[author: Emily Rubino]

On January 4, 2023, the U.S. District Court for the Southern District of New York granted in part and denied in part JPMorgan’s motion to dismiss claims by Essilor International SAS and Essilor Manufacturing (Thailand) Co., Ltd.—owners of ophthalmic brands, including Ray-Ban—arising out of a cybercrime scheme in which cybercriminals transferred $272 million from an Essilor-owned JPMorgan account. Essilor sued JPMorgan for the amount of funds that could not be recovered from the transferees—$100 million.

Asserting claims under the New York UCC, for negligence, and under contractual duties owed by a bank to an account holder, Essilor alleged that the transfers at issue raised red flags that JPMorgan should have caught and investigated pursuant to both contractual and extracontractual duties. Specifically, Essilor pointed to factors such as the overdraft limit being exceeded on at least nine occasions during the fraudulent period, when Essilor had never exceeded the limit in years prior. Essilor also pointed out that the transfers involved entities Essilor had never previously transferred funds to, were not in the ophthalmic industry, and that were “easily identifiable . . . as shell entities with no purpose except to facilitate fraud.” The court held that Essilor failed to state a claim for breach of contract, because the accountholder agreement at issue did not contain a provision requiring JPMorgan to “monitor for and prevent overdrafts” over a particular limit, and failed to state a negligence claim, because banks do not owe duties as “professionals” to accountholders. The court allowed the plaintiff’s New York UCC claim to proceed, however. Under UCC Section 4-A-204(1)(a), a receiving bank must refund any payment made pursuant to a payment order that is “not authorized” by the customer. The court determined that the question of what constitutes customer “authorization” to fulfill a payment order “present[ed] a question of fact that cannot be decided at the motion-to-dismiss stage.”

The case is Essilor Int’l SAS v. JPMorgan Chase Bank NA, No. 1:22-cv-3361 (S.D.N.Y. Jan. 4, 2023). Essilor is represented by Wollmuth Maher & Deutsch LLP. JPMorgan is represented by Wilmer Cutler Pickering Hale and Dorr LLP. The opinion is available here