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Nirav Ingredients, Inc. v. Wells Fargo Bank

Case Number : 3:20-cv-00366-FDW-DSC

Date Filed : 1/27/2021 State : North Carolina

  • Background : The plaintiffs in this case are Nirav Ingredients, Inc. and Ash Ingredients, Inc. and the defendants are Wells Fargo Bank, N.A. and John Doe(s). On May 16, 2019, Ash received an email that appeared to be sent by Nirav stating that Ash needed to make electronic payments to the two accounts sent. Ash then wired $82,925 and $11,819 to the account on May 24, 2019, without verifying the authenticity of the emails. The email sent in reality belonged to a third-party Hacker as part of a fraudulent email scheme and the account Ash sent money to belonged to K.P., who had opened the account on September 30, 2014, at Wells Fargo. Wells Fargo Bank has verified her identity and ran a search that found that there was no negative banking history for her. On June 3, 2019, Nirav reported the wires to Wells Fargo and notified the bank that Ash had sent the hackers the funds instead of Nirav because of the fraudulent email. However, the funds had already left the account. Wells Fargo then opened two claim numbers for each of the two wires made. The account also became inaccessible after Well Fargo placed a “Hard Hold” following the company policy while investigating the claims. On June 18, 2019, Wells Fargo closed the account and ended their customer relationship with K.P. since she failed to promptly report receipt of the wire funds that were not meant for her.

  • Plaintiff Argument: The plaintiffs allege that Wells Fargo transferred the money without hesitation despite knowing that the hacker’s account was not owned by Nirav since Ash had transacted millions of dollars to Nirav’s real account. Although Wells Fargo played an essential role in the fraud, they refuse to assist Nirav in its efforts to recover the money stolen and even refused to disclose the identity of the hacker. Even though there is a growing rate of online banking fraud, Wells Fargo little to no effort in protecting their clients and did not afford their clients the same protective measures that they expect their clients to undertake while making wire transfers. According to Nirav, the wire transfers resulted in “actual damaged”, and injuries to its “creditworthiness”, and caused President Himanshu Doshi enough stress to contract an acute heart failure that required bypass surgery. - Negligence - Alleging violation of Article 4A of the UCC - Violation of North Carolina’s Unfair and Deceptive Trade Practices Act

  • Defendants Argument : Wells Fargo states that although the account did not belong to Nirav, they had no obligation to check whether the account name and the account number matched during a wire transfer. Wells Fargo argues that the negligence claims should be dismissed pursuant to Rule 12(b)(6) because UCC Article 4A preempts state law negligence claims rooted in wire fund transfers. In order to claim negligence in North Carolina, Nirav must have shown that the defendant owed the plaintiff a legal duty, a breach of that duty, and that the plaintiff's injury was caused by the breach (Matishius v. Carolco Studios, Inc.). Nirav failed to supply give any authority to the Court to demonstrate that negligence claims were rooted in the aftereffects of a wire transfer. Wells Fargo also argues that Nirav’s claim alleging a violation of Article 4A of the UCC should be dismissed pursuant to Rule 12(b)(6) since Nirav lacks the necessary statutory standing to sue the defendants under the UCC. Although Nirav stated that they hold statutory standing as an “intended beneficiary” since Ash intended for the wire transfer to go to Nirav as the beneficiary, the originator of the wire transfers, Ash< asserts no claims against Wells Fargo. Since Nirav lacks the required basis in tort or statutory standing, the claims for violation of North Carolina’s Unfair and Deceptive Trade Practices Act (“UDTPA”) must fail. The pleasing before the court appears to narrow procedures and post-trader conduct while the complaint originally based its UDT{A claim on its prior negligence allegations that involve the opening and management of fraudulent account, including the wire transfer procedures and post-transfer conduct.

  • Judge Verdict : The court rules that Nirva’s claim against Wells Fargo for negligence can proceed to the limited extent that the Plaintiffs rely on conduct relating to the opening and maintaining of a fraudulent account. The rest of the negligence claims regarding wire fund transfers and the resulting conduct are dismissed.

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