Approved Mortgage Corporation v. Truist Bank , formerly known as SUNT RUST BANK

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-3163
A PPROVED MORTGAGE C ORPORATION,
Plaintiff-Appellant,
v.
T RUIST BANK , formerly known as SUNT RUST BANK ,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:22-cv-00633 — Jane Magnus-Stinson, Judge.
____________________
A RGUED SEPTEMBER 20, 2023 — D ECIDED J UNE 28, 2024
____________________
Before R IPPLE , J ACKSON-A KIWUMI , and LEE , Circuit Judges.
R IPPLE , Circuit Judge. Before Approved Mortgage Corpora-
tion (“Approved Mortgage”) could initiate two wire transfers,
the instructions for the transactions were altered surrepti-
tiously by a third party. Truist Bank (“Truist”), formerly
known as SunTrust Bank, ultimately received the transfers,
deposited the funds into an account it previously had flagged
as suspicious, and then allowed the withdrawal of a half-mil-
lion dollars in cashier’s checks from that account.

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2 No. 22-3163
With the funds unrecoverable, Approved Mortgage
brought this action against Truist, seeking damages in the
amount of the transfers. Approved Mortgage asserted two
claims under Section 207 of Article 4.1 of the Indiana Uniform
Commercial Code (“UCC”), which governs the rights, duties,
and liabilities of banks and their customers with respect to
electronic funds transfers. It also asserted a common law neg-
ligence claim. The district court dismissed the Section 207
claims for lack of privity between Approved Mortgage and
Truist. The court dismissed the negligence claim as
preempted by Article 4.1.1
Approved Mortgage’s Section 207 claims were properly
dismissed. Section 207 does not establish an independent
remedy. It must be read with Section 402 and, under Section
402, a sender is entitled to a refund only from the bank which
received its payment. The district court erred, however, in its
dismissal of Approved Mortgage’s negligence claim. To the
extent that the negligence claim arises from Truist’s issuance
of the cashier’s checks after Truist credited the funds to the
suspicious account, the claim is not preempted by Article 4.1.
We therefore affirm in part and reverse in part the judg-
ment of the district court. The case is remanded to the district
court for further proceedings consistent with this opinion.
1 The jurisdiction of the district court is predicated on its diversity juris-
diction. See 28 U.S.C. § 1332.

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No. 22-3163 3
I
BACKGROUND
A.
Because this case comes to us from the district court’s
grant of a motion to dismiss under Rule 12(b)(6) of the Federal
Rules of Civil Procedure, we present the facts as alleged in
Approved Mortgage’s amended complaint.
Approved Mortgage is a mortgage originator that pro-
vides loans to residential and commercial customers. In the
summer of 2021, Approved Mortgage received payoff re-
quests from two of its customers. These customers directed,
in both situations, that the payments be made to Huntington
Mortgage Company (“Huntington”). Before Approved Mort-
gage acted on these requests, however, the instructions for
both payoffs were altered by unknown perpetrators who had
accessed illegally Approved Mortgage’s system. These hack-
ers had modified the wire instructions to substitute SunTrust
Bank, Truist’s former name, as the beneficiary instead of Hun-
tington.
Approved Mortgage therefore unwittingly provided these
altered wire instructions to MVP National Title Company
(“MVP Title”) when it sought to fulfill the payoff requests.
MVP Title then initiated funds transfers by sending payment
orders with the altered wire instructions to its bank, BankU-
nited.
Following these instructions, BankUnited sent payment
orders to Truist in the amount of $217,108.33 on July 30, 2021,
and in the amount of $333,536.65 on August 4, 2021. Truist
accepted the transfers and applied the funds to an account at
Truist matching the account number on the altered wire

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4 No. 22-3163
instructions. This account, which belonged to AER Opera-
tions, LLC (“AER Operations”), did not match the other infor-
mation provided in these instructions. The instructions iden-
tified Truist, not AER Operations, as the transfer’s benefi-
ciary. The AER Operations account listed an address in Tilla-
mook, Oregon, rather than the Columbus, Ohio, address
given in the instructions.
This situation was not the first sign of suspicious activity
connected to the AER Operations account. Less than two
weeks earlier, on July 22, 2021, Truist had stopped a wire
transfer of $116,306.51 intended for the same account on sus-
picion of fraud or other irregularity.
On August 9, 2021,2 Arthur Rubiera, AER Operations’s
registered agent, traveled from his home in Oregon to a Mem-
phis, Arkansas, branch of Truist. Despite Truist’s past con-
cerns with the AER Operations account and the other indicia
of suspicious activity, Truist employees provided Rubiera
with $546,658 in cashier’s checks drawn from the AER Oper-
ations account. Rubiera then distributed the cashier’s checks
to other parties who converted the funds into cryptocurrency.
Because the wired funds never reached Huntington, Ap-
proved Mortgage paid off the two customers’ mortgages with
its own funds. MVP Title, the originator of the funds transfers,
assigned to Approved Mortgage any claims it might have
against Truist.
2 The amended complaint presents this date as August 9, 2020, but, as the
district court recognized, given the other dates provided in the complaint,
this is clearly scrivener’s error. Approved Mortg. Corp. v. Truist Bank, 638
F. Supp. 3d 941, 944 n.2 (S.D. Ind. 2022). Approved Mortgage uses the Au-
gust 9, 2021, date in its briefing.

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No. 22-3163 5
B.
In 2022, Approved Mortgage brought this action against
Truist in Indiana state court. Truist subsequently removed the
case to the United States District Court for the Southern Dis-
trict of Indiana, asserting diversity of citizenship.
Once in federal court, Approved Mortgage filed an
amended complaint bringing three distinct claims. The first
two of these claims were brought under Article 4.1 of the In-
diana UCC, Indiana’s adoption of Article 4A of the UCC. The
first claim alleged that Truist had violated Indiana Code § 26-
1-4.1-207(a) by accepting payment orders which referred to a
nonexistent or unidentifiable account. The second claim al-
leged that Truist violated Indiana Code § 26-1-4.1-207(b)(2) by
accepting the payment orders despite knowing that the bene-
ficiary’s name and beneficiary’s account number identified
different persons. In both, Approved Mortgage asserted that,
either in its own capacity or as MVP Title’s assignee, it was
entitled to a refund of the misapplied funds under Indiana
Code § 26-1-4.1-402(d) and that Approved Mortgage suffered
damages as a result of the transfers.
Approved Mortgage’s third claim alleged common law
negligence. Approved Mortgage alleged that Truist breached
its duty to act with ordinary care, to use sound banking prac-
tices, and to act in a commercially reasonable manner when it
failed to flag the AER Operations account as suspicious before
the funds transfers occurred and when it allowed Rubiera to
withdraw the funds from the account despite the indicia of
suspicious activity.
In its Rule 12(b)(6) motion to dismiss this amended com-
plaint, Truist submitted that both Section 207 claims failed

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6 No. 22-3163
because neither Approved Mortgage nor MVP Title were in
privity with Truist. It further contended that Approved Mort-
gage’s negligence claim could not proceed because it was
preempted by Article 4.1 and alternatively that Truist owed
Approved Mortgage no duty of care under Indiana law.
The district court granted Truist’s motion to dismiss all
three of Approved Mortgage’s claims with prejudice. The dis-
trict court determined that privity was required for Approved
Mortgage’s Section 207 claims. It reasoned that Section 207
identifies circumstances in which the acceptance of a funds
transfer cannot occur. It also noted, however, that Section 207
does not provide a remedy when funds are nevertheless
transferred despite the strictures of Section 207. Approved
Mortgage therefore must look to the refund provision of Sec-
tion 402(d) for its remedy. Then, relying on both the plain lan-
guage of Section 402(d) and the reasoning of the Court of Ap-
peals for the Second Circuit in Grain Traders, Inc. v. Citibank,
N.A., 160 F.3d 97 (2d Cir. 1998), the district court determined
that Section 402(d) only obligates a receiving bank to refund
the sender from which it received the payment. Applying this
privity requirement, the district court concluded that Ap-
proved Mortgage, as MVP Title’s assignee, had no valid Sec-
tion 402(d) refund remedy (and therefore no Section 207
claims) against Truist; BankUnited, not Truist, was the receiv-
ing bank of the payment orders sent by MVP Title.
Finally, the district court concluded that the negligence
claim was preempted because “the harm of which Approved
Mortgage complains is in reality a direct result of Truist’s ac-
ceptance of the wire transfers and the resulting payment of
funds to AER Operations,” and the “acceptance of wire trans-
fers and liability for losses associated with wire transfers is

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No. 22-3163 7
expressly addressed in the UCC.” Approved Mortg. Corp. v.
Truist Bank, 638 F. Supp. 3d 941, 953 (S.D. Ind. 2022). The dis-
trict court did not address whether Truist owed Approved
Mortgage a duty of care under Indiana law. Approved Mort-
gage timely appealed.
II
DISCUSSION
We review the grant of a Rule 12(b)(6) motion to dismiss
de novo, accepting as true the complaint’s well-pleaded alle-
gations and drawing all reasonable inferences in the plain-
tiff’s favor. Chaidez v. Ford Motor Co., 937 F.3d 998, 1004 (7th
Cir. 2019).
Approved Mortgage submits that the district court erred
in holding that its Section 207 claims required privity. It also
contends that its common law negligence claim is not
preempted by Article 4.1.
Our “primary goal” when interpreting an Indiana statute
“is to determine and follow the legislature’s intent.” Lake Im-
aging, LLC v. Franciscan All., Inc., 182 N.E.3d 203, 207 (Ind.
2022). “The best evidence of this intent is the statutory lan-
guage itself, which, when given its plain and ordinary mean-
ing, should apply ‘in a logical manner consistent with the stat-
ute’s underlying policy and goals.’” Id. (quoting Cubel v.
Cubel, 876 N.E.2d 1117, 1120 (Ind. 2007)). We look to the stat-
ute “as a whole, avoiding ‘interpretations that depend on se-
lective reading of individual words that lead to irrational and
disharmonizing results.’” Id. (quoting ESPN, Inc. v. Univ. of
Notre Dame Police Dep’t, 62 N.E.3d 1192, 1195 (Ind. 2016)). We
interpret words not otherwise defined as taking “their

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8 No. 22-3163
common and ordinary meanings.” Porter Dev., LLC v. First
Nat’l Bank of Valparaiso, 866 N.E.2d 775, 778 (Ind. 2007).
When the Indiana legislature adopts a UCC provision, In-
diana courts consider the official UCC commentary express-
ing the intent of its drafters as indicative of legislative intent,
even when the comments themselves have not been adopted
explicitly by the legislature. See Kenworth of Indianapolis, Inc. v.
Seventy-Seven Ltd., 134 N.E.3d 370, 382 (Ind. 2019); EngineAir,
Inc. v. Centra Credit Union, 107 N.E.3d 1061, 1066–67 (Ind. Ct.
App. 2018). We also consider, as persuasive authority, other
courts’ interpretations of Article 4A provisions. See Insul-Mark
Midwest, Inc. v. Mod. Materials, Inc., 612 N.E.2d 550, 556 (Ind.
1993); United Bank of Crete-Steger v. Gainer Bank, N.A., 874 F.2d
475, 478 n.5 (7th Cir. 1989) (“In order to promote the objective
of uniformity stated in § 1–102 of the Uniform Commercial
Code, it is appropriate, if not mandated, that a court refer to
decisions of other jurisdictions interpreting the same provi-
sion.”) (applying Indiana law).
A.
We turn first to Approved Mortgage’s submission with re-
spect to Section 207. The two funds transfers at issue in this
case each involved two payment orders.3 In both transactions,
3 Article 4.1 defines a payment order as “an instruction of a sender to a
receiving bank.” Ind. Code § 26-1-4.1-103(a)(1). A funds transfer is a “se-
ries of transactions” beginning with the originator’s payment order “made
for the purpose of making payment to the beneficiary of the order.” § 26-
1-4.1-104(a). This originator is the “sender of the first payment order in a
funds transfer,” § 26-1-4.1-104(c), but each subsequent payment order
within the funds transfer has its own sender. § 26-1-4.1-103(a)(5). “A funds
transfer is completed by acceptance by the beneficiary’s bank of a payment
( … continued)

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No. 22-3163 9
the originator, MVP Title, sent the first payment order to its
bank, BankUnited. Then BankUnited sent the second pay-
ment order to the beneficiary’s bank, Truist. Approved Mort-
gage maintains that Truist was prohibited under Section 207
of Article 4.1 from accepting the payment order.
The district court concluded that privity was required for
Approved Mortgage’s Section 207 claims. Its analysis was
two-pronged: a claim alleging that acceptance was barred un-
der Section 207 must look to Section 402 for its remedy; and,
under Section 402(d), a sender is only entitled to a refund
from its receiving bank. Approved Mortgage disputes both
prongs of this analysis on appeal. We agree with the district
court’s approach.
Section 207 identifies conditions under which “acceptance
of the [payment] order” by a beneficiary’s bank “cannot oc-
cur.” Ind. Code § 26-1-4.1-207. Subsection (a) prohibits ac-
ceptance “if, in a payment order received by the beneficiary’s
bank, the name, bank account number, or other identification
of the beneficiary refers to a nonexistent or unidentifiable per-
son or account.” § 26-1-4.1-207(a). Subsection (b) prohibits ac-
ceptance if the beneficiary’s bank knows that the payment or-
der identifies the beneficiary by a name and bank account
number belonging to different persons. § 26-1-4.1-207(b). Of
great importance to this case, Section 207 does not state what
happens when funds are received by the beneficiary’s bank
order for the benefit of the beneficiary of the originator’s payment order.”
§ 26-1-4.1-104(a). “For any given funds transfer, there can be only one orig-
inator, originator's bank, beneficiary, and beneficiary’s bank, but there can
be several senders and receiving banks, one of each for every payment
order required to complete the funds transfer.” Grain Traders, Inc. v. Citi-
bank, N.A., 160 F.3d 97, 100 (2d Cir. 1998).

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10 No. 22-3163
despite the prohibition on acceptance. The statutory language
states that acceptance “cannot occur,” but does not explain
the effect of the non-occurrence.
Section 402 provides this answer. It describes how the fail-
ure to complete a funds transfer through acceptance by the
beneficiary’s bank affects the payment obligations of the var-
ious parties to the transfer. Under subsection (c), each
sender’s obligation to pay its payment order to its receiving
bank “is excused if the funds transfer is not completed by ac-
ceptance by the beneficiary’s bank of a payment order in-
structing payment to the beneficiary of that sender’s payment
order.” § 26-1-4.1-402(c). If a sender already made payments
in the noncompleted funds transfer, it is entitled to a refund
of that payment under subsection (d). Section 402 thus pro-
vides a remedy by which senders are made whole when the
beneficiary’s bank’s acceptance of a payment order could not
have occurred.4 The UCC commentary refers to this arrange-
ment as a “money-back guarantee.” UCC § 4-A-402, cmt. 2.
Approved Mortgage contends that Section 207 creates
causes of action distinct and independent from a Section
402(d) refund action.5 We cannot accept this view. The plain
text of Section 207 does not expressly reference Section 402.
But, as we already have noted, Section 207 also does not itself
provide the consequences when acceptance cannot occur. It
4 “[T]he noncompletion of a funds transfer … releases each sender from
its payment obligation to the respective receiving bank, or entitles such a
sender to a refund of payment already made.” 1 The Law of Electronic Funds
Transfers § 2.04 (2022).
5 We note that this position is at odds with Approved Mortgage’s
amended complaint, which invokes the Section 402(d) refund obligation
in asserting both Section 207 claims. R.19 at ¶¶ 29, 35.

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No. 22-3163 11
must be read within the context of Article 4.1’s statutory
framework, and, within that framework, Section 402 explains
those consequences.6
Section 207’s commentary conveys clearly that its drafters
intended for banks to look to Section 402 when acceptance
could not occur. This commentary states that non-acceptance
under Section 207 excuses senders’ payment obligations un-
der Section 402(b) and (c). The first comment explains that
when acceptance cannot occur under Section 207(a) because
the beneficiary of a funds transfer is nonexistent or unidenti-
fiable, each sender in the funds transfer is not obliged under
Section 402(c) to pay its order and “each sender in the funds
transfer that has paid its payment order is entitled to get its
money back.” UCC § 4-A-207, cmt. 1. The second comment
applies Section 402 to a scenario in which the beneficiary’s
bank knew about a conflict between the beneficiary’s name
and account number, but still received the funds from the
originator’s bank and credited them to the account number.
Because the beneficiary’s bank’s acceptance could not occur
under Section 207(b), the originator’s bank is not obliged un-
der Section 402(b) to pay these funds to the beneficiary’s bank;
6 Most district courts that have addressed this issue have reached the same
conclusion. See Imperium Logistics, LLC v. Truist Fin. Corp., 686 F. Supp. 3d
600, 605 (E.D. Mich. 2023); Scura, Wigfield, Heyer, Stevens & Cammarota, LLP
v. Citibank, N.A., No. 21-CV-12835, 2022 WL 16706948, at *3 (D.N.J. Oct. 3,
2022); Wellton Int’l Express v. Bank of China (Hong Kong), 612 F. Supp. 3d
358, 364 (S.D.N.Y. 2020); Simple Helix, LLC v. Relus Techs., LLC, 493 F. Supp.
3d 1087, 1101–02 (N.D. Ala. 2020); Frankel-Ross v. Congregation OHR Hatal-
mud, No. 15-CIV-6566, 2016 WL 4939074, at *3 (S.D.N.Y. Sept. 12, 2016).
But see Wheels Invs., LLC v. Wells Fargo Bank, N.A., No. 6:19-CV-658, 2021
WL 8895130, at *3 (M.D. Fla. Apr. 29, 2021) (declining to apply Section
402’s privity requirement to a claim brought under Section 207).

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12 No. 22-3163
the originator is excused under Section 402(c) from its obliga-
tion to pay the originator’s bank; and the beneficiary’s bank
“takes the loss.” UCC § 4-A-207, cmt. 2. Although Section
402(d) is not cited expressly in these comments, because Sec-
tion 402(c)’s relief from the obligation to pay is triggered by
Section 207, Section 402(d)’s refund of the non-obliged pay-
ments must be as well. Section 402(d) is the means by which
parties receive their “money back” for non-obliged payments
already made.7
Next, Approved Mortgage submits that Section 402(d) it-
self does not impose a privity requirement. It contends that
the district court erred in finding the plain language of Section
402(d) to support a privity requirement and by applying Grain
Traders to this case. Approved Mortgage challenges the priv-
ity requirement as “impracticable and unworkable” because
it would require an action against BankUnited in the absence
of wrongdoing on BankUnited’s part.8 We address each of
these arguments in turn.
First, even though Section 402(d) does not use the word
privity, its plain language tethers the refund obligation to the
payment order, not a funds transfer generally:
If the sender of a payment order pays the order
and was not obliged to pay all or part of the
amount paid, the bank receiving payment is
7 5 Frederick H. Miller & Alaina Gimbert, Hawkland UCC Series § 4A-207:2
(2024) (“[I]n any of the circumstances enumerated in U.C.C. § 4A-207, the
determination that no person has any rights or obligations in the payment
order implicates the full panoply of U.C.C. Article 4A provisions which
effectuate the money-back guarantee.”).
8 Appellant’s Opening Br. 32.

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No. 22-3163 13
obliged to refund payment to the extent the
sender was not obliged to pay.
Ind. Code § 26-1-4.1-402(d). The use of definite articles (“the
sender” and “the bank receiving payment”) limit its scope to
the parties to that payment order. Nothing in its text expands
the refund obligation beyond the payment order to the
broader funds transfer.
Second, the Second Circuit’s reasoning in Grain Traders is
persuasive, and we see no merit in Approved Mortgage’s at-
tempt to limit its holding to intermediary banks.9 Grain Trad-
ers did concern a refund sought from an intermediary bank
and, given this context, the Second Circuit discussed the bur-
dens that the lack of a privity requirement would place on in-
termediary banks. Grain Traders essentially interpreted the
text of Section 402(d) and that text makes no distinction be-
tween different types of receiving banks. The Second Circuit
held that Section 402 “imposes a privity requirement such
that a sender seeking a refund for an uncompleted funds
transfer may look only to the receiving bank to whom it is-
sued a payment order and payment.” Grain Traders, 160 F.3d
at 106. The Second Circuit noted that the UCC comments
identified the money-back guarantee as “particularly im-
portant” to the originator of the funds transfer when the in-
completion is due to the fault of an intermediary bank rather
than the originator’s bank. Id. at 101 (quoting UCC § 4-A-402,
9 The term “intermediary bank” refers to any receiving bank in a funds
transfer that is not the originator’s bank or the beneficiary bank. Ind. Code
§ 26-1-4.1-104(b). In Grain Traders, the originator of a funds transfer sought
a refund under Section 402(d) from an intermediary bank when the trans-
fer was not completed. 160 F.3d at 99. The court held that the originator
could only look to its bank for a refund. Id. at 106.

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14 No. 22-3163
cmt. 2). In this scenario, the originator’s bank must refund
payment to the originator and then bear “the burden of ob-
taining [a] refund from the intermediary bank that it paid.”
Id. (quoting UCC § 4-A-402, cmt. 2). The Second Circuit rea-
soned that the drafters of Article 4A intended “to effect an or-
derly unraveling of a funds transfer in the event that the trans-
fer was not completed, and accomplished this by incorporat-
ing a ‘privity’ requirement into the ‘money back guarantee’
provision so that it applies only between the parties to a par-
ticular payment order and not to the parties to the funds
transfer as a whole.” Id. The text of Section 402(d) makes no
distinction between originator’s banks, intermediary banks,
and beneficiary’s banks.
In contending that a privity requirement cannot exist be-
cause it would require actions be brought against “innocent”
banks, and thus insulate “wrongdoer” banks from liability,
Approved Mortgage misapprehends Section 402. The money-
back guarantee is triggered by the failure to complete a funds
transfer. The identity of the party at fault for that failure is not
relevant to the remedial scheme. The orderly unraveling does
impose a burden on “innocent” banks. A receiving bank must
refund its sender, even if it will not receive a refund from its
receiving bank. See UCC § 4A-402, cmt. 2. The imposition of
this burden was a conscious choice of Article 4A’s drafters. In
adopting the Article 4A framework, the Indiana legislature
adopted that choice.
This conclusion that Article 4A’s drafters intended to im-
pose a privity requirement is consistent with the stated pur-
poses of Article 4A. The privity requirement advances the
UCC drafters’ goal of promoting “certainty and finality so
that ‘the various parties to funds transfers [will] be able to

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No. 22-3163 15
predict risk with certainty’” and make decisions based on
these known risks. Grain Traders, 160 F.3d at 102 (quoting
UCC § 4-A-102, cmt.). “To allow a party to, in effect, skip over
the bank with which it dealt directly, and go to the next bank
in the chain would result in uncertainty as to rights and lia-
bilities,” and “create a risk of multiple or inconsistent liabili-
ties.” Id. at 102.10
At bottom, Article 4.1 provides a framework for facilitat-
ing complicated transactions between sophisticated parties
with competing interests. This framework requires that in-
complete funds transfers be orderly unwound payment order
by payment order. If acceptance could not occur under Sec-
tion 207, BankUnited, not Truist, had the obligation to refund
MVP Title, and Truist was only obligated to refund BankU-
nited. Because Section 402(d) could only entitle Approved
Mortgage, as MVP Title’s assignee, to a refund from BankU-
nited, the district court properly dismissed both of Approved
Mortgage’s Section 207 claims.
10 Crafting Article 4A required weighing the competing interests of “the
banks that provide funds transfer services and the commercial and finan-
cial organizations that use the services.” UCC § 4-A-101, cmt. Section 402’s
money-back guarantee can be understood as a compromise between those
competing interests. The creation of this “form of vicarious liability” for
banks which could render them responsible for the insolvency of other
banks was “the quid pro quo offered by the banking community in return
for the general rule that consequential damages are not recoverable for
execution errors.” Thomas C. Baxter, Jr. & Raj Bhala, Proper and Improper
Execution of Payment Orders, 45 Bus. Law. 1447, 1463 (1990). See also Carl
Felsenfeld, Strange Bedfellows for Electronic Funds Transfers: Proposed Article
4A of the Uniform Commercial Code and the UNCITRAL Model Law, 42 Ala.
L. Rev. 723, 749–50 (1991).

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16 No. 22-3163
B.
We next turn to the question of whether Approved Mort-
gage’s common law negligence claim is preempted in whole
or in part by Article 4A. Because Article 4A’s drafters in-
tended for it to be “the exclusive means of determining the
rights, duties and liabilities of the affected parties in any situ-
ation covered by” its provisions, no party may “resort to prin-
ciples of law or equity outside of Article 4A … to create rights,
duties and liabilities inconsistent with” its provisions. UCC
§ 4-A-102, cmt.; see Grain Traders, 160 F.3d at 103.
In considering whether Approved Mortgage’s claim was
preempted, the district court quoted at length from its discus-
sion of Article 4A preemption in BMO Harris Bank N.A. v.
Salin Bank & Trust Co., 442 F. Supp. 3d 1075 (S.D. Ind. 2020).
In BMO Harris, the court framed the inquiry as dependent on
whether the conduct or factual scenario was “addressed
squarely by the provisions of Article 4A.” Id. at 1081 (quoting
Consorcio Indus. de Construccion Titanes, S.A. de C.V. v. Wells
Fargo Bank, N.A., No. 3:10-CV-2111, 2012 WL 13019678, at *3
(N.D. Tex. July 12, 2012)). The district court concluded in the
case now before us that Approved Mortgage’s negligence
claim was preempted because “the harm of which Approved
Mortgage complains is in reality a direct result” of actions ad-
dressed in Article 4.1: “Truist’s acceptance of the wire trans-
fers and the resulting payment of funds to AER Operations.”
Approved Mortg., 638 F. Supp. 3d at 953.
We cannot accept this “direct result” reasoning. “Article
4A embodies an intent to restrain common law claims only to
the extent that they create rights, duties, and liabilities incon-
sistent with Article 4A.” Patco Constr. Co. v. People’s United
Bank, 684 F.3d 197, 215 (1st Cir. 2012). A common law claim is

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No. 22-3163 17
not “per se inconsistent with [Article 4A’s] regime” merely
because the alleged facts include a wire transfer. Ma v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84, 89 (2d Cir.
2010); see Regions Bank v. Provident Bank, Inc., 345 F.3d 1267,
1274–75 (11th Cir. 2003). A court must determine whether Ar-
ticle 4A’s “provisions protect against the type of underlying
injury or misconduct alleged in a claim.” Ma, 597 F.3d at 89–
90. If Article 4A “does not protect against the underlying in-
jury or misconduct alleged,” then a common law claim is not
preempted. Patco Constr. Co., 684 F.3d at 215–16.
Several courts have framed the preemption inquiry as
whether the common law claim arose out of a situation cov-
ered by Article 4A. Zengen, Inc. v. Comerica Bank, 158 P.3d 800,
808 (Cal. 2007); Fitts v. AmSouth Bank, 917 So.2d 818, 824 (Ala.
2005).11 Some have articulated this concern as an additional
ground for finding a claim preempted, separate from a con-
cern that the common law claim seeks to create inconsistent
rights, duties, or liabilities. See Zengen, 158 P.3d at 808. We
prefer to view these two concerns as closely related. Both for-
mulations are rooted in the same UCC commentary. If a sce-
nario is squarely addressed by the particular provisions of Ar-
ticle 4A, then allowing the plaintiff to proceed on a common
law claim based on that scenario would necessarily create
rights, duties, and liabilities inconsistent with those stated in
Article 4A’s provisions. See Schlegel v. Bank of America, N.A.,
628 S.E.2d 362, 368 (Va. 2006).
When the alleged acts or omissions forming the basis for a
common law claim are outside the scope of Article 4.1, the
11 See also Wright v. Citizen’s Bank of E. Tennessee, 640 F. App’x 401, 407 (6th
Cir. 2016) (unpublished-nonprecedential).

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18 No. 22-3163
claim is not preempted.12 The Supreme Court of Virginia rec-
ognized this distinction in Schlegel. In that case, the Virgina
court considered common law claims against a bank arising
from two categories of conduct: (1) unauthorized payment or-
ders transferring a business’s funds to a former executive’s
account; and (2) the bank’s decision to freeze the funds in the
former executive’s account rather than refund them after
learning the payment orders were unauthorized. Id. at 364–
65. The court held that common law claims based on the funds
transfers themselves were preempted by Article 4A, but that
common law claims based on the post-transfer freezing of the
funds were not. Id. at 368. The court understood Article 4A as
targeting three categories of errors: those “during the issu-
ance and acceptance of the payment order”; those “during the
execution of the payment order by the receiving bank”; and
those “stem[ming] from payment issues” between senders
and receiving banks. Id. (quoting Sheerbonnet, Ltd. v. American
Express Bank, Ltd., 951 F. Supp. 403, 412 (S.D.N.Y. 1995)). Be-
cause the freezing of funds did not fall into any of these cate-
gories but arose from an alleged independent deposit agree-
ment, the court held that a common law claim based on that
freezing was not covered by the provisions of Article 4A. Id.
We draw a similar distinction with respect to Approved
Mortgage’s negligence claim. Approved Mortgage presents
its negligence theory as composed of three separate acts or
12 See Regions Bank, 345 F.3d at 1275, 1279 (holding that since Article 4A is
“silent with regard to claims based on the theory that the beneficiary bank
accepted funds when it knew or should have known that the funds were
fraudulently obtained,” it “does not preempt a state law claim if money is
transferred by wire to a party that knows or should have known that the
funds were obtained illegally”).

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No. 22-3163 19
omissions. Truist failed to flag the AER Operations account as
fraudulent based on the averted wire transfer. Truist handed
over the cashier’s checks to Rubiera despite the suspicious cir-
cumstances surrounding the account. Truist failed to have ap-
propriate security procedures in place to detect suspicious ac-
tivity. These acts or omissions produced two harms for Ap-
proved Mortgage. First, Truist received the transfers and
credited them to the AER Operations account. Second, Truist
permitted Rubiera to withdraw $546,658 in cashier’s checks
from that account, impeding any attempt for recovery.
A negligence claim based on this first harm, Truist’s re-
ceipt of the wire transfers and depositing of the funds into the
AER Operations account, is preempted by Article 4.1. Article
4.1 squarely addresses the duties of the beneficiary bank in
accepting a funds transfer. Allowing a common law claim that
Truist was negligent in accepting such transfers would re-
quire recognizing that Truist’s duties as the beneficiary’s bank
extended beyond those set forth in Article 4.1 to include pre-
cautionary measures to prevent misapplied transfers. A claim
based on the misapplication of funds due to lack of diligence
on the part of the beneficiary’s bank incontrovertibly arises
from an “underlying injury or misconduct” which Article 4.1
aims to protect against. Ma, 597 F.3d at 89–90.
However, to the extent Approved Mortgage’s negligence
claim is based on the second harm, Truist’s issuance of cash-
ier’s checks to Rubiera, the claim is not preempted by Article
4.1. Like the freezing of funds in Schlegel, this alleged harm
resulted from activity beyond the scope of Article 4.1. 628

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20 No. 22-3163
S.E.2d at 368.13 The negligent withdrawal claim does not arise
from the wire transfers themselves but from Truist’s conduct
after crediting the transferred funds to the AER Operations
account. It exacerbates the earlier transfer injury by making
the repayment contemplated by Article 4.1 more difficult and,
indeed, unsure.
Article 4.1 does not preempt common law claims for post-
transfer activity merely because the activity involves previ-
ously transferred funds. See Schlegel, 628 S.E.2d at 368. The
later withdrawal of funds obtained in a transfer from the ben-
eficiary’s account is not part of the transfer.14 Because Article
4.1 does not govern later withdrawals, Approved Mortgage’s
proposed duty to prevent suspicious withdrawals is not in-
consistent with any duty under Article 4.1.
Truist submits that Article 4.1 “provides a comprehensive
set of rules for evaluating funds transfers, and those rules do
13 See also Wright, 640 F. App’x at 409 (distinguishing precluded claims
based on bank’s delay in completing a wire transfer from the non-pre-
cluded claims in Schlegel and other cases) (unpublished-nonprecedential).
14 Under Article 4.1, the beneficiary’s bank is obliged upon acceptance of
the payment order to pay the amount of the order to the beneficiary. Ind.
Code § 26-1-4.1-404(a). “If the beneficiary’s bank credits an account of the
beneficiary,” the beneficiary’s bank’s payment obligation is met “when
and to the extent (i) the beneficiary is notified of the right to withdraw the
credit, (ii) the bank lawfully applies the credit to a debt of the beneficiary,
or (iii) funds with respect to the order are otherwise made available to the
beneficiary by the bank.” § 26-1-4.1-405(a). “In the typical case the benefi-
ciary is paid when the beneficiary is given notice of the right to withdraw
the credit.” UCC § 4-A-405, cmt. 1. There is no allegation that Truist failed
to pay the transfer amounts to AER Operations.

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No. 22-3163 21
not involve pre-transfer or post-transfer conduct.”15 It does
not explain, however, why the post-transfer conduct here
should be treated as within the scope of Article 4.1 despite this
lack of rules governing such conduct. Article 4.1 may seek to
govern all the responsibilities of a beneficiary’s bank with re-
spect to a funds transfer (including pre-transfer diligence)
through the completion of the funds transfer. But Article 4.1
does not seek to affect the transferred funds indefinitely. Tru-
ist has provided no convincing rationale for why the scope of
Article 4.1 extends to conduct that occurred after Truist cred-
ited the transferred funds to the AER Operations account.
To the extent that Approved Mortgage’s negligence claim
arises from Truist permitting Rubiera’s withdrawal of cash-
ier’s checks from the AER Operations account, it is not
preempted by Article 4.1. We have limited our discussion of
the common law claim to this question of Article 4.1 preemp-
tion. We have not considered any other challenge to the
claim’s viability under Indiana law. The district court did not
decide whether Truist owed a duty of care to Approved Mort-
gage. We leave such questions to the district court on remand.
Conclusion
The judgment of the district court is affirmed in part and
reversed in part. The case is remanded for further proceed-
ings consistent with this opinion. The parties will bear their
own costs on appeal.
AFFIRMED in part, REVERSED and REMANDED in part
15 Appellee’s Br. 17–18.

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