Appendix A, Court of Appeals Decision

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APPENDIX

ia

TABLE OF CONTENTS

Appendix A, Court of Appeals Decision
     (Mar. 20, 2022) ...................................................... 1a
Appendix B, District Court Decision
     (Sep. 23, 2021) .................................................... 33a
Appendix C, District Court Decision
     (Sep. 8, 2020) ...................................................... 75a
Appendix D, District Court Order
     (Sep. 8, 2020) ...................................................... 88a
Appendix E, Relevant Statutory And
Regulatory Provisions ........................................ 90a

1a

APPENDIX A

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
___________________
No. 21-2218
___________________

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.

2a

___________________
No. 21-2219
___________________

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 – Appellee.
___________________
Appeal from the United States District Court for the
Eastern District of Virginia, at Alexandria. Leonie M.
Brinkema, District Judge (1:20-cv-00658-LMB-IDD)
___________________
Argued: October 27, 2022
Decided: March 20, 2023

3a

___________________

Before AGEE and HARRIS, Circuit Judges, and Lydia
K. GRIGGSBY, United States District Judge for the
District of Maryland, sitting by designation.
___________________

Affirmed by unpublished opinion. Judge Griggsby
wrote the opinion, in which Judge Agee and Judge
Harris joined.
___________________

ARGUED: Eric Franklin Citron, GOLDSTEIN &
RUSSELL, P.C., Bethesda, Maryland; Alan E.
Schoenfeld, WILMER CUTLER PICKERING HALE
AND DORR LLP, New York, New York, for
Appellants. Gary Andrew Orseck, KRAMER LEVIN
NAFTALIS & FRANKEL LLP, Washington, D.C., for
Appellee.
ON
BRIEF:
Albinas
J.
Prizgintas,
Washington,
D.C.,
Margarita
Botero,
Denver,
Colorado, Marissa W. Medine, WILMER CUTLER
PICKERING HALE AND DORR LLP, New York, New
York, for Appellant JPMorgan Chase Bank, N.A.
Kathleen Foley, GOLDSTEIN & RUSSELL, P.C.,
Bethesda, Maryland, for Appellant Blue Flame
Medical LLC. Matthew M. Madden, Donald Burke,
ROBBINS, RUSSELL, ENGLERT, ORSECK, &
UNTEREINER LLP, Washington, D.C., for Appellees.
___________________

Unpublished opinions are not binding precedent in
this circuit.

4a
 GRIGGSY, United States District Judge for the
District of Maryland, sitting by designation:
This appeal involves the collapse of an agreement
to obtain face masks for the State of California during
the early days of the COVID-19 pandemic. Defendant
and Third-Party Plaintiff-Appellee Chain Bridge Bank
(“Chain Bridge”) withheld and returned certain funds
wired to the bank account of Plaintiff-Appellant Blue
Flame Medical LLC (“Blue Flame”) in order to
purchase face masks for shipment under its contract
with California. Thereafter, Blue Flame filed a
complaint asserting violations of U.C.C. §§ 4A-204(a)
and 4A-404 against Chain Bridge, and state law
claims for tortious interference with a contract,
tortious interference with a business expectancy,
conversion, fraud, constructive fraud, negligence,
defamation and breach of contract against Chain
Bridge
and
its
President,
David
M.
Evinger
(“Evinger”), and Chief Executive Officer, John J.
Brough (“Brough”) (collectively, “Defendants”). JA19-
53. Chain Bridge then filed a third-party complaint
against California’s bank, Third Party Defendant-
Appellant,
JPMorgan
Chase
Bank,
N.A.
(“JPMorgan”), asserting claims for indemnification
under U.C.C. § 4A-211(f) and for unjust enrichment.
JA113-22.
The district court dismissed five of Blue Flame’s
state law claims on preemption grounds. JA54; JA61.
After the parties filed cross-motions for summary
judgment on the remaining claims, the district court
entered summary judgment in Defendants’ favor on
each of Blue Flame’s remaining claims and entered

5a
 summary judgment in favor of Chain Bridge on its
claim for indemnification from JPMorgan. JA3066-
3099. The district court held that: (1) Blue Flame’s
U.C.C. § 4A-404(a) claim failed as a matter of law,
because. Blue Flame could not establish that it
sustained any damage from the return of California’s
funds; (2) Blue Flame’s U.C.C. § 4A-204(a) claim also
failed as a matter of law, because that statute is not
applicable to the payment order that Chain Bridge
generated to facilitate the return of California’s funds;
(3) Blue Flame’s claims for tortious interference with
the contract and with business expectancy also failed
as a matter of law, because Blue Flame did not proffer
any evidence of damage resulting from the return of
California’s funds; (4) Blue Flame’s defamation claim
similarly failed as a matter of law, because there is no
evidence in the record to show that Defendants made
any false statements about Blue Flame or its
principals; and (5) the undisputed material facts
established JPMorgan’s liability to indemnify Chain
Bridge under U.C.C. § 4A-211(f) for the loss and
expenses resulting from the cancellation of the
payment order wiring California’s funds to Blue
Flame. JA3083-96.
We agree with the district court that Blue Flame’s
U.C.C. § 4A-204(a) claim fails as a matter of law,
because that provision is not applicable to the
payment order that Chain Bridge generated for the
return of California’s funds. In addition, we agree with
the district court that Blue Flame’s U.C.C. § 4A-404(a)
claim fails as a matter of law, because Blue Flame
cannot establish that it sustained any damage from

6a
 the return of California’s funds and that Blue Flame’s
claims for tortious interference also fail as a matter of
law, because Blue Flame did not establish a valid
contract with California. We also agree with the
district court that the undisputed material facts of this
case establish JPMorgan’s liability to indemnify Chain
Bridge under U.C.C. § 4A-211(f) for its loss and
expenses resulting from the cancellation of the
payment order wiring California’s funds to Blue
Flame.
For the reasons below, we affirm.
I.
Blue Flame’s principals, John Thomas (“Thomas”)
and Mike Gula (“Gula”), are political consultants.
JA3067. When the COVID-19 pandemic began in late
2019, neither Thomas nor Gula had “any experience in
the field of medical supplies,” the “healthcare
industry,” or “supply chain management.” JA3067;
JA527. Nevertheless, in February 2020, Thomas and
Gula decided to turn their attention to “connecting . . .
medical supply companies with buyers.” JA2496. To
that end, on March 23, 2020, they formed Blue Flame.
JA576.
Three days before Blue Flame’s certificate of
formation was filed, an acquaintance of Thomas
contacted California’s State Controller, Betty Yee, on
Thomas’
behalf,
about
California’s
interest
in
purchasing face masks from Thomas and Gula. JA660-
61. Through Yee, Thomas and Gula were put in touch
with California’s Department of General Services

7a
 (“DOS”), the entity responsible for contracting with
vendors for supplies. JA639-654.
In anticipation of receiving a purchase order from
California for the purchase of face masks, Gula went
to the McLean, Virginia office of Chain Bridge to open
a bank account for Blue Flame on March 23, 2020.
JA3070. Based on the forms Gula completed, Chain
Bridge opened an account in Blue Flame’s name and
provided Gula with instructions for wiring funds to the
account. JA95-112.
On March 25, 2020, two days after Blue Flame’s
formation, DOS issued Blue Flame a purchase order
for 100 million N95 face masks, in four specified
models, for a total price of $609,161,000.00, 75% of
which was required to be pre-paid to Blue Flame.
JA578-581. The purchase order includes a provision
allowing California to “terminate performance of work
under this Contract for its convenience . . . if [DOS]
determines that a termination is in the State’s
interest.” JA1165; JA3068. The purchase order also
includes an initial delivery date of April 3, 2020 for the
masks. JA3068.
At approximately 3:30 PM on March 25, 2020,
Gula called Chain Bridge’s Senior Vice President and
Branch Manager, Heather Schoeppe (“Schoeppe”), to
inform her that “the state of California is sending an
unbelievably large wire transfer in the amount of $450
million.” JA3070; JA139-40. The record shows that the
anticipated wire transfer into Blue Flame’s account
raised concerns within Chain Bridge. JA3070.

8a

After her conversation with Gula, Schoeppe called
Chain Bridge’s Chief Financial Officer, Joanna
Williamson (“Williamson”), to ask whether it would be
feasible to accept a wire transfer for $450 million.
JA1836; JA3071. Williamson acknowledged that it
was a large sum, but told Schoeppe “we’ll do whatever
we need to do” to accommodate it. JA3071. Williamson
also told Schoeppe that a deposit of that size would
affect the bank’s balance sheet and “capital ratios,” but
without more analysis, or more information about how
long the funds would remain in the account, she was
not sure whether the impact would be negative. Id.
On March 26, 2020, at 11:21 AM ET, a
representative from the California State Treasurer’s
Office originated a wire transfer in the amount of
$456,888,600 for Blue Flame’s benefit through
California’s bank, JPMorgan. JA140; JA3073. The
outgoing
wire
transfer
triggered
an
alert
in
JPMorgan’s “roll payment guardian application,”
which screens for suspicious transaction activity.
JA920. An agent for JPMorgan contacted California to
verify approval for the wire transfer, which California
confirmed. Id.
The timeline for what occurred next is central to
the parties’ dispute in this appeal. At 11:55 AM on
March 26, 2020, Chain Bridge received the incoming
wire transfer, which was credited to Blue Flame’s
account. JA936-37. At 11:57 AM, Gula received an
automated “Incoming Wire Confirmation” informing
him that $456,888,600.00 had been received on Blue
Flame’s behalf. JA944-45.

9a

Because officials at Chain Bridge remained
concerned about the transaction, Evinger ordered that
a hold be placed on the funds at 12:07 PM. JA1016-17.
JPMorgan also had concerns about the wire transfer.
As a result, JPMorgan’s Executive Director, Rakesh
Korpal (“Korpal”) asked his colleague Tim Coffey
(“Coffey”) “to call Chain Bridge Bank to determine if
they knew the beneficiary of the funds and what the
disposition of the transactions or the funds were at
that point.” JA925.
Coffey called Chain Bridge at approximately 12:30
PM and asked to speak to someone in either the wire
transfer
or
fraud
departments,
relaying
that
JPMorgan had “concerns of fraud” related to the Blue
Flame transaction. JA1023; JA3074. At 12:44 PM,
Korpal also called Chain Bridge and spoke with
Brough and Evinger, explaining JPMorgan’s concern
that the “amount seems to be quite high for the
supplies that they’re purportedly paying for.” JA1047;
JA3074.
Chain Bridge and JPMorgan also consulted with
California about the wire transfer. At 12:51 PM, Fee
Chang (“Chang”), an employee of DOS called Chain
Bridge and “confirm[ed]” that the wire transfer was
“legitimate.” JA1048; JA3075. At 12:55 PM, Brough
and Evinger called Chang to ask for “documentation to
support . . . that funds were transferred properly.”
JA1049; JA3075. Chang replied that the funds had
been transferred by the California State Treasurer’s
Office, and she referred Brough and Evinger to Natalie
Gonzalez, whom Chang stated was “in charge of the
transfers.” Id. At 1:19 PM, Natalie Gonzalez and Mark

10a
 Hariri of the California State Treasurer’s Office called
Brough and Evinger to discuss the transfer of funds to
Blue Flame’s account. JA1054; JA3075.
Shortly thereafter, at 1:34 PM, Brough and
Evinger again spoke with Korpal. JA1062; JA3076.
During this call, Evinger asked: “Is there any way for
JPMorgan to issue a recall for the wire, so that while
you intervene in this you have the funds and feel more
comfortable?” Id. Korpal responded:
Well, I feel comfortable that you’re holding
the money right now. I can issue a recall. But
I don’t think you and I want to get onto the
front page of the Wall Street Journal,
especially if this is a legitimate transaction.
Id. Korpal instead asked for “a few more minutes” to
determine a course of action. Id.
Minutes later, at 1:37 PM, Coffey called Evinger
and Brough to explain:
We’re going to be recalling those funds, OK?
We have enough concerns that we feel we
need to call those funds back. Do you need a
recall message from us, or what are you
looking for from us?
JA1063; JA3076. In response, Chain Bridge asked for
an official communication from JPMorgan, over the
Fedline platform, requesting a recall of the funds. Id.
At 2:05 PM, JPMorgan sent a message to Chain
Bridge via the Fedwire Funds Processor (“Fedwire”)
officially asking for the return of California’s funds.
JA1064-65; JA3077. At 3:21 PM, Chain Bridge

11a
 returned the funds to JPMorgan, noting in the
accompanying Fedwire message that the action was
taken “PER YOUR REQUEST.” JA1075-76; JA3077.
The funds were posted to California’s JPMorgan
account by 4:02 PM. JA142; JA3077.
Sometime after JPMorgan requested the return of
the funds, but before California learned the funds had
already been returned, California also “requested the
funds be recalled.” JA916. Once the funds were back
with California, a DOS employee emailed various
California employees, stating, “Funds are with [the
State Treasurer’s Office]. After further discussion we
won’t be moving forward with the vendor.” JA1079.
Thereafter, Blue Flame tried to continue its
negotiations with California. JA3078. But California’s
DOS representative declined to enter into a new
agreement with Blue Flame and began forwarding all
Blue Flame correspondence to the Federal Bureau of
Investigation.1 JA2712-14. Although California never

1 On April 8, 2021, Congressional Representative Katie Porter
of the 45th District of California wrote to the Principal Deputy
Inspector General of the Department of Health and Human
Services about concerns of “potential price gouging regarding
personal protective equipment during the COVID pandemic,”
identifying Blue Flame as a “potentially costly and burdensome
middleman.” JA36; JA3078. Blue Flame subsequently provided a
response to congressional investigators that included a list of all
contracts, orders, or agreements that Blue Flame entered into
with federal, state, or local governments or governmental
entities, for medical supplies or equipment. JA1119-29. This list
shows that, of the 24 entities identified by Blue Flame, the
company only filled two orders. Id.

12a
 explicitly canceled the purchase order, Gula stated
that it “was clear” that the “deal was canceled by
[California’s] actions.” JA561.
Following the termination of its purchase order
with California, Blue Flame filed a complaint in the
United States District Court for the Eastern District
of Virginia asserting claims under U.C.C. §§ 4A-204(a)
and 4A-404 against Chain Bridge, and various state
law claims against Chain Bridge, Evinger and Brough.
JA19-53. The district court dismissed Blue Flame’s
state law claims for conversion, fraud, constructive
fraud, negligence and breach of contract on federal law
preemption grounds. JA54.
After Chain Bridge filed a third-party complaint
against
JPMorgan,
asserting
claims
for
indemnification under U.C.C. § 4A-211(f) and for
unjust enrichment, all parties filed cross-motions for
summary judgment. JA113-21. The district court
entered summary judgment in Defendants’ favor on
each of Blue Flame’s remaining claims and entered
summary judgment in favor of Chain Bridge on its
§ 4A-211(f) claim for indemnification from JPMorgan.
JA3066-103.
The district court concluded with regard to Blue
Flame’s U.C.C. § 4A-404(a) claim, that any fraud by
Blue Flame in the underlying transaction with
California was not the sort of mistake that would
make JPMorgan’s cancellation effective under U.C.C.
§ 4A-211(c). JA3082-83. Nonetheless, the district court
held that Blue Flame’s U.C.C. § 4A-404(a) claim failed
as a matter of law, because Blue Flame could not

13a
 “establish that it sustained any damage” from the
return of California’s funds. JA3083.
The
district
court
also
held
that
U.C.C.
§ 4A-204(a) is not applicable to the payment order that
Chain Bridge generated to facilitate the return of
California’s funds to JPMorgan, because this payment
order was “issued” by Chain Bridge, rather than
“accepted” by Chain Bridge. JA3089. The district court
further held that Blue Flame’s tortious interference
claims failed as a matter of law, because Blue Flame
did not proffer evidence of any damage resulting from
the return of California’s funds. JA3090. Blue Flame’s
defamation claim also failed as a matter of law,
because the district court found that there is no
evidence in the record to show that Defendants made
any false statements about Blue Flame or its
principals. JA3090-91.
As a final matter, the district court held that there
was “no evidence in the record of a communication
between Chain Bridge and JPMorgan indicating an
agreement to displace the default rule of automatic
indemnity” under U.C.C. § 4A-211(f). JA3095.
Accordingly, the district court concluded that the
undisputed material facts established JPMorgan’s
liability to indemnify Chain Bridge under U.C.C.
§ 4A-211(f). JA3092-96.
Blue Flame and JPMorgan each filed timely
notices of appeal.
On appeal, Blue Flame raises three challenges to
the district court’s decision. First, Blue Flame
challenges the district court’s decision that U.C.C.

14a
 § 4A-204(a) imposes no liability on Chain Bridge for
withholding and returning California’s funds to
JPMorgan. Second, Blue Flame challenges the district
court’s decision that its state law claims are
preempted, insofar as these claims were directed at
Chain Bridge’s alleged falsification of the payment
order generated to return California’s funds. Third,
Blue Flame argues that the district court erred in
entering summary judgment on its U.C.C. § 4A-404(a)
and tortious interference claims and finding that it
suffered no damage from Chain Bridge’s conduct. For
its part, JPMorgan challenges the district court’s
determination that Chain Bridge is entitled to
indemnification under § 4A-211(f).
II.
This Court reviews the district court’s grant of
summary judgment de novo. Ray Commc’ns, Inc. v.
Clear Channel Commc’ns, Inc., 673 F.3d 294, 299 (4th
Cir. 2012). The Court asks whether, considering the
record adduced by the parties in the district court,
“there is no genuine dispute as to any material fact”
and the moving party is “entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A genuine issue
of material fact exists only “if the evidence is such that
a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). The district court’s dismissal
of Blue Flame’s state law claims is also reviewed de
novo. Ray v. Roane, 948 F.3d 222, 226 (4th Cir. 2020).

15a

III.
A.
We agree with the district court that Blue Flame
cannot prevail on its U.C.C. § 4A-204(a) claim against
Chain Bridge. In Count II of the complaint, Blue
Flame asserts a claim under that statute related to
Chain Bridge’s decision to return California’s funds to
JPMorgan. This provision provides, in relevant part,
that:
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).
To prevail on its U.C.C. § 4A-204(a) claim, Blue
Flame must show that Chain Bridge, in the capacity
of a receiving bank, accepted a payment order issued
in Blue Flame’s name as sender, to return California’s
funds. We agree with the district court that Blue
Flame cannot make this showing for several reasons.

16a

First, the record shows that the payment order
generated to return California’s funds was issued—
rather than accepted—by Chain Bridge, at the request
of JPMorgan. This payment order states that Chain
Bridge is returning California’s funds pursuant to
JPMorgan’s request. JA2214 (Chain Bridge’s Fedwire
message to JPMorgan stating that the action was
taken “PER YOUR REQUEST.”). The record also
makes clear that JPMorgan is identified as the
“receiving bank” for this payment order. JA2216.
Given this, the undisputed evidence in the record
shows that Chain Bridge did not accept the payment
order generated to return California’s funds in the
capacity of a receiving bank.
Second, the undisputed record evidence makes
clear that the payment order returning California’s
funds was not issued in the name of Blue Flame as
sender. Rather, the record evidence shows that Blue
Flame is identified as the “originator” of the funds
transfer for this payment order. JA2216.2

2 Blue Flame argues that § 4A-204(a) applies even though the
purchase order does not list Blue Flame as the sender, because
Chain Bridge purported to accept a payment order naming it as
the original sender of the funds transfer when the bank issued
the payment order to JPMorgan and debited California’s funds
from its account. Blue Flame asserts that a funds transfer
requires two payment orders—one from the customer to its bank
ordering a payment and a second from the customer’s bank to the

17a

Given this, we agree with the district court that
the undisputed record evidence shows that Chain
Bridge did not accept the payment order returning
California’s funds in the capacity of a receiving bank,
and that this payment order was not issued in the
name of Blue Flame as sender. Accordingly, we affirm
the district court’s decision to grant summary
judgment in Defendants’ favor on Blue Flame’s U.C.C.
§ 4A-204(a) claim.
B.
We also agree with the district court that Blue
Flame’s state law claims for conversion, fraud,
constructive fraud, negligence and breach of contract
are preempted by Article 4A of the Uniform
Commercial Code (“Article 4A”). In Counts III, VI, VII,
VIII, and X of the complaint, Blue Flame asserts that
these state law claims against Chain Bridge relate to

beneficiary actually sending the money. So, when Chain Bridge
issued a payment order to JPMorgan’s bank it was necessarily
purporting to accept a payment order from Blue Flame and was
fulfilling its duty to issue the second. This argument is without
merit. What occurred here was not a funds transfer, but a
cancellation, albeit an ineffective one. A cancellation does not
require two payment orders, only “a communication of the sender
of a payment order cancelling or amending the order . . .
transmitted to the receiving bank . . . and the receiving bank’s
“agree[ment] to the cancellation of amendment.” U.C.C.
§ 4A-211(a). Chain Bridge did not purport to fulfill a payment
order from Blue Flame but complied with JPMorgan’s refund
request. To hold otherwise would mean that a bank violates
U.C.C. § 4A-204(a) every time it complies with a cancellation and
that cannot be true. Section 4A-204(a) is simply inapplicable to
this situation.

18a
 the return of California’s funds to JPMorgan via
Fedwire. JA43 (alleging that Defendants had no legal
justification to remove funds wired by California from
Blue Flame’s account); JA47-52 (alleging that
Defendants decided to undo the transaction and closed
Blue Flame’s account without reason and the bank
had no right to return funds paid to Blue Flame). The
district court appropriately dismissed these claims,
because they are foreclosed by the “strong doctrine of
preemption” for “state causes of action that essentially
overlap or dovetail” with the provisions of Article 4A.
JA60.
The Federal Reserve Act gives the Board of
Governors of the Federal Reserve System (“the
Federal Reserve”) the authority to promulgate
“regulations governing the transfer of funds and
charges . . . among Federal reserve banks and their
branches.” 12 U.S.C. § 248-1; see also id. § 248(i)
(allowing the Federal Reserve to make “all rules and
regulations necessary to enable” it to effectively
perform its duty to safeguard Federal Reserve money).
Pursuant to that authority, the Federal Reserve
promulgated Regulation J Subpart B to “govern funds
transfers through the Fedwire Funds Service.” 12
C.F.R. § 210.25(a). Subpart B expressly incorporates
the provisions of Article 4A, which similarly governs
funds transfers. Id. In addition, the Federal Reserve’s
official
commentary
to
Subpart
B
addresses
preemption and provides, in relevant part, that:
[R]egulations of the Board may preempt
inconsistent
provisions
of
state
law.
Accordingly,
subpart
B
of
this
part

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supersedes
or
preempts
inconsistent
provisions of state law. It does not affect state
law governing funds transfers that does not
conflict with the provisions of subpart B of
this part, such as Article 4A as enacted in any
state, as such state law may apply to parties
to funds transfers through the Fedwire Funds
Service whose rights and obligations are not
governed by subpart B of this part.
12 C.F.R. pt. 210, subpt. B, app. A, cmt. to § 210.25.
We held in Donmar Enterprises, Inc. v. Southern
National Bank of North Carolina, that Regulation J
preempts any state law cause of action premised on
conduct falling within the scope of Subpart B, whether
the state law conflicts with, or is duplicative of,
Subpart B. 64 F.3d 944, 949–50 (4th Cir. 1995). In
Eisenberg v. Wachovia Bank, N.A., we also held that
determining if a state law claim is preempted by
Regulation J turns on whether the challenged conduct
in the state law claim would also be covered under
Subpart B. 301 F.3d 220, 223 (4th Cir. 2002).
The challenged conduct that gives rise to Blue
Flame’s state law claims here falls within the scope of
Article 4A and, therefore, Subpart B. Blue Flame
challenges Defendants’ decision to return California’s
funds to JPMorgan via Fedwire—specifically alleging
that Defendants had no right to “undo the
transaction,” JA48, “remove the funds,” JA44, and
“return the funds,” JA52, and contesting their failure
to “process the wire transfer,” JA50. But U.C.C.
§ 4A-211 governs the cancellation or amendment of

20a
 payment orders, and explains what is necessary for a
cancellation to be “effective.” U.C.C. § 4A-211. U.C.C.
§ 4A-404 also addresses the obligation of the
beneficiary’s bank to pay the beneficiary once the bank
accepts a payment order on the beneficiary’s behalf. As
we discuss below, this statute also provides a
remedy—consequential damages—if the bank refuses
to pay the beneficiary, absent effective cancellation.
U.C.C. § 4A-404(a). These provisions directly cover
Chain Bridge’s decision to withhold and return
California’s
funds
via
Fedwire
pursuant
to
JPMorgan’s refund request. In fact, as will also be
discussed below, the district court concluded that
JPMorgan’s refund request was not an effective
cancellation and Chain Bridge, therefore violated §
4A-404(a), by failing to pay Blue Flame, confirming
our conclusion this statute envelops the challenged
conduct.
Accordingly, we agree with the district court that
Blue Flame’s state law claims for conversion, fraud,
constructive fraud, negligence and breach of contract
relate to conduct that falls within the scope of Subpart
B, and we affirm the district court’s holding that these
claims are, therefore, preempted. Eisenberg, 301 F.3d
at 223; see also U.C.C. § 4A-102 cmt. (Article 4A
preempts other law “in any situation covered by [its]
particular provisions”).
C.
We also agree with the district court that Blue
Flame has not established damages to support its
U.C.C. § 4A-404(a) claim, because the record evidence

21a
 shows that California would have canceled its contract
with Blue Flame even if its funds had not been
returned to JPMorgan via the Fedwire transfer.
The district court concluded that, although Chain
Bridge violated § 4A-404(a) by returning California’s
funds to JPMorgan, Blue Flame could not establish
that it sustained any damages from the return of these
funds. JA3083. The district court reached this
conclusion for two independent reasons.
First, the district court found that the evidence
showed that California would have ended its
relationship with Blue Flame even if Chain Bridge had
released the funds, because Blue Flame could not
fulfill the contract. JA3083-84. Second, the district
court also found that there was no evidence in the
record that Blue Flame would have successfully
fulfilled California’s order, even if Blue Flame had
received the funds. JA3085. Because we agree that the
record evidence shows that California would have
canceled its contract with Blue Flame, even if its funds
had not been returned, we affirm the district court’s
grant of summary judgment on this claim.
We first observe that California had the right to
terminate
its
contract
with
Blue
Flame
for
convenience. The record shows that California’s
purchase order with Blue Flame allows the State to
terminate
the
order
“for
its
convenience,”
if
termination is “in the State’s interest.” JA1165. The
purchase order also requires that, upon notice of
termination, Blue Flame must stop work on the order.
JA1165.

22a

The record evidence also shows that, once
California officials became aware of Blue Flame’s
origins, California immediately asked for its funds
back. Notably, the record shows that almost
immediately after the wire transfer was sent to Chain
Bridge, JPMorgan reached out to California officials to
inform them of Blue Flame’s new creation and lack of
experience. JA920. Chain Bridge had a similar
conversation with California officials within an hour
of receiving the wire transfer. JA1048-49; JA1054. The
record also shows that JPMorgan initiated a fraud
investigation regarding the wire transfer and that
Chain Bridge promptly put a hold on the wired funds
upon receipt. JA920; JA1016. Shortly thereafter,
Chain
Bridge
returned
California’s
funds
to
JPMorgan. JA1075-76.
The record evidence also makes clear that
California did not intend to proceed with its contract
with Blue Flame. After learning of Blue Flame’s
origins, California promptly “requested the funds be
recalled,” without knowing that JPMorgan had
already received its funds back. JA0916; JA1079. The
record also shows that, on the same day that
California’s funds were returned to JPMorgan, a
California Department of General Services employee
sent an email to multiple California employees stating
that: “Funds are with [the State Treasurer’s Office].
After further discussion we won’t be moving forward
with the vendor.” JA1079. While California never
explicitly canceled the purchase order with Blue
Flame, Mike Gula testified that it “was clear” that the
“deal was canceled by [California’s] actions.” JA0561.

23a
 This testimony is substantiated by other evidence in
the record showing that, following the return of its
funds, California declined Blue Flame’s further
attempts at negotiation and sent Blue Flame’s
correspondence to the FBI. JA2712-14. Given this, the
record evidence shows that California would have
terminated its contract with Blue Flame before Blue
Flame could have filled any orders for face masks.
Lastly, the record evidence also makes clear that
California would have requested the return of its
funds before the funds would have been released to
Blue Flame. Chain Bridge’s CEO, John J. Brough,
testified that Chain Bridge had an internal policy for
new customer accounts that allowed it to hold funds
transfers for one day after receipt. JA188. Pursuant to
this policy, Chain Bridge would have held California’s
funds until the next day, if the bank had not returned
the funds to JPMorgan. 3  JA191-92. As discussed
above, the record evidence makes clear that, within
this time frame, California would have requested the
return of its funds and decided not to move forward
with its contract with Blue Flame. JA916; JA1079.
Accordingly, Blue Flame would not have had the
opportunity to fill any part of California’s order,
because California would have canceled the contract
and Blue Flame would have been required to

3  At his deposition, Chain Bridge’s CEO, John J. Brough,
testified that Chain Bridge would have held the relevant funds
until the next day regardless of JPMorgan’s recall, pursuant to
the bank’s policy. JA191-92.

24a
 immediately stop work on the purchase order
pursuant to the contract’s terms. JA1165.
Because the evidence shows that California would
have ended its relationship with Blue Flame, even if
Chain Bridge had released its funds, we affirm the
district court’s decision that Blue Flame cannot
establish damages for its U.C.C. § 4A-404(a) claim.4
We also find Blue Flame’s argument that it is
entitled to recover the amount of California’s wire
payment as damages under U.C.C. § 4A-404(a) to be
unpersuasive. Blue Flame argues that Chain Bridge
was required to pay it the full amount of California’s
wire transfer, because JPMorgan’s cancellation of the
wire transfer was not effective and U.C.C. § 4A-404(a)
requires a bank to pay the beneficiary, absent an
effective cancellation. Appellant’s Br. at 54-55. This
statute provides that: “[t]he right of a beneficiary to
receive payment and damages as stated in subsection
(a) may not be varied by agreement.” U.C.C.
§ 4A-404(c).
Blue Flame argues that the statute establishes
both a right to receive payment and its damages in this
case. We disagree.

4  Blue Flame argues that the district court prematurely
granted summary judgment on its damages claim, because there
is a genuine issue of material fact in dispute regarding whether
it could have completed the purchase order with California.
Appellant’s Br. at 49-54. But, there is no material dispute of fact
in the record as to whether California would have canceled the
contract. Accordingly, we need not address whether Blue Flame
had the capability to fill the contract to resolve this claim.

25a

We read this statute to simply recognize a
beneficiary’s right to payment and the right of the
beneficiary to recover any damages resulting from a
bank’s refusal to make a payment. But we find no
statutory right in § 4A-404(a) to receive the amount of
the payment itself as damages, regardless of whether
the
beneficiary
incurred
actual
consequential
damages.
In fact, the plain language of § 4A-404(a) provides
that, if the bank refuses to pay, “the beneficiary may
recover damages resulting from the refusal[.]” U.C.C.
§
4A-404(a)
(emphasis
supplied).
The
official
comments to the statute confirm our reading of the
statute and state that a refusal to pay the beneficiary
“may result in consequential damages.” Id. § 4A-404
cmt. 3 (emphasis supplied). Given this, we conclude
that Blue Flame is not entitled to receive the amount
of California’s funds as damages under U.C.C. § 4A-
404(a), absent proof of actual damages caused by the
return of these funds. Accordingly, we affirm the
district court’s grant of summary judgment on this
claim.
D.
We also affirm the district court’s dismissal of
Blue Flame’s tortious interference claim, because Blue
Flame has not established a valid contract with
California. Blue Flame argues that California’s
decision to back out of its contract with Blue Flame,
after receiving calls from Chain Bridge, shows that
Chain Bridge interfered with its contract and business
expectancy. Appellant’s Br. at 56. The district court

26a
 granted summary judgment in Defendants’ favor on
these claims for three independent reasons.
First, the district court found that there were
issues with the validity of the contractual relationship
and business expectancy between Blue Flame and
California, given Blue Flame’s “apparent initial
misrepresentation to California authorities.” JA3090.
Second, the district court found insufficient evidence
to conclude that Chain Bridge had an “intent to
disturb” the business relationship between Blue
Flame and California. JA3090-91. Lastly, the district
court found insufficient evidence in the record to show
that Blue Flame could have fulfilled California’s order
and that California would not have cancelled the
contract and insisted on the return of its funds.
JA3091.
Because we agree that Blue Flame has not
established a valid contractual relationship with
California in this case, we affirm the district court’s
grant of summary judgment on Blue Flame’s tortious
interference claims.
To prevail on a tortious interference claim based
upon interference with a contract or business
expectancy, Blue Flame must show, among other
things, the existence of a valid contract or business
expectancy. Chaves v. Johnson, 335 S.E.2d 97, 102
(Va. 1985). The record shows that Blue Flame did not
argue that it had a valid contractual relationship with
California before the district court. JA11. Rather, Blue
Flame argued that the parties stipulated that there
was
an
agreement
and
that
this
stipulation

27a
 established a valid contractual relationship. JA11; see
also Appellant’s Br. at 55.
The record evidence makes clear, however, that
the parties stipulated only that there was an
agreement between Blue Flame and California.
JA139. Accordingly, there is no stipulation in the
record that this agreement was valid. JA139.
Blue Flame argues on appeal that reversal of the
district court’s decision is, nonetheless, required,
because the district court failed to properly address
the validity of its contract with California. Blue
Flame’s Reply Br. at 27. But, by failing to raise this
issue before the district court, or in its opening brief,
Blue Flame has waived this argument. See Belk, Inc.
v. Meyer Corp., 679 F.3d 146, 153 n.6 (4th Cir. 2012)
(concluding the appellant waived an argument “by
inadequately presenting the challenge in its opening
brief”); see also Fed. R. App. P. 28(a)(8). Accordingly,
we affirm the district court’s dismissal of Blue Flames’
tortious interference claims, because Blue Flame has
not established a valid contractual relationship with
California.5
E.
As a final matter, we agree also with the district
court that JPMorgan is obligated to indemnify Chain

5 Because we conclude that Blue Flame fails to establish a valid
contract with California, we need not reach Blue Flame’s
argument that the district court erred by entering summary
judgment in favor of Chain Bridge on its U.C.C. § 4A-404(a) and
tortious interference claims.

28a
 Bridge for the loss and expenses resulting from the
return of California’s funds under U.C.C. § 4A-211(f).
This provision provides that:
Unless otherwise provided in an agreement of
the parties or in a funds-transfer system rule,
if the receiving bank, after accepting a
payment order, agrees to cancellation or
amendment of the order by the sender or is
bound by a fundstransfer system rule
allowing cancellation or amendment without
the bank’s agreement, the sender, whether or
not cancellation or amendment is effective, is
liable to the bank for any loss and expenses,
including reasonable attorney’s fees, incurred
by the bank as a result of the cancellation or
amendment or attempted cancellation or
amendment.
U.C.C. § 4A-21l(f). The official comments to U.C.C.
§ 4A-211 also explain that:
If a receiving bank agrees to cancellation or
amendment under subsection (c)(1) or (2), it is
automatically entitled to indemnification
from the sender under subsection (f). The
indemnification provision recognizes that a
sender has no right to cancel a payment order
after it is accepted by the receiving bank. If
the receiving bank agrees to cancellation, it is
doing so as an accommodation to the sender
and it should not incur a risk of loss in doing
so.
Id. at cmt. 5.

29a

The record evidence shows that Chain Bridge
accepted the payment order wiring California’s funds
to Blue Flame’s account in the capacity of the receiving
bank. JA936-37. Shortly thereafter, Chain Bridge
agreed to return these funds to JPMorgan, at
JPMorgan’s request. JA2214. Because the record
evidence shows that Chain Bridge, in the role of the
receiving bank, accepted the payment order wiring
California’s funds to Blue Flame, and that Chain
Bridge subsequently agreed to the cancellation of this
payment order at JPMorgan’s request, U.C.C.
§ 4A-211(f) governs the parties’ obligations with
regards to indemnification.
On appeal, JPMorgan advances the same three
arguments that it unsuccessfully raised before the
district court to argue that it has no obligation to
indemnify Chain Bridge under § 4A-211(f). Namely,
that: (1) § 4A-211(f) is not applicable, because Chain
Bridge
cancelled
the
payment
order
wiring
California’s funds to Blue Flame’s account for its own
reasons; (2) the parties agreed that JPMorgan would
not indemnify Chain Bridge, displacing automatic
indemnification; and (3) Chain Bridge cannot
establish that its claimed loss and expenses were
caused by JPMorgan’s conduct. We find these
arguments unpersuasive.
First, as discussed above, the record evidence
makes clear that JPMorgan cancelled the payment
order wiring California’s funds when it sent a message
to Chain Bridge via Fedwire asking for the return of
these funds. JA1064-65. We also agree with the
district court that U.C.C. § 4A-211(f) does not impose

30a
 any requirement that Chain Bridge accommodate this
cancellation request solely to benefit JPMorgan. There
is no language within § 4A-211(f) that requires the
receiving bank to have a certain subjective motivation
when
accepting
cancellation.
In
fact,
as
the
commentary to § 4A-211(f) notes, when a receiving
bank agrees to a cancellation, it does so “as an
accommodation to the sender” and is “automatically
entitled to indemnification,” because a receiving bank
is never required to agree to cancellation once it has
accepted
the
original
payment
order.
U.C.C.
§ 4A-211(f) cmt. 5 (emphasis added). The use of the
word “automatically” in the official comment to this
statute also suggests that indemnification is certain,
regardless of the circumstances.
6  Given this,
JPMorgan is not relieved of its obligation to indemnify
Chain Bridge under U.C.C. § 4A-211(f), even if Chain

6  JPMorgan argues that common law indemnification
principles apply and support its argument. Notably, the Uniform
Commercial Code provides that “[u]nless displaced by the
particular provisions of [the U.C.C.], the principles of law and
equity . . . supplement its provisions.” U.C.C. § 1-103(b). Under
common law indemnification principles, an indemnitee whose
liability is “technical, passive or secondary” can shift “the burden
for the entire loss . . . to the indemnitor whose actual fault caused
the injury.” White v. Johns-Manville Corp., 662 F.2d 243, 249–50
(4th Cir. 1981). Where an indemnitee “active[ly]” caused the
injury, “an essential predicate to the[] right to indemnification is
necessarily missing.” Id. at 250. However, we conclude that the
§ 4A-211(f) displaces common law principles by allowing for
automatic indemnification. See Banca Commerciale Italiana v. N.
Trust Int’l Banking Corp., 160 F.3d 90, 94 (2d Cir. 1998) (noting
that § 4A-211 does not require the plaintiff to meet common law
indemnification elements).

31a
 Bridge had its own reasons for agreeing to the
cancellation of the payment order.
Second, JPMorgan’s argument that the parties
reached an agreement to displace the automatic
indemnification default rule under U.C.C. § 4A-211(f)
is unsubstantiated. JPMorgan correctly observes that
it would not be obligated to indemnify Chain Bridge if
the parties agreed to displace this default rule. But,
JPMorgan’s reliance upon an internal Chain Bridge
phone call to show that Chain Bridge and JPMorgan
reached such an agreement is misplaced.7 We agree
with the district court that this internal phone call
among Chain Bridge employees does not establish a
meeting of the minds between Chain Bridge and
JPMorgan
regarding
indemnification.
In
fact,
JPMorgan was not even aware of the conversation
until this litigation ensued. JA3094; see also U.C.C.
§ 1-201(b)(3) (an agreement could include a “bargain
of the parties in fact, as found in their language or
inferred from other circumstances, including course of
performance, course of dealing, or usage of trade”).

7 During this internal phone call, a Chain Bridge employee
(Claudia Mojica-Guadron) asked, “Are we getting an indemnity
letter from [JPMorgan]?” Evinger or Brough responded: “They’re
sending a recall notice through Fed[Line] . . . just return it to the
same place it came from.” JA346. Another Chain Bridge employee
then asked, “Claudia, you mentioned the indemnity letter, is that
part of the procedures usually?” Mojica-Guadron replied:
“Normally you want to get that from the other bank, just because,
and in this case because we credited the customer’s account.”
Evinger or Brough then cut in and said: “It’s okay, don't worry
about it . . . It is what it is.” Id.

32a

Finally, we agree with the district court that this
litigation is evidence of the loss and expenses that
Chain Bridge has incurred due to JPMorgan’s request
for the return of California’s funds. Accordingly, we
affirm the district court’s decision that JPMorgan
must
indemnify
Chain
Bridge
under
U.C.C.
§ 4A-211(f).
IV.
For the reasons set forth herein, we affirm the
district court’s grant of summary judgment in
Defendants’ favor on Blue Flame’s U.C.C. § 4A-204(a)
claim and Blue Flame’s state law claims for
conversion, fraud, constructive fraud, negligence and
breach of contract. We also affirm the district court’s
grant of summary judgment in favor of Defendants on
Blue
Flame’s
U.C.C.
§
4A-404
and
tortious
interference claims. Lastly, we affirm the district
court’s grant of summary judgment in Chain Bridge’s
favor on its claim that JPMorgan is obligated to
indemnify Chain Bridge under U.C.C. § 4A-211(f).

AFFIRMED.

33a

APPENDIX B

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
 ________________________

BLUE FLAME MEDICAL LLC,

Plaintiff,

v.

CHAIN BRIDGE BANK, N.A., et al.,

Defendants.
________________________

CHAIN BRIDGE BANK, N.A.,

Third Party Plaintiff,

v.

JPMORGAN CHASE BANK, N.A.,

Third Party Defendant.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
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)
)
1:20-cv-658
(LMB/IDD)

MEMORANDUM OPINION
Before the Court are the motion for summary
judgment of defendants Chain Bridge Bank, N.A.
(“Chain Bridge”), its Chief Executive Officer, John

34a
 Brough (“Brough”), and its President David Evinger
(“Evinger”) against plaintiff Blue Flame Medical LLC
(“Blue Flame” or plaintiff”) [Dkt. No. 118]; plaintiff
Blue Flame’s cross-motion for partial summary
judgment motion against defendants [Dkt. No. 127];
third-party
plaintiff
Chain
Bridge’s
summary
judgment motion against third-party defendant
JPMorgan Chase Bank, NA (“JPMorgan”) [Dkt. No.
122]; and JPMorgan’s cross-motion for summary
judgment against Chain Bridge [Dkt. No. 112]. For the
reasons that follow, defendants’ motion for summary
judgment against plaintiff Blue Flame will be granted,
and plaintiff Blue Flame’s motion will be denied.
Additionally, third-party plaintiff Chain Bridge’s
motion for summary judgment against third-party
defendant JPMorgan will be granted, and JPMorgan’s
cross-motion for summary judgment will be denied,
leaving the amount of attorney fees and litigation
expenses owed to Chain Bridge by third-party
defendant JPMorgan as the only issue remaining to be
resolved.
I. FACTUAL BACKGROUND
Before the onset of the COVID-19 pandemic, John
Thomas (“Thomas”) and Michael Gula (“Gula”) were
political consultants. As of late 2019 and early 2020,
Thomas and Gula had no “experience in the field of
medical
supplies,”
no
“specialized
training
or
certifications relating to supply chain management,”
and no “specialized training or certifications in the

35a
 healthcare industry,” Def. Ex. 1 (Gula Tr.), 25:6-181;
nevertheless, in February of 2020, Thomas and Gula
decided to tum their attention from political
consulting to “connecting ... medical supply companies
with buyers.” Pl. Ex. 85 (Bearman Tr.), 53:12-14.
Email records indicate that in March of 2020, Thomas
and Gula were seeking out possible contracts,
including by paying referral fees to various industry
contacts. Def. Ex. 4 (March 17, 2020 email labeled
“Current contracts 3.17”). On March 23, 2020, Thomas
and Gula formed Blue Flame Medical LLC by filing a
Certificate of Formation with the Delaware Secretary
of State. Def. Ex. 5.
A. The California Negotiations
On March 20, 2020—before Blue Flame’s
certificate of incorporation was filed—California’s
State Controller, Betty Yee, was contacted by an
acquaintance of John Thomas who had fundraised for
her in the past, and who sent her a text message
relating: “I received this text from John Thomas a
lobbyist involved in stimulus: [‘]I have 1 00mil 3m
masks sitting here at the Port. Of Long Beach. Can
you reach out to newsoms [sic] people?[’]” Def. Ex. 15;
see also [Dkt. No. 119] at 5 n.3.2 Yee contacted Thomas
to discuss whether he was in a position to supply N95

1 Chain Bridge’s exhibits (“Def. Ex.”) have been filed at Docket
Numbers 130, 131, and 142. Blue Flame’s exhibits (“Pl. Ex.”) have
been filed at Docket Numbers 132 and 150.
2 There is no evidence in the record that either Thomas or Blue
Flame had 100 million 3m masks in the Port of Long Beach at
that, or any, time.

36a
 masks to the state of California, see Def. Ex. 12, and
through Yee, Thomas and Gula were put in touch with
California’s Department of General Services (“DOS”),
the entity responsible for contracting with vendors for
supplies. Id. at 200123. At his deposition, Thomas
conceded that Blue Flame never sold any of the 100
million masks he claimed to have had available at the
Port of Long Beach, and although he insisted that
there were “imminent” deals to move that many
masks, he was unable to “specifically recall” any of
them. Def. Ex. 2 (Thomas Tr.), 101:1-103-1. On March
25, 2020, only two days after Blue Flame’s formation,
DOS issued Blue Flame a purchase order for a total of
100 million N95 masks in four specified models, for a
total price of $609,161,000.00, 75% of which was
required to be pre-paid. Def. Exs. 6-7 (Blue Flame
Invoice; DOS Purchase Order). The purchase order
incorporated the terms included in Form GSPD – 401
Non-IT Commodities, see Def. Ex. 7, which included a
provision
allowing
California
to
“terminate
performance of work under this Contract for its
convenience ... if [DOS] determines that a termination
is in the State’s interest.” Def. Ex. 79 at 123(a). The
purchase order also included a delivery date of April 3,
2020, although DOS contract administrator Michael
Wong (“Wong”) clarified at his deposition that DOS
only expected an initial delivery on April 3. Def. Ex 7;
Def. Ex. 8 (Wong Tr.), 108:21-109:7 (explaining that a
failure to make an initial delivery by April 3 would
have been considered a breach of the contract). Wong
also testified that, based on representations by Blue
Flame, DOS expected at least 63 million N95 masks to
be delivered no later than within 30 days, id. at 71:18-

37a
 72:8 (citing Def. Ex. 10), and then-Director of DOS
Daniel Kim (“Kim”) testified that Blue Flame had
indicated that the entire order of 100 million N95
masks would be delivered to California within “days or
weeks.” Def. Ex. 11 (Kim Tr.), 39:6-14.
At 11:46 PM on March 25, 2020—the same day
that DOS submitted its purchase order to Blue
Flame—Thomas sent Kim and Wong a message that
included “a list of rough delivery timelines” for the 100
million N95 masks. Def. Ex. 9. Thomas explained that
he had “[s]pent some time talking to [his] main
manufacturer, Henry Huang,” and that he told Huang
that if they “deliver on time and [do] what we said
we[’]d do,” they might establish a good relationship
with California for later orders. Thomas represented
that Huang “moved Heaven and Earth to steal from
neighboring factories and promised to deliver the full
order from his shop alone ... You’ll see on my chart the
delivery dates are early.” Id. The chart indicated that
the first million N95 masks would be delivered on
April 2, 2020 and that the entire shipment would be
delivered no later than April 24, 2020. Id.
 At his deposition, Kim was asked whether, at the
time when the purchase order was submitted, he was
aware that Blue Flame had only existed for two days,
was not registered to conduct business in California,
had not yet delivered any N95 masks to any
customers, and had opened its bank account only the
day before. Def. Ex. 11 (Kim Tr.), 82:20-85:8. Kim
testified that he was unaware of those facts, and that
if he had known that information when negotiating

38a
 with Thomas and Gula, it would have “raised alarm
bells.” Id.
B. The Chain Bridge Bank Account
On March 23, 2020, in anticipation of receiving
California’s purchase order, Gula went to the McLean,
Virginia office of Chain Bridge to open a bank account
for Blue Flame. To open the account, Gula filled out an
Account Agreement form on which he represented that
the nature of Blue Flame’s business was “[m]edical
consulting.” Def. Ex. 31 (Account Agreement). He also
estimated that the average amount the account would
receive in domestic and foreign wire transfers per
month would total $100,000,000, and the average
amount wired out of the account monthly would be
$25,000,000. Def. Ex. 30.3 Based on the forms Gula
completed, Chain Bridge opened an account in Blue
Flame’s name, and provided Gula with instructions for
wiring funds to the account. Def. Exs. 34-35; see also
Pl. Exs. 24-25.
At around 3:30 PM 4 on March 25, 2020, Gula
called Chain Bridge’s Senior Vice President and
Branch Manager Heather Schoeppe (“Schoeppe”) to

3 Early on the same morning that Gula visited Chain Bridge to
set up the account, Blue Flame’s attorney Ethan Bearman
cautioned him: “Odd money moves raise red flags and can hold
up transactions. Be VERY CLEAR with the bank that we have
gigantic orders coming in from the State of California and we will
provide documentation of the order.” Def. Ex. 32. Gula responded,
“Got it.” Id.
4 The times of phone calls are included in Dkt. No. 130 and Pl.
Ex. 62.

39a
 inform her that “the state of California is sending an
unbelievably large wire transfer in the amount of $450
million.” Def. Ex. 37 (audio recording). Gula asked
Schoeppe to call or email him “the second” that the
wire transfer from California hit his account, which
Schoeppe agreed to do. Id. At around 6:15 PM that
same day, Schoeppe called Gula back to ask for more
information about the incoming wire. Def. Ex. 38
(audio recording). Specifically, she asked what the
purpose of the wire transfer was, to which Gula
responded that “we’re buying 100 million masks for
the State of California from China.” She also asked
when Blue Flame would likely wire the funds out of
the account. Gula said that he did not know exactly
when the funds would be wired out, and speculated
that it would probably not be all at once, because he
thought they would pay some unspecified entity in
China as the masks were manufactured. Gula told
Schoeppe he would have a better idea of how long the
money would be in the account the next day. Id.
After her conversation with Gula, Schoeppe called
the bank’s Chief Financial Officer Joanna Williamson
(“Williamson”), to ask whether it would be feasible to
accept a wire for $450 million. Pl. Ex. 30 (audio
recording). Williamson acknowledged that it was a
large sum, but told Schoeppe “we’ll do whatever we
need to do” to accommodate it. Id. Williamson also told
Schoeppe that a deposit of that size would affect the
bank’s balance sheet and “capital ratios,” but without
more analysis or more information about how long the
funds would remain in the account, she was not sure
whether the impact would be negative. Id.

40a

Next, Schoeppe reported to Chain Bridge’s Chief
Executive
Officer,
defendant
Brough,
and
its
President, defendant Evinger, explaining to them that
Gula had “been calling all day” and summarizing her
conversations with him. Def. Ex. 39 (audio recording).
Either Evinger or Brough—it is unclear who from the
recording—promptly Googled Gula, and found a report
about a deal for 1 million masks, but did not find any
report of a deal involving 100 million masks. Evinger
or Brough then said, if Gula was telling the truth
about the size of the wire, “we can’t hold that money
on our balance sheet,” and Gula would need to agree
to an arrangement that would spread the funds out
over various accounts. Id. Evinger or Brough affirmed
that “on a normal day” the bank “would do” a
transaction of the size that Gula had described, but
then observed that this was “kind of a weird
transaction.” During the call, Schoeppe looked up Blue
Flame and learned that it had only been founded the
day before, and after some discussion, Evinger or
Brough opined that it was “unbelievable” that a two-
day old business had been awarded a $450 million-
contract from the State of California.
Evinger and Brough next called Gula directly.
That call was not recorded and there is disagreement
over exactly what was said, compare [Dkt. No. 119] at
¶ 14 with [Dkt. No. 149] at ¶ 14; however, the parties
agree that Evinger and Brough asked Gula for
documentation showing that the deal with California
was legitimate. It is undisputed that Blue Flame never
sent Chain Bridge the requested documentation. See
id.; Def. Ex. 45; Pl. Ex. 84. The parties also agree that

41a
 Evinger and Brough informed Gula that a deposit of
$450 million would not be covered by FDIC insurance,
and that the funds would need to be placed into
“sweep-accounts”
spread
out
over
multiple
institutions, also referred to as the “ICS Program.” See
Pl. Ex. 84. On her earlier call with Williamson,
Schoeppe had stated that she planned to prepare the
paperwork needed to keep the funds in separate
accounts, and after their call with Evinger and
Brough, they likewise instructed employees to go
ahead and prepare the ICS Program paperwork. Pl.
Ex. 59.5
At 6:17 PM on March 25, 2020, Brough emailed
Gula: “Just one question. Did you send any money to
China or others as a ‘fee’ for these transactions?” Pl.
Ex. 37; Def. Ex. 45. Gula responded, “[N]o, we have not
sent the money to [C]hina but when we do this is
where we are sending it,” and included instructions for
wiring funds to Wingar Industrial, Inc. Id. at 13448.
Wingar Industrial, Inc. is evidently the United States-
based affiliate of Great Health Companion, the
Chinese company from whom Blue Flame intended to
source the majority of the masks for California’s order,
see Pl. Ex. 95 at ¶ 28; however, when Evinger searched
for Wingar Industrial, Inc. online, he could find only
that it was a “cutlery company,” which “raised more

5 After the wire transfer had been received from California’s
bank and credited to Blue Flame’s account, Chain Bridge’s
employees learned that “the ICS program has a maximum limit
of $125 mil.” Pl. Ex. 59 (email from Senior Vice President and
Commercial Banking Manager Mike Richardson).

42a
 red flags” for Chain Bridge. Def. Ex. 40 (Brough Tr.),
159:18-160:2.
C. The Payment Reversal
On March 26, 2020, at 11:21 AM ET, a
representative from the California State Treasurer’s
Office originated a wire transfer in the amount of
$456,888,600, for Blue Flame’s benefit, through
California’s bank, third-party defendant JPMorgan.
[Dkt. No. 96] at ¶ 15 (Stipulation of Uncontested
Facts). Rakesh Korpal, a JPMorgan Executive
Director and the leader of JPMorgan’s Fraud
Payments Control Team, testified that the outgoing
wire triggered an alert in the “roll payment guardian
application[,] which is screening for suspicious
transaction activity.” Def. Ex. 47 (Korpal Tr.), 44:3-6.
As a result of the alert, an agent for JPMorgan
contacted the bank’s California clients to verify
approval for the transaction, which California
confirmed. Id. at 44:7-14. At 11:55 AM, Chain Bridge
received the incoming wire, which was credited to Blue
Flame’s Account. See Def. Ex. 50; Pl. Ex. 59 at 663-664
(email from Chain Bridge Operations Associate Rick
Claburn reporting to management that the “wire has
been received and credited to the client’s account”). At
11:57 AM, Gula received an automated “Incoming
Wire
Confirmation”
informing
him
that
$456,888,600.00 had been received on Blue Flame’s
behalf. Def. Ex. 52.
Because
Chain
Bridge
officials
remained
concerned about the transaction, at 12:07 PM, only ten
minutes after Chain Bridge received the transfer,

43a
 Evinger ordered that a hold be placed on the funds.
Def. Ex. 55. Meanwhile, Korpal was attempting to
gather more information about the transaction from
California
officials,
“given
the
value
of
the
transaction.” Def. Ex. 47 (Korpal Tr.), 61:10-22.
Although an official in the California State Treasurer’s
Office confirmed the details of the transaction to
Korpal, he asked his colleague Tim Coffey (“Coffey”)
“to call Chain Bridge Bank to determine if they knew
the beneficiary of the funds and what the disposition
of the transactions or the funds were at that point.” Id.
at
62:11-18.
Coffey
called
Chain
Bridge
at
approximately 12:30 PM and asked to speak to
someone in either the wire transfer or fraud
departments, relaying that JPMorgan had “concerns
of fraud” related to the Blue Flame transaction. Def.
Ex. 57 (audio recording). Coffey testified that he was
put in touch with Evinger, who he remembers telling
him that Chain Bridge had “similar suspicions” and
“had already been engaged in holding on to the funds
at that time.” Pl. Ex. 63 (Coffey Tr.), 64:19-65:7.6

6 In Blue Flame’s opposition brief, it argues that during this
call Evinger “falsely stated that Chain Bridge had not credited
Blue Flame’s account,” and that “[t]hat statement was significant
since JPMC believed (mistakenly) that the funds could be
returned without Blue Flame’s authorization as long as they had
not been credited to Blue Flame’s account.” [Dkt. No. 149] at ¶ 21.
This characterization is not consistent with the portions of

44a

At 12:44 PM, Korpal called Chain Bridge and
spoke
with
Brough
and
Evinger,
explaining
JPMorgan’s concern that the “amount seems to be
quite high for the supplies that they’re purportedly
paying for” and asking Chain Bridge, “Is it a new
account or a well-established business?” Def. Ex. 59
(audio recording). Brough explained: “The money went
into an account that is brand new, it was opened by an
existing client, he’s been a client for about 10 years.
He’s a lobbyist.” Id. Brough recounted his and
Evinger’s conversations with Gula the previous day,
and told Korpal, “We asked him a number of
questions—he had answers to all the questions, of
course.” Id. Brough and Evinger said they had had

Coffey’s deposition transcript that Blue Flame cites: Coffey
testified that he learned from Evinger that a hold had already
been placed on the funds, but Coffey does not testify that Evinger
told him that the funds had not yet been credited to Blue Flame’s
account. See Pl. Ex. 63 at 64-66. On the other hand, Korpal
testified that “Tim [Coffey] and I spoke with” Chain Bridge and
“[t]hey confirmed that the transaction had not been credited to
Blue Flame Medical’s account.” Pl. Ex. 44 (Korpal Tr.), 63:3-9. In
the recorded calls between Korpal, Brough, and Evinger, neither
Brough nor Evinger makes any statement that the funds had not
yet been credited to Blue Flame’s account. See Def. Exs. 59, 63
(audio recordings). As a result, there does not appear to be any
non-hearsay evidence in the record that Chain Bridge told Coffey
or Korpal that the funds had not yet been credited to Blue Flame’s
account while they were being held for investigation; however, as
discussed below, there was testimony that Chain Bridge later
represented to California’s State Treasurer’s Office that the
funds had not been credited to Blue Flame’s account before
JPMorgan recalled the funds. See Def. Ex. 62 (Gonzalez Tr.),
50:11-15.

45a
 difficulty contacting anyone in California’s state
government who was able to verify the transaction,
and Korpal told them that he planned to “get in touch
with the banker for the State of California” to ask for
additional details about the transaction, because
JPMorgan’s Global Investigations Team was “coming
back to [him] and saying, this does not look right
either,” and because his own research was “all leading
to not-good places.” Id.
At 12:51 PM, Fee Chang—an employee of
California’s Department of General Services—called
Chain Bridge in response to a voicemail that Chain
Bridge had left on the department’s main telephone
line. Def. Ex. 60 (audio recording). In the voicemail,
Chang
“confirm[ed]”
that
the
transfer
was
“legitimate,” but asked Chain Bridge to call her back
to confirm the exact amount of the transfer. Id. At
12:55 PM, Brough and Evinger called Chang to ask for
“documentation to support ... that funds were
transferred properly.” Def. Ex. 61 (audio recording).
Chang replied that the funds had been transferred by
the California State Treasurer’s Office, and referred
Brough and Evinger to Natalie Gonzalez, whom
Chang stated was “in charge of the transfers.” Id.
At 1:19 PM, Natalie Gonzalez and Mark Hariri of
the California State Treasurer’s Office called Brough
and Evinger to discuss the transfer of funds to Blue
Flame’s account. Gonzalez testified at her deposition
that she and Hariri “were told by Chain Bridge Bank,
that the account had just been opened the day
previously by a lobbyist.” Def. Ex. 62 (Gonzalez Tr.),
53:12-14. Gonzalez also recalled “the president of the

46a
 bank” telling her that the funds had not “been credited
to the client account at that time,” and in response she
and Hariri asked Chain Bridge to “wait until [they
could] find out additional information” from the
Department of General Services. Id. at 49:12, 50:11-
15. During her deposition, when Gonzalez was asked
whether Evinger or Brough (who she did not
remember being on the call) had told her anything
about Blue Flame other than “that the account had
just been opened the day previously by a lobbyist,” she
said no, they had not. Id. at 53:6-16.
At 1:34 PM, Brough and Evinger again spoke with
Korpal. Def. Ex. 63 (audio recording). During that call,
Evinger asked, “Is there any way for JPMorgan to
issue a recall for the wire, so that while you intervene
in this you have the funds and feel more comfortable?”
Korpal responded, “Well, I feel comfortable that you’re
holding the money right now. I can issue a recall. But
I don’t think you and I want to get onto the front page
of the Wall Street Journal, especially if this is a
legitimate transaction.” Id. Korpal asked for “a few
more minutes” to determine a course of action, and
Evinger and Brough responded that they looked
forward to hearing back from him. Id.
Just minutes later, at 1:37 PM, Korpal’s colleague,
Coffey called Evinger and Brough to explain, “We’re
going to be recalling those funds, OK? We have enough
concerns that we feel we need to call those funds back.
Do you need a recall message from us, or what are you
looking for from us?” Def. Ex. 64 (audio recording).
Chain Bridge asked for an official communication from
JPMorgan, over the Fedline platform, requesting a

47a
 recall of the funds. Id. Korpal testified at his
deposition that he made the decision to recall the
funds from Chain Bridge, Pl. Ex. 44 (Korpal Tr.),
79:14-19, and that at the time he was under the
impression that the funds were properly subject to
recall, because Coffey had told him that the funds had
not yet been credited to Blue Flame’s account. Id. at
38:14-40:9, 62:8-64:2.
At 1:55 PM, Chain Bridge notified Gula that it had
“received official notice from the sending bank to
return the wire,” and advised Gula to “resolve [the
matter] directly with the state of California.” Def. Ex.
67. At 2:05 PM,7 JPMorgan sent a message to Chain
Bridge via the Fedwire Funds Processor, officially
asking for the return of the funds. Def. Ex. 65.
According to Korpal, the actual recall of the funds
corresponded with a 2:00 PM request from the
California State Treasurer’s Office that JPMorgan
recall the funds, because the Office was “not
comfortable” with the Department of General Service’s
due diligence. Def. Ex. 47 (Korpal Tr.), 21:11-22:17.8
At approximately 2:30 PM, Gula came to Chain
Bridge to speak to Brough and Evinger. Brough

7 Plaintiff quibbles that Chain Bridge’s records show the recall
occurring at 1:45 PM, see [Dkt. No. 149] at ¶ 28 (citing Pl. Ex. 70);
however, it is not clear what service or application generated the
record to which plaintiff cites, and the Fedwire message itself
states “Create Time: 2020-03-26 14:05:47.902.” Def. Ex. 65.
8 Later that evening, Gonzales asked JPMorgan “to reach out
to Chain Bridge Bank and see where the wire-recall is in the
process” Def. Ex. 66.

48a
 testified that Gula apologized for the transaction and
did not object to the return of funds. Def. Ex. 40
(Brough Tr.), 305:10-22. In his deposition, Gula
explained that he did not “ask them ... not to return
the money to California or its bank” because Chain
Bridge “didn’t ask. They just took it,” and because he
was under the impression that Chain Bridge “had
already stolen the money out of my account.” Pl. Ex. 1
(Gula Tr.), 208:18-20, 209:6-7. At 3:21 PM, Chain
Bridge returned the funds to JPMorgan, noting in the
accompanying Fedwire message that the action was
taken “PER YOUR REQUEST.” Def. Ex. 68. The funds
posted to California’s JPMorgan account by 4:02 PM.
[Dkt. No. 96] at ¶ 34.
D. The Feasibility of Fulfilling the California
Contract
On March 26, 2020—the same day that the wire
transfer was reversed—the deputy director of the
Department of General Services announced in an
internal email that the “wire transfer was processed
on STO’s [California State Treasurer Office’s] end but
not completed. Funds are with STO. After further
discussion we won’t be moving forward with the
vendor.” Pl. Ex. 76. On March 27, 2020, Thomas
reached back to Betty Yee, California’s State
Controller who was Thomas’s first contact in the state
government. Thomas messaged Yee, “I’m sure you
heard about my bank bouncing payment hours after it
went through. Unbelievable. However, I’ve come up
with a work around for the product I have in route.”

49a
 Def. Ex. 12 at 200132.9 Yee responded that Thomas
needed to communicate directly with General Services
Director Daniel Kim, that he should “cease to keep
[Yee] in the loop,” and that he had a “credibility issue”
that he needed to solve. Id. at 200133.
Blue Flame tried to continue negotiating with the
Department
of
General
Service’s
Contract
Administrator Wong, but Wong declined to enter into
a new agreement with Blue Flame and began
forwarding all Blue Flame correspondence directly to
the FBI. Pl. Exs. 108, 109.
On April 8, Congressional Representative Katie
Porter of the 45th District of California wrote to the
Principal Deputy Inspector General of the Department
of Health and Human Services about concerns of
“potential price gouging regarding personal protective
equipment during the COVID pandemic,” identifying
Blue Flame as a “potentially costly and burdensome
middleman.” [Dkt. No. 1] at ¶ 81. In a letter dated
June
22,
2020,
responding
to
congressional
investigators, Blue Flame provided a “list of all
contracts, orders, or agreements that Blue Flame has
entered into with federal, state, or local governments
or governmental entities for medical supplies or
equipment.” Def. Ex. 73 at 163508. Of the 24 entities
listed, Blue Flame only filled two orders: one for
96,000 N95 masks purchased for Chicago by an
anonymous buyer on April 16, 2020, for which 100,000
masks were delivered on May 26, 2020, Id. at 163513;

9 There is no evidence in the record that any product was
actually en route at that time.

50a
 Pl. Ex. 112, Schedule A at 5; and an order for 1.55
million N95 masks purchased by Maryland. Pl. Ex.
111. The Maryland order, placed on April I, 2020, was
initially cancelled after Blue Flame encountered
issues with its supplier, Great Health Companion
Group, which informed Blue Flame that “it could not
deliver the masks because of the actions of the Chinese
Government.” Def. Ex. 73 at 163508. Blue Flame
ultimately reached a settlement agreement with
Maryland on October 9, 2020, under which it delivered
the 1.55 million masks. Pl. Ex. 111. Blue Flame has
not identified any other order or contract for N95
masks that it was able to fulfill.
II. PROCEDURAL HISTORY
On June 12, 2020, Blue Flame filed a Complaint
alleging ten counts against the defendants under
federal and state law, five of which were dismissed on
September 8, 2020. [Dkt. Nos. 1, 31]. In the remaining
counts, Blue Flame alleges that Chain Bridge violated
the
Uniform
Commercial
Code
(“UCC”),
as
incorporated in Federal Reserve Regulation J,
§ 4A-404(a) (Count I) and § 4A-204(a) (Count 11); and
that all defendants committed tortious interference
with a contract (Count IV), tortious interference with
a business expectancy (Count V), and defamation
(Count IX). On September 29, 2020, defendants filed
their answer asserting a counterclaim against Blue
Flame to recover their attorneys’ fees, based on the
Terms and Conditions governing Blue Flame’s bank
account; however, the Court granted a motion to
dismiss that counterclaim on November 11, 2020.
[Dkt. Nos. 38, 67]. On October 13, 2020, Chain Bridge

51a
 filed a third-party complaint against JPMorgan,
seeking indemnification under Regulation J or under
a theory of unjust enrichment, which JPMorgan
answered on November 16, 2020. [Dkt. No. 43, 64].
After engaging in discovery, each party has filed one
or more motions for summary judgment; the motions
have been fully briefed and oral argument has been
held. For the reasons discussed in open court and in
this Memorandum Opinion, defendants’ motions for
summary judgment will be granted as to plaintiff Blue
Flame and third-party defendant JPMorgan. Plaintiff
Blue Flame’s cross-motion for partial summary
judgment and JPMorgan’s cross-motion for summary
judgment will be denied.
III. DISCUSSION
A. Standard of Review
A court must grant summary judgment where
“there is no genuine issue as to any material fact and
... the movant is entitled to judgment as a matter of
law.” Norfolk S. Ry. Co. v. City of Alexandria, 608 F.3d
150, 156 (4th Cir. 2010) (quoting Fed. R. Civ. P. 56).
Where there are cross-motions for summary judgment,
a court must “consider and rule upon each party’s
motion separately to determine whether summary
judgment is appropriate as to each.” Monumental
Paving & Excavating, Inc. v. Penn. Mfrs. Ass’n Ins.
Co., 176 F.3d 794, 797 (4th Cir. 1999).

52a
 B. Blue Flame’s Claims against Chaing Bridge,
Brough, and Evinger
A. Count I (UCC § 4A-202(a))
Plaintiff alleges that Chain Bridge violated UCC
§ 4A-404(a) by returning the wired funds to JPMorgan
after crediting the funds to plaintiff’s account. Section
§ 4A-404(a) provides that: “if a beneficiary’s bank
accepts a payment order, the bank is obliged to pay the
amount of the order to the beneficiary of the order.”10
To make out a claim under UCC § 4A-404(a), Blue
Flame must show that Chain Bridge accepted a
payment order, and then failed to pay the amount of
the order to Blue Flame, the beneficiary. Unlike at the
dismissal stage, defendants no longer argue that
Chain Bridge did not “accept” a payment order on Blue
Flame’s behalf, and evidence in the record establishes
that the funds were “accepted” because they were
credited to Blue Flame’s account. See Def. Ex. 50; Pl.
Ex. 59 at 663-664 (email from Chain Bridge
Operations Associate Rick Claburn reporting to
management that the “wire has been received and
credited to the client’s account”); Def. Ex. 52. Instead,
defendants argue that although the payment was
initially accepted, they should not face liability for its
return because JPMorgan cancelled the payment. This
argument relies on § 4A-211(e), which provides: “A
canceled payment order cannot be accepted. If an
accepted payment order is canceled, the acceptance is
nullified and no person has any right or obligation

10 Subject to Sections 4A-211(e), 4A-405(d), and 4A-405(e)

53a
 based on the acceptance.” Whether a cancellation
order can trump an acceptance depends on whether
the cancellation is “effective”:
(c) After a payment order has been accepted,
cancellation or amendment of the order is not
effective unless the receiving bank agrees or
a
funds-transfer
system
rule
allows
cancellation
or
amendment
without
agreement of the bank.
…
(2) With respect to a payment order accepted
by the beneficiary’s bank, cancellation or
amendment is not effective unless the order
was issued in execution of an unauthorized
payment order, or because of a mistake by a
sender in the funds transfer which resulted in
the issuance of a payment order (i) that is a
duplicate of a payment order previously
issued by the sender, (ii) that orders payment
to a beneficiary not entitled to receive
payment from the originator, or (iii) that
orders payment in an amount greater than
the amount the beneficiary was entitled to
receive from the originator.
Id. at § 4A-211(c)(2). In other words, to effectively
cancel after accepting the order, (1) Chain Bridge must
agree to the cancellation, and (2) the cancellation must
be made to correct for one of the specified mistakes: a
duplicate order, a misstated beneficiary, or an
erroneous amount. Although Chain Bridge did agree
to return the funds, none of the specified mistakes

54a
 applies.
Therefore,
defendant
Chain
Bridge’s
obligation to its customer, Blue Flame, cannot be
nullified through the cancellation process.
Defendants try to argue that 211(c) is irrelevant,
because § 4A-211(e) broadly provides that “any”
cancellation of a payment order—not just an
“effective” cancellation—“nullifies the consequences of
acceptance.” [Dkt. No. 119] at 17. This argument lacks
textual support, and defendants do not cite any cases
that follow their strained reading of the regulation.
Defendants try to avoid this conclusion by arguing
that the cancellation was effective under § 4A-211(c)
because the wire transfer was a “mistake” given that
“California originated the funds transfer only as a
result of having been misled about Blue Flame’s bona
fides as a PPE supplier.” [Dkt. No. 119] at 17.
Although this may be true regarding the underlying
transaction between California and Blue Flame, the
banking regulations at issue govern only the transfer
of funds. Therefore, in the context of banking
regulations, a mistake must be one made by the
sending bank in the course of effecting a transfer. The
only case cited by defendants actually makes this
clear. In CFTC v. Rust Rare Coin Inc., 469 F. Supp. 3d
1211 (D. Utah 2020), the court found that a mistake in
the underlying transaction should not be conflated
with the mistakes governed by the regulation:
Mr. Jacobson does not argue that the transfer
was unauthorized. Instead, he contends that
because RRC was defrauding its investors

55a

(including Mr. Jacobson), it was a “mistake”
to transfer funds to RRC.
There is no authority supporting this
interpretation of mistake. This situation is
simply not covered by the three types of
mistakes identified in Subsections (i) through
(iii) of the statute. Subsections (i) and (iii)
involve mistakes regarding the amount of the
transfer (e.g. the correct amount was
accidentally sent twice or more money was
sent
than
the
transferor
intended).
Subsection (ii) involves a mistake regarding
the identity of the transferee. Mr. Jacobson
did not make a mistake regarding either the
amount of the transfer or the identity of the
transferee.
Mr. Jacobson urges the court to embrace a
broader interpretation of Subsection (ii),
arguing that the words “not entitled to receive
payment” imply more than just mistaken
identity. The court disagrees. The official
comments to the U.C.C. clearly explain that
“not entitled,” in this context, refers to a
mistaken identity.
Id. at 1218 (citing UCC § 4A-211 cmt. 4). Although not
binding on this Court, CFTC highlights the strict
scope of the banking regulations. These regulations
create default rules that allocate the risk of loss
between banking entities and their customers for
problems that happen during fund transfers. The
regulations do not govern the underlying transactions

56a
 that result in those fund transfers, which may have
problems of their own. Accordingly, Chain Bridge
cannot rely on problems with the underlying
transaction to escape its obligation to its customer
under the banking regulations.
Although
defendant
Chain
Bridge
violated
§ 4A-404(a) by returning the wire to JPMorgan after
the wire had been credited to Blue Flame’s account,
summary judgment is still appropriate in defendant’s
favor because plaintiff cannot establish that it
sustained any damage from that return. Section
4A-404(a) of the UCC provides relief only if a violation
results in foreseeable damages to the plaintiff: “If the
bank refuses to pay after demand by the beneficiary
and receipt of notice of particular circumstances that
will give rise to consequential damages as a result of
nonpayment, the beneficiary may recover damages
resulting from the refusal to pay to the extent the bank
had notice of the damages....” The UCC does not
provide for, and Blue Flame has not claimed, statutory
damages for a violation of § 4A-404(a). Instead, in
Count I plaintiff seeks “its lost profits for the
transaction with California, lost future business
opportunities with California and other customers,
and reputational damage as a result of the subsequent
media coverage of the incident.” See Complaint, [Dkt.
No. 1] at 197.
Defendants
offer
two
equally
compelling
arguments establishing that Blue Flame cannot prove
the damages it claims. First, defendants argue that
even if Chain Bridge had released the disputed funds
to Blue Flame on March 26, 2020, California would

57a
 have ended its relationship with Blue Flame, resulting
in the return of the funds, because the evidence in this
record unequivocally shows that plaintiff could not
fulfill the contract. [Dkt. No. 119] at 22. In opposition,
Blue Flame urges that this “argument omits
Defendants’ essential role in causing California not to
proceed with the transaction,” and that “[t]he very fact
that California sent prepayment in the first place—
before
Defendants
interfered—demonstrates
conclusively that California had agreed to proceed
with the transaction.” [Dkt. No. 149] at 13.
There is unrebutted evidence in this record that,
independent of any action by any defendant,
JPMorgan began a fraud investigation concerning the
wire transfer within minutes of Chain Bridge’s receipt
of the wire, and once California officials became aware
of Blue Flame’s recent creation and the fact that its
owners were lobbyists, it immediately asked for the
wire transfer to be cancelled and the funds returned,
and was no longer interested in dealing with Blue
Flame. Def. Ex. 62 (Gonzalez Tr.), 53:12-14; Pl. Ex. 76.
Examples of California’s decision not to deal further
with plaintiff include Thomas’s March 27, 2020 efforts
to revive the deal by reaching out to Controller Yee,
which were met with no interest, and Yee telling
Thomas that his company had a “credibility issue”
they would need to resolve. Def. Ex. 12 at 200132-133.
Similarly, Blue Flame’s April 2020 negotiations with
the Department of General Services to reach another
agreement
were
rejected,
and
the
California
administrator with whom Thomas was negotiating
ultimately began forwarding his correspondence with

58a
 Blue Flame to the FBI. Pl. Exs. 108, 109. The
“credibility issues” Blue Flame faced would not have
been avoided if Chain Bridge had credited the funds to
Blue Flame’s account when they were first received,
because California officials would still have had
reason to investigate Blue Flame’s credibility even if
the funds were held in Blue Flame’s account instead of
being returned promptly to California’s bank. In fact,
under its purchase order, California could “terminate
performance of work under this Contract for its
convenience if ... [the Department of General Services]
determines that a termination is in the State’s
interest.” Def. Ex. 79 at ¶ 23(a).
Chain Bridge’s second persuasive argument
concerning damages is that “there is no record
evidence that Blue Flame would have successfully
fulfilled California’s order even if Blue Flame had
received California’s funds.” [Dkt. No. 119] at 24.
According to Blue Flame’s own representations to
Congress, it was able to fill only two orders for N95
masks, both much smaller than the order placed by
California and neither within the time frame that Blue
Flame provided to California. Pl. Ex. 112, Schedule A
at 5; Pl. Ex. 111; Def. Ex. 73 at 163513.
The so-called “ample evidence” which Blue Flame
claims establishes that it could have met California’s
order proves no such thing. [Dkt. No. 149] at 14. First,
Blue Flame argues that it “had signed and executed
agreements in place with two suppliers, confirming its
ability to supply the N95 masks,” id.; however, the
evidence cited for this claim is only the purchase
orders and reseller agreements that Blue Flame

59a
 submitted to its purported suppliers, Suuchi Inc. and
Great Health Companion. Pl. Exs. 19, 20, 21, 22. The
documents evidence only that Blue Flame placed
orders for the masks to fulfill California’s purchase
order, not that the orders would have been, or could
have been, filled by the suppliers. Moreover, neither
the purchase orders nor the reseller agreements
included delivery schedules suggesting that the
products would arrive in time to satisfy the
representations that Blue Flame made to California.
Compare Pl. Ex. 19 (Suuchi Inc. agreement stating
delivery date was “based on time from funds clearing”
and that other shipping instructions were “TBD”); Pl.
Ex. 20 (Great Health Companion agreement stating
that “Seller will fulfill within 40 days from the time
payment is received and cleared” but that the masks
would “be shipped in tranches as often and as soon as
available”); with Def. Ex. 8 (Wong Tr.), 108:21-109:7
(DOS expecting first delivery of masks no later than
April 3, 2020); Def. Ex. 9. (Thomas representing that
all masks would be delivered “early” and no later than
April 24, 2020).
Blue Flame’s opposition also mischaracterizes the
assurances it had received from its largest supplier,
Great Health Companion. Blue Flame claims that it
had “received confirmation from Henry Huang, the
CEO
of
its
primary
supplier
[Great
Health
Companion], ... that [it] would be able to deliver 100
million masks to California within 30 days, provided
prepayment was made.” [Dkt. No. 149] at 14 (citing Pl.
Exs. 15, 2). Plaintiff’s Exhibit 15 is a series of text
messages between Thomas and Huang, in which

60a
 Thomas wrote: “Henry, Mike said you can get us 100m
n95 over a 30-day period of time.” Far from confirming
that to be the case, Huang only responded: “John, we
will give it all our efforts here to fight for the most
scare [sic] resources during crazy times.” Pl. Ex. 15 at
212725-26; see also Pl. Ex. 2 at 201:7-202:21 (Thomas
deposition transcript in which Thomas inaccurately
characterizes the text conversation with Huang).
Twelve days after defendants filed their Motion for
Summary Judgment, 11  Blue Flame filed a sworn

11 On August 3, 2021, five days after oral argument on the
motions for summary judgment, plaintiff Blue Flame filed a
Motion for Leave to File Supplemental Authorities [Dkt. No. 170]
in which it provided case law to support its argument that
Huang’s late-filed declaration should be considered. Specifically,
Blue Flame explained that the attached caselaw showed that
Huang’s inability to “comply with either Defendants’ or Plaintiff’s
efforts to take his deposition” was due to both the COVID-19
pandemic and Chinese law and should not disqualify his
declaration from the Court’s consideration. [Dkt. No. 171] at 3-4.
In reply, defendants pointed out that none of the cited decisions
is actually “recent,” and argued that plaintiff’s effort was “in
substance a post-argument sur-reply” about accepting Huang’s
late-filed declaration, over which the parties had already argued.
[Dkt. No. 173] at 1. Defendants persuasively distinguished the
cited opinions from the facts of this case, arguing that “[b]asic
fairness” precludes consideration of the declaration because
Huang’s “evident partisanship” for his friends at Blue Flame
would
make
his
testimony
“fertile
grounds
for
cross-
examination[.]” Id. at 1-2. Ultimately, the Court agrees that this
issue has already been fully argued with sufficient authority, and
none of the supplemental authority offered is new or relevant
enough to justify reopening the issue for further argument.
Accordingly, the Court will deny the motion, by an Order to
accompany this Memorandum Opinion.

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 declaration
by
Huang—which
Blue
Flame
characterizes as “confirm[ing]” that Great Health
Companion “had the capacity to supply the 100 million
masks California purchased.” [Dkt. No. 149] at 14; Pl.
Ex. 95. Chain Bridge strongly objected to the Court
considering that declaration, as it was filed after the
close of discovery, during which defendants had been
unable to depose Huang. The Court agrees that the
declaration should not be considered, because it was
not produced during discovery and defendants were
not able to depose Huang. Even if it were considered,
the declaration is not particularly helpful to plaintiff.
Although Huang attests in that declaration that his
company had the capacity to fill the order at some
point, the paragraphs in that declaration not cited by
Blue Flame acknowledge that Huang’s company would
not have been able to satisfy the full order in the time
frame that Thomas gave to California officials.
Moreover, Huang only “believed,” but did not know for
sure, that prepayment would have made it easier for
him to supply the masks. Pl. Ex. 95 at ¶ 26.
Finally, the declaration is inconsistent with other
evidence on the record. For example, the statement
claiming that Huang’s company had the ability to fill
Blue Flame’s California order is flatly contradicted by
the email Huang sent Blue Flame on April 7, 2020, in
which he warned that “[t]here are only a set number
of n95 masks throughout the country being produced
every day[,] most of which are existing long term
contracts dating back to February,” and that there “is
infinite demand but limited supply.” Def. Ex. 83.
Huang concluded: “See orders for 10-50M n95 here is

62a
 there, however that would be impossible to fulfill given
the number of people that all want it. I do not wish for
blue flame to commit to something it will have a hard
time delivering on.” Id. (emphasis added). Huang’s
April 7 warning to Blue Flame that it would not be
able to fill orders of even 10-50 million masks
thoroughly undercuts any suggestion in Huang’s late-
filed declaration that his company would have been
able to fill an order for 100 million masks in the time
period that Blue Flame gave to California officials.
Additionally, the uncontested record showed how few
of its orders plaintiff was able to fulfill and that its
biggest sale involved only 1.55 million, not 100 million,
masks delivered in October 2020, not April 2020.
These uncontested facts establish that Chain Bridge’s
return of the wire transfer did not damage plaintiff in
any respect. What damaged plaintiff was its
unrealistic promise that it could deliver the large
quantities of N95 masks in a short amount of time.
The evidence in the record makes clear that there
is no basis beyond rank speculation on which a
reasonable factfinder could find that Blue Flame was
capable of fulfilling its order to California, nor is there
any evidence that California, which was equipped with
the power to terminate work on its contract with Blue
Flame at any time, would have continued to do
business with the plaintiff had Chain Bridge not
reversed
the
payment.
Accordingly,
summary

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 judgment will be granted in defendant’s favor on
Count I.12
B. Count II (UCC § 4A-204(a))
UCC § 4A-204(a) provides that:
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[.]
Blue Flame alleges that Chain Bridge violated this
provision because “in complying with California’s
request to return the funds, the Bank issued a new
payment order on behalf of Blue Flame which was
neither authorized by Blue Flame nor effective as Blue
Flame’s order.” Complaint [Dkt. No. 1] at ¶ 110.
Although Blue Flame characterizes this provision as
providing a cause of action based on payment orders
issued by a bank, id. at ¶ 109; [Dkt. No. 149] at 26,

12 Blue Flame offered some argument and evidence supporting
the general proposition that large orders create an incentive
among suppliers to work harder to prioritize satisfying such
orders. That argument and the proffered evidence fails to
recognize the unique supply problems that existed in the early
months of the pandemic and do not change the clear evidence that
Huang was not able to supply the masks in the quantity and time
frame Blue Flame proposed.

64a
 § 4A-204(a) actually covers payment orders that a
bank accepts from a third party pretending to be the
bank’s customer. See Motion to Dismiss [Dkt. No. 19]
at 11-12 (citing Gold v. Merrill Lynch & Co., No. 09-
318-PHX-JAT, 2009 WL 2132698, at *1 (D. Ariz. July
14, 2009) (payment orders from plaintiffs retirement
account that his wife “had completed ... by forging
[plaintiffs] signature”); Regatos v. North Fork Bank,
838 N.E.2d 629, 630-31 (N.Y. 2005) (payment order
“from someone [the bank] believed to be [its
customer],” when the bank did not follow agreed-upon
security procedures); Ma v. Merrill Lynch, Inc., 597
F.3d 84, 86-87 (2d Cir. 2010)).
In its opposition brief at the motion to dismiss
stage, Blue Flame conceded: “If discovery establishes
that Defendants accomplished their unauthorized
return of the funds by accepting a cancellation request
made by California’s bank, Blue Flame agrees that
this Count would not survive upon a motion for
summary judgment.” [Dkt. No. 27] at 15 n.8. That is
precisely what the evidence in the record shows: that
JPMorgan sent a “request for reversal” asking Chain
Bridge to “PLS RETURN FUNDS[.]” Def. Ex. 65. Blue
Flame’s opposition to summary judgment tries to walk
back its previous concession, now arguing that
because the reversal of funds was accomplished
through a payment order generated by Chain Bridge
without Blue Flame’s authorization, § 4A-204(a)
applies, [Dkt. No. 149] at 26; however, that payment
order was “issued” by Chain Bridge, not “accepted” by
Chain Bridge, which is the conduct that the regulation
covers. Accordingly, § 4A-204 does not apply to the

65a
 reversal of funds at all, and summary judgment will
be granted in defendant’s favor on Count II.
C. State Law Claims
Respectively, Counts IV and V allege that all
defendants tortiously interfered with Blue Flame’s
contract and business expectancy. Virginia has
adopted the Restatement (Second) of Torts definition
of tortious interference. DurretteBradshaw, P.C. v.
MRC Consulting, L.C., 670 S.E.2d 704, 706 (Va. 2009).
The prima facie elements of these torts are: “(I) the
existence of a valid contractual relationship or
business expectancy; (2) knowledge of the relationship
or expectancy on the part of the interferor; (3)
intentional interference inducing or causing a breach
or termination of the relationship or expectancy; and
(4) resultant damage to the party whose relationship
or expectancy has been disrupted.” Chaves v. Johnson,
335 S.E.2d 97, 102 (Va. 1985). If the contract is at will
or only a business expectancy is alleged, the plaintiff
must also prove that the “defendant employed
improper methods.” Dunlap v. Cottman Transmission
Sys., LLC, 754 S.E.2d 313, 318 (Va. 2014). Blue Flame
argues that Chain Bridge’s violation of the banking
regulations qualifies as “improper methods,” thereby
satisfying this element.
Satisfying one element is not sufficient to prevail
on these claims. First, there are issues with the
validity of the contractual relationship and business
expectancy between Blue Flame and California given
Blue Flame’s apparent initial misrepresentations to
California authorities. Specifically, Gula sent Yee a

66a
 text stating, “I have 100 3m masks sitting here in the
Port of Long Beach.” Def. Ex. 15; see also [Dkt. No.
119] at 5 n.3. Moreover, given the warnings from Blue
Flame’s Chinese supplier about the difficulty of
obtaining large quantities of N95 masks, the Blue
Flame contract with California contained statements
that were at best naive, and at worst, knowingly false,
which undercuts the validity of Blue Flame’s business
relationship with California.
Second, there is insufficient evidence upon which
a reasonable factfinder could conclude that the alleged
interferor, Chain Bridge, had an “intent to disturb” the
business relationship. There is no evidence that
defendants shared information about Blue Flame with
California officials for any reason other than to avoid
potential liability themselves. See UCC § 4A-201
(requiring
banks
transferring
funds
to
use
commercially reasonable methods to prevent fraud).
Finally, because damages are an essential
element of both tortious interference claims, these
counts fail for the same reason that Count I failed:
there is insufficient evidence in this record from which
a reasonable factfinder could conclude that Blue
Flame could have fulfilled California’s order and that
California would not have cancelled the contract and
insisted on a return of the funds in that event.
Accordingly, summary judgment will be granted to
defendants on Counts IV and V.
In the remaining claim, Count IX, plaintiff seeks
damages on a theory of defamation. In Virginia,
defamation requires “I) publication, 2) of an actionable

67a
 statement, 3) with the requisite intent.” Schaecher v.
Bouffault, 772 S.E.2d 589, 594 (Va. 2015) (internal
citation omitted). An actionable statement must be
both defamatory and objectively false; “statements of
opinion are generally not actionable because such
statements cannot be objectively characterized as true
or false.” Jordan v. Kollman, 612 S.E.2d 203, 206 (Va.
2005). Summary judgment is appropriate as to this
claim because there is no evidence in the record that
defendants made any false statements regarding Blue
Flame or its principals. Natalie Gonzalez, the
California official to whom Brough and Evinger spoke
directly, testified conclusively that the only statement
defendants made to her about Blue Flame was “that
[its] account had just been opened the day previously
by a lobbyist.” Def. Ex. 62 (Gonzalez Tr.), 53:6-16. That
the account had been opened the previous day is not
contested, Def. Exs. 34-35; see also Pl. Exs. 24-25, and
Blue Flame has alleged, and therefore does not
contest, that its principals “recently began their
careers in the medical supply industry, but they each
have had distinguished, award-winning careers in the
political consulting industry.” [Dkt. No. 1] at ¶ 22. The
semantic distinction between “political consultant”
and “lobbyist” is not so vast as to be legally actionable.
Blue Flame does not argue that any one statement
by defendants was false; instead, it argues that
“Defendants’ narrow focus on the truth of their
individual statements ignores that their comments,
taken as a whole, plainly were made to raise concerns
that Blue Flame’s agreement with California was
somehow fraudulent.” [Dkt. No. 149] at 29. Although

68a
 defamation
may
at
times
be
established
by
insinuation, the simple (and true) statement that Gula
was a lobbyist who opened his bank account the day
before does not present such a case. Accordingly,
because Blue Flame concedes that defendants’
statements were true, summary judgment will be
granted in defendants’ favor on Count IX.
C. Chain Bridge’s Claim for Indemnification
by JPMorgan
In its third-party complaint, Chain Bridge seeks
indemnification
from
JPMorgan
under
UCC
§ 4A-211(f) for any damages awarded against it, as
well as for the attorneys’ fees and costs it incurred in
defending this litigation. Although granting Chain
Bridge’s Motion for Summary Judgment moots its
claim for reimbursement of any damages, there
remains the issue of whether JPMorgan must
reimburse Chain Bridge for its attorney’s fees and
expenses incurred in this litigation. [Dkt. No. 123]
at 2.
UCC § 4A-211(f) provides:
(f)
Unless
otherwise
provided
in
an
agreement of the parties or in a funds-
transfer system rule, if the receiving bank,
after accepting a payment order, agrees to
cancellation or amendment of the order by the
sender or is bound by a funds-transfer system
rule allowing cancellation or amendment
without the bank’s agreement, the sender,
whether or not cancellation or amendment is
effective, is liable to the bank for any loss and

69a

expenses, including reasonable attorney’s
fees, incurred by the bank as a result of the
cancellation or amendment or attempted
cancellation or amendment.
The official comments to this provision explain that:
If a receiving bank agrees to cancellation or
amendment under subsection (c)(1) or (2), it is
automatically entitled to indemnification
from the sender under subsection (f). The
indemnification provision recognizes that a
sender has no right to cancel a payment order
after it is accepted by the receiving bank. If
the receiving bank agrees to cancellation, it is
doing so as an accommodation to the sender
and it should not incur a risk of loss in doing
so.
Id. at cmt. 5. Both parties agree that this section
covers the reversal of funds, but they interpret it
differently. Chain Bridge argues that because there
was no “agreement of the parties” to the contrary, and
because as the “receiving bank” it agreed to
cancellation following an acceptance of the funds,
JPMorgan is automatically required to indemnify it
for “any loss and expenses, including reasonable
attorney’s
fees.”
JPMorgan
advances
several
arguments to support its claim that it does not have to
indemnify Chain Bridge: 1) Chain Bridge “sought and
obtained the wire’s cancellation,” and Chain Bridge
should not be allowed to “insur[e] itself for its own
conduct,” [Dkt. No. 113] at 2; 2) “the parties’
discussions and course of conduct” evidenced an

70a
 agreement between the parties that JPMorgan would
not be liable for indemnification, id.; and 3) Chain
Bridge cannot prove that its “loss and expenses” were
incurred “as a result” of JPMorgan’s cancellation. Id.
The first of these arguments—that JPMorgan is
not liable for indemnification because Chain Bridge
“directed” the transfer—is unpersuasive, as the text of
the UCC does not impose any requirement that the
receiving bank accommodate the sender’s cancellation
request solely to benefit the sender. 13  In fact, the
regulation
does
not
impose
any
requirements
regarding the receiving bank’s motivations at all.
JPMorgan attempts to sidestep the text of the
regulation by placing heavy emphasis on the
comment, which explains that a receiving bank is not
required to cancel a transfer after the funds have been
accepted, and that as a result, any cancellation can be
considered “an accommodation to the sender.” UCC
§ 4A-211 cmt. 5. It does not follow from this
description that the cancellation must have benefited
the sending bank equally or more than the receiving
bank: because cancellation is not required, a receiving

13  JPMorgan’s claims in this litigation that Chain Bridge
directed the cancellation appear to be in tension with its claims
in state agency proceedings in California that the state is liable
to indemnify JPMorgan for any losses because “the Agencies and
Employees [of the state of California] originated the Wire
Transfer, notwithstanding a deviation from normal vetting
procedures; they sought the reversal of the Wire Transfer; and
they benefited from the reversal of the Wire Transfer—obtaining
the return of funds in full and choosing not to go through with the
Blue Flame transaction, without suffering any loss[.]” Def. Ex. 96
at 7.

71a
 bank will still be “accommodating” a sending bank,
even if cancellation serves the receiving bank’s own
interests. The only case law that JPMorgan cites to
bolster its interpretation of the regulation are common
law precedents discussing the general policy behind
indemnification; however, as JPMorgan concedes,
reference to the common law is only appropriate
“[u]nless displaced by the particular provisions of” the
UCC. [Dkt. No. 113] at 15 (citing UCC § 1-103(b)).
Section 4A-211(f) clearly displaces a traditional
common law analysis by creating a default rule for risk
allocation which parties can only alter through
agreement.
JPMorgan next argues that the parties displaced
the default rule, because they “reached an agreement,
through their discussions and course of conduct, about
how to handle the wire” which “did not include any
indemnity obligation.” [Dkt. No. 113] at 22. JPMorgan
incorrectly reverses the requirements of the regulation
when it suggests that the parties needed to have
agreed upon indemnification; the UCC provides for
indemnification as a default. To avoid indemnification,
there would have to be an agreement to override the
default rule. Such an agreement could include a
“bargain of the parties in fact, as found in their
language or inferred from other circumstances,
including course of performance, course of dealing, or
usage of trade[.]” UCC § 1-201(b)(3).
JPMorgan cites an internal Chain Bridge phone
call as evidence of Chain Bridge having agreed not to
seek indemnification. During this call, as Evinger and
Brough prepared employees for a cancellation order

72a
 from JPMorgan, an employee (Claudia Mojica-
Guadron) asked, “Are we getting an indemnity letter
from [JPMorgan]?” 14 Evinger or Brough responded:
“They’re sending a recall notice through Fed[Line] ...
just return it to the same place it came from.” JPM Ex.
23 (audio recording). Another employee then asked,
“Claudia, you mentioned the indemnity letter, is that
part of the procedures usually?” Mojica-Guardon
replied: “Normally you want to get that from the other
bank, just because, and in this case because we
credited the customer’s account.” Evinger or Brough
then cut in and said: “It’s okay, don’t worry about it. ...
It is what it is.” Id. Evinger testified in his deposition
that he and Brough “didn’t view there was a need for
an indemnification based on the recall because the
recall had the indemnification built in, and we viewed
JPMorgan, you know, as our counterparty,” Def. Ex.
28 (Evinger Tr.), 261:12-17.
An agreement between Chain Bridge and
JPMorgan to change the default rule would require a
meeting of the minds between Chain Bridge and
JPMorgan about indemnity at the time of the alleged
agreement, not simply an internal discussion at Chain
Bridge bank about potential liabilities. There is no
evidence in the record of a communication between
Chain Bridge and JPMorgan indicating an agreement
to displace the default rule of automatic indemnity.
JPMorgan is a sophisticated banking entity well-

14 In fact, the employee asked if they would be getting an
“indemnity letter from Chase,” but she was clearly referring to
JPMorgan.

73a
 aware of the banking regulations and perfectly
capable of executing agreements to reallocate risk.
JPMorgan did not do so in this case.
This conclusion is not meant to punish or criticize
JPMorgan. In fact, JPMorgan’s quick and thorough
investigation of potential fraud is commendable. The
bank went above and beyond for its customer,
California, by bringing to the customer’s attention
several problems with the underlying contract.
JPMorgan can work out with California, in the
separate proceeding in California, how to allocate its
losses.
Finally, JPMorgan argues that Chain Bridge’s
litigation expenses are not “a result of the
cancellation.” [Dkt. No. 113] at 24-25. This argument
is weak as this civil action undoubtedly resulted from
the reversal of the wire transfer, and, as Chain Bridge
correctly argues, “there is zero evidentiary basis for
JPMorgan’s speculation that Chain Bridge would have
returned the funds without a cancellation by
JPMorgan.” [Dkt. No. 123] at 21.
IV. CONCLUSION
For the reasons stated in open court and in this
memorandum, defendants’ Motion for Summary
Judgment against plaintiff Blue Flame [Dkt. No. 118]
and Chain Bridge’s Motion for Summary Judgment
against Third Party Defendant JPMorgan [Dkt. No.
122] will be GRANTED; Blue Flame’s Motion for
Partial Summary Judgment [Dkt No. 127] and Motion
for Leave to File Supplemental Authorities [Dkt. No.
170] and JPMorgan’s Motion for Summary Judgment

74a
 [Dkt. No. 112] will be DENIED; and Chain Bridge and
JPMorgan will be directed to submit a briefing
schedule regarding the amount of attorneys’ fees and
expenses to be awarded to Chain Bridge if they are
unable to resolve the issue within 14 days.
An Order reflecting these decisions will be issued
with this Memorandum Opinion.
Entered this 23rd day of September, 2021.

Alexandria, Virginia

____________/s/_______________
Leonie M. Brinkema
United States District Judge

75a

APPENDIX C
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
 ________________________

BLUE FLAME MEDICAL LLC,

Plaintiff,

v.

CHAIN BRIDGE BANK, N.A., et al.,

Defendants.
________________________

)
)
)
)
)
)
)
)
)
)

Civil No. 20-658

Alexandria, Virginia
September 8, 2020

TRANSCRIPT OF MOTION HEARING
VIA TELEPHONE CONFERENCE
BEFORE THE HONORABLE LEONIE M. BRINKEMA
UNITED STATES DISTRICT JUDGE

APPEARANCES:
For the Plaintiff:
PETER HUGH WHITE, ESQ.

Schulte Roth & Zabel LLP

1152 15th Street, NW

Suite 850

Washington, D.C. 20005

76a
 For the Defendants: GARY A. ORSECK, ESQ.
Robbins Russell Englert Orsech
Untereiner & Sauber LLP
2000 K Street, NW
Fourth Floor
Washington, D.C. 20006

Court Reporter:
PATRICIA A. KANESHIRO-
MILLER, RMR, CRR

Proceedings Reported by stenotype shorthand.
Transcript produced by compter-aided transcription.
PROCEEDINGS
(9:38 a.m.)

THE COURT: Are the parties on the line for Blue
Flame Medical, LLC, versus Chain Bridge Bank?
We’re a little bit early, but are you all there yet?
MR. WHITE: Your Honor, this is Pete White from
Schulte Roth for the plaintiff. I am here.
THE COURT: All right. How about for the
defendants?
MR. ORSECK: Good morning, Your Honor. This
is Gary Orseck from Robbins Russell for the
defendants.

77a

THE COURT: How do you spell your last name,
please?
MR. ORSECK: O-R-S-E-C-K.
THE COURT: Mr. Orseck, you’re going to be the
main spokesperson for the defendants?
MR. ORSECK: That’s right.
THE COURT: All right. Then we have everyone
who we need online.
So this is, as I said, Blue Flame Medical, LLC,
versus Chain Bridge Bank, et al., 20-CV-658.
Gentlemen, we are on the record. I have a court
reporter with me, so it is going to be very important to
state your name before you speak so that we can
attribute the correct statements to the correct people.
All right. This is the defendant’s motion to dismiss
the 10-count complaint that’s been filed in this case,
and before we get into the discussion, I just wanted to
ask you, Mr. Orseck, how in the world do you prove
any damages if any of these claims do go forward given
the information that was in Exhibit A attached to the
defendant’s motion to dismiss, which is a detailed
discussion -- and it is on your part, it is a statement
attributable to Blue Flame -- of the inability of Blue
Flame to deliver the N-95 masks to other states after
California? In other words, to me, one of the
arguments that is most telling is the argument that
only a few days or weeks after this California
transaction which fell through, that your client, Blue
Flame, was unable to deliver any masks to the State
of Maryland. And so I don’t understand how there

78a
 could possibly be -- even if there were liability on any
of these claims -- how there could possibly be any
damages that you could point to in this case. After this
transaction fell through with California, number one,
you were able to continue to get contracts with other
states and with other entities for the products; and
number two, not because of your fault -- I recognize the
realities of what was going on here -- but you were
unable to deliver any significant quantities of these
masks. And as I understand it, the deal with
California was for millions of these N-95 masks.
So where are your damages in this case, Mr.
Orseck?
MR. WHITE: You addressed that question to Mr.
Orseck, but he represents defendants.
THE COURT: I’m sorry. Mr. White.
MR. WHITE: I thought you meant that one for me.
Your Honor, part of the problem here is reliance on
information outside the complaint is inappropriate,
and this is exactly why. It is a factual matter. There
are 1.55 million masks on their way to be delivered to
Maryland right now. They were delivered on time. We
expect them to be accepted by Maryland. The status of
that situation at the time of the letter that was sent,
leave aside whether the letter is appropriate for
consideration at this point, but the status of things at
that time are not set in stone. The fact of the matter is
they were able to accomplish that delivery. They’re in
the process of accomplishing that delivery. 1.55
million masks are on their way to Maryland right now
on a boat. So it really shows the extent to which

79a
 plaintiffs are trying to rely on stuff that is not in the
complaint to defeat the well-stated claims in the
complaint because those aren’t before the Court at this
point. Obviously, as you know, damages is premature
at this point, but there is no possibility of damages. I
understand the Court’s concern. The reality is the
actions by Chain Bridge Bank here caused -- and the
evidence will show when we get to trial -- the actions
by Chain Bridge Bank caused very significant
consequential damages; and the inappropriate, clearly
inappropriate cancellation under the U.C.C. of money
that had been placed into the beneficiary’s account
without the beneficiary’s consent caused incredible
consequential damages to plaintiffs. So the reality is
they were able to pull the Maryland deal out of the
ditch, but it became so much more difficult because of
what defendants here did, and that’s what damages
are all about. There were significant consequential
damages as a result of the improper conduct of Chain
Bridge Bank, which both violated Federal Reserve
Regulation J, which incorporates the U.C.C., the Court
is aware, expressly violated that, but also tortiously
interfered with the contract with California and their
business expectancy and defamed them.
THE COURT: All right. Again, you’re correct, the
damages are not the issue directly in front of the Court
right now, but I always, when I get a motion to
dismiss, want to start talking with counsel wisely
about what a case is truly worth because if portions of
the complaint do survive the motion to dismiss, then
everyone has to think about the realities of the
litigation. I must say, based upon everything that I

80a
 read, including the exhibits that were attached to the
motions, it did strike me as though this is a case where
whether there would be any damages was going to be
a very significantly open question.
But anyway, let’s get to the motion that is before
us. The defendant has moved to dismiss all 10 of these
counts. You have briefed the issues extensively, and
I’m not going to hear a whole lot of argument. But, Mr.
White, you do have to address this argument about
preemption because the defendant has correctly
argued that there is a strong doctrine of preemption
where there are state causes of action that essentially
overlap or dovetail the U.C.C. claims, and that would
affect several of your state causes of action. You want
to address that, please.
MR. WHITE: I would be happy to, Your Honor.
The defense takes a --
THE COURT: Mr. White, we’re having trouble
hearing you because we are having so many people
signing in. Can you speak louder, please.
MR. WHITE: My apologies, Your Honor.
The defense tried to have both sides of the issue.
They want to pick and choose -- this is Peter White
again -- that want to pick and choose the parts of the
U.C.C. that apply. They at some point say that the
U.C.C. does not apply. Obviously, it can’t be
preempted if it does not apply. The general preemption
argument is that there are state law claims, and
tortious interference of contract is a clear one, that go
beyond what the U.C.C. governs. Defamation is
another very obvious one, as well, as is breach of

81a
 contract in this context. The breach of contract here
was the agreement, the accounts agreement, and their
conduct is not covered by the preemptive -- their
conduct was outside of the U.C.C. That means that it
is beyond the preemptive conduct. The tortious
interference claim in particular, Your Honor, that is
the one that I think is most clearly beyond the scope of
any preemption by the U.C.C. because there is an
external contract involved. I don’t think the plaintiffs
even seriously make the argument that the tortious
interference claim is preempted. I think that
argument is best made as to the breach of contract and
negligence claims. But the tortious interference claim,
because it deals with a contract and a business
expectancy entirely outside of the relationship that the
U.C.C. governs, that is clearly not preempted.
THE COURT: All right. Well, you have basically
answered my question because I agree with you that
counts 4, 5, and 9 -- that is, the two tortious
interference counts and the defamation count -- raise
sufficient issues beyond what is involved in the U.C.C.
claims, that they’re not preempted. But certainly
count 3, which is conversion, counts 6 and 7, which are
for fraud and constructive fraud, count 8, which is for
negligence, and count 10, breach of contract, it seems
to me are definitely preempted, so I’m going to grant
the motion to dismiss as to those counts.
And the other issue that I want to hear discussed
is, you’ve raised two counts under the U.C.C. The
second count has to do, as I understand it, with your
theory that the defendants violated the U.C.C. by
returning the payment that had been sent to them

82a
 from California. Right? That they basically issued --
they had accepted -- they basically accepted a payment
order to pay out. And I’m not sure that’s exactly how
you’ve pled the case, first of all, from a technical
pleading standpoint. But why do you need count 2 if
you have count 1?
MR. WHITE: For a couple of reasons, Your Honor.
Number one, the damages calculations are different
under the private causes of action. Number two, I
guess in a certain -- if the facts come up in a certain
way, they could become alternative. But the theory
under count 2, it is clear that the money came into the
account or was accepted under the U.C.C. That is not
an issue now, it is not going to be an issue later. So the
money was in that account. That money was being
transferred out of the account. The only way that that
could really happen is by a payment order issued out
of that account. If it turns out that the way that it was
issued out of the account and back to California’s
account at JP Morgan, that’s a payment order that is
not authorized by the beneficiary. That’s the core of
the count 2 claim, Your Honor. It is unclear, frankly,
from the documentation that was attached, which I
don’t think is appropriate for the Court to consider at
this point, but even if the Court considers it, all that
talks about is a request. It doesn’t talk about what
mechanism was used. We have stated enough facts to
entitle discovery to determine whether legally what
was done was a payment order out of the beneficiary’s
account, Blue Flame’s account, without Blue Flame’s
consent because clearly they did not consent. And if
that occurred, that is the count 2 liability.

83a

THE COURT: All right.
MR. ORSECK: If I may respond on count 2?
THE COURT: Go ahead.
MR. ORSECK: Yeah, Mr. White is skipping past
the key operative language of Section 204(a), which in
order to impose liability requires that the payment
order be, quote, “issued in the name of the bank’s
customer as sender.” All of the cases that apply Section
204(a) are instances where a third party either forges
the customer’s name or purports to act in the name of
the customer and sends a payment order to the bank
that is either unauthorized or not effective. So Mr.
White is asserting that the return of the money from
my client, from Chain Bridge Bank, was not
authorized – I understand that’s the pleading -- but
they don’t plead that the payment order was issued in
the name of the sender. To the contrary, multiple
times in the complaint -- and I can point you to
paragraphs 72, 77, 78, and 110 -- the theory here is
that
in
response
to
our
allegedly
improper
communication to the State of California, California
issued a request that the money be returned. And
there is no authority, either in the text or in any of the
caselaw that has been cited or in any caselaw that we
have found at all that applies Section 204(a) in that
instance. I think the reason that the plaintiff has
tacked on that count is because in that count, and in
that count alone, they seek as damages enforcement of
the entire payment. So, in other words, they’re asking
that we be liable for the $456 million that was in the
original wire. For reasons you alluded to at the outset,

84a
 I think this entire suit is seeking a massive windfall,
but none nearly so much as count 2, for which there is
just no statutory basis.
THE COURT: But wouldn’t you agree that at this
stage, which is just the motion-to-dismiss stage, the
plaintiff is correct that we would need to look at some
of the evidence to see exactly how these various wire
transactions were delineated. And I’m a little
concerned about dismissing this count at this point
without a little bit of discovery. It seems to me that
because the case is being pared down by today’s
rulings, you ought to be able to focus on what I think
everybody agrees are sort of the key points of the
discovery. For example, exactly what was said by the
bank officials to the California people. As you know,
your argument about the defamation claim is that you
were either stating an opinion, which would not be
actionable under a defamation theory, or you had
basically -- it was a legal obligation on your part,
frankly, that you had a privilege to be able to make
these statements to the California authorities as a
responsible bank. And that would, it seems to me, play
a little bit into counts 1 and 2, as well.
I’m reluctant to dismiss count 2 at this point.
Again, I think there are significant problems with this
case. As I said, I don’t really see at the end of the day
how the plaintiff is going to be able to recoup damages,
especially because, as I said, there is no evidence at
least right now, and there is no claim really in the
complaint, that the plaintiff was unable to get further
contracts to sell these products. In our conversation
today apparently Maryland didn’t cancel the contract.

85a
 So even after all this problem, they’re still apparently
in business.
So what I’m going to do today is I’m going to go
ahead and grant the motion to dismiss in part and
dismissing the state law claims that I designated
earlier on the basis of preemption. So as I said, counts
3, 6, 7, 8, and 10 are out. I’m going to let counts 1, 2, 4,
5, and 9 go forward, five counts go forward. And we
will see how the case works itself out. I, however,
strongly recommend that both sides think very quickly
about whether this case should go forward and
whether or not you might want to try to talk to a
mediator to see if you can settle this because I think
the discovery might get a little bit expensive, and
they’re might be some difficulties, because obviously
there are going to be state officials from California who
are going to have to be deposed.
Is Blue Flame Medical, LLC, still in business, Mr.
White?
MR. WHITE: Yes, Your Honor.
THE COURT: So, obviously, it has got another
bank to work with it, and it has contracts, you
indicated, still going forward; correct?
MR. WHITE: Your Honor, actually -- I know that
their account was terminated at Chain Bridge Bank; I
do not know their current banking arrangement.
THE COURT: They must have a bank someplace
or they wouldn’t be able --
MR. WHITE: They must, Your Honor. I just don’t
know what it is.

86a

THE COURT: So one representation that I got in
one of the papers I was reading, if in fact, for example,
Blue Flame was representing to the California
authorities that all these masks were sitting in a
warehouse in Long Beach -- I mean, that was
mentioned in one of the pleadings -- you know,
obviously, that wasn’t the case. Now, maybe that
statement wasn’t made; I don’t know. I guess the
people in California with whom they were dealing
would know about it. But as I read the complaint, you
all started talking to the California people in early
March. This company wasn’t even formed until March
23rd. The account gets opened on March 25th. This
wire transfer occurs on March 26th. The timing is
quite incredible, especially when you look at the
amount of money that was involved. What? $456
million. I mean, there are all sorts of strange issues in
this case, and I think wise parties ought to think about
evaluating the case more realistically.
But at this point, as I said, I’m going to let those
counts go forward, and that’s my ruling for today.
So if you do need to work with a magistrate judge
on this case, Judge Davis is the magistrate assigned,
and of course there are lots of private mediators out
there, as well.
All right, gentlemen, thank you for calling in.
(Adjourned at 9:58 a.m.)

87a
 CERTIFICATE OF OFFICIAL COURT REPORTER

I, Patricia A. Kaneshiro-Miller, certify that the
foregoing is a correct transcript from the record of
proceedings in the above-entitled matter.

/s/ Patricia A. Kaneshiro-Miller
-----------------------------------------------
PATRICIA A. KANESHIRO
September 9, 2020
-MILLER

88a

APPENDIX D

IN THE UNITED STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
 _

BLUE FLAME MEDICAL LLC,

Plaintiff,

v.

CHAIN BRIDGE BANK, N.A., et al.,

Defendants.

)
)
)
)
)
)
)
)
)

1:20-cv-658
(LMB/IDD)

ORDER

For the reasons stated during a telephone
conference held on the record with attorneys for all
parties present, defendants’ Motion to Dismiss [Dkt.
No. 18] is GRANTED IN PART and DENIED IN
PART; and it is hereby
ORDERED that Counts III, VI, VII, VIII, and X of
plaintiff’s Complaint [Dkt. No. 1] be and are
DISMISSED.
The Clerk is directed to forward copies of this
Order to counsel of record.

89a

Entered this 8th day of September, 2020.
Alexandria, Virginia

____________/s/_______________
Leonie M. Brinkema
United States District Judge

90a

APPENDIX E

12 U.S.C. § 248 (Enumerated powers) provides, in
relevant part:
…
(i) Requiring bonds of agents; safeguarding
property in hands of agents
To require bonds of Federal reserve agents,
to make regulations for the safeguarding of all
collateral, bonds, Federal reserve notes, money,
or property of any kind deposited in the hands of
such agents, and said board shall perform the
duties, functions, or services specified in this
chapter, and make all rules and regulations
necessary to enable said board effectively to
perform the same.
…
(j) Exercising supervision over reserve banks
To exercise general supervision over said
Federal reserve banks.
…
(o) The Board may appoint the Federal Deposit
Insurance Corporation as conservator or receiver for a
State member bank under section 1821(c)(9) of this
title.
…

91a
 12 U.S.C. § 342 (Deposits; exchange and
collection; member and nonmember banks or
other depository institutions; charges) provides:
Any Federal reserve bank may receive from any of
its member banks, or other depository institutions,
and from the United States, deposits of current funds
in lawful money, national-bank notes, Federal reserve
notes,
or
checks,
and
drafts,
payable
upon
presentation or other items, and also, for collection,
maturing notes and bills; or, solely for purposes of
exchange or of collection, may receive from other
Federal reserve banks deposits of current funds in
lawful money, national-bank notes, or checks upon
other Federal reserve banks, and checks and drafts,
payable upon presentation within its district or other
items, and maturing notes and bills payable within its
district; or, solely for the purposes of exchange or of
collection, may receive from any nonmember bank or
trust company or other depository institution deposits
of current funds in lawful money, national-bank notes,
Federal reserve notes, checks and drafts payable upon
presentation or other items, or maturing notes and
bills: Provided, Such nonmember bank or trust
company or other depository institution maintains
with the Federal Reserve bank of its district a balance
in such amount as the Board determines taking into
account items in transit, services provided by the
Federal Reserve bank, and other factors as the Board
may deem appropriate: Provided further, That nothing
in this or any other section of this chapter shall be
construed as prohibiting a member or nonmember
bank or other depository institution from making

92a
 reasonable charges, to be determined and regulated by
the Board of Governors of the Federal Reserve System,
but in no case to exceed 10 cents per $100 or fraction
thereof, based on the total of checks and drafts
presented at any one time, for collection or payment of
checks and drafts and remission therefor by exchange
or otherwise; but no such charges shall be made
against the Federal reserve banks.
12
U.S.C.
§
464
(Checking
against
and
withdrawal of reserve balance) provides:
The required balance carried by a member bank
with a Federal Reserve bank may, under the
regulations and subject to such penalties as may be
prescribed by the Board of Governors of the Federal
Reserve System, be checked against and withdrawn by
such member bank for the purpose of meeting existing
liabilities.
12 C.F.R. § 210.25 provides, in relevant part:
(a) Authority and purpose. This subpart provides
rules to govern funds transfers through the Fedwire
Funds Service, and has been issued pursuant to the
Federal Reserve Act—section 13 (12 U.S.C. 342),
paragraph (f) of section 19 (12 U.S.C. 464), paragraph
14 of section 16 (12 U.S.C. 248(o)), and paragraphs (i)
and (j) of section 11 (12 U.S.C. 248(i) and (j))—and
other laws and has the force and effect of federal law.
This subpart is not a funds-transfer system rule as
defined in Section 4A–501(b) of Article 4A.

93a

(b) Scope.
(1) This subpart incorporates the provisions
of Article 4A set forth in appendix A of this part.
In the event of an inconsistency between the
provisions of the sections of this subpart and
appendix A of this part, the provisions of the
sections of this subpart shall prevail. In the event
of an inconsistency between the provisions this
subpart and section 919 of the Electronic Fund
Transfer Act, section 919 of the Electronic Fund
Transfer Act shall prevail.
…
12 C.F.R. § Pt. 210, Subpt. B, App. A, cmt. to
§ 210.25 provides, in relevant part:
The Commentary provides background material
to explain the intent of the Board of Governors of the
Federal Reserve System (Board) in adopting a
particular provision in the subpart and to help readers
interpret that provision. In some comments, examples
are offered. The Commentary constitutes an official
Board interpretation of subpart B of this part.
Commentary is not provided for every provision of
subpart B of this part, as some provisions are self-
explanatory.
Section 210.25—Authority, Purpose, and Scope
(a) Authority and purpose. Section 210.25(a)
states that the purpose of subpart B of this part is to
provide rules to govern funds transfers through the
Fedwire Funds Service and recites the Board’s
rulemaking authority for this subpart. Subpart B of
this part is Federal law and is not a “funds-transfer

94a
 system rule” as defined in section 4A–501(b) of Article
4A, Funds Transfers, of the Uniform Commercial Code
(UCC), as set forth in appendix A of this part. Certain
provisions of Article 4A may not be varied by a funds-
transfer system rule, but under section 4A–107,
regulations of the Board and operating circulars of the
Federal
Reserve
Banks
supersede
inconsistent
provisions of Article 4A to the extent of the
inconsistency. In addition, regulations of the Board
may preempt inconsistent provisions of state law.
Accordingly, subpart B of this part supersedes or
preempts inconsistent provisions of state law. It does
not affect state law governing funds transfers that
does not conflict with the provisions of subpart B of
this part, such as Article 4A as enacted in any state,
as such state law may apply to parties to funds
transfers through the Fedwire Funds Service whose
rights and obligations are not governed by subpart B
of this part.
(b) Scope. (1) Subpart B of this part incorporates
the provisions of Article 4A set forth in appendix B of
this subpart. The provisions set forth expressly in the
sections of subpart B of this part supersedes or
preempt any inconsistent provisions of Article 4A as
set forth in appendix B of this subpart or as enacted in
any state. The official comments to Article 4A are not
incorporated in subpart B of this part or this
Commentary to subpart B of this part, but the official
comments may be useful in interpreting Article 4A.
Because section 4A-105 refers to other provisions of
the Uniform Commercial Code, e.g., definitions in
Article 1 of the UCC, these other provisions of the

95a
 UCC, as approved by the National Conference of
Commissioners on Uniform State Laws and the
American Law Institute, from time to time, are also
incorporated in subpart B of this part. Subpart B of
this part applies to any party to a Fedwire funds
transfer that is in privity with a Federal Reserve
Bank. These parties include a sender (bank or
nonbank) that sends a payment order directly to a
Federal Reserve Bank, a receiving bank that receives
a payment order directly from a Federal Reserve
Bank, and a beneficiary that receives credit to an
account that it uses or maintains at a Federal Reserve
Bank for a payment order sent to a Federal Reserve
Bank. Other parties to a funds transfer are covered by
this subpart to the same extent that this subpart
would apply to them if this subpart were a “funds-
transfer system rule” under Article 4A that selected
subpart B of this part as the governing law.
…
U.C.C. § 4A-102 (Subject Matter) provides:
Except as otherwise provided in Section 4A-108,
this Article applies to funds transfers defined in
Section 4A-104.
OFFICIAL COMMENTS
Article 4A governs a specialized method of
payment referred to in the Article as a funds transfer
but also commonly referred to in the commercial
community as a wholesale wire transfer. A funds
transfer is made by means of one or more payment
orders. The scope of Article 4A is determined by the

96a
 definitions of “payment order” and “funds transfer”
found in Section 4A-103 and Section 4A-104.
The funds transfer governed by Article 4A is in
large part a product of recent and developing
technological changes. Before this Article was drafted
there was no comprehensive body of law--statutory or
judicial--that defined the juridical nature of a funds
transfer or the rights and obligations flowing from
payment orders. Judicial authority with respect to
funds transfers is sparse, undeveloped and not
uniform. Judges have had to resolve disputes by
referring to general principles of common law or
equity, or they have sought guidance in statutes such
as Article 4 which are applicable to other payment
methods. But attempts to define rights and obligations
in funds transfers by general principles or by analogy
to rights and obligations in negotiable instrument law
or the law of check collection have not been
satisfactory.
In the drafting of Article 4A, a deliberate decision
was made to write on a clean slate and to treat a funds
transfer as a unique method of payment to be governed
by unique rules that address the particular issues
raised by this method of payment. A deliberate
decision was also made to use precise and detailed
rules to assign responsibility, define behavioral
norms, allocate risks and establish limits on liability,
rather than to rely on broadly stated, flexible
principles. In the drafting of these rules, a critical
consideration was that the various parties to funds
transfers need to be able to predict risk with certainty,
to insure against risk, to adjust operational and

97a
 security procedures, and to price funds transfer
services
appropriately.
This
consideration
is
particularly important given the very large amounts
of money that are involved in funds transfers.
Funds transfers involve competing interests--
those of the banks that provide funds transfer services
and the commercial and financial organizations that
use the services, as well as the public interest. These
competing interests were represented in the drafting
process and they were thoroughly considered. The
rules that emerged represent a careful and delicate
balancing of those interests and are intended to be the
exclusive means of determining the rights, duties and
liabilities of the affected parties in any situation
covered by particular provisions of the Article.
Consequently, resort 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. § 4A-104 (Funds Transfer—Definitions)
provides, in relevant part:
…
OFFICIAL COMMENTS
…
3. … The function of banks in a funds transfer
under Article 4A is comparable to the role of banks in
the collection and payment of checks in that it is
essentially mechanical in nature.
…

98a
 U.C.C. § 4A-204 provides:
(a) 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. However, the customer is not entitled to
interest from the bank on the amount to be refunded
if the customer fails to exercise ordinary care to
determine that the order was not authorized by the
customer and to notify the bank of the relevant facts
within a reasonable time not exceeding 90 days after
the date the customer received notification from the
bank that the order was accepted or that the
customer’s account was debited with respect to the
order. The bank is not entitled to any recovery from
the customer on account of a failure by the customer
to give notification as stated in this section.
(b) Reasonable time under subsection (a) may be
fixed by agreement as stated in Section 1-302(b), but
the obligation of a receiving bank to refund payment
as stated in subsection (a) may not otherwise be varied
by agreement.
…

99a

OFFICIAL COMMENTS
1. With respect to unauthorized payment orders,
in a very large percentage of cases a commercially
reasonable security procedure will be in effect. Section
4A-204 applies only to cases in which (i) no
commercially reasonable security procedure is in
effect, (ii) the bank did not comply with a commercially
reasonable security procedure that was in effect, (iii)
the sender can prove, pursuant to Section 4A-
203(a)(2), that the culprit did not obtain confidential
security information controlled by the customer, or (iv)
the bank, pursuant to Section 4A-203(a)(1) agreed to
take all or part of the loss resulting from an
unauthorized payment order. In each of these cases
the bank takes the risk of loss with respect to an
unauthorized payment order because the bank is not
entitled to payment from the customer with respect to
the order. The bank normally debits the customer’s
account or otherwise receives payment from the
customer shortly after acceptance of the payment
order. Subsection (a) of Section 4A-204 states that the
bank must recredit the account or refund payment to
the extent the bank is not entitled to enforce payment.
…
U.C.C. § 4A-211 (Cancellation and Amendment of
Payment Order) provides, in relevant part:
…
(c) After a payment order has been accepted, can-
cellation or amendment of the order is not effective un-

100a
 less the receiving bank agrees or a funds-transfer sys-
tem rule allows cancellation or amendment without
agreement of the bank.
…
(2) With respect to a payment order accepted
by the beneficiary's bank, cancellation or
amendment is not effective unless the order was
issued in execution of an unauthorized payment
order, or because of a mistake by a sender in the
funds transfer which resulted in the issuance of a
payment order (i) that is a duplicate of a payment
order previously issued by the sender, (ii) that
orders payment to a beneficiary not entitled to
receive payment from the originator, or (iii) that
orders payment in an amount greater than the
amount the beneficiary was entitled to receive
from the originator. If the payment order is
canceled or amended, the beneficiary's bank is
entitled to recover from the beneficiary any
amount paid to the beneficiary to the extent
allowed by the law governing mistake and
restitution.
…
OFFICIAL COMMENTS
1. This section deals with cancellation and
amendment of payment orders. It states the conditions
under which cancellation or amendment is both
effective and rightful. There is no concept of wrongful
cancellation or amendment of a payment order. If the
conditions stated in this section are not met the
attempted cancellation or amendment is not effective.

101a
 If the stated conditions are met the cancellation or
amendment is effective and rightful. The sender of a
payment order may want to withdraw or change the
order because the sender has had a change of mind
about the transaction or because the payment order
was erroneously issued or for any other reason. One
common situation is that of multiple transmission of
the same order. The sender that mistakenly transmits
the same order twice wants to correct the mistake by
cancelling the duplicate order. Or, a sender may have
intended to order a payment of $1,000,000 but
mistakenly issued an order to pay $10,000,000. In this
case the sender might try to correct the mistake by
cancelling the order and issuing another order in the
proper amount. Or, the mistake could be corrected by
amending the order to change it to the proper amount.
Whether the error is corrected by amendment or
cancellation and reissue the net result is the same.
This result is stated in the last sentence of subsection
(e).
…
4. With respect to a payment order issued to the
beneficiary’s
bank,
acceptance
is
particularly
important because it creates liability to pay the
beneficiary, it defines when the originator pays its
obligation to the beneficiary, and it defines when any
obligation for which the payment is made is
discharged. Since acceptance 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. Except as
provided
in
subsection
(c)(2),
cancellation
or

102a
 amendment after acceptance by the beneficiary’s bank
is not possible unless all parties affected by the order
agree. Under subsection (c)(2), cancellation or
amendment is possible only in the four cases stated.
…
U.C.C. § 4A-404 (Obligation of Beneficiary’s Bank
to Pay and Give Notice to Beneficiary) provides,
in relevant part:
(a) Subject to Sections 4A-211(e), 4A-405(d), and
4A-405(e), if a beneficiary’s bank accepts a payment
order, the bank is obliged to pay the amount of the
order to the beneficiary of the order. Payment is due
on the payment date of the order, but if acceptance
occurs on the payment date after the close of the funds-
transfer business day of the bank, payment is due on
the next funds-transfer business day. If the bank
refuses to pay after demand by the beneficiary and
receipt of notice of particular circumstances that will
give rise to consequential damages as a result of
nonpayment, the beneficiary may recover damages
resulting from the refusal to pay to the extent the bank
had notice of the damages, unless the bank proves that
it did not pay because of a reasonable doubt concerning
the right of the beneficiary to payment.
…
(c) The right of a beneficiary to receive payment
and damages as stated in subsection (a) may not be
varied by agreement or a funds-transfer system rule.
The right of a beneficiary to be notified as stated in
subsection (b) may be varied by agreement of the
beneficiary or by a funds-transfer system rule if the

103a
 beneficiary is notified of the rule before initiation of
the funds transfer.
…

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www.supremecourt.gov