Stephen GROSSMAN, Plaintiff-Appellant,
v.
NATIONSBANK, N.A., Defendant-Appellee.
No. 00-10730
Non-Argument Calendar.
United States Court of Appeals,
Eleventh Circuit.
Sept. 6, 2000.
Appeal from the United States District Court for the Middle District of Florida. (No. 98-00239-CIV-OC-21C),
Ralph W . Nimmons, Jr., Judge.
Before TJOFLAT, BARKETT and HULL, Circuit Judges.
PER CURIAM:
Plaintiff-Appellant Stephen Grossman appeals the district court's order dismissing his complaint for
failure to state a claim upon which relief could be granted. Fed.R.Civ.P. 12(b)(6). This case arises out of
Grossman's claims that Nationsbank improperly transmitted a fund transfer on his behalf through the Federal
Reserve Wire Transfer Network ("Fedwire").1 Grossman alleged that the improper transfer resulted in
damages of over $200,000 to him. After review, we affirm.
I. GROSSMAN'S COMPLAINT
We first review the allegations in Grossman's complaint. Grossman's complaint alleges that he
entered into a joint venture agreement (the "JV agreement") with HMF Management ("HMF") in order to
participate in an investment program. On October 7, 1996, in furtherance of the JV agreement, Grossman
opened an account at First Union National Bank (the "HMF-Grossman JV account"). Grossman received
instructions from HMF for the wire transfer of Grossman's investment funds into the HMF-Grossman JV
1
Fedwire is the funds-transfer system owned and operated by the Federal Reserve Banks. See 12
C.F.R. § 210.26(e). Fedwire is an "electronic funds transfer system which permits large dollar fund
transfers by computer-to-computer communications between banks." Lopez v. First Union National Bank
of Florida, 129 F.3d 1186, 1188 (11th Cir.1997).
account at First Union. Grossman attached to his complaint as Exhibit B a copy of the wire-transfer
instructions as he received them from HMF. The wire transfer instructions read as follows:
WIRE TRANSFER INSTRUCTIONS
HMF-GROSSMAN JV
BANK NAME: AM SOUTH BANK
BANK ADDRESS: CLEARWATER, FLORIDA
ABA# : 063 210 112
ACCOUNT NAME: DIVERSIFIED VENTURES
ACCOUNT NUMBER: 3283155856
FOR FURTHER CREDIT TO:
BANK NAME: FIRST UNION
BANK ADDRESS: JACKSONVILLE, FLORIDA
ABA# : 063000021
ACCOUNT NAME: HMF-GROSSMAN JV
CAP ACCOUNT NUMBER: 9981575600 [handwritten]
—————
(R1-2 at Exh. B). The wire transfer instructions thus directed that the funds be wired to bank name "Am
South Bank," account name "Diversified Ventures," account number 3283155856, and then "for further credit
to" bank name "First Union," account name "HMF-Grossman JV," account number 9981575600.
On October 11, 1996, Grossman visited a Nationsbank2 branch office and requested assistance in
effecting the wire transfer of his funds to the HMF-Grossman JV account. Grossman provided a copy of the
2
Grossman originally filed his complaint against Barnett Bank. After Barnett Bank merged into
Nationsbank, Nationsbank was substituted as the defendant in this case. To avoid confusion, we will
refer only to Nationsbank in this opinion.
wire-transfer instructions to an employee of Nationsbank. The employee prepared a "Request for Funds
Transfer" form that Grossman signed. Grossman attached to his complaint at Exhibit C a copy of the funds
transfer form. The funds transfer form contained the following information, in pertinent part (the printed
form headings are underlined):
WIRE AMOUNT $250,000.00
RECEIVING BANK (Use ONLY if different from Beneficiary's Bank)
FINAL DESTINATION: FIRST UNION, JACKSONVILLE, FL R/T
# 06300021, HMF-GROSSMAN JV # 9981575600
BENEFICIARY'S BANK
FIRST DESTINATION: AM SOUTH BANK, CLEARWATER, FL R/T/
# 063 210 112 DIVERSIFIED VENTURES
BENEFICIARY NAME
AM SOUTH BANK
BENEFICIARY ACCOUNT NUMBER (REQUIRED)
3283155856
ORIGINATOR TO BENEFICIARY INFORMATION (SPECIAL
INSTRUCTIONS, EX. ATTENTION, REFERENCE NUMBER, ETC.)
FINAL DESTINATION ADDRESS: FIRST UNION 2801 SOUTHWEST HIGH
MEADOWS AVE, PALM CITY, FL 34490
ORIGINATOR/BY ORDER OF
STEPHEN GROSSMAN METHOD OF PAYMENT: DBT ACCT # 2010788969
—————
(R1-2 at Exh. C).
On October 17, 1996, Grossman was again in the Nationsbank branch office. The employee who had
prepared the funds transfer form asked Grossman if the transfer had gone well. Grossman replied that he
assumed it had gone well because the funds had reached the HMF-Grossman JV account at First Union. The
employee then told Grossman that the "wire transfer room" had told her that because both Nationsbank and
First Union were "on line," there was no need to route the funds through Am South Bank. As a result,
Nationsbank had wired the money directly to First Union for credit to the HMF-Grossman JV account.
Grossman then reviewed the joint-venture documents, and determined that the transfer directly from
Nationsbank to the HMF-Grossman JV account "appeared to be inconsistent with the wiring instructions
given to him." While the funds had reached the ultimate intended account, the HMF-Grossman JV account,
the funds had gone to the account directly and not through Am South Bank and the Diversified Ventures
account. On October 18, 1996, Grossman again contacted the Nationsbank branch office and requested that
the "wire be sent in accordance with the instructions he had been provided and, in turn, had provided the
bank." After the same Nationsbank employee consulted with the "wire room," she told Grossman that the
funds would be recalled and resent in conformity with the instructions.
Within the next several days, Grossman received confirmation from both the "wire room" and the
same Nationsbank employee that the funds had been recalled and resent. However, in early November,
Grossman contacted First Union and learned that no deposit had been received to the HMF-Grossman JV
account. Grossman immediately called Am South Bank to inquire as to why the funds had not been
forwarded to the HMF-Grossman JV account as the wiring instructions had directed. Am South told
Grossman that it could not provide him any information regarding an account to which he was not a
signatory, and that he should contact the owner of the Diversified Ventures account at Am South to which
Nationsbank had wired the funds.
Over the next several months, Grossman tried unsuccessfully to determine what had happened to the
funds that were intended for deposit in the HMF-Grossman JV account at First Union. Nationsbank
continued to insist that it had transferred the money to Am South according to Grossman's instructions, and
that it was then Am South's responsibility to complete the transaction pursuant to the instructions that
Nationsbank had forwarded to Am South with the funds. In March 1997, Am South informed Grossman that
the Diversified Ventures account had been closed in February 1997.
HMF, the sole signatory to the Diversified Ventures account at Am South, initially told Grossman
that the delay in forwarding the funds to the HMF-Grossman JV account at First Union had been due to a
federal audit of Diversified Ventures. However, on March 6, 1997, HMF wired $50,000.00 to Grossman's
Nationsbank account in return for an agreement from Grossman authorizing HMF to deduct $50,000.00 from
the principle sum of the investment that it would soon transfer to the HMF-Grossman JV account. Grossman
attached to his complaint at Exhibit D a copy of this agreement.
In August 1997, Grossman sought assistance from the Federal Reserve Bank in Washington D.C.
Officials there informed him that Nationsbank was responsible for the loss of the funds due to its failure to
execute the payment order according to Grossman's instructions. According to the Federal Reserve, the loss
of the funds was not to be blamed on Am South's failure to forward the funds as instructed. As a result,
Grossman made a written demand for damages on Nationsbank. Nationsbank promised to address
Grossman's demands "as expeditiously as possible," but never concluded its inquiry. Grossman's complaint
alleges damages in excess of $200,000.00 as a result of Nationsbank's "failure to complete the wire transfer
transaction in accordance with the instructions Grossman had provided, or to advise Grossman that such
transaction could not be completed as structured."
II. THE DISTRICT COURT'S ORDER
In its motion to dismiss, Nationsbank contended that Grossman failed to plead the essential elements
of a cause of action for the erroneous execution of a Fedwire funds transfer. Fed.R.Civ.P. 12(b)(6). In
granting Nationsbank's motion to dismiss, the district court noted that Grossman's complaint had failed to
specify pursuant to which statute or statutes he had filed his claims, and whether he was suing under Florida
or federal law. After an analysis of the preemptive effect of federal regulations, the district court concluded
that even if Grossman had intended to proceed under Florida law, the state law would be preempted by
Subpart B of Federal Reserve Board Regulation J ("Regulation J"),3 which governs wire transfers effected
through Fedwire.
Therefore, the district court analyzed the claims in Grossman's complaint exclusively using Subpart
B of Regulation J, which applies U.C.C. Article 4A as the governing statute for Fedwire funds transfers. See
12 C.F.R. § 210.25(b)(1) (providing also that Regulation J controls in the event of inconsistencies with
U.C.C. Article 4A). All of the parties now agree that Nationsbank's duty was governed by Regulation J and
U.C.C. Article 4A. The parties disagree regarding whether the district court properly held that Grossman's
complaint failed to allege a cause of action under Regulation J, 12 C.F.R. Part 210, Subpart B, App. B, § 4A-
302(a)(1).
III. STANDARD OF REVIEW
We review de novo a district court's order dismissing a complaint for failure to state a claim upon
which relief could be granted. See Lopez v. First Union National Bank of Florida, 129 F.3d 1186, 1189 (11th
Cir.1997) (citation omitted). When considering a motion to dismiss, all facts set forth in the plaintiff's
complaint "are to be accepted as true and the court limits its consideration to the pleadings and exhibits
attached thereto." GSW, Inc. v. Long County, 999 F.2d 1508, 1510 (11th Cir.1993). A complaint may not
be dismissed pursuant to Rule 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to relief." Lopez, 129 F.3d at 1189 (internal quotations
and citation omitted).
IV. DISCUSSION
3
55 Fed.Reg. 40,791 (1990) (as amended Oct. 5, 1990) (codified at 12 C.F.R. Part 210 (Subpart B &
Appendix B)).
The district court held, and the parties agree, that the provisions of Regulation J exclusively apply
to the fund transfer in this case because it was effected by the use of Fedwire, the Federal Reserve Banks'
wire-transfer system. See 12 C.F.R. § 210.25-32. Regulation J applies U.C.C. Article 4A to wire transfers
conducted using Fedwire. See 12 C.F.R. § 210.25(b)(1); Appendix B to Subpart B to Part 2104; see also
Donmar Enters., Inc. v. Southern Nat'l Bank, 64 F.3d 944, 948 (4th Cir.1995).
We address Nationsbank's duty under Regulation J and U.C.C. Article 4A once Grossman requested
the fund transfer, so that we can determine whether Grossman's complaint sufficiently stated a claim that
Nationsbank breached its duty under those provisions. However, we will first provide Article 4A's definition
of the terms that are necessary to discuss the wire-transfer process in this case.5 The originator is "the sender
of the first payment order in a funds transfer," in this case, Grossman.6 12 C.F.R. Part 210, Subpart B, App.
B, § 4A-104(c). The payment order is the "instruction ... to pay ... a fixed or determinable amount of money
to a beneficiary." Id. § 4A-103(a)(1). The originator's bank is "the receiving bank to which the payment
order of the originator is issued if the originator is not a bank." Id. § 4A-104(d)(i). Because Grossman is not
a bank, he took his payment order to the originator's bank, in this case, Nationsbank. The beneficiary is "the
person to be paid by the beneficiary's bank." Id. § 4A-103(a)(2). The beneficiary's bank is "the bank
identified in the payment order in which an account of the beneficiary is to be credited pursuant to the order
or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an
4
Subsection 210.25(b)(1) states that Subpart B to Part 210 (the codification of Regulation J)
"incorporates the provisions of Article 4A set forth in appendix B to this subpart. In the event of an
inconsistency between the provisions of the sections of this subpart and appendix B, to this subpart, the
provisions of the sections of this subpart shall prevail."
5
We recognize that many other terms would need to be defined to allow a complete understanding of
the complex wire-transfer process. In an attempt to present this subject in the most simple, yet
comprehensive, manner, we have selected to define the following terms. We believe that these definitions
are sufficient to discuss the issues in this case.
6
A sender is defined as "the person giving the instruction to the receiving bank." 12 C.F.R. Part 210,
Subpart B, App. B, § 4A-103(a)(5). There is a sender at each step in the transfer chain, but for our
purposes, it is important to note that Grossman was a sender when he transmitted the initial wire-transfer
instructions to Nationsbank. A receiving bank is "the bank to which the sender's instruction is
addressed." Id. § 4A-103(a)(4).
account." Id. § 4A-103(a)(3).
In the simplest Fedwire transfer, the funds to be transferred are debited from the originator's account,
and travel from the originator's bank to the beneficiary's bank, where the beneficiary's account is credited.7
However, an originator can instruct the originator bank that the funds are to travel through one or more
intermediary banks, defined by Article 4A as a "receiving bank other than the originator's bank or the
beneficiary's bank." Id. § 4A-104(b). A receiving bank is "the bank to which the sender's instruction is
addressed," id. § 4A-103(a)(4), or in other words, each bank in the chain that receives a payment order,
including the originator's bank, any intermediary banks, and ultimately the beneficiary's bank.
Now we address whether Nationsbank complied with it's duty under Regulation J. Regulation J
directs that Nationsbank's duty as a receiving bank was to issue a payment order that complied with the
sender's (Grossman's), instructions:
The receiving bank is obliged to issue, on the execution date, a payment order complying with the
sender's order and to follow the sender's instructions concerning (i) any intermediary bank or
funds-transfer system to be used in carrying out the funds transfer, or (ii) the means by which
payment orders are to be transmitted in the funds transfer. If the originator's bank issues a payment
order to an intermediary bank, the originator's bank is obliged to instruct the intermediary bank
according to the instruction of the originator. An intermediary bank in the funds transfer is similarly
bound by an instruction given to it by the sender of the payment order it accepts.
12 C.F.R. Part 210, Subpart B, App. B, § 4A-302(a)(1) (emphasis supplied).
After analyzing Nationsbank's duty under § 4A-302(a)(1), we conclude that Grossman could not
prove a set of facts in support of his claim which would entitle him to relief. The instructions Grossman
provided to Nationsbank did not identify the banks by the terms "intermediary bank" and "beneficiary's
7
This appears to be what happened in Nationsbank's initial attempt to carry out Grossman's request.
Nationsbank debited $250,000 from Grossman's Nationsbank account, Nationsbank transferred the
money to First Union, and First Union credited the HMF-Grossman joint venture account. We recognize
that we are simplifying the process, in that we are leaving out the role of the Federal Reserve Bank. Often,
the actual transfer involves steps in which originator's bank sends a payment order to a Federal Reserve
Bank (in this function, technically an intermediary bank, to be defined and discussed below), and the
reserve bank debits the account of the originator's bank at the reserve bank, and credits the reserve bank
account of the beneficiary's bank. At that point, the reserve bank sends a payment order to the
beneficiary's bank, which now has the money in its account and can credit the individual account of the
beneficiary. However, the steps involving the Federal Reserve Bank are not crucial to this case, so for
simplicity's sake, we will leave them out of our descriptions.
bank." The instructions were therefore non-specific. On appeal, Grossman argues that he instructed
Nationsbank to send the funds to the HMF-Grossman JV account at First Union, using Am South as an
intermediary bank. However, the instructions Grossman gave Nationsbank cannot be read as indicating a
normal transfer using an intermediary bank, because funds traveling through an intermediary bank are not
deposited in an individual account at the intermediary bank.8 12 C.F.R. Part 210, Subpart B, App. B § 4A-
105(a)(2). The instructions Grossman gave to Nationsbank specifically stated that the money was to reach
the Diversified Ventures account at Am South, account number 3283155856. The next line of the instructions
read "for further credit to" the HMF-Grossman JV account at First Union, which indicates that the funds were
first intended to be credited to the Diversified Ventures account at Am South with instructions that the funds
were "for further credit to the HMF-Grossman JV account at First Union." Indeed, Nationsbank first sent the
money directly to the HMF-Grossman JV account at First Union, and Grossman told Nationsbank in no
uncertain terms that was not what he had instructed.
Grossman may not have understood that once the funds were deposited in the Diversified Ventures
account at Am South, neither he nor Nationsbank would have any control over the money. Nonetheless,
Grossman's instructions told Nationsbank to wire the funds to the Diversified Ventures account at Am South
with instructions to send the money on to the HMF-Grossman JV account at First Union. Nationsbank did
exactly that. The payment order form prepared by Nationsbank, which Grossman signed, listed the "First
Destination" as the Am South Diversified Ventures account, and instructed that the "Final Destination" was
to be the HMF-Grossman JV account at First Union. If this is not the transaction Grossman desired, he has
not alleged that he gave Nationsbank any additional instructions, or that Nationsbank had any other way of
knowing that Grossman intended a different transaction. Because Nationsbank followed the instructions that
Grossman provided, Nationsbank complied with its duty under Regulation J. Therefore, Grossman cannot
8
Article 4A defines a "bank," as used in the term "intermediary bank," as a "person engaged in the
business of banking and includes a savings bank, savings and loan association, credit union, and trust
company. A branch or separate office of a bank is a separate bank for purposes of this Article." 12
C.F.R. Part 210, Subpart B, App. B § 4A-105(a)(2). Therefore, the term "intermediary bank" does not
seem to include an individual bank account.
state a claim for a violation of Regulation J, and the district court did not err in granting Nationsbank's Rule
12(b)(6) motion to dismiss.9
AFFIRMED.
9
Grossman also argues that the district court erred in dismissing his complaint with prejudice, and
without giving him an opportunity to amend. Because Grossman could not prove that Nationsbank failed
to comply with the instructions it received, we conclude that Grossman could not amend his complaint so
that it would state a claim under Regulation J. Thus, we cannot find that the district court erred in
dismissing Grossman's complaint with prejudice.