“The statute is somewhat confusingly drafted and perhaps ambiguous.”
How later courts described this case
- “The statute is somewhat confusingly drafted and perhaps ambiguous.”
Written by the judges who cited it.
The opinion
Case 2:22-cv-03090-DSF-PVC Document 22 Filed 08/31/22 Page 1 of 7 Page ID #:171
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
DOUGLAS G. GRAY, et al., CV 22-03090 DSF (PVCx)
Plaintiffs,
Order DENYING Motion to
v. Remand (Dkt. 16)
KRISTINE BEN, et al.,
Defendants.
Plaintiffs Douglas G. Gray and Arlene Gray move to remand this
action to Los Angeles County Superior Court. Dkt. 16 (Mot.).
Defendants, JPMorgan Chase Bank, N.A. and Kristine Ben oppose.
Dkt. 17 (Opp’n.). The Court deems this matter appropriate for decision
without oral argument. See Fed. R. Civ. P. 78; Local Rule 7-15. For
the reasons stated below, the Grays’ motion is DENIED.
I. BACKGROUND
On March 11, 2022, the Grays filed their first amended complaint
in Los Angeles Superior Court, bringing claims against Ben and Chase
for negligence under California law and elder financial abuse pursuant
to Cal. Welf. & Inst. Code §§ 15610.30 and 15657.5. Dkt. 1, Ex. A,
CM/ECF page ID 26 et seq.1 (FAC) ¶¶ 30-38.
The Grays allege they were victims of a wire fraud scam. Id.
¶¶ 11-23. On November 30, 2020, an individual who identified himself
as Jonathan from Amazon contacted Mrs. Gray by telephone informing
her that a fraudulent charge of $349.99 had been made to her Amazon
1 In future, exhibits to notices of removal should be separately linked.
Case 2:22-cv-03090-DSF-PVC Document 22 Filed 08/31/22 Page 2 of 7 Page ID #:172
account and that Amazon intended to refund that amount. Id. ¶ 11.
The individual gained remote access to Mrs. Gray’s computer so she
could observe him filling out a refund form. Id. ¶ 12. The individual
stated that he erroneously processed a refund of $35,000 to her Chase
checking account. Id. ¶¶ 12-13. Mrs. Gray then received instructions
to wire funds to the Bangkok Bank in Thailand in order to “correct the
mistake.” Id. ¶¶ 13-14.
On November 30, Mrs. Gray wire transferred $34,650 to Bangkok
Bank from the Chase branch in Woodland Hills. Id. ¶ 15. On
December 3, after receiving another telephone call, Mrs. Gray wire
transferred $35,000 to Bangkok Bank from Chase’s West Hills branch.
Id. ¶¶ 18-21. On December 4, Mrs. Gray visited Chase’s Woodland
Hills branch to relay her suspicions about the wire transfers. Id. ¶¶ 23-
25. She was informed that it was an “elder scam.” Id. ¶ 25. On
December 5, the Grays returned to the Woodland Hills branch and met
with Ben to discuss how to respond to the theft. Id. ¶ 26.
The Grays allege that Defendants failed to make reasonable
inquiries of Mrs. Gray prior to her authorizing the wire transfer to
Bangkok Bank, failed to train their employees, and failed to implement
policies and procedures that would have prevented Mrs. Gray from
authorizing the wire transfer or assisted in recovering the funds after
the wire transfer was executed. Mot. at 3.
II. LEGAL STANDARD
A. Removal
“Federal courts are courts of limited jurisdiction” and “possess
only that power authorized by [the] Constitution and statute . . . .”
Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). A
defendant may remove an action to federal court if the federal court
could exercise subject matter jurisdiction over the action. 28 U.S.C. §
1441(a).
“The removal statute is strictly construed against removal
jurisdiction” and “[t]he defendant bears the burden of establishing that
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Case 2:22-cv-03090-DSF-PVC Document 22 Filed 08/31/22 Page 3 of 7 Page ID #:173
removal is proper.” Provincial Gov’t of Marinduque v. Placer Dome,
Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). If a defendant fails to meet
its burden of establishing the Court has subject matter jurisdiction, the
suit is remanded. 28 U.S.C. § 1447(c). Generally, doubts as to
removability are resolved in favor of remanding the case. See
Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-109 (1941);
Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).
B. Edge Act
The Edge Act provides in part:
[A]ll suits of a civil nature . . . to which any corporation organized
under the laws of the United States shall be a party, arising out
of transactions involving international or foreign banking . . . or
out of other international or foreign financial operations . . . shall
be deemed to arise under the laws of the United States, and the
district courts of the United States shall have original
jurisdiction of all such suits; and any defendant in any such suit
may, at any time before the trial thereof, remove such suits from
a State court into the district court of the United States for the
proper district by following the procedure for the removal of
causes otherwise provided by law.
12 U.S.C. § 632; see also Am. Int’l Grp., Inc. v. Bank of Am. Corp., 712
F.3d 775, 780 (2d Cir. 2013) (indicating that in order to qualify for
removal to federal court, the suit must be civil in nature, one of the
parties to the suit must be a corporation organized under the laws of
the United States, and the suit must arise out of a transaction
involving international or foreign banking or financial operations).
But jurisdiction under the Act does not exist “merely because
there was a federally chartered bank involved, there were banking-
related activities, and there were foreign parties.” Pinto v. Bank One
Corp., No. 02 Civ.8477 NRB, 2003 WL 21297300, at *3 (S.D.N.Y. June
4, 2003) (citation omitted). “Rather, a Court should satisfy itself that
the suit arises out of an international or foreign transaction which falls
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Case 2:22-cv-03090-DSF-PVC Document 22 Filed 08/31/22 Page 4 of 7 Page ID #:174
within the realm of those ‘characterized as traditional banking
activities.’” Id. (citation omitted).
III. DISCUSSION
Defendants assert that this Court has original jurisdiction
pursuant to the Act. Dkt. 1 at 1. Defendants assert that this action “is
of a civil nature,” “Chase is a national bank organized under the laws of
the United States,” and the action “arises out of two alleged wire
transfers made by Plaintiffs to . . . banks in Thailand.” Id. at 1-2. The
Grays do not dispute that this is a civil action and Chase is a national
bank organized under the laws of the United States. The issue is
whether the suit arises out of transactions involving international or
foreign banking or financial operations for purposes of the Act. See
Wilson v. Dantas, 746 F.3d 530, 535 (2d Cir. 2014). The Ninth Circuit
has not opined on the standard for determining when an action arises
out of transactions involving international banking.2 Defendants argue
that this Court should construe the provision broadly because multiple
2 The Ninth Circuit has determined that another paragraph of section 632,
which grants original jurisdiction in federal court for cases involving a federal
reserve bank, “is written in the broadest possible language” and signals
Congress’s “strong” and “unequivocal” intent to provide a federal forum for
those entities. See City & Cnty. of San Francisco v. Assessment Appeals Bd.,
122 F.3d 1274, 1276 (9th Cir. 1997). But district courts in California have
questioned whether the court’s analysis applies beyond the paragraph
regarding federal reserve banks. See, e.g., Kim v. Wells Fargo, N.A., No. 21-
cv-05405-JD, 2021 WL 5996486, at *2 (N.D. Cal. Dec. 20, 2021) (noting that
the section specific to federal reserve banks “does not contain the qualifier
applicable here that the lawsuit must arise out of a transaction involving
international or foreign banking” and finding the court’s analysis
nonbinding); Bortz v. JP Morgan Chase Bank, N.A., No. 21-cv-0618-BAS-
JLB, 2021 WL 8450484, at *3 n.2 (S.D. Cal. Aug. 10, 2021) (finding the Ninth
Circuit’s holding “to be limited to federal reserve banks” and “not applicable
to the facts here”); People v. Wells Fargo & Co., No. CV 15-4181-GW(FFMx),
2015 WL 4886391, at *6 (C.D. Cal. Aug. 13, 2015).
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courts have done so and a “broad construction is consistent with the
overall purpose of the Edge Act.” Id. at 12.
The scope of the Edge Act’s jurisdictional grant is not clearly
defined. Am. Int’l Grp., Inc., 712 F.3d at 780 (“The statute is somewhat
confusingly drafted and perhaps ambiguous.”). Courts are split on
whether the Act should be interpreted as providing a broad basis for
federal jurisdiction or read more narrowly. Ritchie Cap. Mgmt. LLC v.
JP Morgan Chase & Co., 960 F.3d 1037, 1047 (8th Cir. 2020) (citing
Sollitt v. KeyCorp, 463 F. App’x 471, 473-74 (6th Cir. 2012)).
Some courts have taken the broad view that “a transaction
between an Edge Act bank and a foreign counterparty is sufficient to
establish an international nexus.” Eddystone Rail Co., LLC v. Bank of
America, N.A., 482 F. Supp. 3d 123, 128-29 (S.D.N.Y. 2020) (discussing
holdings in numerous district court cases); see also Pinto v. Bank One
Corp., No. 02 Civ. 8477 NRB, 2003 WL 21297300, at *5 (SDNY June 4,
2003) (holding that the Act granted federal jurisdiction where internet
gambling transactions involved a domestic credit card-issuing bank and
foreign merchant banks). Sending payments to a foreign bank account
has been found to qualify as a “transaction involving international
banking.” In re Citibank Aug. 11, 2020 Wire Transfers, 520 F. Supp.
3d 390, 412 (S.D.N.Y. 2021).
Other courts have criticized this approach on the grounds that
interpreting the Act broadly “would lead to absurd results” and is
inconsistent with the principle that statutes affording removal should
be strictly construed. People v. Wells Fargo & Co., No. CV 15-4181-
GW(FFMx), 2015 WL 4886391, at *6 (C.D. Cal. Aug. 13, 2015); Bortz v.
JP Morgan Chase Bank, N.A., No. 21-cv-0618-BAS-JLB, 2021 WL
8450484, at *3 (S.D. Cal. Aug. 10, 2021); see Sollitt v. KeyCorp, 463
Fed. App’x. 471, 473-74 (6th Cir. 2012) (noting that some courts have
held that the jurisdictional requirements of section 632 are met “if any
part of it arises out of transactions involving international or foreign
banking” but refusing “to subscribe to such an inherently limitless
view”) (emphasis in original). Some courts have interpreted the Edge
Act narrowly, finding that claims do not arise out of transactions
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involving international banking where the international nature of the
transaction is incidental, irrelevant, or otherwise legally insignificant
to plaintiffs’ claims. See Sollitt, 463 Fed. App’x. at 474-75; Wells Fargo,
2015 WL 4886391, at *5; Weiss v. Hager, No. 11 CV 2740 (VB), 2011
WL 6425542, at *3 (S.D.N.Y. Dec. 19, 2011).
The Grays contend that the Edge Act does not confer federal
jurisdiction in this case because “Defendants’ potential liability does
not arise from the foreign aspect of the wire transfers, but rather from
Defendants’ failures that occurred prior to and unconnected thereto.”
Mot. at 4. They argue that the traditional banking activity of
transferring funds through wire transfer is irrelevant to Defendants’
liability for negligence and elder financial abuse. Id. The Grays argue
that the “international aspect of the wire transfer does not establish an
essential element of the state claims for negligence or elder abuse.” Id.
(citing Telecredit Serv. Ctr. v. First Nat. Bank of the Fla. Keys, 679 F.
Supp. 1101 (S.D. Fla. 1988)).
The Court disagrees with the Grays’ assertions that Defendants’
potential liability arises from failures unconnected to the wire
transfers, and that transferring funds through wire transfer is
irrelevant to Defendants’ liability. The alleged failures that give rise to
potential liability stem directly from Defendants’ processing the wire
transfers authorized by Mrs. Gray without inquiring about their
purpose, and Defendants’ response after learning that the wire
transfers were part of a scam. See FAC ¶¶ 30-31. The Grays’
negligence claim is based on alleged failures in policies and procedures
that would have prevented them from suffering losses resulting from
the wire transfers. Id. Defendants’ potential liability arises from the
fact that they processed “the wire transfers from Mrs. Gray’s checking
account to Bankok Bank” and in doing so “failed to use reasonable care
to prevent plaintiffs from suffering loss or harm.” Id. ¶ 30. And the
elder financial abuse claim alleges that Defendants knowingly assisted
in or facilitated the fraudulent taking of their funds – by processing the
wire transfers and failing to implement and utilize procedures in
connection with the wire transfers. Id. ¶¶ 33-35.
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The Grays refer to the “Bangkok Bank.” Id. ¶¶ 19, 30. They
state that the recipient bank is located in Thailand and allege that Mr.
Gray asked Ben to contact the recipient bank, but she refused. Id. ¶ 27.
Their negligence claim is based in part on Defendants’ alleged failure
“to comply with the recall procedures of the international messaging
network known as the Society for Worldwide Interbank Financial
Telecommunications (‘SWIFT’), and the SWIFT Global Payments
Innovation ‘SWIFT gpi.’” FAC ¶ 31. The Grays’ claims clearly focus on
the authorization and approval of two international wire transfers.
FAC ¶¶ 30-38. Wire transfers are clearly traditional banking
activities.
Federal courts have a strict duty to exercise the jurisdiction
conferred on them by Congress. City & Cnty. of San Francisco v.
Assessment Appeals Bd., 122 F.3d 1274, 1276 (9th Cir. 1997) (citing
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996)). The Edge
Act provides a broad grant of jurisdiction, allowing defendants to
remove suits “at any time before [] trial.” See 12 U.S.C. § 632. The
Court finds this action arises out of transactions involving
international or foreign banking. The Court concludes that Defendants
have met their burden to show that the Edge Act confers federal
jurisdiction over this suit and DENIES the Grays’ motion to remand.
Because the Court has jurisdiction under the Edge Act, it does not
address Defendants’ arguments regarding diversity jurisdiction.
IV. CONCLUSION
The Grays’ motion to remand is DENIED.
IT IS SO ORDERED.
Date: August 31, 2022 ___________________________
Dale S. Fischer
United States District Judge
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