Blue Flame Medical LLC v. Chain Bridge Bank, N.A., et al.

Respondent Chain Bridge Bank, N.A., wired over $456 million out of petitioner Blue Flame Medical LLC’s account without authorization. The question is whether petitioner’s state-law claims challenging that conduct are preempted by the U.S. Federal Reserve Bank’s Regulation J, Subpart B, which governs cash-equivalent interbank payment orders over the Fedwire Funds Transfer System, commonly known as “wire transfers.” The Fourth Circuit recognized that once a bank accepts a wire transfer and credits the funds to its customer’s account, that money belongs to the customer. That is the essential premise of a wire—it is immediate and irrevocable. Any dispute about the funds must be settled another way, for example, through litigation. Yet the court held that when a bank takes money out of its customer’s account without authorization and gives it back to the sender, there is no remedy. Regulation J failed to address this circumstance, the court held. And based on circuit precedent interpreting commentary— not Regulation J’s provisions or the enabling statute— the Fourth Circuit gave implied field-preemptive effect to the regulation, precluding any state law that might fill the gap. That understanding has been adopted in several other circuits as well. The question presented is: Does the Federal Reserve’s Regulation J impliedly preempt the field regarding the conduct of parties to a Fedwire Funds Service wire transfer, based on commentary to the regulation and Article 4A of the Uniform Commercial Code, as the First, Fourth, Ninth, and Eleventh Circuits have held?