## Facts

- Grain Traders, Inc. instructed its bank, Banco de Credito Nacional (BCN), to transfer $310,000 through a specified chain: BCN → Citibank (New York) → Banque du Crédit et Investissement Ltd. (BCIL) → Banco Extrader S.A. (Extrader) → beneficiary Claudio Goidanich Kraemer.
- BCN sent a payment order to Citibank consistent with Grain Traders’ instructions.
- Citibank executed BCN’s order by debiting BCN’s account at Citibank, crediting BCIL’s account at Citibank, and issuing a payment order to BCIL for further transfer.
- The transfer was not completed to the beneficiary because BCIL and Extrader later suspended operations amid financial distress.
- Grain Traders alleged Citibank caused or contributed to the failure by freezing BCIL’s account and/or using the credited funds as a setoff against BCIL’s debts.
- Grain Traders sued Citibank in federal court under New York U.C.C. Article 4-A and common-law theories seeking recovery of the $310,000.
- The district court granted summary judgment to Citibank; Grain Traders appealed.

## Issues

1. Whether an intermediary bank incurs liability under N.Y. U.C.C. Article 4-A when it executes a payment order as instructed but downstream banks fail to complete the funds transfer.
2. Whether the originator has a direct Article 4-A refund claim against an intermediary bank, rather than against the originator’s own bank.
3. Whether common-law claims (e.g., negligence, conversion, unjust enrichment) may proceed where Article 4-A supplies the governing rights and remedies for the funds transfer.

## Decision

- The Second Circuit affirmed summary judgment for Citibank.
- Citibank satisfied its Article 4-A obligations as an intermediary bank by executing BCN’s payment order (debiting BCN, crediting BCIL, and forwarding instructions).
- Article 4-A did not provide Grain Traders a direct refund claim against Citibank; any refund remedy ran against BCN as the originator’s bank.
- Common-law claims were unavailable to the extent they would alter Article 4-A’s allocation of risk and remedies.

## Legal Principles

- Article 4-A is a comprehensive statutory scheme governing electronic funds transfers, designed to provide certainty and finality through defined duties and remedies.
- An intermediary bank that executes a sender’s payment order in compliance with Article 4-A is not liable to the originator for nonperformance by later participants in the transfer chain.
- The originator’s principal refund remedy for a failed transfer lies against the originator’s bank, not against intermediary banks, absent a specific statutory basis or separate agreement.
- Article 4-A generally displaces inconsistent common-law theories that would reallocate losses or impose additional duties (such as policing the solvency of other banks in the chain).

## Conclusion

The court held that Citibank, acting as an intermediary bank, completed the obligations Article 4-A imposed when it executed BCN’s payment order, and it could not be charged with the loss caused by downstream bank failures; Grain Traders’ refund remedy did not run directly against Citibank, and common-law claims could not be used to circumvent Article 4-A’s remedial structure.


Grain Traders, Inc. v. Citibank, N.A., 160 F.3d 97 (2d Cir. 1998)