Filed: Nov. 27, 2019
Latest Update: Mar. 03, 2020
Summary: Case: 18-15014 Date Filed: 11/27/2019 Page: 1 of 23 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ No. 18-15014 Non-Argument Calendar _ D.C. Docket No. 0:18-cv-60250-UU PETER E. SHAPIRO, P.A., Plaintiff-Appellant, versus WELLS FARGO BANK N.A., Defendant-Appellee. _ Appeal from the United States District Court for the Southern District of Florida _ (November 27, 2019) Before MARTIN, ROSENBAUM, and ANDERSON, Circuit Judges. PER CURIAM: Case: 18-15014 Date Filed
Summary: Case: 18-15014 Date Filed: 11/27/2019 Page: 1 of 23 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ No. 18-15014 Non-Argument Calendar _ D.C. Docket No. 0:18-cv-60250-UU PETER E. SHAPIRO, P.A., Plaintiff-Appellant, versus WELLS FARGO BANK N.A., Defendant-Appellee. _ Appeal from the United States District Court for the Southern District of Florida _ (November 27, 2019) Before MARTIN, ROSENBAUM, and ANDERSON, Circuit Judges. PER CURIAM: Case: 18-15014 Date Filed:..
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Case: 18-15014 Date Filed: 11/27/2019 Page: 1 of 23
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 18-15014
Non-Argument Calendar
________________________
D.C. Docket No. 0:18-cv-60250-UU
PETER E. SHAPIRO, P.A.,
Plaintiff-Appellant,
versus
WELLS FARGO BANK N.A.,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(November 27, 2019)
Before MARTIN, ROSENBAUM, and ANDERSON, Circuit Judges.
PER CURIAM:
Case: 18-15014 Date Filed: 11/27/2019 Page: 2 of 23
Plaintiff-Appellant Peter E. Shapiro, P.A. (“Shapiro”), 1 a law firm domiciled
in the State of Florida, appeals the district court’s grant of summary judgment to
Wells Fargo Bank, N.A. (“Wells Fargo”), a federally chartered national bank
domiciled in South Dakota and California. After falling victim to a targeted email
phishing scam,2 Shapiro filed a diversity action in the United States District Court
for the Southern District of Florida alleging that Wells Fargo should not have
processed a $504,611.13 wire he initiated through his own bank in connection with
the closing of a business transaction. Although he presents several arguments on
appeal, Shapiro’s essential argument is that Wells Fargo should not have processed
his wire because it knew—or with the exercise of reasonable due diligence should
have known—that the account name identified in Shapiro’s payment order did not
match the account name actually associated with the Wells Fargo account number
identified in the payment order.3 We have reviewed the parties’ briefs, relevant
1
Peter E. Shapiro, an individual, is the sole principal and employee of the Shapiro law
firm. Although the Shapiro law firm entity is the named plaintiff-appellant in this appeal, we
refer to the individual and the law firm entity interchangeably in this decision.
2
“Phishing doesn’t attack computers. It attacks the people using computers.” Quinn
Norton, Phishing Is the Internet’s Most Successful Con, Atlantic (Sept. 12, 2018), https://
www.theatlantic.com/technology/archive/2018/09/phishing-is-the-internets-most-successful-
con/569920. Phishing attacks come in many different varieties and go by many different names
(a fake email targeting a specific person, like Shapiro in this case, is sometimes called spear-
fishing), but all phishing attacks are intended to trick a person using a computer into sharing
information or doing something that benefits the perpetrator of the fraud. See id.
3
We address Shapiro’s Article 4A arguments in Part III.A, infra. Shapiro also argues
that the district court erred by dismissing his common law negligence claim on grounds that it
was preempted by Article 4A and by later denying its motion to amend to restate a broader
common law negligence claim. We address these two latter arguments in Part III.B, infra.
2
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portions of the record, and applicable law, including applicable provisions of
Florida’s codification of Article 4A of the Uniform Commercial Code (“UCC”)
dealing with funds transfers. For the reasons described below, we affirm the
decisions of the district court that together resulted in the granting of Wells Fargo’s
motion for summary judgment and the dismissal of Shaprio’s claims.
I. BACKGROUND
We assume the parties are familiar with the factual and procedural
background of this case and recount that background here only to the extent
necessary to provide context for our decision. Shapiro was engaged by his father
and brother to provide legal counsel in connection with the sale of their car
dealership in upstate New York. In connection with the closing of the sale
transaction, Shapiro’s father and brother were required to pay off a short-term loan
to a lender represented by another attorney, James Messenger (“Messenger”). On
November 16, 2017, Shapiro’s brother forwarded Shapiro an email from
Messenger indicating that the loan payoff wire should be sent to Messenger’s
account at M&T Bank in Syracuse, New York. The next day, November 17, 2017,
Shapiro’s brother forwarded Shapiro a second email (this one also purportedly
from Messenger) providing a different set of wire instructions, this time to a Wells
Fargo branch in Texas. The email read as follows:
Please here are my escrow account for today payoff wire transfer
instructions. Our M&T bank is currently on audit as a result can’t
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receive funds for now. Please let the wire transfer be made to this our
Wells Fargo bank. Find attached our bank details.
The attached bank details identified a valid Wells Fargo account number and
named Messenger as the beneficiary, but the account did not belong to Messenger.
Instead, it belonged to a person named Chris Achebe, a Nigerian citizen living in
the United States.
Shapiro did not speak with Messenger or email him to confirm the wire
instructions. 4 In instructing his bank (Citibank) to send his clients’ loan payoff to
Messenger on November 21, 2017, he instructed it to send a wire in the amount of
$504,611.13 to the valid Wells Fargo account number named in the second email
from Shapiro’s brother. Wells Fargo received the wire transfer through the
electronic Fedwire system, and it processed the wire using another electronic
system known as the Money Transfer System (“MTS”). Because in fact the name
4
A quick phone call from Shapiro to Messenger before initiating the wire probably
would have revealed the fraud and saved the parties a great deal of time and money. That said,
Shapiro’s actions in this regard do not play into our analysis in this case because the official
comments to Fla. Stat. § 670.207 indicate that “Article 4A makes irrelevant the issue of whether
[the originator of a funds transfer] was or was not negligent in issuing its payment order.” Fla.
Stat. § 670.207, Official Comment 2. We note this principle is different in other UCC articles,
including Article 3 and Article 4, where it is a “fundamental principle . . . that the loss resulting
from [other frauds like] forgery or alteration should fall on the party in the best position to
prevent the fraud.” Salvatore Scanio & Robert W. Ludwig, Contracting Out of the Uniform
Commercial Code: Reducing Bank Liability by Shortening the One-Year Notice Period for
Reporting Check Fraud, 33:11 Banking & Fin. Servs. Policy Report 15, 17 n.8 (Nov. 2014).
Regarding our reliance on the official comments to Article 4A, see In re Graupner, 537 F.3d
1295, 1301 n.4 (11th Cir. 2008) (noting that the official comments to the UCC “occupy an
unusual position as aids to statutory interpretation and should be regarded as an indispensable
part of the UCC framework”) (citations and internal quotation marks omitted)).
4
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of the intended beneficiary (James H. Messenger) did not match the name of the
owner of the Wells Fargo account identified in Shapiro’s payment order (Chris
Achebe), the automated MTS audit trail5 reflected that there was a “possible name
mismatch in [credit] party,” although no individual person was aware of that.
Notwithstanding this possible name mismatch, Wells Fargo’s MTS processed the
wire—as it was programmed to do—because the account number in Shapiro’s
payment order matched a valid Wells Fargo account number. Although the wire
was manually screened by an individual person for Office of Foreign Assets
Control (“OFAC”) compliance purposes,6 the parties do not dispute that no
individual person at Wells Fargo (including the OFAC screener) obtained actual
knowledge of the possible name mismatch in Shapiro’s payment order.
5
As the district court correctly noted, the parties dispute the extent of automation
involved with the MTS audit trail. We agree with the district court that the dispute is not
material. Even if Wells Fargo intentionally programmed the automated portions of its MTS
system to ignore potential name mismatches (which we assume to be true for purposes of
reviewing the district court’s ruling on Wells Fargo’s motion for summary judgment), “it may
rely on the number as the proper identification of the beneficiary of the order” unless and until an
individual person conducting the transaction has actual knowledge of a name mismatch or would
have had such knowledge had the organization exercised due diligence. See Fla. Stat.
§ 670.207(2); id. § 671.201(25)(c), (27).
6
The wire transfer was directed to an OFAC screener because the partial word
“ATTORN” in Shapiro’s wire instructions was a possible match for the name “ATTOUN,” an
individual person on the OFAC sanction list apparently because of his ties to Hamas. Wells
Fargo’s OFAC screening process does not use the MTS system, and only the information set
forth in the initial payment order received by Wells Fargo is routed to the OFAC screener for
review. The OFAC screening cleared the Shapiro wire as a false positive after determining that
“ATTORN” was an obvious misspelling of “ATTORNEY.”
5
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Once Wells Fargo completed the wire transfer, Achebe promptly removed
the transferred funds from his Wells Fargo account. Shapiro’s bank (Citibank) sent
a recall request almost a month later, but Wells Fargo declined the request because
the money had already been removed from Achebe’s account.
Shapiro sued Wells Fargo in the District Court for the Southern District of
Florida. It initially alleged that Wells Fargo breached its obligations under relevant
provisions of Article 4A of the UCC. Of relevance here, Shapiro alleged that
Wells Fargo should not have processed the wire because its automated systems
knew that the beneficiary identified in the payment order was not the owner of the
Wells Fargo’s account identified in the payment order. Shapiro’s complaint also
alleged that Wells Fargo was negligent because it breached a common law duty of
ordinary care when it failed to refuse to accept Shapiro’s funds transfer or freeze
the funds once they hit Achebe’s account.
Wells Fargo moved to dismiss the common law negligence claim and filed
an answer, and the district court granted its motion to dismiss on grounds that the
negligence cause of action was preempted by Article 4A. Later, some four months
after the cut-off date for amendments set forth in the district court’s scheduling
order, Shapiro moved to amend its complaint to add a negligence claim relating to
alleged acts and omissions of Wells Fargo with respect to the Achebe account
during the time period prior to the erroneous funds transfer. The district court
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denied that motion primarily on grounds that granting it would result in significant
litigation delay, but also because Shapiro had not explained how information
revealed by Wells Fargo late in discovery (which Wells Fargo had initially resisted
revealing) was “a necessary prerequisite” to Shapiro’s expanded negligence claim.
Finally, Wells Fargo moved for summary judgment as to Shapiro’s Article 4A
claim. The district court granted that motion, reasoning that Wells Fargo was
entitled to complete the funds transfer under Fla. Stat. § 670.207(2)
notwithstanding the name mismatch because the payment order identified a valid
Wells Fargo account number and no individual person had actual knowledge of the
discrepancy. Shapiro appealed these three decisions of the district court to this
Court. This is Shapiro’s appeal.
II. STANDARD OF REVIEW
We review a district court’s grant of a defendant’s motion to dismiss de
novo, Young Apartments, Inc. v. Town of Jupiter, Fl., 529 F.3d 1027, 1037 (11th
Cir. 2008), and a district court’s denial of a plaintiff’s motion to amend for an
abuse of discretion, Cockrell v. Sparks,
510 F.3d 1307, 1310 (11th Cir. 2007).
Finally, we review a district court’s ruling on a motion for summary judgment de
novo. Global Quest, LLC v. Horizon Yachts, Inc.,
849 F.3d 1022, 1026 (11th Cir.
2017). “Summary judgment is appropriate when the evidence, viewed in the light
most favorable to the nonmoving party, presents no genuine issue of material fact
7
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and compels judgment as a matter of law.” Id. (citations omitted); see also Fed. R.
Civ. P. 56(a).
III. DISCUSSION
A. The district court did not err in granting Wells Fargo’s motion for
summary judgment with respect to Shapiro’s claims under Article 4A of the UCC.
Shapiro argues on appeal that there are disputed issues of material fact with
respect to the question whether Wells Fargo had “knowledge” that the beneficiary
named in Shapiro’s payment order was not the same person that owned the Wells
Fargo account identified in the payment order. As a result, Shapiro argues that the
district court erred when it concluded, as a matter of law, that Wells Fargo lacked
such knowledge and dismissed Shapiro’s claims. We disagree with Shapiro’s
argument.
The State of Florida has adopted Article 4A of the UCC. The dispositive
provision of Article 4A in this case is Fla. Stat § 670.207, which describes the
rights, duties, and obligations of parties when a funds transfer “misdescribes” the
beneficiary. In relevant part, subsection (2) of § 670.207 provides that:
(2) If a payment order received by the beneficiary’s bank
identifies the beneficiary both by name and by an identifying or bank
account number and the name and number identify different persons,
the following rules apply:
(a) Except as otherwise provided [in a later subsection not at
issue in this case], if the 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
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beneficiary’s bank need not determine whether the name and number
refer to the same person.
(b) If the beneficiary’s bank pays the person identified by name
or knows that the name and number identify different persons, no
person has rights as beneficiary except the person paid by the
beneficiary’s bank if that person was entitled to receive payment from
the originator of the funds transfer. If no person has rights as
beneficiary, acceptance of the order cannot occur.
Fla. Stat. § 670.207(2) (emphasis added). In turn, the general UCC definitions
provide that a person 7 “knows” or has “knowledge” of a fact when the person has
actual knowledge of the fact. Id. § 671.201(25)(c). An organization is deemed to
have knowledge of a fact relating to “a particular transaction from the time when it
is brought to the attention of the individual conducting that transaction,” or,
alternatively, “from the time when it would have been brought to the individual’s
attention if the organization had exercised due diligence.”
Id. § 671.201(27). An
organization has “exercise[d] due diligence if it maintains reasonable routines for
communicating significant information to the person conducting the transaction
and there is reasonable compliance with the routines.”
Id.
7
The UCC defines “person” to include “an individual” and various legal entities,
including corporations and associations. Fla. Stat. § 671.201(30). It also defines “organization”
to mean “a person other than an individual.”
Id. § 671.201(28). Thus, in defining the rules for
“knowledge,” the UCC impliedly distinguishes between individual persons (i.e., human beings)
and organizations (i.e., legal entities and the like) because it provides a more specific rule that
defines when knowledge “received by an organization is effective for a particular transaction.”
Id. § 671.201(27). To avoid any confusion, when not quoting directly from Article 4A we refer
to corporations, associations, and the like in this opinion as “organizations,” and we refer to
human beings as “individual persons.”
9
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Thus, the proper resolution of this case depends on (1) whether an individual
person had actual knowledge of the fact that the Wells Fargo account number
identified in Shapiro’s payment order actually belonged to Achebe and not to
Messenger, or (2) even if no individual person had actual knowledge of the name
mismatch, whether Wells Fargo’s failure to communicate information from its
automated audit trail regarding a potential name mismatch to an individual person
means it failed to exercise due diligence and thus should be deemed to have
knowledge of the mismatch.
There is no reasonable dispute in this case that no individual person
(including the OFAC compliance screener) had actual knowledge of the name
mismatch before Wells Fargo approved Shapiro’s funds transfer and placed the
funds in Achebe’s account. Thus, Shapiro will succeed in obtaining a reversal of
the district court’s grant of summary judgment only if he is able to demonstrate a
genuine issue of material fact as to Wells Fargo’s failure to exercise due diligence
in processing the Shapiro wire. This he cannot do. To begin, the relevant UCC
provision expressly provides that, in cases involving payment orders that identify
both an account name and an account number, where the bank lacks actual
knowledge that the account name and number do not match, the beneficiary’s bank
(here, Wells Fargo) “may rely on the number as the proper identification of the
beneficiary of the order.” Fla. Stat. § 670.207(2)(a). Indeed, the beneficiary’s
10
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bank “need not determine whether the name and number refer to the same person.”
Id. This clear rule statement is explained in great detail in the comments to §
670.207, which, although not binding law, “do occupy an unusual position as aids
to statutory interpretation and should be regarded as an indispensable part of the
UCC framework.” In re Graupner,
537 F.3d 1295, 1301 n.4 (11th Cir. 2008)
(citations and internal quotation marks omitted). Like the district court, we
consider the following official commentary adopted by the Florida legislature—
which emphasizes the efficiency and certainty rationales at the heart of § 670.207
and other rules found in Article 4A—persuasive in this case:
A very large percentage of payment orders issued to the beneficiary’s
bank by another bank are processed by automated means using
machines capable of reading orders on standard formats that identify
the beneficiary by an identifying number or the number of a bank
account. The processing of the order by the beneficiary’s bank and
the crediting of the beneficiary’s account are done by use of the
identifying or bank account number without human reading of the
payment order itself. The process is comparable to that used in
automated payment of checks. The standard format, however, may
also allow the inclusion of the name of the beneficiary and other
information which can be useful to the beneficiary’s bank and the
beneficiary but which plays no part in the process of payment. If the
beneficiary’s bank has both the account number and name of the
beneficiary supplied by the originator of the funds transfer, it is
possible for the beneficiary’s bank to determine whether the name and
number refer to the same person, but if a duty to make that
determination is imposed on the beneficiary’s bank the benefits of
automated payment are lost. Manual handling of payment orders is
both expensive and subject to human error. If payment orders can be
handled on an automated basis there are substantial economies of
operation and the possibility of clerical error is reduced. [Section
670.207] allows banks to utilize automated processing by allowing
11
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banks to act on the basis of the number without regard to the name if
the bank does not know that the name and number refer to different
persons. 8 “Know” is defined in Section [671.]201(25) to mean actual
knowledge, and Section [671.]201(27) states rules for determining
when an organization has knowledge of information received by the
organization. The time of payment is the pertinent time at which
knowledge or lack of knowledge must be determined.
Although the clear trend is for beneficiary’s banks to process
payment orders by automated means, Section [670.207] is not limited
to cases in which processing is done by automated means. A bank
that processes by semi-automated means or even manually may rely
on number as stated in [Section 670.207].
....
. . . Beneficiary’s Bank has no duty to determine whether there
is a conflict and it may rely on the number as the proper identification
of the beneficiary of the order.
Fla. Stat. § 670.207, Official Comment 2 (emphasis added).
Thus, against this backdrop, we must determine whether knowledge of the
name mismatch should be imputed to Wells Fargo because it failed to exercise due
diligence within the meaning of Fla. Stat. § 671.201(27) by implementing and
using an automated funds transfer system that ignores potential name mismatches.
Stated in the relevant language of the statute, the question we must answer is did
8
See also First Sec. Bank of N.M. v. Pan Am. Bank, 215 F.3d 1147, 1152 (10th Cir.
2000) (noting that “Article 4A was crafted with the express purpose of creating—in an age of
increasing automation—inflexible rules of liability for wire transfer disputes,” that “such bright-
line rules are necessary so that parties to the millions of annual wire transfers may predict risk
with certainty, . . . insure against risk, . . . adjust operational and security procedures,
and . . . price funds transfer services appropriately,” and that “[t]he efficiency benefits of an
automated system are undermined if a bank is not able to rely on its automated system but must
independently verify there is no conflict between a beneficiary name and an account number”
(alterations in original) (citations and internal quotation marks omitted)).
12
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Wells Fargo “maintain[] reasonable routines for communicating significant
information to the person conducting the transaction” and then reasonably comply
with that routine?
Considering the clear intention of the statute, which is to allow for the
automated processing by banks of a large number of payment orders on a daily
basis, while reducing both transaction costs and the potential for clerical error, we
easily conclude that Wells Fargo maintained and complied with reasonable
routines, and thus exercised due diligence, with respect to the processing of
Shapiro’s payment order through its automated MTS. In reaching this conclusion,
we emphasize that § 671.201(27) operates to impute organizational knowledge
only when an organization fails to maintain “reasonable routines for
communicating significant information” to the person conducting the transaction.
In processing the payment order Shapiro originated, it was not unreasonable for
Wells Fargo to allow its automated payment system to ignore a potential name
mismatch and “rely on the number as the proper identification of the beneficiary of
the order.” Fla. Stat. § 670.207(2)(a). Indeed, this is expressly allowed
by § 670.207(2)(a). See id. (“The beneficiary’s bank need not determine whether
the name and number refer to the same person.”). Because the statute expressly
permitted Wells Fargo to do that, we cannot conclude that Wells Fargo failed to
maintain a reasonable routine.
13
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In adopting the comments to Article 4A, the Florida legislature made it clear
that two of the critical considerations embodied in Article 4A were to allow parties
to funds transfers “to be able to predict risk with certainty” and “to adjust
operational and security procedures.” Fla. Stat. § 670.102, Official Comment.
And that is exactly what Wells Fargo did in this case. In reliance on the clear rules
set forth in Fla. Stat. § 670.207(2), it implemented and used an automated system
that processed payment orders on the basis of a matching account number alone,
ignoring potential name mismatches automatically reflected in the audit trail. We
agree with the district court that Shapiro’s “proposed due diligence standard would
undermine the express purpose of Article 4A by reinserting human review into a
process which is intended to be quick and automated.” Accord Fla. Stat. §
670.207, Official Comment 2 (“If the beneficiary’s bank has both the account
number and name of the beneficiary supplied by the originator of the funds
transfer, it is possible for the beneficiary’s bank to determine whether the name
and number refer to the same person, but if a duty to make that determination is
imposed on the beneficiary’s bank the benefits of automated payment are lost.”).
We decline to read such a duty into Article 4A.9
9
One can reasonably question the wisdom of the rule (and the allocation of risk) on
which Wells Fargo relied in this case, especially in light of the fact that modern technology
probably is capable of easily differentiating between a partial mismatch (e.g., John Doe versus
Jon Doe) and a complete mismatch (e.g., James Messenger and Chris Achebe). But, that does
not change the fact that Wells Fargo is entitled to rely on the rule as it now exists, and arguments
14
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Nor are we persuaded by Shapiro’s argument that Wells Fargo’s OFAC
screening creates factual issues that should preclude summary judgment. We have
already concluded that Wells Fargo, as an organization, did not fail to act with the
due diligence required by Article 4A of the UCC by allowing its automated MTS
to process Shapiro’s funds transfer without escalating information relating to a
possible name mismatch to an individual person for review (including the OFAC
screener or any other Wells Fargo personnel). It is also undisputed that the OFAC
screener did not have actual knowledge of the potential name mismatch because he
reviewed only the original payment order (and not the information generated by
the MTS audit trail). Consequently, Wells Fargo still did not fail to act with due
diligence in this case because the OFAC screener did not have any material
information regarding the name mismatch to “communicate” to other individual
persons at Wells Fargo in any event. See Fla. Stat. § 671.201(27) (“Due diligence
does not require an individual acting for the organization to communicate
information unless such communication is part of the individual’s regular duties or
the individual has reason to know of the transaction and that the transaction would
be materially affected by the information.”); see also id. § 670.207(2)(a) (“The
beneficiary’s bank need not determine whether the name and number refer to the
that certain provisions of Article 4A are unwise or lead to unjust results are for the Florida
Legislature and not this Court to consider.
15
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same person.”); id. § 670.207, Official Comment 2 (“A bank that processes by
semi-automated means or even manually may rely on number as stated in Section
[670.207].”).
Finally, Shapiro did not allege below—and has not clearly argued on appeal
with appropriate citations to the record and relevant authority—that Wells Fargo’s
screening procedures violated any specific statute, regulation, or rule relating to the
OFAC sanctions program. Instead, Shapiro argues generally that “[a] fact-finder
might well determine that OFAC screening should reasonably be applied to the
[credit] party, in which case ‘due diligence’ would require that the information
with regard to the name on the account be included in the OFAC screening
process.” This argument is not enough to overcome summary judgment. No
reasonable fact finder could conclude that Wells Fargo failed to act with due
diligence under Article 4A because a limited screening intended to comply with
the regulatory requirements of an entirely different body of law did not reveal the
name mismatch, especially when it is not clear that Wells Fargo failed to adhere to
any particular OFAC requirements in any event.10 We therefore decline to disturb
10
We also note that the Code of Federal Regulations has adopted substantially all of
Article 4A of the UCC, including provisions relating to the misdescription of a beneficiary’s
bank. Like Florida law, these regulations provide that “[t]he beneficiary’s bank need not
determine whether the name and number refer to the same person.” 12 C.F.R. § 210.25(b)(1);
Appendix B to 12 C.F.R. Ch. II, Subch. A, Pt. 210. These federal regulations apply to Shapiro’s
funds transfer because it was processed through Fedwire. See 12 C.F.R. § 210.25(b)(2)(v). To
the extent that OFAC requirements might be read to create affirmative due diligence obligations
16
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on appeal the district court’s disposition of Shapiro’s claims under Article 4A of
the UCC on the basis that the OFAC screener potentially could or should have
discovered the potential name mismatch.
B. The district court did not err in granting Wells Fargo’s motion to
dismiss Shapiro’s common law negligence claims or in denying Shapiro’s
subsequent motion to amend its complaint to state an expanded negligence
claim.
Shapiro also argues on appeal that the district court erred (1) by granting
Wells Fargo’s motion to dismiss its common law negligence claim on grounds that
the claim was preempted by the statutory scheme set forth in Article 4A of the
UCC, and (2) by denying Shapiro’s motion to amend its complaint to add a new
claim for negligence some four months after the scheduled amendment deadline
passed. We conclude that the district court did not err in reaching either
conclusion.
First, with respect to the preemption issue, the district court did not err when
it concluded that Article 4A preempted Shapiro’s common law negligence claim
because Shapiro’s initial complaint alleged no negligence beyond the scope of the
erroneous funds transfer. Given the scope of those allegations, Article 4A
specifically (and thus exclusively) defines the duties, rights, and liabilities of the
under Article 4A in this case, Florida state law and federal regulations specifically addressing the
rights, duties, and obligations of the parties in cases involving a misdescribed beneficiary in a
payment order (including, in particular, that a beneficiary’s bank may rely on the account
number without regard to the account owner’s name under most circumstances) must take
precedence and serve as our guideposts in this case.
17
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parties in the misdescription-of-beneficiary situation presented by this case. See
Regions Bank v. Provident Bank, Inc., 345 F.3d 1267, 1274–75 (11th Cir. 2003)
(observing that Article 4A was “intended to be the exclusive means of determining
the rights, duties and liabilities of the affected parties in any situation covered by
the particular provisions of the Article” and concluding that “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 Article 4A); Corfan Banco Asuncion
Paraguay v. Ocean Bank,
715 So. 2d 967, 971 (Fla. 3d DCA 1998) (agreeing with
trial judge in case involving correctly identified beneficiary but incorrect account
number that Article 4A preempted plaintiff’s negligence claim where “[t]he duty
claimed to have been breached by [the bank] in its negligence count is exactly the
same duty established and now governed by [Article 4A]”). Thus, we disagree
with Shapiro’s argument that common law negligence principles are consistent
with, and should supplement, the relevant provisions of Article 4A in this case.
Shapiro’s initial complaint clearly alleged that Wells Fargo breached duties with
respect to the erroneous funds transfer that are significantly broader than—and thus
inconsistent with—the duties stated in Fla. Stat. § 670.207(a) (i.e., Shapiro alleged
that Wells Fargo had a duty to refuse to accept the wire or freeze the funds
because, even though the payment order identified the correct account number, it
also included a misdescribed beneficiary). Under the particular circumstances of
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this case, the district court was correct to conclude that Article 4A preempted the
common law negligence claim set forth in Shapiro’s initial complaint.
Second, with respect to Shapiro’s claim that the district court abused its
discretion by denying its motion to amend its complaint to allege a broader
negligence claim relating to Wells Fargo’s acts or omissions before the erroneous
funds transfer, we find no clear error, and thus no abuse of discretion, in the
judgment of the district court. “We have often held that a district court’s decision
to hold litigants to the clear terms of its scheduling orders is not an abuse of
discretion.” Josendis v. Wall to Wall Residence Repairs, Inc., 662 F.3d 1292,
1307 (11th Cir. 2011); accord Lowe’s Home Centers, Inc. v. Olin Corp.,
313 F.3d
1307, 1315 (11th Cir. 2002) (agreeing with “the district court’s conclusion that, in
order to ensure the orderly administration of justice, [the district court had] the
authority and responsibility to set and enforce reasonable deadlines”). Moreover,
we have also noted that district courts have “great discretion when deciding
whether to grant a motion for leave to amend a complaint following the filing of
responsive pleadings.” Lowe’s Home
Centers, 313 F.3d at 1314–15; see also Fla.
Evergreen Foliage v. E.I. DuPont De Nemours & Co.,
470 F.3d 1036, 1041 (11th
Cir. 2006) (denying motion to amend because, inter alia, plaintiffs “did not move
to amend their complaints until after the district court denied a motion to dismiss”).
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Here, the district court’s April 19, 2018 scheduling order set the cut-off date
for amending pleadings at May 18, 2018 and required discovery to be completed
by September 21, 2018. Shapiro filed a motion to amend its pleadings on
September 14, 2018. This date is some five months after Wells Fargo answered
Shapiro’s complaint, nearly four months after the cut-off date for amending
pleadings, and only one week before the parties were supposed to have completed
discovery. Although it is true that Wells Fargo resisted many of Shapiro’s initial
discovery requests on attorney-client privilege, work product, and other non-
frivolous legal grounds (thus extending discovery proceedings past the cut-off date
for amending pleadings), we cannot conclude that the district court clearly abused
its discretion in this case when it decided that Shapiro had not shown good cause to
avoid enforcement of the district court’s scheduling order, which clearly indicated
a cut-off date for amending pleadings at May 18, 2018.
This is especially true here because Wells Fargo had already answered
Shapiro’s complaint and the district court had even granted Wells Fargo’s motion
to dismiss Shapiro’s initial negligence claim from the original complaint. See Fla.
Evergreen Foliage, 470 F.3d at 1041; Lowe’s Home
Centers, 313 F.3d at 1314–15.
Moreover, Shapiro did not adequately explain to the district court—and has not
adequately explained on appeal—why it could not have stated a broader and
legally plausible claim for negligence in its original complaint without the factual
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information regarding the Achebe account eventually revealed by Wells Fargo
before the close of discovery.11 For example, even though Shapiro’s original
complaint included a factual allegation that “the WELLS FARGO bank account
had been opened in the name of ‘Chris Achebe,’ presumably as part and parcel of
the fraudulent scheme,” Shapiro’s original negligence count clearly focused only
on Wells Fargo’s alleged breach of one or more common law duties relating to its
handling of the erroneous funds transfer at issue in this case—and not with respect
to Wells Fargo’s breach of any common law duties relating to its opening or
maintenance of the Achebe account prior to that funds transfer. Because the
district court did not clearly abuse its discretion in denying Shapiro’s untimely
motion to amend to avoid having to reset and restart the entire case timeline shortly
11
It likely would have been futile to do so in any event because even Shapiro recognizes
that “the general rule is that a bank does not generally have a duty to monitor its customers’
accounts for the benefit of third parties.” Appellant’s Br. 34 n.13. Accord Chang v. JPMorgan
Chase Bank, N.A., 845 F.3d 1087, 1094 (11th Cir. 2017) (“Florida, like other jurisdictions,
recognizes that as a general matter, a bank does not owe a duty of care to a noncustomer with
whom the bank has no direct relationship.” (citations and internal quotation marks omitted)).
Although this could serve as another basis for our holding that the district court did not commit
reversible error in this case, see Coventry First, LLC v. McCarty,
605 F.3d 865, 870 (11th Cir.
2010) (noting that “[a] proposed amendment may be denied for futility when the complaint as
amended would still be properly dismissed” (citation and internal quotation marks omitted)), we
decline to fully explore this issue for two reasons. First, the district court did not address the
issue in its order denying Shapiro’s motion to amend, and our standard of review with respect to
the futility issue is de novo (not abuse of discretion). See
Cockrell, 510 F.3d at 1310. Second, it
is clear to us that the district court’s stated reasons for denying the motion (i.e., avoiding
litigation delay and enforcing the terms of its scheduling order) did not constitute clear and
reversible error.
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before the close of discovery, we decline to disturb the district court’s decision on
appeal.
IV. CONCLUSION
The district court did not err when it dismissed Shapiro’s original common
law negligence claim because the specific provisions of Article 4A regarding the
misdescription of a beneficiary’s bank preempt Shapiro’s common law negligence
claim in this case. Nor did the district court err in later denying Shapiro’s motion
to amend its complaint to state a broader negligence claim. It was not clear error,
and thus not an abuse of discretion, for the district court to deny the motion to
amend to avoid significant litigation delay at a late stage in the proceedings,
especially in light of Shapiro’s failure to adequately explain to the district court
why information revealed late in discovery was a necessary prerequisite to its
ability to state a broader negligence claim earlier in the litigation. Finally, the
district court did not err when it granted Wells Fargo’s motion to dismiss Shapiro’s
claims under Article 4A because § 670.207 clearly indicates that Wells Fargo was,
under the circumstances presented in this case, entitled to use its automated
payment system to process Shapiro’s wire on the basis of a valid account number
alone (without regard to a possible mismatch between the intended beneficiary and
the actual credit party detected by an automated payment system and noted in that
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system’s audit trail). The judgment of the district court granting Wells Fargo’s
motion for summary judgment and dismissing Shapiro’s claims is therefore
AFFIRMED.12
12
Any other arguments asserted on appeal by Shapiro are rejected without need for
further discussion.
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