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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
THIRD-PARTY
COMPLAINT
Jury Trial Demanded
CHAIN BRIDGE BANK, N.A,
Third-Party Plaintiff,
v.
JPMORGAN CHASE BANK, N.A.,
Third-Party Defendant.
CHAIN BRIDGE BANK, N.A.’S THIRD-PARTY COMPLAINT
AGAINST JPMORGAN CHASE BANK, N.A.
Defendant/Third-Party Plaintiff Chain Bridge Bank, N.A., for its Third-Party Complaint
against Third-Party Defendant JPMorgan Chase Bank, N.A. (“JPMorgan”), hereby alleges as
follows:
PARTIES
1.
Defendant/Third-Party 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, 22101. It is the sole subsidiary of Chain Bridge
Bancorp, Inc., a bank holding company registered with the Federal Reserve and incorporated under
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the laws of the Commonwealth of Virginia with the same principal place of business as Chain
Bridge Bank, N.A.
Third-Party Defendant JPMorgan is a national banking association organized under the
laws of the United States with its principal place of business in Columbus, Ohio. It is a wholly
owned subsidiary of JPMorgan Chase & Co., a registered bank holding company that has elected
to be treated as a financial holding company, which is incorporated under the laws of Delaware
and maintains its principal place of business at 383 Madison Avenue, New York, New York,
10017.
JURISDICTION AND VENUE
2.
The Court has subject matter jurisdiction over Chain Bridge Bank N.A.’s claim
against JPMorgan for indemnification under Federal Reserve Board Regulation J because that
claim arises under federal law. See 28 U.S.C. § 1331. The Court has ancillary jurisdiction over
Chain Bridge Bank N.A.’s claim against JPMorgan for unjust enrichment. See 28 U.S.C.
§ 1367(a).
3.
The Court has personal jurisdiction over JPMorgan because, as described below,
Chain Bridge Bank, N.A.’s third-party claims arise from business that JPMorgan has transacted in
the Commonwealth of Virginia. See Va. Code § 8.01-328.1(A)(1).
4.
Venue is proper in this Court with respect to Chain Bridge Bank N.A.’s third-party
claims against JPMorgan because venue in this Court is proper with respect to the original action.
See, e.g., One Beacon Ins. Co. v. JNB Storage Trailer Rental Corp., 312 F. Supp. 2d 824, 828-29
(E.D. Va. 2004).
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FACTUAL ALLEGATIONS
A.
California’s Wire Transfer To Blue Flame
5.
On or about March 25, 2020, Plaintiff Blue Flame Medical LLC (“Blue Flame”)
opened a commercial banking account with Chain Bridge Bank, N.A. Blue Flame had been
incorporated in Delaware just two days before, on March 23, 2020.
6.
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.
7.
California’s wire transfer was sent over the Federal Reserve’s Fedwire Funds
Service. For that reason, the wire transfer is governed by Federal Reserve Board regulations and
guidance, including Subpart B of the Federal Reserve Board’s Regulation J. 12 C.F.R. §§ 210.25-
210.32. Subpart B of Regulation J incorporates Article 4A of the Uniform Commercial Code
(UCC),1 and Fedwire transfers under Article 4A are a form of “funds transfer,” or a series of
transactions by which an “originator” causes a “beneficiary” to receive payment through
instructions to one or more banks. UCC § 4A-104(a).2 Those instructions, which form the
individual steps of a funds transfer, are known as “payment orders.” Id. § 4A-103(a)(1).
8.
At 11:55 AM ET, Chain Bridge Bank, N.A. received a payment order from
JPMorgan in connection with California’s wire transfer. A copy of that payment order is attached
hereto as Exhibit A.
1 12 C.F.R. § 210.25(b)(1); 12 C.F.R. pt. 210, subpt. B, app. B; see also Donmar Enters., Inc.
v. Southern Nat’l Bank of N.C., 64 F.3d 944, 948 (4th Cir. 1995).
2 Unless otherwise indicated, all references in this complaint to provisions of Article 4A of the
UCC are to the version of that law incorporated by reference in Subpart B of Regulation J and
reprinted as an appendix to Subpart B.
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9.
Upon information and belief, California’s 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. But neither of Blue Flame’s principals, Mike Gula and John Thomas, 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.
B.
The Cancellation Of California’s Wire Transfer
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 service message to Chain Bridge Bank, N.A.
through the Federal Reserve’s Fedwire funds transfer system in which JPMorgan requested
cancellation of the payment order. A copy of JPMorgan’s cancellation message is attached hereto
as Exhibit B.
12.
At 3:21 PM ET, Chain Bridge Bank, N.A. honored the cancellation request by
returning $456,888,600 to JPMorgan by wire transfer. A copy of the payment order sent through
the Fedwire system to effectuate the return of the $456,888,600 to JPMorgan is attached hereto as
Exhibit C.
C.
This Litigation
13.
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
impose liability based on Chain Bridge Bank, N.A.’s decision to honor JPMorgan and California’s
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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.
14.
Among other things, Blue Flame’s complaint alleges that Chain Bridge Bank, N.A.
remains liable to pay Blue Flame on the payment order for California’s wire transfer because, Blue
Flame contends, Chain Bridge Bank, N.A. accepted that payment order and it could not be validly
cancelled under the circumstances.
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.
COUNT I
INDEMNIFICATION UNDER REGULATION J
16.
Chain Bridge Bank, N.A. realleges and incorporates by reference each allegation
contained in the preceding paragraphs as if fully set forth herein.
17.
Under UCC § 4A-211(f), “if the receiving bank, after accepting a payment order,
agrees to cancellation or amendment of the order by the sender . . . , the sender, whether or not
cancellation or amendment is effective, is liable to the [receiving] bank for any loss and expense,
including reasonable attorney’s fees, incurred by the [receiving] bank as a result of the cancellation
or amendment or attempted cancellation or amendment.”
18.
As the UCC’s official commentary explains, Section 4A-211(f) ensures that, “[i]f
a receiving bank agrees to cancellation” of a payment order, “it is automatically entitled to
indemnification from the sender.” UCC § 4A-211(f). The indemnification provision reflects the
commercial reality that, “[i]f the receiving bank agrees to cancellation, it is doing so as an
accommodation to the sender and it should not incur a risk of loss in doing so.” Id.
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19.
As described above, JPMorgan requested cancellation of California’s wire transfer,
and Chain Bridge Bank, N.A. honored that cancellation request by returning the $456,888,600 to
JPMorgan by wire transfer.
20.
Accordingly, under UCC § 4A-211(f) JPMorgan is liable to Chain Bridge Bank,
N.A. for “any loss and expenses, including reasonable attorney’s fees, incurred . . . as a result of
the cancellation” of JPMorgan’s payment order. This includes the costs and attorney’s fees Chain
Bridge Bank, N.A. has incurred and will continue to incur as a result of the cancellation of
JPMorgan’s payment order, both on its own behalf and on behalf of its officers, Messrs. Brough
and Evinger. It also includes any judgment entered against Chain Bridge Bank, N.A. on Blue
Flame’s claims in this case and any amounts for which Chain Bridge Bank, N.A. becomes liable
to Messrs. Brough and Evinger as a consequence of any judgment entered against them on Blue
Flame’s claims in this case for conduct occurring within the scope of their employment.
COUNT II
DECLARATORY JUDGMENT
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 regarding whether JPMorgan is liable
to indemnify Chain Bridge Bank, N.A., under UCC § 4A-211(f), for any loss and expense incurred
by Chain Bridge Bank, N.A. as a result of JPMorgan’s cancellation of the payment order for
California’s wire transfer.
23.
As described above, JPMorgan requested cancellation of California’s wire transfer,
and Chain Bridge Bank, N.A. honored that cancellation request by returning the $456,888,600 to
JPMorgan by wire transfer.
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24.
Accordingly, under UCC § 4A-211(f) JPMorgan is liable to Chain Bridge Bank,
N.A. for “any loss and expenses, including reasonable attorney’s fees, incurred . . . as a result of
the cancellation” of the payment order for California’s wire transfer,
25.
Accordingly, Chain Bridge Bank, N.A. is entitled to a declaratory judgment that
JPMorgan is liable to it for the costs and attorney’s fees Chain Bridge Bank, N.A. has incurred and
will continue to incur as a result of the cancellation of JPMorgan’s payment order, both on its own
behalf and on behalf of its officers, Messrs. Brough and Evinger, as well as any judgment entered
against Chain Bridge Bank, N.A. on Blue Flame’s claims in this case and any amounts for which
Chain Bridge Bank, N.A. becomes liable to Messrs. Brough and Evinger as a consequence of any
judgment entered against them on Blue Flame’s claims in this case for conduct occurring within
the scope of their employment.
COUNT III
UNJUST ENRICHMENT
26.
Chain Bridge Bank, N.A. realleges and incorporates by reference each allegation
contained in the preceding paragraphs as if fully set forth herein.
27.
As described above, Chain Bridge Bank, N.A. returned $456,888,600 to JPMorgan
by wire transfer in response to JPMorgan’s request to cancel California’s wire transfer.
28.
Chain Bridge Bank, N.A. agreed to return the funds to JPMorgan on the
understanding that California’s wire transfer had been cancelled, with the result that Chain Bridge
Bank, N.A. had no obligation to make payment to Blue Flame and JPMorgan had a legal
entitlement to return of the funds, or that at a minimum JPMorgan would be required to indemnify
Chain Bridge Bank, N.A. under UCC § 4A-211(f) for any loss resulting from the cancellation.
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29.
Blue Flame has nonetheless alleged in this litigation that Chain Bridge Bank, N.A.
remains liable to Blue Flame on the payment order for California’s wire transfer because that
payment order could not be validly cancelled under the circumstances.
30.
If Blue Flame were to prevail on its claims against Chain Bridge Bank, N.A., and
if JPMorgan were not required to indemnify Chain Bridge Bank, N.A. under UCC § 4A-211(f) (as
alleged in Counts I and II), then JPMorgan would be unjustly enriched at the expense of Chain
Bridge Bank, N.A. In that scenario, Chain Bridge Bank, N.A. would have transferred
$456,888,600 to JPMorgan despite not having any legal obligation to do so, and under the
circumstances it would be inequitable for JPMorgan to retain that benefit.
31.
Accordingly, to prevent such unjust enrichment, Chain Bridge Bank, N.A. is
entitled to an award of damages against JPMorgan in the amount of any judgment entered in favor
of Blue Flame on its claims against Chain Bridge Bank, N.A.
PRAYER FOR RELIEF
WHEREFORE, based upon the foregoing allegations and claims, Chain Bridge Bank, N.A.
demands judgment in its favor and against Third-Party Defendant JPMorgan as follows:
(a)
an award of money damages for all losses and expenses incurred as a result of Blue
Flame’s lawsuit, including the amount of any judgment entered in favor of Blue Flame against
Chain Bridge Bank, N.A., as well as Chain Bridge Bank, N.A.’s attorney’s fees and costs, both on
its own behalf and on behalf of its officers, Messrs. Brough and Evinger, and any amounts for
which Chain Bridge Bank, N.A. becomes liable to Messrs. Brough and Evinger as a consequence
of any judgment entered against them on Blue Flame’s claims in this case for conduct occurring
within the scope of their employment;
(b)
an order declaring that JPMorgan is liable to indemnify Chain Bridge Bank, N.A.,
under UCC § 4A-211(f), for any loss and expense incurred by Chain Bridge Bank, N.A. as a result
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of JPMorgan’s cancellation of the payment order for California’s wire transfer, including the
amount of any judgment entered in favor of Blue Flame against Chain Bridge Bank, N.A., as well
as Chain Bridge Bank, N.A.’s attorney’s fees and costs, both on its own behalf and on behalf of
its officers, Messrs. Brough and Evinger, and any amounts for which Chain Bridge Bank, N.A.
becomes liable to Messrs. Brough and Evinger as a consequence of any judgment entered against
them on Blue Flame’s claims in this case for conduct occurring within the scope of their
employment; and
(c)
any such further relief as this Court deems just and proper.
TRIAL BY JURY IS DEMANDED.
Date: October 13, 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 Defendant/Third-Party
Plaintiff Chain Bridge Bank, N.A.
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CERTIFICATE OF SERVICE
I hereby certify that on October 13, 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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