Fischer & Mandell LLP v. Citibank, N.A.
2011 U.S. App. LEXIS 2115
| 2d Cir. | 2011Background
- In January 2009, F&M deposited a counterfeit Wachovia check for $225,351 into its Citibank trust account.
- Citibank made the funds provisionally available online and, per client instruction, F&M wired $182,780 to South Korea the next day.
- F&M then wired $27,895 to Canada after seeing an available balance of $61,232; the transfer went via Bank of America as intermediary.
- The Federal Reserve later dishonored the check; Citibank charged back the overdraft and debited a money market account to cover it.
- F&M sued for breach of contract and negligence; the district court granted Citibank summary judgment on both claims.
- The court relied on Citibank’s Agreements (Manual, Addendum, User Agreement) to define rights and liabilities and held that funds were provisionally, not finally, available.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Article 4-A preempts the breach of contract claim | F&M argues preemption would bar common-law claims conflicting with Article 4-A. | Citibank contends Article 4-A governs electronic transfers and can be varied by agreement. | Breach claim not preempted; variances allowed by agreement. |
| Meaning of 'available' funds under the Agreements | F&M asserts 'available' equates to collected funds and misled by provisional availability. | Citibank's 'available' is provisional, subject to charge-back if the check is dishonored. | 'Available' is provisional, not necessarily 'collected'; subject to charge-back. |
| Whether Article 4 preempts common-law negligence | F&M argues negligence should lie outside Article 4-A. | Courts should align with Article 4-A; common-law claims may be preempted if inconsistent. | Article 4-A preempts any negligence claim inconsistent with its provisions. |
| Whether Citibank acted reasonably in attempting to recall the wires | Delay of about fifteen hours to cancel caused injury to F&M. | Cancellation occurred after the transfers were already executed; request was ineffective. | Cancellation orders were ineffective because transfers were executed before recall; no triable issue. |
Key Cases Cited
- Grain Traders, Inc. v. Citibank, N.A., 160 F.3d 97 (2d Cir. 1998) (preemption when common-law claims conflict with Article 4-A)
- Ma v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84 (2d Cir. 2010) (recognizes variances allowed by Article 4-A regime)
- Putnam Rolling Ladder Co. v. Mfrs. Hanover Trust Co., 74 N.Y.2d 340 (N.Y. 1989) (UCC certainty and efficiency in commercial transactions)
- Sunshine v. Bankers Trust Co., 34 N.Y.2d 404 (N.Y. 1974) (bank not shielded from ordinary care duties under UCC 4-103)
- Centre-Point Merch. Bank Ltd. v. American Express Bank Ltd., 913 F. Supp. 2d 202 (S.D.N.Y. 1996) (permissible non-UCC-law analysis when not inconsistent with Article 4-A)
- Shearbonnet, Ltd. v. Am. Express Bank, Ltd., 951 F. Supp. 403 (S.D.N.Y. 1995) (common-law claims may proceed where not conflicting with Article 4-A)
- Aleo Int'l, Ltd. v. Citibank, N.A., 160 Misc. 2d 950 (Sup. Ct. N.Y. Cnty. 1994) (recall-of-wire-transfer-cancellation effectiveness)
- FDIC v. Great Am. Ins. Co., 607 F.3d 288 (2d Cir. 2010) (summary judgment cannot rely on conclusory allegations)
- Call v. Ellenville Nat'l Bank, 5 A.D.3d 521 (2d Dep't 2004) (provisional credit and charge-back rights when check dishonored)