Full text
Nos. 21-2218, 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-Appellant.
On Appeal from the United States District Court
for the Eastern District of Virginia, No. 1:20-cv-00658-LMB-IDD
Before the Honorable Judge Leonie M. Brinkema
REPLY BRIEF FOR THIRD-PARTY DEFENDANT-APPELLANT
JPMORGAN CHASE BANK, N.A.
ALBINAS J. PRIZGINTAS
WILMER CUTLER PICKERING
HALE AND DORR LLP
1875 Pennsylvania Ave. NW
Washington, DC 20006
(202) 663-6000
MARGARITA BOTERO
WILMER CUTLER PICKERING
HALE AND DORR LLP
1225 Seventeenth St., Suite 2600
Denver, CO 80202
(720) 274-3135
ALAN E. SCHOENFELD
MARISSA W. MEDINE
WILMER CUTLER PICKERING
HALE AND DORR LLP
7 World Trade Center
250 Greenwich St.
New York, NY 10007
(212) 937-7518
alan.schoenfeld@wilmerhale.com
March 14, 2022
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TABLE OF CONTENTS
TABLE OF AUTHORITIES .................................................................................... ii
INTRODUCTION ..................................................................................................... 1
ARGUMENT ............................................................................................................. 2
I.
THERE IS NO RIGHT TO INDEMNIFICATION UNDER U.C.C. § 4A-211(f)
BECAUSE CHAIN BRIDGE REQUESTED AND DIRECTED THE
CANCELLATION ................................................................................................ 2
A.
Chain Bridge Canceled The Wire ......................................................... 2
B.
Chain Bridge Directed The Cancellation .............................................. 6
II.
JPMC AND CHAIN BRIDGE AGREED TO THE WIRE¶S RETURN WITHOUT
INDEMNITY ..................................................................................................... 12
III.
CHAIN BRIDGE CANNOT ESTABLISH CAUSATION ........................................... 17
CONCLUSION ........................................................................................................ 21
CERTIFICATE OF COMPLIANCE
CERTIFICATE OF SERVICE
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TABLE OF AUTHORITIES
CASES
Page(s)
Banca Commerciale Italiana v. Northern Trust International Banking
Corp., 160 F.3d 90 (2d Cir. 1998) ............................................................... 8, 9
Clackamas Gastroenterology Associates, P. C. v. Wells,
538 U.S. 440 (2003)......................................................................................... 9
Donmar Enterprises, Inc. v. Southern National Bank of North
Carolina, 64 F.3d 944 (4th Cir. 1995) ............................................................. 7
Knox Energy, LLC v. Gasco Drilling, Inc.,
738 F. App¶x 122 (4th Cir. 2018) ............................................................ 13, 15
Knussman v. Maryland,
272 F.3d 625 (4th Cir. 2001) ......................................................................... 17
Kunik v. New York City Department of Education,
436 F. Supp. 3d 684 (S.D.N.Y. 2020) ........................................................... 15
Qura v. D.R. McClain & Son,
1996 WL 554434 (4th Cir. Sept. 30, 1996) ................................................... 17
White v. Johns-Manville Corp.,
662 F.2d 243 (4th Cir. 1981) ........................................................................... 8
STATUTORY PROVISIONS
U.C.C.
§ 1-103 ............................................................................................................. 9
Article 4A Prefatory Comment ........................................................................ 9
§ 4A-105 cmt. 2 ............................................................................................... 3
§ 4A-106 ...................................................................................................... 3, 4
§ 4A-210 .......................................................................................................... 4
§ 4A-211 .................................................................................................passim
§ 4A-211 cmt. 5 ........................................................................................... 6, 8
OTHER AUTHORITIES
Restatement (Second) of Contracts (1981) .............................................................. 13
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INTRODUCTION
Chain Bridge obtained exactly what it wanted when²holding $456 million
the State of California had wired to Chain Bridge¶s customer, Blue Flame
Medical²it asked JPMC: ³Is there any way for JPMorgan to issue a recall for the
wire?´ Now Chain Bridge tries to avoid the consequences, but neither the law nor
facts support that result.
Chain Bridge insists that it should be indemnified under U.C.C. § 4A-211(f),
but that provision does not apply because Chain Bridge did not ³agree[] to´ a
³cancellation´ ³by the sender.´ Rather, Chain Bridge requested and directed the
cancellation. Moreover, the evidence shows that Chain Bridge reached an
agreement with JPMC to reverse the wire without any indemnification obligation,
which defeats any argument for indemnification. Finally, the factual record
forecloses Chain Bridge from establishing the causal link required for
indemnification.
None of this is to say that the concerns Chain Bridge had in making its
request to JPMC were groundless. Under urgent circumstances, Chain Bridge
sought the reversal of a half-billion-dollar wire based on concerns about its own
client and protecting its own balance sheet. The priority was to safeguard their
own exposure with all possible speed. Indemnity, simply, was not part of the
bargain. As Chain Bridge¶s principals put it, with resignation: ³It is what it is. «
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[We] have been working on this with both the State of California and JPMorgan
and this is what we have to do.´
ARGUMENT
I.
THERE IS NO RIGHT TO INDEMNIFICATION UNDER U.C.C. § 4A-211(f)
BECAUSE CHAIN BRIDGE REQUESTED AND DIRECTED THE CANCELLATION
A.
Chain Bridge Canceled The Wire
Section 4A-211(f) provides indemnification only where there is a
³cancellation « by the sender,´ and ³the receiving bank « agrees to´ that
³cancellation.´ U.C.C. § 4A-211(f). Where, as here, a receiving bank cancels a
wire, there is no right to indemnification under § 4A-211(f). At 1:34 p.m. on
March 26, 2020, Chain Bridge¶s President called JPMC and asked: ³Is there any
way for JPMorgan to issue a recall for the wire?´ JA3135 at 0:04-0:09. As JPMC
explained (JPMC Br. 29-31), Chain Bridge¶s oral request to reverse the wire
constitutes a cancellation request under Article 4A, to which JPMC agreed.
JA246-247. That should be the end of the matter.
Instead of grappling with its own cancellation request²Chain Bridge
mentions the call only once in passing (CBB Br. 16)²Chain Bridge seeks to evade
it. Reprising arguments it pressed in the district court (but that the court did not
address), Chain Bridge contends that its own actions are ³irrelevant´ because only
a sender can cancel a wire. CBB Br. 69. As JPMC already explained (JPMC Br.
31-32), that is wrong, and Chain Bridge¶s remaining arguments in its answering
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brief lack merit. As detailed below, Chain Bridge had the ability to cancel the
wire; its various claims that it was powerless to do so are belied by statute and
practical operation of the wire system.
Focusing on § 4A-211(a), Chain Bridge argues that this provision ³defines´
the universe of cancellations and supports the notion that ³every cancellation of a
payment order is done by µthe sender of the payment order.¶´ CBB Br. 70.
Section 4A-211(a) does no such thing; it simply describes how senders may
transmit communications canceling, or amending, payment orders. Neither this
provision, nor any other, states that ³every cancellation´ (id.) is done by the sender.
Chain Bridge¶s reliance on § 4A-211(b) fails for the same reason.
The provisions JPMC cites, by contrast, show that receiving banks can effect
cancellations under Article 4A. See JPMC Br. 31-32. Chain Bridge says little in
response. See CBB Br. 70-72. It acknowledges (CBB Br. 70 n.23) that Article 4A
identifies the ³functions of [a] receiving bank´ as ³receipt, processing, and
transmittal of payment orders, cancellations and amendments.´ U.C.C. § 4A-105
cmt. 2 (emphasis added). Chain Bridge¶s only response is to protest, without
explanation, that that language ³cannot plausibly´ mean what it says. CBB Br. 71
n.24. Chain Bridge also acknowledges that Article 4A speaks to a receiving bank¶s
³processing of payment orders and communications cancelling or amending
payment orders,´ U.C.C. § 4A-106(a) (emphasis added), but tries to amend the text
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by adding the word ³sender´ where it does not appear. See CBB Br. 70 n.23
(arguing that § 4A-106(a) must refer to ³senders¶ µcommunications cancelling or
amending payment orders¶´ (emphasis in original)).
Moreover, Chain Bridge accepts that what happened in this case was a
³reversal´ (CBB Br. 19, 26), as did the district court (see JA3096 (³the reversal of
the wire transfer´)). And there can be no question that a receiving bank can effect
a reversal of funds, as Chain Bridge did here. Chain Bridge recognizes that § 4A-
210 ³allows a receiving bank to µreject¶ a payment order´ (CBB Br. 70). Chain
Bridge resists the conclusion that a rejection is just another form of cancellation by
the recipient²both of which result in the reversal of a wire. See U.C.C. §§ 4A-
210, -211. But the only way that Chain Bridge gets there is by clinging to the point
that a ³receiving bank can reject a payment order only before it is accepted.´ CBB
Br. 70. That is irrelevant. A cancellation is also constrained by ³acceptance,´
U.C.C. § 4A-211(c), (d). Whether or not the formality of ³acceptance´ has
occurred dictates only whether a reversal (i.e., a rejection or a cancellation) is
legally effective. It does not bear on whether a receiving bank can reverse a
payment order in the first place²and a receiving bank clearly can do so.
Indeed, Chain Bridge now abandons the categorical argument it advanced in
district court that it was ³powerless´ to reverse the wire (Chain Bridge Mem. Opp.
to JPMC Mot. Summ. J. 14, Dist. Ct. Dkt. 141 (³CBB Opp.´)), retreating to the
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position that there is ³considerable doubt about´ whether it could do so (CBB Br.
71). As JPMC¶s cited sources show, receiving banks can reverse wires²even
unilaterally. A Fedwire guide expressly instructs receiving banks: ³If you receive
a funds transfer message and need to return it to the sender ABA, you can derive
the reversal.´ JA2940 (emphasis added), cited at JPMC Br. 32. Chain Bridge
cites nothing to the contrary. And the fact that receiving banks can effectuate
unilateral reversals highlights the absurdity of Chain Bridge¶s categorical position
that ³every cancellation of a payment order is done by µthe sender of a payment
order.¶´ CBB Br. 70 (second emphasis added). Chain Bridge¶s argument that
every cancellation necessarily comes from a sender would mean that a unilateral
reversal by a receiving bank would entitle that receiving bank to indemnification
for its unilateral actions. That cannot be correct.1
1
The facts need not be as extreme as a unilateral reversal unbeknownst to the
sending bank to illustrate the flaw in Chain Bridge¶s view of § 4A-211(f). Take
the case of a receiving bank that refuses to credit its beneficiary client despite pleas
from the originator and the sending bank. The receiving bank insists on reversal of
the payment order and asks the sending bank to provide a reversal message. The
sender accommodates the request so that its client can find another way to pay the
beneficiary. Under Chain Bridge¶s read, those circumstances would still constitute
a cancellation ³by the sender´ triggering an indemnification obligation under § 4A-
211(f)²even though the sender unwaveringly pressed the receiving bank to credit
the funds.
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B.
Chain Bridge Directed The Cancellation
Even assuming Chain Bridge¶s request that JPMC recall the wire did not
itself constitute a cancellation request by Chain Bridge, Chain Bridge¶s
indemnification claim still fails because Chain Bridge directed the cancellation.
Chain Bridge challenges that result on the law and the facts. It is wrong on both.
1.
As to the law, Chain Bridge¶s position conflicts with the statute¶s
plain language. The words of U.C.C. § 4A-211(f) take care to set out a particular
situation where the cancellation is ³by´ one bank and a different bank ³agrees to´
it: an affirmative act ³by the sender,´ to which the receiving bank responsively
³agrees.´ U.C.C. § 4A-211(f). It would be inconsistent with that plain text to
include the distinct circumstance where a cancellation is directed by the receiving
bank.2
Ignoring the text, Chain Bridge turns to the commentary and contorts its
guidance to mean that cancellation is always ³an accommodation to the sender,´
U.C.C. § 4A-211 cmt. 5, because receiving banks are under no obligation to return
accepted funds. See CBB Br. 73. That is incorrect. As explained, a receiving
bank can reverse a wire transfer unilaterally, without the sender¶s advance
knowledge or request. See supra p.5. There is no way to understand that event as
2
Chain Bridge¶s claim would still fail on the law if the record reflected a joint
decision by Chain Bridge and JPMC to reverse the wire, as opposed to, as here, a
cancellation directed by Chain Bridge. See JPMC Br. 26, 34-35.
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³an accommodation to the sender´²even though it is true that the receiving bank
in that hypothetical case was under no obligation to effectuate the return. In any
event, the commentary¶s use of the term ³accommodation´ underscores that the
phrase ³agrees to´ (in the provision¶s text) describes a responsive act. See Donmar
Enters., Inc. v. Southern Nat¶l Bank of N.C., 64 F.3d 944, 948 (4th Cir. 1995)
(commentary is ³µuseful in interpreting Article 4A¶´). Where a receiving bank
directs a cancellation²as Chain Bridge did here²that is incompatible with the
meaning of ³agrees to.´
Chain Bridge complains that JPMC¶s interpretation would require a factual
finding ³that the receiving bank honored the cancellation request solely to
µaccommodate¶ the sender¶s interest, rather than its own.´ CBB Br. 73. Not so.
The statute only provides for indemnification when a receiving bank ³agrees to´
cancellation of a payment order ³by the sender´²³as an accommodation to the
sender,´ and not in other circumstances. Under that reading, courts are tasked, as
they always are, with determining whether facts match a legal description. To be
sure, there may be close cases where it is for some reason unclear which bank
directed the cancellation. But courts are well-equipped to analyze whether
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circumstances fit statutory language. And, in any event, this is not a close case.
See infra pp.10-11.3
Finally, indemnification at common law reaffirms JPMC¶s straightforward
interpretation of the statute¶s text, and the U.C.C. expressly incorporates common-
law principles. Indeed, as Chain Bridge does not and cannot dispute, only JPMC¶s
reading of § 4A-211(f) accords with the purpose of indemnification at common
law, which is premised on the principle that a party should be responsible for the
consequences of its actions. See JPMC Br. 28-29, 36-37; see, e.g., White v. Johns-
Manville Corp., 662 F.2d 243, 249-250 (4th Cir. 1981) (indemnification ³applies a
restitutionary principle´ that allows an indemnitee whose liability is merely
³technical, passive or secondary´ to ³shift[]´ ³the burden for the entire loss « to
the indemnitor whose actual fault caused the injury´). Indemnification does not
apply where, as here, the putative indemnitee undertook the liability-producing
conduct actively and of its own accord.
Chain Bridge invokes Banca Commerciale Italiana v. Northern Trust
International Banking Corp., 160 F.3d 90 (2d Cir. 1998), to argue that the Court
3
Chain Bridge criticizes JPMC for not mentioning the commentary¶s
statement that a receiving bank ³is automatically entitled to indemnification´ if it
³agrees to cancellation.´ CBB Br. 73 (quoting U.C.C. § 4A-211 cmt. 5) (emphasis
added). JPMC has never questioned the so-called ³automatic-ness´ (id.) of § 4A-
211(f)¶s operation²if its predicate requirements are satisfied. But they are not
satisfied here.
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should disregard common-law principles of indemnification because Article 4A
displaces them. Banca is inapposite. The narrow question there was whether a
statute of limitations for actions ³µcreated or imposed by statute¶´ governed a
§ 4A-211(f) claim. To answer that question, the court examined whether § 4A-
211(f) indemnification would exist apart from statute. It is both uncontroversial
and unremarkable to say that it would not, and accordingly that the codification of
the provision marked a ³depart[ure] from the common law.´ Banca, 160 F.3d at
94; see also Article 4A Prefatory Comment (before Article 4A, there was ³no
consensus about the juridical nature of a wire transfer´). Chain Bridge¶s leap from
there²that § 4A-211(f) precludes consideration of common-law principles²is
unsupported. Far from being precluded, courts are regularly encouraged to find
³helpful guidance´ from ³the common law¶s definition´ of familiar concepts in
statutory interpretation cases. Clackamas Gastroenterology Assocs., P.C. v. Wells,
538 U.S. 440, 447-448 (2003).
The U.C.C. directs it explicitly. A core feature of its design is the
incorporation of common-law principles unless inconsistent with the text. See
U.C.C. § 1-103(b) (³Unless displaced by the particular provisions of [this Act], the
principles of law and equity « supplement its provisions.´). Accordingly,
common-law indemnification informs the bounds of the provision and confirms
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that a § 4A-211(f) claim fails where the receiving bank itself cancels or directs
cancellation of the payment order.
2.
As to the facts, Chain Bridge accuses JPMC of
³mischaracteriz[ations],´ but Chain Bridge¶s recitation cannot be reconciled with
the record. The first two facts that Chain Bridge cites to challenge that it ³directed
the cancellation´ are (1) that JPMC ³initiated contact with Chain Bridge to report
JPMorgan¶s own µconcerns of fraud¶´ and (2) that JPMC asked ³Chain Bridge to
place a temporary hold on the funds.´ CBB Br. 74-75 (quoting JA3074). If
initiating contact to report concerns and placing funds on hold are relevant to show
who directed a cancellation, they reveal unequivocally that it was Chain Bridge.
Before JPMC ³initiated contact with Chain Bridge,´ Chain Bridge repeatedly
called California to report concerns about Blue Flame and the legitimacy of the
transaction (JA281-282). That is an extraordinary step for a counterparty bank
with no relationship to the sender of the wire. JA337-338; JA1480; JA1494;
JA338 (California representative not aware of ³any other instance´ where a
counterparty bank sought to contact California about a wire¶s return). And before
the banks ever spoke, Chain Bridge independently and immediately placed the
funds on hold based on concerns it had about its own client. JA256; JA260l;
JA185-186. Under Chain Bridge¶s own theory, it was the bank that directed the
reversal from the start.
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Chain Bridge calls the ³notion´ that it ³orchestrated´ the cancellation
³baseless´ (CBB Br. 75) but fails to even try to refute JPMC¶s evidence for it²for
example, that Chain Bridge explicitly pushed for the wire¶s reversal twice. Chain
Bridge pushed for reversal with California and, undeterred after California
declined at the time (JA215), Chain Bridge then asked JPMC to issue a recall
(JA3135 at 0:04-0:09). Chain Bridge¶s answering brief has nothing to say about
why those actions do not show that Chain Bridge orchestrated the cancellation.
Chain Bridge also accuses JPMC of ³obliquely´ contending that the wire
transfer ³somehow´ ³caused µdismay and concern¶ over the bank¶s µcapital
ratios.¶´ CBB Br. 75 n.26 (citing JPMC Br. 1, 9). There is nothing oblique about
the record on this point, as the contemporaneous evidence shows. Chain Bridge
employees said, ³[T]here is no way we can hold it on our balance sheet´ (JA172)
and that they would ³need it off of the books asap´ (JA164). The manager of
Chain Bridge¶s commercial banking team warned that it could cause ³problems on
our capital ratios´ as it was ³half our asset size.´ JA167. To the extent the Court
harbors any factual questions about whether Chain Bridge orchestrated the
cancellation, it should remand for trial.
Finally, repeating a point the district court found unremarkable, Chain
Bridge criticizes JPMC for taking a position here that, it says, is inconsistent with
the one it has taken against California. See CBB Br. 75-76. There is no
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inconsistency. See JPMC Br. 35 n.6. Of course California wanted its $456 million
returned, but that is immaterial here. This third-party case brought by Chain
Bridge is about Chain Bridge¶s demand for indemnification from JPMC and the
inapplicability of Section 4A-211(f) to the interaction between the banks.
II.
JPMC AND CHAIN BRIDGE AGREED TO THE WIRE¶S RETURN WITHOUT
INDEMNITY
Even assuming the requirements of § 4A-211(f) were satisfied, Chain
Bridge¶s indemnification claim still fails because the parties ³otherwise provided
in an agreement.´ U.C.C. § 4A-211(f).
Having resisted the point below, Chain Bridge finally concedes on appeal
that an ³agreement´ to displace an indemnification obligation under § 4A-211(f)
need not be express. Compare CBB Opp. 18 (³Section 4A-211(f) provides that
parties can expressly agree that there will be no indemnification between them[.]´
(emphasis added)), with CBB Br. 77 (³[U]nder the UCC, an µagreement¶ can be
µinferred from other circumstances, including a course of performance, course of
dealing, or usage of trade.¶´). Under the U.C.C.¶s plain text, an ³µagreement¶ can
be µinferred from other circumstances.¶´ CBB Br. 77; see JPMC Br. 38-39. Here,
the circumstances provide clear evidence of an agreement to return the funds
without any indemnification by JPMC. JPMC Br. 49-46. At the very least, the
circumstances raise a genuine factual dispute precluding the entry of summary
judgment in Chain Bridge¶s favor.
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There is no dispute on the law. As one of Chain Bridge¶s own cases shows,
to determine whether a meeting of the minds occurred between the parties to an
agreement, a factfinder assesses whether the parties¶ ³µwords and acts¶´ ³µjudged
by a reasonable standard [] manifest an intention to agree[.]¶´ Knox Energy, LLC
v. Gasco Drilling, Inc., 738 F. App¶x 122, 124 (4th Cir. 2018), cited at CBB Br.
79; see also Restatement (Second) of Contracts § 202(1) (1981) (³Words and other
conduct are interpreted in the light of all the circumstances, and if the principal
purpose of the parties is ascertainable it is given great weight.´). Here, Chain
Bridge¶s words and acts²including Chain Bridge informing JPMC of its
independent decision to hold the funds, its disclosure to JPMC of serious concerns
about the wire¶s legitimacy, its discussion with JPMC of its communication with
California, and its express request to JPMC to recall the wire²made clear to
JPMC that Chain Bridge expected the reversal to proceed without indemnity by
JPMC. See JPMC Br. 39-43. Contemporaneous record evidence shows that Chain
Bridge had the same understanding. See id.
The most notable example of Chain Bridge¶s understanding, though
certainly not the only one, is the 1:43 p.m. call on March 26 among high-level
Chain Bridge employees. JA3140 at 1:19-2:50; see also JPMC Br. 41-42. Chain
Bridge attempts to downplay the significance of this critical call and even omits
crucial portions of it. See CBB Br. 78-79. The relevant discussion²prompted by
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the concerned question of a Chain Bridge wire transfer specialist with more than
20 years¶ experience²is reflected below:
Operations Technician (Mojica-Guadron): Are we getting an
indemnity letter from Chase?
President (Evinger): You¶re going to get a Service Bureau message
through Fedline. « Just return it to the same place it came from. «
So, you will be getting something from Chase imminently on Fed line.
We asked for it to go back through Fed line. «
Director of Operations (Thais Ribeiro): Claudia, you mentioned the
indemnity letter. Is that part of the procedures usually?
Operations Technician (Mojica-Guadron): Normally, you want to
get that from the other bank just because²and in this case because we
credited the customer¶s account.
President (Evinger): It¶s okay. Don¶t worry about it. « It is what it
is. It¶s²
CEO (Brough): David and I have been working on this with both the
State of California and JPMorgan and this is what we have to do. «
JA3140 at 1:19-2:50.
In this singularly revealing exchange, Chain Bridge¶s President cast aside
the question from the bank¶s wire-transfer specialist, who asked whether it was
necessary to execute an indemnity letter with Chase, per ³normal[]´ practice.
JA3140 at 1:19-2:50. With resignation, Chain Bridge¶s President told her: ³It¶s
okay. Don¶t worry about it. « It is what it is. It¶s²´ at which point Chain
Bridge¶s CEO interjected: ³[We] have been working on this with both the State of
California and JPMorgan and this is what we have to do.´ Id. (emphasis added).
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The only plausible way to interpret this call²and the only permissible way at
summary judgment (see JPMC Br. 23)²is that Chain Bridge¶s principals were
relaying to their team the mutual understanding, the ³µmeeting of the minds,¶´
Knox Energy, 738 F. App¶x at 124, that had developed during their conversations
with JPMC throughout the day. Chain Bridge would return the funds to JPMC
without any indemnification obligation by JPMC.
Chain Bridge still cannot provide a coherent counter-explanation of this
phone call. See JPMC Br. 44-45. As in the district court, Chain Bridge seeks
refuge in its President¶s post hoc deposition testimony, where he claimed that he
knew at the time of the cancellation that Chain Bridge was fully and
unconditionally protected by a ³built in´ indemnification right. JA804; see CBB
Br. 78. That self-serving deposition testimony cannot be reconciled with the
contemporaneous record evidence. See, e.g., Kunik v. New York City Dep¶t of
Educ., 436 F. Supp. 3d 684, 695 (S.D.N.Y. 2020) (³In the face of
contemporaneous evidence in Plaintiff¶s own words, her self-serving comments
from her deposition after the filing of this lawsuit cannot create an issue of
fact[.]´), aff¶d, 842 F. App¶x 668 (2d Cir. 2021); see also JPMC Br. 45-46.
Nor can Chain Bridge reconcile the view it now espouses of this phone call
with its position in this litigation. Chain Bridge has insisted that it is ³customary´
(Chain Bridge Mem. Supp. Mot. Summ. J. 15, Dist. Ct. Dkt. 123) for reversal
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messages to disclaim indemnity by displaying the phrase, ³No Indemnity.´
Attempting to evade the plain consequence of that position²i.e., that Chain Bridge
would have done or said something to prepare for such a disclaimer²Chain
Bridge now claims, citing nothing, that its principals had ³absolutely no reason´ to
³expect´ the disclaimer here. CBB Br. 80. But that position finds no support in
the evidentiary record, and certainly is not a permissible inference to Chain Bridge
at summary judgment.
Surely, Chain Bridge¶s principals would have had reason in this situation to
prepare for the ³No Indemnity´ disclaimer. Chain Bridge itself requested the
reversal and this was an unprecedented, half-billion-dollar wire transfer²
amounting to almost half of Chain Bridge¶s total assets, with significant
consequences for Chain Bridge. See, e.g., JA167 (Chain Bridge¶s commercial
banking team calling the wire ³massive´ and warning that it could cause ³problems
on our capital ratios´ as it was ³half our asset size´). At minimum, Chain Bridge¶s
principals would have expressed a caveat on the call giving instructions to the wire
transfer specialist: ³Just return [the wire], unless the recall message includes the
phrase µNo Indemnity.¶´
That is not what happened, and the reason is simple. The possibility of a
³No Indemnity´ disclaimer did not matter. Chain Bridge and JPMC had already
agreed, as reflected by their words and deeds, to return the wire without indemnity.
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As Chain Bridge¶s principals succinctly summed it up: ³It is what it is. « [We]
have been working on this with the State of California and JPMorgan and this is
what we have to do.´ JA3140 at 2:31-2:50.
III.
CHAIN BRIDGE CANNOT ESTABLISH CAUSATION
Finally, Chain Bridge¶s indemnification claim also fails because its asserted
³loss and expenses´ were not ³incurred « as a result of the cancellation.´ U.C.C.
§ 4A-211(f). Any loss and expenses accruing to Chain Bridge²i.e., Blue Flame¶s
damages, if any, and Chain Bridge¶s litigation expenses²result from Chain
Bridge¶s own actions. At minimum, there are genuine factual disputes precluding
the entry of summary judgment for Chain Bridge.
It is undisputed that Chain Bridge, as the party seeking indemnification
under § 4A-211(f), must establish but-for and proximate causation for its alleged
losses and expenses. See JPMC 46-47; CBB Br. 80-83. The disagreement on
appeal concerns whether, as a factual matter, Chain Bridge satisfied its burden to
prevail at summary judgment. Causation is a fact-intensive inquiry that is rarely
suitable for summary judgment. See Knussman v. Maryland, 272 F.3d 625, 652
(4th Cir. 2001) (Lee, J., concurring in part) (³It is well settled that causation is
ordinarily left for a jury to determine.´); Qura v. D.R. McClain & Son, 1996 WL
554434, at *4 (4th Cir. Sept. 30, 1996). It is especially unwarranted here, where
there is substantial evidence from which a jury could conclude that Chain Bridge
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never would have given Blue Flame access to $456 million wire²let alone within
sufficient time for Blue Flame to purportedly complete its deal with California.
Chain Bridge insists that only ³speculative´ ³supposition´ supports that it
³would have continued to withhold payment from Blue Flame in the absence of a
cancellation.´ CBB Br. 82. That is incorrect. As the record shows, Chain Bridge
resolved on its own to hold the wired funds up to and past the point when Blue
Flame supposedly needed to wire them out to complete the PPE transaction. That
alone defeats causation. See JPMC Br. 47-50. According to Blue Flame, the funds
needed to be transferred to a manufacturer immediately in order to secure
inventory for its first California shipment. JA19 ¶ 56; see also JA2085. Yet the
record is clear that Chain Bridge²itself having pushed for the reversal of the wire
twice²had no intention of making the funds available to Blue Flame that day, let
alone anytime soon, regardless of JPMC¶s conduct.
Chain Bridge¶s CEO confirmed as much, testifying that he was ³almost sure
that [Chain Bridge] would have held the funds´ had Chain Bridge ³not received the
request to return the wire.´ JA192; see also JA860 (³We probably would have
held the funds had we not received a request to return the funds.´). Citing the
same deposition testimony, Chain Bridge suggests that it might have paid Blue
Flame ³as soon as the next day´²March 27. CBB Br. 82-83 (citing JA857, 860-
861). However, the testimony on which Chain Bridge relies shows that its hold
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was the default, and Chain Bridge would have consulted counsel to extend it
however long it deemed necessary: ³[W]e would have engaged counsel to extend
that hold greater than the period beyond our funds availability policy.´ JA861.4
Moreover, the contemporaneous record evidence shows that while Chain
Bridge still had the funds, it told Blue Flame¶s principal to look elsewhere for
banking assistance. JA384 (³John [Brough] told Mike [Gula] that the bank was
going to close the Blue Flame Medical account and all of the other accounts Mike
had opened in the last couple of weeks. « John told Mike to not send the money
back to Chain Bridge Bank because the funds would be returned due to the fact
that the account was closed.´). And five minutes after Chain Bridge returned the
wire to JPMC, it closed Blue Flame¶s account. See JA142 ¶¶ 31, 33 (showing
account closure at 3:26 p.m. ET on March 26, 2020).
Chain Bridge tries to minimize its effort to sever the relationship with Blue
Flame by saying it took no action until after JPMC shared concerns about the wire.
See CBB Br. 83. But minutes after Chain Bridge received the wire and before
speaking with JPMC, Chain Bridge instructed employees to cease communications
4
JPMC does not question whether Chain Bridge¶s decision to hold the funds
was prudent. And Chain Bridge¶s incentives to do so were strong. As JPMC
explained, Chain Bridge was concerned that providing Blue Flame with access to
the funds might run afoul of Chain Bridge¶s obligations under the Bank Secrecy
Act (JPMC Br. 48-49), which Chain Bridge does not dispute (CBB Br. 80-83).
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with its client. JPMC Br. 18 (citing JA414; JA259). As for the delayed account
termination, the reason for that was purely logistical. According to Chain Bridge,
it was unable close Blue Flame¶s account until the funds were off its books. See
JA418. In sum, the undisputed facts show that Chain Bridge ceased
communication with Blue Flame almost immediately upon receipt of the wire, and
then severed the relationship with Blue Flame as soon as it could. JPMC¶s actions
aside, Blue Flame would have found itself in the same position with the same
purported injuries because Chain Bridge was not going to make the funds available
to Blue Flame within the time when Blue Flame said it needed them. Thus, JPMC
was not the but-for cause of Chain Bridge¶s ³loss and expenses.´5
Finally, as JPMC explained (JPMC Br. 47-48, 50), it need not show that
Chain Bridge ³µwould have returned the funds without a cancellation by
JPMorgan¶´ (CBB Br. 81 (quoting district court decision)). But Chain Bridge
certainly could have done so (see supra p.5), and there is evidence in the record
that it would have²because Chain Bridge¶s wire transfer policy required the
return of the funds. See JPMC Br. 50-51. Chain Bridge refers to the policy as an
5
Chain Bridge contends that Blue Flame was aware of Chain Bridge¶s funds
availability policy, which states that wired funds will not be available until the next
business day. CBB Br. 83 (citing JA2839). For purposes of the causation inquiry
here, it is immaterial whether Blue Flame should have relied on same-day access to
the funds. The point is that Blue Flame purportedly did²and that Chain Bridge
chose not to grant it.
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³internal guideline,´ but that distorts the policy¶s plain text. CBB Br. 82. Under
the relevant provision, a wire ³will be returned´²without exception or
discretion²when there is ³any question as to the beneficiary¶s right to the
funds[.]´ JA226 (emphasis added). Chain Bridge focuses on the preceding
sentence, but that sentence concerns circumstances that are not at issue here²³a
discrepancy between the beneficiary account number and the beneficiary name[.]´
Id. There is no dispute that the wire presented a ³question as to the beneficiary¶s
right to the funds,´ and when that occurs, Chain Bridge¶s policy mandates that the
funds be returned.
CONCLUSION
The order of the district court granting summary judgment to Chain Bridge
should be reversed, and judgment should be rendered in favor of JPMC. In the
alternative, the order of the district court granting summary judgment to Chain
Bridge should be reversed and the case should be remanded for further
proceedings.
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Respectfully submitted.
/s/ Alan E. Schoenfeld
ALBINAS J. PRIZGINTAS
WILMER CUTLER PICKERING
HALE AND DORR LLP
1875 Pennsylvania Ave. NW
Washington, DC 20006
(202) 663-6000
MARGARITA BOTERO
WILMER CUTLER PICKERING
HALE AND DORR LLP
1225 Seventeenth St., Suite 2600
Denver, CO 80202
(720) 274-3135
ALAN E. SCHOENFELD
MARISSA W. MEDINE
WILMER CUTLER PICKERING
HALE AND DORR LLP
7 World Trade Center
250 Greenwich St.
New York, NY 10007
(212) 937-7518
alan.schoenfeld@wilmerhale.com
March 14, 2022
USCA4 Appeal: 21-2218 Doc: 41 Filed: 03/14/2022 Pg: 25 of 27
CERTIFICATE OF COMPLIANCE
Pursuant to Fed. R. App. P. 32(g)(1), the undersigned hereby certifies that
this brief complies with the type-volume limitation of Fed. R. App. P.
32(a)(7)(B)(ii).
1.
Exclusive of the exempted portions of the brief, as provided in Fed. R.
App. P. 32(f), the brief contains 5,013 words.
2.
The brief has been prepared in proportionally spaced typeface using
Microsoft Word for Office 365 in 14 point Times New Roman font. As permitted
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feature of this word processing system in preparing this certificate.
/s/ Alan E. Schoenfeld
ALAN E. SCHOENFELD
March 14, 2022
USCA4 Appeal: 21-2218 Doc: 41 Filed: 03/14/2022 Pg: 26 of 27
CERTIFICATE OF SERVICE
I hereby certify that on this 14th day of March, 2022, I electronically filed
the foregoing with the Clerk of the Court for the United States Court of Appeals
for the Fourth Circuit using the appellate CM/ECF system. Counsel for all parties
to the case are registered CM/ECF users and will be served by the appellate
CM/ECF system.
/s/ Alan E. Schoenfeld
ALAN E. SCHOENFELD
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