Supreme Court, Westchester County, February 27, 2020

Zeichner Ellman & Krause LLP, New York City (Stephen F. Ellman and Ronald M. Neumann of counsel), for defendant.

Michael Targoff, plaintiff pro se.

Plaintiff Michael Targoff commenced this action against defendant Wells Fargo Bank, N.A., sounding in negligence and breach of contract, on the theory that Wells Fargo allowed wire fraud to be perpetuated against him. Most of the allegations in the amended complaint are undisputed. Plaintiff intended to make a $1 million investment with a real estate developer, Wilcox Qualified Opportunity Zone Fund No. 6. To carry out that intention, on May 23, 2019, he complied with instructions he received in an email which appeared to be from Wilcox, directing him to wire his funds to a specified account number ending in 7684 at a Wells Fargo branch in Boca Raton, Florida. The following day, plaintiff learned that Wilcox had not received his funds, and that it did not hold any accounts at Wells Fargo. Plaintiff then instructed his bank to contact Wells Fargo, asking it to freeze the account and return the $1 million. It is undisputed that on or about May 31, 2019, Wells Fargo returned $982,749.81 to plaintiff with the notation "return of $1,000,000, less fees."

Plaintiff's original complaint, filed on June 25, 2019, contained a single cause of action for negligence, alleging that defendant failed to comply with federal "Know Your Customer" {**67 Misc 3d at 506}banking regulations promulgated under the USA PATRIOT Act (see Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub L 107-56, 115 US Stat 272, amending 31 USC § 5318 [l]). His first amended complaint, filed on September 3, 2019, alleges in addition that Wilcox assigned its right, title, and interest in the 7684 account to him, despite earlier claiming that Wilcox did not own any interest in such account (see first amended complaint ¶¶ 6, 17). Based on the purported assignment from Wilcox, plaintiff's first amended complaint added a cause of action for breach of contract. Plaintiff seeks $17,250.19 plus loss of interest on $982,749.81 for eight days.

Defendant now moves to dismiss the first amended complaint, contending that the USA PATRIOT Act does not create a private cause of action, that the New York Uniform Commercial Code provides immunity for defendant under these circumstances, and that plaintiff lacks standing to bring a breach of contract claim against defendant because he is not in privity with defendant. Moreover, defendant demonstrates that the 7684 account is not, and never was, in Wilcox's name, but is rather an Interest on Trust Accounts (IOTA) program attorney trust account opened in 2017 by M— Law,^[FN*] a Florida-based law firm.

In support of its motion, defendant submits M— Law's February 23, 2017 Wells Fargo business account application upon which the 7684 account was opened, as well as monthly bank statements for that account from April 2019 through June 2019. The monthly bank statements reflect that $1,000,000 was transferred into the account on May 23, 2019, service charges of $45 were imposed on May 23 and May 24, 2019, $20,000 was withdrawn on May 24, 2019, and on May 29, 2019, the entire amount remaining in the account, $982,749.81, was withdrawn. The affirmation of counsel for Wells Fargo, submitted in support of the motion, asserts that the bank was unaware, until it received the amended complaint, that a wire transfer from the 7684 account on May 24, 2019, in the amount of $20,000 was unauthorized.

In opposition, plaintiff continues to maintain that due to defendant's negligence, the 7684 account was fraudulently opened in Wilcox's name, thereby enabling the fraud against him. Although plaintiff concedes the general rule that a bank does not{**67 Misc 3d at 507} owe a duty to non-customers (see Lerner v Fleet Bank, N.A., 459 F3d 273, 286 [2d Cir 2006]), he contends that an applicable exception exists under Florida law when a bank opens an account without following its own standard procedures (see Hsi Chang v JPMorgan Chase Bank, N.A., 845 F3d 1087, 1094-1095 [11th Cir 2017]). Alternatively, plaintiff argues that if the account belonged to M— Law as opposed to Wilcox, then, pursuant to section 4-A-207 (3) (b) of the Uniform Commercial Code, defendant was negligent in failing to recognize the discrepancy between the account number and account name on the payment order before disbursing the funds.

"When assessing the adequacy of a complaint in light of a CPLR 3211 (a) (7) motion to dismiss, the court must afford the pleadings a liberal construction, accept the allegations of the complaint as true and provide plaintiff . . . the benefit of every possible favorable inference" (People v Coventry First LLC, 13 NY3d 108, 115 [2009] [internal quotation marks and citation omitted]). "However, this does not apply to legal conclusions or factual claims which were either inherently incredible or flatly contradicted by documentary evidence" (Peters v Accurate Bldg. Inspectors Div. of Ubell Enters., Inc., 29 AD3d 972, 973 [2d Dept 2006] [internal quotation marks omitted]). Pursuant to CPLR 3211 (a) (1), "a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Kupersmith v Winged Foot Golf Club, Inc., 38 AD3d 847, 848 [2d Dept 2007]).

Initially, defendant submitted documentary evidence to conclusively disprove plaintiff's claim that Wells Fargo allowed a fraudulent perpetrator to open the 7684 account in Wilcox's name. The business account application and the bank account statements for the 7684 account definitively establish that the 7684 account was not fraudulently opened in Wilcox's name at all, either in order to defraud potential investors or otherwise. In fact, M— Law opened the account in 2017 as its IOTA account, and the account remained in the name of the law firm's trust account through the time of the events at issue.

As to plaintiff's argument in opposition to the motion, contending that defendant was negligent in allowing the transfer of plaintiff's funds into that account when the transferee name did not match that of the account holder,{**67 Misc 3d at 508} plaintiff did not assert such a claim in either the original or the amended complaint. This alternative argument, that defendant should have recognized the discrepancy and stopped payment on the wire transfer, was raised for the first time in opposition to the instant motion. In any event, the position is without merit.

"Article 4-A of the U.C.C. governs the procedures, rights, and liabilities arising out of commercial electronic funds transfers" (Grain Traders, Inc. v Citibank, N.A., 160 F3d 97, 100 [2d Cir 1998]). "Article 4A controls how electronic funds transfers are conducted and specifies certain rights and duties related to the execution of such transactions" (Youxin Ma v Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F3d 84, 89 [2d Cir 2010]). "[P]arties whose conflict arises out of a funds transfer should look first and foremost to Article 4-A for guidance in bringing and resolving their claims" (Phil & Kathy's v Safra Natl. Bank of N.Y., 595 F Supp 2d 330, 332 [SD NY 2009] [internal quotation marks and citation omitted]).

[1] Under Uniform Commercial Code § 4-A-207, if a beneficiary's name does not match the account number provided on a payment order received by the beneficiary's bank, and "the [*2]beneficiary's bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary's bank need not determine whether the name and number refer to the same person" (UCC 4-A-207 [2] [a]). Therefore, by the statute's explicit terms, a bank such as Wells Fargo, that accepts a wire transfer and credits the proceeds to the account number designated by the originator, has handled the wire transfer properly as long as it does not have actual knowledge that the recipient's account belongs to someone other than the intended beneficiary. Numerous trial level courts have recognized that banks act properly in accepting a wire transfer "where the beneficiary's name and account number do not match but, under certain conditions, the funds transfer can still go forward based on the beneficiary's account number alone" (see Tzaras v Evergreen Intl. Spot Trading, Inc., 2003 WL 470611, *4, 2003 US Dist LEXIS 2550, *11 [SD NY, Feb. 25, 2003, No. 01 Civ 10726 (LAP)]; Frankel-Ross v Congregation OHR Hatalmud, 2016 WL 4939074,*5, 2016 US Dist LEXIS 128342, *14-15 [SD NY, Sept. 12, 2016, 15 Civ 6566 (NRB)] ["Section 4-A-207 itself forecloses (any duty on the part of the beneficiary's bank): it specifically states that '(t)he beneficiary's {**67 Misc 3d at 509}bank need not determine whether the name and (account) number refer to the same person' "]; Kafati v Wells Fargo Bank, 2018 NY Slip Op 31744[U], *7 [Sup Ct, NY County 2018]).

Since plaintiff neither alleges that defendant had actual knowledge of the discrepancy between the transferee's name and the account number, nor suggests any basis for such an inference, section 4-A-207 forecloses any duty on the part of the beneficiary's bank. Defendant bank was entitled, under the UCC, to rely on the account number that plaintiff provided when arranging for the wire transfer, and no liability on the part of the bank is established by the bank's failure to ensure that the transferee's name matched the name on the account.

[2] Moreover, plaintiff cannot state a cause of action for common-law negligence. A negligence claim requires that the defendant owe a duty to the plaintiff (see Pasternack v Laboratory Corp. of Am. Holdings, 27 NY3d 817, 825 [2016]). A bank owes no duty of care to non-customers (see Renner v Chase Manhattan Bank, 1999 WL 47239, *13, 1999 US Dist LEXIS 978, *39-40 [SD NY, Feb. 3, 1999, No. 98 Civ 926 (CSH)]; Johnson v Chase Manhattan Bank, 2000 US Dist LEXIS 5587, *15 [SD NY, Apr. 27, 2000, 98 Civ 8173 (RMB) (RLE)] ["The general rule is that a bank does not owe a duty to a non-customer third-party"]; see also Century Bus. Credit Corp. v North Fork Bank, 246 AD2d 395, 396 [1st Dept 1998] ["to hold that banks owe a duty to their depositors' creditors to monitor the depositors' financial activities . . . would be to unreasonably expand banks' orbit of duty"]). Moreover, common-law claims are precluded "when such claims would impose liability inconsistent with the rights and liabilities expressly created by Article 4-A" of the Uniform Commercial Code (Fischer & Mandell, LLP v Citibank, N.A., 632 F3d 793, 797 [2d Cir 2011] [internal quotation marks and citation omitted]; Youxin Ma v Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F3d 84, 89 [2d Cir 2010] ["common law claims at odds with Article 4A are no longer permitted"]; Frankel-Ross v Congregation OHR Hatalmud, 2016 WL 4939074, *5, 2016 US Dist LEXIS 128342, *14-15 [SD NY, Sept. 12, 2016, 15 Civ 6566 (NRB)]).

Plaintiff's reliance on an exception to the general rule that a bank does not owe a duty to non-customers is misplaced. The exception on which plaintiff relies requires (1) that a fiduciary relationship exists between the customer and non-customer, (2) that the bank knows or should know of such relationship, and{**67 Misc 3d at 510} (3) that the bank has actual knowledge of the customer's misappropriation (see Hsi Chang v JPMorgan Chase Bank, N.A., 845 F3d at 1094-1095). Since plaintiff [*3]does not allege any of the above conditions, the proposed exception is inapplicable.

Nor may plaintiff succeed in establishing the existence of a duty by reliance on a claim that defendant bank violated banking regulations that were promulgated pursuant to the USA PATRIOT Act. It is well established that neither the Bank Secrecy Act (31 USC § 5311 et seq.) nor the USA PATRIOT Act of 2001 (Pub L 107-56, 115 US Stat 272) provides a private right of action, and that courts do not recognize a duty of care that is predicated upon the statutes' monitoring requirements (see Frankel-Ross v Congregation OHR Hatalmud, 2016 WL 4939074, *4-5, 2016 US Dist LEXIS 128342,11-12, *14-15). Therefore, plaintiff's allegation that Wells Fargo failed to properly comply with "Know Your Customer" banking regulations cannot form the basis for plaintiff's cause of action against it.

Finally, plaintiff's second cause of action for breach of contract is dismissed due to lack of privity. Documentary evidence submitted by defendant conclusively established that Wilcox never had an interest in the 7684 account. Since Wilcox had no greater connection to Wells Fargo than plaintiff, and could not transfer any interest in the account to plaintiff, Wilcox's purported assignment of its rights to plaintiff failed to provide plaintiff with a basis for claiming a breach of contract by Wells Fargo.

Based upon the foregoing, it is hereby ordered that defendant's motion to dismiss is granted, and the Clerk is directed to enter judgment accordingly.