Full text
Nos. 21-2218 (L), 21-2219
______________________________
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
______________________________
BLUE FLAME MEDICAL LLC,
Plaintiff-Appellant,
v.
CHAIN BRIDGE BANK, N.A.,
Defendant and Third Party Plaintiff-Appellee,
JOHN J. BROUGH; DAVID M. EVINGER,
Defendants-Appellees,
v.
JPMORGAN CHASE BANK, N.A.,
Third Party Defendant.
(Caption continued on inside cover)
______________________________
Appeals from the United States District Court
for the Eastern District of Virginia (No. 1:20-cv-00658-LMB-IDD)
______________________________
REPLY BRIEF FOR APPELLANT BLUE FLAME MEDICAL LLC
______________________________
Eric F. Citron
Kathleen Foley
GOLDSTEIN & RUSSELL, P.C.
7475 Wisconsin Ave., Suite 850
Bethesda, MD 20814
(202) 362-0636
ecitron@goldsteinrussell.com
kfoley@goldsteinrussell.com
Counsel for Appellant Blue Flame Medical LLC
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______________________________
BLUE FLAME MEDICAL LLC,
Plaintiff,
v.
CHAIN BRIDGE BANK, N.A.,
Defendant and Third Party Plaintiff-Appellee,
JOHN J. BROUGH; DAVID M. EVINGER,
Defendants,
v.
JPMORGAN CHASE BANK, N.A.,
Third Party Defendant-Appellant.
______________________________
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TABLE OF CONTENTS
TABLE OF AUTHORITIES .................................................................................... ii
INTRODUCTION ..................................................................................................... 1
ARGUMENT ............................................................................................................. 2
I.
JPMC’s Failed Cancellation Request Is Irrelevant .............................................. 2
II. CBB Must Be Liable For Wiring Money Out Of Blue Flame’s Account
Under §204(a), State Law, Or Both ..................................................................... 4
A. Section 204(a) ................................................................................................ 5
B. State Law ..................................................................................................... 12
III. The District Court Erred In Granting Summary Judgment For Lack Of
Damages ............................................................................................................. 14
A. CBB Could Not Have “Held” the Funds ..................................................... 17
B. CBB’s Factual Assertions Are Disputed by Record Evidence ................... 18
1. California’s Post-Transfer Conduct ...................................................... 18
2. Blue Flame’s Damages .......................................................................... 20
C. Until It Returns Blue Flame’s Funds, CBB Is in Continuing
Violation of 404(a) ...................................................................................... 23
D. CBB’s “Bad Faith” Argument Is Plainly Specious ..................................... 24
IV. Factual Disputes Preclude Summary Judgment On Blue Flame’s
Tortious-Interference Claims ............................................................................. 26
CONCLUSION ........................................................................................................ 28
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TABLE OF AUTHORITIES
Cases
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242 (1986) ............................................................................................. 16
DePaola v. Clarke,
884 F.3d 481 (4th Cir. 2018) ................................................................................ 24
Eisenberg v. Wachovia Bank, N.A.,
301 F.3d 220 (4th Cir. 2002) ......................................................................... 12, 13
Ma v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
597 F.3d 84 (2d Cir. 2010) ................................................................................... 13
Regions Bank v. Provident Bank, Inc.,
345 F.3d 1267 (11th Cir. 2003) ..................................................................... 13, 25
United States v. Gomori,
437 F.2d 312 (4th Cir. 1971) ................................................................................ 18
Constitutional Provisions
U.S. Const. amend. VII ....................................................................................... 2, 16
Statutes
U.C.C. §4A-102 cmt. .................................................................................... 3, 12, 25
U.C.C. §4A-103(a)(1) ............................................................................................6, 8
U.C.C. §4A-103(a)(4) ................................................................................................ 6
U.C.C. §4A-104(a) ..................................................................................................... 6
U.C.C. §4A-104(c) .................................................................................................6, 9
U.C.C. §4A-104(d) ..................................................................................................... 6
U.C.C. §4A-104 cmt.1 ...........................................................................................6, 7
U.C.C. §4A-104 cmt.3 ............................................................................................... 3
U.C.C. §4A-104 cmt.6 ............................................................................................... 8
U.C.C. §4A-204(a) ........................................................................................... passim
U.C.C. §4A-204 cmt.1 ...........................................................................................1, 5
U.C.C. §4A-209(a) ..................................................................................................... 6
U.C.C. §4A-209(b)(1)(ii) ......................................................................................... 17
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U.C.C. §4A-209 cmt.4 ...................................................................................... 17, 23
U.C.C. §4A-211 .............................................................................................. 1, 3, 10
U.C.C. §4A-211(f) ................................................................................................... 19
U.C.C. §4A-211 cmt.1 ............................................................................................... 3
U.C.C. §4A-211 cmt.4 .................................................................................. 3, 11, 13
U.C.C. §4A-211 cmt.5 ............................................................................................. 10
U.C.C. §4A-301(a) ..................................................................................................... 6
U.C.C. §4A-404(a) ........................................................................................... passim
U.C.C. §4A-404(c) ............................................................................................ 17, 23
Regulations
12 C.F.R. §210.25(b)(1) ........................................................................................... 17
12 C.F.R. §229.10(b) ............................................................................................... 17
Other Authorities
Restatement (Second) of Torts §766 ....................................................................... 27
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INTRODUCTION
CBB’s briefing is calculated to mislead this Court about how Article 4A han-
dles funds transfers involving multiple banks. That is disappointing, given that de-
fendants Chain Bridge Bank and its top executives (and their sophisticated counsel)
surely understand this technical but critical regulation. But more striking—and dis-
positive—is not what CBB argues, but what it concedes. CBB no longer contests
the district court’s findings that it credited Blue Flame’s account, Resp.Br.37-38
n.14, or that JPMC’s cancellation request was ineffective under §4A-211,
Resp.Br.22 n.6. And while it disputes the nature of the payment order reproduced
at App.Br.22, it doesn’t even try to produce another payment order or other legal
basis for its conceded debit from Blue Flame’s account—despite our explicit chal-
lenge to provide one. See id. 34-35.
Those concessions make this case easy, and demonstrate the stakes for bank-
ing law if this Court gets it wrong. As Article 4A’s drafters recognized, and as
should be obvious to any bank customer, that law depends on the bedrock rule that
a bank must be “entitled to payment from the customer” before it “debits the cus-
tomer’s account.” See §4A-204 cmt.1. CBB’s position that it needed neither an
effective cancellation nor Blue Flame’s permission to take Blue Flame’s money
from Blue Flame’s account is thus as unlikely—and dangerous—as it seems.
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CBB’s response fares no better in defending the district court’s summary
judgment respecting damages. CBB tries lots of colorful storytelling to impugn the
credibility of Blue Flame and its witnesses. See, e.g., Resp.Br.1-3, 6-14, 42-44, 53-
56. But all that can do is clarify that this case concerns competing factual stories
that depend on the credibility of Blue Flame and its evidence. We certainly think
Blue Flame’s story about whether it would have achieved some profits under its Cal-
ifornia contract absent CBB’s front-page-worthy failure to act like a normal bank is
better supported by the voluminous record. But that is precisely what juries are for,
and it makes a farce of the Seventh Amendment to pretend that a case so obviously
rooted in pure factual disputes is a candidate for summary judgment on the ground
that the plaintiff wasn’t damaged “in any respect.” JA3088.
ARGUMENT
I.
JPMC’s Failed Cancellation Request Is Irrelevant
We begin with a critical, global point. CBB’s brief is peppered with vague
suggestions that JPMC’s cancellation request somehow affects its liability under Ar-
ticle 4A. See Resp.Br.31-32, 34-35, 37-38. For example, it invokes that allegedly
unique circumstance to explain why its rule would not permit bank executives to
wire their customers’ cash wherever they please. Id. 58. Likewise, CBB suggests
that it excuses its now-conceded decision to willfully issue an unauthorized payment
order naming Blue Flame as originator and then debit the funds from Blue Flame’s
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account. Id. 31-32, 34-35, 37-38. Elsewhere, CBB halfheartedly suggests that it
might avoid the clear dictates of §§204(a) and 404(a) altogether because its “decision
… to accommodate [JPMC’s] cancellation request was governed by [§]4A-211.”
Resp.Br.58. But each of these arguments ignores that JPMC’s cancellation order
was concededly ineffective under §4A-211, and so couldn’t possibly affect how Ar-
ticle 4A’s “precise and detailed rules” governing a bank’s “essentially mechanical”
role in a funds transfer assign liability here. U.C.C. §4A-102 cmt.; id. §4A-104
cmt.3.
As with CBB’s arguments about “fraud” and second thoughts, however, see
App.Br.42-44, Article 4A’s drafters already anticipated and rejected CBB’s theory.
As they put it, because “acceptance affects the rights of the originator and the bene-
ficiary, it is not appropriate to allow the beneficiary’s bank to agree to cancellation
or amendment except in unusual cases.” U.C.C. §4A-211 cmt.4 (emphasis added).
Nevertheless, CBB’s argument boils down to the assertion that it was free “to agree
to cancellation” unilaterally, even outside those “unusual cases.” That is incorrect.
The commentary likewise clarifies that CBB can get no mileage out of the
failed cancellation here, expressly warning that Article 4A contains “no concept of
wrongful cancellation or amendment of a payment order.” Id. cmt.1. Instead, “[i]f
the conditions stated in this section are not met the attempted cancellation or amend-
ment is not effective.” Id. Put otherwise, there are effective cancellations and there
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are nullities, and because CBB does not argue that this cancellation was effective,
all its arguments about cancellation can be safely ignored.
II.
CBB Must Be Liable For Wiring Money Out Of Blue Flame’s Account
Under §204(a), State Law, Or Both
At the opening brief’s core was a simple challenge to CBB to provide some
law that would constrain banks from wiring their customers’ money wherever they
pleased if neither §204(a) nor state law applied here. CBB declined. Indeed, it has
proffered no legal rule that would excuse its conduct without permitting some other
bank to issue “its own payment order,” Resp.Br.35, allowing it to freely debit its
customer’s account whenever it believed the money belonged elsewhere.
Faced with supporting this enormous loophole, CBB at best argues that adopt-
ing its rule here should create limited concern about future cases because this one
involves only a bank choosing to comply with an ineffective cancellation request—
as opposed to wiring money around “willy-nilly.” Resp.Br.58. But as we have just
seen, Article 4A treats ineffective cancellations as irrelevant nullities, supra pp.3-4,
and CBB’s rationale (which stems from its decision to issue “its own” unauthorized
payment order) has no necessary, logical connection to any ineffective cancellation
request. This Court should take no comfort in such a distinction without a difference,
particularly when its decision will become the first and leading opinion construing
the relevant provisions of Article 4A.
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A.
Section 204(a)
The heart of §4A-204(a) is a strict-liability rule: When “a receiving bank ac-
cepts a payment order issued in the name of its customer as sender,” and that cus-
tomer didn’t authorize it, the bank has no right to take payment—and must refund
any debits it made—from the customer’s account. U.C.C. §4A-204(a) and cmt.1.
That rule is tailor-made for this case: There is incontrovertible evidence from CBB’s
own files, reproduced at App.Br.22, that CBB accepted a payment order in Blue
Flame’s name and debited Blue Flame’s account knowing full well that Blue Flame
hadn’t authorized it.
CBB’s response is to characterize that evidence as showing only that CBB
issued “its own payment order,” Resp.Br.35, naming Blue Flame as “originator,” id.
33, and not that CBB “accepted” or “received” any payment order here naming Blue
Flame as “sender,” id. 35-36. This is, frankly, a dispiriting effort to pull a fast one
on this Court, rooted in the hope that it will misunderstand the counterintuitive way
Article 4A defines certain terms to account for multi-bank transfers. See App.Br.33-
34 & n.4. As we explain below, issuing “its own payment order” naming its cus-
tomer as the “originator” is precisely how an originator’s bank “accepts” the origi-
nator’s payment order under Article 4A—indeed, that is what it means to accept a
customer’s payment order. Thankfully, the text and official commentary of Article
4A make this fairly obvious for transfers that (like this one) involve only two parties
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with different banks. CBB’s failure to disclose and address this material is inexpli-
cable.
1. A “funds transfer” is a “series of transactions [that] begin[s] with the orig-
inator’s payment order.” U.C.C. §4A-104(a). A “payment order” is “an instruction
of a sender to a receiving bank, transmitted orally, electronically, or in writing, to
pay, or to cause another bank to pay, … money to a beneficiary.” Id. §4A-103(a)(1).
And, critically, when the account that has the money is at a different bank than the
account getting the money, there are always “two payment orders [] involved.” Id.
§4A-104 cmt.1 (“Case #2”) (emphasis added).
The first is the payment order the originator (i.e., “the sender of the first pay-
ment order in a funds transfer,” id. §4A-104(c)) delivers to their bank—which is
called both the “originator’s bank,” id. §4A-104(d) and a “receiving bank,” id. §4A-
103(a)(4), because it receives this first payment order from the originator. The sec-
ond is the payment order that bank sends to the beneficiary’s bank—which also be-
comes a “receiving bank” when it receives this second payment order, see id.—di-
recting it to pay the beneficiary. As the text makes pellucid, the first receiving bank
“executes” the first payment order by issuing the second one. Id. §4A-301(a) (ex-
tremely clear). And in so doing, it thereby “accepts” the payment order it originally
received for purposes of Article 4A. See id. §4A-209(a) (same).
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CBB’s theory that this transaction involved only one payment order—which
it “issued” on “its own” to effectuate the funds transfer at 3:21PM, see JA2214—is
thus a logical and regulatory impossibility. The only circumstance in which the “se-
ries of transactions” in a funds transfer involves only one payment order is when the
subject accounts are at the same bank. U.C.C. §4A-104 cmt.1 (“Case #1”). And
while CBB claims (at 31) that it “initiat[ed] a new wire transfer” “in response to
[JPMC’s] cancellation request,” it immediately (and correctly) observes that
JPMC’s request was “not a payment order,” id., and so could not have been the cat-
alyst for CBB’s payment order to JPMC naming Blue Flame as the originator.
Where has the first payment order gone? The simple answer, as CBB well knows,
is that when CBB concededly issued a payment order to the beneficiary’s bank
(JPMC) directing payment to the beneficiary (California), and then debited the
money it sent to JPMC from Blue Flame’s account, it necessarily purported to “ac-
cept” a payment order naming its customer (Blue Flame) as the original sender of
the funds transfer.
2. This brings us to JA2216, reproduced at App.Br.22, which certainly looks
like a payment order naming Blue Flame as sender that CBB purported to accept by
sending its own conforming payment order to JPMC and debiting Blue Flame’s ac-
count. CBB’s efforts to attack this incontrovertible evidence are untenable.
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First, CBB says (Resp.Br.32) that this was actually “an internal [CBB] record
of the wire transfer,” thereby implying that it was not a payment order. This impli-
cation is not colorable, which is likely why CBB carefully avoids saying that this
“internal record” is not a “payment order.” See id. 32-33. It also oddly declines to
explain how this “record” of the funds transfer was generated 22 minutes before the
transfer itself. Compare JA2216, with JA2214.
Space-time discontinuity aside, it also makes no difference whether CBB’s
archives label this a “record” or “payment order.” As §4A-103(a)(1) carefully notes,
the “payment order” inheres in the “instruction of a sender to a receiving bank … to
pay, or to cause another bank to pay, … money to a beneficiary,” (emphasis added),
and “the applicability of Article 4A does not depend upon the means used to transmit
th[at] instruction.” U.C.C. §4A-104 cmt.6. In the ordinary two-customer/two-bank
case, such an instruction consists of five core pieces of information: (1) the customer
originating the funds transfer; (2) the amount; (3) the ultimate beneficiary; and
(4)/(5) the applicable account and ABA routing numbers for the originator’s and
beneficiary’s banks, which will be respectively sending and receiving the inter-bank
money transfer within the Federal Reserve’s system. Whatever CBB calls it, JA2216
is thus a “record” of a payment order that falsely purports to have originated with
Blue Flame, and that is what matters.
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CBB’s arguments only grow more disappointing from there. CBB says (at
32) that this can’t be a payment order that, if executed, subjects it to liability under
§4A-204(a) because §4A-204(a) concerns a payment order “issued in the name of
its customer as sender,” while this “record” identifies “Blue Flame as the originator
of the funds transfer, not the sender of the payment order.” But this “record” in fact
identifies Blue Flame as simply the “originator,” and (as CBB knows perfectly well)
Article 4A defines “originator” as “the sender of the first payment order in a funds
transfer.” §4A-104(c) (emphasis added). Perhaps CBB was hoping the Court would
not read Article 4A.
Likewise, CBB argues (at 33) that the payment order it issued to JPMC “lists
[CBB] as the ‘Sender,’” not Blue Flame. But that payment order actually records
CBB as the “Sender ABA,” together with its ABA routing number. JA2214 (empha-
sis added). CBB is willfully sowing confusion here; “Sender ABA” identifies the
financial institution that will be sending cash reserves across the Fed’s interbank
system to consummate the transaction, not the sender (i.e., originator) of the original
payment order.
Next, we hear that JA2216 cannot be a payment order executed in violation
of §4A-204(a) because it “lists [JPMC] as the ‘Receiving Bank,’” whereas CBB
would have been the “receiving bank” as to a first payment order naming Blue Flame
as sender. Resp.Br.32. Don’t be fooled. As explained above, every funds transfer
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between customers of different banks will have two receiving banks, see supra p.6,
and there’s no need for the outgoing wire-transfer records of the first receiving bank
to denote itself as a receiving bank because it is always a “receiving bank” in any
such transaction. Conversely, it is natural for CBB’s own records to refer to the next
bank in the payment-order chain as “Receiving Bank” because that’s the bank to
which the first payment order instructs CBB to send its downstream order (and, ul-
timately, the funds).
CBB also contends that Blue Flame’s straightforward reading of §4A-204(a)
can’t be right “because it would impose liability on a receiving bank even when it
agrees to an effective cancellation” under §4A-211. Resp.Br.37. This argument is
backwards, and proves our point.
The potential liability CBB identifies is real, but is accounted for by Article
4A itself—as the commentary (again) reveals to anyone who earnestly reads it. As
it explains, Article 4A gave CBB complete discretion to refuse JPMC’s post-ac-
ceptance cancellation request here precisely because of the risk that that acceptance
had already caused CBB to incur liabilities it might be unable to recover under the
law of restitution or mistake—whether the cancellation request was otherwise valid
or not. See U.C.C. §4A-211 cmt.5. This risk is also why Article 4A provides for
the very automatic indemnification that CBB successfully claimed from JPMC here.
Id. Accordingly, the real upshot of CBB’s one-horrible parade is that a bank like
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JPMC or its underlying customer might be liable if a downstream bank accommo-
dates a post-acceptance cancellation request and then is successfully sued or cannot
recover amounts it already paid out. And that isn’t remotely surprising: Article 4A
exists because the risk of loss must be initially allocated to someone, and it is the
sender and his bank who are best positioned to avoid the kinds of unauthorized pay-
ment orders and technical mistakes for which post-acceptance cancellation is some-
times available (but never required). That does not mean beneficiaries keep wind-
falls. It just means that, as Article 4A says repeatedly, whether the losing parties can
recover their losses from the beneficiaries is a question governed by other sources
of law. See id. cmt.4 (Cases #1-4).
3. Meanwhile, it is the consequences of CBB’s argument that are truly unac-
ceptable. CBB is stuck between a rock and hard place: It either (1) issued an unau-
thorized payment order naming Blue Flame as sender to implement an ineffective
cancellation request, or (2, worse) was just playing Robin Hood—debiting its own
customer’s account based on its own notions of justice, without any purported legal
basis for enforcing payment. Neither is consistent with the rule of law or a stable
banking system, which is why the former requires a refund under §4A-204(a), and
the latter is theft redressable through state law. Indeed, it is striking that—while
CBB attacks the payment-order status of JA2216—it never even tries to identify a
valid payment order or other legal basis for debiting Blue Flame’s account to pay
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for the outgoing transfer it concededly executed on “its own.” Resp.Br. 35. This is
why, as the opening brief explained, the district court’s view that neither state law
nor §4A-204(a) applies here must be rejected. Yet CBB defends the district court’s
reasoning while offering no intelligible legal rule to rein it in. This Court should be
very wary of approving such an invitation for banks to wrongfully treat their cus-
tomers’ accounts as their own.
B.
State Law
Indeed, the district court simply cannot be right that neither state law nor Ar-
ticle 4A proscribes CBB’s conduct here. Article 4A preempts state-law claims only
where “the challenged conduct in the state claim would be covered under [Article
4A] as well.” Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 223 (4th Cir. 2002).
Thus, if Article 4A does not apply, state law must. See U.C.C. §4A-102 cmt. (Article
4A preempts other law “in any situation covered by [its] particular provisions”). The
better view, however, is that both apply because two distinct types of liable conduct
are at issue.
Section 204(a) is a strict-liability rule for assigning the loss whenever a bank
accepts an unauthorized payment order—no matter how innocently. And more
broadly, Article 4A is concerned with how financial institutions process payment
orders and the different liabilities they might incur throughout that process. It thus
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makes CBB liable for executing on the unauthorized payment instructions recorded
in JA2216, without regard to fault.
But Article 4A isn’t concerned with what happens before and after that pro-
cess. Accordingly, Article 4A itself explains that state-law remedies are necessary
to go after the fraudsters who create unauthorized payment orders or recover monies
already paid out to beneficiaries. See U.C.C. §4A-211 cmt.4. Here, CBB seems to
have conceded this kind of malfeasance as well: Its own story is that it generated
“its own payment order” that named Blue Flame as the originator without authoriza-
tion, and then debited money from Blue Flame’s account without legal basis. That
is either a conversion after the first funds transfer was complete or a fraud before the
second one began (or both)—and Article 4A addresses neither. The Court should
thus hold that Blue Flame’s state-law claims are not preempted insofar as they ad-
dress CBB’s fraudulent issuance of the first payment order or its decision to debit
Blue Flame’s account without a legal basis. See, e.g., Eisenberg, 301 F.3d at 224;
Regions Bank v. Provident Bank, Inc., 345 F.3d 1267, 1275 (11th Cir. 2003) (finding
no preemption where “Article 4A is silent”); Ma v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 597 F.3d 84, 89-90 (2d Cir. 2010) (“Not all common law claims are per
se inconsistent with this regime. … [T]he critical inquiry is whether [Article 4A’s]
provisions protect against the type of underlying injury or misconduct alleged.”).
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III.
The District Court Erred In Granting Summary Judgment For Lack Of
Damages
As usual in litigation, each side here has its own story about what happened,
including what would have happened had CBB followed the law. Here is Blue
Flame’s, along with just some of the record citations that support it:
Had CBB complied with the law, the funds that were undisputedly credited to
Blue Flame’s account on March 26, 2020, JA3140 2:09-2:27; JA2098; JA1544;
JA3073, would have stayed put, and CBB’s Assistant VP would have processed Blue
Flame’s outgoing wires to Suuchi on March 26, as she told Thomas she would,
JA1560-62; see JA2074. This would have been consistent with CBB’s Funds Avail-
ability Disclosure, which allows but doesn’t require CBB to hold wire-transfer funds
from new customers for one business day, see JA2839, and from which bank per-
sonnel may grant exceptions, JA188; accord JA2838 (“If you will need the funds
from a deposit right away, you should ask us when the funds will be available.”).
Upon receiving that $22,680,000, Suuchi would have honored the terms of its
purchase agreement with Blue Flame, immediately shipping six million masks to
California, JA1557; JA1767-68, arriving around April 6, 2020, JA608-09. Blue
Flame would also have paid Great Health Companion, which would have started
shipping masks in “tranches[,] as often and as soon as available.” JA1771. Those
masks would have started arriving around April 2, with more arriving almost daily
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through at least April 24, until Blue Flame delivered most if not all of the 100 million
masks California said to “shoot for.” JA608-09; JA1591.
Blue Flame was in close contact with California officials, JA1571-85;
JA1587-96; JA1683-92, and its suppliers, JA2207-08; JA2589-92; JA1720-50, and
would have been able to provide evidence of its ongoing performance. What’s more,
California’s deal with Blue Flame contemplated a formal process for contract termi-
nation, JA1165-66, which could not have been effected instantaneously once Blue
Flame began to perform. Especially with evidence of performance in hand, Califor-
nia—which had gone to a lot of trouble to hammer out the deal, see JA1571-85;
JA1587-96; JA1683-92; JA1081-1103—would have been reluctant to undertake the
termination process: The State “just needed the product” Blue Flame would have
delivered, JA2889, and it “would have accepted” any and all of Blue Flame’s N95
masks, JA3012. And, per its agreement with Blue Flame, it would have paid contract
price for each mask it accepted. See JA1165-66.
China’s brief export restrictions would not have significantly delayed these
shipments. JA2795-97. And given California’s dire need and Blue Flame’s ongoing
performance, any minor delays would not have caused California to immediately
break the contract anyway: What’s a few days, or even weeks, compared to the re-
peated, months-long failures California forgave by its next contractor to obtain the
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16
certification necessary to produce any masks at all? See App.Br.24-25 (California’s
subsequent course of conduct with BYD).
To be sure, CBB has a different story—a colorful one, often premised on du-
bious inferences, designed to disparage the credibility of Blue Flame and its princi-
pals at every turn. Resp.Br.1-3, 6-14, 42-44, 53-56. But all of that can—indeed,
must—be ignored: In this posture, what matters is Blue Flame’s story and whether
its evidence, taken as true, supports it, after drawing every reasonable inference in
Blue Flame’s favor. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255-
56 (1986). Meanwhile, CBB’s efforts to contest credibility are, if anything, a virtual
guarantee that summary judgment was inappropriate, because weighing credibility
is a core jury function. See App.Br.45.
Indeed, every sentence above is a factual judgment call, and each is either
supported by competent record evidence or else a natural inference from those sup-
ported facts. Unlike CBB, we are not so brazen as to assume the jury will eventually
side with us on every one. But at this stage, that is exactly the assumption the law
requires this Court to make, because sorting and weighing all that conflicting evi-
dence, assessing all the witnesses’ credibility, and then making inferential, predic-
tive judgments about the relative likelihood of the different hypothetical outcomes
in the absence of a violation is exactly what juries do. This is not a close call: A
jury trial over legal damages is a constitutional right, and if the Seventh Amendment
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17
means anything at all, it must cover a fight that is entirely about facts and inferences,
like the one above, regarding a hypothetical world that doesn’t exist because of de-
fendants’ legal violations.
A.
CBB Could Not Have “Held” the Funds
CBB argues that “the relevant counterfactual was one in which ‘the funds
were held in Blue Flame’s account’” rather than wired by CBB back to JPMC.
Resp.Br.41 (quoting JA3084). But that’s not right: CBB both credited Blue Flame’s
account, see JA3073, and concededly informed Blue Flame of the payment order’s
receipt, Resp.Br.14; JA140 ¶17. Article 4A gave CBB a legal obligation to pay Blue
Flame when the earliest of these events occurred. See U.C.C. §§4A-209(b)(1)(ii),
4A-404(a); accord id. §4A-209 cmt.4 (“Acceptance by the beneficiary’s bank means
that the bank is liable to the beneficiary for the amount of the order.”).
To be sure, CBB could theoretically have used its Funds Availability Disclo-
sure to support a one-day hold on the funds in Blue Flame’s account: Although §4A-
404(c) provides that “[t]he right of a beneficiary to receive [immediate] payment and
damages … may not be varied by agreement,” a superseding regulation mandates
that the funds be available no later than the next day. See 12 C.F.R. §§210.25(b)(1),
229.10(b) (Regulation CC). But that same law plainly forecloses CBB’s suggestion
that it could have held the funds indefinitely.
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CBB thus tries to conjure a “concession” on this point. But even if such purely
legal questions could be “conceded” away,1 the record below firmly establishes that
no such concession occurred. See Dkt. 159 at 5. And given the evidence above
about California’s inability and likely disinclination to instantaneously terminate the
contract once the transaction was consummated, supra pp.15-16, there is no evi-
dence (let alone conclusive evidence at the summary-judgment stage) that a one-day
hold would have made any difference at all.
B.
CBB’s Factual Assertions Are Disputed by Record Evidence
CBB argues along two additional lines that there are no meaningful record
disputes. Resp.Br.39-50. It is wrong at every turn.
1. California’s Post-Transfer Conduct
CBB claims that, “within hours of initiating the wire transfer, California offi-
cials decided not to proceed with the transaction.” Resp.Br.39. It then argues (at
40) that, because California could have terminated its contract with Blue Flame at
will, nothing “would have been different” if CBB had released the funds to Blue
Flame. This line of argument fails twice over.
1 But see United States v. Gomori, 437 F.2d 312, 314-15 (4th Cir. 1971)
(“[C]oncessions of law have not before been thought to bind us.”).
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First, CBB ignores that California’s conduct on March 26 was premised on
CBB’s §4A-404(a) violation and the groundwork CBB laid to effect it. Like JPMC’s
and CBB’s own employees, California officials clearly knew the State would face
unacceptable legal liability if it tried to unwind a transfer after Blue Flame’s account
had been credited. See, e.g., JA1054 (“[W]e asked [Evinger] if the money had been
credited to the client account at that time, and he said no. And we said, well, please
wait until we can find out additional information.”); JA804 (Evinger depo.) (“[T]he
conversation was [about] the bank maintaining that hold while—while they did more
research.”); see also U.C.C. §4A-211(f). Indeed, upon learning that California was
terminating the relationship, one State official was confused: “Please clarify[,] as we
had a confirmation that the wire transfer went through.” JA481. Had CBB told the
truth about crediting Blue Flame’s account, California would almost certainly not
have risked liability by trying to unwind the wire transfer, much less broken the
contract and sued for return of the money before giving Blue Flame even a few days
to demonstrate that it could deliver the product California needed so badly. See
supra pp.14-16. Indeed, armed with the evidence detailed above and the need to
make contested inferences about what would have happened had CBB followed the
law, a reasonable jury could certainly have rejected CBB’s speculative assertion that
California was destined to immediately cancel the contract no matter what. See id.
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20
Second, the record does not establish the underlying facts upon which CBB
premises the inferential judgment that California was bound to cancel right
away. CBB asserts that, upon receiving CBB’s flurry of calls, California “immedi-
ately” “decided not to proceed with the transaction,” and that “California officials
eagerly supported reversal of the wire transfer.” Resp.Br.39. But none of CBB’s
record cites supports these statements. The best CBB can provide is an intraoffice
email, JA1070, from one California official whose job was to manage the State’s
“short-term cash position,” and she “just … want[ed] to know where [the wire was]
in the process,” because she would have to “account for and deal with” the money
upon its return, JA1057-58 (“I did not request the wire to be recalled. … It wasn’t
anything that I had communicated to [JPMC]. I was told the wire was coming
back.”). And recall the standard: The record need not be devoid of evidence that
California might have terminated quickly; it need only be two-sided enough to per-
mit a reasonable juror to believe the opposite.
2. Blue Flame’s Damages
Meanwhile, crediting the story above and the facts detailed at App.Br.11-12,
Blue Flame has plainly established genuine disputes of fact regarding its damages,
and CBB cannot seriously argue otherwise.
Consider CBB’s contention, contra supra pp.14-15, that Blue Flame’s suppli-
ers could not have fulfilled its purchase orders. To take just one piece of contrary
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21
evidence, Blue Flame’s expert averred—in a report CBB’s brief simply ignores—
that it could have. JA2789. Once again, this is the end of the summary-judgment
fight: The standard of review is de novo; CBB’s burden is to establish the absence
of any competent evidence of damages; and it has chosen to ignore a valid expert
report entirely. That alone precludes summary judgment, and this Court need say
no more.
But there’s certainly more one could say. For example, CBB claims that
“there is no evidence to support” Blue Flame’s assertions that CBB’s destruction of
the California deal damaged Blue Flame’s ability to fulfill future orders. Resp.Br.43
n.16. But again, that just ignores record evidence—plainly identified in the opening
brief (at 23-24, 52)—that the demise of the California deal damaged both Blue
Flame’s reputation with its suppliers, JA2529; JA2207, and its ability to lock in pro-
duction lines to fulfill future orders, JA2530-31. At trial, CBB is free to pretend
such evidence doesn’t exist or merit any weight given its contrary story, but it cannot
defend the summary-judgment holding that way.
Or take the Suuchi masks. John Thomas’s testimony that these six-million
masks were available to be shipped immediately upon payment, JA1557, conclu-
sively establishes that fact for summary-judgment purposes. CBB thus tries to void
this testimony with an evidentiary objection, arguing that Thomas “could articulate
no basis in his personal knowledge to support” it. Resp.Br.43-44. But CBB omits
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22
that it was deposing Thomas at the time, see JA535-36, and didn’t ask him to “artic-
ulate” his “basis” for this testimony, see JA1557. Unsurprisingly, CBB cites no case
excluding a deponent’s testimony for failure to undergird his factual assertions with
a sua sponte explanation of his personal knowledge. CBB’s lack of a contempora-
neous objection is therefore fatal. But more importantly, this is what we have jury
trials for: If CBB thinks Thomas has no basis for this factual testimony, it can prove
that when he’s on the stand. Until then, this Court must proceed from the assumption
that, if CBB hadn’t violated §4A-404(a) and denied Blue Flame payment, Suuchi
would have delivered six million masks to California almost immediately.
Faced with such summary-judgment-precluding facts, CBB tries a goalpost
move, suggesting (without any authority) that instead of putting forth evidence of
some damages (which is the legal element for having a claim), Blue Flame must
instead show that it could have produced all 100 million masks because it somehow
forfeited the former approach. Resp.Br.48. In fact, Blue Flame has consistently
claimed all its lost profits as damages, e.g., JA36 (defendants “caused Blue Flame
to lose all profits”), without ever disclaiming its entitlement to its profits from deliv-
ering fewer than 100 million masks. And it is certainly entitled to press such an
argument on appeal from the district court’s holding that CBB’s “return of the wire
transfer did not damage [Blue Flame] in any respect.” JA3088 (emphasis added).
Meanwhile, no one could seriously believe that a contract like this one—which set
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23
a plainly aspirational goal, see App.Br.12, in the midst of wild uncertainty—was
designed to be valueless to Blue Flame unless it delivered every one of 100 million
masks on time.
C.
Until It Returns Blue Flame’s Funds, CBB Is in Continuing Viola-
tion of 404(a)
U.C.C. §4A-404(a) clearly states that “if a beneficiary’s bank accepts a pay-
ment order, the bank is obliged to pay the amount of the order to the beneficiary.”
And §4A-404(c) expressly contemplates “[t]he right of a beneficiary to receive pay-
ment and damages.” UCC §4A-404(c) (emphasis added); accord id. §4A-209 cmt.4
(“Acceptance by the beneficiary’s bank means that the bank is liable to the benefi-
ciary for the amount of the order.”). While Blue Flame has certainly argued for
“damages” as §4A-404(a) defines them, e.g., JA3034-36, it has also always asserted
its entitlement to the original payment, e.g., JA40 (CBB’s “acceptance of the pay-
ment order obligated it to pay Blue Flame”); id. (listing items of consequential dam-
ages as being “among other harms” caused by CBB’s U.C.C. violations). The as-
sertion that this argument is waived (at Resp.Br.50-51) accordingly fails.
Indeed, Blue Flame’s entitlement to payment is crystal clear under both §4A-
204(a) and §4A-404(a)—an overlap it had no need to break apart until the order on
appeal here unexpectedly rejected both bases for liability on different legal grounds.
That accounts for Blue Flame’s failure to earlier emphasize the straightforward fact
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24
that, if the Court found that CBB was violating the law by not paying all the money
to Blue Flame, the remedy would have to begin with paying the money to Blue
Flame. Indeed, because CBB’s failure to pay the money itself is an ongoing viola-
tion of §4A-404(a), it would be pointless to call this argument waived anyway, be-
cause Blue Flame can file a new, timely claim for redress until the “continuing vio-
lation” ends and CBB pays the funds transfer as the law requires. See DePaola v.
Clarke, 884 F.3d 481, 486-87 (4th Cir. 2018).
CBB’s contrary theory—that §4A-404(a) “[b]y its plain terms” limits a cus-
tomer’s recovery to consequential damages, Resp.Br.51—is not only foreclosed by
the “plain terms” but also completely zany. Under CBB’s view, a bank could seize
billions from a wire beneficiary, pay off only the consequential damages of which it
had notice, and then just walk away with the principal. Happily, however, Article
4A clearly covers this case by obliging CBB to “pay the amount of the order,” and
CBB will continue to have that enforceable duty until it complies with the law.
D.
CBB’s “Bad Faith” Argument Is Plainly Specious
CBB’s unseemly argument about the “good-faith” principle enshrined else-
where in the U.C.C., Resp.Br.52-56, merits little attention because it could not be
more clearly foreclosed. Indeed, Article 4A’s commentary explicitly states that “re-
sort to principles of law or equity outside of Article 4A is not appropriate to create
rights, duties and liabilities inconsistent with those stated in this Article.” U.C.C.
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25
§4A-102 cmt. (emphasis added). Moreover, as the opening brief explained,
App.Br.43-44, Article 4A directs a beneficiary’s bank to stay out the relationship
between the originator and beneficiary by sticking to its mechanical role, paying the
beneficiary, and leaving the resolution of disputes about the parties’ respective du-
ties, breaches, and acts of good or bad faith to other sources of law. Accordingly, it
is unsurprising that the sole appellate case CBB cites on this issue cuts directly
against it. In Regions Bank, the Eleventh Circuit observed that “[t]he legislative
intent reflected in [Article 4A] is that carefully drafted provisions are not to be side-
stepped when convenient by reference to other sources of law.” 345 F.3d at 1275
(citation and alteration omitted). It thus turned to alternate sources of law only after
finding that “Article 4A [was] silent” on the issues presented there, id., which can
hardly be said here.
Given the clarity with which Article 4A’s drafters foreclosed arguments like
this one, it is fair to assume that it appears here as a hook for casting irrelevant as-
persions at Blue Flame. See, e.g., Resp.Br.8-10, 55. Blue Flame obviously disputes
any assertion that it engaged in any fraud—a claim that CBB has been all too happy
to toss out without any obligation to prove it.2 But the more important point is that
2 The record is replete with evidence refuting these aspersions. Thomas’s
statements to Controller Yee regarding 3M masks were based on information, in-
cluding “proof of life” documentation, provided to Thomas by an individual with
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26
neither Article 4A nor basic rule-of-law principles allow a bank to use a half-baked
and underproved allegation of fraud on some other party to avoid liability for its own
Article 4A violations.
IV.
Factual Disputes Preclude Summary Judgment On Blue Flame’s
Tortious-Interference Claims
Apart from the same arguments about damages discussed above, see supra
pp.14-23, CBB’s defense of the district court’s summary-judgment grant on tortious
interference rests on two additional ineffective arguments.
First, CBB seeks (at 61-62) to transform the district court’s statement—that
“there are issues with the validity of the contractual relationship and business expec-
tancy between Blue Flame and California,” JA3090—into a finding that, as a matter
whom Blue Flame Strategies had a referral-partner agreement. JA2499-2507;
JA2512-13; JA3131; JA2533-39. And his statements regarding Blue Flame’s other
transactions were based on ongoing negotiations between Blue Flame and other re-
ferral partners, relayed to Thomas by Gula. JA2514-15; JA2521-23; JA2621-25.
This all proved irrelevant to Blue Flame’s deal with California anyway, because no
California official negotiated with Blue Flame to purchase any 3M-brand N95
masks, and California in fact wanted other mask models expressly approved by the
Department of Public Health. See JA1590 (Wong specifying model numbers);
JA615 (Wong: “[W]e can only accept … the model numbers I texted you”); JA2557-
58 (Wong confirming none of those models were 3M). Yee played no role in Cali-
fornia’s negotiations with Blue Flame or general procurement of PPE. JA2584 (Yee
“was not influencing or attempting to influence” other California officials to “do a
deal” with Blue Flame); JA2585-87. And there is no evidence that Thomas’s state-
ments about other deals, see Resp.Br.8, were ever made known to any California
official with authority over California’s decision to contract with Blue Flame.
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27
of law, fraud occurred and neither the contract nor expectancy was valid. Were that
so, one would expect the district court to have identified the elements of fraud in the
inducement and applied law to fact, which it did not. So even if the district court
had held that identifying some “issues” sufficed to justify its summary judgment on
this claim (which, again, it didn’t), reversal would still be required for failure to
identify any record evidence matching up to any identified law regarding fraud.
Second, CBB confuses the intent standard to suggest that CBB could only
have tortiously interfered if CBB was “substantially certain” that its conduct would
scuttle the contract. Resp.Br.62-63. That is wrong; the “substantially certain” re-
quirement is just a method of proving intent (through an action and knowledge of its
likely consequences), and so is obviously unnecessary if there is direct evidence of
intent to interfere. See Restatement (Second) of Torts §766 & cmt.j. Here, there is
substantial evidence that CBB was trying to blow up the deal to protect its capital
ratios, which CBB does not contest outside a single footnote. See Resp.Br.75 n.26.
And that footnote provides only post-hoc testimony about whether there actually
was a capital-ratios problem, which of course says nothing about whether Blue
Flame’s undisputed evidence shows that CBB believed there was a capital-ratios
problem at the time. Having left that issue uncontested, CBB has no way to defend
the district court’s summary judgment on this claim.
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CONCLUSION
This Court should direct judgment for Blue Flame on its §4A-204(a) claim,
and reverse and remand for trial on Blue Flame’s state-law, §4A-404(a), and tor-
tious-interference claims.
March 14, 2022
Respectfully submitted,
s/ Eric F. Citron
Eric F. Citron
Kathleen Foley
GOLDSTEIN & RUSSELL, P.C.
7475 Wisconsin Ave., Suite 850
Bethesda, MD 20814
(202) 362-0636
ecitron@goldsteinrussell.com
kfoley@goldsteinrussell.com
Counsel for Appellant Blue Flame Medical LLC
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