## Facts

- PacMoore Products, Inc. (PacMoore) maintained corporate bank accounts with Fifth Third Bank (Fifth Third).
- PacMoore directed that wire transfers from its accounts require dual authorization, including approval by PacMoore’s president, William Moore.
- A related company owned by Moore, PacMoore Process Technologies, LLC (PPT), sold substantially all its assets in September 2021 to Glanbia, an unrelated entity; PPT also had accounts at Fifth Third.
- After the sale, Fifth Third unilaterally changed the wire-authorization setup for both PPT’s and PacMoore’s accounts by designating Kenneth Tatina (Glanbia’s controller and not a PacMoore employee) as the sole approver for wires from both companies’ accounts.
- Neither Moore nor anyone at PacMoore approved Fifth Third’s change to PacMoore’s wire-authorization process.
- Moore discovered the change in early February 2022 and immediately objected to Fifth Third, stating the change was without his consent and insisting that wires required approval by both Moore and Tatina.
- Fifth Third responded that restoring dual authorization would affect “the entire PacMoore relationship,” and it did not restore dual authorization; Tatina remained the sole approver for PacMoore’s account.
- Moore threatened to close accounts but did not do so and, as alleged in the complaint, decided in the short term to work within the new arrangement.
- On May 17, 2022, Moore asked Tatina to initiate a wire transfer of $207,018.83 from PacMoore’s Fifth Third account to Moore’s personal Merrill Lynch account.
- During the email exchange, a third-party hacker intercepted Tatina’s message and provided Tatina with fraudulent wire instructions for the hacker’s KeyBank account.
- Tatina initiated the wire using the fraudulent beneficiary information, and Fifth Third executed the transfer based on Tatina’s payment order; the funds were not recovered.
- PacMoore sued Fifth Third under § 4A-202 of the Illinois Uniform Commercial Code (Article 4A), alleging Fifth Third executed an unauthorized payment order. Fifth Third removed the case to federal court and moved to dismiss the amended complaint under Rule 12(b)(6).

## Issues

1. Whether the May 17, 2022 payment order was “authorized” under Illinois UCC § 4A-202(a) when Fifth Third executed the wire based on Tatina’s instruction after PacMoore learned of, objected to, but continued operating under an authorization setup making Tatina the sole wire approver.
2. Whether PacMoore plausibly stated an Article 4A claim that Fifth Third executed an unauthorized payment order, given the complaint’s allegations that Moore directed Tatina to initiate the wire and chose to proceed under the new arrangement.

## Decision

- The court granted Fifth Third’s Rule 12(b)(6) motion to dismiss.
- The court held that, based on the facts PacMoore pled, Tatina’s May 17 payment order was authorized under § 4A-202(a) as a matter of law.
- The court reasoned that PacMoore’s allegations showed Moore knew Tatina was the sole approver, chose to keep using the accounts under that setup, and then instructed Tatina to initiate the transfer—conduct that made Tatina’s order effective as PacMoore’s order for Article 4A purposes.
- The hacker’s interception and substitution of beneficiary instructions did not convert the bank’s execution of Tatina’s order into execution of an unauthorized payment order under § 4A-202(a).
- The amended complaint was dismissed with prejudice because the pleadings showed PacMoore could not state a viable unauthorized-order claim under Article 4A.

## Legal Principles

- Under Illinois UCC § 4A-202(a), a payment order is authorized if issued by a person authorized to act for the customer or otherwise effective as the customer’s order; the analysis uses agency concepts.
- A customer’s knowing conduct—such as continuing to use an account after learning who is treated as the authorized sender and directing that person to send a wire—can establish actual authority or ratification sufficient to make the payment order authorized under § 4A-202(a).
- The Article 4A question of authorization focuses on whether the sender of the payment order had authority to bind the customer, not on whether a third party manipulated communications leading to the order.
- When a bank receives a facially valid payment order from a person authorized (or treated as authorized through the customer’s conduct), the bank’s execution of that order generally does not create liability under § 4A-202(a) even if the order resulted from fraud between the customer and its agent.
- A complaint may be dismissed at the pleading stage when its own allegations establish that the challenged payment order was authorized, defeating an unauthorized-order theory under Article 4A.

## Conclusion

PacMoore’s amended complaint alleged that Fifth Third made Tatina the sole wire approver without PacMoore’s consent, but it also alleged that Moore learned of the change, continued using the accounts under that setup, and instructed Tatina to initiate the May 17 wire. Because those allegations made Tatina’s payment order effective as PacMoore’s authorized order under Illinois UCC § 4A-202(a), the court dismissed the Article 4A claim with prejudice despite the hacker’s diversion of the funds.


PacMoore Products, Inc. v. Fifth Third Bank, 671 F. Supp. 3d 873 (2023)