UMB moves for dismissal in Utah lawsuit

UMB Bank on Monday filed a motion to dismiss an amended complaint brought against it by a Utah issuer hit by a hack involving fraudulent wire instructions, alleging that the issuer “bears all responsibility for damages” resulting from the theft. 

Plaintiff Fiddlers Canyon Hills Infrastructure Financing District’s amended complaint alleges that UMB should have realized the wire instructions it received were fraudulent. Filed on Nov. 10 in the Third Judicial District Court in and for Salt Lake County, State of Utah, the amended complaint also named law firm Snow Jensen & Reece as a defendant. 

“As a direct and proximate result of UMB’s breaches, Fiddlers Canyon has suffered damages in an amount to be determined at trial but in no event less than $3,858,917.13,” Fiddlers Canyon said in the complaint. 

A December 2024 limited offering memorandum for roughly $14 million of Fiddlers Canyon Infrastructure Financing District special assessment bonds, Series 2024, listed UMB as trustee, registrar and paying agent. The bonds, issued in December of last year, were not rated.

In its motion to dismiss, UMB said while Fiddlers Canyon’s complaint “blames UMB for the actions of a hacker that gained access to Fiddlers Canyon’s email accounts, then spoofed multiple email addresses, and ultimately stole funds from Fiddlers Canyon,” whether that blame is warranted rests entirely on an indenture of trust and pledge agreement between UMB and Fiddlers Canyon. 

“In that agreement, the parties negotiated terms that place all responsibility for such a loss, especially a loss connected with Fiddlers Canyon’s email, squarely on Fiddlers Canyon,” UMB’s motion said. “The complaint improperly alleges duties outside of the agreement and ignores the very language of the agreement limiting liability.”

Fiddlers Canyon’s complaint should be dismissed for several reasons, UMB said. 

“First, Fiddlers Canyon’s claim for breach of fiduciary duty should be dismissed because it is barred by the economic loss rule,” UMB’s motion said. 

In the agreement, the Fiddlers Canyon and UMB expressly contracted for their respective obligations and no independent duty arises outside of the parties’ contractual relationship, UMB’s motion said. 

“And because the allegations for breach of fiduciary duty are identical to the allegations for breach of contract, the breach of fiduciary duty claim is duplicative,” the motion said. “Fiddlers Canyon should not be entitled to recover beyond its bargained-for risks.” 

Secondly, Fiddlers Canyon’s claim for violation of Utah’s Uniform Commercial Code warrants dismissal as it fails to state a claim, UMB’s motion said.  While the amended complaint cites certain provisions, those provisions don’t support liability, the motion said. 

“Article 4A governs fund transfers and holds a bank responsible only if it fails to follow an agreed, commercially reasonable security procedure in good faith,” UMB said. “The amended complaint alleges no such deviation and instead relies on conclusory assertions and a misreading of the statute.” 

Thirdly, Fiddlers Canyon’s  “vague claim for breach of contract” deserves to be dismissed because the terms of the agreement itself show that UMB hasn’t breached the agreement “and Fiddlers Canyon bears all responsibility for damages flowing from the hacker’s theft,” UMB’s motion said. 

“Fourth, Fiddlers Canyon’s claim for breach of the implied covenant of good faith and fair dealing should also be dismissed,” the motion said, adding that the agreement between Fiddlers Canyon and UMB “specifically disavows any implied covenants.” 

 “And given the allocation of risk explicitly in the agreement, any implied covenant that would shift that risk to UMB would be contrary to the agreement and improper under Utah law,” UMB’s motion said. 

In conclusion, UMB’s motion said the terms of the agreement between Fiddlers Canyon and UMB explicitly put the risk of a hacker on Fiddlers Canyon. 

“Fiddlers Canyon’s attempt to escape responsibility by manufacturing duties or shoehorning statutory claims all run afoul of the parties’ agreement,” UMB’s motion to dismiss said.