Urban-gro files motion to dismiss counterclaims in lawsuit against bank

LAFAYETTE — Urban-gro Inc. (Nasdaq: UGRO) filed a motion last week in Boulder County District Court, along with two responses, to dismiss Sunflower Bank’s counterclaims that the agricultural engineering firm was responsible through lax security practices for the alleged $5.1 million wire transfer fraud it suffered in October.

Urban-gro also requested a hearing on Sunflower’s motion to interplead more than $1.7 million of recovered funds. 

On Monday, Sunflower Bank filed a motion in opposition to Urban-gro’s request for a hearing.

This lawsuit began in early November, weeks after Urban-gro announced that it had been the victim of a wire fraud scheme. Urban-gro sued Sunflower Bank, alleging that the bank had allowed a fraudster with a fake email address to initiate wire transfers out of Urban-gro’s sweep account. Urban-gro also sued the bank for theft for failing to return the recovered funds without Urban-gro signing an indemnity agreement. 

Then, in late November, Sunflower Bank filed counterclaims against Urban-gro, accusing Urban-gro of breach of contract for failing to secure its own bank accounts. The bank also asked the court to interplead the returned funds until it could be determined if the transfers were in fact fraudulent.

In its motion to dismiss filed last week, Urban-gro argued that Sunflower Bank’s counterclaims are preempted by the Uniform Commercial Code and that its request for an interpleader fails to meet the threshold for sustainability. 

When it asked the court to interplead the returned funds, Sunflower Bank argued that it wasn’t certain if the transfers were fraudulent and therefore the bank faced the threat of litigation from the two entities — Davlean LLC and Ethbase Investments LLC — that had received the returned funds. 

In its response filed last week, Urban-gro stated that it had never conducted business with Davlean or Ethbase. The company argued that even if its own negligence had contributed to the fraud, no party has claim to the returned funds besides Urban-gro.

“Defendant is making a spurious claim only to retain property, for some unknown reason, that it knows belongs to Urban-gro,” the response reads.

It also accused Sunflower Bank of playing “the blame the victim card.” Urban-gro’s response equates Sunflower Bank’s argument to the management company of a condo complex letting a thief into the building while a resident was on vacation, only to “ultimately recover some of the stolen property — but refuse to return it to the condo owner just in case the thief comes back to claim the stolen property.”

A date for a potential hearing has not been set.

Urban-gro is represented by Giovanni Ruscitti of Berg Hill Greenleaf Ruscitti. Sunflower Bank is represented by Eric Liebman of Moye White.

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