
business checking account for Blue Flame. Defendants otherwise deny the allegations in
Paragraph No. 26.
27.
Denied.
28.
Defendants admit that Chain Bridge Bank, N.A. is well known in the political
consulting and finance worlds and that is has served as the bank for numerous presidential and
congressional campaigns as well as for various party committees. Defendants are without
sufficient information to form a belief as to the remainder of the allegations in Paragraph No. 28,
and therefore deny those allegations.
29.
Defendants admit that on March 24, 2020, at 12:17 PM ET, Mr. Gula emailed Maria
Cole, “need wiring instructions to RECEIVE blue flame medical account,” and otherwise deny the
allegations in Paragraph No. 29.
30.
Denied.
31.
Defendants admit that Blue Flame spoke with Mr. Brough and Mr. Evinger on March
25, 2020, about Blue Flame’s business, its transaction with California, and its anticipated need to
send and receive wires. Defendants otherwise deny the allegations in Paragraph 31.
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32.
Defendants admit that, on March 25, 2020, at 11:19 AM ET, Mr. Gula emailed Ms.
Cole, “also need email ASAP when the wire hits from Cali,” and otherwise deny the allegations
in Paragraph No. 32.
33.
Admitted.
34.
Admitted.
35.
Defendants admit that, on March 25, 2020, at 3:03 PM ET, Ms. Cole sent Mr. Gula
wire instructions and a verification letter for Blue Flame’s account at the Bank, and otherwise deny
the allegations in Paragraph No. 35.
36.
Defendants admit that on March 25, 2020, at 4:11 PM ET, Ms. Cole asked Mr. Gula,
“[t]his wire you are waiting for, how much are you expecting and who is the originator?” Ms.
Cole further stated that “Our wire department would like to know how to track it and let you
know.” Ms. Cole also sought to confirm that the wire was “coming to your new account Blue
Flame Medical.” Defendants otherwise deny the allegations in Paragraph No. 36.
37.
Defendants admit that Mr. Gula responded one minute later that the expected amount
was “$450,000,0000 from the state of California (no t a typo)” and that “Blueflame medical”
would be the beneficiary.
38.
Admitted.
39.
Defendants admit that, during the March 25 call that commenced at approximately
4:47 PM ET, Mr. Gula provided certain information regarding Blue Flame’s business and
transaction with California and identified a China-based supplier of masks. Defendants further
admit that Mr. Gula stated that he expected Chain Bridge Bank, N.A., to receive, for Blue Flame’s
benefit, a $450 million wire transfer originated by California. Defendants otherwise deny the
remaining allegations in Paragraph No. 39.
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40.
Denied.
41.
Defendants admit that Mr. Gula expressed his desire to exit the world of politics.
Defendants otherwise deny the allegations in Paragraph No. 41.
42.
Denied.
43.
Defendants admit that Mr. Brough reviewed operational challenges with the Bank’s
receipt of a $450 million wire transfer, and otherwise deny the allegations in Paragraph No. 43.
44.
Admitted.
45.
Denied.
46.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 46, and therefore deny those allegations.
47.
Denied.
48.
Admitted.
49.
Defendants admit that Mr. Gula sent an email on March 25, at 6:18 PM ET, attaching
wire instructions to a California bank account for a Chinese company, and stating “no, we have
not sent the money to china but when we do this is where we are sending it.” Defendants otherwise
deny the allegations in Paragraph No. 49.
50.
Denied.
51.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 51, and therefore deny those allegations.
52.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 52, and therefore deny those allegations.
53.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 53, and therefore deny those allegations.
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54.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 54, and therefore deny those allegations.
55.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 55, and therefore deny those allegations.
56.
Denied.
57.
Defendants admit that Chain Bridge Bank, N.A., was in contact with Blue Flame
representatives on the morning of March 26. Defendants are without sufficient information to
form a belief as to the remaining allegations in Paragraph No. 57, and therefore deny those
allegations.
58.
Denied.
59.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 59, and therefore deny those allegations.
60.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 60, and therefore deny those allegations.
61.
Defendants are without sufficient information to form a belief as to Mr. Gula’s
actions upon receipt of the wire confirmation email as alleged in the last sentence of Paragraph
No. 61. Defendants otherwise admit the allegations of Paragraph No. 61.
62.
Defendants are without sufficient information to form a belief as to the alleged call
between Ms. Cole and Mr. Thomas, and therefore deny those allegations. Defendants otherwise
deny the allegations in Paragraph No. 62.
63.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 63, and therefore deny those allegations.
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64.
Defendants admit that at 12:11 PM ET, on March 26, 2020, Ms. Cole emailed the
Bank’s wire transfer request form to Blue Flame and stated that “[o]nce completed please send it
to me.” Defendants are without sufficient information to form a belief as to the other allegations
in Paragraph No. 64, and therefore deny those allegations.
65.
Defendants admit that at 12:14 PM ET, an attorney purportedly working with Blue
Flame sent Ms. Cole details for an outbound wire transfer including the amount, account name and
number, wire routing number, and receiving bank, which had an address in New Jersey.
Defendants otherwise deny the allegations in Paragraph No. 65.
66.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 66, and therefore deny those allegations.
67.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 67, and therefore deny those allegations.
68.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 68, and therefore deny those allegations.
69.
Admitted.
70.
Admitted.
71.
Defendants deny that some or all of Mr. Gula’s personal accounts or accounts related
to Mr. Gula’s other business ventures have not been closed. Defendants otherwise admit the
allegations in Paragraph No. 71.
72.
Denied.
73.
Defendants deny the first sentence of Paragraph No. 73. Defendants are without
sufficient information to form a belief about which “news reports and public statements” are
alleged, and therefore deny the second sentence of Paragraph No. 73. Defendants further state,
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however, that Mr. Brough and Mr. Evinger asked California officials if they knew Blue Flame was
a new company with a bank account opened just the day before by political lobbyists. Defendants
deny telling any California officials that Defendants were concerned Blue Flame’s transaction with
California “was fraudulent.”
74.
Denied.
75.
Denied. Defendants further incorporate by reference their answer to Paragraph No.
43.
76.
Defendants admit that Chain Bridge Bank, N.A.’s total deposits as of December 31,
2019, totaled approximately $762 million. Defendants otherwise deny the allegations in Paragraph
No. 76.
77.
Defendants are without sufficient information to form a belief as to what caused
California to cancel its wire transfer to Chain Bridge Bank, N.A., for the benefit of Blue Flame,
and therefore deny the allegations of Paragraph No. 77.
78.
Defendants admit that Chain Bridge Bank, N.A., agreed to California’s request to
cancel the payment order and return the funds. Defendants otherwise deny the allegations in
Paragraph No. 78.
79.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 79, and therefore deny those allegations.
80.
Denied.
81.
Defendants admit that Representative Katie Porter sent an April 8, 2020 letter to the
Principal Deputy Inspector General of the Department of Health and Human Services, and refer
the Court to that letter for its contents. Defendants further admit, on information and belief, that
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government law enforcement agencies have commenced investigations into Blue Flame and its
business. Defendants otherwise deny the allegations in Paragraph No. 81.
82.
Defendants admit, on information and belief, that news outlets began reporting in
May 2020 on California’s cancellation of its wire transfer to Blue Flame and Blue Flame’s failure
to complete its transaction with California and numerous other customers. Defendants otherwise
deny the allegations in Paragraph No. 82.
83.
Denied.
84.
Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 84, and therefore deny those allegations.
85.
Defendants admit, on information and belief, that press have reported an agreement
between California and BYD, a China-based manufacturer, to purchase N95 masks for
approximately $1.4 billion. Defendants otherwise deny the allegations in Paragraph No. 85.
COUNT I
VIOLATION OF FEDERAL RESERVE REGULATION J
AND SECTION 4A-404(a) OF UNIFORM COMMERCIAL CODE
86.
Answering Paragraph No. 86, Defendants repeat and reallege their answers to
Paragraph Nos. 1 through 85.
87.
Admitted.
88.
Defendants state that the allegations in Paragraph No. 88 contain legal conclusions
to which Defendants are not obligated to respond. To the extent a response is required, Defendants
deny these allegations.
89.
Defendants admit that California’s bank, JPMorgan, sent a payment order to Chain
Bridge Bank, N.A., via the Fedwire Funds Service for the benefit of Blue Flame. Defendants are
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without sufficient information to form a belief as to the remaining allegations in Paragraph No. 89,
and therefore deny those allegations.
90.
Defendants deny that Chain Bridge Bank, N.A., confirmed “the availability of the
funds for Blue Flame’s use” and that “the Bank’s online account access portal” “show[ed] the
funds as available in Blue Flame’s account.” Defendants are without sufficient information to
form a belief as to the remaining allegations in Paragraph No. 90, and therefore deny those
allegations.
91.
Denied.
92.
Denied.
93.
Denied.
94.
Denied.
95.
Denied.
96.
Denied.
97.
Denied.
COUNT II
VIOLATION OF FEDERAL RESERVE REGULATION J
AND SECTION 4A-204 OF UNIFORM COMMERCIAL CODE
98.
Answering Paragraph No. 98, Defendants repeat and reallege their answers to
Paragraph Nos. 1 through 97.
99.
Admitted.
100. Defendants state that the allegations in Paragraph No. 100 contain legal conclusions
to which Defendants are not obligated to respond. To the extent a response is required, Defendants
deny these allegations.
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101. Defendants admit that California’s bank, JPMorgan, sent a payment order to Chain
Bridge Bank, N.A., via the Fedwire Funds Service for the benefit of Blue Flame. Defendants are
without sufficient information to form a belief as to the remaining allegations in Paragraph No.
101, and therefore deny those allegations.
102. Denied.
103. Defendants are without sufficient information to form a belief as to the allegations in
Paragraph No. 103, and therefore deny those allegations.
104. Denied.
105. Denied.
106. Defendants admit that they contacted California government officials, but otherwise
deny the allegations in Paragraph 106.
107. Denied.
108. Denied.
109. Denied.
110. Denied.
111. Denied. Defendants further state that funds were returned to JPMorgan, for the
benefit of the California State Treasurer’s Office, as a result of JPMorgan’s written cancellation
of its wire transfer transmitted via the Fedwire Funds Service.
112. Denied.
COUNT III
CONVERSION
113. – 124.
By Order of the Court dated September 8, 2020, Count III has been
dismissed and therefore no response to Paragraph Nos. 113 through 124 is required.
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COUNT IV
TORTIOUS INTERFERENCE WITH CONTRACT
125. Answering Paragraph No. 125, Defendants repeat and reallege their answers to
Paragraph Nos. 1 through 124.
126. Defendants deny that they “improper[ly] interfere[d]” with any contractual
relationship between Blue Flame and California, or that any such contractual relationship “would
have provided substantial future economic benefit to Blue Flame.” Defendants state that they are
without sufficient information to form a belief as to the remaining allegations in Paragraph No.
126, and therefore deny those allegations.
127. Defendants state that they are without sufficient information to form a belief as to the
allegations in Paragraph No. 127, and therefore deny those allegations.
128. Defendants admit that they were aware of a purported contractual relationship
between Blue Flame and California on March 26, 2020, when they contacted California
government officials, but otherwise deny the allegations in Paragraph No. 128.
129. Defendants state that the allegations in Paragraph No. 129 contain legal conclusions
to which Defendants are not obligated to respond. To the extent a response is required, Defendants
deny these allegations.
130. Denied.
131. Denied.
132. Denied.
133. Denied.
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COUNT V
TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY
134. Answering Paragraph No. 134, Defendants repeat and reallege their answers to
Paragraph Nos. 1 through 133.
135. Defendants state that they are without sufficient information to form a belief as to the
nature of any “valid business expectancy” that Blue Flame had with California, and therefore deny
that allegation. Defendants otherwise deny the remaining allegations in Paragraph No. 135.
136. Defendants state that they are without sufficient information to form a belief as to the
allegations in Paragraph No. 136, and therefore deny those allegations.
137. Denied.
138. Denied.
139. Denied.
140. Defendants deny the allegations in the first sentence of Paragraph No. 140.
Defendants state that they are without sufficient information to form a belief as to the allegations
in the second sentence of Paragraph No. 140, and therefore deny those allegations.
141. Denied.
142. Denied.
COUNT VI
FRAUD
143. – 151. By Order of the Court dated September 8, 2020, Count VI has been dismissed
and therefore no response to Paragraph Nos. 143 through 151 is required.
COUNT VII
CONSTRUCTIVE FRAUD
152. – 159. By Order of the Court dated September 8, 2020, Count VII has been dismissed
and therefore no response to Paragraph Nos. 152 through 159 is required.
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COUNT VIII
NEGLIGENCE
160. – 164. By Order of the Court dated September 8, 2020, Count VIII has been
dismissed and therefore no response to Paragraph Nos. 160 through 164 is required.
COUNT IX
DEFAMATION
165. Answering Paragraph No. 165, Defendants repeat and reallege their answers to
Paragraph Nos. 1 through 164.
166. Defendants admit that Brough and Evinger communicated with the California State
Treasurer’s Office, but otherwise deny the allegations in Paragraph No. 166.
167. Denied.
168. Denied.
COUNT X
BREACH OF CONTRACT
169. – 179.
By Order of the Court dated September 8, 2020, Count X has been
dismissed and therefore no response to Paragraph Nos. 169 through 179 is required.
PRAYER FOR RELIEF
Defendants deny the allegations in the “Prayer for Relief” section, which begins on page
35 of the Complaint. Defendants aver that Plaintiff is not entitled to any relief whatsoever.
AFFIRMATIVE DEFENSES
FIRST AFFIRMATIVE DEFENSE
(Breach of the Obligation of Good Faith)
Plaintiff breached its obligation of good faith in the performance and enforcement of its
contracts and duties, including under Uniform Commercial Code (UCC) § 1-304, by inducing
California to originate a large wire transfer purportedly as an upfront deposit for N95 masks that
Blue Flame lacked either the intent or capacity to deliver, making material misrepresentations to
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Chain Bridge Bank, N.A., in order to induce Chain Bridge Bank, N.A., to open an account to
receive such a wire transfer, failing to provide Chain Bridge Bank, N.A., requested information
and documents prior to any acceptance of the wire transfer, and engaging in the bad-faith
enforcement of alleged duties against Chain Bridge Bank, N.A., in a commercially unreasonable
manner.
SECOND AFFIRMATIVE DEFENSE
(Cancellation)
Chain Bridge Bank, N.A.’s acceptance of JPMorgan Chase’s payment order, on behalf of
California as originator, was nullified by the cancellation of that payment order pursuant to UCC
§ 4-211.
THIRD AFFIRMATIVE DEFENSE
(Fraudulent Inducement)
Plaintiff fraudulently induced Defendant Chain Bridge Bank, N.A., to enter into an
Account Agreement with Plaintiff that included wire-transfer services by knowingly or recklessly
making one or more material misrepresentations concerning the nature of Blue Flame’s business
and the size and frequency of the wire transfers that it expected to send and receive. Specifically,
on or about March 25, 2020, Plaintiff’s principal, Michael Gula, falsely stated to one or more Bank
employees, at the Bank and during Plaintiff’s account-opening process, that Blue Flame expected
to receive only a total of $75 million in domestic wires, and to send only a total of $25 million in
domestic wires, on average in any given month. Gula made that statement, on Plaintiff’s behalf
and within the scope of his agency for Plaintiff, even while knowing or recklessly disregarding
that Blue Flame was then arranging to receive a single incoming domestic wire that exceeded $450
million, and intending to arrange outgoing wires totaling a significant portion of that sum. On
information and belief, Gula knowingly or recklessly misrepresented Blue Flame’s expected wire
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activity in order not to raise Defendants’ suspicions until after Plaintiff’s account had been opened
and its wiring instructions had been provided. Defendants reasonably relied on Plaintiff’s
misrepresentations, made through Mr. Gula, leading to any injuries sustained, and would not have
entered into the Account Agreement or otherwise provided wire-transfer services to Blue Flame
but for those fraudulent misrepresentations.
FOURTH AFFIRMATIVE DEFENSE
(Equitable Estoppel)
Plaintiff is equitably estopped from pursuing the relief it seeks because Plaintiff, through
its principal Michael Gula, knowingly made misrepresentations to Defendants concerning the
nature of Blue Flame’s business and the size and frequency of the wire transfers that it expected
to send and receive. Defendants, who did not know the truth, justifiably relied on those
misrepresentations and acted on the basis of them, leading to any injuries sustained.
FIFTH AFFIRMATIVE DEFENSE
(Comparative Fault)
Plaintiff’s alleged damages, if any, were caused by the actions or inactions of non-party
persons or entities for which Defendants had no legal duty, contractual duty, responsibility,
control, or right of control. On information and belief, JPMorgan Chase and the State of California
caused or contributed to Plaintiff’s alleged damages, including by cancelling their respective
payment orders, receiving funds returned by Chain Bridge Bank, N.A., on account of that
cancellation, and, in California’s case, breaching its contract with Plaintiff. Any award made in
favor of Plaintiff must be reduced by an amount equal to the percentage of fault of JPMorgan
Chase and/or the State of California in causing or contributing to the damages as alleged in the
complaint.
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SIXTH AFFIRMATIVE DEFENSE
(Consent, Acquiescence, or Ratification)
Plaintiff, through its principal Michael Gula, consented to, acquiesced in, or ratified Chain
Bridge Bank, N.A.’s accommodation of JP Morgan Chase’s cancellation of California’s wire
transfer and return of funds to the State of California. Prior to accommodating JP Morgan Chase’s
cancellation request and returning to it the wired funds, Defendants informed Gula of the
cancellation request and Gula knowingly and voluntarily did not object to the Bank’s stated intent
to honor the cancellation request.
SEVENTH AFFIRMATIVE DEFENSE
(Preemption)
Plaintiff’s tortious-interference and defamation claims are preempted in whole or in part
by federal law, including because disputes concerning the rights and obligations of parties to a
funds transfer are governed by the provisions of Federal Reserve Regulation J, Subpart B.
EIGHTH AFFIRMATIVE DEFENSE
(Funds Availability Agreement)
Plaintiff expressly agreed to a funds availability policy stating that no funds that Chain
Bridge Bank, N.A., received by wire transfer for Plaintiff’s benefit would be made available to
Plaintiff for use until the following business day.
NINTH AFFIRMATIVE DEFENSE
(Qualified Privilege)
Plaintiff’s defamation claim is barred because Defendants’ statements were made without
malice to the State of California, an actor with interests or duties in the subject of the
communication. To the extent that Plaintiff’s tortious-interference claims are based on the same
statements, they are likewise barred by Defendants’ qualified privilege.
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TENTH AFFIRMATIVE DEFENSE
(Failure to Mitigate)
Plaintiff failed to take reasonable steps to minimize or prevent the damages it claims to
have suffered. Upon information and belief, Blue Flame took no action following California’s
cancellation of its wire transfer to communicate with California, try to alleviate California’s
concerns, make alternative arrangements to receive any renewed wire transfer from California, or
enforce any contractual rights it has against California.
ELEVENTH AFFIRMATIVE DEFENSE
(Limitations on Damages, UCC 4A-404(a))
The damages claimed by Plaintiff are limited, in whole or in part, by UCC § 4A-404(a).
Plaintiff fails to state a claim for damages, including consequential damages, because Chain Bridge
Bank, N.A., did not refuse to pay Plaintiff after demand for payment by Plaintiff and receipt of
notice of particular circumstances giving rise to consequential damages as a result of nonpayment.
Furthermore, any nonpayment to Plaintiff was attributable to reasonable doubt concerning Blue
Flame’s right to payment under the circumstances. Any award made in favor of Plaintiff must be
reduced by an amount necessary to prevent award of consequential or additional damages.
TWELFTH AFFIRMATIVE DEFENSE
(Unjust Enrichment or Windfall)
Any award in favor of Plaintiff would result in its unjust enrichment and a windfall.
California originated the cancelled and returned wire transfer as consideration for contractual
obligations that Plaintiff was required to perform under an alleged contract. Plaintiff, upon
information and belief, never performed any of its contractual obligations and is under no current
obligations that would entitle it to the proceeds of the contract’s consideration.
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THIRTEENTH AFFIRMATIVE DEFENSE
(Setoff/Recoupment)
Plaintiff’s claims are barred, in whole or in part, by the doctrines of setoff or recoupment.
In the event that Defendants are liable to Plaintiff, then Defendants would be entitled by contract
to offsets for amounts that they paid in connection with disputes involving Blue Flame’s account.
COUNTERCLAIMS
Defendant/Counterclaim-Plaintiff Chain Bridge Bank, N.A., through undersigned counsel,
as and for its Counterclaims, alleges as follows:
THE PARTIES
1.
Counterclaim-Plaintiff Chain Bridge Bank, N.A. is a national banking association
organized under the laws of the United States with a principal place of business at 1445A Laughlin
Avenue, McLean, Virginia, 22011. It is the sole subsidiary of Chain Bridge Bancorp, Inc., a bank
holding company registered with the Federal Reserve and incorporated under the laws of the
Commonwealth of Virginia with the same principal place of business as Chain Bridge Bank, N.A.
2.
Upon information and belief, Counterclaim-Defendant Blue Flame Medical LLC
(“Blue Flame”) is a limited liability company formed under the laws of the state of Delaware, with
a principal place of business at 150 South Los Robles Avenue, Suite 675, Pasadena, California,
91001.
FACTUAL ALLEGATIONS
A.
Blue Flame’s Account Agreement
3.
On or about March 25, 2020, Chain Bridge Bank, N.A., entered into a contract with
Blue Flame, acting by and through one or more of its principals, Michael C. Gula and John S.
Thomas, in connection with the opening of a commercial banking account for Blue Flame. The
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parties’ contract was memorialized in an Account Agreement, a copy of which is attached hereto
as Exhibit A.
4.
The Account Agreement incorporated by reference a series of additional documents
governing the details of the parties’ contractual relationship. Among those additional documents
was the Terms and Conditions for Blue Flame’s account, a copy of which is attached hereto as
Exhibit B. In the Account Agreement, Mr. Gula, on behalf of Blue Flame, acknowledged his
receipt of those Terms and Conditions.
5.
Section 2 of the Terms and Conditions states that “this document . . . is a contract
that establishes rules which control [Blue Flame’s] account(s) with [Chain Bridge Bank, N.A.].”
Section 2 further states that, if Blue Flame “open[ed]” the account, it “agree[d] to these rules.”
6.
In Section 3 of the Terms and Conditions, Blue Flame agreed that it would be
“liable for [Chain Bridge Bank, N.A.’s] costs as well as for [Chain Bridge Bank, N.A.’s]
reasonable attorney’s fees, to the extent permitted by law, whether incurred as a result of collection
or in any other dispute involving [Blue Flame’s] account.” Blue Flame further agreed that this
obligation would be triggered by “any action that [Blue Flame] or a third party takes regarding the
account that causes [Chain Bridge Bank, N.A.], in good faith, to seek the advice of an attorney.”
B.
The Cancellation Of California’s Wire Transfer
7.
On March 26, 2020, at approximately 11:23 AM eastern time (“ET”), a
representative from the State Treasurer’s Office of the State of California initiated a wire transfer
in the amount of $456,888,600 for Blue Flame’s benefit by delivering an instruction to California’s
Bank, JPMorgan Chase Co. (“JPMorgan”). At 11:55 AM ET, Chain Bridge Bank, N.A., received
a payment order from JPMorgan in connection with this wire transfer.
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8.
Upon information and belief, the wire transfer of $456,888,600 was intended by
California as a down payment for a purchase of 100 million N95 masks from Blue Flame. Neither
Gula nor Thomas, however, had any experience in the medical supply industry. To the contrary,
both had previously worked as political operatives. In addition, on information and belief, Blue
Flame in fact had no ability, then or ever, to procure and provide the 100 million N95 masks that
it had promised to California. Blue Flame nevertheless falsely represented to California that it
could provide them within a matter of days.
9.
Upon information and belief, California initiated the wire transfer directing
payment to Blue Flame’s account at Chain Bridge Bank, N.A., based on wire instructions that Blue
Flame had provided to California.
10.
Within hours of Chain Bridge Bank, N.A.’s receipt of the payment order for
California’s wire transfer, JPMorgan notified Chain Bridge Bank, N.A., that JPMorgan and
California would be canceling that payment order by requesting return of the $456,888,600.
11.
At 2:05 PM ET, JPMorgan sent a message to Chain Bridge Bank, N.A., through
the Fedwire funds transfer system operated by the United States Federal Reserve Banks in which
JPMorgan requested cancellation of the payment order.
12.
At 3:21 PM ET, Chain Bridge Bank, N.A., honored JPMorgan and California’s
cancellation request by returning $456,888,600 to JPMorgan by wire transfer.
13.
At 3:36 PM ET, Chain Bridge Bank, N.A., notified Blue Flame that Blue Flame’s
account had been voided.
C.
Blue Flame Is Liable For Chain Bridge Bank, N.A.’s Costs And Reasonable
Attorney’s Fees In This Litigation
14.
On June 12, 2020, Blue Flame filed this lawsuit against Chain Bridge Bank, N.A.,
and two of its officers, John J. Brough, and David M. Evinger. Blue Flame’s complaint seeks to
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impose liability based on Chain Bridge Bank, N.A.’s decision to honor JPMorgan and California’s
request to cancel the wire transfer and based on interactions between Messrs. Brough and Evinger
and California government officials in connection with the wire transfer.
15.
Chain Bridge Bank, N.A., has incurred and will continue to incur substantial costs
and attorney’s fees in defending against Blue Flame’s claims in this action, both on its own behalf
and on behalf of its officers, Messrs. Brough and Evinger.
16.
Under Section 3 of the Terms and Conditions, Blue Flame is liable to Chain Bridge
Bank, N.A., for the costs and attorney’s fees incurred by Chain Bridge Bank, N.A., in the defense
of this case. This lawsuit is a “dispute involving [Blue Flame’s] account” as to which Blue Flame
agreed to be “liable for [Chain Bridge Bank, N.A.’s] costs as well as for [Chain Bridge Bank,
N.A.’s] reasonable attorney’s fees.” The fees incurred by Chain Bridge Bank, N.A., are
attributable to an “action that [Blue Flame] . . . [took] regarding [its] account” that has “cause[d]
[Chain Bridge Bank, N.A.], in good faith, to seek the advice of an attorney”—namely, Blue
Flame’s inducement of California officials to initiate the March 26, 2020 wire transfer.
17.
Blue Flame is liable for costs and reasonable attorney’s fees incurred by Chain
Bridge Bank, N.A., notwithstanding the voiding of the Account Agreement. The events giving
rise to Blue Flame’s claims in this case occurred while the Account Agreement was in force. In
addition, Blue Flame’s inducement of California officials to initiate a wire transfer to Chain Bridge
Bank, N.A., for the benefit of Blue Flame—the “action that [Blue Flame] . . . [took] regarding [its]
account” that has given rise to the costs and attorney’s fees in this litigation—unquestionably
occurred before the Account Agreement was voided.
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CAUSES OF ACTION
COUNTERCLAIM I
(Attorney’s Fees Pursuant to the Account Agreement)
18.
Chain Bridge Bank, N.A., realleges and incorporates by reference each allegation
contained in the preceding paragraphs as if fully set forth herein.
19.
Under Section 3 of the Terms and Conditions governing Blue Flame’s account,
Blue Flame is liable to Chain Bridge Bank, N.A., for all costs and attorney’s fees reasonably
incurred by Chain Bridge Bank, N.A., in the defense of this action.
20.
Accordingly, Chain Bridge Bank, N.A., is entitled to an award of money damages,
in an amount to be determined at trial, for all costs and attorney’s fees reasonably incurred in the
defense of this litigation.
COUNTERCLAIM II
(Declaratory Judgment Pursuant to 28 U.S.C. § 2201)
21.
Chain Bridge Bank, N.A., realleges and incorporates by reference each allegation
contained in the preceding paragraphs as if fully set forth herein.
22.
A current dispute exists between the parties concerning whether Section 3 of the
Terms and Conditions, as incorporated in Blue Flame’s Account Agreement, obligates Blue Flame
to pay Chain Bridge Bank, N.A., all costs and reasonable attorney’s fees incurred by Chain Bridge
Bank, N.A., in the defense of this litigation.
23.
Under Section 3 of the Terms and Conditions governing Blue Flame’s account,
Blue Flame is liable to Chain Bridge Bank, N.A., for all attorney’s fees reasonably incurred by
Chain Bridge Bank, N.A., in the defense of this litigation.
24.
Accordingly, Chain Bridge Bank, N.A., is entitled to a declaration that Blue Flame
is obligated to pay all costs and reasonable attorney’s fees associated with the defense of this
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litigation incurred to date and through the litigation’s termination, including through any and all
appeals.
PRAYER FOR RELIEF
WHEREFORE, Chain Bridge Bank, N.A., prays for judgment as follows:
(a)
An award of all reasonable attorney’s fees and costs incurred by Chain Bridge
Bank, N.A., in defending against the claims brought by Blue Flame in this action;
(b)
An order declaring that Blue Flame is obligated to pay Chain Bridge Bank, N.A.,
for all costs and reasonable attorney’s fees associated with the defense of this litigation incurred
to date and through the termination of this litigation, including through any and all appeals; and
(c)
Any other relief permitted by law that the Court deems appropriate.
JURY DEMAND
Chain Bridge Bank, N.A., hereby demands trial of this matter by a jury for all counts on
which trial by jury is available.
Date: September 29, 2020
Respectfully submitted,
/s/ Donald Burke
Gary A. Orseck (admitted pro hac vice)
Matthew M. Madden (admitted pro hac vice)
Donald Burke (VA Bar No. 76550)
ROBBINS, RUSSELL, ENGLERT, ORSECK,
UNTEREINER & SAUBER LLP
2000 K Street, N.W., 4th Floor
Washington, D.C. 20006
Tel: (202) 775-4500
Fax: (202) 775-4510
dburke@robbinsrussell.com
Counsel for Defendants
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CERTIFICATE OF SERVICE
I hereby certify that on September 29, 2020, I will electronically file the foregoing with the
Clerk of Court using the CM/ECF system, which will then send a notification of such filing to the
following:
Peter H. White, Esq.
SCHULTE ROTH & ZABEL LLP
901 Fifteenth Street, NW, Suite 800
Washington, DC 20005
Tel: 202-729-7476
Fax: 202-730-4520
peter.white@srz.com
Counsel for Blue Flame Medical LLC
/s/ Donald Burke
Donald Burke (VA Bar No. 76550)
ROBBINS, RUSSELL, ENGLERT,
ORSECK,
UNTEREINER & SAUBER LLP
2000 K Street, N.W., 4th Floor
Washington, D.C. 20006
Tel: (202) 775-4500
Fax: (202) 775-4510
dburke@robbinsrussell.com
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