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No. 22A___
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In the Supreme Court of the United States
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BLUE FLAME MEDICAL LLC,
Petitioner,
v.
CHAIN BRIDGE BANK, N.A., ET AL.,
Respondents.
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APPLICATION TO EXTEND TIME TO FILE A PETITION FOR A WRIT OF
CERTIORARI FROM JUNE 20, 2023, TO AUGUST 17, 2023
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To the Honorable John G. Roberts, Jr., as Circuit Justice for the Fourth Circuit:
Pursuant to 28 U.S.C. § 2101(c) and Supreme Court Rules 13.5, 22, and 30.3, Blue
Flame Medical LLC respectfully requests that the time to file a petition for a writ of
certiorari be extended 58 days from June 20, 2023, to and including August 17, 2023.
The Fourth Circuit issued its opinion on March 20, 2023. App. 2. Absent an
extension, the petition would be due on June 20, 2023.1 This application is being filed
at least 10 days before that date. See Sup. Ct. R. 13.5. This Court will have
jurisdiction to review the petition under 28 U.S.C. § 1254.
1 Ninety days from March 20, 2023, is Sunday, June 18, 2023. The Following day, Monday, June
19, 2023, is a federal legal holiday. See 5 U.S.C. § 6103(a) (recognizing “Juneteenth National
Independence Day, June 19”). Thus, the petition was originally due on June 20, 2023. See Sup. Ct.
R. 30.1.
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1. This case presents important questions regarding the U.S. Federal Reserve
Bank’s Regulation J, which incorporates Article 4A of the Uniform Commercial Code
(Article 4A) governing cash-equivalent interbank payment orders, colloquially known
as “wire transfers.” Specifically, the case raises the questions (a) whether U.C.C.
§ 4A-204(a) requires repayment when a bank accepts a payment order falsely issued
in its customer’s name, and (b) whether Article 4A preempts state-law claims
respecting a bank’s knowingly false issuance of a payment order in its customer’s
name. The Fourth Circuit held that (a) “Section 4A-204(a) is simply inapplicable” to
the knowingly unauthorized wire transfer that petitioner’s bank made from
petitioner’s account, App. 12-14 & n.2, and yet also, somehow, that (b) this same
conduct “falls within the scope of Article 4A” such that petitioner’s state-law claims
against its bank, based on that conduct, are preempted. App. 14-16.
Respondents include the two banks from which a wire transfer was initiated and
received, respectively, and then wired back without the petitioner account holder’s
authorization after the funds had already been accepted by the receiving bank into
petitioner’s account—the receiving bank being respondent Chain Bridge Bank, N.A.
Chain Bridge Bank’s top executives who were involved in executing the unauthorized
wire from petitioner’s account are also respondents.
This case arises from Chain Bridge Bank’s unauthorized wire of hundreds of
millions of dollars out of petitioner’s account, causing the collapse of an over $600
million contract between petitioner and the State of California, which ordered
personal protective equipment from petitioner during the early days of the COVID-
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19 pandemic. App. 5-6. Chain Bridge Bank wired over $450 million in prepaid funds
to California’s account with respondent JPMorgan Chase Bank, N.A., admittedly
without petitioner’s authorization, that California had already successfully wired to
petitioner to fulfill an order for at least 100 million N95 masks. App. 7-9.
Petitioner brought this case alleging, among other things, a violation of
Regulation J, which unambiguously provides that, unless they follow certain
verification procedures not at issue here, banks are liable for processing payment
orders their customers did not in fact authorize. U.C.C. § 4A-204(a). Chain Bridge
Bank argued, among other things, that its conduct in wiring funds that it had already
accepted into petitioner’s account did not implicate § 4A-204(a), and that petitioner’s
state law claims for conversion, fraud, constructive fraud, negligence, and breach of
contract were preempted because the bank’s “challenged conduct” nevertheless “falls
within the scope of Article 4A.” See App. 12, 16.
2. The U.S. Federal Reserve Bank long ago developed the Fedwire Funds
Transfer System so that “interbank payment obligations” could be settled without
“the physical delivery of cash or gold … , which was both risky and costly.” Bd. of
Governors of the Fed. Resrv., Fedwire Funds Transfer System: Assessment of
Compliance with the Core Principles for Systemically Important Payment Systems
(revised July 2014), https://tinyurl.com/4mbwzd4b. Today, the Fedwire Funds Service
is routinely used for “time-critical payments such as the settlement of commercial
payments and financial market transactions” between banks and bank customers
largely because it settles each transaction on a real-time basis. See ibid. Such
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payment “to the receiving participant over the Fedwire Funds Service is final and
irrevocable when the amount of the payment order is credited to the receiving
participant’s account.” Ibid.
Despite the Fedwire’s benefits, major economic actors still lacked the certainty
that inhered in cash transactions because, for a long time, only state law governed
what happened if a wire transfer went wrong. See U.C.C. § 4A-102 cmt. The solution
was Article 4A of the Uniform Commercial Code, which, as previewed above, the
Federal Reserve Board incorporated into Regulation J. Funds Transfers Through
Fedwire, 55 Fed. Reg. 40,791-01 (Oct. 5, 1990); 12 C.F.R. § 210.25(b)(1).
Interrelated provisions of Article 4A clearly assign the risk of loss in various
circumstances—including when banks make transfers that do not follow Article 4A’s
“precise and detailed rules” for determining whether a wire is authorized. See U.C.C.
§ 4A-204 & cmt. 1 (explaining circumstances where “the bank takes the risk of loss
with respect to an unauthorized payment order”). Thus, the rules firmly require that,
once a transferee’s bank has accepted a wire, it must give the funds to the intended
recipient. See U.C.C. § 4A-404(a). Article 4A does not allow for this requirement to be
altered by agreement, id. § 4A-404(c), while making it virtually impossible to cancel
a wire once the transferee’s bank has accepted it, see id. § 4A-211(c)(2). Indeed,
because the cash belongs to the transferee as soon as it arrives, such an order cannot
be cancelled even with the consent of that beneficiary’s bank “except in unusual
cases” involving either the consent of all affected parties or very specific technical
mistakes. See id. § 4A-211(c)(2) & cmt. 4 (“Since acceptance [by the beneficiary’s
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bank] affects the rights of the originator and the beneficiary it is not appropriate to
allow the beneficiary’s bank to agree to cancellation or amendment, except in unusual
cases.”).
The result of these detailed rules is that “[t]he function of banks in a funds
transfer under Article 4A is … essentially mechanical in nature.” U.C.C. § 4A-104
cmt. 3. It is thus clear both what banks need to do to avoid creating liabilities in funds
transfers and what liability they face if they violate their role in the machine.
Relevant here, § 4A-204(a) provides:
If a receiving bank accepts a payment order issued in the name of its customer
as sender which is (i) not authorized and not effective as the order of the
customer under Section 4A-202, or (ii) not enforceable, in whole or in part,
against the customer under Section 4A-203, the bank shall refund any
payment of the payment order received from the customer to the extent the
bank is not entitled to enforce payment and shall pay interest on the
refundable amount calculated from the date the bank received payment to
the date of the refund.
U.C.C. § 4A-204(a) (emphasis added).
3. Interpreting Article 4A’s provisions, the district court held that § 4A-204(a) is
not applicable to the payment order that respondent Chain Bridge Bank generated
to return the money California already transferred to petitioner back into the State’s
account with respondent JPMorgan, because the district court believed the payment
order was merely “issued” by Chain Bridge Bank to itself rather than “accepted” by
Chain Bridge Bank. App. 10 (quotation marks omitted).
The Fourth Circuit affirmed. App. 12. The court did not dispute that Chain Bridge
Bank had conceded that it had already accepted the wire from California and credited
$450 million to petitioner’s account with Chain Bridge Bank. And the court
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acknowledged that JPMorgan’s “cancellation” of the already-accepted wire was
“ineffective.” App. 13 n.2. Nevertheless, the court held that “[w]hat occurred here was
not a funds transfer” that implicated § 4A-204(a), “but a cancellation.” Ibid. So too,
the court agreed with the district court’s conclusion that “the payment order
generated to return California’s funds was issued—rather than accepted—by Chain
Bridge.” App. 13.
The court rejected petitioner’s argument that under the plain text of § 4A-204(a),
a “receiving bank” is a bank that receives a payment order (not the funds), see U.C.C.
§ 4A-103(a)(1), (3)-(4), and it “accepts” that payment order when it sends out funds in
response, see id. § 4A-209(a) (“a receiving bank … accepts a payment order when it
executes the order”). Instead, the court accepted Chain Bridge Bank’s argument that
it had issued “its own payment order” to itself, naming petitioner as “originator,”
rather than having “accepted” or “received” any payment order naming petitioner as
“sender.” See Resp. Br. for the Appellees, Doc. 64, at 33, 35-36 (emphasis added).
As petitioner had explained, issuing “its own payment order” naming its customer
as the “originator” is precisely how an originator’s bank “accepts” the originator’s
payment order under Article 4A—indeed, that is what it means to accept a customer’s
payment order. But the court believed that accepting petitioner’s argument “would
mean that a bank violates U.C.C. § 4A-204(a) every time it complies with a
cancellation and that cannot be true.” App. 14, n.2. The court did not explain why
that would follow when § 4A-204(a) would only apply in cases where, as here, there
was no effective cancellation. As petitioner explained, and the court accepted, the
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cancellation was ineffective. See App. 13, n.2. It therefore couldn’t possibly affect how
Article 4A’s “precise and detailed rules” governing a bank’s “essentially mechanical”
role in a funds transfer assign liability. U.C.C. § 4A-102 cmt.; id. § 4A-104 cmt.3.
4. The district court had previously held without reasoning, at the motion to
dismiss stage, that petitioner’s state law claims for conversion, fraud, constructive
fraud, negligence, and breach of contract are preempted by Article 4A. See App. 14.
Importantly, the district court ruled that these claims are preempted before it
ultimately resolved, at the summary judgment stage, that Chain Bridge Bank’s
conduct did not, after all, implicate § 4A-204(a).
The Fourth Circuit affirmed this holding too. App. 14. The court did not explain
how affirming both district court rulings could be internally consistent, when the
district court first held, at the motion to dismiss stage, that petitioner’s state law
claims against Chain Bridge Bank were preempted because the alleged misconduct
implicated Article 4A and then later held, at the summary judgment stage, that the
same conduct did not implicate § 4A-204(a). Petitioner had explained that the district
court simply could not be right that neither state law nor Article 4A proscribes Chain
Bridge Bank’s unlawful conduct here.
In other words, petitioner explained that if Article 4A does not apply to Chain
Bridge Bank’s conduct, then it could not preempt petitioner’s state law claims based
on that conduct. Nevertheless, without addressing this contradiction, the Fourth
Circuit held that the “district court appropriately dismissed these claims, because
they are foreclosed by the ‘strong doctrine of preemption’ for ‘state causes of action
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that essentially overlap or dovetail’ with the provisions of Article 4A,” App. 14
(quoting district court), despite the court of appeals’ holding on the very same page
that “Section 4A-204(a) is simply inapplicable to this situation,” App. 14 n.2.
Reasons For Granting An Extension Of Time
The time to file a Petition for a Writ of Certiorari should be extended for 58 days
for the following reasons:
1. The forthcoming petition is likely to be granted. Under the Fourth Circuit’s
result-oriented decision, clearly biased against petitioner’s principals, who the court
described as conservative “political consultants” without “any experience in the field
of medical supplies” who “[n]evertheless …. formed Blue Flame” to “connect[] …
medical supply companies with buyers” at the beginning of the COVID-19 pandemic,
App. 5, banks are free to wire their customers’ money to whomever they want, without
consequence, because according to the court, neither § 4A-204(A) nor common law can
reach a bank’s unambiguously wrongful conduct in knowingly wiring funds out of
their customers’ accounts without authorization. That drastic result demands a
response from this Court, before other bank customers are harmed to the tune of
hundreds of millions of dollars as petitioner was damaged here, entirely without
consequence to the wrongdoing banks.
And the Fourth Circuit was plainly wrong in its inconsistent rulings. The court’s
reasoning that “[w]hat occurred here was not a funds transfer, but a cancellation,” is
entirely incompatible with the court’s acceptance that the purported “cancellation”
was “ineffective.” App. 13 n.2. As Article 4A’s official commentary explains, “[t]here
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is no concept of wrongful cancellation or amendment of a payment order. If the
conditions stated in [§ 4A-211] are not met the attempted cancellation or amendment
is not effective.” U.C.C. § 4A-211 cmt. 1. Plainly, Chain Bridge Bank’s wire transfer
to JPMorgan could not be effected by Chain Bridge Bank accepting a cancellation of
JPMorgan’s original funds transfer where the district and appellate courts agreed
there was not an effective cancellation. It thus had to be accomplished by acceptance
of the new payment order that (again, according to the Fourth Circuit itself) had been
“issued … by Chain Bridge” Bank and not petitioner. App. 13.
It will be particularly critical that this Court reverse the Fourth Circuit’s
preemption holding if it accepts that Chain Bridge Bank’s conduct is not otherwise
prohibited by § 4A-204(a). That is because, if the Fourth Circuit is right that:
(1) Chain Bridge Bank did not “accept” the unauthorized payment order insofar as it
issued that order to itself; (2) issuing that unauthorized order to itself is not covered
by § 4A-204(a); and (3) state-law causes of action for that wrongful issuance are still
preempted, the upshot will be that banks can wire money out of their customers’
accounts any time they wish simply by drawing up their own unauthorized payment
orders—free from any consequence under either Regulation J or any other source of
authority (given Regulation J’s preemptive effect).
This is not and cannot be the law. Instead, Article 4A sets up a plain and simple
system where a bank’s acceptance of an unauthorized order—even one it issues to
itself—is regulated by § 4A-204(a) and the fraudulent creation of that order remains
subject to ordinary common-law remedies. Rejecting either proposition would have
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been incorrect. The Fourth Circuit’s rejection of both is catastrophic and requires
correction.
2. The press of other matters before this and other courts makes the existing
deadline on June 20, 2023, difficult to meet. Petitioner only recently retained
undersigned counsel to assist in preparing this petition. Further time is required to
allow counsel to study the voluminous record and prepare a concise petition for the
Court’s review. In addition to this case, counsel has other briefs due in this Court in
June and August, as well as multiple briefs in several federal and state courts of
appeals.
3. Whether or not the extension is granted, the petition will be considered—and,
if the petition were granted, the case would be considered on the merits—in the next
Term. The extension thus will not substantially delay the resolution of this case or
prejudice any party.
Conclusion
For the foregoing reasons, the time to file a petition for a writ of certiorari in this
matter should be extended for 58 days to and including August 17, 2023.
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Respectfully submitted,
Daniel Woofter
Counsel of Record
GOLDSTEIN, RUSSELL & WOOFTER LLC
1701 Pennsylvania Ave., NW
Suite 200
Washington, DC 20006
(202) 240-8433
dw@goldsteinrussell.com
June 9, 2023