Ex 2 Grice Rep PDF

What This Document Is

A single-page excerpt from the February 12, 2021 expert report of Charles H. Grice — Chain Bridge's retained expert — filed by JPMorgan as Exhibit 2 to its own reply declaration, so that the reply brief (158.0) could engage Grice's "industry practice" opinion directly.

Factual Summary

In the excerpted paragraphs, Grice opines that receiving banks rely on UCC § 4A-211's indemnification when honoring sending banks' cancellation (recall) requests — "[a]bsent such a safeguard, receiving banks would rarely, if ever, honor requests to cancel wire transfers that they have already accepted." He states it is industry practice for a sending bank wishing to opt out of that indemnification to say so "explicitly and in writing," by including "NO INDEMNITY" or similar phrasing in the Fedwire return request, citing paragraph 14.1 of Federal Reserve Banks Operating Circular No. 6 (in effect March 26, 2020): "[b]y requesting cancellation or amendment of a Payment Order, the sender may be liable under Section 4A-211 of Article 4A unless the request states 'NO INDEMNITY.'" Grice concludes he is "unaware of any 'No Indemnity' or similar disclaimer made by JPMorgan in connection with its request to cancel the California Wire Transfer."

Key Facts

Grice's core opinion for Chain Bridge: sender-side indemnification under § 4A-211 is the default that makes recall requests workable, and opting out requires an explicit written "NO INDEMNITY" in the Fedwire message.
The cited authority is Federal Reserve Operating Circular No. 6 ¶ 14.1 (Dec. 20, 2019 version), quoted verbatim in the excerpt.
Grice characterizes the reversal as "JPMorgan['s]... request to cancel the California Wire Transfer" — the Chain Bridge-side expert framing of the recall's origin, the mirror image of JPMC's position (158.0) that Chain Bridge requested it.
JPMorgan filed this excerpt of its opponent's expert report itself, to argue (158.0) that if "No Indemnity" text were truly customary, Chain Bridge's principals would have demanded an indemnity letter before returning the wire.

Source Caveats

A three-paragraph excerpt of a longer report, selected by the opposing party (JPMorgan) for its reply; Grice's full report and context are not in this filing.
Retained-expert opinion for Chain Bridge, reproduced as attributed opinion; the "request to cancel" attribution to JPMorgan is Grice's characterization, part of the docket's unresolved recall-causation dispute.

Date: 2021-05-27

Cite this document

“Ex 2 Grice Rep PDF.” Original at ecf.vaed.uscourts.gov, dated 2021-05-27. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-05-27-ex-2-grice-rep-pdf/, SHA-256 be8dd07bb5fa0916b7a2b8494c7aef5bd729bc6e830ac1de69cf98258398e3e1.

Full text

Case 1:20-cv-00658-LMB-IDD Document 158-3 Filed 05/27/21 Page 1 of 3 PagelD#
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EXHIBIT 2
Case 1:20-cv-00658-LMB-IDD Document 158-3 Filed 05/27/21 Page 2 of 3 PagelD#
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CONFIDENTIAL

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
CHAIN BRIDGE BANK, N.A.,
JOHN J. BROUGH, and

DAVID M. EVINGER,

Defendants.

EXPERT REPORT OF CHARLES H. GRICE
February 12, 2021
29

Case 1:20-cv-00658-LMB-IDD Document 158-3 Filed 05/27/21 Page 3 of 3 PagelD#

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CONFIDENTIAL

banks’ cancellation (i.e., recall) requests. In particular, receiving banks generally rely on this
provision and understand that it causes a sending bank that makes a cancellation request to bear
the risk that its cancellation will be deemed ineffective, lead to expensive litigation, or otherwise
result in costs or expenses to the receiving bank. Absent such a safeguard, receiving banks would
rarely, if ever, honor requests to cancel wire transfers that they have already accepted.

22. | When a sending bank wishes to opt out of the U.C.C.’s indemnification obligation
in connection with a wire-transfer cancellation request, it is industry practice that it do so explicitly
and in writing prior to the receiving bank’s decision to comply with a cancellation request.
Specifically, a sending bank intending to opt out of the standard indemnification requirements will
include the clear phrase “NO INDEMNITY,” or similar phrasing, in the text of a Fedwire request
to return a wire. Doing so provides a receiving bank with clear notice that it, rather than the sending
bank, will bear any risk of loss associated with the sending bank’s cancellation request should it
choose to accept that request. This practice is consistent with paragraph 14.1 of the Federal Reserve
Banks Operating Circular No. 6: Funds Transfers Through the Fedwire Funds Service, which was
in effect on March 26, 2020 and which states that “[b]y requesting cancellation or amendment of
a Payment Order, the sender may be liable under Section 4A-211 of Article 4A unless the request
states ‘NO INDEMNITY.’””’ All else equal, a “no indemnity” qualifier on a wire-transfer
cancellation request makes it more likely that a receiving bank will not agree to honor the
cancellation.

23. [am unaware of any “No Indemnity” or similar disclaimer made by JPMorgan in

connection with its request to cancel the California Wire Transfer. In particular, no such disclaimer

Federal Reserve Banks Operating Circular No. 6, FUNDS TRANSFERS THROUGH THE FEDWIRE FUNDS
SERVICE 4§ 1.1, 14.1 (December 20, 2019), available at https://www.frbservices.org/assets/resources/rules-
regulations/122019-operating-circular-6.pdf, accessed February 5, 2021.

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