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ZEK Wins Decisive Victories for Three Bank Clients in Wire Transfer Cases

  • Wellton Int’l Express v. Bank of China (Hong Kong), 2020 U.S. Dist. LEXIS 59224 (S.D.N.Y. April 3, 2020) Click here for Decision
  • Targoff v. Wells Fargo Bank, N.A., 2020 N.Y. Misc. LEXIS 904, 2020 WL 990054 (Westchester Cnty. S. Ct. Feb. 27, 2020) Click here for Decision
  • Allied Contracting II Corp. (USA), (N.Y. Cnty. S. Ct. May 5, 2020 Click here for Decision

ZEK New York litigators Peter Janovsky and Ronald Neumann won decisive victories for our bank clients in convincing three different New York courts to dismiss cases against banks with similar fact patterns involving a prevalent type of computer internet fraud.

In all three cases, plaintiffs (two were corporations and one was an attorney) alleged that they were induced by a fraudulent email generated by an unknown computer hacker to direct bona fide wire transfer payments to the account of our bank client’s customers who were not the intended recipients of the wired funds. In both the Wellton and Allied Contracting cases, plaintiffs also alleged that ZEK’s client banks agreed to restrain the wire proceeds, but nonetheless allowed the proceeds to be withdrawn.

In all three cases, ZEK litigators Janovsky and Neumann successfully argued that Article 4-A applied to the wire transfers at issue, and the banks properly credited the wired proceeds to the account number designated in the wire payment order. ZEK’s attorneys then persuaded the courts to dismiss the common law claims in two of the three cases, while in the third, plaintiff abandoned its common law causes of action after receiving ZEK’s motion papers and memorandum of law.

Plaintiff Allied Contracting alleged CTBC was liable for aiding and abetting fraud, and for commercial bad faith. The Allied Contracting court, citing with approval the federal court’s decision in Wellton, dismissed plaintiff’s aiding and abetting fraud claims on several grounds, including failure to plead the bank’s lack of actual knowledge of a fraud or substantial assistance in the fraud. In addition, the Court dismissed the commercial bad faith claims because the complaint failed to plead “facts inculpating the principals of the bank as actual participants in unlawful activity.” Finally, the Court denied leave for plaintiff to replead, because “Plaintiff has not submitted any proposed amendments that would cure the pleading deficiencies or presented any arguments to show that it can state viable causes of action upon repleading.”

The courts in Wellton and Targoff, in dismissing the claims against ZEK client banks, adopted Ron Neumann’s position that Article 4-A required a banking relationship, which the court labeled as “privity,” that plaintiffs lacked, thereby upholding the maxim that a “bank owes no duty of care to a non-customer.” Targoff, 2020 N.Y. Misc. LEXIS 904, at *8. The Wellton court similarly decided that the “lack of privity” between plaintiffs and ZEK’s client doomed their case and required the dismissal of all claims.

For questions regarding these cases or Article 4-A matters in general, please contact Peter Janovsky (pjanovsky@zeklaw.com) or Ronald Neumann (Rneumann@zeklaw.com).

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Peter Janovsky is a partner at ZEK and a member of both its Litigation and Bankruptcy groups. His 32 years of experience includes successfully litigating trials, motions and appeals in complex real estate, secured lending, title, partnership agreements, license agreements and many other issues in Courts on all levels.

Ronald M. Neumann is Of Counsel to ZEK and a member of the firm’s Litigation Department specializing in a broad range of banking litigation, including payment disputes involving the UCC, the Electronic Funds Transfer Act and Reg E and Automated Clearing House (NACHA) issues.