thousand dollars fraudulent and an authorized wire transfer is borne by choice escrows the customer or bank or south that's the bank under section four eight two zero two of the mississippi uniform commercial code under article four a bank or south bears the l honour's under article for a bank or south bears a loss unless it can shift the loss under for it to a to b which choice is called a three legged stool its bank or south burns at all times to prove all three legs and failure  prove any one of the three legs of the storm is fatal to its case i'd like to take the commercial results of the security procedure leg first allow order a little out of order of my briefing here as i believe this is the clearest leg in choices favor because  being that its security procedure did not perform transactional analysis meaning its security procedure never looked at the payment order itself rather its security procedure exclusively authenticated the user at the logon stage of the computer process transactional payment order analysis is required for a two zero two seat which is the provision that guides the court on how to determine commercial reasonable us where it states that the court shall consider the circumstances of the customer known to the control and dual control the two different options here and the only difference of dual control is an additional user id and password again it is still authentication at the logon phase and never looks at the actual payment order itself no review of the size of the payment order occurs because a dual control versus a single control or the type or the frequency of the game it's only having someone else log in and verify that that's who that person is and i believe it's the code comments that clarify that looking at only the user is insufficient in the comments which are at the joint appendix in seven sixty five or seven sixty seven the drafter stated as follows there is no way of determining the authority or the identity of the person who caused the message to be sent rather the receiving bank relies upon a security procedure pursuant to which the authenticity of the message can be tested employees of the bank can be trained to test the payment order according to the various steps in the security procedure and most importantly and comment for on the joint appendix seven sixty seven it says that in a wire transfer each payment order is transmitted individually a testing procedure will be individually applied to each payment order we believe this is bank or south fatal flaw compared to its security functions it only focused on trying to authenticate the user and perform no review at all of the payment order which means that that section of for a two a to see which says you have to consider the circumstances of the customer never occurs in bank or south security functions the problem of bank or south analysis is that section four eight two zero two see controls commercial reason commercial reason is not th e two thousand and five guidance the two thousand and five guidance is not law passed by the mississippi legislature the two thousand and five guidance never uses the phrase commercially reasonable and never references article for your honour's we believe this fact is that you must do transactional analysis as exemplified in the pack oh case out of the first circuit in that case the court found that the bank had multi factor authentication under the two thousand and five guidance and yet still found the security proceed jer to be commercially unreasonable based upon its analysis of four eight two zero to see that it must adjust its security procedure based upon the circumstances of the customer and must review the payment border itself none of  bank or such security functions consider the size the type or the frequency of any of choice as payment orders at any time we believe this admission by bank or south requires judgement favor of choice on the first leg your honour's a second leg of like discusses the good faith aspect bank or south of the burden to prove that it accepted the march seventeenth two thousand and ten pain order in both subjective and objective good faith subjective is not at issue here we have no issue with trying to prove subjective good faith objective is defined as the observance of the reasonable commercial standards of fair deal it's inherent that before you prove that you observed the standards you must establish what those standards are because the guard before a does not tell us what the standards of good faith but we need to start by clearing up one assertion by bank or self that has no support in the record there has been and never has there never was an agreement that the two thousand and five guidance is the subjective standard of good faith in this case the district court was able to skip standard of good faith in his report we believe he failed to do so and as a result since the district court entered an order that an expert's testimony is limited to the opinions that are provided in the written report that bank or south has not and cannot establish the objective standard of good faith since its expert never opined on yawners we believe this is also it similar to the experimental case and experimental the court found it dispositive that the bank had the burden to establish what the standard is and the bank failed to do so in that case because his their expert was not qualified to establish what those standards are we believe when the court reviews mr macca hones report that it will be unquestionably clear that he discussed the commercial reasonable this of the security procedure he used the phrase commercially reasonable over twenty times he cited to the statutory language about commercial reasons we do not believe he ever talked about the objective standard of good faith or good faith at all in inciting the statutory language he relied upon as i said he talked about four eight two zero two p which has both the commercial reasonable ness aspect and the good faith but he intentionally removed the quoted language about good  that language and for it to to be a good faith is not in his report the definition of commercial reasonable missed in this is in his report for a two or to see the definition of good faith is nowhere to be found in his report as we believe that this idea that the two thousand and five guidance is not only according to bank or south all it has to follow with regard to a security procedure we believe the assertion that it is the objective standard of good faith for a bank to accept payment order is a creation of bank or sat and has no support in the record from its expert as such an opinion is never given your arms again we've filed a summary judgment most on this so therefore we believe our first motion for summary judgment should be granted regarding the good faith issue but they've also filed a summary judgment motion where they bear the burden to prove all the undisputed material facts not a single one of its one hundred fifteen material facts ever states what the objective standard of good faith is they talk about things that their security procedure did but simply that parties provide headings to tell the reader what you're about to read about every one of his eleven headings was an accurate description of the opinions you get not a single heading provided the ad reader the concept i'm about to talk about good for you are the last leg of this what what if what if anything did you identify as the standard for good things your honor we haven't done that i do believe that is something an expert must do i don't i can't stand here knowing not knowing banking internet security to establish what that objective standard is that's for an expert we never asked our expert brad merryman to do so because it's their burden to do so first of all as experimental says and second of all we don't think they ever did it if that's their burden and they never established a standard that's their burden of proof so i  here that's why we say it has to be an expert i can't get on the witness stand say i think the objective standard is this because i don't was there no expert testimony we were on summary judgment your honor but so no i there's just the reports that your expert doesn't help find that we are expert has no opinion whatsoever in the record on objective on good faith at all just about commercial reasons every opinion he provided had to do with the commercial re construct the bank on limitations it wants with regard to its payment orders i don't think there's really a question that there's been a judicial admission that this email is an instruction the one word answer of admit from bank or south to our paragraph sixty one under the davis and bryce cases are a clear statement that they are admitting that is a judicial fact and it can't be contradicted by evidentiary admissions later in the record being that it had been the request to use the term and or it does your honor and i don't think that's a distinction in which in any way lessen the admission if i believe what they were trying to cite to is that it somehow makes it an equivocal admission admission but i don't think the admission is a quick equivocal what they're complaining about is the way we played our paragraph as as we described it as kind of like joining several liability it means that all three collectively and all three individually if they want to admit one or two and not the third of what we said it was an instruction a wish an requirement they could have done that rebuttal one quick question do you have any evidence or authority that security procedures commercially reasonable only if it has transactional analysis do i have any evidence that it must have transaction earth already we've got sean i do believe it's from the code itself where it says that you must consider the size type and frequency of payment order isn't that like a list of things to be considered as opposed to a mandatory proposition i think it says including meaning it's not an exclusive list but i think those are some of the things that you should be including if if it's part of it and then there's the pac ok's where they talk about the mandate it's pepco does a great job of laying out the first circuit lays out exactly what this is about and in there they had a risk scoring ability but they didn't functional meaning a this the wires are come up we're just getting high risk or is meaningless really risky but they didn't have the alarm set off it didn't stop the wire they at least had the functionality bank or south that even offer that function so yes i do believe patco end and this is like the third case of these article for a fraudulent wire transfer so there's not a lot of case law on this but i do believe that the code comments are very clear that you cannot authenticate the person you have to offe rather strange interpretations of the statutory language and relying upon comments over the actual language of the statute to try to in graft requirements that the industry does not recognize first of all with regard to whether the security procedure was commercially reasonable the focus here is on dual control that is the linchpin of judge mommer is entire opinion and the what what choice neglect to advise either the district court or this court is that whatever the security procedure was if it was just a user id and a password that is deemed to be commercially reasonable a procedure was offered to choice that it declined and that procedure which was offered was commercially reasonable so what we what we have to look at and what judge mocker looked at  computer with their username and password has to request the trier wire transfer electronically it goes into the bank system but it cannot be released until a separate user with their own user id and password authorizes it to be released so what would have happened here is we're going to have this for her hundred forty thousand dollar request come in to send money to a bank in cyprus and someone else at bank at choice escrow would have had to review that and say grace over it before it was authorized to be released by declining dual control that they enable situation where this request is made by one user using her password the request came with the same ip address as her computer it came with this with the recognize device token id on her computer which is all part of the security procedure and there there is no way that the bank's system could detect that this was someone fraudulent utilizing her computer in effect what apparently happened here and the experts seem to agree on this was that somebody sitting somewhere in eastern europe probably was able to take over ms ms black's computer at choice escrow and place the order essentially through her computer if dual control had been place that wouldn't have happened because someone else using their own computer that these didn't have access to would have had to approve it so under the code if if we offered them dual control and if that was commercially reasonable then and they declined it then whatever security procedure in place is deemed to be commercially reasonable that's the actual language of the code we have here two instances where they were offered dual control that both were declined and the the written memo that choice escrow signed to waive dual control because that's the bank's requirement if you're going to waive it you have to sign a document say you've waited that memo warned of exactly what happened here then in november of two thousand and nine about six months before this wire transfer incident there was a second occasion where there was communication between choice in the bank and the bank again said you need to use dual control if you don't there's a risk that someone can steal your passwords and take over your computers and and wire transfer your money again declined by choice escrow and that was the linchpin of the judge's ruling now is transactional analysis and it real time fraud monitoring system required it is not there's nothing in the language of the code itself which talks about transaction analysis or or requires that there the two thousand and five guidance that's been referred to by the f f i e c which is a a regulatory body that governs all financial institutions that guidance document doesn't require transactional analysis and choice in its brief a page sixty three acknowledges that that guidance is the standard against which to judge commercial reasonable us so we have a situation where dual control was offered declined that was commercially reasonable their expert admitting that in his deposition and we've cited that in our brief so we have a situation where commercial reasonable this is taken out of the picture essentially by their decision to decline dual control because the the security system that bankruptcy had in place without dual control is deemed commercially reasonable under the law the second issue that that is raised it primarily is this issue of good fit where are they getting the transactional analysis from comments is a sense actual analysis is something that choices expert brought into this matter it is not mentioned in the comments it's not mentioned in the code language itself it's not mentioned in the two thousand and five guidance one other place that is mention is in this experimental case that they rely on where the court specifically one of the arguments there was that the banks procedure was not reasonable because it didn't have transactional analysis the court in experimental their main case they rely on rejected that argument and in and is as a very good discussion of that basically saying that where where transactional analysis may be a good idea nothing in the u c c language itself requires it it's not a a recognized tool in the industry yet and so we're not going to hold the bank responsible for not having it turning to the issue of good faith the main case that i think the court ought to focus on here is th main family federal credit case that both parties site which says that in deciding what these standards of good faith and fair dealing are under the u c c that you did the test is whether the conduct and here the conduct is reviewing in deciding to honor this this payment order the electronic transfer payment order that's the conduct did that conduct comport with quote industry or commercial standards applicable to the transactions there's nothing in that case there's nothing anywhere except in choices a brief that says that these standards that we're talking about have to be tied to the buzzwords good faith or fair dealing that is their invention in this case what the case law says is that the standard has to be quote industry or commercial standards applicable to the transaction both experts reports indeed their second amended complaint repeated lee refers to these two thousand and five f f i e c guidance as the banking industry standard for addressing these electronic payment orders granted it doesn't say this is the standard for good faith that's not required faith in his report at section nine point five of his report he states and i quote based on the source ip address of the requested wire transfer belonging to choice the presence of a secure cookie and the use of a valid username and password the bank accepted the payment order in good faith seen black and white in his report choice did not they ask him about many of the sections of his report they read to him verbatim from his report in his deposition and they chose not to ask him one single question about that section of his report or the topic of good faith at all their expert in his deposition was asked do you have an opinion that the bank acted in bad faith he said no i don't have any opinion on that so what do we have here that judge mof were was looking at he has both parties experts repeatedly referring to these two thousand and five standards as the industry standard for banking practices he has our experts the bank acted in good faith based on the exact circumstances of this wire transfer and he has choices experts saying i have no opinion on that i think it's very clear the judge  correctly ruled that there's there was no controverted issue of fact on this and he correctly granted summary judgment in bankruptcy very quickly the issue of whether this was whether there was an instruction from choice to block wire transfers and this whole issue of whether there was a judicial admission we don't believe there was when when you say it's they're there pleading says it was a wish comma requirement and slash or instruction we admitted that we think it probably was their wish but we don't think it was an instruction and in fact when mr paine the principle of choice escrow was deposed and this is it joint appendix five ninety six and six hundred he said on two different occasions he  said this was an inquiry to the bank he never used the word instruction he never contended it was an instruction he's the author of the e mail that they're relying upon this for this so if if we can't go to the person who wrote the email as the best source for what that meant i don't know what we can do there was no instruction but even if there was even if you construe this to be an instruction you've got to go on to the next step of the analysis which is does that instruction violate it written agreement between the parties and i can't i can't probably go into all of the detail of that for you right now but it's laid out explicitly in our brief there are at least two of the agreements that choice escrow signed the funds transfer agreement and this dual waiver waiver memo both of those documents both say that wire transfers to foreign countries cannot be stopped either by the automated system or by the bank that's in the written agreements that they signed and an alleged instruction by mr paine that choice escrow to block wire transfers violates the terms of those two written agreements and so it's ineffective under the code even if you find that it was an instruction in the first place finally i want to turn really really briefly to our counter claim bankruptcy filed the counterclaim in this action seeking to recover its attorney's fees and expenses incurred in defending this case under the terms of several of the written agreements between the parties they're all detailed in the brief the judge mof were dismissed granted a motion to dismiss that counter claim because he believed in his words that the way it was framed it could require choice to actually pay back the wire transfer funds themselves if they recovered in this case in other words they recover against bancorp south and then these agreements require them to pay the money back immediately well that's not what we were asking for and i think judge mommer misunderstood we've detailed in the brief that in in our counterclaim in our suggestions in opposition to their motion to dismiss and in a motion for a reconsideration of the dismissal order we laid out in great detail that we were only seeking to recover attorney's fees and costs in the in mississippi is identical to the u c c in the zuri the case law is fairly sparse so it really doesn't matter we would ask the court to affirm this summary judgment  are briefly on our cross appeal if the court resolves choices appeal and choices favor it's a moot point nonetheless we ask that the court grant our motion to strike the arguments that were put forth there were never argued below including specifically  prevailing party argument the only time they asked for with this type of attorney for the relief of a prevailing nature was in their motion to reconsider which was not appealed to this court the motion to dismiss is what they've appealed and no such argument was and all loss that's what the parties agreed to we can't now shift and cherry pick out parts in order to avoid displacement of article four a when they were considering that we are now being asked by bank or south to transfer this from a indemnity provision to a prevailing party attorneys fees cause and that rewriting of the contract cannot be done on commercial reason with c r as we were discussing transactional analysis is the language of the code directly say the word transactional analysis of course not the words transactional analysis frequency of a payment you have to look at the payment one authenticator at logon in no way and considers anything about the size type or frequency of a payment order and we strongly suggest urge the court to look at the comments indicating that id identity of a person cannot be identified as regards the size type and frequency where does that language come in for a two zero two c it's where you find the definition of how you find commercial reasons the wishes the circumstances of the customers all list of their dual control admitted the two thousand and five guidance is the standard the code says it is a this customer this bank flexible analysis not a baseline standard or as i see amount of time we will we believe that makes for south has failed its horns and we ask for judgment not favor very