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Expert Report of Thomas C. Baxter, Jr. on Behalf of Third-Party Defendant JPMorgan Chase Bank, N.A. (Exhibit 4, Document 145-5)

Date
2021-05-20

Summary

Exhibit 4, filed May 20, 2021 as Document 145-5 in Blue Flame Medical LLC v. Chain Bridge Bank, N.A., John J. Brough, and David M. Evinger, Civil Action No. 1:20-cv-00658 (LMB/IDD), in the U.S. District Court for the Eastern District of Virginia, with a third-party claim by Chain Bridge Bank against JPMorgan Chase Bank, N.A. The three-page exhibit consists of a slip sheet, the cover page of the expert report of Thomas C. Baxter, Jr. on behalf of JPMorgan Chase Bank, N.A., dated March 12, 2021, and one page of that report marked confidential under protective order. That page, covering paragraphs 46 and 47, states the author's view that Chain Bridge asked JPMC to send a reversal request for the $457 million Wire Transfer and that JPMC accommodated the request. It also discusses Section 4A-211 and Chain Bridge's decision to close the Blue Flame account.

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Cite this document

“Expert Report of Thomas C. Baxter, Jr. on Behalf of Third-Party Defendant JPMorgan Chase Bank, N.A. (Exhibit 4, Document 145-5).” Original at ecf.vaed.uscourts.gov, dated 2021-05-20. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-05-20-plaintiff-v-chain-bridge-bank-n-a-2099fcda-1/, SHA-256 2099fcda341517b71d2ddfe12ae3b42ce8c563bb4055f48b98e53fe746236af9.

Full text

Case 1:20-cv-00658-LMB-IDD   Document 145-5   Filed 05/20/21   Page 1 of 3 PageID#
                                    3549




                   EXHIBIT 4
Case 1:20-cv-00658-LMB-IDDDocument 145-5 Filed 05/20/21 Page 2 of 3 PageID#
                                 3550
                 CONFIDENTIAL UNDER PROTECTIVE ORDER


                   IN THE UNITED STATES DISTRICT COURT
                  FOR THE EASTERN DISTRICT OF VIRGINIA
                             (Alexandria Division)


  BLUE FLAME MEDICAL LLC,

                          Plaintiff,
                                            Civil Action No. 1:20-cv-00658 (LMB/IDD)
  v.

  CHAIN BRIDGE BANK, N.A.,
  JOHN J. BROUGH, and
  DAVID M. EVINGER,

                          Defendants.


  CHAIN BRIDGE BANK, N.A.,

                   Third-Party Plaintiff,

  v.

  JPMORGAN CHASE BANK, N.A.,

                   Third-Party Defendant.



          EXPERT REPORT OF THOMAS C. BAXTER, JR. ON BEHALF OF
           THIRD-PARTY DEFENDANT JPMORGAN CHASE BANK, N.A.

                                   MARCH 12, 2021
Case 1:20-cv-00658-LMB-IDD      Document 145-5 Filed 05/20/21 Page 3 of 3 PageID#
                                       3551
                       CONFIDENTIAL UNDER PROTECTIVE ORDER


 situation that results in indemnity – where the beneficiary’s bank is acting in reliance on the

 circumstances communicated to it by the sender and accommodating the sender’s concerns.

 After all, as discussed below, the reversal in such a joint-decision scenario would not be initiated

 “by the sender,” as required by Section 4A-211.

        46.     But in this highly unusual factual context, Chain Bridge asked JPMC to send it a

 reversal request, and JPMC accommodated the request. There is an important technical detail

 that needed to be addressed in order to execute Chain Bridge’s decision to reverse the Wire

 Transfer rather than to “hold” its proceeds. Based on my experience, in a Fedwire reversal

 situation like this, there is a need to reverse the accounting entries effected to accounts at the

 Federal Reserve; the Chain Bridge account at the Federal Reserve Bank of Richmond would be

 debited for the $457 million transfer and JPMC’s account at the New York Fed would need to

 receive a corresponding credit. Tying the reversing entries to the original Wire Transfer is

 important as a housekeeping and accounting matter. These are not insignificant accounting

 entries, and the books and records of the respective Federal Reserve Banks need to be accurate

 about what is reflected. The administrative actions taken by JPMC not only tied the reversal to

 the original Wire Transfer, but the associated entries were necessary to execute another

 important element of Article 4A’s architecture – and this was getting California its money back.

 JPMC’s actions were thus a direct result of Chain Bridge’s decision to cancel the Wire Transfer.

        47.     Finally, there is the decision by Chain Bridge to close the Blue Flame account. 40

 This unilateral decision by Chain Bridge evidences just how uncomfortable Chain Bridge was

 with Blue Flame. Chain Bridge was so uncomfortable that it decided to sever the customer




 40
        See, e.g., Brough Dep. 325:5-19.

                                                   18

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