## Facts

- Impulse Trading, Inc., a Minnesota corporation, sold computer equipment to a Russian buyer and agreed to accept payment in Indian rupees due to currency-convertibility constraints.
- Norwest Bank Minnesota, N.A. told Impulse it could route rupees into Norwest’s account at the State Bank of India (SBOI), after which Norwest would convert the rupees to U.S. dollars and credit Impulse’s Norwest account.
- The buyer instructed its bank (a Russian state bank) to send rupee payment orders to SBOI for credit to Norwest’s SBOI account; earlier transfers cleared without issue.
- SBOI received a payment order for roughly six million rupees, credited the rupees to Norwest’s SBOI account, and Norwest converted the rupees and credited $231,929.12 to Impulse’s Norwest account.
- SBOI later determined the transfer violated Indian foreign-exchange regulations and a bilateral trade/payment agreement and reversed the rupee credit to Norwest’s SBOI account.
- After SBOI’s reversal, Norwest debited Impulse’s account for $231,929.12 plus interest to offset the loss caused by the reversal.
- Impulse sued, alleging violations of UCC Article 4A and asserting wrongful setoff, conversion, and negligence.

## Issues

1. Whether UCC Article 4A governed the parties’ rights and obligations arising from the cross-border funds transfer and the posting of the dollar credit to Impulse’s account.
2. Whether Norwest violated Article 4A by debiting Impulse’s account after SBOI reversed the rupee credit to Norwest’s foreign account.
3. Whether Norwest’s debit constituted wrongful setoff or conversion under Minnesota common law.
4. Whether Norwest was negligent in structuring or executing the rupee-to-dollar payment arrangement.

## Decision

- Judgment was entered for Norwest on Impulse’s Article 4A claim and all common-law claims.
- The court held Article 4A supplied the controlling framework for the funds-transfer dispute and supported Norwest’s reversal of the credit after the upstream reversal.
- The court found Norwest’s dollar credit to Impulse was contingent on the continued validity of the rupee credit at SBOI, and could be reversed when SBOI reversed the underlying deposit.
- The court rejected wrongful setoff and conversion because Norwest had a right to debit Impulse’s account to restore the parties to the position that would have existed absent the invalid foreign credit.
- The court rejected negligence because Impulse did not prove Norwest breached a duty of care or assumed the risk that foreign regulatory restrictions would unwind the transfer.

## Legal Principles

- UCC Article 4A provides the primary rules for rights, obligations, and loss allocation in covered funds transfers, limiting inconsistent common-law theories.
- A bank may reverse a customer credit that is effectively provisional or dependent on the completion and finality of an upstream leg of a funds-transfer chain.
- In cross-border transfers, the customer may bear the risk that the chosen payment route and currency restrictions will trigger foreign legal or regulatory reversals, absent an agreement shifting that risk to the bank.
- Claims labeled as conversion, wrongful setoff, or negligence fail where the bank’s debit is authorized by the governing statutory and transactional framework and no independent breach of duty is shown.

## Conclusion

The court held that Article 4A governed the disputed wire-transfer transaction and permitted Norwest to debit Impulse’s account after the foreign bank reversed the rupee credit; because Norwest acted within the statutory and transactional allocation of risk, Impulse’s statutory and common-law claims were denied.


Impulse Trading, Inc. v. Norwest Bank Minn., N.A., 907 F. Supp. 1284 (D. Minn. 1995)