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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.
DEFENDANTS’ REPLY IN SUPPORT OF MOTION FOR
SUMMARY JUDGMENT AGAINST PLAINTIFF BLUE FLAME MEDICAL LLC
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 Defendants
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TABLE OF CONTENTS
Page
I.
Blue Flame Cannot Establish Damages ........................................................................... 1
A. Blue Flame Could Not Have Forced California To Proceed With Its Order ............ 1
B. There Is No Evidence That Blue Flame Could Have Fulfilled California’s
Order And All Relevant Evidence Is To The Contrary ............................................. 3
C. Blue Flame Cannot Recover Damages Based On Other Transactions ..................... 7
II. Blue Flame Cannot Establish Liability Under UCC Section 4A-404(a) (Count I) .......... 9
A. The Cancellation Of California’s Wire Transfer Nullified Chain Bridge’s
Obligation To Pay ..................................................................................................... 9
B. Blue Flame’s Breach Of Its Obligation Of Good Faith Forecloses Any
Remedy Under The UCC ........................................................................................ 12
III. Blue Flame’s Claim Under UCC Section 4A-204 Fails As A Matter Of Law (Count
II) .................................................................................................................................... 16
IV. Defendants Are Entitled To Summary Judgment On Blue Flame’s State-Law
Claims ............................................................................................................................. 17
A. Blue Flame’s Defamation Claim Fails As A Matter Of Law (Count IX) ............... 17
B. Blue Flame’s Tortious Interference Claims Fail As A Matter Of Law (Counts
IV and V) ................................................................................................................. 19
TABLE OF AUTHORITIES
Cases:
Bumpas v. Ryan,
No. 3:07-cv-0766, 2013 WL 2418258 (M.D. Tenn. June 3, 2013) .....................................6
Cambridge Literary Props., Ltd. v. W. Goebel Porzellanfabrik G.m.b.H. &
Co. Kg., No. CV 00-10343-NG, 2006 WL 8458370 (D. Mass. Mar. 14,
2006) ....................................................................................................................................6
Carwile v. Richmond Newspapers, Inc.,
82 S.E.2d 588 (Va. 1954)...................................................................................................18
Cashion v. Smith,
749 S.E.2d 526 (Va. 2013)...........................................................................................18, 19
Commerce Funding Corp. v. Worldwide Sec. Servs. Corp.,
249 F.3d 204 (4th Cir. 2001) .............................................................................................20
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Cases—Continued:
Page
Crouse v. Wal-Mart Stores East, Inc.,
No. 1:01CV00079, 2002 WL 1046714 (W.D. Va. May 23, 2002) .....................................7
Dedvukaj v. Equilon Enters., L.L.C.,
301 F. Supp. 2d 664 (E.D. Mich. 2004), aff’d, 132 F. App’x 582 (6th Cir.
2005) ................................................................................................................................5, 6
Eisenberg v. Wachovia Bank, N.A.,
301 F.3d 220 (4th Cir. 2002) .............................................................................................20
Evans v. Technologies Applications & Serv. Co.,
80 F.3d 954 (4th Cir. 1996) .................................................................................................7
Go-Best Assets Ltd. v. Citizens Bank of Massachusetts,
972 N.E.2d 426 (Mass. 2012) ............................................................................................12
Henry v. Outback Steakhouse of Fla., LLC,
No. 15-cv-10755, 2017 WL 1382292 (E.D. Mich. Apr. 18, 2017) .....................................5
Hunter v. Holsinger,
No. 5:15-cv-00043, 2016 WL 1169308 (W.D. Va. Feb. 19, 2016) .............................14, 20
Hyland v. Raytheon Tech. Servs. Co.,
670 S.E.2d 746 (Va. 2009).................................................................................................18
LaVay Corp. v. Dominion Fed. Sav. & Loan Ass’n,
830 F.2d 522 (4th Cir. 1987) ...............................................................................................8
Lucas v. Jolin,
No. 1:15-cv-108, 2016 WL 2853576 (S.D. Ohio May 16, 2016) ........................................6
Maryland Highways Contractors Ass’n, Inc. v. Maryland,
933 F.2d 1246 (4th Cir. 1991) .............................................................................................4
McKellar v. State Farm Fire & Cas. Co.,
No. 14-cv-13730, 2016 WL 304759 (E.D. Mich. Jan. 26, 2016) ........................................6
Mullen v. Brantley,
195 S.E.2d 696 (Va. 1973)...................................................................................................8
Paradise Wire & Cable Defined Benefit Pension Plan v. Weil,
918 F.3d 312 (4th Cir. 2019) .............................................................................................16
Regions Bank v. Provident Bank, Inc.,
345 F.3d 1267 (11th Cir. 2003) ...................................................................................11, 13
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Cases—Continued:
Page
Shirvinski v. United States Coast Guard,
673 F.3d 308 (4th Cir. 2012) .............................................................................................19
Simple Helix, LLC v. Relus Techs., LLC,
493 F. Supp. 3d 1087 (N.D. Ala. 2020) .............................................................................12
Steele v. Goodman,
382 F. Supp. 3d 403 (E.D. Va. 2019) ................................................................................18
Sutherland v. SOS Int’l, Ltd.,
541 F. Supp. 2d 787 (E.D. Va. 2008) ..............................................................................2, 7
Synovus Bank v. Tracy,
603 F. App’x 121 (4th Cir. 2015) ......................................................................................13
United States v. $3,000 in Cash,
906 F. Supp. 1061 (E.D. Va. 1995) ...................................................................................13
Regulations and rules:
Uniform Commercial Code:
§ 1-304 ...................................................................................................................12, 13, 14
§ 1-304 cmt. 1 ....................................................................................................................12
§ 1-304 cmt. 2 ....................................................................................................................12
§ 4A-204(a) ..................................................................................................................16, 17
§ 4A-209(a) ........................................................................................................................17
§ 4A-209 cmt. 3 ...................................................................................................................3
§ 4A-211(c)(2) ...................................................................................................................10
§ 4A-211(c)(2)(ii) ................................................................................................................9
§ 4A-211 cmt. 4 ...................................................................................................................9
§ 4A-301(a) ........................................................................................................................17
§ 4A-404(a) ............................................................................................................2, 3, 8, 11
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Regulation and rules—Continued: ............................................................................................. Page
§ 4A-404 cmt. 3 .................................................................................................................10
Fed. R. Civ. P. 56 ...................................................................................................................5, 7
Fed. R. Civ. P. 56(c)(1)(B) ........................................................................................................4
Fed. R. Civ. P. 56(c)(4) ..............................................................................................................7
Other Authorities:
J. David McSwane, How Profit and Incompetence Delayed N95 Masks While
People Died at the VA, ProPublica (May 1, 2020) ............................................................14
Restatement (Third) of Torts: Liability for Economic Harm (2020) .....................14, 15, 16, 20
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Defendants are entitled to summary judgment because the undisputed evidence
demonstrates that Blue Flame’s claims fail as a matter of law. Blue Flame lacks any evidence of
recoverable damages. California had an unfettered right to walk away from its transaction with
Blue Flame, which is exactly what it did upon learning that Blue Flame was not what it had
pretended to be. Moreover, Blue Flame had no hope of fulfilling California’s order for 100 million
N95 masks. There is simply no basis for the fantastical notion that Blue Flame—a days-old
company with no relevant experience and which consistently failed to fulfill other customers’ PPE
orders—could somehow have attained that remarkable feat.
Blue Flame also cannot establish liability. Try as it might, Blue Flame cannot adduce
evidence that it was entitled to receive payment on a wire transfer that it had procured from
California by fraud. To the contrary, the wire transfer was cancelled, which nullified Chain
Bridge’s obligation to pay. And Blue Flame’s patent failure to act in good faith bars all relief under
the UCC. Nor can Blue Flame establish liability for defamation or tortious interference with
contract by pointing to Defendants’ indisputably true statements, which assisted California
officials in safeguarding almost half a billion dollars of taxpayer funds.
I.
Blue Flame Cannot Establish Damages
Blue Flame begins its opposition (at 13-15) by addressing the key defect that this Court
has previously identified—namely, how Blue Flame could possibly hope to prove damages given
its acknowledged inability to fulfill its other customers’ orders for N95 masks because of supply-
chain issues in China. Dkt. No. 32 (9/8/2020 Hr’g Tr.) 3, 5. Blue Flame has no persuasive answer.
A.
Blue Flame Could Not Have Forced California To Proceed With Its Order
Blue Flame’s damages case fails, even before considering Blue Flame’s inability to fulfill
California’s order, because California had—and exercised—an unfettered right to terminate its
order. There is no dispute that California decided not to move forward with the transaction after
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identifying Blue Flame’s “credibility issue” and learning that it was a days-old enterprise with no
relevant expertise. See Memo. 22-24.
Blue Flame does not dispute California’s unilateral right to terminate, but contends that it
nevertheless may recover from Defendants damages resulting from California’s decision not to
proceed because Defendants “interfered” and “caus[ed] California not to proceed with the
transaction.” Opp. 13. What Blue Flame appears to be relying on is Chain Bridge’s sharing of
indisputably true information about Blue Flame with California officials. See id. at 14 (referring
to “facts Defendants improperly reported to the STO”).1 But Chain Bridge’s truth-telling is distinct
from its agreement to return California’s wire transfer to JPMorgan. So even if California refused
to do business with Blue Flame because Chain Bridge related facts about Blue Flame, that does
not transform whatever profits Blue Flame speculates it could have derived from the California
order into “damages resulting from [Chain Bridge’s] refusal to pay.” UCC § 4A-404(a).
Blue Flame also attempts to tie California’s refusal to proceed with its order to Chain
Bridge’s alleged violations of Article 4A. See Opp. 13-14. But Blue Flame offers only
“[u]nsupported speculation,” Sutherland v. SOS Int’l, Ltd., 541 F. Supp. 2d 787, 789 (E.D. Va.
2008), that California would have stuck with Blue Flame—credibility deficits and woeful
inexperience aside—if only Blue Flame had wired out a portion of California’s funds to one of the
purported brokers with which Blue Flame had placed an order. That speculation “is not enough to
withstand a motion for summary judgment.” Id.
Moreover, Blue Flame’s response is incoherent because even Blue Flame agrees that Chain
1 Blue Flame contends (Opp. 14) that “no California witness testified that the State would have
terminated the transaction if it had known in advance the facts Defendants improperly reported to
the STO.” That contention mischaracterizes the record, see pp. 14-16, infra, but in any event, it is
irrelevant to Defendants’ damages argument. The key point, for present purposes, is that California
refused to do business with Blue Flame upon learning the true facts that Blue Flame had concealed.
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Bridge was not required to wire California’s funds out to Blue Flame’s selected brokers
immediately, and thus before California learned the truth about Blue Flame. As a new customer,
Blue Flame was subject to Chain Bridge’s Funds Availability Disclosure providing that “[f]unds
from wire[] transfers . . . will be available on the first business day after the day of your deposit.”
Ex. 113 at 2610 (emphasis added).2 Blue Flame also concedes (Opp. 21) that Chain Bridge could
have continued to hold California’s funds while conducting additional due diligence, and was
under no obligation to wire any of those funds to Blue Flame’s mask brokers.3
Those undisputed facts doom Blue Flame’s damages theory. California had already learned
the truth about Blue Flame—and decided not to proceed with the transaction—well before there
was any basis for Blue Flame to insist that California’s funds had to be released to it or to its
brokers. Because any such damages arose before a payment right could have ripened, Blue Flame
has no evidence of “damages resulting from [Chain Bridge’s] refusal to pay.” UCC § 4A-404(a).
B.
There Is No Evidence That Blue Flame Could Have Fulfilled California’s
Order And All Relevant Evidence Is To The Contrary
Blue Flame also cannot establish damages because there is no record evidence that Blue
Flame would have successfully fulfilled California’s order even if Blue Flame had received
California’s funds. See Memo. 24-26. Tellingly, Blue Flame makes no effort to contest our
showing (id. at 24) that supplying 100 million units of four specific models of Chinese-
manufactured N95 masks was an impossible task given the market conditions that prevailed in
2 Exhibits cited as Ex. 1 through Ex. 99 refer to exhibits to the Declaration of Donald Burke in
support of Defendants’/Third-Party Plaintiff’s motions for summary judgment, at Dkt. Nos. 130
and 131. Exhibits cited as Ex. 113 through Ex. 122 refer to exhibits to the Declaration of Donald
Burke filed in support of this reply.
3 As Blue Flame acknowledges (Opp. 21 & n.18), a “receiving bank” generally “has no duty
to accept a payment order,” UCC § 4A-209 cmt. 3, meaning that Chain Bridge was not required
to accept a payment order from Blue Flame directing payment to its supposed brokers.
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March 2020.4 Blue Flame also glosses over its repeated failures to fulfill other customers’ orders
for N95 masks (at least 12 orders in total), which confirms that neither Blue Flame nor any of its
supposed supply partners had the ability to fulfill California’s order. See id. at 15, 25.
Blue Flame responds by pointing to its agreements with Great Health and Suuchi, and the
orders it placed with those brokers. See Opp. 14. But given “the difficulty of sourcing N95 masks
at that time,” id., merely placing an order with a purported mask broker provides no evidence that
100 million N95 masks actually would have been delivered. That much is confirmed by Blue
Flame’s inability to fulfill other customers’ orders, despite placing its own orders with its supposed
supply chain. See Memo. 25. Blue Flame likewise derives no support from its assertion (Opp. 14)
that it “received confirmation” from Great Health’s CEO, Henry Huang, that Great Health could
deliver 100 million masks to California within 30 days. Whatever reassurances Blue Flame claims
to have received from Huang are inadmissible hearsay, which is insufficient to avoid summary
judgment. See Fed. R. Civ. P. 56(c)(1)(B); Maryland Highways Contractors Ass’n, Inc. v.
Maryland, 933 F.2d 1246, 1251 (4th Cir. 1991). And as already noted, Great Health was
consistently unable to fulfill other orders that Blue Flame placed, despite also having agreed to
provide those PPE products to Blue Flame.5
4 Blue Flame does not dispute that California’s order exceeded China’s total exports of N95
masks to the United States between March and mid-April of 2020; that even by the end of April
2020, total Chinese production of N95 masks stood at roughly 5 million per day; that supplies of
the particular N95 models that Blue Flame had agreed to sell were much more limited; and that
Blue Flame faced fierce worldwide competition from other purchasers for even those limited
supplies of masks. See Memo. 24; Ex. 22 (Faulkner Rep.) ¶¶ 30, 48, 51, 53-55.
5 The documentary evidence Blue Flame cites does not support its assertion that it received
confirmation from Huang that Great Health could supply California’s order. On March 26, 2020,
Thomas texted Huang: “Henry, Mike said you can get us 100m n95 over a 30 day period of time
that’s amazing.” White Ex. 15 at 725. In response, Huang did not confirm that account, but merely
said that “we will give it all our efforts here to fight for the most scarce resources during crazy
times.” Id. at 725-26.
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In a last-ditch effort to save its case, Blue Flame has now revealed a declaration from
Huang, see White Ex. 95, which Blue Flame presents as evidence that, although Great Health could
not fulfill other orders for Blue Flame, Great Health nonetheless “had the capacity to supply the
100 million masks California purchased.” Opp. 14. But Huang’s declaration cannot support that
proposition because it is not cognizable at summary judgment.6
First of all, basic fairness precludes any consideration of evidence provided by a witness
like Huang, who has refused to make himself available for deposition. Defendants subpoenaed
Huang’s deposition in December 2020, but Huang refused, citing limitations imposed by Chinese
law. Ex. 114 at 4-5. At the end of discovery, Defendants learned that Blue Flame’s John Thomas
had been in contact with Huang—his “very good friend[],” Ex. 115 (Gula Tr.) at 214—and that as
a result Huang was considering traveling outside of China to give testimony at Blue Flame’s
request. Ex. 114 at 3. Defendants repeatedly asked to be included in any discussions regarding
Huang’s deposition, and followed up with a subpoena to Huang for the production of relevant
documents, which were never provided. Id. at 1-3. When Huang responded, he advised that he was
“currently still in China and will be for the near future.” Id. at 1.
In similar circumstances, courts have rejected parties’ attempts to end-run the ordinary
discovery process by securing a declaration from a witness who has chosen to “ma[ke] himself
unavailable for discovery.” Dedvukaj v. Equilon Enters., L.L.C., 301 F. Supp. 2d 664, 668 (E.D.
Mich. 2004), aff’d, 132 F. App’x 582 (6th Cir. 2005). As courts have recognized, it is inherently
unfair when “one party has been in continued contact with non-party affiants but the other party
has been denied the ability to question their statements.” Henry v. Outback Steakhouse of Fla.,
6 Defendants’ reply is the appropriate procedural vehicle for objecting to consideration of
Huang’s declaration. “There is no need to make a separate motion to strike.” Fed. R. Civ. P. 56
advisory committee’s note to 2010 amendment.
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LLC, No. 15-cv-10755, 2017 WL 1382292, at *2 (E.D. Mich. Apr. 18, 2017).7
Indeed, allowing a witness who has refused to participate in discovery to parachute into a
case only at summary judgment, in order to “give unchallenged affidavit testimony[,] . . . would
clearly violate the purpose of discovery.” McKellar v. State Farm Fire & Cas. Co., No. 14-cv-
13730, 2016 WL 304759, at *8 (E.D. Mich. Jan. 26, 2016). And there is no question that Huang
chose not to participate in discovery: As Huang’s declaration acknowledges (White Ex. 95 ¶¶ 12-
13), he could have left China to attend a deposition, and he would have been permitted to return.
He did not do so (according to his untested declaration, at least) because of the quarantine
restrictions he would have encountered upon returning to China. Id. ¶ 12.8 Moreover, Huang’s
declaration fails to explain why he was willing and able to provide this declaration, but refused
Defendants’ document subpoena. Huang’s evident partisanship further confirms that any
consideration of his untested declaration would be profoundly unfair.9
7 See also, e.g., Cambridge Literary Props., Ltd. v. W. Goebel Porzellanfabrik G.m.b.H. & Co.
Kg., No. CV 00-10343-NG, 2006 WL 8458370, at *1 (D. Mass. Mar. 14, 2006); Bumpas v. Ryan,
No. 3:07-cv-0766, 2013 WL 2418258, at *2 (M.D. Tenn. June 3, 2013); Lucas v. Jolin, No. 1:15-
cv-108, 2016 WL 2853576, at *8 (S.D. Ohio May 16, 2016).
8 In some cases, courts have observed that the declarant was not only absent during the
discovery period but also was unlikely to be available for trial. E.g., Dedvukaj, 301 F. Supp. 2d at
668. Here, Huang’s affidavit asserts that he “intend[s] to testify at the trial of this action, if needed.”
White Ex. 95 ¶ 13. But that assertion makes no difference, given that Huang attributes his choice
not to make himself available to quarantine restrictions in China and his own work responsibilities.
Id. ¶ 12. There can be no assurances as to when the Chinese government might loosen those
restrictions or when Huang’s responsibilities might change in a way that would lead Huang to
choose to attend trial.
9 It would be particularly unfair for the Court to consider Huang’s untested declaration because
Defendants would have had fertile grounds for cross-examination if Huang had not refused to be
deposed. Huang’s new assertion that Great Health could have supplied 100 million N95 masks for
California is contradicted by his own warning to Blue Flame, on April 7, 2020, that orders for 10
to 50 million N95 masks “would be impossible to fulfill given the number of people that all want
it.” Ex. 83 (emphasis added). Blue Flame’s Gula also observed that “I have been lied to up and
down in China on when we were getting everything and product that was supposed to have shipped
and wasn’t,” and that “Henry has completely lied and let us down.” Ex. 116 at 9703-04. In addition,
Defendants would have explored Huang’s personal relationship with Thomas and whether Huang
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In any event, Huang’s belated declaration cannot save Blue Flame’s bacon because it does
not “set out facts that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(4) (emphasis added).
It is well settled that “summary judgment affidavits cannot be conclusory.” Evans v. Technologies
Applications & Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996). Thus, a declarant’s “unsupported
assertions” will not be considered, id., and “[u]nder Rule 56, affidavits based merely upon personal
belief are inadmissible,” Crouse v. Wal-Mart Stores East, Inc., No. 1:01CV00079, 2002 WL
1046714, at *4 (W.D. Va. May 23, 2002). Yet that is all Huang offers here. For example, Huang
asserts that Great Health “had the ability to obtain 100 million units of the N95 mask models
specified by California as they were manufactured.” White Ex. 95 ¶ 23.10 But Huang offers no
facts as to how Great Health would have accomplished this massive task. He does not identify any
source of supply for the masks he claims he would have found. Nor does he articulate any plan for
the massive increase in production that would have been required to fulfill California’s order. In
short, Huang’s declaration offers only unsupported assertions and statements of Huang’s own
beliefs about Great Health’s capabilities.11 The declaration does not “set out facts that would be
admissible in evidence,” Fed. R. Civ. P. 56(c)(4), so it should not be considered.
C.
Blue Flame Cannot Recover Damages Based On Other Transactions
Blue Flame cannot recover consequential damages for other unconsummated transactions.
To begin with, Chain Bridge lacked sufficient notice of those transactions to make any such
has any financial interest in the outcome of this litigation.
10 Even Huang cannot bring himself to endorse Blue Flame’s outlandish tale that it would have
fulfilled California’s order within 30 days. He says instead that Great Health could have supplied
100 million N95 masks to Blue Flame within three months. White Ex. 95 ¶ 32.
11 Huang’s comments about the impact of the Chinese government’s export restrictions on
California’s order are of a piece. Huang hazards his own foreign policy view that those restrictions
“would not have impacted [Great Health’s] shipment of masks to California due to the relative size
and importance of that order.” White Ex. 95 ¶ 40. But Huang’s “[u]nsupported speculation,”
Sutherland, 541 F. Supp. 2d at 789, about that geopolitical question is not entitled to any weight.
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damages recoverable under Section 4A-404(a). Memo. 26-27. Blue Flame cites (Opp. 15) evidence
that it had shared information with Chain Bridge about its general business model, expected annual
wire activity, and hopes to complete other PPE transactions in the future, but that sort of general
information falls well short of what Section 4A-404(a) requires to permit recovery for damages—
viz., “notice of particular circumstances that will give rise to consequential damages.” UCC § 4A-
404(a) (emphasis added).12
In any event, these other unrelated transactions failed for reasons entirely independent of
Defendants’ conduct. See Memo. 27. Blue Flame asserts (Opp. 15) that its inability to fulfill these
orders was a result of Defendants’ conduct, on the theory that the failure of the California
transaction deprived Blue Flame of capital that it would have used to finance additional orders.
But Blue Flame fails to identify a single subsequent transaction that allegedly failed for that reason.
In fact, Blue Flame repeatedly failed to fulfill orders for customers that had made upfront
payments, which provided Blue Flame with the capital needed to purchase PPE items. See Ex. 85
(Stamm Rep.) ¶ 33. That track record confirms that the failure of these transactions was not
attributable to any deprivation of capital. It is therefore unsurprising that Blue Flame told
congressional investigators that it was unable to fulfill PPE orders because of Great Health’s
inability to source the required products and other supply-chain disruptions—not because of a lack
of financing, or anything else that could be attributed to Defendants. See Ex. 73 at 3508-13.
12 The absence of notice here is underscored by the “rule barring an award of speculative
profits,” which “generally precludes damages for lost profits caused by harm done to a new
business.” LaVay Corp. v. Dominion Fed. Sav. & Loan Ass’n, 830 F.2d 522, 529 (4th Cir. 1987);
see also Mullen v. Brantley, 195 S.E.2d 696, 700 (Va. 1973) (observing that “a new business or
enterprise . . . is a speculative venture, the successful operation of which depends upon future
bargains, the status of the market, and too many other contingencies to furnish a safeguard in fixing
the measure of damages”). Although Blue Flame may have hoped to complete transactions with
other customers, any such profits were too speculative for Chain Bridge to be charged with notice.
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II.
Blue Flame Cannot Establish Liability Under UCC Section 4A-404(a) (Count I)
A.
The Cancellation Of California’s Wire Transfer Nullified Chain Bridge’s
Obligation To Pay
Blue Flame cannot establish liability on its claim for violation of UCC Section 4A-404(a)
because California’s wire transfer was cancelled. See Memo. 16-20. 13 Blue Flame contends (Opp.
16-21) that the cancellation was ineffective, but Blue Flame’s arguments lack legal support and
are contradicted by the undisputed factual record.14
1. Our opening memorandum explains (at 16-18) that the cancellation of California’s wire
transfer was effective because there was “a mistake by a sender in the funds transfer which resulted
in the issuance of a payment order . . . that order[ed] payment to a beneficiary not entitled to receive
payment from the originator.” UCC § 4A-211(c)(2)(ii). California’s payment order was issued by
“mistake” because it was the product of Blue Flame’s misrepresentations and concealment, which
likewise meant that Blue Flame was not entitled to receive payment from California.
Blue Flame nonetheless maintains (Opp. 16-18) that cancellation is effective under Section
4A-211(c)(2)(ii) only in cases of mistaken identity, where a payment order directs payment to a
beneficiary different from the one the originator had intended to pay. But there is no basis for that
atextual limitation on Section 4A-211(c)(2)(ii)’s scope. To be sure, “case #3” set forth in the
Official Comment to Section 4A-211 addresses a case of mistaken identity. But the cited comment
makes clear that it is merely an “example[]” to “illustrate subsection (c)(2).” UCC § 4A-211 cmt.
4. That does not mean that Section 4A-211(c)(2)(ii)’s generic reference to “mistake” is limited to
mistaken identity.
13 In addition, Blue Flame never made a demand for payment from Chain Bridge, which
provides an independent reason for summary judgment on Count I. See Dkt. No. 140, at 23.
14 Blue Flame’s arguments are also beside the point, because a cancellation need not be
effective to nullify a bank’s obligation to pay its customer. See Memo. 16.
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Blue Flame invokes (Opp. 18) the Official Comment to Section 4A-404, which states that
“reasonable doubt concerning the right of the beneficiary to payment” does not exist when an
originator “alleg[es] that the beneficiary is not entitled to payment because of fraud against the
originator or a breach of contract relating to the obligation.” UCC § 4A-404 cmt. 3. But that
comment is inapposite. Its conclusion that an originator’s concerns of fraud do not, on their own,
give rise to a reasonable doubt regarding the beneficiary’s right to payment rests on the premise
that “the originator of a funds transfer cannot cancel a payment order to the beneficiary’s bank . . .
because the originator is not the sender of that order.” Id. In other words, the comment addresses
a situation in which the beneficiary’s bank has not received a cancellation request from the sender
of the payment order, which would be the proper party to seek cancellation of that payment order.
That has no logical bearing on the distinct question of what grounds for effective cancellation are
available when the sender does make a cancellation request, as JPMorgan did here.
2. The conclusion that Chain Bridge acted properly by honoring JPMorgan’s cancellation
request is reinforced by the substantial regulatory jeopardy that Chain Bridge would have
encountered had it released California’s funds to Blue Flame. See Memo. 18-20. Blue Flame
appears to misunderstand our argument. It suggests (Opp. 19) that Defendants rely on Bank
Secrecy Act and Anti-Money Laundering concerns as a new basis for effective cancellation beyond
those identified in UCC Section 4A-211(c)(2). But our point is a narrower one: If there is any
lingering doubt as to whether effective cancellation was possible here under Section 4A-
211(c)(2)—and there should be none, see p. 9, supra—then that doubt should be resolved to avoid
an absurd reading that would require a payment to Blue Flame that could have triggered substantial
regulatory jeopardy for Chain Bridge. See Memo. 20.
Blue Flame also downplays the red flags that surrounded the California transaction and
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the attendant potential for regulatory jeopardy. But what Blue Flame dismisses as “generic ‘red
flags’” (Opp. 20) in fact corresponded to specific guidelines for detecting and preventing fraud in
PPE transactions. See Memo. 19-20. Blue Flame notes (Opp. 20-21) that Gula ultimately shared
certain information with Chain Bridge about the California transaction. But he did so after first
concealing the transaction from Chain Bridge when opening Blue Flame’s account, only to come
clean when it was no longer feasible to hide the size of California’s incoming wire transfer. The
limited information that Gula grudgingly shared with Chain Bridge indisputably raised concerns
of potential illegality (including concerns that Blue Flame was itself being victimized by its foreign
counterparties). And Gula, Thomas, and Bearman all exhibited unusual and suspicious behavior
in their interactions with Chain Bridge—displaying an extreme level of urgency to receive the wire
that was itself a red flag. See Ex. 53 (Grice Rep.) ¶¶ 93-97; Ex. 117 (Brough Tr.) at 359-60.15
Finally, several of the cases Blue Flame cites (Opp. 20 & n.16) support Defendants’
position, not Blue Flame’s, because they hold that a bank’s strict compliance with Article 4A in
processing a wire transfer does not preclude a claim against the bank under certain circumstances.
In Regions Bank v. Provident Bank, Inc., 345 F.3d 1267 (11th Cir. 2003), the court held that a
claim “requir[ing] a receiving or beneficiary bank to disgorge funds that it knew or should have
known were obtained illegally when it accepted a wire transfer” would not be barred by Article
4A. Id. at 1275 (emphasis added). To be sure, the court held that this standard was not satisfied on
the facts of the case, id. at 1278-79, but the possibility of vindication after years of litigation does
not require a bank to discount the risk of refusing to honor a cancellation request under suspicious
15 The red flags of potential fraud that characterized the California transaction, in combination
with JPMorgan’s request for cancellation, also gave rise to Chain Bridge’s “reasonable doubt
concerning [Blue Flame’s] right to payment” under UCC § 4A-404(a), which provides an
independent ground for rejecting Blue Flame’s claim under that section. See Memo. 20 n.10; Dkt.
No. 140, at 20-21.
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circumstances—especially where JPMorgan had conveyed its own concerns of fraud.16
B.
Blue Flame’s Breach Of Its Obligation Of Good Faith Forecloses Any Remedy
Under The UCC
Blue Flame’s claim for violation of UCC Section 4A-404(a) is independently barred by
Blue Flame’s multiple breaches of its obligation to act in good faith in enforcing remedies under
the UCC. See Memo. 21-22.
1. The Court should reject Blue Flame’s series of meritless legal arguments that are
designed to avoid having this Court pass upon its bad faith misconduct. First, Blue Flame
misunderstands Chain Bridge’s Section 1-304 argument in suggesting (Opp. 22-23) that it
somehow seeks to use a breach of Blue Flame’s account agreement as a defense to Blue Flame’s
claims arising under federal law—viz., the UCC provisions incorporated into claims under
Regulation J. Our point is more straightforward: Blue Flame’s Section 4A-404(a) claim seeks to
exercise a right created by the UCC. Blue Flame may do so only if it has complied with its
“obligation of good faith in . . . enforcement.” UCC § 1-304; see also id. cmt. 2. And if the Court
concludes that Blue Flame has not acted in good faith, then that breach will “make[] unavailable,
under the particular circumstances, [the] remedial right or power” that Blue Flame is seeking to
exercise. Id. cmt. 1. The defense arises directly under the UCC.
Blue Flame also insists (Opp. 23-24, 25 n.23) that its fraud against California and Chain
Bridge does not demonstrate any breach of its “obligation of good faith in . . . enforcement” of
16 In Go-Best Assets Ltd. v. Citizens Bank of Massachusetts, 972 N.E.2d 426 (Mass. 2012), the
court reasoned that Article 4A required that wired funds be deposited in the customer’s account,
but held that this obligation would not preclude a duty of care requiring the bank “to take
reasonable steps to prevent” misappropriation, “by freezing the account or otherwise ensuring that
the . . . funds were safeguarded.” Id. at 433 & n.6. That duty could be triggered by “actual
knowledge of an intended or apparent misappropriation.” Id. (emphasis added); see also Simple
Helix, LLC v. Relus Techs., LLC, 493 F. Supp. 3d 1087, 1107 (N.D. Ala. 2020) (permitting claims
against bank that “knowingly pays a person not entitled to the originator’s payment”).
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rights created by the UCC.17 But that argument ignores the undeniable linkage between Blue
Flame’s fraud and the UCC payment right it is now seeking to enforce against Chain Bridge.
Indeed, Blue Flame is seeking to enforce a payment right against Chain Bridge that is attributable
to its fraudulent transaction with California, even though the underlying fraud would provide a
defense to a claim brought against California. Blue Flame is also seeking to take advantage of its
fraud in inducing Chain Bridge to open an account, by enforcing a payment right that could not
conceivably exist in the absence of that fraud. Section 1-304’s requirement of good faith precludes
exactly this sort of bad-faith opportunism, where a party asserts that wooden, literal compliance
with Article 4A requires a court to give effect to a fraud. As the Eleventh Circuit has emphasized—
in specific reliance on the UCC’s good faith obligation—“[i]t could hardly have been the intent of
the drafters to enable a party to succeed in engaging in fraudulent activity, so long as it complied
with the provisions of Article 4A.” Regions Bank, 345 F.3d at 1276.18
Finally, Blue Flame contends (Opp. 24-25) that its fraud on California is irrelevant because
its UCC claims seek recovery from Chain Bridge, rather than California. But Chain Bridge is not
pursuing a “claim” under Section 1-304, so it makes no sense to speak of Chain Bridge’s
17 Blue Flame’s reliance (Opp. 24) on the Fourth Circuit’s non-precedential, per curiam
decision in Synovus Bank v. Tracy, 603 F. App’x 121 (2015), is misplaced. There, the court
concluded that the plaintiff bank had not engaged in fraud. See id. at 125-26. Thus, it had no
occasion to decide whether a plaintiff can insist on literal compliance with the UCC when the
result would be to give effect to the plaintiff’s own fraud.
18 Blue Flame attempts to distinguish Regions Bank on the ground that it involved preemption
of a state-law claim, rather than a claim for violating the UCC. See Opp. 23 n.20. But that was
simply a result of the case’s procedural posture: The defrauded party brought a claim to recover
funds from the bank that had received a wire transfer, and the court held that Article 4A could not
serve “as a shield for fraudulent activity.” 345 F.3d at 1276. If anything, the principle announced
in Regions Bank applies with added force here because Blue Flame is asking this Court to put its
imprimatur on Blue Flame’s own fraud. Cf. United States v. $3,000 in Cash, 906 F. Supp. 1061,
1066-67 (E.D. Va. 1995) (“It is well settled that courts will not permit anyone to reap the benefits
of a contract or an agreement, the carrying out of which involves his complicity in any fraudulent
act[.]”) (internal quotation marks omitted).
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“standing” in this context. Id. Rather, Chain Bridge asserts, as a defense, that Blue Flame has
breached its “obligation of good faith in . . . enforcement” of UCC rights against Chain Bridge.
UCC § 1-304. Blue Flame is seeking to give effect to its fraud against California by enforcing
rights against Chain Bridge, and it is perfectly natural for that fraud to provide a defense to Blue
Flame’s claims. Cf. Restatement (Third) of Torts: Liability for Economic Harm § 17 cmt. k (2020);
Hunter v. Holsinger, No. 5:15-cv-00043, 2016 WL 1169308, at *14 (W.D. Va. Feb. 19, 2016).
2. Blue Flame also denies that it has acted in bad faith. See Opp. 24-25. But its insistence
(id. at 25) that it did not procure California’s order through fraud cannot be squared with the
undisputed evidence. First of all, Blue Flame cannot explain away Thomas’s repeated
misrepresentations to Controller Yee. As explained in our opening memorandum (SUF ¶ 4),
Thomas told Yee that Blue Flame (i) had 100M N95 masks; (ii) had “almost sold all” of them;
(iii) was “delivering another 100m units of n95 mask[s]” to additional customers; and (iv) would
have “100m units every week” for sale. Not a word of that was true. See Ex. 2 (Thomas Tr.) at
101, 119-20.19 Those misrepresentations were critical to Yee. Ex. 16 (Chivaro Tr.) at 73-74, 78.
And Yee was not hermetically sealed from California’s decision to purchase from Blue Flame, as
Blue Flame now suggests. Yee interceded with the Governor’s office to promote Blue Flame,
referred Blue Flame to the Department of General Services (DGS), and expedited and facilitated
19 Blue Flame never had “‘proof of life’ documentation” (Opp. 2) for 100 million 3M N95
masks at the Port of Long Beach. Blue Flame points to a grainy video (White Ex. 88) that Thomas
apparently circulated within Blue Flame on March 25. See Ex. 118 at 819. It is impossible to tell
where the video was taken, when it was taken, or who took it. And it arrived days after Thomas
told Yee that the Long Beach masks were no longer available. See Ex. 12 at 119. Moreover, the
same video appears to have circulated widely as fictitious “proof of life” during the COVID-19
crisis. See J. David McSwane, How Profit and Incompetence Delayed N95 Masks While People
Died at the VA, ProPublica (May 1, 2020), https://perma.cc/95RT-YSYM (recounting the story of
a would-be PPE purchaser who received the same video as “proof of life” for 6 million N95 masks
at the Port of Los Angeles, which also turned out to be non-existent).
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the State’s warrants authorizing the wire to Blue Flame. Ex. 119 (Chivaro Tr.) at 90-95; see also
Ex. 120 (Wong Tr.) at 85-87 (describing coordination between DGS and Controller’s Office
regarding payment to Blue Flame). Approval from the Governor’s office—not just DGS—was
ultimately required for the wire transfer to proceed. See Ex. 121 (Kim Tr.) at 63-65.20
Thomas also made false representations directly to the DGS personnel who were
negotiating with Blue Flame regarding California’s order. He falsely claimed that Blue Flame had
connections with “manufacturers” in China, and DGS relied on that misstatement. See Memo. SUF
¶ 5; Ex. 121 (Kim Tr.) at 92; Ex. 122 at 6516. He sent DGS a fictitious delivery schedule that
contemplated delivery of 100 million N95 masks within 30 days. Memo. SUF ¶¶ 7-8. And he told
DGS that Blue Flame “cages the money” for PPE transactions, Ex. 120 (Wong Tr.) at 58,
conveying the false impression that Blue Flame had held money to pay manufacturers on behalf
of other customers. In fact there were no other customers, and Blue Flame did not yet even have a
bank account in which to “cage” money.
Finally, Blue Flame wrongly contends (Opp. 4) that it had no obligation to volunteer basic
information regarding its own background and experience to California—including the fact that
the company was formed only days earlier, had no relevant expertise, and had never delivered a
single N95 mask to anyone. It was surely a “basic assumption” of the transaction that Blue Flame
was a bona fide vendor of PPE, and because Thomas knew that California was mistaken on this
point, he had a duty to correct that mistake. See Restatement (Third) of Torts: Liability for
Economic Harm § 13(c) (2020). Indeed, Blue Flame effectively concedes the point, by arguing
that Chain Bridge’s informing California officials of these very facts “was reasonably calculated
20 Yee’s text messages with Thomas confirm her central role. See Ex. 12 at 119-21 (Yee has
“been bugging chief of staff and others”); id. at 124 (“I will get my folks working on how to
facilitate prepayment”); id. at 130 (“I will see to it that the wire happens first thing this morning”).
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to cause California to re-think its transaction with Blue Flame.” Dkt. No. 128, at 28. It cannot be
that the omission was immaterial, but the disclosure was significant. Moreover, Thomas was under
an obligation to disclose these facts to correct the misleading impression created by his own
statements that depicted Blue Flame as an experienced PPE vendor. See Restatement (Third) of
Torts: Liability for Economic Harm § 13(c) (2020); Paradise Wire & Cable Defined Benefit
Pension Plan v. Weil, 918 F.3d 312, 318 (4th Cir. 2019).
Blue Flame also contends (Opp. 24) that it did not fraudulently induce Chain Bridge to
open its account. But it is not true that Gula was unaware of the expected size of California’s
imminently arriving wire transfer when he came to Chain Bridge to open Blue Flame’s account.
Ex. 32; Ex. 27 at 805, 813. He simply chose to conceal that information from Chain Bridge—
despite having been warned by Blue Flame’s own attorney before visiting Chain Bridge to open
the account that he should alert Chain Bridge to the incoming wire. Ex. 32. Moreover, Blue Flame
does not contest that Gula falsely told Chain Bridge that Blue Flame would be a “consulting”
business rather than a high-risk “import/export” business. That caused Chain Bridge to open an
account that it otherwise would not have opened without additional investigation. Ex. 33.21
III.
Blue Flame’s Claim Under UCC Section 4A-204 Fails As A Matter Of Law (Count
II)
Blue Flame’s claim under UCC Section 4A-204 fails because Chain Bridge did not
“accept[] a payment order issued in the name of [Blue Flame] as sender” that was either
unauthorized and not effective or unenforceable. Memo. 27-28 (citing UCC § 4A-204(a)). Blue
Flame’s one-paragraph defense of Count II does not contest any of the operative facts. See Opp.
21 Blue Flame’s suggestion (Opp. 5) that Gula disclosed $1.5 billion in annual wire activity is
baseless. Blue Flame is aggregating, and annualizing, the figures that Gula supplied for both
incoming and outgoing wires. Gula plainly offered no hint that a $456 million wire would be
arriving that same day.
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26. It is undisputed that JPMorgan’s cancellation request was not a payment order, and both parties
agree that, in response to that cancellation request, Chain Bridge sent a payment order to JPMorgan
returning California’s funds.22 Instead, Blue Flame responds with the baffling assertion that “Chain
Bridge reversed the Wire Transfer by sending—and thereby accepting—a payment order
identifying Blue Flame as the ‘originator’ to [JPMorgan].” Id. But the payment order that Chain
Bridge sent to JPMorgan listed Chain Bridge as the “sender,” not Blue Flame, Ex. 68, so it was
not “a payment order issued in the name of [Chain Bridge’s] customer as sender,” UCC § 4A-
204(a) (emphasis added). And Chain Bridge could not “accept” its own payment order by sending
it to JPMorgan. Rather, a bank’s issuance of a conforming payment order to the next bank in a
funds transfer constitutes execution, and thus acceptance, of the prior “payment order received by
the bank.” UCC § 4A-301(a) (emphasis added); see also UCC § 4A-209(a); Dkt. No. 140 (Defs.
SJ Opp.) 25. Here, as just explained, there was no such prior payment order: Chain Bridge did not
receive any payment order in connection with the cancellation of California’s wire transfer that it
could have accepted, which means it could not have violated Section 4A-204(a).23
IV.
Defendants Are Entitled To Summary Judgment On Blue Flame’s State-Law Claims
A.
Blue Flame’s Defamation Claim Fails As A Matter Of Law (Count IX)
As our opening memorandum explains (at 28-29), Blue Flame’s defamation claim fails as
a matter of law because Defendants did not make any false statement of fact to California officials
and because Defendants’ statements were privileged.
1. Blue Flame does not dispute that Defendants made no false statements of fact. Instead,
22 Blue Flame asserts (Opp. 11) that JPMorgan sent its cancellation message at 1:45 PM, rather
than 2:05 PM. Nothing turns on the point, but we note that Blue Flame has stipulated (correctly)
that JPMorgan sent its message at 2:05 PM on March 26, 2020. See Dkt. No. 96, at ¶ 29.
23 Blue Flame’s claim under Section 4A-204(a) is independently foreclosed by Blue Flame’s
breach of its obligation of good faith. See pp. 12-16, supra.
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Blue Flame decries what it calls “Defendants’ narrow focus on the truth of their individual
statements” and insists that defamation may be premised on supposed “insinuations” that Blue
Flame was engaged in fraud. Opp. 29. But that gets the law of defamation backwards. The
touchstone of a defamation claim is “a false factual statement.” Hyland v. Raytheon Tech. Servs.
Co., 670 S.E.2d 746, 750 (Va. 2009). Blue Flame’s observation (Opp. 29) that “[i]sinuations may
constitute defamatory statements” does not undermine that principle, because it addresses
situations in which an expression of opinion can be understood to have a “provably false factual
connotation.” Cashion v. Smith, 749 S.E.2d 526, 531-32 (Va. 2013).24 It does not cover the
converse situation, in which the plaintiff contends that the recipient of a statement would draw the
wrong conclusion from indisputably true facts.25
2. Blue Flame maintains (Opp. 29-30) that Defendants’ statements could not be privileged
because California had no interest in verifying the legitimacy of the wire transfer after it was sent.
Nonsense. California had just sent a wire transfer for nearly a half-billion dollars to a three-day-
old company that had never delivered a single product to anyone. California plainly had an interest
in making sure that taxpayer funds were not put at risk, and that interest did not vanish the moment
California initiated the wire transfer.
Blue Flame also errs in contending (Opp. 30) that it can overcome the privilege because
Defendants acted with malice. To the contrary, the statements Defendants made to California
24 See also Carwile v. Richmond Newspapers, Inc., 82 S.E.2d 588, 592 (Va. 1954) (defendant’s
“suggest[ion] . . . that the plaintiff could and should be subjected to disbarment proceedings”
conveyed message that plaintiff was “guilty of unethical and unprofessional conduct”).
25 Our opening memorandum also explains (at 29 n.18) that Defendants’ statements lacked
defamatory “sting.” In response, Blue Flame cites Steele v. Goodman, 382 F. Supp. 3d 403 (E.D.
Va. 2019), but Blue Flame misdescribes that case. The defendant’s statements there did not merely
“imply[]” that the defendant was engaged in fraud, as Blue Flame misleadingly asserts. Opp. 29
n.30. Rather, the defendant stated that the plaintiff was “a serious con man” who was engaged in
“a serious fraud.” Steele, 382 F. Supp. 3d at 421.
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officials were factually true, so they could not have been made with “knowledge that they were
false,” as required to prove malice. Cashion, 749 S.E.2d at 533. Nor did Defendants act in bad
faith on the theory that their concerns about the legitimacy of the California transaction were a
pretext for concerns about Chain Bridge’s balance sheet. See Defs. SJ Opp. 7-9, 11.
B.
Blue Flame’s Tortious Interference Claims Fail As A Matter Of Law (Counts
IV and V)
Blue Flame’s claims for tortious interference with contract (Count IV) and business
expectancy (Count V) fail because Defendants did not employ any improper methods, act with any
wrongful intent to interfere, or induce any breach of contract by California. See Memo. 29-30.
Blue Flame’s opposition does nothing to rehabilitate these claims.
1. Blue Flame contends (Opp. 27) that Defendants’ statements to California officials were
defamatory and thus supply the “improper methods” necessary for a tortious interference claim.
But Defendants’ statements were true and otherwise privileged against a defamation claim, see pp.
17-19, supra, so they cannot support a claim for tortious interference, see Shirvinski v. United
States Coast Guard, 673 F.3d 308, 322 (4th Cir. 2012).
Blue Flame glancingly suggests (Opp. 27-28 & n.29) that Defendants employed improper
methods by violating “accepted banking practices.” As we have previously explained, however,
no reasonable factfinder could conclude that Defendants’ decision to contact California officials
while investigating the wire transfer was a departure from the sort of clearly established industry
norms that would be required to support tortious interference liability. See Defs. SJ Opp. 29.
Blue Flame is also wrong to argue (Opp. 28) that Chain Bridge’s alleged violations of
Article 4A amount to “improper methods.” Chain Bridge did not violate Article 4A. See pp. 9-17,
supra. Moreover, this version of Blue Flame’s tortious interference theory is preempted by Subpart
B of Regulation J, which “preempts any state law cause of action premised on conduct falling
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within the scope of Subpart B.” Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 223 (4th Cir.
2002). In Eisenberg, the Fourth Circuit held certain clams not preempted “insofar as they
challenge[d] the opening and management of” a customer’s account, because they were “premised
on conduct not covered by Subpart B.” Id. at 224 (emphasis added). Here, by contrast, Blue
Flame’s theory is preempted because it is expressly premised on a violation of Regulation J.
2. Blue Flame fails to respond to our argument (Memo. 30) that Defendants did not act
with any wrongful intent to interfere with Blue Flame’s contract rights. Elsewhere, Blue Flame
has argued that Defendants acted with wrongful intent because their statements to California were
“substantially certain” to lead California to revisit its decision to purchase from Blue Flame. Dkt.
No. 128, at 28-29 (quoting Commerce Funding Corp. v. Worldwide Sec. Servs. Corp., 249 F.3d
204, 212 (4th Cir. 2001)). But that argument rests on the audacious premise that Defendants were
required to assume that Blue Flame was perpetrating a fraud on California that Defendants’ truthful
statements would reveal. That is entirely unpersuasive. See Defs. SJ Opp. 26-27.
3. Blue Flame appears to agree with our submission (Memo. 30) that Defendants did not
induce any breach of contract by California, as Blue Flame’s Complaint alleged. Compl. ¶¶ 129,
138. Instead, Blue Flame now asserts (Opp. 27) that Defendants are liable not for inducing a
breach, but rather for inducing “termination” of Blue Flame’s contractual relationship with
California. But there can be no liability for inducing termination of a contract that was procured
by fraud and thus was not valid in substance. See Restatement (Third) of Torts: Liability for
Economic Harm § 17 cmt. k; Hunter, 2016 WL 1169308, at *14; Defs. SJ Opp. 25-26.26
26 The same principle forecloses Blue Flame’s business expectancy claim. In its pleadings,
Blue Flame has referred to its “contract to deliver 100 million masks to the state of California” as
both a “valid contract and business expectancy.” Dkt. No. 128, at 27. In any event, whatever hope
of future business with California that Blue Flame may have had was also procured by Blue
Flame’s misrepresentations and concealment, and thus is not entitled to protection.
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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 Defendants
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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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