Fourth Circuit: Banks Not Liable For Executing Wire Transfer Orders In Absence of Contractual Duty

Introduction 

Let's review a recent victory for banks regarding alleged liability for executing wire transfer orders.  In Satterfield v. Wells Fargo Bank, N.A. (In re Est. of Cook),[1] the Fourth Circuit Court of Appeals, which hears appeals from federal courts in Virginia, ruled that a bank and a credit union were not required, in the absence of a contractual duty, to investigate and decline wire transfer orders from an elderly and mentally impaired customer who was the target of a fraudulent scheme.

The Facts

            The customer, Mr. Cook, had accounts at Wells Fargo and Navy Federal Credit Union pursuant to deposit agreements with them. He was a decorated Navy veteran and was highly intelligent.  Over the course of a 40-year career in the Navy and as a government contractor, he had managed his financial affairs very well, achieving a net worth of $8-10 million. A conservative spender and detailed record keeper, he also was the trustee of a $2 million trust and managed two rental properties, plus his mother’s assets. 

But in 2019 he suffered a stroke, which impaired his ability to make reasoned judgments.  After the stroke he was forced to retire, failed to administer the trust and became unresponsive to the beneficiaries, stopped filing tax returns, and grew increasingly isolated. 

 In October 2020, Mr. Cook received a scam email purportedly from Amazon.  The next day, apparently induced by the email and a telephone conversation with the scammer, he visited Navy Federal and wired money to an account at Standard Chartered in Singapore.  Before then, he had never wired money.

Over the next 7 months, he made another 73 wire transfers from Navy Federal, plus one from Wells Fargo, to Standard Chartered in Singapore and the Bank of Bangkok.  Almost all the transfers were in the amount of $49,500.00.  The transfers totaled $3,680,700.00 and were sent to an apparently fictitious name and address.

During those 7 months, Navy Federal reported Mr. Cook to Fairfax County’s Adult Protective Services (“APS”) based on wire transfers “indicative of possible elder financial exploitation.” APS investigated, but Mr. Cook would not cooperate.  APS therefore closed its investigation after referring the case to the FBI and asking Navy Federal to continue to monitor Mr. Cook’s accounts.  Wells Fargo declined Mr. Cook’s request to send a second wire transfer. 

In April 2021, Mr. Cook died at age 76.  The administrator of his estate (the “Administrator”) sued Navy Federal and Wells Fargo, alleging that their deposit agreements with Mr. Cook imposed on them an “implied covenant of good faith and fair dealing” and that they had breached that covenant “when they failed to adequately investigate” the wire transfers. 

In addition, the Administrator alleged that the banks breached other duties by failing to stop the wire transfers, asserting that banks owe a duty of care to their customers under Virginia law, that they owe an additional duty of care under the federal Bank Secrecy Act, and that Navy Federal also assumed a duty to protect Mr. Cook when it reported his wire transfers to APS.

The Court Ruling

The banks filed motions to dismiss the lawsuit, which the trial court granted.  The Fourth Circuit agreed with the trial court’s ruling.  As to the claims that the banks had violated the “implied covenant of good faith and fair dealing” imposed by their deposit agreements, the Fourth Circuit explained that such a covenant cannot “create duties that otherwise do not exist”.  In other words, for the implied covenant to be actionable, the Administrator would have to point to language in the deposit agreements creating an obligation by the banks to investigate suspicious wire transfer orders.  The Administrator was unable to point to any such language, so her “implied covenant” claims failed.   

As to the Administrator’s other claims – i.e., that the banks owed Mr. Cook duties of care under Virginia law and the Bank Secrecy Act and that Navy Federal had undertaken a duty to protect Mr. Cook by reporting him to APS – the Fourth Circuit ruled that they were preempted by Virginia’s Uniform Commercial Code (“UCC”), specifically Article 8.4A, which governs funds transfers. 

Part of Article 8.4A, section 8.4A-212, provides that a bank does not have –

“any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this title or by express agreement.  Liability based on acceptance arises only when acceptance occurs … and liability is limited to that provided in this title.  A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this title or by express agreement.” (emphasis added)

The Fourth Circuit wrote that the Administrator’s claims must fail because they “rely on a duty not contained within Article 4A of the Virginia UCC or an express agreement between the parties….”  In so doing, the court relied on a decision of the Virginia Court of Appeals   concerning a lawsuit that also involved a wire-fraud scam.[2]  The Fourth Circuit wrote that “[a]llowing suits outside of Article 4A’s careful design inherently upsets” the balancing of interests that went into drafting Article 4A, which aims to allow banks to “predict risk with certainty, insure against risk, adjust operational and security procedures, and price funds transfer services appropriately.”

In a footnote, the Fourth Circuit noted that a duty may arise when one party “takes charge of or exercises control over” another – thereby suggesting that lawsuits “outside of Article 4A’s careful design” might be possible in certain situations – but wrote that “when Navy Federal reported its suspicions about Cook’s exploitation to APS, it neither ‘took charge of’ nor ‘exercised control over’ Cook. … Therefore, no duty ever arose between Cook and Navy Federal.”     

Takeaway

The Fourth Circuit’s ruling in Mr. Cook’s case is similar to its ruling in the Studco case we reported on in July 2025 (you can read that article here).  Each case involves a bank or credit union being sued for losses arising from a fraudulent scheme that involved funds transfers – wire transfers in Mr. Cook’s case, and ACH transfers in the Studco case.  In each case, the party who filed the lawsuit alleged that the bank or credit union was on notice of irregularities and therefore had a duty to decline the funds transfers.  In fact, in Mr. Cook’s case, the Administrator cited the trial court’s ruling against the credit union in Studco – which the Fourth Circuit would subsequently overturn on appeal – in support of her case.

Most importantly, in each case the Fourth Circuit looked to the language of Article 4A and the policies behind that language – in short, promoting the efficient facilitation of commerce – in overturning lawsuits that, if successful, would create uncertainty for banks in how they should manage funds transfers.  In so doing, the Fourth Circuit greatly limited the scope of legal risks banks face in managing funds transfer

Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice.  Readers with particular needs on specific issues should retain the services of competent counsel.

[1] The case citation is 2025 U.S. App. LEXIS 19802 (4th Cir. August 6, 2025).

[2] That case was Navy Fed. Credit Union v. Lentz, 78 Va. App. 250 (Va. Ct. App. 2023).