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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
CHAIN BRIDGE BANK, N.A,
Third-Party Plaintiff,
v.
JPMORGAN CHASE BANK, N.A.,
Third-Party Defendant.
REPLY MEMORANDUM IN SUPPORT OF THIRD-PARTY PLAINTIFF
CHAIN BRIDGE BANK, N.A.’S MOTION FOR SUMMARY JUDGMENT AGAINST
THIRD-PARTY DEFENDANT JPMORGAN CHASE BANK, N.A.
May 27, 2021
ROBBINS, RUSSELL, ENGLERT, ORSECK
& UNTEREINER LLP
Gary A. Orseck (admitted pro hac vice)
Matthew M. Madden (admitted pro hac vice)
Donald Burke (VA Bar No. 76550)
2000 K Street, N.W., 4th Floor
Washington, D.C. 20006
Tel: (202) 775-4500
Fax: (202) 775-4510
dburke@robbinsrussell.com
Counsel for Third-Party Plaintiff
Chain Bridge Bank, N.A.
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TABLE OF CONTENTS
Page
I.
Chain Bridge Is Entitled To Summary Judgment On Counts I & II ......................................... 2
A.
Section 4A-211(f) Applies To The Cancellation ............................................................. 2
B.
There Was No Agreement That Provided There Would Be No Indemnification ............ 8
C.
Chain Bridge’s Loss And Expenses Are The Result Of The Cancellation .................... 11
D.
Equitable Estoppel Does Not Preclude Summary Judgment ......................................... 12
II. Chain Bridge Is Entitled To Summary Judgment On Count III ............................................. 14
TABLE OF AUTHORITIES
Cases:
Page
Banca Commerciale Italiana, N.Y. Branch v. Northern Tr. Int’l Banking
Corp., 160 F.3d 90 (2d Cir. 1998) .................................................................................6, 13
Bernardini v. Central Nat’l Bank of Richmond,
290 S.E.2d 863 (Va. 1982).................................................................................................15
Criterion Ins. Co. v. Fulgham,
247 S.E.2d 404 (Va. 1978).................................................................................................15
Hamed v. Saul,
432 F. Supp. 3d 610 (E.D. Va. 2020) ................................................................................14
James G. Davis Constr. Corp. v. FTJ, Inc.,
841 S.E.2d 642 (Va. 2020).................................................................................................15
Knox Energy, LLC v. Gasco Drilling, Inc.,
738 F. App’x 122 (4th Cir. 2018) ......................................................................................10
New Hampshire v. Maine,
532 U.S. 742 (2001) .............................................................................................................8
Newton v. Newton,
118 S.E.2d 656 (Va. 1961).................................................................................................15
Smith v. Schlage Lock Co.,
986 F.3d 482 (4th Cir. 2021) .............................................................................................11
Terry v. Bank of Am., N.A.,
350 F. Supp. 2d 727 (W.D. Va. 2004) ...............................................................................15
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Cases—Continued:
Page
Veolia Es Special Services, Inc. v. Techsol Chemical Co.,
No. 07-cv-0153, 2008 WL 11380183 (S.D.W.Va. Oct. 14, 2008) ....................................14
Regulations:
Uniform Commercial Code:
§ 4A-102 cmt. ....................................................................................................................13
§ 4A-105 cmt 2 ....................................................................................................................4
§ 4A-106(a) ..........................................................................................................................4
§ 4A-210 ..............................................................................................................................4
§ 4A-210(d) ..........................................................................................................................4
§ 4A-211(a) ................................................................................................................ passim
§ 4A-211(b) ..........................................................................................................................3
§ 4A-211(c) ..........................................................................................................................3
§ 4A-211(f) ................................................................................................................ passim
§ 4A-404(a) ........................................................................................................................13
12 C.F.R. pt. 210, subpt. B, app. A, cmt. (a) to § 210.25 ........................................................13
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JPMorgan attempts to avoid summary judgment as to Chain Bridge’s right to
indemnification by rewriting UCC Section 4A-211(f). The Court should reject JPMorgan’s
meritless legal arguments, apply the UCC as written, and grant summary judgment in favor of
Chain Bridge on Counts I and II.
First, JPMorgan argues that indemnification is unavailable here because the cancellation
of its payment order was not done “by the sender” under Section 4A-211(f). That is so, it says,
because this cancellation was instead “directed,” “requested,” and “instigated” by the receiving
bank, Chain Bridge. But under the UCC, there is no such thing as cancellation of a payment order
by the receiving bank—or by anyone other than the sender. Rather, every cancellation is, by
definition, a “communication of the sender of a payment order.” UCC § 4A-211(a) (emphasis
added). Nor is there any other legal basis for construing Section 4A-211(f) to depend on the
sender’s reasons for cancelling its payment order, the receiving bank’s motivations for agreeing to
the sender’s cancellation, or the extent, tone, and sequence of the parties’ pre-cancellation
discussions on the topic. In any event, the undisputed record does not plausibly support
JPMorgan’s premise that Chain Bridge “directed the cancellation at every material turn.” Indeed,
in another forum, JPMorgan concedes that California “decided to reverse the payment” and
proceeded to “procure[] the reversal of the Wire Transfer,” and that JPMorgan dutifully “assisted
the State” in accomplishing the reversal. CBB Ex. 96 at 1, 4.
Second, JPMorgan argues that Chain Bridge somehow bargained away its right to
indemnification, sub silentio, because it did not “include” JPMorgan’s indemnification obligation
when it agreed to JPMorgan’s cancellation request. But that is the exact opposite of what Section
4A-211(f) actually says. The text could not be clearer that senders automatically indemnify
receiving banks that agree to the cancellation of accepted payment orders “[u]nless otherwise
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provided in an agreement of the parties.” It is undisputed that JPMorgan and Chain Bridge did not
have any agreement to displace or modify Section 4A-211(f)’s default rule.
Third, JPMorgan says that Chain Bridge’s losses and expenses arising from Blue Flame’s
claims are not “a result of the cancellation.” Yet Blue Flame’s claims assert that Chain Bridge
impermissibly returned the wire to JPMorgan in response to its cancellation, instead of paying
Blue Flame. That is the end of the matter as far as “causation” goes. JPMorgan nevertheless
speculates that Chain Bridge might have returned the half-billion dollars to JPMorgan even if
JPMorgan had not cancelled its payment order. Or perhaps, JPMorgan supposes, Chain Bridge
might have held those funds indefinitely. These unsubstantiated hypotheticals are not sufficient
to preclude Chain Bridge from establishing that its losses and expenses on Blue Flame’s claims
are, in the real world, incurred “as a result of” its agreement to JPMorgan’s cancellation.
Finally, and in the alternative, if indemnification is unavailable, then Chain Bridge is
entitled to summary judgment on its claim that JPMorgan will be unjustly enriched by any amount
of the wire transfer that Chain Bridge is ultimately ordered to pay Blue Flame.
I.
Chain Bridge Is Entitled To Summary Judgment On Counts I & II
A.
Section 4A-211(f) Applies To The Cancellation
As explained in Chain Bridge’s opening memorandum, Chain Bridge is entitled to
indemnification by JPMorgan as a matter of law. See CBB Mem. in Support of Mot. for Summ.
J. (“CBB Br.”) (Dkt. No. 123) 12-23. Unless the parties agree to the contrary (which did not
happen here, see § I.B, infra), indemnification applies when “the receiving bank, after accepting a
payment order, agrees to cancellation or amendment of the order by the sender.” UCC § 4A-
211(f). Chain Bridge was the receiving bank on JPMorgan’s payment order, it accepted that
payment order, and it later agreed to the sender’s cancellation of that order. JPMorgan thus is
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liable to Chain Bridge “for any loss and expenses, including reasonable attorney’s fees, incurred
by [Chain Bridge] as a result of the cancellation.” Id. JPMorgan’s arguments to avoid this result
are both legally and factually baseless.
1.
JPMorgan’s opposition to summary judgment, like its own motion (Dkt. No. 113
at 14-21) (“JPMC Br.”), depends principally on the up-is-down premise that it was Chain Bridge
that made the “cancellation request under Article 4A,” and that JPMorgan “agreed to Chain
Bridge’s reversal request.” JPMC Mem. in Opp. to Summ. J. (“JPMC Opp.”) (Dkt. No. 145) 9,
13. JPMorgan contends that, because Chain Bridge supposedly “instigated” and “directed” the
cancellation of JPMorgan’s payment order, that cancellation was not one done “by the sender,”
such that Section 4A-211(f) does not apply.
But Article 4A does not provide for two different types of cancellation—one “by the
sender” and another “by the receiving bank.” As Chain Bridge explained (CBB Br. 17), Section
4A-211 defines cancellation as a “communication of the sender of a payment order” that is
“transmitted to the receiving bank.” UCC § 4A-211(a) (emphasis added). In other words, every
cancellation of a payment order is something done “by the sender.” If the sender’s cancellation
precedes acceptance of the payment order, then it is automatically effective. Id. § 4A-211(b). If,
however, the receiving bank has already accepted the payment order (as in this case), then the
sender’s cancellation is effective only if the receiving bank “agrees” to it. Id. § 4A-211(c). There
is no such thing under the UCC as a receiving bank’s cancellation of a sender’s payment order, or
a sender’s agreement to a receiving bank’s “cancellation.”
JPMorgan nevertheless asserts that “Article 4A recognizes that receiving banks, just like
senders, can effect cancellations.” JPMC Opp. 11-12. But JPMorgan does not point to any support
in the UCC, Regulation J, Operating Circular No. 6 (CBB Ex. 86), the case law, or anywhere else
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for that proposition, because there is none. Instead, it directs the Court to a separate provision of
Article 4A that addresses the circumstances in which receiving banks can unilaterally “reject” a
payment order prior to its acceptance. Id. at 12 (citing UCC § 4A-210). But rejection is not (as
JPMorgan wishes) “just another form of cancellation.” Id. As Section 4A-210(d) states, but
JPMorgan omits, “[a]cceptance of a payment order precludes a later rejection of the order.”
Accordingly, although receiving banks are authorized to reject (not cancel) a sender’s payment
order, they can do so only before they have accepted that order. There is no dispute that Chain
Bridge automatically accepted JPMorgan’s payment order upon its receipt, see CBB Br. 13, and
so it could not have rejected that payment order under Section 4A-210, let alone “cancelled” it.1
Unhappy with that result, JPMorgan complains that Chain Bridge’s reliance on the plain
language of Section 4A-211(a) is unduly “formalistic.” JPMC Opp. 11. Its suggested solution is
to ignore the definition of “cancellation” in Section 211(a), on the theory that it is “irrelevant” to
whether Chain Bridge is entitled to indemnification under Section 211(f). Id. That is wrong. The
fact that only the sender can cancel its payment order (Section 211(a)) precludes JPMorgan’s
theory that, under Section 211(f), a “cancellation” may or may not be done “by the sender,”
depending upon who “instigated,” “orchestrated,” “directed,” or “laid the foundation” for the idea.
1 JPMorgan also looks for support in Section 4A-106(a)’s provision that receiving banks may
set cut-off times “for the receipt and processing of payment orders and communications cancelling
or amending payment orders.” JPMC Opp. 12. But that section confirms that receiving banks
only receive and process senders’ “communications cancelling or amending payment orders.”
UCC § 4A-106(a). JPMorgan also points to a comment on the UCC’s definition of a receiving
bank’s “funds-transfer business day,” in which the commentators explain that “the defined term is
limited to the period during which all functions of the receiving bank can be performed, i.e.,
receipt, processing, and transmittal of payment orders, cancellations and amendments.” UCC
§ 4A-105 cmt 2. That commentary, which clarifies that a receiving bank must be open for all
funds-transfer business to be deemed open for any of it, cannot plausibly be understood to
contradict Section 4A-211(a)’s explicit language that a cancellation is conveyed only by
“[a] communication of the sender of a payment order.”
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All cancellations are necessarily “by the sender.” Accordingly, Section 4A-211(f) simply states
that when a receiving bank agrees to a cancellation as it is defined in Section 4A-211(a), it is
indemnified by the sender. Nothing in the UCC makes the sender’s reasons for cancelling its
payment order relevant to its indemnification obligation.
JPMorgan’s reimagining of Section 4A-211(f)—in which cancellations are not “by the
sender” if a receiving bank’s “self-interested decision-making” contributes to its agreement (JPMC
Opp. 1)—would preclude indemnification in every case. As Chain Bridge has explained, once a
receiving bank accepts a payment order, it is under no obligation to agree to the cancellation of
that order, and presumably will provide its agreement only when doing so is in its self-interest for
one reason or another. CBB Br. 19.
JPMorgan responds by offering up a variety of legal formulations, each intended to
reassure the Court that JPMorgan does not propose to do away with the availability of
indemnification under Section 211(f) altogether. Thus, it suggests that perhaps Section 211(f)
might allow for indemnification to a receiving bank that agrees to a cancellation because it is
“appropriate” and justified by “good reasons”—just so long as the receiving bank does not do
anything to “seek” such a cancellation. JPMC Opp. 12. Elsewhere, JPMorgan describes its rule
as prohibiting indemnification in instances where the receiving bank’s own interest in cancellation
is “even[]” with that of the sender (id. at 16 n.3), or where the receiving bank is anything more
than merely “agnostic or reluctant” toward cancellation (JPMC Br. 15, 19). What each of these
standards has in common is that (i) they find zero grounding in the text of the UCC; and (ii) they
would have courts, on a case-by-case basis, adjudicate exactly why a receiving bank agreed to
honor a sending back’s cancellation. The Court should reject all of this.
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Finally, JPMorgan contends that common-law equitable principles should prevent Chain
Bridge’s indemnification because JPMorgan is not at fault for any injury caused by a cancellation
that Chain Bridge “directed.” JPMC Opp. 12-13. Section 4A-211(f), however, states an
unambiguous default rule in favor of indemnification that intentionally “departs from the common
law,” “does not require any showing of the elements required to establish common law fraud or
unjust enrichment,” and does not depend on “any showing of wrongfulness on the part of the
sender.” Banca Commerciale Italiana, N.Y. Branch v. Northern Tr. Int’l Banking Corp., 160 F.3d
90, 94 (2d Cir. 1998). The UCC drafters purposefully supplanted such fact-specific examinations
of comparative fault with a default rule of “absolute liability on the sender of an electronic funds
transfer to the receiving bank if the sender cancels a payment order that has already been accepted,
even though the receiving bank has freely agreed to the cancellation.” Id.
2.
As explained above (at 4-5), and in Chain Bridge’s opening memorandum (CBB
Br. 17-19), Chain Bridge’s reasons for agreeing to JPMorgan’s cancellation have no legal bearing
on its right to indemnification under Section 4A-211(f). In any event, JPMorgan badly
mischaracterizes the facts surrounding the cancellation.
First, it is not the case that “Chain Bridge asked JPMC ‘to issue a recall for the wire.’”
JPMC Opp. 13. JPMorgan has by now selectively quoted Evinger’s question to Korpal eight times,
across two briefs, and not even once quoted that question in full. And for good reason. Evinger
asked Korpal: “Is there any way for JPMorgan to issue a recall for the wire so that while you
intervene in this you have the funds and feel more comfortable.?” CBB Br. SUF ¶ 9 (emphasis
added). That question came in response to Korpal telling Evinger that JPMorgan’s customer,
California, was still “a bit unsure” about its payment to Blue Flame. CBB Ex. 63 at 0:00-0:02.
Evinger’s inquiry, about how to proceed to make JPMorgan more comfortable during its ongoing
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investigation, cannot plausibly be described as a “direction” to JPMorgan to cancel its payment
order (which, in any event, JPMorgan would have been entirely welcome to ignore).
Second, it is undisputed that JPMorgan issued a “communication” cancelling its payment
order (see UCC § 4A-211(a)) in the form of the Fedwire service message it sent to Chain Bridge
at 2:05 PM on March 26. Ex. 65; see CBB Br. SUF ¶ 12. JPMorgan coded its message as a
“request for reversal,” and specifically directed Chain Bridge to “please return funds” to
JPMorgan. CBB Br. 13-14. That alone is sufficient grounds for summary judgment in Chain
Bridge’s favor on its claim for indemnification. But to the extent it matters (and it doesn’t),
JPMorgan’s reversal message is not the “sole factual support” (JPMC Opp. 13) for the proposition
that JPMorgan cancelled its payment order, and did so for its own good reasons. Chain Bridge’s
motion also recounts, among other things, Tim Coffey’s recorded statement to Chain Bridge’s top
officers that JPMorgan was “going to be recalling those funds” because JPMorgan had “enough
concerns that we feel we need to claw those funds back.” CBB Br. SUF ¶ 10.
Third, Chain Bridge did not “choreograph” the cancellation (JPMC Opp. 1) by its
appropriate responses to receiving a massive wire transfer for the benefit of a three-day-old
company. See id. at 14-15. Chain Bridge placed a temporary hold on the funds, evaluated the
wire for red flags of suspicious activity under the Bank Secrecy Act, considered whether Blue
Flame might be involved (wittingly or unwittingly) in a fraudulent scheme, and discussed whether
a large deposit would have any adverse effects on its balance sheet (it did not2). Chain Bridge
2 Chain Bridge officials have testified, without contradiction, that a $456 million deposit on
March 26, 2020, would not have adversely affected the bank’s risk-based capital ratios (which are
unaffected by cash the bank holds at the Federal Reserve), its leverage ratio (which is determined
quarterly), or any “reserve” requirements (which were reduced to zero percent effective the same
day as the wire transfer). See CBB Mem. in Opp. to JPMC Mot. for Summ. J. (“CBB Opp.”) (Dkt.
No. 141) CSUF ¶ 4 & n.2 and pp. 19-20, incorporated here by reference.
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ultimately closed Blue Flame’s account only after the wire had been reversed. None of that is
evidence that Chain Bridge somehow managed to compel JPMorgan, the nation’s largest bank, to
cancel its payment order.3
Finally, JPMorgan’s story here bears no resemblance to the story it simultaneously reports
in its formal administrative claim against California. See CBB Ex. 96. There, JPMorgan insists
that its own customer, California—not Chain Bridge—was the one that “decided to reverse the
payment” to Blue Flame (id. at 1), “decided that the Wire Transfer should be reversed” (id. at 3),
was “eager to obtain a return of the funds in full” (id. at 4), “request[ed] that the Wire Transfer be
reversed” (id.), “decided that the funds should be returned to the State” (id.), “procured the reversal
of the Wire Transfer” (id.), and at the “direction” of which JPMorgan took its “actions concerning
the Wire Transfer, including, in particular, the reversal” (id. at 5). The fluidity (if you will) of
JPMorgan’s position on cancellation, based solely on its immediate litigation objective, is all the
more reason to reject the far-fetched legal theory it presents here. Cf. New Hampshire v. Maine,
532 U.S. 742, 748-51 (2001) (doctrine of judicial estoppel precludes a litigant from taking a
contrary position in a separate proceeding because its interests have changed).
B.
There Was No Agreement That Provided There Would Be No
Indemnification
A sender’s obligation to indemnify a receiving bank is automatic, under Section 4A-211(f),
“[u]nless otherwise provided in an agreement of the parties.” As Chain Bridge’s motion explains,
3 In recounting these and other events (see JPMC Opp. 4-5, 14-15), JPMorgan takes many of
the same liberties with documents, testimony, and recorded conversations as it did in its motion
for summary judgment. For the reasons we have explained, these additional details are irrelevant
to the straightforward question of indemnification that is presented here (and answered by Section
4A-211(f)’s text). Rather than repeating our objections to the ways in which JPMorgan
mischaracterizes the record, Defendants incorporate by reference the Counterstatement of
Undisputed Facts in Chain Bridge’s memorandum in opposition to JPMorgan’s motion. CBB
Opp. 2-12.
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there is no evidence that JPMorgan and Chain Bridge reached any agreement to displace or modify
that default indemnification rule. CBB Br. 15-16, 21.
JPMorgan tries to turn that default rule on its head. It would prefer the applicable rule to
be that there is no indemnification if the parties reach a cancellation agreement that does not
“include an indemnity obligation.” JPMC Opp. 17; see also id. at 2 (“[T]here was an agreement
between Chain Bridge and JPMC to return the wire, and it did not include an indemnification
obligation.”); id. at 16 (“The Parties’ Agreement Did Not Include Any Obligation By JPMC To
Indemnify Chain Bridge”); id. (“JPMC and Chain Bridge reached an agreement that did not
include any express or implied promise to indemnify.”) (all emphasis added). For the reasons
explained in Chain Bridge’s opposition to JPMorgan’s motion (CBB Opp. 20-21, incorporated
here by reference), that is the opposite of the rule that is actually set forth in Section 4A-211(f).
It could hardly be clearer that parties to a cancelled payment order do not need to include
the sender’s indemnity obligation in their agreement for it to be “part of the bargain.” JPMC Opp.
17. Section 4A-211(f) states that obligation for them. The parties can disclaim or modify that
default rule “in an agreement,” UCC § 4A-211(f), but if their agreement is silent on the issue then
the default rule, which requires indemnification, stays in place. JPMorgan inaccurately claims that
“Chain Bridge agrees that an ‘agreement’ between the parties would override any indemnification
obligation.” JPMC Opp. 16. Instead, the only thing that overrides Section 4A-211(f)’s
indemnification obligation is an agreement to override Section 4A-211(f)’s indemnification
obligation.
There is no disputing that the parties here had no such agreement. JPMorgan acknowledges
that it had no written agreement with Chain Bridge to override Section 4A-211(f). JPMorgan’s
Fedwire reversal message, which Chain Bridge agreed to, did not say that there would be “NO
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INDEMNITY.” The Federal Reserve’s authoritative guidance on funds-transfer operations makes
clear that, when payment-order senders want to disclaim indemnification, they are advised to do
so within their cancellation message by specifically stating the words “NO INDEMNITY.” See
Ex. 86 at ¶ 14.1. JPMorgan did no such thing. Nor did JPMorgan and Chain Bridge reach a “no
indemnity” agreement by telephone, or via any other means of communication. All of this is
undisputed. See JPMC Br. SUF ¶ 49 (“JPMC and Chain Bridge never discussed indemnity”).
There is likewise no evidentiary basis for JPMorgan’s suggestion (JPMC Opp. 17) that a
no-indemnity agreement between Chain Bridge and JPMorgan can be “inferred from other
circumstances” and was “evident” to both parties. For this overreaching theory, JPMorgan cites
to “[a]n internal Chain Bridge call” that supposedly “supports a reasonable inference” that the
parties reached an unwritten, unspoken “agreement” to displace Section 4A-211(f). Id. But as
Chain Bridge’s opposition brief explains (CBB Opp. CSUF ¶¶50-51 & p.21), JPMorgan provides
a selective and misleading account of that call. The discussion on that call shows that Chain Bridge
correctly understood that it did not need a separate “indemnity letter” from JPMorgan to provide
it the indemnification right already afforded to it by the text of Section 4A-211(f). That is, it did
not need any letter documenting that JPMorgan had “promised any indemnification” (JPMC
Opp. 2) because indemnification was guaranteed to Chain Bridge by law. In all events, JPMorgan
was not even aware of that internal Chain Bridge phone call until it obtained the recording in civil
discovery. How that could support a finding that there was a meeting of the minds between
JPMorgan and Chain Bridge to foreclose indemnification is anyone’s guess. See, e.g., Knox
Energy, LLC v. Gasco Drilling, Inc., 738 F. App’x 122, 124 (4th Cir. 2018) (under Virginia law,
“a legally enforceable agreement” requires “the meeting of the minds of the parties”).
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C.
Chain Bridge’s Loss And Expenses Are The Result Of The Cancellation
The undisputed facts demonstrate that Chain Bridge’s loss and expenses in this litigation
are being “incurred . . . as a result of the cancellation.” UCC § 4A-211(f). The basis of Blue
Flame’s claims is that Chain Bridge impermissibly “agree[d] to cancel or amend the payment
order,” and therefore returned $456 million to JPMorgan instead of paying it to Blue Flame.
Compl. ¶ 93. Any judgment that Blue Flame were to obtain on those claims, and the expenses of
having to defend against them, are thus being incurred “as a result of” JPMorgan’s cancellation
within the meaning of Section 4A-211(f).
JPMorgan responds by speculating that, even without its cancellation, Chain Bridge would
have unilaterally sent the money back to JPMorgan, or else would have withheld the funds from
Blue Flame indefinitely. Based on that speculation, JPMorgan theorizes that Chain Bridge may
have ended up with the same loss and expenses, from the same litigation, even if JPMorgan had
not cancelled its payment order and taken back possession of the money. But that “unsupported
speculation” about what might have happened is not sufficient to defeat a summary judgment
motion. Smith v. Schlage Lock Co., 986 F.3d 482, 486 (4th Cir. 2021) (per curiam).
In any case, the grounds on which JPMorgan launches this thought experiment are
demonstrably lacking in substance. Chain Bridge was “happy to return the wire” under the
circumstances, JPMC Opp. 18, but insisted it would do so only after it received an official
communication from JPMorgan cancelling its payment order and nullifying Chain Bridge’s
obligation to pay its customer, see CBB Br. SUF ¶ 10. Chain Bridge and JPMorgan were each
investigating the transaction, consistent with their obligations under the Bank Secrecy Act, but
there is no evidence that Chain Bridge would not have paid Blue Flame if JPMorgan had stood
behind its payment order instead of cancelling it. In fact, Chain Bridge’s CEO testified that, if
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JPMorgan had not cancelled its payment order, then the bank would have consulted with its legal
counsel to determine whether to pay the wire to Blue Flame the next day. See CBB Br. 21-22.
JPMorgan argues (JPMC Opp. 1, 3, 15, 18-19) that Chain Bridge’s internal wire transfer
policy “required” it to return the wire no matter what JPMorgan said or did. The relevant
provision, which JPMorgan never quotes in full, states: “If the Bank notices a discrepancy between
the beneficiary account number and beneficiary name, the Bank reserves the right to return the
wire although it is not obligated to do so. If there is any question as to the beneficiary’s right to
the funds, such as a discrepancy between name and account number, the wire will be returned.”
JPMC Ex. 10 at 4298 (emphasis added). That internal procedural guidance, which expressly
disclaims that the Bank has an “obligation” to do anything, is not a binding and irrevocable legal
commitment to return wires even if their sender does not ask the Bank to do so.
D.
Equitable Estoppel Does Not Preclude Summary Judgment
JPMorgan argues that its affirmative defense of equitable estoppel provides an independent
reason for denying Chain Bridge summary judgment on its indemnification claims, and that, in
any event, Chain Bridge “defaulted” on its burden to rebut that defense. JPMC Opp. 22-24.
Neither argument has merit.
The initial iteration of JPMorgan’s equitable estoppel defense asserted that “Chain Bridge
intended to return the wire transfer regardless of JPMC’s actions,” and that JPMC “justifiably
relied on that intent and acted on the basis of it, leading to any alleged damages or losses Chain
Bridge sustained.” JPMC Ans. & Aff. Defs. (Dkt. No. 64) at 7-8 (Sixth Defense). That merely
restates JPMorgan’s meritless “causation” defense to Chain Bridge’s indemnification claims, and
it fails in the guise of an affirmative defense for the same reasons. See p. 11, supra. JPMorgan
later tried to reformulate its equitable estoppel defense, in interrogatory responses that it served at
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the end of discovery. In that second iteration, JPMorgan describes the defense as being that Chain
Bridge led JPMorgan to believe that indemnification was inapplicable, and that it obtained a
benefit from the cancellation. See JPMC Opp. 22. Those are also contentions, however, that
JPMorgan makes to support its defenses on the merits, JPMC Br. 3, 21-26, 28, JPMC Opp. 16-20,
23, and that Chain Bridge has thoroughly rebutted, CBB Br. 21-24, CBB Opp. 20-24.4
Recast as an affirmative defense, these theories also fail for the additional reason that, if
JPMorgan is liable to Chain Bridge under Section 4A-211(f), then common-law affirmative
defenses that try to reverse that result are preempted by Regulation J and the UCC. See 12 C.F.R.
pt. 210, subpt. B, app. A, cmt. (a) to § 210.25 (Regulation J “supersedes or preempts inconsistent
provisions of state law”); UCC § 4A-102 cmt. (UCC Article 4A provides “the exclusive means of
determining the rights, duties and liabilities of the affected parties” to a funds transfer); Banca
Commerciale Italiana, 190 F.3d at 94 (Section 4A-211(f) intentionally “departs from the common
law”); see also Dkt. No. 32 (9/8/20 Hr’g Tr.) at 7 (dismissing five state-law causes of action as
preempted by UCC Article 4A).
JPMorgan therefore pins its hopes on the notion that Chain Bridge has “defaulted” on this
affirmative defense. According to JPMorgan, Chain Bridge needed to invoke this affirmative
defense by name when it responded to the substance of it, at some length, among its related
4 JPMorgan implausibly asserts that there is a material dispute over whether Chain Bridge had
“credited” the wire transfer to Blue Flame’s checking account. Chain Bridge did not, but it makes
no difference either way. Blue Flame claims it was entitled to payment, under Section 4A-404(a),
because Chain Bridge accepted JPMorgan’s payment order. JPMorgan does not dispute that it
knew, when it cancelled its payment order, that Chain Bridge had already accepted it. In any event,
uncontroverted testimony and documents, including the Chain Bridge’s general ledger and Blue
Flame’s account activity report, establish beyond dispute that funds had been “memo posted” to
Blue Flame’s account, reflecting only a pending transaction, and would not have been finally
credited (“hard posted”) to Blue Flame’s account until overnight batch data processing took place.
Ex. 40 (Brough Tr.) at 194-95; Ex. 101 (Williamson Tr.) at 101-02; Ex. 108 (account activity);
Ex. 109 (general ledger).
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arguments on the merits. The case that JPMorgan points to as setting that trap for the unwary
reached the opposite conclusion, however. In Veolia Es Special Services, Inc. v. Techsol Chemical
Co., No. 07-cv-0153, 2008 WL 11380183 (S.D. W. Va. Oct. 14, 2008), the defendant opposed
summary judgment on the basis of an affirmative defense that the plaintiff had not addressed in its
opening brief. The court nevertheless proceeded to consider that defense on its merits because it
was later addressed in the plaintiff’s reply brief. Id. at *4. This Court need not ignore the legal
insufficiency of JPMorgan’s equitable-estoppel defense merely because JPMorgan’s “Sixth
Defense” was not identified by name in Chain Bridge’s opening brief.5
II.
Chain Bridge Is Entitled To Summary Judgment On Count III
Chain Bridge is entitled to summary judgment on its alternative claim of unjust enrichment
because, contrary to JPMorgan’s argument (JPMC Opp. 20-22), the undisputed evidence
establishes each element of that claim as a matter of law. First, Chain Bridge undoubtedly
conferred a $456 million benefit on JPMorgan when it returned those funds to it. Its conferral of
that benefit was not negated by JPMorgan’s later posting of those funds to California’s account,
which in any event did not remove the funds from JPMorgan’s property. See CBB Opp. 23-24.
Second, JPMorgan undoubtedly knew that Chain Bridge was conferring that benefit on it, having
sent Chain Bridge a Fedwire message seeking return of those funds. See CBB Br. SUF ¶ 12.
5 Nor is JPMorgan helped by the general rule that courts “ordinarily” do not address arguments
that are raised for the first time in a reply brief. See JPMC Opp. 23 (citing Hamed v. Saul, 432 F.
Supp. 3d 610 (E.D. Va. 2020)). That principle is intended to prevent “unfair[ness]” to a non-
movant who lacks the opportunity to address an argument raised by a movant only in its reply
brief. See Hamed, 432 F. Supp. 3d at 613. Here, by contrast, JPMorgan’s carbon-copy affirmative
and merits defenses have been thoroughly vetted by both sides’ briefs, and JPMorgan’s opposition
brief argues (unpersuasively) why the equitable estoppel version of that defense should prevent
summary judgment.
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Third, and finally, JPMorgan’s acceptance and retention of that benefit would be
inequitable if this Court were to find that JPMorgan was not entitled to cancel its payment order
and that the funds had to be paid to Blue Flame. In that event, JPMorgan will have been unjustly
enriched in the amount of any returned funds that Chain Bridge is now ordered to pay to Blue
Flame. See CBB Br. 23-24. JPMorgan’s unjust receipt and retention of those funds would, in that
scenario, follow from the parties’ mutual mistake that any factual prerequisites for payment-order
cancellation had been satisfied (including facts to which Chain Bridge was not privy, such as the
specific results of JPMorgan’s internal investigation and its discussions with its customer). See id.
That basis for Chain Bridge’s unjust enrichment claim does not state a new “payment-by-
mistake” claim not pleaded in the Third-Party Complaint. See JPMC Opp. 21. As the Virginia
Supreme Court recently explained, “[t]ypical examples of unjust enrichment involve a payment or
overpayment under a mistake of fact.” James G. Davis Constr. Corp. v. FTJ, Inc., 841 S.E.2d 642,
647 (2020). Nor would any such mutual mistake about whether the factual circumstances
permitted cancellation be a mistake of law, which in any event would not preclude recovery for
unjust enrichment. See, e.g., Criterion Ins. Co. v. Fulgham, 247 S.E.2d 404, 407 (Va. 1978)
(recovery upon mistakes of law is permitted where holding otherwise “would enrich” a party
“unjustifiably,” distinguishing Newton v. Newton, 118 S.E.2d 656 (Va. 1961)). It is also not true
that JPMorgan has “retain[ed] nothing” (JPMC Opp. 22) because it posted the returned funds to
California’s account. Funds credited to a depositor’s account remain the bank’s property, offset
by the bank’s obligation to pay its depositor according to the account’s terms. See Terry v. Bank
of Am., N.A., 350 F. Supp. 2d 727, 730 (W.D. Va. 2004) (funds deposited in a customer’s bank
account remain “the property of the bank”); Bernardini v. Central Nat’l Bank of Richmond, 290
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S.E.2d 863, 864 (Va. 1982) (“[M]oneys deposited immediately become the property of the bank,
and the [bank] becomes debtor of the depositor.”).
* * * * *
For the foregoing reasons, and those stated in our opening memorandum, Chain Bridge’s
motion for summary judgment against JPMorgan should be granted.
Date: May 27, 2021
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 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 Third-Party Plaintiff
Chain Bridge Bank, N.A.
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CERTIFICATE OF SERVICE
I hereby certify that on May 27, 2021, 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. (VA Bar No. 32310)
SCHULTE ROTH & ZABEL LLP
901 Fifteenth Street, NW, Suite 800
Washington, DC 20005
Phone: (202) 729-7476
Fax: (202) 730-4520
Email: peter.white@srz.com
Counsel for Plaintiff
Meredith K. Loretta, Esq. (VA Bar No. 92369)
WILMER CUTLER PICKERING HALE &
DORR LLP
1875 Pennsylvania Avenue NW
Washington, DC 20006
Phone: (212) 663-6981
Email: meredith.loretta@wilmerhale.com
Counsel for Third-Party Defendant
/s/ Donald Burke
Donald Burke (VA Bar No. 76550)
ROBBINS, RUSSELL, ENGLERT,
ORSECK & UNTEREINER 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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