Unreported / Non-Citable
Background
Plaintiffs, a married couple proceeding under the pseudonyms John and Jane Doe, allege they lost nearly $570,000 in a cryptocurrency scam. Taking the first amended complaint (FAC) as true, the court recounts that they answered a Facebook advertisement for an investment school and then made seven wire transfers over four days in late July and early August 2024 from their Stanford Federal Credit Union (SFCU) and EverBank accounts to four entities. Those entities proved fraudulent. Plaintiffs allege the entities banked at Community Federal Savings Bank (CFSB) and Choice Financial Group (CFG), and that the money moved on through Currency Cloud to TranSwap Technologies and through CFG to Mercury Advisory. On August 2 plaintiffs asked SFCU to process one wire promptly. On August 5 they told SFCU that two $200,000 wires were fraudulent and asked for recall.
Plaintiffs' theory is that the recipient institutions unlawfully processed the wires and that SFCU failed to investigate reasonably. They sued through counsel on August 27, 2025, against sixteen defendants on fifteen claims. The court dismissed several claims with leave to amend. Counsel then withdrew, and plaintiffs, now pro se, filed the FAC on April 10, 2026, asserting eight counts against six defendants. SFCU, CFSB with Currency Cloud, and CFG with Mercury Advisory each moved to dismiss. TranSwap, a foreign defendant, had not been served.
The Court’s Holding
The court granted all three motions and dismissed the claims against SFCU, CFSB, Currency Cloud, CFG and Mercury Advisory without leave to amend, because plaintiffs had already had a chance to cure. The Fair Credit Billing Act count against SFCU was untimely: the statute requires suit within one year of the alleged violation, the violation was tied to the August 5, 2024 notice, and suit was filed August 27, 2025. Plaintiffs did not contest limitations. They also did not contest SFCU's argument that the Act does not govern wire disputes, which the court noted would have been a separate ground for dismissal. The Division 11 claim failed because plaintiffs did not plausibly allege the transfers were unauthorized. They initiated the wires and asked that one be expedited. The declaratory relief count was duplicative of the contract claim.
The court held that the breach of contract and UCL claims against SFCU, and the UCL, conversion and negligence claims against the other moving defendants, were preempted by Division 11 of the California Commercial Code. Their gravamen was the acceptance and execution of the wire transfers, which Division 11 specifically covers. The court relied on Zengen, Inc. v. Comerica Bank and on N.D. Cal. decisions including Liu v. Bank of America. The aiding-and-abetting fraud claims failed because plaintiffs pleaded no facts showing that CFSB, Currency Cloud, CFG or Mercury Advisory knew of the scam. They also lacked the who, what, when, where and how required for fraud-based claims, and they did not cure deficiencies the court had identified earlier.
More than a year after filing, TranSwap still had not been served, and plaintiffs had not regularly reported their service efforts. The court declined further extensions and dismissed the claims against TranSwap and any Doe defendants without prejudice. It terminated the alternate-service motion as moot and directed the clerk to enter judgment and close the case.
Key Takeaways
- A claim under Division 11 of the California Commercial Code requires plausible allegations that the transfer was not authorized, and customers who initiated the wires and asked that one be expedited did not meet that requirement.
- In this order, common-law and UCL claims whose gravamen is a bank's acceptance and execution of wire transfers were treated as preempted by Division 11, even though the transfers were allegedly part of a fraud.
- Aiding-and-abetting fraud claims against banks require particularized facts showing the bank knew of the fraud, and conclusory allegations of knowledge do not suffice.
- Plaintiffs' failure to oppose a limitations argument left their one-year Fair Credit Billing Act claim time-barred.
- The moving defendants were dismissed without leave to amend, but the unserved foreign defendant and Doe defendants were dismissed only without prejudice, because the dismissal rested on lack of service rather than the merits.
Why It Matters
This is a district court order, and the metadata marks it unreported, so it carries persuasive weight only and binds no other court. Its practical value is that it applies Division 11 preemption to claims against both the customer's own institution and downstream recipient institutions, relying on recent N.D. Cal. authority. It also shows how a pro se plaintiff's silence on an argument, such as limitations or authorization, can be decisive.
Because the court dismissed with prejudice in effect as to all served defendants and directed entry of judgment, any further challenge would go through appeal. The dismissal of TranSwap rested on service, so the order does not decide whether claims against it would have survived on the merits.