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ReAmerica, S.A. v. Wells Fargo Bank International

August 11, 2009

REAMERICA, S.A., PLAINTIFF-APPELLANT,
v.
WELLS FARGO BANK INTERNATIONAL, DEFENDANT-APPELLEE.



SYLLABUS BY THE COURT

In this diversity action, plaintiff-appellant ReAmerica, S.A. appeals from a March 18, 2008 final order of the United States District Court for the Southern District of New York (Deborah A. Batts, Judge), granting summary judgment to defendant-appellee Wells Fargo Bank International on plaintiff-appellant's claims that Wells Fargo had "wrongfully debited" ReAmerica's account and that Wells Fargo negligently transmitted the data from which one could derive the authorization code for the account. We conclude that Article 4A of the Model Uniform Commercial Code ("U.C.C.") as enacted by Minnesota, see Minn. Stat. § 336.4A-101 et seq., governs this action, and, as a result, plaintiff-appellant's claim that Wells Fargo wrongfully debited its account is time-barred by the one-year statute of repose of section 4A-505 of the U.C.C. Additionally, we conclude that plaintiff-appellant's common law negligence claim is precluded by Article 4A of the U.C.C. Accordingly, we affirm the final order of the District Court.

Affirmed.

The opinion of the court was delivered by: JOSÉ A. Cabranes, Circuit Judge

Argued: May 6, 2009

Before: WINTER and CABRANES, Circuit Judges*fn1

Plaintiff-appellant ReAmerica, S.A. ("plaintiff" or "ReAmerica") appeals from a March 18, 2008 final order entered in the United States District Court for the Southern District of New York (Deborah A. Batts, Judge), granting summary judgment to defendant Wells Fargo Bank International ("Wells Fargo") on ReAmerica's claims that (1) Wells Fargo had "wrongfully debited" ReAmerica's account and (2) Wells Fargo had negligently transmitted the data from which one could derive the authorization code for the account. See ReAmerica, S.A. v. Wells Fargo Bank International, No. 04 Civ. 5233, 2008 U.S. Dist. LEXIS 30614 (S.D.N.Y. Mar. 18, 2008).*fn2 We agree with the District Court that Article 4A of the Model Uniform Commercial Code ("U.C.C.") as enacted by Minnesota, see Minn. Stat. § 336.4A-101 et seq., governs this action, and, as a result, plaintiff's claim that Wells Fargo wrongfully debited its account is time-barred by the one-year statute of repose set forth in section 4A-505. Additionally, we agree with the District Court that plaintiff's common law negligence claim is precluded by Article 4A of the U.C.C. Accordingly, we affirm the final order of the District Court.

BACKGROUND

The following facts are undisputed. ReAmerica is a reinsurance company with its principal place of business in Argentina. In 1989, it opened a bank account with Norwest Bank International, a predecessor-in-interest to Wells Fargo. In 1991, the parties executed a wire transfer agreement that enabled ReAmerica to transfer electronic funds from its account. The agreement contained the following choice of law provisions:

11.1 Article 4A. The rights and obligations of the parties regarding funds transfers shall be governed solely by this Agreement and Article 4A of the Uniform Commercial Code ("Article 4A") without regard to whether Article 4A has been enacted in the state(s) in which the parties have their princip[al] places of business.

11.2 Applicable Law. This Agreement and the rights and obligations of the Bank and the User shall be governed by the law of the state in which the Bank has its princip[al] office or, if that state has not enacted Article 4A, the laws of the State of Minnesota . . . .

ReAmerica, S.A., 2008 U.S. Dist. LEXIS 30614, at *3-4. For the relevant time period, Wells Fargo had its principal place of business in Minnesota.

The agreement also set forth a security procedure, which specified how the parties would complete a wire transfer. In order to initiate such a transfer, ReAmerica would prepare a payment order that included an authorization code or "test key" number, which ReAmerica derived from a table and test key formula that was provided by Wells Fargo. Wells Fargo would then verify the test key number and execute the payment order. Between January 1, 2000 and December 5, 2001, ReAmerica transmitted 139 wire transfer payment orders from its account at Wells Fargo.

During this period, a consultant to ReAmerica, Ricardo Wagner, obtained the authorization code and forged the signature of ReAmerica's chief executive officer, Carlos Romanelli, on twenty-four payment orders transmitted to Wells Fargo, to divert part of ReAmerica's funds to what is believed to be Wagner's own personal account. By e-mail dated January 28, 2002 and letter dated January 29, 2002, ReAmerica requested that Wells Fargo suspend activity in the account due to its "serious suspicion" that the account was being fraudulently used. Id. at *6. By letter dated April 17, 2002, ReAmerica requested information from Wells Fargo regarding ReAmerica's account activity for the 2000 to 2001 time period. Although the letter stated that fraudulent activity in the account had been discovered, it did not identify the specific transactions that were fraudulent, nor did it state whether any transactions would be disputed. Wells Fargo promptly complied with ReAmerica's request and Romanelli later testified that ReAmerica was able to identify by April 2002 the specific transactions that the company intended to dispute. However, it was not until nearly two years later-on March 18, 2004-that ReAmerica notified Wells Fargo that it was disputing the twenty-four payment orders that were fraudulently initiated by Wagner.

On July 2, 2004, ReAmerica filed this action to recover $1,026,665.38-the total amount unrecovered from the disputed transfers. Specifically, ReAmerica claimed that (1) Wells Fargo had wrongfully debited its account, and (2) Wells Fargo negligently transmitted the test key data to ReAmerica by twice faxing it to the attention of one of Romanelli's employees, and not to Romanelli himself, as a result of which, ReAmerica argued, Wagner was able to obtain the data that facilitated his fraud.*fn3 After discovery, Wells Fargo moved for summary judgment, which the District Court granted on March 18, 2008. At the outset, the District Court agreed with the parties that, pursuant to the wire transfer agreement, the electronic fund transfers at issue were governed by Article 4A of the U.C.C. See id. at *11-12. With respect to ReAmerica's claim that its account was wrongfully debited, the District Court determined that section 4A-505 of the U.C.C. posed a procedural bar-a one-year statute of repose on claims that an account was wrongfully debited based on a payment order, which runs from the date the bank (Wells Fargo) notifies the other party (ReAmerica) of the payment order. See id. at *13-14. The District Court concluded that Wells Fargo had given adequate notice of the relevant payment orders, but that ReAmerica had failed to object within the requisite one-year period. See id. at ...


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