Forest Capital, LLC v. BlackRock, Inc.

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 1:14-cv-01530-JFM. Copies to all parties and the district court. [999907617]. [15-1551]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-1551

FOREST CAPITAL, LLC,
Plaintiff - Appellant,
v.
BLACKROCK, INC.,
Defendant - Appellee.
-----------------------------COMMERCIAL FINANCE ASSOCIATION,
Amicus Supporting Appellant,
SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION,
Amicus Supporting Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.
J. Frederick Motz, Senior District
Judge. (1:14−cv−01530−JFM)

Argued:

May 11, 2016

Decided:

August 10, 2016

Before GREGORY, Chief Judge, and WILKINSON and DIAZ, Circuit
Judges.

Affirmed by unpublished opinion. Judge Diaz wrote the opinion,
in which Chief Judge Gregory and Judge Wilkinson joined.

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ARGUED: Jeffrey A. Wurst, RUSKIN MOSCOU FALTISCHEK, P.C.,
Uniondale, New York, for Appellant.
Thomas E.L. Dewey, DEWEY
PEGNO & KRAMARSKY LLP, New York, New York, for Appellee.
ON
BRIEF: David C. Gartenberg, DEWEY PEGNO & KRAMARSKY LLP, New
York, New York, for Appellee.
David J. Chizewer, Richard M.
Kohn, Amanda G. Penabad, GOLDBERG KOHN LTD., Chicago, Illinois;
Jonathan N. Helfat, Chad B. Simon, OTTERBOURG P.C., New York,
New York, for Amicus Commercial Finance Association.
Kevin
Carroll, SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION,
Washington, D.C.; Lewis J. Liman, Sandra M. Rocks, Abena A.
Mainoo, CLEARY GOTTLIEB STEEN & HAMILTON LLP, New York, New
York, for Amicus The Securities Industry and Financial Markets
Association.

Unpublished opinions are not binding precedent in this circuit.

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DIAZ, Circuit Judge:
BlackRock, Inc., an investment firm, received a letter from
its customer, People’s Power & Gas (“PP&G”), stating that PP&G
had assigned a security interest in its BlackRock account to a
creditor, Forest Capital, LLC.

PP&G’s letter requested that

future remittances from the account be sent to Forest.
PP&G

changed

complied.
violated

its

mind

According
two

and
to

sections

of

asked

Forest,
Article

to

receive

BlackRock’s
9

of

the

funds,

court

dismissed

the

complaint

for

failure

to

BlackRock

payment

to

Maryland

Commercial Code (UCC) and amounted to conversion.

When

PP&G

Uniform

The district

state

a

claim.

Because the UCC provisions on which Forest relies do not provide
a private right of action, and because the property Forest seeks
to recover is not subject to a claim for conversion, we affirm.

I.
A.
PP&G is an energy service company. 1
New

It buys energy from ISO

England

PP&G

(“ISO-NE”),

which

extends

1

credit

and,

for

We derive our account of the facts from Forest’s
complaint, viewing them in the light most favorable to Forest
and drawing all reasonable inferences in its favor.
See
Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir.
1992).
We have also considered several documents attached to
the complaint and to BlackRock’s subsequent motions, which we
are authorized to rely on because we find them “integral to the
(Continued)
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collateral,

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requires

PP&G

to

account held in PP&G’s name.

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deposit

funds

into

a

BlackRock

To perfect its security interest

in the account, ISO-NE entered into a Control Agreement with
BlackRock
authorized

and

PP&G;

as

relevant

BlackRock

to

release

here,
funds

the
to

Control

PP&G

at

Agreement
ISO-NE

and

PP&G’s joint request.
PP&G, in turn, sells energy to end users on credit, but
rather than collect payment, it sells its accounts receivable to
Forest at a discount.

This arrangement between PP&G and Forest,

known as factoring, is set out in a Master Factoring Agreement
(“MFA”).

The MFA includes two other obligations relevant here.

First, Forest agreed to fund up to 75 percent of the collateral
PP&G was required to maintain in the BlackRock account.

Second,

PP&G granted Forest a security interest in substantially all of
its assets, with the exception of “prepayments to third parties
for energy purchases.”

J.A. 41.

In December 2013, Forest discovered that PP&G had “fail[ed]
to fulfill various obligations under the MFA” and, as a result,
declared PP&G in default.

J.A. 11.

To induce Forest not to

enforce its default remedies, PP&G’s CEO, David Pearsall, sent a

complaint and authentic.” Kensington Volunteer Fire Dep’t, Inc.
v. Montgomery County, 684 F.3d 462, 467 (4th Cir. 2012) (quoting
Philips v. Pitt Cty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir.
2009)).
4

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letter

to

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BlackRock

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notifying

it

of

“certain

financing

agreements entered into by and between [PP&G] and Forest”:
PP&G has granted Forest a security interest in
substantially all of its assets including, but not
limited to, all payment intangibles which may be owed
at any time by BlackRock . . . to PP&G, including the
return of any deposits or any part thereof given by or
on behalf of PP&G to BlackRock . . . .
Accordingly,
this shall serve as notification and authorization
that you are to remit to Forest all monies that may be
or may become payable by BlackRock to [PP&G].
This
instruction cannot be changed except by a writing duly
executed by Forest.
All payments to or for the
benefit of PP&G and/or Forest may only be sent by wire
as follows . . . .
J.A. 48.
did.

Forest never changed the instruction, but Pearsall

He asked BlackRock to remit funds directly to PP&G, and

BlackRock complied, making two payments to PP&G totaling more
than $1,000,000.
B.
Believing itself entitled to the transferred funds, Forest
quickly

filed

suit,

asserting

claims

of

breach

of

contract

against PP&G, breach of guaranty of validity against Pearsall,
and

conversion

BlackRock.

and

a

violation

of

UCC

section

9-607

against

The parties agreed to a Stipulation and Order of

Settlement, according to which BlackRock paid some funds from
the

account

to

Forest,

and

the

suit

was

dismissed

without

prejudice, with all parties reserving their rights, remedies,
and defenses.

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After PP&G entered Chapter 7 bankruptcy, Forest filed suit
against

BlackRock

for

(1) conversion,

(2) violation

of

UCC

section 9-607, (3) violation of UCC section 9-406, and (4) an
accounting.

BlackRock moved to dismiss under Federal Rule of

Civil Procedure 12(b)(6), and the district court granted the
motion.

Forest Capital LLC v. BlackRock, Inc., No. JFM-14-1530,

2015 WL 874611 (D. Md. Feb. 26, 2015).

Forest’s subsequent

motion for reconsideration was denied.
This appeal followed.

II.
We review de novo the district court’s grant of BlackRock’s
motion to dismiss for failure to state a claim.

Kensington

Volunteer Fire Dep’t, Inc. v. Montgomery County, 684 F.3d 462,
467 (4th Cir. 2012).

We accept as true all of the complaint’s

factual

ensuring

allegations,

that

it

contains

“sufficient

factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’”

De’lonta v. Johnson, 708 F.3d

520, 524 (4th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)).

We may affirm “on any legal ground supported

by the record and are not limited to the grounds relied on by
the district court.”
Cir. 1993).

Jackson v. Kimel, 992 F.2d 1318, 1322 (4th

Because this case involves matters of state law

only, “our role is to apply the governing state law, or, if
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necessary, predict how the state’s highest court would rule on
an unsettled issue.”

Askew v. HRFC, LLC, 810 F.3d 263, 266 (4th

Cir. 2016) (quoting Horace Mann Ins. Co. v. Gen. Star Nat’l Ins.
Co., 514 F.3d 327, 329 (4th Cir. 2008)).
On appeal, Forest objects to the dismissal of its claims
for violation of the UCC and for conversion, and it argues that
the district court abused its discretion in ignoring Forest’s
request to amend its complaint and in denying its motion for
reconsideration.

We address these issues in turn.
A.

Forest asserts that BlackRock’s transfer of funds to PP&G
was made “in violation of” sections 9-406 and 9-607 of the UCC.
J.A. 17, 18.

Because we accept BlackRock’s argument that these

UCC sections do not provide a private right of action, we affirm
the district court’s dismissal of the claims. 2
1.
When determining whether a state statute creates a private
right

of

action,

“the

central

inquiry

[is]

whether

the

legislative body intended to create [one], either expressly or
by implication.”
779 (Md.

2016)

Fangman v. Genuine Title, LLC, 136 A.3d 772,
(quoting

Baker

v.

2

Montgomery

County,

50

A.3d

We decline to address the district court’s holdings
regarding the validity of Forest’s security interest or the
adequacy of notice given to BlackRock.
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1112, 1123 (Md. 2012)).

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Here, Forest does not argue that the

statute expressly creates a right, so we decide only whether one
is implied.

Maryland courts ask three questions to determine

whether a state statute implies a private right of action:
(1) Is the plaintiff one of the class for whose
special benefit the statute was enacted? (2) Is there
any indication of legislative intent, explicit or
implicit, either to create such a remedy or to deny
one?
(3) Is it consistent with the underlying
purposes of the legislative scheme to imply such a
remedy for the plaintiff?
Id. at 780; see also Erie Ins. Co. v. Chops, 585 A.2d 232, 23637 (Md. 1991) (holding that a statute requiring auto insurers to
notify the Motor Vehicle Administration of the cancellation of
an insured’s policy did not create a private right of action in
favor of a plaintiff injured by an uninsured driver whose lapse
in coverage the insurer failed to report).

If “neither the

statute nor the legislative history reveals a legislative intent
to create a private right of action for the benefit of the
plaintiff,” a court need proceed no further.

Genuine Title, 136

A.3d at 779 (quoting Baker, 50 A.3d at 1123).
In

construing

the

UCC,

Maryland

courts

use

“the

same

principles of statutory construction that . . . would apply in
determining
though

the

some

meaning

consideration

among jurisdictions.
(Md.

1979).

of

any

is

other

given

to

legislative
maintaining

enactment,”
uniformity

Jefferson v. Jones, 408 A.2d 1036, 1039

These

interpretive
8

principles

“require

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of

the

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legislative

intent,

and

if . . .

construction becomes necessary because the terminology chosen is
not

clear,

then

[the

court]

must

consider

not

only

the

significance of the literal language used, but the effect of [a]
proposed reading in light of the legislative purpose sought to
be accomplished.”

Id.

Moreover, the UCC’s Official Comments

“are an excellent place to begin a search for the legislature’s
intent when it adopted the Code,” though “these comments are not
controlling authority and may not be used to vary the plain
language of the statute.”

Id.
2.

We begin with section 9-406(a).

According to Forest, the

statute grants a private right of action to an assignee (Forest)
against

an

account

debtor

(BlackRock)

who,

after

receiving

notice that its debt has been assigned, pays the assignor (PP&G)
rather than the assignee. 3
In relevant part, the statute provides:
[A]n account debtor on an account, chattel paper, or a
payment intangible may discharge its obligation by
paying the assignor until, but not after, the account
debtor receives a notification, authenticated by the
assignor or the assignee, that the amount due or to
become due has been assigned and that payment is to be
made
to
the
assignee.
After
receipt
of
the
notification, the account debtor may discharge its
3

BlackRock objects to being called an account debtor, but
we need not address the issue because of our holding that the
statute does not provide Forest a right of action.
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obligation by paying the assignee and may
discharge the obligation by paying the assignor.
Md. Code Ann., Com. Law § 9-406(a).
person

obligated

intangible.”

on

an

account,

§ 9-102(3).

An

not

An “account debtor” is “a
chattel

account

paper,

debtor,

or

general

therefore,

is

simply the name given to a person with certain kinds of payment
obligations.

A “general intangible” is “any personal property,

including things in action, other than accounts, chattel paper,
commercial

tort

instruments,

claims,

deposit

investment

accounts,

property,

documents,

letter-of-credit

goods,
rights,

letters of credit, money, and oil, gas, or other minerals before
extraction.”

§ 9-102(42) (emphasis added).

This is of course a

catchall definition of exclusion, but the UCC does tell us that
the

term

“includes

payment

intangibles

and

software.”

Id.

“Payment intangible” is further defined as “a general intangible
under

which

the

account

monetary obligation.”

debtor’s

principal

obligation

is

a

§ 9-102(62).

With these definitions in mind, we return to the operation
of section 9-406(a).

A person indebted on a payment intangible

(the account debtor) may satisfy its obligation by paying its
creditor

(the

assignor

has

assignor)
assigned

until

the

it

right

to

receives
receive

notice

that

payment.

the

After

notification, the account debtor may satisfy the obligation only
by paying the assignee.

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To

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determine

whether

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section

9-406

provides

an

implied

right of action, we first ask whether Forest (the assignee) is
part of the class for whose special benefit the statute was
enacted.

To the extent the statute grants any rights, it grants

one to the account debtor, not to the assignee, as it explains
when the account debtor “may discharge its obligation” and avoid
making payments to both the assignor and assignee.
Taranto,

No.

10-76041-AST,

2012

WL

1066300,

at

See In re
*11

(Bankr.

E.D.N.Y. Mar. 27, 2012) (stating that N.Y. U.C.C. Law § 9-406
“prevents different creditors from being paid twice for the same
debt”).

The

“[s]ubsection

commentary
(a)

confirms

provides

the

this

reading,

general

rule

stating

that

concerning

an

account debtor’s right to pay the assignor until the account
debtor receives the appropriate notification.”

Md. Code Ann.,

Com. Law § 9-406 cmt. 2 (emphasis added).
Accordingly,

because

the

statute

grants

rights

to

the

account debtor rather than the assignee, we think the better
view of the statute is that account debtors are its special
beneficiaries.
Credit

Corp.,

Cf. Auto. Acceptance Corp. v. Universal C.I.T.
139

A.2d

683,

686

(Md.

1958)

(referring

to

a

similar provision in a now-repealed statute, Md. Code, art. 8,
sec. 2 (1951), as “protecting a debtor who pays to the assignor
without notice of the assignment” (emphasis added)).
if

we

were

to

assume

that

Forest
11

is

part

of

the

But even
class

the

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legislature was specially intending to benefit, we would still
proceed to the second question, whether there is “legislative
intent, explicit or implicit, either to create . . . a remedy or
to deny one.”

Genuine Title, 136 A.3d at 779 (quoting Baker, 50

A.3d at 1122); see also id. at 786 (noting that members of the
class for whose benefit a statute was enacted may still lack a
private right of action).
Nothing suggests such an intention.

As noted, if section

9-406 grants any rights, it grants them to the account debtor.
It grants no rights to the assignee and imposes no obligations
on the account debtor; whatever “obligation” the account debtor
may have is assumed to exist already.

Section 9-406 simply

explains how to satisfy that obligation, providing a potential
defense to an account debtor who has already paid the assignor
or assignee.

This is strong evidence that the legislature did

not intend to confer a private right of action.

See Baker, 50

A.3d at 1123 (“If a statute’s language provides a right to a
particular class of persons, there is a strong inference that
the legislature intended the statute to carry an implied cause
of action.

Conversely, that inference becomes attenuated when

the statute is framed as a ‘general prohibition or a command’ to
a governmental entity or other group or confers a generalized
benefit.” (citations omitted) (quoting Univs. Research Ass’n v.
Coutu, 450 U.S. 754, 772 (1981))).
12

The lack of evidence of

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legislative intent alone defeats Forest’s argument that section
9-406 confers a right of action.
A right of action for the assignee is also inconsistent
with the underlying purpose of the statute, which is to clarify
an

account

assigned.

debtor’s

payment

obligation

when

its

debt

is

The court’s decision in Platinum Funding Services,

LLC v. Petco Insulation Co., No. 3:09CV1133 MRK, 2011 WL 1743417
(D. Conn. May 2, 2011), makes this point.

There, the plaintiff

was a factor who purchased some but not all of the accounts
receivable

of

the

assignor.

The

plaintiff

gave

the

account

debtor notice under section 9-406 that payment on all invoices
should be made to the plaintiff—the purported assignee—and not
to the assignor.
payments

to

the

Id. at *2.
assignor

on

When the account debtor made

invoices

that

the

plaintiff

had

neither purchased nor been assigned, the plaintiff nevertheless
alleged it was entitled to recover under section 9-406, solely
on the basis that notice under the statute created a payment
obligation.

Id. at *6.

The court rejected this “novel legal

theory of recovery”: “Because the right to receive payments on
those particular invoices was never assigned to [the plaintiff],
UCC § 9-406 . . . [is] of no help to [the plaintiff’s] cause.”
Id. at *9.
We agree with the court in Platinum Funding that “[t]he
language of UCC § 9-406 . . . presumes that an ‘assignor’ has
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already assigned its right to receive payment from an account
debtor to an ‘assignee.’”

Id.

And as the case demonstrates,

creating a private right of action under section 9-406 could
undercut that presumption, creating rights out of nothing more
than

a

notification

and

submitting

obligations they never agreed to take on.

account

debtors

to

We do not believe the

Court of Appeals of Maryland would recognize such a right of
action.
Nevertheless, Forest relies on Platinum Funding to press
its contention that section 9-406 confers a right of action,
apparently because the plaintiff there characterized its claim
as one made under section 9-406, and the court never explicitly
rejected that characterization.

Forest is wrong.

First, the

court rejected the plaintiff’s purported 9-406 claim.

Second,

whether section 9-406 confers a right of action was not an issue
in the case.

Finally, the court’s description of the statute

supports a reading consistent with ours, not Forest’s: “When a
factoring

firm . . .

provides

an

account

debtor . . .

with

a

notice under UCC § 9–406 . . ., the notice ensures that if the
factoring firm later sues the account debtor for misdirecting
payments to the factoring firm’s assignor, the account debtor
will not be able to assert in defense that it already paid the
assignor.”

Id. at *8.

The effect of the notice is to defeat

the account debtor’s defense that it has satisfied the debt, not
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to create a freestanding cause of action for disregarding the
notice.
In Forest’s view, however, without “an independent cause of
action in favor of a secured party, an assignee would be void of
a

remedy

after

notification.”

an

account

debtor

Reply Br. at 13.

failed

to

abide

by

That is not correct.

a
For

example, in IIG Capital LLC v. Archipelago, L.L.C., 36 A.D.3d
401, 402 (N.Y. App. Div. 2007), the plaintiff was a factor who
was assigned accounts receivable on which the defendants were
obligated.

Although the plaintiff gave notice of the assignment

under section 9-406(a), the defendants never paid the plaintiff,
who brought claims for breach of contract and account stated.
See id. at 402-03.
The

court

denied

the

defendants’

motion

to

dismiss,

rejecting in particular their argument that they had already
settled the accounts with the assignor.
the

accounts

“were

assigned

to

Id. at 404.

plaintiff

pursuant

Because
to

the

factoring agreement, and proper notice was given [under section
9-406],

defendants’

payment

in

settlement

to

[the

assignor]

would not be a defense to an action by plaintiff to collect on
the accounts.”

Id.

As IIG demonstrates, an assignee who has

provided notice under section 9-406 has other remedies available
when an account debtor pays the assignor and refuses to pay the
assignee.
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3.
We find even less reason to think that UCC section 9-607(a)
provides Forest a private right of action.

The statute reads as

follows:
If so agreed,
secured party:

and

in

any

event

after

default,

a

(1) May notify an account debtor or other person
obligated on collateral to make payment or otherwise
render performance to or for the benefit of the
secured party;
. . .
(3) May enforce the obligations of an account debtor
or other person obligated on collateral and exercise
the rights of the debtor with respect to the
obligation of the account debtor or other person
obligated on collateral to make payment or otherwise
render performance to the debtor, and with respect
to any property that secures the obligations of the
account debtor or other person obligated on the
collateral . . . .
§ 9-607(a).

Subsection (e) clarifies that “[t]his section does

not determine whether an account debtor . . . owes a duty to a
secured

party.”

§ 9-607(e).

Rather,

as

the

commentary

explains, “This section establishes only the baseline rights of
the secured party vis-a-vis the debtor [i.e., PP&G]—the secured
party

is

entitled

to

earlier if so agreed.”

enforce

and

collect

after

default

or

Id. at cmt. 6 (emphasis added).

The statute does not expressly create a right of action for
a

secured

party

such

as

Forest,

obligations on an account debtor.
16

nor

does

it

impose

any

While section 9-607 does give

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secured parties “the right to enforce claims that the debtor may
enjoy against others,” id. at cmt. 3, the text and commentary
make plain that this is a right against the debtor–assignor, not
the account debtor.
In sum, we hold that there is no private right of action
for transfers made “in violation of [sections 9-406 and 9-607]
of

the

UCC.”

J.A.

17,

18.

Accordingly,

the

claims

were

properly dismissed.
4.
In its reply brief, Forest argues for the first time that,
even if it has no claim under the UCC, it has nevertheless
stated

a

According

claim
to

for

Forest,

breach
“the

of

contract.

existence

of

Reply
a

Br.

breach

of

at

15.

contract

claim is still plausible on the face of the Complaint—as the
Complaint alleges that Forest, standing in the shoes of PP&G, is
asserting a claim against BlackRock, an account debtor, as if
BlackRock had failed to pay the funds to PP&G.”
However,

“issues

raised

for

generally will not be considered.”
Servs.,

134

consider

a

F.3d

1222,

1227

the

first

Id.
time

on

appeal

Karpel v. Inova Health Sys.

(4th

hostile-work-environment

Cir.
claim

1998)

(refusing

presented

to

to
the

district court after summary judgment had been granted for the
defendant).

And even when properly preserved issues are raised

on appeal, they must be raised in the opening brief.
17

See Carter

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v. Lee, 283 F.3d 240, 252 n.11 (4th Cir. 2002).

“Failure to

comply with the specific dictates of this rule with respect to a
particular claim triggers abandonment of that claim on appeal.”
Edwards v. City of Goldsboro, 178 F.3d 231, 241 n.6 (4th Cir.
1999) (emphasis added) (citing Fed. R. App. P. 28(a)(9)(A)); see
also Stevenson v. City of Seat Pleasant, 743 F.3d 411, 416 (4th
Cir. 2014) (holding that the appellants “waived any challenge”
to the district court’s dismissal of multiple claims by failing
to present arguments on appeal regarding those claims); Bocek v.
JGA

Assocs.,

(“Because

LLC,

[the

537

F.

App’x

plaintiff’s]

169,

position

174

on

(4th

appeal

Cir.
is

2013)

that

the

defendants’ . . . actions breached the Straw Purchase Agreement,
not the Consulting Agreement, we are constrained to conclude
that [the plaintiff] has waived any breach of contract claim
premised

on

a

breach

of

the

Consulting

Agreement.”).

The

purpose of this rule “is to avoid unfairness to an appellee and
minimize

the

‘risk

of

an

improvident

being issued on an unbriefed issue.’”

or

ill-advised

opinion

Brown v. Nucor Corp., 785

F.3d 895, 920 (4th Cir. 2015) (quoting United States v. Leeson,
453 F.3d 631, 638 n.4 (4th Cir. 2006)).
Here,

prior

to

the

one-sentence

assertion

in

its

reply

brief, Forest had given no indication that it was pursuing a
claim based on a breach of contract.
that

it

“brought

its

action

against
18

Indeed, Forest concedes
BlackRock

based

upon

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Pg: 19 of 25

BlackRock’s conversion of Forest’s funds.”

Reply Br. at 15.

Notably, Forest did not move in the district court to amend its
complaint to allege the claim for breach.
insisted

throughout

the

litigation

that

Rather, Forest has

BlackRock’s

liability

arose out of ignoring the notification letter and wrongfully
transferring funds to PP&G, a purported conversion and violation
of

the

UCC.

See,

e.g.,

J.A.

16

(“The . . .

transfers

by

BlackRock to PP&G at the request of Pearsall, despite the clear
instructions in the Notification Letter, amount to conversion by
defendant

BlackRock.”);

from

BlackRock

the

§ 9-607 . . . .”);
BlackRock

J.A.

Account
J.A.

Account

18

17

(“BlackRock

directly

transferred

to

PP&G

in

(“BlackRock

paid

funds

directly

to

PP&G

funds

violation

of
the

violation

in

from

of

§ 9-406 . . . .”); J.A. 426 (Forest stating in a heading of its
memorandum in opposition to BlackRock’s motion to dismiss, “The
Control Agreement Does Not Affect Forest’s Rights”); Appellant’s
Br. at 3
pursuant

(“BlackRock failed to honor the notice it had received
to

UCC

§§ 9-406

and

9-607

and

improperly

disbursed

funds to PP&G . . . .” (emphasis added)); id. at 6-7 (“BlackRock
disregarded the clear and unambiguous terms contained in the
Notification

and

made

payments

directly

to

PP&G

from

the

BlackRock Account[,] . . . thereby depriving Forest of its right
to those funds.

BlackRock’s failure to abide by the terms of

the

was

Notification

a

violation
19

of

both

UCC

§§ 9-406

and

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9-607.”

Filed: 08/10/2016

(emphasis

(“Forest’s

Complaint

added)

Pg: 20 of 25

(citations

sufficiently

set

omitted));
forth

id.

viable

at

8

causes

of

action for each of its claims against BlackRock, all of which
arise out of BlackRock’s failure to comply with its obligations
under the UCC.” (emphasis added)).
We decline to consider Forest’s belated breach-of-contract
claim.
B.
Next, Forest objects to the dismissal of its conversion
claim.

According to the complaint, BlackRock converted Forest’s

funds when it transferred them to PP&G rather than to Forest.
J.A. 16.

The district court dismissed the claim because Forest

did not allege that BlackRock converted funds “for its own use
and

benefit.”

Forest

Capital,

2015

WL

874611,

at

*1.

In

addition to defending the district court’s holding, BlackRock
argues that it did not exercise the necessary control over the
funds or commit any wrongful act, and that the property Forest
is seeking to recover is intangible and therefore not subject to
conversion.

Because we agree with this last argument, we do not

reach the others.
Conversion in Maryland has two elements: “a physical act
combined

with

a

certain

state

of

mind.”

Darcars

Motors

of

Silver Spring, Inc. v. Borzym, 841 A.2d 828, 835 (Md. 2004).
“The physical act can be summarized as ‘any distinct act of
20

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ownership or dominion exerted by one person over the personal
property of another in denial of his right or inconsistent with
it.’”

Id. (quoting Allied Inv. Corp. v. Jasen, 731 A.2d 957,

963 (1999)).

The intent element is satisfied by “a wide range

of different states of mind,” but “[a]t a minimum, a defendant
liable of conversion must have ‘an intent to exercise a dominion
or control over the goods which is in fact inconsistent with the
plaintiff’s

rights.’”

Id.

at

836

(quoting

Keys

v.

Chrysler

Credit Corp., 494 A.2d 200, 208 (Md. 1985)).
Not

all

Historically,

personal
the

tort

property
was

is

confined

subject
to

to

conversion.

recovering

tangible

property, but over time it has expanded to cover some, but not
all, intangible property rights.

Dan B. Dobbs, et al., The Law

of Torts §§ 709-710 (2d ed. 2016); see Thompson v. UBS Fin.
Servs., Inc., 115 A.3d 125, 130-31 (Md. 2015).

“Maryland law

does not recognize a tort claim for conversion of intangible
property

interests

document

over

ownership

or

unless

which

the

dominion.”

they

are

defendant
Jasen,

731

merged

into

exercises
A.2d

at

a

some
965.

tangible
form

of

Examples

include “a stock certificate, a promissory note, or a document
that embodies the right to a life insurance policy.”

Thompson,

115 A.3d at 131 (citations omitted).
Under Forest’s theory of the case, the property it seeks to
recover must be intangible.

If Forest had any right to receive
21

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money from BlackRock, it was because section 9-406 transferred
BlackRock’s

payment

obligation

from

PP&G

to

Forest.

And,

because section 9-406 applies only to obligations on accounts,
chattel

paper,

or

payment

intangibles—here,

only

a

payment

intangible is arguable—Forest had a right to payment only if
BlackRock

was

obligated

on

a

payment

intangible.

Because

a

payment intangible is, of course, intangible property, and here
it

was

not

[BlackRock]

“merged

into

exercise[d]

subject to conversion.

a

some

tangible
form

of

document
ownership,”

over
it

which
is

not

Jasen, 731 A.2d at 965.

We pause here to note that the parties’ (and the amici’s)
briefs are devoted in large part to the question of whether
BlackRock

was

obligated

on

a

payment

intangible

therefore an account debtor under section 9-406.

and

was

We need not

answer the question, as the conversion claim fails no matter who
is

right.

If

(as

Forest

contends)

BlackRock’s

payment

obligation was a payment intangible, then the type of property
at issue could not have been converted—it was intangible and
Forest never alleged it was merged into a document over which
BlackRock exercised dominion.

And if (as BlackRock contends)

the obligation was not a payment intangible, then section 9-406
did not apply, the notification letter had no effect, and the
transfer to PP&G did not interfere with Forest’s rights.
either case, Forest could not state a claim for conversion.
22

In

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To avoid this conclusion, Forest attempts to have it both
ways,

characterizing

the

property

interest

as

a

payment

intangible for the purposes of applying section 9-406, but as
money for the purposes of the conversion claim.
at

21

(“The

payment

intangible

is

the

See Reply Br.

property

interest—the

monetary obligation which attached to the funds once [ISO-NE]
released its interest.”).

For, although money is generally an

intangible not subject to conversion, an exception exists for
“specific segregated or identifiable funds.”
966.

But

obligation

having
to

conceded

Forest

was

that

on

a

Jasen, 731 A.2d at

BlackRock’s

payment

only

possible

intangible,

Forest

is

stuck with the fact that a payment intangible is by definition
not

money.

which

See

includes

property, . . .
regardless

of

§ 9-102(42)
payment
other

whether

(defining

general

intangibles,

than . . .
the

a

as

“any

money”).

transferred

intangible,
personal

Accordingly,

funds

were

“specific

segregated or identifiable funds,” Forest asserts no interest in
them.

Its

asserted

interest

is

in

payment,

not

in

any

particular money.
For

this

reason,

Forest’s

reliance

on

Franklin

American

Mortgage Co. v. Sanford Title Services, LLC, No. RDB 10-920,
2011 WL 310469 (D. Md. Jan. 26, 2011), is misplaced.

There, the

plaintiff, a mortgage company, alleged that it wired money to a
closing

agent,

who

failed

to
23

apply

the

money

to

pay

off

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mortgages and closing costs as it had promised.

Id. at *1.

According to the court, this money-based conversion claim could
go forward because it met “an exception for a conversion action
seeking

funds

separate

that

accounts.”

were

or

Id.

should

at

*4.

have

been

Unlike

segregated

the

into

plaintiff

in

Franklin American, Forest did not give funds to BlackRock that
were diverted from their intended purpose.

We do not see how

the case would apply to the facts here, where Forest claims a
right to payment rather than to specific funds.
C.
Forest also takes issue with the district court’s denial of
its request to amend its complaint.

Because the issue Forest

wished to address in an amended complaint—whether the BlackRock
funds

were

“prepayments”

excluded

from

Forest’s

security

interest—is not relevant to our disposition of Forest’s claims,
we need not decide whether the district court erred.
D.
Finally,

Forest

contends

that

the

district

court

should

have granted its “Motion to Reconsider and/or to Reargue,” which
sought relief under either Rule 59(e) or 60(b) of the Federal
Rules of Civil Procedure.
We would ordinarily review the district court’s decision on
a motion under Rule 59(e) or 60(b) for an abuse of discretion.
See Pac. Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d 396, 402
24

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Pg: 25 of 25

(4th Cir. 1998) (Rule 59(e)); McLawhorn v. John W. Daniel & Co.,
924 F.2d 535, 538 (4th Cir. 1991) (Rule 60(b)).

But because we

are also reviewing the underlying grant of BlackRock’s motion to
dismiss, we have already considered the merits of the judgment
under a de novo standard, which is of course more favorable to
Forest than a review for abuse of discretion. 4
need

not

discretion.

decide

whether

the

district

Accordingly, we

court

abused

its

See Stevenson, 743 F.3d at 416 (applying de novo

review where notice of appeal sought review of summary-judgment
order as well as Rule 59(e) and Rule 60(b) orders).

III.
We affirm the district court’s judgment dismissing Forest’s
claims under the UCC and for conversion.
AFFIRMED

4

Forest’s motion also addressed the district court’s denial
of its request to amend, which we would review for abuse of
discretion, see Francis v. Giacomelli, 588 F.3d 186, 197 (4th
Cir. 2009); as we have explained, we need not address the issue.
25